Andrijic v Chief Commissioner of State Revenue

EX TEMPORE JUDGMENT (REVISED)

Pursuant to an amended summons which I granted leave to file in court today, the plaintiffs apply for a review of the defendant's decision not to set aside a notice issued pursuant to s 46 of the Taxation Administration Act 1996 (NSW) ("the Act"). Section 46 of the Act is a form of statutory garnishee order. It permits the defendant to enforce its entitlement to payment of tax by garnisheeing the bank accounts of a taxpayer.
As set out in the amended summons, the plaintiffs seek a declaration that an email sent by an officer of Revenue New South Wales is a determination of part of an objection, and that the decision of the defendant of 19 December 2024 set out in the email be set aside.
The matter comes before the Court today by way of a notice of motion filed on 20 December 2024 on behalf of the plaintiffs. The plaintiffs only sought one order, being an injunction restraining the defendant from giving effect to or taking any step in relation to its decision to issue notices under s 46 of the Act to the Commonwealth Bank, Westpac and other financial institutions.
The plaintiffs then sought leave to amend the motion today to seek a further order (as set out in proposed short minutes provided by the plaintiffs) that, within 48 hours of making the first order, the defendant pay the sum of $738,572.76, comprising various amounts to each of the first, second, third and fourth plaintiffs. The first to fourth plaintiffs are seeking reimbursement of part of the amount already debited from the bank accounts.
On the application today, Mr Barlin appears for the plaintiff and Mr Berkmann appears for the defendant. The defendant opposes the application.

Determination

It is not necessary that I undertake any analysis of the various provisions of the Act at this time. Suffice to say, the defendant maintains that it has complied with the provisions of the Act. In particular, the defendant submits that pursuant to s 81(1) of the Act, where a member of a group fails to pay an amount, every member of the group is liable jointly and severally to pay that amount. Further, as set out in s 45, if two or more persons are jointly and severally liable to pay an amount, the amount that is unpaid is a tax debt payable to the Chief Commissioner by each of them.
The defendant submits that the original Payroll Tax Assessment Notice was issued to Dalma Form Specialists Pty Ltd on 29 April 2024. Thereafter, there being no payment by Dalma Form Specialists Pty Ltd, a number of joint and several liability notices were issued. Thereafter, directors compliance notices were issued, the effect of which is to make the directors liable for the tax debt.
The defendant submits that the amount payable is a debt and that it is now recoverable as a debt. Further, as set out in s 94 of the Act, the fact that an objection is pending does not prevent the defendant from recovering the tax as a debt. The s 46 notice has been properly issued and the defendant has, or it will shortly receive, the funds which have been debited from the various bank accounts.
There are really two issues for determination, being: 1. Should the defendant be restrained from seeking to further enforce as against the plaintiffs? in other words, should there be a stay on the s 46 notices issued to each of the ANZ, Commonwealth and Westpac banks? and 2. In the circumstances set out in the affidavits of each of the first to four plaintiffs, should the defendant be required to reimburse certain funds to each of the plaintiffs to ensure that they have money to live on and are also, at least in respect of the third and fourth plaintiffs, able to pay their legal fees?
The first plaintiff seeks reimbursement of a sum of $71,312. The second plaintiff seeks reimbursement of $6,596.52. The third plaintiff seeks reimbursement of the sum of $333,938.06. The fourth plaintiff seeks the sum of $326,738.06. The amounts sought by the third and fourth plaintiffs each include the sum of $200,000 on account of legal fees which they estimate they will incur, not just in pursuing these proceedings but for the purposes of pursuing the objection.
There is no dispute that the Court has power to make orders the effect of which would be to stay the further enforcement of a s 46 notice. However, it is not conceded that the Court has power to make any order requiring the defendant to reimburse sums already obtained pursuant to s 46 notice. In this regard, the plaintiffs rely on s 65 of the Supreme Court Act 1970 (NSW), submitting that the Court may order any person to fulfil their duty, the fulfilment of which the person seeking the order is personally interested. As I understand it, the plaintiffs submit that s 65 would provide a power to require the defendant to reimburse the plaintiffs in respect of moneys already received pursuant to a s 46 notice.
The relevant principles which apply to an application such as this are set out in Deputy Commissioner of Taxation v Denlay [2010] QCA 217 ("Denlay") as follows: "A convenient starting point in the consideration of authority is Snow [v Deputy Commissioner of Taxation (1987) 14 FCR 119 ("Snow")], in which French J considered the authorities at some length and concluded (at 139): … the power of State courts to stay recovery proceedings … is well established and … courts exercising it have regard to the following propositions: 1. The policy of the (ITA Act) … 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 (although some judges have expressed different views on this point). 4. Irrespective of the … 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 a 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 where appeal is a factor relevant to the exercise of the discretion."
As observed in Denlay and Snow, the power to grant a stay is exercised sparingly and the onus is on the taxpayer to justify it. One factor which may warrant the granting of a stay is extreme personal hardship to the taxpayer who is called upon to pay. However, the mere imposition of the obligation to pay does not constitute hardship.
Further, as observed in Fyna Projects v Chief Commissioner of State Revenue (2018) 99 NSWLR 673; [2018] NSWCA 331, the payroll tax legislation suggests that disputes about a liability for payroll tax should in the ordinary course be dealt with under the objection, review and appeal procedures established by the legislation itself. The amounts payable are to be paid notwithstanding the exercise of rights of objection and review. This is on the basis that if the taxpayer's objection is made out, the amounts will be refunded with interest. Of course, unlike many applications for a stay, there is no risk that the defendant will not be able to return the money should the plaintiff's position be established.
There is evidence that each of the individual plaintiffs will suffer personal hardship if a stay is not granted. The effect of the evidence from each of the plaintiffs is that the bank accounts which have been the subject of the s 46 notice are the only bank accounts held by them, and that any moneys they receive, such as ongoing salary or wage payments, would be paid into those bank accounts. Each of the individual plaintiff's set out details of their ongoing expenditure.
For example, the first plaintiff, Ms Andrijic, says that she works as a personal trainer. She has business expenses which she incurs as part of her work as a personal trainer. Further, she is the main financial provider for her children. She says that she estimates an amount of $1,500 to $2,000 per week is spent just on her children. She also assists her parents in the order of approximately $200 per week.
Mr Rade Cikes says that he has no access to money and is unable to meet his living expenses. Similarly, Ms Rosa Cikes says she is significantly adversely impacted. Again, she says the defendant has removed all access to her money. Mr Igor Cikes gives evidence to a similar effect, suggesting that he cannot attend to the care, maintenance, and support of his children and is unable to meet his living expenses.
In considering an application such as this, it is necessary to weigh up a number of competing factors. Firstly, as pointed out by the defendant, the various provisions of the Act are quite clear. In circumstances in which an amount owing under a notice of assessment has not been paid, the defendant may issue a s 46 notice. That has happened in this case. The money is recoverable as a debt.
Further, it is clear that the entitlement of the taxpayer, in this case the twelve plaintiffs, to file an objection or seek review is not in any way limited by virtue of the s 46 notice. The process of objection and review, and perhaps reassessment, will be undertaken irrespective of the defendant's attempts to enforce the debt owing.
On the other hand, in some circumstances there will be very severe personal hardship to a taxpayer arising out of the steps taken by the defendant to recover the debt. The plaintiffs say that the defendant has drained at least all of the individual plaintiffs of any funds such that they cannot meet ordinary living expenses.
An example of what may occur if the restraining order is not made is that Mr Igor Cikes may continue to receive his salary, said to be $4,000 per week, but at the moment that money is paid into any of his bank accounts meaning the money will presumably be paid out to the defendant. In those circumstances, he would not be able to pay ongoing living expenses because he does not have any access to any funds and even the salary he is receiving will be the subject of the s 46 notice.
In my view, a particularly important factor is that it appears to be common ground that all of the funds held in all of the bank accounts have been already debited and are on their way to the defendant.
I am concerned that there may not have been full disclosure of all of the financial circumstances of each of the individual plaintiffs. As the defendant submits, no tax returns were exhibited and the defendant has made searches suggesting that each of the plaintiffs own some property. However, the properties appear to be, by and large, homes in which they live which may be subject to a mortgage.
I am not satisfied that the plaintiffs have established an entitlement to reimbursement of any funds. The moneys have been received by the defendant in accordance with its entitlement. There has been no abuse of process. As far as I can determine, there has been no failure to follow proper procedure. A s 46 notice was issued and the money has or will be received.
The plaintiffs have not established that the defendant should repay some of the money received either to pay living expenses or fund the litigation. The Act is quite clear in that the objection and review process does not preclude the defendant from recovering amounts said to be owing.
However, I am concerned that without a stay on the further enforcement, any moneys coming into these bank accounts which would ordinarily be used for the personal living expenses of the plaintiffs will be immediately removed from the accounts and paid to the defendant's account.
There is no evidence any of the plaintiffs are about to receive any significant funds or that they are withholding moneys themselves instead of putting them in the bank accounts. As far as I can determine, any moneys coming into these accounts are not likely to be large and, seemingly, are for payment of wages or those sorts of things.
In the circumstances, having regard to the personal circumstances of each of the individual plaintiffs and having regard to the fact that there is now no money left in the accounts at the present time, I am satisfied that order 1 in the motion should be made, in favour of the first to fourth plaintiffs.
I am not satisfied that there should be a stay in favour of the corporate plaintiffs. The plaintiffs say that two of the companies, Dalma Services and Dalma Hire, will be adversely affected. Reference is made for example to paragraph 40 of the affidavit of Mr Rade Cikes sworn 20 December 2024. However, in my view that which is set out in paragraph 40 is merely a general statement of how the s 46 notice may continue to impact upon the company.
Reference has been made to the exhibit to the affidavit which I assume might contain some more detail or source documents but that was not admitted into evidence and the defendant objects to it now being so admitted. I doubt that it would have assisted the plaintiffs. It does not seem to me that the principles which I have applied in terms of personal hardship would apply to a corporate plaintiff. Under the circumstances, the order for a stay is limited to the first to fourth plaintiffs.
For completeness, I confirm that any funds already debited from any of the bank accounts which are in limbo in the sense of not yet being credited to the defendant's bank accounts are not subject to the stay; the basis for the orders I have made is that all of the bank accounts have already been debited pursuant to the s 46 notice; and, that at least in respect of the individual plaintiffs, there would be no further debits. In other words, they can use whatever wages and money they have going forward.
I thus make the following orders: 1. Order that the plaintiffs be granted leave to file the amended summons dated 23 December 2024. 2. Order that the plaintiffs be granted leave to file the affidavit of Kimberley June Gates of 23 December 2024. 3. Order that leave be granted to join JASON ANDRIJIC and INCLINE HIRE PTY LTD (A.C.N. 606 546 338) as the thirteenth and fourteenth plaintiffs to this proceeding. 4. Order that the notices issued by the defendant pursuant to section 46 of the Taxation Administration Act 1996 (NSW), the particulars of which are: 1. in respect of the first plaintiff: 1. notice issued to Australia and New Zealand Banking Group Limited with issue date 12 December 2024 and amount payable of $12,960,071.33; 2. notice issued to Commonwealth Bank of Australia with issue date 12 December 2024 and amount payable of $12,960,071.33; 3. notice issued to National Australia Bank with issue date 12 December 2024 and amount payable of $12,960,071.33; 4. notice issued to Westpac Banking Corporation with issue date 12 December 2024 and amount payable of $12,960,071.33; 1. in respect of the second plaintiff: 1. notice issued to Australia and New Zealand Banking Group Limited with issue date 12 December 2024 and amount payable of $12,960,071.33; 2. notice issued to Commonwealth Bank of Australia with issue date 12 December 2024 and amount payable of $12,960,071.33; 3. notice issued to National Australia Bank with issue date 12 December 2024 and amount payable of $12,960,071.33; 4. notice issued to Westpac Banking Corporation with issue date 12 December 2024 and amount payable of $12,960,071.33; 1. in respect of the third plaintiff: 1. notice issued to Australia and New Zealand Banking Group Limited with issue date 12 December 2024 and amount payable of $12,960,071.33; 2. notice issued to Commonwealth Bank of Australia with issue date 12 December 2024 and amount payable of $12,960,071.33; 3. notice issued to National Australia Bank with issue date 12 December 2024 and amount payable of $12,960,071.33; 4. notice issued to Westpac Banking Corporation with issue date 12 December 2024 and amount payable of $12,960,071.33; 1. in respect of the fourth plaintiff: 1. notice issued to Australia and New Zealand Banking Group Limited with issue date 12 December 2024 and amount payable of $12,960,071.33; 2. notice issued to Commonwealth Bank of Australia with issue date 12 December 2024 and amount payable of $12,960,071.33; 3. notice issued to National Australia Bank with issue date 12 December 2024 and amount payable of $12,960,071.33; 4. notice issued to Westpac Banking Corporation with issue date 12 December 2024 and amount payable of $12,960,071.33; be stayed until further or other order of the Court. 1. Order that costs be the plaintiffs' costs, in other words should the plaintiffs succeed in this matter the plaintiff will be entitled to the costs of these proceedings. 2. Order that the matter be listed for Directions in the Revenue List of the Equity Division on 6 February 2025. 3. Confirm that any funds already debited to any of the bank accounts which are 'in limbo' but have not made it to the defendant's bank accounts are not subject to the stay.

At a glance

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Before

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Judgment (4 paragraphs)

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Legislation Cited (2)

Cases Cited (4)

Cited By (1)