Cywinski v. Deputy Federal Commissioner of Taxation

Members:
Fullagar J

Tribunal:
Supreme Court of Victoria

Decision date: Judgment handed down 24 June 1988.

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Fullagar J.

This is an appeal from an order of a Master made on 1 June 1988 by which he ordered that the plaintiff, the Deputy Commissioner of Taxation, recover against the defendant $453,753.29 with interest in the sum of $29,584.53 and refused a stay of execution.

The matter comes before me in the Practice Court and, at the outset, I indicated my opinion that it was unsatisfactory to have appeals of this nature determined here.

I have listened to a very careful examination of the affidavits, a long argument by Mr Merkel and citations from what is to me a most astonishingly large mass of authority upon how a wide judicial discretion ought to be exercised. I have been referred, amongst other cases, to
D.C. of T. (Vic.) v. Yosemite Afforestation Pty. Ltd. (1987) 19 A.T.R. 70;
Held v. D.F.C. of T. 88 ATC 4315;
Tupicoff v. F.C. of T. 84 ATC 4851;
D.F.C. of T. v. Ewen 84 ATC 4550;
Snow v. D.F.C. of T. 87 ATC 4078;
D.F.C. of T. v. Trower 86 ATC 4157; and
Koadlow v. D.F.C. of T. 85 ATC 4147. I have been referred to the printed ruling of the Commissioner; and I have heard a close examination of the authorities and conflicting arguments as to what ought to be deduced from them.

The Full Court cases, of course, deserve my careful attention because anything said in them by way of ratio decidendi is binding on me, and any obiter dicta contained in them is persuasive to me.

There are two decisions at first instance which, in my view, have achieved considerable importance in the arguments. One is the decision of O'Bryan J. in Ewen's case, and the other is the decision of Murphy J. in the Yosemite case. The former was decided in May 1984 and the latter in August 1987, and counsel have said that the earlier case was apparently not cited in the later one. Mr Merkel argued forcefully that the present case fits all the attributes which appear underneath the word ``Held'' in the headnote of the Yosemite case, that the contentions to be put on the appeal to

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the Federal Court by the appellant are not illusory or slight, that I should not hold that this was otherwise than a bona fide appeal, and that I should follow the course followed by Murphy J. in the Yosemite case accordingly, and stay execution of the judgment.

It is quite impossible for me sitting in this court in this month to embark on a lengthy reserved judgment, and there appears to me to be no purpose in my doing so when I have reached a conclusion as to what I should do. Indeed, having viewed with increasing dismay the vast amount of authority upon how a very broad discretion ought to be exercised, I think perhaps I am doing a service to the law in not delivering a judgment of the kind to which I have referred. I think that the discretion given to me is a very wide one and, if I state some requirements which I think ought to be shown in a case of this particular kind, I am stating them with particular reference to the circumstances of this case and not attempting to lay down some general principle to guide, or more likely fetter, some later unfortunate Judge who happens to read them.

It is my opinion that, in view of sec. 201 of the Income Tax Assessment Act, the burden does lie upon the taxpayer to establish some real and substantial grounds for granting a stay.

Secondly, I think that a taxpayer has to show that the case is somehow out of the ordinary run and, if one uses the word ``exceptional'' in that sense, I think the use of the word exceptional is unexceptionable.

The ways in which a taxpayer may show an exceptional case are not limited simply to ``hardship''. With the greatest respect I should have thought that, if it had been put to Murphy J. in the Yosemite case that there were dicta indicating that hardship was a requirement, that his Honour might well have answered that the items in the headnote, taken with all the peculiar circumstances of the case before him, did in his opinion constitute sufficient ``hardship'' to satisfy such a requirement if there be one.

However this may be, I am not satisfied that the taxpayer here has demonstrated exceptional circumstances, or has satisfied the onus that lies upon him of satisfying the court that a stay should be granted.

I do think that the most usual way of showing that the case is exceptional is by showing that the taxpayer would suffer a real and substantial hardship if the judgment were executed, and I would, with respect, not disapprove of anything said by O'Bryan J. in Ewen's case.

In the present case, I am simply not satisfied that the applicant shows any hardship at all. His own financial position, his ability to pay, are matters about which he remains completely and utterly silent, except for some dolorous observations by his counsel about the possibility of bankruptcy intervening and the applicant being unable to prosecute his appeal. On these matters the affidavits are singularly silent.

I am respectfully grateful to read in the report of the Full Court's decision in Held's case, at p. 4321, the observation of their Honours 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''.

Like King J., who was the primary Judge in that case, I am not able to form a view of who will succeed on the appeal. Each side seems to have substantial arguments to put, and I have no idea what the final facts will turn out to be upon a full scale investigation into them.

I think, therefore, I am in the position that the Full Court found was the primary Judge's position in Held's case, that the applicant's case for a stay should depend upon whether he has shown that he would suffer extreme personal hardship if the execution were levied. I am not wedded to the expression ``extreme personal hardship''. All these things are relative, but it has to be a hardship in all the circumstances sufficient to satisfy the heavy onus which a taxpayer bears, in the light of sec. 201, to establish that he is entitled to a stay. In Held's case it was argued that there was extreme personal hardship in that the taxpayer was unable to pay the amount of the judgment and feared that bankruptcy proceedings would be taken against him and that his business would collapse. In considering this contention the Full Court held in that case that ``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''. That is my impression in the present case also. Then their Honours added:

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ATC 4802

``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 the decision below, and accordingly he has not shown any special circumstances which would justify the making of an order staying execution of the judgment.''

In my opinion, those observations read on to the present case.

I refer also to the words of McGarvie J. in Trower's case.

In that case at p. 4162 his Honour said:

``In this case there is nothing to show that the taxpayer will suffer particular and substantial prejudice if the policy of the Act as stated in sec. 201 leads to there being no stay of execution.''

Again, in my view, that is the position in this case. I have already stated the amount for which the Master has, in effect by his order, allowed execution. There is a sum of $44,393.20 which I think is of the nature of a kind of penalty for which there ought to be a stay, if a stay for that part only be requested. This was apparently not asked for below, and it has not been asked for here.

Mr Merkel: I am sorry, your Honour. We would ask for that.

His Honour: Very well; I think that it has already been indicated by Mr Kendall that if it were asked for he would not strenuously oppose it.

Accordingly, I propose to allow a stay of execution until the hearing and determination by the Federal Court of the appeal herein, or further order, in respect only of that amount of the judgment which consists of $44,393.20 being additional tax referred to at the end of the particulars in the writ.

I direct that the interest on the amount in the judgment be recalculated accordingly and, in the absence of agreement within seven days, be fixed by a Master.

The stay is granted upon the undertaking of the defendant, by his counsel, to prosecute the appeal with despatch.

There will be liberty to the plaintiff to apply in the event of the plaintiff wishing to contend that this undertaking has been broken, and that the appeal is not being prosecuted with despatch.

The orders of the Master are varied accordingly, and the appeal is otherwise dismissed.

I order that the costs of the plaintiff of this appeal be paid by the defendant.

Mr Merkel: There is just one matter, your Honour. As your Honour is aware, the application has proceeded on the basis of the relevance of Murphy J.'s judgment. We have an appeal as of right. I am instructed the client does wish to appeal. We would ask your Honour for a stay of your Honour's order pending an application to the Full Court on the first available day, if it could take the matter on a motions day, on the undertaking that we would make that application when the business of the court would permit it.

His Honour: What do you say, Mr Kendall?

Mr Kendall: At present there is no stay of execution except for that order by your Honour. May I indicate this, your Honour. That if the defendant gives notice of appeal within 14 days the plaintiff would not seek to execute within that period. I don't give that as an undertaking but that is the practice which has been adopted in other cases, and I am instructed that the plaintiff would not move to execute if that step were taken within that time.

His Honour: If that step is taken within 14 days, do you then contend you are free to execute on the 15th.

Mr Kendall: If I may just get instructions.

His Honour: It seems to me, before you get those instructions - it seems to me a solution may be to undertake that if he lodges notice of appeal to the Full Court - it is the Full Court?

Mr Merkel: Yes, your Honour.

His Honour: Within 14 days - there are two undertakings. Undertake not to execute for 14 days. If, at the expiry of 14 days, the defendant has lodged a notice of appeal to the Full Court, undertake not to execute except upon 14 days' written notice to the defendant's solicitors.

Mr Kendall: I don't know that I am able to give the latter part of such an undertaking. What happened in Held's case where a similar situation arose was this: a notice of appeal was

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served within a short time after his Honour's judgment, and steps were then taken by way of an application by the taxpayer for a stay of execution pending appeal. In my respectful submission, that is the course which should be undertaken here. I am indicating that my client will not seek to execute for a period of 14 days. To indicate, rather than to give an undertaking. Although if your Honour requires it in the form of an undertaking I would seek specific instructions for that. He would not otherwise regard himself bound at the present stage. I say that because the onus to appeal, and to apply for a stay of execution, to the Full Court would, in my submission, be on the taxpayer in the events that have happened. Your Honour, I am able to give an undertaking that the plaintiff will not seek to execute for 14 days, and that should then give the taxpayer time to decide what he wishes to do, and when he wishes to apply.

His Honour: What I propose to order then is that, counsel for the plaintiff having indicated to the court that the plaintiff will not execute the judgment for the next 14 days, a stay pending appeal from the present decision is refused.