[2008] HCA 41
Deputy Federal Commissioner of Taxation v Niblett (1965) 83 WN (Pt 1) (NSW) 405
Re Roma Industries Pty Ltd (1976) 6 ATR 54
Source
Original judgment source is linked above.
Catchwords
[2008] HCA 41
Deputy Federal Commissioner of Taxation v Niblett (1965) 83 WN (Pt 1) (NSW) 405
Re Roma Industries Pty Ltd (1976) 6 ATR 54
Judgment (2 paragraphs)
[1]
JUDGMENT - EX TEMPORE (REVISED)
By notice of motion filed in court on 24 January 2025, Incline Hire Pty Limited (the applicant) seeks orders to prevent the Commissioner of State Revenue from (a) taking "any recovery action" in relation to a notice of assessment issued on 16 October 2024, pending the outcome of the process of objection and review, and (b) staying the effect of certain notices issued by the defendant pursuant to s 46 of the Taxation Administration Act 1996 (NSW) in relation to the applicant.
The applicant is the fourteenth plaintiff who, by an amended summons filed in court on 24 December 2024, seeks a variety of orders to restrain the defendant from recovering amounts of payroll tax, interest and penalties owing by a number of persons and entities associated with Dalma Form Specialists Pty Limited (Dalma).
The background to this application is as follows. On 29 April 2024 the defendant issued payroll tax assessment notices to Dalma in the amount of $11,823,972.30. Payment was due on or before 20 May 2024. Those assessments concerned liability under Part 3, Division 8 of the Payroll Tax Act 2007 (NSW) and related to the financial years 2018 through to 2021 (the Dalma assessments).
The director of Dalma is Mr Andrijic, who is the thirteenth plaintiff. I note that he is also the sole director of the applicant.
At the time the Dalma assessments were issued, Dalma was in voluntary administration. On 14 August 2024, Dalma was placed into liquidation.
On 16 October 2024, the defendant issued joint and several liability notices pursuant to s 45(2A) of the Taxation Administration Act and s 81 of the Payroll Tax Act to a number of entities, including the applicant. The due date for payment under those notices was 23 October 2024. The notice issued to the applicant was in the same amount as the amount of the Dalma assessments. The notices proceeded on the footing that the corporate entities were members of the same group as Dalma, within the meaning of Part 5 of the Payroll Tax Act. The applicant disputes this proposition.
On 24 October 2024 an officer of the defendant issued a director's compliance notice to Mr Andrijic, among others, pursuant to s 47B of the Taxation Administration Act. That notice was in respect of the present applicant's tax debt, the due date for payment of which had by that date passed.
The notice issued to Mr Andrijic required him to rectify the applicant's tax default in accordance with s 47(B3) of the Taxation Administration Act and informed him that failure to do so within 21 days may result in the issue of a notice of assessment to him as a jointly and severally liable taxpayer. The evidence shows that Mr Andrijic did not take steps to rectify the default, and so on 12 December 2024 he was issued with a corporate tax liability notice of assessment whereby he became liable for the whole of the amount of the debt.
Also on 12 December 2024 the defendant issued s 46 notices to three banks with whom various of the plaintiffs hold accounts, namely, the Australia and New Zealand Banking Group (ANZ), the Commonwealth Bank of Australia (CBA) and the National Australia Bank (NAB). I shall refer to these s 46 notices as the first s 46 notices. It was the issue of these first s 46 notices that prompted these proceedings.
On 19 December 2024 the defendant was asked to withdraw the first s 46 notices, but an officer of the defendant declined to do so. Although the administrative timeline is a little unclear, it seems that what happened then was as follows. First, the first to twelfth plaintiffs sought urgent interlocutory relief from the duty judge by way of a summons filed in court on 20 December 2024. The application came on for a contested hearing before Cavanagh J on 24 December 2024, at which time the plaintiffs filed an amended summons that included the entities that are now the thirteenth and fourteenth plaintiffs.
The notice of motion that had previously been filed by the first to twelfth applicants was not amended in any formal sense, but prior to the hearing before Cavanagh J on 24 December the solicitor for the plaintiffs provided the court and the defendant with short minutes of order that were to be sought from the court on 24 December. Those short minutes of order included, relevantly, interlocutory relief in respect of the thirteenth and fourteenth plaintiffs.
At the outset of the hearing before Cavanagh J on 24 December, the plaintiffs sought and were granted leave to file the amended summons formally adding the thirteenth and fourteenth plaintiffs to the proceedings. The relief claimed by all of the plaintiffs on that day included orders that the first s 46 notices be stayed. In relation to the fourteenth plaintiff, proposed order 4(n) specifically sought that the first s 46 notices issued to the ANZ, CBA, NAB and Westpac Banking Corporation in relation to it be stayed.
Cavanagh J declined to make those orders for reasons delivered on that day: [42]-[43] of Andrijic v Chief Commissioner of State Revenue [2024] NSWSC 1686. His Honour did, however, make orders staying the operation of the first s 46 notices in so far as they related to the first to fourth plaintiffs, who are individuals.
On 14 January 2025 the defendants served what I shall refer to as the second s 46 notices on two entities with whom the applicant has an ongoing contractual relationship, namely, Lendlease Construction Pty Limited (Lendlease) and Lendlease Corporation Limited. Also on that day, the defendant issued notices to those two Lendlease entities pursuant to s 72 of the Taxation Administration Act, requiring them to produce information and documents.
I note at this point two additional matters by way of general background. The first is that the evidence on which the applicant relies shows that on 18 December 2024 the applicant transferred the sum of $835,000 out of one of its NAB accounts to Ms Emily Grant, who is the sister of the thirteenth plaintiff. A further amount of $9,900 was transferred to Ms Grant the following day. I will say more about this in the context of considering the substantive application.
The second point is that at no time prior to the commencement of these proceedings, or indeed it seems at any other time, have any of the plaintiffs voluntarily made any payments to reduce their liabilities for payroll tax to the defendant. The only payments that have been made to date are those made by the third-party banks in compliance with the first s 46 notices. As matters stand, the amount owing by the plaintiffs to the defendant in respect of their combined payroll tax liabilities is approximately $7 million.
The applicant relies on affidavit evidence from Mr Andrijic and from its solicitor, Ms Gates. The evidence shows that the applicant carries on business as a supplier of formwork in the construction industry. It is a significant participant in that industry and currently has major contracts in place, including contracts to supply formwork and related services on major city projects.
Draft financial statements for the financial year ending 30 June 2024 show that the applicant has almost nothing by way of fixed assets save for a few thousand dollars' worth of equipment. At the end of that year, it had trade receivables of about $3.5 million. Its inventory consisted of work in progress. Its liabilities consisted essentially of trade payables. In the year ending 30 June 2024 it generated revenue of approximately $30 million with a cost of goods sold of about $24,400,000, the bulk of which represents payments to subcontractors.
The applicant's four major contracts are in evidence, including its contract with Lendlease. That contract relates to the Victoria Cross integrated station development in North Sydney, which is part of the Sydney Metro City and Southeast Network development.
There is some uncertainty about the payments which the applicant can expect to receive from the Lendlease entities pursuant to that arrangement. The evidence shows that, although there remains work to be done under that contract for which the applicant will be entitled to issue payment claims, and although the applicant previously had a practice of submitting regular payment claims, the applicant ceased making payment claims at the time the second s 46 notices were issued.
Mr Andrijic's evidence is that if the s 46 notices in relation to the Lendlease entities and the banks stay in place, the applicant will be unable to continue to perform its contract with Lendlease because it will not have access to ongoing funds to be able to pay creditors. Mr Andrijic says that without revenue coming from the Lendlease entities, the applicant will be unable to procure the materials and services it needs in order to be able to continue to trade, and that the applicant will probably be unable to trade at all.
The relief now sought by the applicant relates to both the first and the second s 46 notices. As I have already mentioned, the question of whether the operation of the first s 46 notices should be stayed was the subject of the application heard by Cavanagh J on 24 December 2024. The applicant says that the matter heard by Cavanagh J on 24 December was only an application by the first to twelfth plaintiffs and that, properly understood, his Honour was not dealing with an application by the thirteenth and fourteenth plaintiffs.
The material that I have already mentioned in relation to that hearing, including the proposed short minutes of order that were forwarded to the court on the eve of that hearing, combined with the proposal that his Honour dealt with at the outset to add the thirteenth and fourteenth plaintiffs to the amended summons, leads me to conclude that, as a matter of substance, his Honour was dealing with an application by the thirteenth and fourteenth plaintiffs for a stay of the first s 46 notices on that occasion.
In Brimaud v Honeysett Instant Print Pty Ltd (1988) 217 ALR 44 McLelland J said at 46 that:
"The private injustice and public undesirability of permitting the relitigation of matters already litigated once is recognised in a number of principles of law, notably the rules relating to res judicata and issue estoppel. The more flexible rules under the rubric of vexation and abuse of process, illustrated in such cases as Stephenson v Garrett [1891] 1 QB 677 and Hunter v Chief Constable West Midlands Police [1982] AC 529, and the restrictive provisions governing the adducing of further evidence on the hearing of an appeal even by way of rehearing: see, for example s 75A(8) of the Supreme Court Act 1970 (NSW).
Interlocutory orders, of their very nature, create no res judicata or estoppel, and the court retains jurisdiction to set aside, vary or discharge an interlocutory order up to the time of the final disposition of the proceedings. However the general rationale of the principles last referred to applies even in the case of interlocutory orders. It would be conducive to great injustice and enormous waste of judicial time and resources if there were no limit on the power of a party to have any interlocutory application or order relitigated at will.
His Honour was not thereby laying down a rule that an application once dismissed may never be revived. But in circumstances where it has not been shown that there are any new matters that have come to light since the application was first heard, or which could reasonably have been put before the court on the earlier occasion, there is a powerful reason to refuse to entertain such an application at all.
In so far as the present application seeks relief in relation to the first s 46 notices, it is I think fair to say that all of the material on which the applicant relies could have been placed before Cavanagh J on 24 December. There has been no explanation as to why it was not, save for the argument that, technically, the fourteenth plaintiff was not actually seeking a stay of the first s 46 notices on that occasion, which is a proposition I am unable to accept for reasons I have already given.
If this were the only matter, I would simply dismiss the application altogether, at least in so far as it relates to the first s 46 notices. However, the application is also pressed in relation to the second s 46 notices, which were not issued until 14 January 2025. Not unsurprisingly, there is a significant overlap between the material relied on in relation to the application as it relates to each set of s 46 notices. That means it is necessary for me to have regard to all of the material on which the applicant relies in any event, even if I were to only confine my consideration to the s 46 notices.
That being so, I will deal with both aspects of the application on the merits. That is, I will deal with the application in relation to both the first and second s 46 notices.
It is necessary to approach all of these issues with an appreciation of the statutory scheme for the recovery of tax debts in New South Wales. That scheme is very much like the scheme that operates federally, and which has been the subject of very considerable judicial consideration. The combined effect of ss 16, 118 and 119 of the Taxation Administration Act is that a notice of assessment of a taxation liability is conclusive evidence of the due making of the assessment and the correctness of the amount and the particulars of the assessment, except in proceedings by way of objection or review under Part 10 of the Act.
The fact that an objection or review is pending does not prevent the defendant from collecting the amount due and payable under the assessment: see ss 94 and 103 of the Taxation Administration Act.
The scheme of the legislation is that, in the ordinary run of things, the defendant is entitled to recover debts prior to and independently of the process of objection and review. As I have mentioned, the scheme bears a very close similarity to the scheme created by the Income Tax Assessment Act 1936 (Cth) and schedule 1 to the Taxation Administration Act 1953 (Cth). The plurality in the Deputy Commissioner of Taxation v Broadbeach Properties Pty Limited (2008) 237 CLR 473; [2008] HCA 41 said this of the federal scheme at [44]:
"Harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue."
The plurality then referred to the decision in Deputy Federal Commissioner of Taxation v Niblett (1965) 83 WN (Pt 1) (NSW) 405 and to the reasons given by Bowen CJ in Eq in Re Roma Industries Pty Ltd (1976) 6 ATR 54; (1976) 1 ACLR 296. All of those observations apply equally in the context of the statutory scheme for the recovery of tax liabilities in New South Wales.
The Court nonetheless has the power to restrain the defendant from recovering tax liabilities pending review. However, it will only exercise that power sparingly. The parties on this application have quite appropriately taken as their starting point the reasons of French J in Snow v Deputy Federal Commissioner of Taxation (WA) (1987) 14 FCR 119, particularly what his Honour said at page 139.
The parties also referred to the reasons of the Full Federal Court in Southgate Investment Funds Limited v Deputy Commissioner of Taxation (2013) 211 FCR 274; [2013] FCAFA 10. At [77] of those reasons, McKerracher, Jagot and Griffiths JJ, identified the considerations which may be relevant in deciding whether or not a stay should be granted. Those criteria have been a useful guide to my own consideration of whether or not a stay should be granted in the present case.
In my view, the evidence here does not demonstrate sufficient reason to grant the relief sought either in relation to the first or second s 46 notices. I have reached that conclusion for a number of reasons.
First, although the application ultimately rests on the proposition that the notices will stultify the applicant's ability to trade, the evidence on which the applicant relies presents a picture of its financial circumstances that is, in my view, incomplete in material respects. In this respect, I have already referred to the transfer of funds to Ms Grant on 18 December 2024 out of the applicant's bank account, but it is necessary to say a little more about this. In an affidavit sworn yesterday, Jason Andrijic explained that the payments that were made to his sister on 18 December 2024 were "not uncommon". He said:
"It was not uncommon that large sums of funds were transferred into and out of the Fourteenth Plaintiff's bank account in the usual course of business. I refer to the bank statement … which shows all the transactions for the period of 1 October 2024 to 31 December 2024. This is largely due to the significant volume and number of payments made to suppliers and providers of services and materials required in the course of the Fourteenth Plaintiff's commercial operations and business…
The Emily Payments were made for the purpose of Emily to make payments on behalf of the Fourteenth Plaintiff to its creditors essential for the continued running of the Fourteenth Plaintiff's business over the holiday period (December 2024 to January 2025). Appearing at… is a copy of the financial report/statement of the Fourteenth Plaintiff generated on 10 February 2025 in respect of the Emily Payments showing the payments made to the Fourteenth Plaintiff's creditors from the Emily Payments monies and payments to the Fourteenth Plaintiff for the purpose of making payments to creditors via direct debit and similar type arrangements."
However, a closer examination of the bank accounts of the fourteenth plaintiff causes me to doubt that the payments made to Ms Grant on 18 December were in the ordinary course of the applicant's operations. In particular, I have already referred to the fact that in its financial statements, including draft updating financial statements through to the end of December 2024, the applicant does not record any liabilities of any particular significance. It certainly does not record loans to related entities or family members. Yet it appears from its bank statements that at least during the period October through to December 2024 the applicant was routinely put in funds to trade by Karina Andrijic, who is the first plaintiff. An aide memoire handed up by counsel for the defendant summarises the extent of the funding provided to the fourteenth applicant by Ms Andrijic during that period. It demonstrates regular and significant contributions of cash, all of which were repaid on a timely basis.
That is a circumstance that has a couple of consequences for the present application. First of all, it demonstrates that the ongoing trading activity of the fourteenth plaintiff, at least in the short period for which the applicant supplied evidence, did not depend entirely upon revenue coming from its contracted customers as Mr Andrijic claims. Rather it had a ready and very cheap source of financing from a related entity, being Karina Andrijic. Ms Andrijic's financial circumstances were the subject of evidence in the application before Cavanagh J, but they have not been the subject of any evidence before me. Nor indeed have the financial circumstances of the many other plaintiffs and individuals been the subject of evidence before me. In these circumstances, I have real doubt about the proposition that the applicant will be unable to trade if the s 46 notices are not stayed.
The second point of relevance is that the proposition that the amounts paid to Mr Andrijic's sister on 18 December 2024 through to 23 December 2024 are of the same character as payments previously made to Karina Andrijic is one that I am unable to accept on the face of the documents. Karina Andrijic seems to have been lending money to the applicant and then being repaid. Emily Grant was simply paid money. I note that the payments to Emily Grant were made at a time when s 46 notices had been issued widely in respect of all of the plaintiffs, but prior to the applicant being formally informed that s 46 notices had been issued in relation to it.
The defendant submitted that these payments to Ms Grant demonstrated a clear attempt to avoid the operation of the first s 46 notices. There is force in that submission.
I was informed from the Bar table that the payments that were made to Ms Grant between 18 December and 23 December 2024 were all paid to her as an agent so that she would be able to meet the liabilities of the applicant. But that is the very thing that a s 46 notice is designed to ensure does not happen. The point of the notice is to ensure that a taxpayer in respect of whom the notice is issued does not continue to pay out available cash to other creditors.
I would not, in any event, give decisive weight to the proposition that the applicant will be unable to trade if the s 46 notices are not stayed. As I have already mentioned, the scheme of the legislation is that liabilities, precisely such as those now in issue, will be due and payable pending the process of objection and review. In many, indeed perhaps in most cases, taxpayers either pay the liability or reach some kind of agreement with the defendant about a payment arrangement pending the process of objection.
In this case, however, no steps seem to have been taken on that front until very late in the day. Despite having been on notice for some considerable time now that the defendant considers each of the plaintiffs to be jointly liable for the Dalma assessments, the applicant took no steps at all to come to an acceptable arrangement with the defendant prior to 3 February. Even on that day, the offer it made, which I have seen, would have required the defendant to refund money obtained from the banks pursuant to the first s 46 notices and to do so without the plaintiffs providing any security for future payments. Instead what was proposed was that: (a) the defendant would remit all interest and penalties; and (b) the plaintiffs would pay the amount of principal liability over a period of five years, with no security. That is a proposition that was obviously not acceptable to the defendant.
It seems that a further offer has been made over the course of the previous week that would see the plaintiffs providing some security to the defendant. However, that is an offer that has clearly not been acceptable to the defendant. It is also an offer that again causes me to have doubt about what the overall financial position of the plaintiffs really is.
Counsel for the applicant submitted that, if a stay is granted, it should be on terms that reflect the more recent offer. That is, the stay should be granted subject to conditions including that other members of what might loosely be called the Dalma Group would provide security to the defendant pending the objection and review process. The form of security offered was the equity in fairly significant commercial property holdings. The actual market value of those properties was not disclosed, but the difference between the amount owing on mortgages and the historical cost of these properties came to approximately $22 million.
Those properties are apparently owned by the trustee of a trust, the beneficiaries of which include at least some of the present plaintiffs. It is not at all clear to me why, if property in that amount is suddenly available to be put up as security, the wider group is not otherwise in a position to allow the fourteenth plaintiff to continue to trade, which is supposedly the applicant's primary concern.
In any event, in circumstances where what is proposed is plainly not acceptable to the defendant, who remains concerned about the risk of non-recovery, I would not make a stay on conditions such as those.
Next it is relevant to note that the material on which the applicant relies does not allow me to form any particular view about the strength of its argument concerning its liability to tax. I am unable to conclude, for example, that it has reasonable prospects of demonstrating that it should not have been grouped with Dalma under Part 5 of the Payroll Tax Act. I am also unable to conclude that it has reasonable prospects of demonstrating that Dalma did not have a payroll tax liability under the Dalma assessments.
The applicant submits that it is not practically possible for it to do any more at this stage other than put the objections to those assessments before the Court (which it has done), because those objections have not yet been ruled on. I see from the applicant's objection that there are many grounds advanced as to why the underlying liability should not attach, but in circumstances where that is the only material I have it is not possible for me to form any particular view about whether or not those grounds have any prospect of success. They are matters about which the applicant's evidence says practically nothing at all.
The applicant also submitted that the effect of the s 46 notices will be to stultify its ability to prosecute its objections to the assessment and any resulting review. The evidence of Ms Gates on this matter explains that the costs of the present applicant alone in connection with these proceedings, may be up to the sum of $130,300 and that its costs in connection with the process of objection and review of the underlying assessments will be up to $326,250. Given that there are 14 plaintiffs, all of whom have objected on the same grounds insofar as the underlying liability of Dalma is concerned and given that the grouping issue is common to all of the entities that have been grouped which presumably includes most of the plaintiffs, I am unable to accept that these represent their estimates of the costs which the applicant alone will be required to bear in connection with the dispute. I also have no evidence at all as to how the other plaintiffs expect to fund the proceedings.
In all of these circumstances I am not persuaded that it is appropriate to make the orders sought in the notice of motion.
The notice of motion is dismissed with costs.
[2]
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Decision last updated: 27 February 2025