Held v. Deputy Federal Commissioner of Taxation

Members:
Young CJ
McGarvie J
O'Bryan J
King J

Tribunal:
Supreme Court of Victoria (Full Court)

Decision date: Judgment handed down 15 April 1988.

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Young C.J.; McGarvie and O'Bryan JJ.

By the summons now before the Court the applicant seeks leave, in so far as it may be necessary, to appeal against an order made by King J. on 26 February 1988. The actual order made by King J. has not been placed before us but it is clear from his Honour's reasons for judgment that the intention of his Honour was to dismiss the appeal which the present applicant took to the learned Judge from a Master's order giving leave to the present respondent to enter final judgment in the action, which is an action for the recovery of income tax assessed against the applicant. Again the Master's order has not been brought before us, but it seems that the applicant also asked the Master to order a stay of execution until the determination by the Administrative Appeals Tribunal of the respondent's disallowance of his objection to certain assessments to Commonwealth income tax.

The facts and circumstances giving rise to the present application are clearly set out in the judgment of King J. and it is unnecessary to repeat them.

The application thus raises two questions, viz. whether the applicant should have leave to appeal against King J.'s dismissal of the appeal against the Master's order (1) giving leave to the respondent to enter final judgment, and (2) refusing a stay of execution pending the determination in the Administrative Appeals Tribunal of the proceedings upon the objection. A third question is also raised by the summons, viz. whether this Court if leave to appeal against King J.'s order were granted and perhaps in any event should grant a stay of execution pending the determination of the appeal whether the appeal be by leave or as of right.

It is difficult to see why it was thought that leave to appeal might be necessary for sec. 14(5) of the Supreme Court Act 1986 provides that ``An order refusing unconditional leave to defend a proceeding is to be taken not to be an interlocutory judgment within the meaning of this section''. It would seem therefore that King J.'s judgment was not to be treated as interlocutory and an appeal would lie to this Court from it pursuant to sec. 10(2) of the Supreme Court Act.

In these circumstances the only matter for consideration is whether this Court should grant a stay of execution pending the determination of the appeal herein which was instituted by notice of appeal dated 11 March 1988. This application invokes the power of the Court under r. 64.18 which reads:

``Except so far as the Full Court or a Judge otherwise orders -

• (a) an appeal shall not operate as a stay of execution or of proceedings under the decision appealed from;
• (b) no intermediate act or step shall be invalidated.''

The Court thus has power to grant a stay of execution pending the determination of an appeal but a stay will only be granted if there are some special circumstances relevant to the purpose for which the stay is sought:
Scarborough v. Lew's Junction Stores Pty. Ltd. (1963) V.R. 129 . In that case Adam J. held, without intending to limit the circumstances in which a stay might be granted, that special circumstances might be found to exist where a successful appellant would be deprived of the fruits of his appeal if a stay of execution were not granted. Adam J. went on to say that the test is whether there is a real risk that the appeal would prove abortive if the appellant were not granted a stay. In that case his Honour was concerned with a plaintiff who had recovered judgment against a defendant. The defendant appealed and showed that there was a real risk that the plaintiff would take the proceeds of the judgment out of the jurisdiction if execution were not stayed. See also
Amoco v. Rocca Bros. (1972) 7 S.A.S.R. 268 at pp. 324-326 .

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ATC 4321

The present case is of course entirely different. It was contended that the Deputy Commissioner had issued inconsistent assessments and that he was not entitled to proceed to judgment on one assessment without withdrawing the other. King J. rejected the argument and as we are not considering the question on appeal all that we need say about it is that for the reasons given by King J. we do not think it is an argument which would have substantial prospects of success on the appeal.

The principal contention before King J. and before us was that execution should be stayed pending determination of the objection in the Administrative Appeals Tribunal. To make good this contention in this Court it would be necessary for the applicant to satisfy us that ``special circumstances'' exist to justify a stay.

The question whether the Commissioner of Taxation should be subjected to a stay of execution in recovery proceedings pending determination of the validity of an assessment upon which the recovery proceedings are based has been the subject of a number of recent reported decisions to which we were referred. Those decisions justify the propositions which are set out by French J. after his examination of the authorities in
Snow v. D.F.C. of T. 87 ATC 4078 at pp. 4093-4094; (1987) 70 A.L.R. 672 at p. 693 . They were referred to by King J. All that we would add is that it must never be forgotten that the power to grant a stay is a discretionary power which cannot be circumscribed by hard and fast rules.

To the extent that it is relevant to take into account the applicant's prospects of success before the Administrative Appeals Tribunal King J. said that he was not able to form even a tentative view. His Honour could do no more than note the concession made by counsel for the Commissioner that in those proceedings there is an arguable issue to be tried. We cannot go further.

The applicant's case for a stay must therefore depend upon whether he has shown that he would suffer extreme personal hardship if execution were levied.

The extreme personal hardship upon which the applicant relies is that he says that he is unable to pay the amount of the judgment and he fears that bankruptcy proceedings would be taken against him. He is a writer and producer engaged in the motion picture industry. He conducts his business through a company and he deposed that as a direct result of these proceedings one of his co-directors has resigned. He further says that he had derived no benefit from the ``scheme'' which has given rise to the assessments, that he has been advised that he has good prospects of success in the proceedings in the Administrative Appeals Tribunal and that the hearing of those proceedings has now been fixed for 18 April 1988.

On the other hand, the assessments admittedly arise out of a tax minimisation scheme to which the applicant at least lent his name. It was suggested before King J. that the applicant's father who was the principal actor in the tax minimisation scheme would or might assist the applicant to meet the liability which he faces. The evidence on this question is equivocal. The applicant has deposed that he has had no guarantee that his father could or would give such assistance, that he had asked his father for a written assurance that he would provide assistance but that his father has refused to give that assurance. He further deposed that although he has relatively good relations with his father at a personal level, his father is not the kind of father who will provide automatic assistance to the applicant in matters of business or finance. The father's affidavit is at pains to point out that the tax minimisation activities which have given rise to the assessments in question were entirely carried out on the basis of his decision to do so for the benefit of the trust of which the applicant is the ``primary beneficiary''. In these circumstances it is difficult to accept that the applicant's father would not feel some obligation to assist the applicant to meet at least some of the liability which has unexpectedly been thrown upon him. Moreover, the father is prepared to give an undertaking on behalf of Deblee Nominees Pty. Ltd. the trustee of the Deblee Trading Trust which has substantial assets and carries on the family business to pay to the respondent any loss that might be suffered solely by reason of being prevented by an order (if a stay of execution were granted) from proceeding to execution. The impression made by the evidence in total is that the minimum amount of information as to the applicant's real financial position has been placed before the Court.

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ATC 4322

In these circumstances the appellant has not shown such extreme personal hardship as would overcome the Deputy Commissioner's entitlement to proceed to execution notwithstanding the institution of an appeal against King J.'s decision and accordingly he has not shown any special circumstances which would justify this Court's making an order staying the execution of the judgment under appeal.

For these reasons the summons will be dismissed.