DFC of T v STJEPOVIC
Judges:JD Phillips J
Court:
Supreme Court of Victoria
JD Phillips J
This proceeding was commenced by writ on 14 November 1990. It is a claim by the plaintiff against the defendant for a total sum of $2,548,919.17. According to the Statement of Claim on the writ, that total comprises, first, a sum of $1,070,604.97 for sales tax outstanding for the period from 25 September 1984 to 16 June 1989; secondly, a further sum of $1,070,604.97 for ``additional tax'' payable under s. 45(1) of the Sales Tax Assessment Act (No. 1) 1930 (Cth) for failing to furnish a return; and thirdly, a sum of $407,709.83 for ``additional tax'' payable under s. 29 of the said Act for late payment, in part, of the sales tax first mentioned and, in part, of the ``additional tax'' claimed under s. 45(1). The amount for late payment was calculated at the rate specified in s. 29 until the issue of the writ. An amended Statement of Claim was filed on 17 December 1990 correcting an obvious mistake in the earlier pleading.
A defence was filed on 5 December 1990, in which, although filed before the amended Statement of Claim, the defendant denied any indebtedness to the plaintiff for sales tax or for additional tax, whether raised under s. 45 or s. 29 of Assessment Act (No. 1). In his defence, the defendant claimed also that the assessments relied upon by the plaintiff were incorrect and invalid and were not ``assessments'' as contemplated by the legislation. The defence purported to raise also a constitutional issue concerning the power of the plaintiff to issue such assessments and this precipitated notices to the Attorneys-General under s. 78B of the Judiciary Act, but that is a point no longer being pursued.
The proceeding came before me in the Causes List, not for determination at trial, but because there were by then four summonses to be dealt with.
The first is the plaintiff's summons dated 1 February 1991. By this, the plaintiff seeks summary judgment against the defendant under Order 22 of Chapter 1 of the Rules.
The second is a defendant's summons filed on 20 March 1991. By that summons, the defendant seeks to have the plaintiff's summons
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for summary judgment struck out as an abuse of the process. An affidavit by Peter Don Pryles sworn 15 March 1991 was filed in support of an application to have the summons for summary judgment adjourned until after the completion of criminal proceedings against the defendant, but on 21 March 1991, his Honour Mr Justice Fullagar, sitting in the Practice Court, refused the application for adjournment and referred both the plaintiff's summons for summary judgment and the defendant's summons filed on 20 March 1991 to the Causes List for hearing and determination. A copy of his Honour's reasons was made available to me by the parties.The third summons was also taken out by the defendant. It was filed on 7 June 1991. By it, the defendant seeks an order staying this proceeding generally, on the ground that the proceeding as a whole is vexatious or an abuse of the process; or alternatively on the ground ``that it is just and equitable to stay the proceedings''; or alternatively on the ground ``that there is a real prospect of substantial prejudice to the defendant in the defence and conduct of a criminal proceeding in which the defendant is the accused''.
Also on 7 June 1991, the defendant issued a subpoena directed to the plaintiff to produce sundry files and records of the plaintiff's in relation to ``the defendant and his associated companies'' and ``the investigation assessment and recovery of alleged unpaid sales tax for the period'' from 1 January 1984 to date. I assume that it was service of this subpoena on the plaintiff that occasioned the fourth summons which is dated 24 June 1991. That is a summons which was taken out by the plaintiff to set aside the subpoena as oppressive and an abuse of the process.
Both the defendant's summons filed on 7 June 1991 and the plaintiff's summons filed on 24 June 1991 were made returnable in the first instance before the Listing Master and the parties are agreed that these too, together with the earlier two summonses, are now before me for determination.
Of course, the primary application before me is the plaintiff's application for summary judgment under Order 22. In support of that application, the plaintiff relied, in the main, upon three affidavits of Eddie Papadimitriou, an officer employed in the debt management section of the Australian Taxation Office. In an affidavit, sworn on 12 February 1991, the deponent exhibited a true copy of a Notice of Assessment issued on 24 November 1989 by the plaintiff to the defendant, notifying liability for and claiming payment of the sales tax and additional taxes that are now the subject matter of this proceeding. The Notice described the assessment as having been made under s. 10A(2) of the Sales Tax Assessment Act (No. 6) 1930 (Cth), and the sales tax as due ``in respect of gold chains imported by you and sold by you or applied by you for your own use during the period 25 September 1984 to 16 June 1989''. The assessment was for sales tax in the sum of $1,070,604.97 and for additional tax under s. 45(1) in a like sum, and the Notice warned of additional tax under s. 29 should the foregoing not be duly paid.
By an affidavit sworn on 24 January 1991, the deponent exhibited a certificate under s. 10 of the Sales Tax Procedure Act 1934 (Cth) in which a Deputy Commissioner of Taxation certified that as at 24 January 1991 the amounts claimed in the Amended Statement of Claim for sales tax and additional taxes under s. 45(1) and s. 29 were all due and owing. A third affidavit of the same deponent, sworn on 11 June 1991, verified the signatures of the Deputy Commissioners appearing on the certificate and the Notice of Assessment respectively. Mr Davies of counsel, who appeared for the plaintiff, relied upon those provisions of the sales tax legislation which rendered the certificate and Notice of Assessment prima facie evidence and conclusive evidence respectively in recovery proceedings such as these.
The defendant opposed the plaintiff's application for summary judgment and, in reliance upon its two summonses, applied to have the plaintiff's summons struck out or the proceeding as a whole stayed. In support of his applications, the defendant relied upon a number of affidavits. When the argument commenced, the defendant was relying upon three affidavits of Peter Don Pryles, the solicitor handling the matter for the defendant. These three affidavits were sworn on 7 June, 13 June and 14 June 1991 respectively. The defendant was relying also on the affidavit of Vesna Amidzic sworn on 14 June 1991. When Mr Davies had commenced to address in reply on the plaintiff's summons for summary
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judgment and in answer on the defendant's summonses, the defendant sought leave to file further affidavits and to rely upon them. The first, an affidavit of the defendant himself sworn on 8 July 1991, denied any involvement by the defendant in the transactions lying behind the Notice of Assessment, and the second, a further affidavit of Mr Pryles sworn 8 July 1991, dealt with the position of the bank which was financing the defendant in his businesses. Yet another affidavit was later filed, this by Mr Pryles of 8 July 1991, purporting to set out the defendant's assets and liabilities on information and belief, and the following day the defendant sought to rely upon still a further affidavit, this time an affidavit of the defendant sworn on 9 July 1991, giving other details of his assets and liabilities. Mr Davies, who appeared for the plaintiff, did not oppose the attempt by the defendant to rely upon the first three of these further affidavits, but he did formally oppose the use of the fourth. However, as in the end he could point to no prejudice, and while the filing of affidavits in running is not to be encouraged, I see no reason why the defendant should not rely upon the contents of these further four affidavits, and in so far as he needs leave to do so, I grant such leave.At this point it is convenient to say something of the events from which the proceeding stems, so far as disclosed by the affidavit material which is relied upon. There was no cross-examination on any of the affidavits filed and, in large part, what follows is found in the affidavit of Peter Don Pryles sworn 13 June 1991. As I have said, Mr Pryles is the solicitor acting for the defendant, and some of the information deposed to was obtained from documents made available by the plaintiff in consequence of a request under the Freedom of Information Act 1982 (Cth) and documents obtained from the Commonwealth in the course of the criminal proceedings against the defendant that I shall mention. During the course of the argument defendant's counsel tendered a folder containing photocopies of some of these documents and this was admitted into evidence without objection.
The defendant is a jeweller who conducts business through a number of associated companies, both here and in New Zealand. At present he is awaiting trial in the Country Court at Melbourne on two counts of defrauding the Commonwealth contrary to s. 29D of the Customs Act and one count of attempting to defraud. The Crown alleges that on 21 September 1989, two couriers, Johan Inhelder (a Swiss national) and Lucia Pley (a Dutch national) were apprehended by customs officers at Melbourne Airport; that Pley and Inhelder were found to have concealed upon them, in clothing vests, 12 kilograms each of gold jewellery which had not been declared for duty; and that both admitted that they were attempting to smuggle the gold into Australia. In lengthy interviews with the police, Inhelder is said to have admitted that, prior to 21 September 1989, he had made 11 smuggling trips to Australia, that these trips were between 25 September 1984 and 16 June 1989 - dates which, it may be observed, are the dates mentioned in the Notice of Assessment now relied upon by the plaintiff - and that on each occasion he had given gold to the defendant.
The defendant denies that he received any gold from Inhelder or that he was in any way involved with the alleged smuggling by Inhelder.
On 26 September 1989 the defendant was charged by the Director of Public Prosecutions of the Commonwealth on numerous counts under s. 29D of the Crimes Act and with organised fraud - although these charges were later supplanted, ultimately by the charges on which he now awaits trial. On 29 September 1989 the Director of Public Prosecutions sought and obtained from his Honour Mr Justice Cummins a restraining order under the Proceeds of Crime Act 1987 (Cth) which effectively froze the assets of the defendant and put them in the hands of the Official Trustee in Bankruptcy. That order was extended on 12 October 1989 by Nathan, J., and was extended and varied on 17 October 1989 by Marks, J. The order of Marks, J. was expressed to remain in force until 29 March 1990 subject to further order and I was told from the Bar table that the effect of that order was indeed continued from time to time and it still remains in force. On 26 June 1991 his Honour Mr Justice Tadgell made an order further extending until 30 August 1991 the order that had been made by Marks, J. on 17 October 1989. That restraining order relates to all of the property of the defendant and commits the custody and control thereof to the Official Trustee, although it does permit the
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defendant to have access to certain items of stock for the purpose of his business and to deal with them in the ordinary course of his trade. Subject thereto, all of the assets of the defendant were and are effectively frozen.With the consent of the parties, I obtained access to such file as was available in the Prothonotary's Office relating to the restraining orders made under the Proceeds of Crime Act and, as disclosed by the papers on that file, the Director of Public Prosecutions sought and obtained the restraining orders for the purpose of satisfying a pecuniary penalty order which it was the intention of the Director to seek against the defendant should he be convicted of the charges against him.
As I have said, it was on 26 September 1989 that the defendant was charged and on 29 September 1989 that the first of the restraining orders was made. On 11 October 1989 the plaintiff issued his first Notice of Assessment against the defendant under the sales tax legislation, apparently in reliance upon the allegations of Inhelder concerning the importation of the gold. A second Notice of Assessment issued on 25 October 1989. On 24 November 1989 a further Notice of Assessment issued, called an amended assessment, and the first two were withdrawn. It is the third, the amended assessment, that now forms the basis of the plaintiff's present claim against the defendant. A fourth assessment that was later made is not presently relevant.
On 6 December 1989 both Inhelder and Pley pleaded guilty to criminal offences arising out of the smuggling of the gold and they were both sentenced to terms of imprisonment. Inhelder promised at the time to give evidence for the Crown, presumably at the future trial of defendant.
On 18 December 1989 the defence lodged Notice of Objection to the plaintiff's amended assessment of 24 November 1989. In that Notice he contested all liability for sales tax or additional tax, asserting that the assessment was invalid, void and of no effect; that the assessment did not reflect any rational basis of liability in the taxpayer and that the taxpayer had not been involved in any importation of or dealing in the goods referred to in the Notice.
Five months or so later, on 21 March 1990, the defendant's committal commenced at the Melbourne Magistrates' Court and Inhelder and Pley both gave evidence for the Crown. On 7 June 1990 Pley was released and deported, but the Director of Public Prosecutions was anxious that Inhelder remain within the jurisdiction until the trial of the defendant. On 28 June 1990 the defendant was committed for trial at the Country Court.
On 21 September 1990 the plaintiff disallowed the defendant's objection to the amended assessment. It would seem from the documents obtained by the defendant from the Australian Taxation Office as a result of his request under the Freedom of Information Act that the objection was disallowed because the assessment was regarded by the Taxation Office as a reasonable response to the allegations made by Inhelder.
On 1 October 1990 the trial of the defendant began in the Country Court on an indictment alleging two ``between dates'' counts of fraud contrary to s. 29D of the Crimes Act 1914 and one count of attempt to defraud the Commonwealth contrary to ss. 7 and 29D of that Act, those charges spanning the same period of time as those set out in the first indictment. Although the defendant was arraigned on 1 October 1990, the jury was empanelled only on 7 November 1990 and it was on 8 November 1990 that Inhelder commenced his evidence-in-chief. Cross-examination began on 12 November 1990, but before the cross-examination could be completed the trial aborted for a reason quite unconnected with his giving evidence. The jury was discharged and the trial was put over until 1 February 1991, defence counsel requesting that Inhelder remain within Australia and be made available at the defendant's new trial. However, it was not to be; for on 14 November 1990, and unbeknown to the defence, a ticket was purchased by the Australian Federal Police for Inhelder to leave Australia and on 18 November Inhelder was deported without notice to the defendant or his legal advisers.
It was on 14 November 1990 that the writ in this proceeding was issued by the plaintiff against the defendant. On 29 November 1990 the defendant requested that his objection to the amended assessment be referred to the Administrative Appeals Tribunal under the relevant provisions for review and appeal in the sales tax legislation, and, although out of time, it was, on request, treated by the Taxation
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Office as having been duly made, with the result that the application for review is now pending before the Tribunal, awaiting hearing. It is due to be mentioned shortly, in fact on 15 July next, but I was told from the Bar table that it is not likely to be heard for some time yet.On 5 December 1990 the defendant's solicitors heard from the Director of Public Prosecutions that Inhelder had in fact left Australia. Since then there have been numerous efforts made, first by the Crown and then by the defence, to arrange for Inhelder's return. At present, the matter is in the hands of the Attorney-General's Department which is in contact with the Swiss authorities, from whom a response was being awaited when this matter was argued before me. Again from the papers filed in relation to the restraining orders, it appears that on 19 February 1991 the defendant was rearrainged, but that that trial was simply adjourned sine die. I was told from the Bar table that the trial was adjourned until it could be determined whether or not Inhelder was going to return to give evidence.
Immediately before I commenced to deliver this judgment I was told by counsel that, according to a communication just received from the Attorney-General's Department, it now appears most unlikely that Inhelder will in fact return to give evidence at all.
From this history of events, it can be seen that there is at present pending before the Administrative Appeals Tribunal the defendant's application for review under the sales tax legislation against the assessment which forms the basis of the plaintiff's claim against the defendant in this proceeding and that there is also pending in the Country Court the defendant's trial for criminal offences charged against him arising out of the importation of the gold which was the occasion for the assessment under the sales tax legislation. Further, there is current a restraining order under the Proceeds of Crime Act affecting the whole of the defendant's property and inhibiting his dealing with it. It is in these circumstances that the defendant opposes the plaintiff's application for summary judgment for the amount of the assessment and seeks a stay of proceedings.
The defendant does not contest the actual calculations made by the plaintiff. Rather he claims that the assessment was issued by the plaintiff for an improper purpose and that it amounts to an abuse of the plaintiff's powers under the sales tax legislation, or that further inquiry at trial will prove that to be so. The defendant contends that in all the circumstances he is entitled to go behind the assessment to demonstrate that it is in truth no proper assessment within the meaning of the Act, and hence no proper basis for the liability claimed; or alternatively that whether he is entitled to go behind the assessment is a serious question to be tried, which is enough to deny the plaintiff summary judgment, if indeed the proceeding as a whole be not stayed. The defendant seeks to stay this proceeding until the determination of the proceedings pending before the Administrative Appeals Tribunal, or alternatively, until completion of the criminal proceedings against him which are pending in the Country Court.
Mr Faris Q.C., who with Mr Jolson appeared for the defendant, did at one stage claim in the course of the argument that in the alternative this proceeding should be stayed pending the resolution of an appeal to the High Court from the decision of the Full Federal Court in David Jones, a case to which I shall refer in a moment, the application for special leave being listed for hearing by the High Court next August; and he claimed also that the proceeding should be stayed until the determination at trial of an application by the defendant which is currently before the Federal Court for an injunction to restrain the proceeding in this Court; but in the end he persisted in neither of these two arguments. Although I have had put before me material relating to the Federal Court proceedings, I do not see that they have any particular significance to what I must decide and I say no more about them.
I turn first to the application by the plaintiff for summary judgment under Order 22. Counsel for the plaintiff had no trouble in making out at least a prima facie case for summary judgment. On its face, the assessment was made in this case under Assessment Act (No. 6), which by s. 5 turns on the importation of goods into Australia by a person, like the defendant, who it was said was required to be registered under the legislation, where the goods are either applied by the importer to his own use or sold by the importer without the quotation of a certificate by the purchaser. In such cases, s. 5 requires that sales tax be paid
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by the importer. Section 9(1) obliges a person liable to pay tax under s. 5 to make monthly returns and renders the tax due and payable within 21 days of the close of the month. An assessment is not then critical to liability, but by s. 10(1) the Commissioner is empowered to make an assessment. In this case the assessment issued under s. 10(2A)(a), which provides:``(2A) Where -
- (a) a person makes default in furnishing a return...
the Commissioner may determine an amount to be the amount upon which, in the opinion of the Commissioner, sales tax should be paid and may make an assessment in relation to the person.''
This section was altered in 1986 but I was assured by plaintiff's counsel that, by virtue of the relevant transitional provisions, it was the section in the form I have quoted that was relevant, notwithstanding that the assessment, when made in this case, was for sales tax in respect of a period going back to 1984. Section 10B authorises an amended assessment.
By s. 12 of Assessment Act (No. 6), certain portions of Assessment Act (No. 1) are made applicable, including s. 29 and Parts VII, VIII and X. Section 45, which is in Part VIII, provides for ``additional tax'' in a case where the taxpayer refuses or fails to furnish a return. By s. 45(1) the ``additional tax'' thus attracted is equal to twice the amount of the primary tax payable, although by s. 47(3) the Commissioner may remit the whole or any part of such additional tax. In this case, the Commissioner remitted one-half of the additional tax and hence claimed, by virtue of s. 45(1) and for additional tax thereunder, an amount equal to the amount of the primary tax.
By s. 29 of Assessment Act (No. 1), additional tax at 20 per cent per annum is payable where tax or additional tax remains unpaid. In this case, the Notice of Assessment dated 24 November 1989 claimed payment of the primary tax ``forthwith'' and additional tax under s. 45 ``no later than December 1989'', and in both cases penalty tax at 20 per cent per annum should the tax or additional tax remain unpaid. When the writ was issued on 14 November 1989, the plaintiff claimed from the defendant penalty tax under s. 29 on the primary tax as from 25 November 1989 and on the additional tax as from 8 December 1989, and in both cases up until the day before the date on which the writ was issued.
All this serves to explain what appeared in the Notice of Assessment and the Certificate which were relied upon by Mr Davies in support of the claim for summary judgment. In a sense, the explanation was not necessary because it was the Notice itself and the Certificate that comprised the plaintiff's case, for both these documents are made evidence, in this proceeding, that the plaintiff is entitled to what it claims from the defendant. Plaintiff's counsel referred me to s. 67 which is in Part X of Assessment Act (No. 1) and which in part provides as follows:
``(1) The mere production of -
- (a) a notice of an assessment or of the making of a refund decision; or
- (b) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner and purporting to be a copy of a notice of an assessment or of the making of a refund decision
is conclusive evidence -
- (c) of the due making of the assessment or the refund decision;
- (d) in the case of a notice of an assessment - except in proceedings under Part VII on a review or an appeal relating to the assessment, that the amounts and all of the particulars of the assessment are correct; and
- (e) in the case of a notice of a refund decision - except in proceedings under Part VII on a review or appeal relating to the decision, that the decision is correct.
...
(4) The mere production of a certificate in writing signed by the Commissioner, a Second Commissioner or a Deputy Commissioner certifying that a sum specified in the certificate was, at the date of the certificate, due and payable by a person in respect of an amount of tax is prima facie evidence of the matters stated in the certificate.''
He also referred me to s. 10 of the Sales Tax Procedure Act, which is very similar in effect,
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at least in recovery proceedings. Section 10(3)(a) and (b) read as follows:``(3) In any proceedings for the recovery of sales tax -
- (a) the mere production of -
- (i) a notice of an assessment or a notice of the making of a refund decision; or
- (ii) a document signed by the Commissioner, a Second Commissioner or a Deputy Commissioner and purporting to be a copy of a notice of an assessment or of the making of a refund decision,
is conclusive evidence -
- (iii) of the due making of the assessment or the decision, as the case may be;
- (iv) in the case of a notice of an assessment - that the amounts and all of the particulars of the assessment are correct; and
- (v) in the case of a notice of a refund decision - that the decision is correct; and
- (b) the mere production of a certificate in writing signed by the Commissioner, a Second Commissioner or a Deputy Commissioner certifying that a sum specified in the certificate was, at the date of the certificate, due and payable by a person in respect of an amount of sales tax is prima facie evidence of the matters stated in the certificate.''
By s. 10(5) of the Procedure Act it is provided that in s. 10 ``sales tax'' includes both tax and additional tax under the sales tax legislation.
Thus, on the face of it, the plaintiff was entitled to summary judgment by virtue of the Notice of Assessment and the Certificate relied upon, when taken in conjunction with the two provisions I have just read. In relation to the Notice of Assessment, s. 67 of Assessment Act (No. 1) is indistinguishable, for present purposes, from s. 177 of the Income Tax Assessment Act 1936 as amended; and it is well established that notice of assessment under that legislation is rendered conclusive of the taxpayer's liability on all matters, at least in recovery proceedings. Of course, under the income tax legislation the taxpayer has the right to object to the assessment, and if the objection be disallowed, to carry his case up on review or by way of appeal. So too in the case of the sales tax legislation, the taxpayer has the right, which the defendant has exercised, to lodge notice of objection to the assessment and then, the objection having been disallowed, to go by way of review to the Administrative Appeals Tribunal or by way of appeal to the Federal Court. All that is provided for in Part VII of Assessment Act (No. 1), which is made applicable here by express provision of Assessment Act (No. 6). As in the case of the income tax legislation, so in the case of the sales tax legislation: the notice of assessment is made conclusive evidence, but not - or at least not to the same extent - in proceedings by way of review or appeal. All that matters to the plaintiff's present claim against the defendant in this proceeding which is for recovery of the tax and additional tax is that the Notice of Assessment upon which the plaintiff is relying is made conclusive evidence in the proceeding. In recovery proceedings, this document in effect covers the field on all aspects of the taxpayer's liability. There is, in short, no room for the taxpayer to dispute his liability in the recovery proceedings. That much appears to be well established:
FC of T v. Clarke (1927) 40 CLR 246;
George v. FC of T (1952) 9 ATD 421, (1952) 10 ATD 65 (FC), (1952) 86 CLR 183;
McAndrew v. FC of T (1956) 11 ATD 131, (1956) 98 CLR 263;
F.J. Bloemen Pty Ltd v. FC of T 81 ATC 4280, (1980-1981) 147 CLR 360;
DFC of T v. Cameron 91 ATC 4056 (Kaye, J.); and this was the view expressed by Fullagar, J. when his Honour dealt with this proceeding in the Practice Court.
To avoid this result, Mr Jolson for the defendant referred me to the recent decision of the Full Court of the Federal Court in
David Jones Finance and Investments Pty Ltd & Anor v. FC of T 91 ATC 4315, (1991) 21 ATR 1506. In that case, the taxpayer faced an income tax assessment based upon a view of the law which, although in line with High Court authority, had not been the view hitherto adopted by the Commissioner in similar situations. The taxpayer had objected to the assessment, and having had his objection disallowed, he sought an injunction against the Deputy Commissioner of Taxation to restrain
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the commencement of recovery proceedings. To support his application for an injunction, the taxpayer alleged that the very issue of the Notice of Assessment was an abuse of power, or that the Notice of Assessment had issued for an improper purpose. On a pleading summons, O'Loughlin, J. held, applying Bloemen, that notice of the assessment was conclusive against the taxpayer, save in proceedings by way of review or on appeal. The Full Court (Morling and French, JJ., Pincus, J. dissenting) disagreed and allowed the appeal. In a joint judgment, the majority held that the jurisdiction or power to grant injunctive relief against the Commissioner derived from s. 39B of the Judiciary Act; that that was a grant of the power which was conferred by s. 75(v) of the Constitution on the High Court; that therefore legislation should not lightly be interpreted as making inroads on that grant of power; and that on full consideration of its purpose and effect, s. 177 did not inhibit the exercise of that power by the Federal Court. As Morling and French, JJ. said, at ATC 4330, ATR 1523 (line 50):``In this Court and in the proper exercise of that jurisdiction the `due making' of the assessment and the amount and all particulars thereof is open to inquiry.''
Their Honours then went on to consider an alternative line of reasoning, justifying a like conclusion.
In my view, the reasoning in the joint judgment depended wholly upon s. 39B of the Judiciary Act and the view taken that that section conferred a jurisdiction or power that was to the same effect as the jurisdiction or power conferred on the High Court by s. 75(v) of the Constitution. No such considerations apply in this Court, where s. 39B is irrelevant. Counsel for the defendant argued that s. 39(2) of the Judiciary Act, in conferring jurisdiction on this Court to entertain a suit to which the Commonwealth was a party, was the necessary basis for this Court's jurisdiction to entertain this proceeding commenced by the plaintiff against the defendant; and that s. 39(2) was, in this respect, not significantly different from s. 39B as considered in David Jones: see
Goward v. Commonwealth (1957) 97 CLR 355. But even if s. 39(2) be the basis for this Court exercising jurisdiction in this proceeding - and it is unnecessary for me to express a view on that - so it was too in the case of Bloemen.
That was a decision by the High Court that s. 177 was effective in proceedings in the Supreme Court of New South Wales where that Court was exercising jurisdiction derived from s. 39(2) of the Judiciary Act and I am bound by that decision of the High Court.
In David Jones the majority in the Federal Court distinguished Bloemen, not on the basis that s. 39(2) was significantly different from s. 39B, but on the basis that s. 39B was what was relevant in the later case and that in the earlier case the High Court had not given consideration to the effect of s. 39(2). It was therefore argued before me that in this proceeding there was at least an issue for trial as to whether the reasoning in David Jones was sufficient to justify a departure from Bloemen on the ground that the effect of s. 39(2) had not been considered in Bloemen and that, for the reasons given in David Jones, provisions such as s. 177 of the income tax legislation (and thus s. 67 and s. 10(3) in this case) were not effective where the Supreme Court was exercising jurisdiction derived from s. 39(2). However, that is no more than a contention that, if and when seised with the matter again, the High Court, if it considers that the majority in David Jones were correct and if it sees no significant distinction between s. 39B and s. 39(2), might then depart from its earlier decision in Bloemen. But, as I understand it, a single judge of the Supreme Court is not entitled to anticipate such a step. Until the step be taken, I am bound by the plain decision in Bloemen which was given in the context of jurisdiction being exercised by a State Supreme Court in reliance upon s. 39(2):
Jacob v. Utah Construction and Engineering Pty Ltd & Anor (1966) 116 CLR 200 at 207 per Barwick, C.J. Moreover, it is significant, I think, that counsel for the defendant conceded that if his submission were adopted that the reasoning in David Jones applied equally to a case arising by reference to s. 39(2) of the Judiciary Act as to one involving s. 39B, s. 177 and the like would have little, if any, effect in recovery proceedings because it may be assumed that the Commissioner of Taxation or his deputy will always be a party thereto: as to sales tax cases, see the Procedure Act s. 10(1), (5).
In my view therefore, the case of David Jones does not justify my departing from the decision in Bloemen; nor, in view of the decision in Bloemen, does it raise a triable issue
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that would warrant the plaintiff's claim against the defendant going to trial - and in saying that I do not overlook what was said by Murphy, J. in Chasfild Pty Ltd v. Taranto (9 June 1988, unreported, but noted in Williams' Supreme Court Practice vol 3 para 16,006) and by O'Bryan, J. in Becton Corporation Pty Ltd v. Tricontinental Corporation Ltd (11 February 1991, unreported), to both of which decisions I was referred by defendant's counsel. See alsoAustralian Can Co Pty Ltd v. Levin & Co Pty Ltd [1947] VLR 332 at 334,
Fancourt & Anor v. Mercantile Credits Ltd (1983) 154 CLR 87 at 99. But thus far, it seems to me that the Notice of Assessment is conclusive in this proceeding for the recovery of amounts under the sales tax legislation and that s. 67 of Assessment Act (No 1) and s. 10(3) of the Procedure Act are sufficient to justify the plaintiff having summary judgment.
Mr Davies had a further argument, that in any event, even if David Jones were sufficient, either at this stage or at trial, to justify the defendant going behind the Notice of Assessment relied upon, the defendant had not in this case established in the affidavit material any ground for supposing that the assessment had been issued in abuse of power or for an improper purpose, which is what the taxpayer alleged in David Jones. When Mr Faris first addressed, he did seek to establish that there were grounds for supposing just such an abuse of power or improper purpose, at least to the extent of warranting further investigation at trial. For reasons I shall give in a moment, I agree with Mr Davies that the material filed does not establish any such thing. At a late stage in the argument, Mr Jolson contended that if David Jones, either now or at trial, were regarded as justifying the defendant going behind the assessment, the defendant could go behind the assessment for all purposes and that would include for the purpose of establishing that he had never been involved in any relevant importation or sale; and in support of his contention Mr Jolson referred to the very width of what was said by their Honours in the majority in David Jones at ATC 4330, ATR 1523 - which I have already quoted. I am not yet clear that David Jones would justify the defendant, if he could go behind the assessment, going behind it, not to show that it was in truth no real assessment, but only to argue about the underlying liability; for, by the legislation itself, that is to be dealt with by way of review or on appeal after disallowance of an objection. But it is unnecessary for me to consider the question because of my conclusion that, notwithstanding the decision of David Jones, the defendant is not entitled, in this proceeding at all events, to go behind the assessment.
I turn now to the principal argument mounted by Mr Faris that on the material filed there was evidence that the issue of the Notice of Assessment in this case and the institution by the plaintiff of this proceeding against the defendant and, indeed, his prosecution of it by the present summons for summary judgment, were tainted by abuse of power or some improper purpose. This was put not only as a serious question to be tried justifying leave to defend, but also as ground for the cross-applications for a stay. As will be seen, in my view the defendant has not made out a case of abuse or improper purpose; nor (if it matters in view of my decision that the Notice of Assessment is conclusive evidence against the defendant in this proceeding) do I think the defendant has made out a case which would warrant further investigation of the allegations at trial.
Initially, Mr Faris put the case for the defendant this way. He said that this case involved no contest on the calculations made by the Deputy Commissioner, but just a flat denial on the part of the defendant that he was involved in any way in any transactions that might have attracted sales tax along the lines referred to in the assessment. He said that the defendant did not deny that Inhelder had smuggled gold into Australia, but did deny that he had had anything to do with it. Now, with the departure of Inhelder from Australia and the likelihood that he will not return, the plaintiff might well be unable to establish any case against the defendant, Mr Faris said, and thus, as the assessment had been based, in large part at least, upon Inhelder's allegations that the gold had been delivered by him to the defendant, the plaintiff ought not to have issued the writ; or, if that was not improper, then the further prosecution of the proceeding was an abuse, now that the plaintiff must appreciate that he might not be able to prove his allegations against the defendant.
In support of his suggestion that the plaintiff was acting improperly in pursuing the
ATC 4725
defendant for amounts under the sales tax legislation, Mr Faris read Mr Pryles' affidavit of 13 June 1991 which set out, in substance, the order of events that I have already described. He further argued that by reference to the documents that had been obtained both pursuant to the request under the Freedom of Information Act and in the course of the criminal prosecution, it could be seen that the Director of Public Prosecutions and the Deputy Commissioner of Taxation were ``hand in glove''; that they had decided together that it would be the former who should seek what he called ``civil recovery'' in the criminal proceedings; and that it was a departure from that ``agreement'' for the latter now to be pursuing the defendant by way of default assessment under the sales tax legislation. Mr Faris argued that that amounted to harassment of the defendant while he was awaiting trial at the instance of the Crown and he said that it was no coincidence that the writ had issued on the very date on which the ticket was purchased for Mr Inhelder's departure from Australia. He pointed to the restraining orders that had been obtained by the Director of Public Prosecutions and that were in aid, he said, of ``civil recovery'' in the criminal proceedings and he contended that now that the criminal proceedings were less likely to succeed, if indeed they proceeded at all, the Deputy Commissioner was acting, not bona fide in the exercise of his own powers under the sales tax legislation, but merely at the behest of the Director of Public Prosecutions to shore up what Mr Faris described as the latter's ``strategy against the defendant''. All this, he said, warranted further investigation at trial and thus leave to defend, or, alternatively, he submitted it justified a stay of this proceeding as an abuse of power on the part of the plaintiff.Mr Davies argued that the material scarcely justified what Mr Faris put by way of submission. He argued that there was no material which was sufficient to indicate any abuse of power or mala fides on the part of the plaintiff, and I agree. For instance, the material falls far short of establishing any ``agreement'' between the Director of Public Prosecutions and the Deputy Commissioner of Taxation that it should be the Director of Public Prosecutions who was to act against the defendant; and, in any event, there was no evidence that the Deputy Commissioner of Taxation, in pursuing the defendant in this proceeding, was acting either in breach of the so-called agreement with the Director of Public Prosecutions or only because the so-called strategy of the Director of Public Prosecutions against the defendant was collapsing with the absence from Australia of Mr Inhelder. Indeed, the mere fact that one of two parties having rights against another chooses, or even agrees (otherwise than with that other) not to pursue those rights for the time being, confers no immunity on that other. Mr Davies pointed out that even if, as happened, the writ was issued on the very day on which Inhelder's ticket to leave Australia had been purchased by the Federal Police, there was evidence that there had been a letter sent in October 1990 by the plaintiff to the defendant warning that proceedings would be instituted if the amount of the assessment was not paid. As Mr Davies put it (and I agree), there is nothing in the material to indicate that the plaintiff has taken any steps other than the ordinary steps by way of recovery consequent upon disallowance of the objection.
When the assessment was issued, Mr Inhelder's allegations involving the defendant had been made and the assessment was at least occasioned by those allegations and probably based in large part upon them. There seems to me no improper purpose or abuse of power in the issue of the Notice of Assessment. Once the assessment was issued, then upon non-payment it was surely open to the Deputy Commissioner of Taxation to issue the writ for recovery of the amounts in the assessment, relying upon the ``conclusive evidence'' provisions in the relevant legislation, and the absence or presence of Inhelder at that stage did not matter. Moreover, the legislation entitles the plaintiff to recover the amount of the assessment notwithstanding the institution of proceedings by way of review or appeal and notwithstanding that those proceedings have not yet been resolved, and in those circumstances I do not see that the issue of the writ in this proceeding or, indeed, the filing of the summons for summary judgment can be said in some way to constitute an abuse of power or to have been done for an improper purpose. In short, I see no irregularity in what the Deputy Commissioner has done in the issuing of the assessment or since; nor, in my view, has the defendant raised an issue in that
ATC 4726
regard that would warrant the matter going to trial for further investigation.For these reasons, what was argued as evidence of an abuse of power or some improper purpose on the part of the plaintiff is, in my view, neither ground on which to grant leave to defend, nor ground for a stay.
I turn now to the balance of the argument advanced on behalf of the defendant for a stay. There was some argument advanced that there should be a stay pending determination of the criminal proceedings because the defendant was necessarily inhibited thereby from fully answering the plaintiff's claim in this proceeding. In this connection, I was referred to four cases:
Jefferson Ltd v. Bhetcha [1979] 2 All ER 1108;
McMahon v. Gould (1982) 1 ACLC 98, (1982) 7 ACLR 202;
FC of T v. Ahern (1986) 17 ATR 535; and in this Court
Philippine Airlines v. Goldair (Aust.) Pty Ltd & Ors [1990] VR 385. In the end, it is unnecessary to consider the argument because it was put on only two bases. First, that the defendant could be permitted to go behind the assessment - and that I have rejected. Secondly, that the defendant could not be expected to go on oath in this proceeding while awaiting trial in the County Court - and by the time the argument had concluded the defendant had sworn two affidavits and was relying on both of them.
The main contention put by the defendant was that there should be a stay pending determination of the defendant's challenge to the assessment now awaiting a hearing by the Administrative Appeals Tribunal. I have already dealt with abuse of power or improper purpose as ground for such a stay, and I have rejected that. As for the rest of the argument, that was put fairly generally by way of appeal to the discretion which it was said this Court retains in cases like the present, and by reference to what was characterised as the severe personal hardship faced by the defendant if a stay were refused.
The starting point of this argument must be s. 43 of the Sales Tax Assessment Act (No. 1) which is rendered applicable here by Assessment Act (No. 6). Section 43(1) reads as follows:
``(1) The fact that a review or appeal is pending in relation to an assessment or refund decision does not in the meantime interfere with, or affect, the assessment or refund decision and sales tax may be recovered as if no review or appeal were pending.''
By s. 43(4) the expression ``sales tax'' includes additional tax, whether levied under s. 45 or under s. 29.
Putting on this s. 43 the like interpretation to that already placed on the similarly worded s. 201 of the Income Tax Assessment Act, s. 43 entitles the Commissioner to recover sales tax, including additional tax otherwise due and payable, notwithstanding that proceedings by way of appeal or review have been instituted and are still unresolved in relation to the assessment upon which the Commissioner's claim depends. The mere fact that a challenge to the underlying assessment has been mounted and remains unresolved is no ground in itself for denying recovery of the amount of the assessment in the meantime. Nonetheless, the Court retains a general power to grant a stay of proceedings or of execution, in appropriate circumstances. In
DFC of T v. Australian Machinery and Investment Co. Pty Ltd (1945) 8 ATD 133 at 135, Latham, C.J. said:
``My brothers Rich, Dixon and Williams and myself are of opinion that the contention that there is no jurisdiction to grant a stay in these proceedings by reason of the provisions of the Income Tax Assessment Act, s. 201 and the associated sections should not be accepted. We are of opinion that there is jurisdiction to grant a stay in such proceedings, but that in considering any application for a stay the policy of the Act as stated in s. 201 is a matter to which great weight should be attached.''
It is interesting to observe that in that case the Court did grant a stay upon payment by the defendant of a portion of the amount claimed and an undertaking by the defendant not to dispose of assets otherwise than in the ordinary course of business. See also
Marina Estates Pty Ltd v. DFC of T 74 ATC 4166 at 4169, (1974) 48 ALJR 219 at 220;
DFC of T v. Mackey 82 ATC 4571 at 4572, (1982) 64 FLR 432 at 433, (1982) 45 ALR 284 at 285;
Snow v. DFC of T 87 ATC 4078 at 4090-4094, (1987) 14 FCR 119 at 135-139, (1987) 70 ALR 672 at 689-693,
Held v. DFC of T 88 ATC 4315 at 4321, (1988) 19 ATR 1213 1215. It is from this last, the decision of the Full Court in
ATC 4727
Victoria, that I take the relevant statement of principle (at ATC 4321, ATR 1214-1215):``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. DFC of T 87 ATC 4078 at pp. 4093-4094; (1987) 70 ALR 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 my mind, it is their Honours' last sentence in the passage I have quoted that is the most significant for present purposes. It may be readily accepted that special circumstances must exist to justify a stay, but every case must depend upon its own facts and circumstances; for the power to grant a stay is discretionary. Many of the cases to which I was referred were no more than examples of particular facts and circumstances giving rise in the event to an exercise of the discretion in a particular way. It may be remarked that in
Re Roma Industries Pty Limited 76 ATC 4113 at 4116, (1976) 1 ACLR 296 at 299, Bowen, CJ. in Eq. said of s. 201 that whatever its merits or demerits, ``it will generally lead the Court to refuse a stay''; but in
Fortuna Holdings Pty Ltd & Ors v. DFC of T 76 ATC 4312 at 4326, (1978) VR 83 at 101, McGarvie, J. doubted that he would have reached the same conclusion as the learned Chief Judge. In the view of McGarvie, J., the decisions that were cited in that case suggested no more than that sometimes the courts were led by the circumstances to grant a stay and sometimes, to refuse a stay. To my mind, that serves to emphasise what must be remembered - that in this area one must approach with caution any argument resting largely upon the result in some other case which necessarily turned upon different facts and circumstances.
This had particular point in the argument put to me. I was referred to a great number of cases and to those already mentioned I now add the following:
DFC of T v. The Hell's Angels Ltd 84 ATC 4545 and 4548, 15 ATR 812 (Beach, J.);
DFC of T v. Ewen 84 ATC 4550, (1984) 15 ATR 818, (O'Bryan, J.);
DFC of T v. Smith 87 ATC 4742 (Southwell, J.);
DFC of T v. Yosemite Afforestation Pty Ltd 88 ATC 4505, (1988) 19 ATR 1326 (Murphy, J.);
Cywinski v. DFC of T 89 ATC 4512, [1990] VR 193 (F.C.); and DFC of T v. Cameron 91 ATC 4056 (Kaye, J.) - and I had reference also to the recent judgment of Cummins, J. in
DFC of T v. Gergis [91 ATC 4510]. I was then pressed, for instance, with the decision in Ewen, supra, where the alleged taxpayer, who carried on the business of raising and breeding horses, claimed to be facing insolvency if required to pay the tax claimed while his challenge to the assessment was still unresolved, but a stay was refused; and I was pressed also with the actual decision in Held, supra, where again a stay was refused although the taxpayer claimed that paying the tax while his appeal was pending would destroy all his business activity. In both these cases it may be said that there was obvious hardship in requiring the taxpayer to pay on the Commissioner's assessment while the challenge to that assessment remained unresolved, yet in neither was a stay granted. However, on examination of the judgments, in both cases the Court pointed to the paucity of the material relating to the financial position of the applicant for the stay and neither case, in my respectful view, can be taken to have established that the circumstances dealt with could not, if established by appropriate material, justify a stay. See and cf Mackey 82 ATC at 4574, 64 FLR at 436 per Moffitt, P.
I have mentioned Ewen and Held out of the many cases to which I was referred because in the present case the defendant relies upon the effect of the plaintiff's present claim on his business activities. The plaintiff's claim is for payment of what is, on any view, a vast sum, particularly when claimed from an individual; and the defendant is a businessman whose assets, according to the material filed, are already heavily pledged as security in
ATC 4728
connection with various trading activities. He has insufficient assets to pay the sum claimed, it is said, and despite some indications to the contrary in some of the cases to which I was referred, I should have thought that extreme personal hardship is much more likely to be demonstrated when an alleged taxpayer does not have the means to pay than when he does. That one who does have the means to pay should be required to pay a debt which, upon review, may be effectively cancelled must at least be inconvenient for the taxpayer, although perhaps no more than inconvenient where assets are available to meet the obligation; and it has been said (and repeated) that the mere obligation to pay which is created by the legislation is not in itself hardship. But where the alleged taxpayer does not have the assets to meet the claim, or at least does not have the assets without the destruction of his business activities or, perhaps, without the sale of something irreplaceable like a long-established family home, it seems to me much more probable that extreme personal hardship can be demonstrated: see and cfFC of T v. Myer Emporium Ltd 86 ATC 4222 at 4223-4224, (1986) 160 CLR 220 at 222-223 and
DFC of T v. Chamberlain 86 ATC 4420, (1986) 83 FLR 387 (which were cited by Cummins, J. in Gergis, supra); and in this regard I refer also to what was said by Mason, A.C.J. in
Clyne v. DFC of T 82 ATC 4510 at 4512, (1982) 56 ALJR 857 at 858 (1982) 43 ALR 342 at 344 in a passage which is set out in Snow, supra, at ATC 4091, FCR 136, and which I shall therefore not set out again.
It is unnecessary in this case, and it should, one might hope, be unnecessary in most cases to explore the position that would arise if the Deputy Commissioner of Taxation were to seek to bankrupt an alleged taxpayer while his challenge to the assessment in question remained unresolved by the review and appeal processes which are permitted by the legislation; as to this, see, for example, Clyne v. DFC of T 83 ATC 4532, (1983) 57 ALJR 673, affirming the Full Court of the Federal Court (82 ATC 4690, (1982) 45 ALR 323) affirming in turn the decision of Lockhart, I. (82 ATC 4349, (1982) 42 ALR 703);
Re Verma; ex parte DFC of T 84 ATC 4864, (1984) 4 FCR 181 and cf Fortuna Holdings, supra. If bankruptcy proceedings are instituted, based upon a judgment for the amount of the assessment under challenge, much may turn ultimately on the attitude of other creditors, rather than of the Commissioner himself while the assessment remains under challenge. But, unless restrained, the Commissioner is entitled to initiate such proceedings and thereafter it is the Bankruptcy Court that is in charge of the ultimate result. That this should be so on the petition of one whose debt is subject to ``a cross-claim of an equal amount'' (as the position was characterised by McGarvie, J. in Fortuna Holdings) seems to me to warrant careful consideration when the alleged taxpayer asks this Court for a stay pending resolution of his challenge to the assessment upon which the Commissioner is moving.
The hardship facing an alleged taxpayer is perhaps the greater in a case like the present where the assessment is a default assessment. For the Commissioner it was said, quite correctly, that the legislation, and in particular s. 43, draws no distinction between the different types of assessment. In the case of all alike, the Commissioner is entitled by s. 43 to insist upon payment without waiting upon the resolution of any outstanding challenge to the underlying assessment. Nevertheless, it is not only that the taxpayer's prospects of success on his challenge to the assessment may in some cases constitute a relevant matter; it has been said that the exercise of the discretion to stay may in some cases involve an examination of ``the nature and basis of the liability on which the disputed tax has been assessed and the nature of the dispute'': see Mackey 82 ATC 4571 at 4574, 64 FLR 432 at 436, 13 ATR 547 at 550 per Moffitt, P., in a passage cited with approval by Kaye, J. (with whom Gobbo, J. agreed) in Cywinski 89 ATC at 4515, [1990] VR at 196-197. It is obvious enough that a default assessment will often be a good deal less precise than an assessment made on full information, for in such cases the Commissioner or his delegate is empowered to make an assessment of the amount on which the tax ought to be levied and often in the absence of any books or records whatsoever in relation to the liability. As Latham C.J. said in
Trautwein v. FC of T (1936) 4 ATD 48 at 62, (1936) 56 CLR 63 at 87, in such circumstances ``it would often be quite impossible to make a correct assessment. The assessment would necessarily be a guess to some extent, and almost certainly inaccurate in fact''. The
ATC 4729
assessment is nonetheless prima facie correct and remains correct until the taxpayer, the alleged taxpayer, shows that it is wrong: as to which see generallyFC of T v. Dalco 90 ATC 4088, (1989-1990) 168 CLR 614. Surely it cannot be altogether irrelevant to the application for a stay that the assessment can be properly characterised as almost necessarily incorrect, ``a guess to some extent'' or ``almost certainly inaccurate in fact'' - although where the taxpayer has brought the difficulty upon himself (for instance, by unlawfully failing to lodge returns), there may be countervailing considerations: for example, see Hell's Angels Ltd, supra.
In this case, I make the point because of the way in which the assessment in question was raised by the plaintiff against the defendant. Whatever was the totality of the information relied upon by the plaintiff in raising the assessment in the first place, it was common ground that the assessment was occasioned by Inhelder's assertions, first that he had smuggled gold into Australia on a number of occasions which he identified and then that he had on each occasion handed the gold over to the defendant. This latter and fundamental allegation is denied by the defendant. None the less, the Deputy Commissioner of Taxation is entitled by the legislation to raise a default assessment against the defendant and I have already said that in his doing so I see no abuse of power or improper purpose. But the issue before the Administrative Appeals Tribunal is whether the defendant is correct or not in his denial: did he, in truth, have nothing to do with the gold that was imported? If that be established, the occasion for the assessment collapses and, I assume at this stage, the basis for the assessment disappears. At all events, that is what the defendant asserts in this proceeding. The affidavit material establishes some ground for the assertion and the Commissioner has not sought to put in any material in answer.
Now, the allegations of Inhelder against the defendant are largely untested, yet it is on such allegations that the plaintiff now claims to recover from the defendant more than $2.5m. Such a case seems to me to be very different from that where the parties are substantially in agreement on the facts of a particular transaction or transactions and are in dispute only upon the proper characterisation of some receipt as income or capital, for instance, or of some payment as an allowable deduction or not. Certainly, this case seems to me very different from that of a scheme for tax avoidance or tax minimisation, a scheme that in some of the cases is called a ``contrivance'', where the parties are in dispute, not about the underlying facts of the transaction in question, but about the effectiveness or not of the scheme as avoiding taxation liability. In such cases of contrived schemes the court appears reluctant to grant a stay, and that is perhaps not surprising; for example, Mackey, Held and Yosemite Afforestation, supra. In this regard, the circumstances of Smith, supra, are perhaps nearer to the present because in that case the alleged taxpayer sought to defer judgment for the amount of the assessment on the ground that he was not resident in Australia in the relevant years and had earned no income in Australia, and that therefore there was no basis upon which valid assessments could have been made. Southwell, J. rejected this as a ground for denying judgment to the plaintiff. His Honour rested the decision on s. 177(1) of the Income Tax Assessment Act and the decision in Bloemen, rejecting an argument that the operation of that section could be avoided where it might be said that the assessment went ``close to guess work, might be inexact or was perhaps incorrect''. But in Smith a stay was not sought and it is in relation to a stay that it seems to me that such considerations might become material (although contrast
DFC of T v. Manners & Anor 85 ATC 4294 at 4296, (1985) 16 ATR 726 at 733 (J.H. Phillips, J.)).
In short, I think that there is much to be said in this case for the claim by the defendant that if he is required to pay $2.5m while his appeal to the Administrative Appeals Tribunal remains unresolved, he will suffer extreme personal hardship. The case of the plaintiff depends in large part upon the assertions of Inhelder, so far as I can presently tell, and, without in any way attempting to assess the alleged taxpayer's chances of success on the appeal, it is obvious that Inhelder's assertions against the defendant are still largely untested and are denied by the defendant. The payment of $2.5m by a man whose assets may well be insufficient, but whose assets are in any event already heavily pledged in support of his business activities, might point fairly obviously, I should have thought, to extreme personal hardship. There
ATC 4730
is, however, evidence that much of the defendant's business activity has already been significantly inhibited by the existence of the restraining orders made from time to time by this court under the Proceeds of Crime Act, and I turn therefore to these.In my opinion, the existence of a current restraining order makes a great deal of difference to the defendant's application for a stay. The orders that have from time to time been made effectively ``freeze'' the assets of the defendant by putting them in the control of the Official Trustee in Bankruptcy. The assets are no longer available to the defendant, save that he is permitted by the terms of the order which is current to deal in some items of jewellery in the ordinary course of business. So long as the current restraining order remains in place, the Deputy Commissioner of Taxation accepts (I was told by his counsel) that he cannot properly complain of the non-payment by the defendant of the tax here in question. So, if judgment be recovered, what point is there to a stay? In his submissions, Mr Davies accepted that the plaintiff's first step after judgment must be to mount some application under the Proceeds of Crime Act, presumably to vary or modify the comprehensive effect of the restraining order at present in force, in order to permit the defendant to utilise assets to effect, if he can, payment of the amounts now claimed; yet it is by no means clear to me that such an application will succeed:
DFC of T & Anor v. Kunz 90 ATC 4977 (Vincent, J.). Be that as it may, until the effect of the restraining order is in some way altered or until the restraining order itself is spent and not renewed, there is little point in staying the execution of any judgment entered, and if I were to stay execution I would perhaps prejudice the plaintiff's applying under the Proceeds of Crime Act.
In these circumstances, I think that the only proper course at this stage is to refuse the application for a stay, but without prejudice to the defendant's renewing it at any time should the existence or not of a stay become significant or threaten to become significant. I have said that in my view there may well be grounds for a stay in this case, but much, of course, will depend upon the sufficiency of the material by then filed, if and when the application is renewed. Plaintiff's counsel made trenchant criticism of the material which is presently before me. The material was cobbled together as the application progressed and in many respects it was unsatisfactory; but, in the event, that does not matter as I have decided to refuse the stay on the ground that a stay would not serve any practical purpose at this juncture - and will not serve any purpose until the restraining order either lapses or its effect is in some way varied or modified.
Finally, in a case like the present, I do not doubt the power in the Court to stay the proceeding or to stay execution on any judgment entered. So much appears to be well established by the authorities to which I have already referred. It was argued by his counsel that in this case the real hardship to the defendant lies, not so much in having to pay any judgment entered, but in suffering judgment in the first place. It was said that, according to the affidavit material filed, the entry of judgment would itself cause the bank to call in all of the loans outstanding (and in relation to which the plaintiff was liable in some way, whether as a guarantor or otherwise) and to sell up all his assets, but I am not persuaded of this. The material is scarcely convincing. The bank has apparently seen fit to support the defendant hitherto, notwithstanding his current dispute with the plaintiff over the amount of the assessment here in question and notwithstanding that he is still awaiting trial on serious criminal offences and, of course, notwithstanding also the considerable inhibition to his business activities occasioned by his being on bail and the existence of successive restraining orders under the Proceeds of Crime Act. I doubt if the bank, which thus far has been willing to continue its support of the defendant, will take fright at the mere entry of judgment in circumstances where any further step against the defendant or his assets appears to be effectively precluded while the current restraining order remains in place and, should the stay become necessary, the defendant's right to apply therefor is reserved.
In so reserving the defendant's right to apply for a stay, I make it plain that I do not prejudge that application, if and when made. It will be entirely a matter for the judge before whom the application comes and it will depend upon the material then filed and perhaps what undertakings, if any, should be sought from the defendant once the restraining order is not as effective as it is at present. I have said no more
ATC 4731
in the course of this judgment than that such an application for a stay, if and when made, might be resolved in the defendant's favour and I think it follows that the bank might see no need to anticipate the worst. If I may say so, what is obviously now called for is the speedy resolution of the outstanding criminal proceedings and also the speedy resolution of the outstanding review by the Administrative Appeals Tribunal. I am reminded that the latter falls for mention on Monday next.For the reasons that I have given, I propose to enter summary judgment against the defendant on the application of the plaintiff. The plaintiff has made out its case and I see no justification for leave to defend, nor do I see any justification to stay the proceeding prior to judgment. However, the application for a stay of execution is refused, not on the merits, but because it is not needed so long as the restraining order remains in place and its effect is unvaried. Therefore I propose to dismiss the application for a stay of execution, but without prejudice to the right of the defendant to renew the application at any time and on such material as may then be filed.
I will discuss with counsel the precise orders to be made on each of the four summonses before me and the question of costs, but I suggest that on the plaintiff's summons for summary judgment filed on 1 February 1991 there should be judgment for the amount claimed and interest to the extent permitted under the Supreme Court Act; that the defendant's summons dated 20 March 1991 be dismissed and that on the defendant's summons dated 7 June 1991 the application for a stay generally be dismissed without prejudice to the right of the defendant to renew his application for a stay of execution at any time and on such material as he may be advised. As for the subpoena that was the occasion for the issue of the plaintiff's summons dated 24 June 1991, that was in the event not relied upon by the defendant in argument and there was, therefore, no occasion for me to consider the summons to strike it out. The summons should, I think, be dismissed if, as I suppose, the defendant accepts that the subpoena no longer has any force or effect.
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