Atkinson v State Bank of NSW & Anor

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

20822/2001 - GEORGE ATKINSON v STATE BANK OF NSW & ANOR

JUDGMENT (ATO garnishee order on bank account - invalidity of Constitution - invalidity of Income Tax Assessment Act 1936 (Cth) - notice of motion to strike out claim)

1 MASTER: By notice of motion, the defendants seek summary judgment that the plaintiff's claim be stayed or dismissed pursuant to Part 13 r 5 SCR or, alternatively, that the statement of claim be struck out pursuant to Part 15 r 26 SCR. On 7 August 2002, Registrar Whitehead made orders that the plaintiff's proceedings be dismissed pursuant to Part 13 r 5A of the Supreme Court Rules (SCR). By a notice of motion of 14 August 2002, the plaintiff sought an order setting aside Registrar Whitehead's orders. This Court set aside those orders on 4 December 2002. The plaintiff relied on his affidavit sworn 7 June 2002. The defendants relied on the affidavit of John Morris Lanser sworn on 15 May 2002.

The law on summary judgment 2 Part 15 r 26 provides: "(1) Where a pleading - (a) discloses no reasonable cause of action or defence or other case appropriate to the nature of the pleading; (b) has a tendency to cause prejudice, embarrassment or delay in the proceedings, or (c) is otherwise an abuse of the process of the Court, the Court may at any stage of the proceedings, on terms, order that the whole or any part of the pleading be struck out. (2) The Court may receive evidence on the hearing of an application for an order under subrule (1)." 3 Part 13 r 5 says: "(1) Where in any proceedings it appears to the Court that in relation to the proceedings generally or in relation to any claim for relief in the proceedings- (a) no reasonable cause of action is disclosed; (b) the proceedings are frivolous or vexatious; or (c) the proceedings are an abuse of the process of the Court, the Court may order that the proceedings be stayed or dismissed generally or in relation to any claim for relief in the proceedings." 4 In a Court of Appeal decision Air Services Australia v Zarb (NSWCA unreported, 26 August 1998) Rolfe AJA found it useful to remind himself of the highly demanding test imposed on a party seeking summary judgment. His Honour referred to Dey v Victorian Railways Commissioners (1949) 78 CLR 62; General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 and Webster & Anor v Lampard (1993) 177 CLR 598. 5 In General Steel Barwick CJ, who heard the application alone stated: "Although I can agree with Latham CJ in the same case when he said that the defendant should be saved from the vexation of the continuance of useless and futile proceedings, in my opinion great care must be exercised to ensure that under the guise of achieving expeditious finality a plaintiff is not improperly deprived of his opportunity for the trial of his case by the appointed tribunal. On the other hand I do not think that the exercise of the jurisdiction should be reserved for those cases where argument is unnecessary to evoke the futility of the plaintiff's claim. Argument, perhaps even of an extensive kind, may be necessary to demonstrate that the case of the plaintiff is so clearly untenable that it cannot possibly succeed." 6 Barwick CJ also said: "It is sufficient for me to say that these cases uniformly adhere to the view that the plaintiff ought not to be denied access to the customary tribunal which deals with actions of the kind he brings, unless his lack of cause of action - if that be the ground on which the Court is invited, as in this case, to exercise its powers of summary dismissal - is clearly demonstrated. The test to be applied has been variously expressed; 'so obviously untenable that it cannot possibly succeed'; 'manifestly groundless'; 'so manifestly faulty that it does not admit of argument'; 'discloses a case which the Court is satisfied cannot succeed'; 'under no possibility can there be a good cause of action'; 'be manifest that to allow them' (the pleadings) 'to stand would involve useless expense'." 7 In Webster Mason CJ, Deane and Dawson JJ reinforced the rigorous test stating, at 602: "The power to order summary judgment must be exercised with 'exceptional caution' and 'should never be exercised unless it is clear that there is no real question to be tried."'

The Pleadings 8 By statement of claim filed 9 October 2002 the plaintiff seeks, firstly, an order that his deposited funds in the sum of $157,042.93 be repaid with interest. Secondly, exemplary or punitive damages as against the defendants. On or about 21 May 1998, a notice pursuant to section 218 of the Income Tax Assessment Act 1936 (Cth) and dated 21 May 1998 was served upon the Colonial State Bank. In compliance with the terms of the notice the bank drew a bank cheque in the sum of $157,035.43, which it forwarded to the Australian Tax Office, and funded the bank cheque by debiting the plaintiff's bank account at its Double Bay branch. 9 The plaintiff alleges that, by its compliance with the s 218 notice, the bank was in breach of contract. Further, the plaintiff alleges that the Australian Taxation office (ATO) itself was not entitled to collect funds from him as it is not a body validly established at law and thereby has no power to do so. As a secondary argument to this claim, the plaintiff also alleges that the ATO has no constitutional basis upon which to collect the funds from him or in general as the Constitution is an invalid document, it having never received royal assent. 10 During the hearing the plaintiff refined his argument. The gravamen of the plaintiff's complaint was that the s 218 notice was simply rubber-stamped by D E Butler Deputy Commissioner of Taxation and Delegate of the Commissioner of Taxation and was not personally signed by him. The plaintiff said that he had attempted to get in contact with Mr Butler but while successful in tracking him to Moonee Ponds had been unable to speak to him. The plaintiff now believes that Mr Butler is working with the Tax Department in New Zealand. The plaintiff submitted that it was a signature not a mere rubber stamp that was required before the proceeds of his bank account, which he had received from a family law settlement (not earned income), could be forwarded to the tax department. 11 The defendants' solicitor submitted that a notice given under s 218 has a similar effect to a garnishee order issued by a court see Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 Mason J at 19. Accordingly, it was submitted that there was no breach of contract as the State Bank was obliged to comply with the order and could be subject to penalties for failing to do so. It was further submitted that the State Bank may have challenged the s 218 notice on grounds of bad faith or improper purpose. However, these grounds were not at issue and the State Bank was bound to accept the correctness of the assessment and could not validly challenge it unless the plaintiff did so: see Sunrise Auto Ltd v Deputy Commissioner of Taxation (Cth) (1995) 61 FCR 446 Beaumont and Beazley JJ at 471-472. 12 In respect of the claim concerning the Constitutional validity of the ATO and its powers to levy taxes, the defendants' solicitor submitted that the plaintiff's arguments as set out in his document entitled "authorities" do not appear to support this claim as pleaded. Nor could the defendant's solicitor appreciate the relevance of the laws of the monarchs of England beginning with King Ethelbert (601-4), Ethelbald (749) and Canute (1020-31) (I shall refer to Canute in more detail later in this judgment) running down to the Magna Carta assisted the plaintiff's case. He also submitted that, at any rate, the claim falls within the jurisdiction of the High Court and is not a matter which this Court can determine. 13 In respect to the plaintiff's first claim, legislation has long since removed any doubt as to the tax commissioner's power to garnish money due or owing. Pursuant to Section 218(1) of the Income Tax Assessment Act 1936 (Cth): "The Commissioner may at any time, or from time to time, by notice in writing (a copy of which shall be forwarded to the taxpayer at his last place of address known to the Commissioner), require: (a) any person by whom any money is due or accruing or may become due to a taxpayer;

(b) any person who holds or may subsequently hold money for or on account of a taxpayer;

(c) any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or

(d) any person having authority from some other person to pay money to a taxpayer; to pay to the Commissioner, either forthwith upon the money becoming due or being held, or at or within a time specified in the notice (not being a time before the money becomes due or is held);

(e) so much of the money as is sufficient to pay the amount due by the taxpayer in respect of tax or, if the amount of the money is equal to or less than the amount due by the taxpayer in respect of tax, the amount of the money; or

(f) such amount as is specified in the notice out of each payment that the person so notified becomes liable from time to time to make to the taxpayer until the amount due by the taxpayer in respect of tax is satisfied; …

(2) Any person who refuses or fails to comply with any notice under this section is guilty of an offence." 14 The Tax Commissioner has the power pursuant to this section to require the first defendant to pay the amount it found due and owing. As Gibbs CJ at 11, pointed out in Clyne, s 218 is obviously designed to confer "exceptional" powers on the Commissioner to facilitate the collection of tax. The defendants were obliged to comply with the notice under section 218 and therefore there was no breach of contract. In the absence of any bad faith, improper purpose or challenge by the plaintiff they could not resist the notice.

The rubber stamp 15 While it may well have been more courteous for the tax officer to have personally signed the s 218 notice rather than affixing his signature by the means of a mere rubber stamp, in Part 10 of the Income Tax Regulations 1936 r 172(2) under the heading "Presumption as to signatures" states in respect of signatures:

"A certificate, notice or other document bearing the written, printed or stamped name (including a facsimile of the signature) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in lieu of that person's signature shall, unless, it is proved that the document was issued without authority, be deemed to have been duly signed by that person." 16 In accordance with this regulation, it was not necessary for the s 218 notice to be signed by Mr Butler. The notice was stamped and as it has not been demonstrated that it was issued without authority, it was valid. 17 As noted, the plaintiff has also pleaded that the Australian Taxation Office is not a validly appointed body. The plaintiff submitted that as the Constitution never received royal assent, Parliament did not have the power to enact the Income Tax Assessment Act 1936 (Cth) or levy any taxes under s 51(ii). 18 Submissions very similar to this have been made in a number cases recently: see Dooney v Henry (2000) 174 ALR 41; Levick v Law Society of New South Wales [2002] NSWSC 481; Miller v Chapman (2001) 46 ATR 317; Matchett v Deputy Commissioner of Taxation (2000) 158 FLR 171; Joose v Australian Securities and Investment Commission (1988) 73 ALJR 232. These submissions have failed in the above cases. They were viewed as being frivolous and as disclosing no cause of action.

19 In Joose, for example, Hayne J was called upon to consider the validity and operative effect of the Income Tax Assessment Act and a number of related taxation statutes including the Income Tax Assessment Act 1997. The argument advanced there was that there had been a break in sovereignty in Australia with the consequence that much of the legislation purportedly passed by the Australian Parliament was invalid. This argument depended primarily upon the invalidity or inoperativeness of the Australian Constitution. However, it was also argued that the Royal Assent had not been validly given to the Acts in question. Furthermore, it was submitted that when Australia signed the Treaty of Versailles as a recognised and independent sovereign entity, the Australian Constitution ceased to have effect. His Honour found, at 235, that the points it sought to "agitate" were "not arguable" and also that none of the applicants identified a point having sufficient merit to warrant removal of the cause concerned into the High Court.

20 Justice Hayne's comments were cited with approval by O'Keefe J in Matchett. In Matchett it was submitted before Justice O'Keefe, amongst other things, that the Income Tax Assessment Act was invalid as the Australian Constitution, which was the purported source of power, was not valid or operative in 1936 and hence all legislation purportedly passed under it was of no effect. After reviewing the authorities, His Honour said at para 24: "If there is any substance whatsoever in the arguments advanced by Mr Levick, it is inconceivable that the High Court would have overlooked the dramatic consequence that would flow from them being correct." 21 The same situation as Joose applies here. There is no utility in removing this matter to the High Court. 22 Generally speaking, it is long received wisdom in this country that the Commonwealth of Australia Constitution Act (UK) came into force on July 9, 1900: see Booker K, Glass A & Watt R Federal Constitutional Law, Butterworths 1998. The colonies of Australia became federated from the first day in January 1901, the date set by a proclamation issued in accordance with covering clause 3 of the Constitution Act. The Statute of Westminster 1931 (UK) and the subsequent Australia Act 1986 (Cth) removed any fetters that remained upon the Commonwealth to legislate in its own right. Further, under section 2 of the Australia Act the legislative powers of each state include full power to make laws for the peace, order and good government of that State". 23 It is interesting to note from the list of authorities handed up by the plaintiff that as long ago as the reign of the Viking King Canute, son of Svein Forkbeard, grandson of Harold Bluetooth and great grandson of Gorm that similar sentiments were being espoused. History records Canute as the unifier of England after his defeat of Edmund Ironside at the battle of Ashingdon and legend has it that, to rebuff the constant flattery of his courtiers, who claimed that nothing in this world would disobey him, he commanded the sea to stop rolling. This of course did not happen and Canute's courtiers were suitably chastened. This ancient tale, however, while enthralling, is of no relevance in these proceedings, except to say that the plaintiff's claim in some ways also represents a similar attempt to command the sea to stop rolling. 24 While the test is stringent for summary judgment, submissions similar to the plaintiff's have, as noted above, already been put to the Courts and they either failed or been viewed as either groundless, manifestly untenable, nonsense or an abuse of process: see Miller v Chapman. For the reasons given earlier, like Miller, it is my view that there is no reasonable cause of action pleaded. The plaintiff's claim is doomed to failure. Pursuant to Part 13 r 5 SCR, the plaintiff's claim is dismissed. 25 Costs are discretionary. Normally costs follow the event. The plaintiff is to pay the defendants' costs as agreed or assessed.

(1) Pursuant to Part 13 r 5 of the SCR , the plaintiff's claim is dismissed.

(2) The plaintiff is to pay the defendants' costs as agreed or assessed. **********

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