Brewer & Ors. v. Deputy Federal Commissioner of Taxation & Ors. (No. 2).

Judges:
Needham J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 7 January 1980.

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Needham J.

On 4 January last I delivered judgment in proceedings between the plaintiffs in these proceedings, the Deputy Commissioner of Taxation and The National Bank of Australasia Limited in which I held that certain notices given by the Deputy Commissioner to the bank based upon sec. 38(1)(c) of the Sales Tax Assessment Act No. 1 were invalid. The basis upon which I held that the notices were invalid was that a bank,

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in which a person other than the taxpayer has a current account, is not a ``person who holds or may subsequently hold money on account of some other person for payment to a taxpayer''. This conclusion is based upon the principle that where there is a current account held by a person with a bank, the relationship between the parties is that of creditor and debtor, and the bank cannot be said to hold money on account of the person who is the proprietor of the current account.

The objections taken by the plaintiffs to the notices were many, including a number of formal objections. These proceedings were argued on 3 January and I stood them over until the following morning and then gave oral judgment, making a declaration that the notices were invalid on the basis to which I have referred. I specifically refrained from dealing with any of the formal objections as it seemed to me that the determination of the matter of principle was, so far as the parties were concerned, of greater importance.

Shortly after the judgment was given, further notices were served upon the bank and these proceedings were immediately commenced by the plaintiffs for injunctive and declaratory relief in respect of these two further notices. The matter came on before me in the afternoon of Friday, 4 January, but as it appeared that there might be some extensive argument about the matter, I was unable to hear it then but stood it over until this morning.

For the Deputy Commissioner it was conceded that the notice which is annexure B to the affidavit of Mr. Brewer sworn on 4 January 1980 was within the principles which I have stated in my earlier judgment. This morning, however, the Commissioner sought to justify the notice which is annexure A to that affidavit. The critical part of the notice, which is in the same form generally as the notices the subject of the previous decision, is a description of the bank as a ``person who holds or may subsequently hold money on account of Richard J. Brewer as trustee for the Richard J. Brewer trust account for payment to Pepora Pty. Limited''. It was suggested by counsel for the Commissioner that such a notice stood in a different context from the notices the subject of the earlier decision, because the account was a trust account, the proprietor of which being Mr. Brewer, the result being that Mr. Brewer held money on trust for some person or body. The Commissioner indicated that he wished to establish that that person or body was the taxpayer, namely Pepora Pty. Limited.

However, counsel for the Commissioner agrees with the analysis of the notice to this effect: that the bank has, in the name of the Richard J. Brewer trust account, a current account, the proprietor of which is Richard J. Brewer. It is only when one goes to the further legal relationship between Mr. Brewer and somebody else that a trust can be seen to arise. The relationship between Mr. Brewer, as proprietor of that current account, and the bank, is in my opinion precisely the relationship which was under consideration in the judgment I gave on Friday.

For these reasons I have declined to permit the Commissioner to investigate the relationship between Mr. Brewer, as proprietor of that trust account, and any other person, being of the view, as I expressed in the previous judgment, that the critical relationship for the purposes of sec. 38(1)(c) is the relationship between the bank and the proprietor of the current account. For the reasons which I then gave, I am of the view that each of these notices is invalid and I would propose to make a declaration to that effect.

I declare that two notices under sec. 38 of the Sales Tax Assessment Act No. 1, served by the Deputy Commissioner of Taxation on The National Bank of Australasia Limited, 340 George Street, Sydney, on 4 January 1980, copies of which are annexed and marked respectively A and B to the affidavit of Richard James Brewer sworn on 4 January 1980, are each invalid.

(Counsel addressed on costs.)

His Honour: So far as costs are concerned, the first and second defendants, that is the Deputy Commissioner and Commissioner of Taxation, submit that because the summons in this matter sought injunctions, both inter-locutory and final, against those defendants giving notices to the bank pursuant to sec. 38 of the Act in respect of the three accounts of which the respective proprietors are the plaintiffs, some part of the costs of the first

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and second defendants should be paid by the plaintiffs.

It is conceded that the summons sought a declaration that notices of the kind referred to in the prayer for an injunction in respect of the accounts referred to in that prayer were null and void, but it is submitted on behalf of those defendants that the principal expense to the defendants in these proceedings related to the claim for an injunction which, it was thought, was based upon a claim that the Commissioner was acting in abuse of the Court's procedures.

I think that the fact that the plaintiffs have been successful in their claim for a declaration prima facie entitles them to their costs, and I can only deprive a successful party of costs if there is some substantial reason for doing so. I do not think that the claim for other orders is such a substantial reason. It is conceivable that, in view of the terms of the judgment I gave on 4 January, the plaintiffs could be entitled to an injunction against the Commissioner, but that matter has not been determined because it has been plain, in my opinion, that the plaintiffs were entitled to a declaration. The reason why the plaintiffs sought orders against the bank on this occasion, so I am told, is that the plaintiffs were unaware when they commenced the proceedings whether the Commissioner of Taxation would appear and that, if the Commissioner had not appeared, some application would have had to have been made for service of the summons on short notice. It was thought by the plaintiffs that in those circumstances an ex parte injunction against the bank from acting upon the notices would be sought, and that that is the reason for the claim in para. (2) of the summons.

I think the essential fact is that these proceedings were made necessary by the actions of the Deputy Commissioner of Taxation, and I do not think that any of the matters to which I have referred would be sufficient reason to deprive the plaintiffs of their costs of the proceedings.

Accordingly, I order that the first and second defendants pay the costs of the plaintiffs, including the costs which the plaintiffs should pay to the third defendant.

ORDER:

Declaration that the Notices issued are invalid and null and void and of no effect. The first and second defendants to pay the costs of the plaintiffs, including the costs which the plaintiffs should pay to the third defendant (the bank).