Federal Commissioner of Taxation v Grimaldi and Others (No 7)

[2009] FCA 768
76 ATR 545

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(Judgment by: Graham J)

Federal Commissioner of Taxation
vGrimaldi and Others (No 7)

Court:

Judge:
Graham J

Legislative References:
Income Tax Act 1986 - s 5(1); s 7
ITAA 1936 - Section 175
Income Tax Rates Act 1986 - s 12(1)
Taxation Administration Act 1953 - Part IVC
Judiciary Act 1903 - s 39B
Federal Court of Australia Act 1976 - s 31A
Federal Court of Australia Act 1976 - Section 31A
Criminal Assets Recovery Act 1990 - s 7; s 10

Case References:
McAndrew v Federal Commissioner of Taxation - [1956] HCA 62
McAndrew v Federal Commissioner of Taxation - (1956) 98 CLR 263; [1956] ALR 1008
FJ Bloemen Pty Ltd v Federal Commissioner of Taxation - (1981) 147 CLR 360; 55 ALJR 451; 35 ALR 104; 11 ATR 914; 81 ATC 4280
FJ Bloemen Pty Ltd v Federal Commissioner of Taxation - [1981] HCA 27
Webb v Federal Commissioner of Taxation (No 2) - (1993) 47 FCR 394; 125 ALR 523; 27 ATR 459; 93 ATC 5123
Deputy Commissioner of Taxation v Clyne (1982) - 60 FLR 45; 12 ATR 738; 82 ATC 4070
Commonwealth v Opiel - (1986) 18 ATR 374; 86 ATC 5013
Deputy Commissioner of Taxation v Richard Walter Pty Ltd - [1995] HCA 23
Deputy Commissioner of Taxation v Richard Walter Pty Ltd - (1995) 183 CLR 168; 69 ALJR 223; 127 ALR 21; 29 ATR 644; 95 ATC 4067
Syngenta Crop Protection Pty Ltd v Federal Commissioner of Taxation - [2005] FCA 1646
Syngenta Crop Protection Pty Ltd v Federal Commissioner of Taxation - [2008] ALMD 422
Syngenta Crop Protection Pty Ltd v Federal Commissioner of Taxation - (2005) 61 ATR 186
Richardson v Federal Commissioner of Taxation - [1932] HCA 67
Richardson v Federal Commissioner of Taxation - (1932) 48 CLR 192
Deputy Commissioner of Taxation v Moorebank Pty Ltd - (1988) 165 CLR 55; 62 ALJR 372; 78 ALR 641; 19 ATR 1156; 88 ATC 4443
Theseus Exploration NL v Foyster - [1972] HCA 41
Theseus Exploration NL v Foyster - (1972) 126 CLR 507; 46 ALJR 448; [1972-73] ALR 839
General Steel Industries Inc v Commissioner for Railways - [1964] HCA 69
General Steel Industries Inc v Commissioner for Railways (NSW) - (1964) 112 CLR 125; 38 ALJR 253; [1965] ALR 636
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd - [2006] FCA 1352
Boston Commercial Services Pty Ltd v GE Capital Finance Australasia Pty Ltd - [2007] ALMD 1936
Boston Commercial Services Pty Ltd v GE Capital Finance A/asia Pty Ltd - (2006) 70 IPR 146; 236 ALR 720
Hocking v Bell - (1945) 71 CLR 430
Paramasivam v University of New South Wales - [2007] FCA 875
White Industries Aust Ltd v Federal Commissioner of Taxation - [2007] FCA 511
White Industries Australia Ltd v Federal Commissioner of Taxation (2007) - 2007 ATC 4441; 240 ALR 792
White Industries Aust Ltd v Federal Commissioner of Taxation - 160 FCR 298
White Industries Australia Ltd v Federal Commissioner of Taxation - 66 ATR 306

Hearing date:
Judgment date: 13 July 2009

Sydney

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Judgment by:
Graham J

Ex tempore

[1] Earlier today judgments were given for the applicant against each of the first and second respondents in accordance with s 31A of the Federal Court of Australia Act 1976 (Cth). The judgment against the first respondent was for $36,341,461.73 and the judgment against the second respondent was for $3,552,577.81. In each case an application has been made for a stay of execution pending the resolution of other issues in relation to tax liability.

[2] In Deputy Cmr of Taxation v Warrick (No 2) (2004) 56 ATR 371 ("Warrick (No 2)"), French J, as his Honour then was, dealt with a generally similar application to those presently made by the first and second respondents. His Honour ordered, amongst other things, that there be judgment for the Deputy Commissioner of Taxation in that case, in the sum of $1,429,791.03, together with further general interest charges to be assessed. His Honour stayed the execution of the judgment until 28 January 2005, or such earlier date as may be ordered. That stay was ordered by His Honour on 13 July 2004; that is to say, he stayed the execution of the judgment for a period of a little over 6 months, subject to an earlier order shortening the period.

[3] In his reasons for judgment at [105], his Honour set out factors relevant to the question of whether or not a stay of recovery proceedings should be ordered, which he drew from his judgment in Snow v DCT (1987) 14 FCR 199. The relevant factors were as follows:

1.

The policy of the ITAA 1936 as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.

2.

The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.

3.

The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion.

4.

Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.

5.

A stay may be granted in the case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.

6.

The mere imposition of the obligation to pay does not constitute hardship.

7.

The existence of a request for reference of an objection for review or appeal is a factor relevant to the exercise of the discretion.

[4] Earlier today, in giving my reasons for judgment referable to the judgments mentioned earlier [see Commissioner of Taxation v Grimaldi (No 5) [2009] FCA 765], I referred to passages from the judgment of Brennan J, as his Honour then was, in Deputy Cmr of Taxation (Cth) v Richard Walter Pty Ltd (1995) 183 CLR 168 ("Richard Walter") at pp 201-202. As his Honour observed, as, indeed, did Dixon J, as his Honour then was, in Richardson v FCT (1932) 48 CLR 192 at 207, the coexistence of tax liabilities in two or more taxpayers in respect of the same income is attended with difficulty. Sometimes the difficulty will be removed by the objection, review and appeal procedures, where the taxpayer will establish the facts in order to establish that the assessment is excessive.

[5] His Honour also observed that the appropriateness of alternative assessment to tax of two taxpayers in respect of the same item of income was recognised in a dictum of the High Court in Deputy Cmr of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55 at 67. The courts, if not the Commissioner, can diminish the difficulty of concurrent assessments by ensuring that there is no double recovery of tax (see per Brennan J in Richard Walter at 201-202).

[6] This is not a case of the coexistence of tax liabilities in two or more taxpayers in respect of the same income, although it is arguably the case that that would occur if a like judgment was entered against the fourth respondent as has been given against the first respondent. Sections 14ZZM and 14ZZR of the Taxation Administration Act 1953 (Cth) make it clear that recovery should not be delayed by outstanding decisions on applications for review or appeal. Section 14ZZM provides:

The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.

A like provision in relation to an appeal to this court is to be found in s 14ZZR.

[7] In Deputy Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432, the Court of Appeal in New South Wales considered an application for leave to appeal, and if leave was granted, an appeal from an order of the primary judge in that matter (Deputy Federal Commissioner of Taxation v Mackey (1982) 82 ATC 4540) staying proceedings in respect of a claim for the recovery of tax assessed in respect of the year ended 30 June 1978 and interest, together with a small additional sum which constituted a penalty.

[8] In that case Hutley JA said in his reasons for judgment at 437-438:

... there are only two cases where it is clear the court should exercise that [special] discretion. First, the comparatively rare case where the Commissioner abuses his position ... 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.

[9] At this stage no evidence has been tendered in support of the application for a stay to suggest any impecuniosity on the part of either of the first or second respondents. Whilst their assets may be affected by freezing orders there is no suggestion of extreme personal hardship founded upon the evidence which is presently before the court. Neither of the judgment amounts has been paid pursuant to the assessments which have provided the basis for the judgments as given, nor has any part thereof been paid. In the case of the first respondent reference has been made to a decision of the Commissioner in his role as superannuation regulator that the fund of which the fourth respondent is trustee has been found to be non-compliant in the 2006 income year.

[10] In such circumstances there is a possibility that the current assessments directed at the fourth respondent will be replaced by further amended assessments calling for the payment of a greater amount of tax. The suggestion is put by the first respondent that if the fourth respondent is subjected to a liability to tax then it may be inferred that any liability of the first respondent will abate accordingly. This does not necessarily follow.

[11] It does not seem to me that this is a case where a stay of proceedings in respect of the recovery of the judgment sum should be ordered in relation to the first respondent on the evidence presently before the court having regard to the principles enunciated by French J in Warrick (No 2) and the terms of the relevant sections in the Taxation Administration Act.

[12] In relation to the second respondent reliance is placed upon the fact that objections were lodged as recently as Friday, 10 July -- that is to say, three days ago -- which are awaiting objection decisions from the applicant. The suggestion is that there should be a stay pending the determination of those objections and, if they are brought, applications for review or appeals referrable to objection decisions that may be anticipated in due course. Warrick (No 2) was an unusual case in that objections had been lodged and a lengthy period of time had elapsed within which the Commissioner had failed to determine the objections. His Honour seems to have been influenced by the fact that a reasonable amount of time needed to be allowed for the Commissioner to make determinations or be deemed to have made a determination refusing the objections and a period within which a review process could then be instituted.

[13] The second respondent's case for a stay presently before me does not, in my view, pass the test enunciated by French J in Warrick (No 2). Reference has also been made to an advice upon which it is said that the second respondent acted. There is no evidence that the advice was sought by and given to the second respondent nor is there any evidence that the second respondent acted strictly in accordance with the advice in conducting his affairs as he did. In my opinion, neither basis for a stay advanced by the second respondent has been made good.