Caporale v Deputy Commissioner of Taxation [2013] FCA 473 | Case summary

Federal Court of Australia|2013-05-23|Before: Mr AJ, Robertson J

Introduction 3 This appeal is from an order for the sequestration of the estate of Ms Rosa Caporale made on 4 February 2013 by the Federal Magistrates Court (now the Federal Circuit Court). 4 Ms Caporale, the appellant, represented herself. I have taken full account of this fact in identifying and addressing the issues raised by her. 5 On 11 February 2013 the appellant filed a notice of appeal seeking to set aside the orders made by the Federal Magistrates Court on 4 February 2013. The present notice of appeal is a further amended notice of appeal filed on 7 March 2013. That document contains some 175 grounds of appeal.

Appeal grounds and consideration of those grounds 6 The fundamental grounds, as grouped by me, are as follows: (i) the judge erred in denying the appellant procedural fairness in failing to consider, properly or at all, the 27 or 28 folders of exhibits to the appellant's affidavits or to allow the appellant to provide a summary of those folders; (ii) the judge erred in failing to adjourn the proceedings, on 31 October 2012, 7 November 2012 and 10 December 2012, to allow the appellant further time to provide further evidence, to subpoena documents and witnesses and to amend the grounds of opposition to the creditor's petition; (iii) the judge erred in failing to find that the judgment of the District Court of New South Wales which underlay the creditor's petition was wrong; (iv) the judge erred in failing to find that the Commissioner could not rely on s 177 of the Income Tax Assessment Act 1936 (Cth) because the conduct of the Australian Taxation Office had not been in good faith and had breached the Model Litigant provisions in the Legal Services Directions 2005 (Cth) which were legally binding on it; (v) the judge erred in failing to be satisfied by the debtor, for the purposes of s 52(2) of the Bankruptcy Act 1966 (Cth), that for other sufficient cause a sequestration order ought not to be made. 7 It is well established that an appeal to this Court under s 24(1)(d) of the Federal Court of Australia Act 1976 (Cth) lies for the correction of error. It is necessary for the appellant to show appellable error in the judgment under appeal: see Frost v Sheahan [2012] FCAFC 46 at [14] and the authorities there cited. 8 Before me the appellant accepted that the Federal Magistrate (as his Honour then was) was not exercising jurisdiction under s 39B of the Judiciary Act 1903 (Cth). Neither, in hearing this appeal, is this Court exercising such jurisdiction. As to the significance of the source of jurisdiction even in a tax appeal in this Court see the decision of the Full Court in Gashi v Commissioner of Taxation (2013) 296 ALR 497. 9 The first significance of this is that ss 175 and 177 of the Income Tax Assessment Act 1936 therefore applied to the proceedings before his Honour. 10 The second significance is that almost the great bulk of the 27 or 28 arch lever folders of exhibits to the appellant's affidavits and admitted by the Federal Magistrate subject to relevance, was irrelevant: see further [16] below. The Federal Magistrate did not rule on that material. My rulings on the relevance of that material are annexed to these reasons. 11 At the commencement of the second day of the hearing of the appeal, on 16 May 2013, I refused an application by the appellant that the further hearing of the appeal should be adjourned to permit the appellant to commence a further proceeding under s 39B of the Judiciary Act 1903 against the Commissioner alleging conscious maladministration and a proceeding claiming damages. I saw no reason why such proceedings could not have been brought a long time ago and I saw no properly pleaded basis for the claims. I note part of the reasons advanced for the adjournment applications before the Federal Magistrate was that the present appellant then proposed, in October 2012, to commence such proceedings. 12 I make the following further preliminary observations. 13 First, the summary of the 27 or 28 arch lever folders was only in its very early stages even at the time of the hearing of the appeal in this Court in mid-May 2013. 14 Second, the appellant has not sought to appeal from the decision of the Administrative Appeals Tribunal (the Tribunal) made on 25 October 2012, to which I refer more fully below. 15 Third, in light of the terms of s 55ZG of the Judiciary Act 1903 and my decision upholding the validity of ss 55ZG(2) and (3) in Caporale v Deputy Commissioner of Taxation [2013] FCA 427, the appellant did not develop her submissions based on non-compliance with the Legal Services Directions 2005. 16 Fourth, in my opinion, by parity of reasoning with Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473, highly relevant, at least, to the exercise of the discretion in s 52(2) of the Bankruptcy Act 1966 must be the terms and operation of ss 175 and 177 of the Income Tax Assessment Act 1936. That is, except in proceedings under Part IVC of the Taxation Administration Act 1953 (Cth), which the proceedings in the District Court and in the Federal Magistrates Court were not and the appeal to this Court is not, the production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, was conclusive evidence of the due making of the assessment and that the amount and all the particulars of the assessment were correct. 17 That statutory regime has a further significance, as explained by the High Court in Clyne v Deputy Commissioner of Taxation (1983) 48 ALR 545 at 547: The rule that a court of bankruptcy may, in certain cases, go behind a judgment to determine whether it is founded on a real debt can have no application in the present case. If the Court were to go behind the judgment it would be faced with the notice of assessment which, under s 177(1) of the Income Tax Assessment Act, is conclusive and with the provisions of s 201 of that Act which permit the recovery of tax as if no appeal were pending. Of course, the Court which gives judgment has a discretion to stay execution in appropriate circumstances but a stay of execution was refused in the present case. The argument that if an assessment to tax is disputed no bankruptcy notice can be founded upon the judgment in respect of the tax until the dispute is resolved by the ultimate court of appeal cannot possibly be accepted. 18 In the present case, as I have said, no appeal has been brought or is pending from a decision of the Tribunal. No other Part IVC proceedings are pending. 19 With the possible exception of [6(ii)], which I shall next consider, there is no substance in the appeal grounds which I have summarised at [6] above. 20 As to the appeal grounds which I have summarised at [6(ii)], before the Federal Magistrates Court the present appellant sought an adjournment so that she could subpoena and question ten officers of the Australian Taxation Office in relation to the evidence that she had filed and as to how they arrived at the assessments and what documents they had before them when they issued the assessments; to provide a summary of the 27 (later 28) volumes; and to give her accountant Mr Cavanagh more time. Two affidavits by him had been filed on 5 November 2012, they were accepted into evidence by the Federal Magistrate at the hearing of 7 November 2012 and Mr Cavanagh was cross-examined on that day. Proceedings in the Local Court involving Sappia Investments Pty Ltd were also raised by the present appellant before the Federal Magistrate on 31 October 2012. 21 On 7 November 2012, having heard extensive oral evidence given by Mr Cavanagh, and having dealt with the affidavit evidence filed by each party, the Federal Magistrate made directions for the filing of written submissions. His Honour directed the present respondent to file his submissions by 9 November 2012 and he gave the present appellant until 3 December 2012. 22 The Federal Magistrate refused the adjournment in relation to the evidence of Mr Cavanagh in part because Mr Cavanagh had previously stated on 7 May 2012 and again on 8 August 2012 that he needed only eight more weeks to complete the task and yet on 7 November 2012 the task was still not completed. 23 On 10 December 2012 the matter was the subject of a further short hearing, having been relisted before the Federal Magistrate on the application of the present appellant. She then sought an extension of time to provide further evidence, a summary of the by then 28 volumes and to file her written submissions. She had also provided to the Federal Magistrate an affidavit filed on 3 December 2012 (dealing largely with recent proceedings in the Local Court involving Sappia Investments Pty Ltd) and a further folder, the twenty-eighth, being her "tax returns" from 1995 to 2010, the majority of which she lodged electronically on 3 December 2012. 24 The Federal Magistrate received the affidavit, subject to relevance. There was also a subpoena for documents which had been issued at the request of the present appellant on 3 December 2012. His Honour noted that he had reserved judgment and he ordered that the subpoena issued on 3 December 2012 be set aside. His Honour gave the present appellant until 17 December 2012 for her written submissions. 25 In my opinion, no denial of procedural fairness on the part of the Federal Magistrate has been made out by the appellant on this appeal. I reach this conclusion for two independent reasons. First, the evidence which the present appellant sought to summarise was largely irrelevant. Second, the history of the proceedings in the Federal Magistrates Court showed that the present appellant had had an adequate opportunity to present her case. 26 Insofar as the applications for adjournment before the Federal Magistrate were put on the basis that the present appellant wished to commence a proceeding under s 39B of the Judiciary Act 1903 against the Commissioner alleging conscious maladministration and a proceeding claiming damages against him, those proceedings were even less clearly articulated then than they were before this Court some six months or more later and I see no error on the part of the Federal Magistrate in refusing the adjournment applications on the basis of future proceedings of such a shadowy character. 27 The appellant before me submitted that there were discrepancies between the amounts which underlay the judgment of the District Court and the amounts for the 1995 to 2000 income years which were the subject of a settlement in 2006 between the present appellant and the Commissioner in the Tribunal. 28 I am not persuaded that there is any substance in that submission, assuming it to be open to be put in the present proceedings. I note that the judgment debt is primarily made up of the present appellant's tax liability for the 2001 and 2002 income years, being primary tax plus General Interest Charge (GIC). 29 I now turn, for completeness, to the proceedings below in greater detail.

The judgment of the Federal Magistrate the subject of the appeal to this Court 30 The Federal Magistrate made the following findings in his judgment of 4 February 2013. 31 The bankruptcy notice followed a judgment obtained in the District Court of New South Wales. On 10 May 2012 the Deputy Commissioner of Taxation filed a creditor's petition in the Federal Magistrates Court seeking a sequestration order and consequential orders against Rosa Caporale. The creditor's petition asserted that Ms Caporale owed the Deputy Commissioner $261,692.30 and committed an act of bankruptcy by not complying with a bankruptcy notice. Following orders made by Registrar Hedge on 22 November 2011 in litigation over the bankruptcy notice, the act of bankruptcy relied upon was committed on 13 December 2011. 32 The creditor's petition was resisted by Ms Caporale, who relied on an amended Notice Stating Grounds of Opposition filed on 1 November 2012. The grounds in that amended notice were forty-five in number, as follows: 1. The Respondent is filing an application to set aside the [judgment] & [seeking] a stay of the enforcement of the [judgment] on the basis that the Deputy Commissioner of Taxation could not have relied on the "Conclusive Evidence" provision to obtain a judgment if it is found that "there is corrupt or a deliberate failure to comply with the provisions of the income tax law by the Commissioner" 2. Therefore the Respondent is seeking in addition to the above that the Court set aside the judgment as there is a Defect in the Notice of the making of the assessments due to the corrupt or a deliberate failure to comply with the provisions of the income tax law by the Commissioner. 3. The Respondent is filing a Statement of Damages claims against the Deputy Commissioner of Taxation 4. The Respondent is filing an application for a Judiciary Review under Part 39 of the Judiciary Act, which would mean that if found in favour of the applicant the [C]ourt would reverse the judgment as it could not rely on the "Conclusive Evidence" provision of part 177 of the Tax Act 5. That the Respondent is filing an appeal on the AAT decision of the 25th October 2012 on the basis that it erred in law [by] denying the Respondent natural justice and denial of procedural fairness by not taking into consideration crucial new evidence that was provided by the ATO officer as a witness under oath on the 3rd October 2012 6. That the Respondent should have the due time to prepare the appeal of the AAT decision and be given the 28 days to appeal. 7. That the Respondent be granted leave to extend the time to provide further evidence in order to establish that the Respondent is solvent and would have the capacity to pay the debt if after all appeal avenues are duly provided to the Respondent and the result is in favour of the Applicant 8. A stay on all action should be taken or the Creditors Petition be dismissed as any action taken to carry put a sequestration order would cause loss of future economic benefits to the Respondent 9. That any action to bankrupt the respondent will strip away the Respondent's rights under the [C]onstitution and cannot as a natural person defendant itself. 10. That the applicant to set aside the [judgment] would be under section 36 of the Civil Procedure rules or equivalent under the Federal Magistrates rules and Acts on the grounds that the [judgment] was procured unlawfully under the Tax Administration [A]ct and other relevant legislation 11. The Respondent claims that the Damages claimed in the application against the Deputy Commissioner of Taxation is significantly greater than what the Respondent owes the Applicant and therefore the Respondent would not owe the Applicant any monies 12. It will deny natural justice to the Respondent 13. It will deny procedural fairness to the Respondent 14. The respondent seeks an adjournment on this matter as there are proceeding before the Administrative Appeals Tribunal that have yet to be determined and would seek that the Adjournment be till the decision is made by the AAT 15. An affidavit supporting the grounds of opposition is filed with this notice. 16. The Respondent therefore seeks that the Creditors petition is dismissed or alternatively that it is adjourned until all of the above matters are decided upon by the various jurisdictions 17. That the evidence and other applications that was to be filed and served by the 10th September 2012 is extended till 4 weeks after the hearing of Sappia Investment Pty Ltd has been determined and a decision received from the local court. 18. That the hearing set for the 7th November 2012 to have the creditor petition set aside is vacated. 19. Alternatively that the hearing be adjourned and the matter be listed for review till after the evidence has been filed and served 4 weeks after the hearing of Sappia Investment Pty Ltd. 20. That the [C]ourt extend the time for the creditors petition if required. 21. The Respondent is seeking the above due to crucial evidence that was given by the ATO in a related matter on the 3rd October 2012 indicating that the ATO has deliberately provided false and fraudulent evidence in the hearings in relation to Section 255-100 of the Tax Administration Act, which affects this matter. 22. The respondent also seeks an extension of time given the events of the 3rd October 2012 to be able to continue to prepare and lodge the applications below. 23. The evidence that was provided by the ATO shows that it lied in relation to a 5 day hearing in August 2012 at the AAT. 24. This significantly alters the outcome and [judgment] that was originally made in relation to this matter and the judgment which has allowed the ATO to proceed to this point should be set aside. 25. The Respondent is also seeking and extension of time to [finalise] financials relating to the applicant that are part of the group and are extensive requiring further time to [finalise] which would show that the Respondent would have the capacity to pay if the monies were owed. 26. That the Respondent be granted leave to extend the time to provide further evidence in order to establish that the Respondent is solvent and would have the capacity to pay the debt if after all appeal avenues are duly provided to the Respondent and the result is in the favour of the Applicant. 27. The Respondent is filing an application to set aside the [judgment] & seeing a stay of the enforcement of the [judgment] on the basis that the Deputy Commissioner of Taxation could not have relied on the "Conclusive Evidence" provision to obtain a judgment if it is found that "there is corrupt or a deliberate failure to comply with the provisions of the income tax law by the Commissioner" 28. Therefore the Respondent is seeking in addition to the above that the Court set aside the judgment as there is a Defect in the Notice of the making of the assessments due to the corrupt or a deliberate failure to comply with the provisions of the income tax law by the Commissioner. 29. The Respondent is filing a Statement of Damages Claims against the Deputy Commissioner of Taxation 30. The Respondent is filing an application for a Judiciary Review under Part 39 of the Judiciary Act, which would mean that if found in favour of the applicant the [C]ourt would reverse the judgment as it could not rely on the "Conclusive Evidence" provision of part 177 of the Tax Act 31. The Respondent claims that the Damages claimed in the application against the Deputy Commissioner of Taxation is significantly greater than what the Respondent owes the Applicant and therefore the Respondent would not owe the Applicant any monies 32. It will deny natural justice to the Respondent 33. It will deny procedural fairness to the Respondent 34. The respondent seeks an adjournment on this matter as there are proceeding before the Administrative Appeals Tribunal that have yet to be determined and would seek that the Adjournment be till the decision is made by the AAT 35. An affidavit supporting the grounds of opposition is filed with this notice. 36. The Respondent therefore seeks that the Creditors petition is dismissed or alternatively that it is adjourned until all of the above matters are decided upon by the various jurisdictions. 37. There will be several reports including medical reports, accountants reports, auditors reports, economic reports, issues of solvency, issues of capacity to pay if required, issues of public interest etc that require experts and the outline to be prepared that will provide the details and the time frames required by the experts. 38. To proceed with the order would deny natural justice and procedural fairness and would result in premature action being taken with dire consequences for the respondent and the public as the respondent would be precluded from managing corporations under subsection 206B(3) or (4) of the Corporations Act 2001 39. To proceed would cause severe financial hardship to the Respondent 40. Premature loss of livelihood and career to the respondent, loss of income 41. Loss of investments into the IETC project affecting the local, national and international economy 42. To proceed would go against the advise of the chartered accountant who has filed an affidavit to verify that the respondent does not owe any monies to the Deputy Commission of Taxation in the years in dispute. 43. To proceed would breach the [C]onstitution by denying the Respondent a right to defend the case given the overwhelming evidence that is available to confirm that the Respondent has an arguable case to show that that there is no monies owing to the Deputy Commissioner of Taxation given the above matters that are currently underway. 44. A stay on all action should be taken or the Creditors Petition be dismissed as any action taken to carry put a sequestration order would cause loss of future economic benefits to the Respondent 45. That all above matter be stayed and enforcement of [judgments] be stayed 33 The Federal Magistrate said that the grounds essentially boiled down to three propositions: first, that the Court should look behind the judgment debt because in reality there was no debt, because Ms Caporale had no taxation liability to the Deputy Commissioner; second, that the Australian Taxation Office acted improperly to obtain judgment on default taxation assessments and third, that Ms Caporale was solvent. 34 The Federal Magistrate held that the procedural requirements for the making of a sequestration and consequential orders had been satisfied. 35 As to whether the Court should look behind the judgment debt and consider whether the judgment was not based on a real debt the Federal Magistrate said the judgment debt underlying this proceeding arose from assessments for personal income tax. On 25 October 2012 the Tribunal refused Ms Caporale an extension of time to dispute the assessments: Rosa Caporale and Commissioner of Taxation [2012] AATA 740. The judgment debt arose as a consequence of: • assessments for the 1995-2000 income years: these assessments were issued as a result of Ms Caporale reaching a settlement with the ATO (after seeking a review in the Tribunal) and the Tribunal making consent orders pursuant to s 42C of the AAT Act; • assessments for the 2001 and 2002 income years: these assessments were raised in accordance with income tax returns as lodged by Ms Caporale; and • GIC: this amount accrued as a matter of law on unpaid tax. 36 The Federal Magistrate said that if the Court went behind the judgment debt to the assessments, the Court was not able to question the correctness of the amounts of the particulars of the assessments that gave rise to the debt as the assessments were conclusive evidence of the debt: s 177 of the Income Tax Assessment Act 1936. In relation to the same submission in Trevaskis v Deputy Commissioner of Taxation 93 ATC 5037, Cooper J said at page 5039: The difficulty with that submission is that when one goes behind the District Court judgment the Court is left with the notices of assessment which are conclusive by virtue of section 177(1) of the Income Tax Assessment Act. The position was stated by Gibbs CJ (with whom Murphy, Wilson, Brennan and Deane JJ agreed) in Clyne v Deputy Commissioner of Taxation (1983) 48 ALR 545 at 547. The Federal Magistrate said that equally in the current context he was not able to go beyond the assessments and must accept that there was in truth and reality a debt. 37 His Honour said that in taxation matters the court will sometimes allow the appeal in respect of the tax dispute to proceed by way of granting an adjournment of the bankruptcy application. In this matter this has not been necessary as the Deputy Commissioner had agreed to the proceedings being adjourned for a sufficient time to allow for the Part IVC proceedings in the Tribunal to be resolved. The Tribunal had now effectively resolved the tax dispute by refusing Ms Caporale an extension of time. 38 I was informed that no appeal from the Tribunal's decision of 25 October 2012 has been filed. I note that the time for filing such an appeal has long expired. 39 The Tribunal said in its decision of 25 October 2012: In relation to the assessments for the income years 1995 to 2000: • there was no particularity in the grounds of the original grounds of objection disputing the assessments [6]; • the Tribunal had already reached a decision based on consent orders agreed upon and entered into by Ms Caporale [7]; • the very lengthy delay in lodging the new objections [8]; • the failure to provide any cogent explanation for the delay [8]; • the failure to articulate any grounds of objection that were additional to those previously considered and rejected [8]. In relation to the assessments for the income years 2001 and 2002, the Tribunal said: • the assessments were in accordance with income tax returns lodged by Ms Caporale; • no satisfactory cogent explanation for the delay had been provided; • aside from vague references to oppressive behaviour by the Deputy Commissioner there did not appear to be any genuine merit in the dispute; • the applications for extension of time were more than a decade out of time - after such a long period the position of the Deputy Commissioner would be prejudiced. 40 The actual decision made by the Tribunal was: The Tribunal: a) In matters 2011/5336-5343 affirms the Commissioner's decision to refuse the extension of time requests. b) Notes that applications 2011/5344-5351 have already been dismissed under section 42B of the Administrative Appeals Tribunal Act 1975. 41 Although the appellant before me said that the Federal Magistrate had misunderstood the decision of the Tribunal, the proposition rested at that level of generality. I am not persuaded that there was any such misunderstanding. 42 Although I take into account that the appellant, having made two unsuccessful attempts to set aside the judgment of the District Court of New South Wales made on 11 August 2011, did on 21 December 2012 file a third application in that Court to set aside that judgment, no submissions were made to me about the substance of that application and I was not taken to the detail of any of the material on which the appellant relied in that application. 43 As to whether the Deputy Commissioner (or the ATO) has acted in some way fraudulently or in bad faith the Federal Magistrate said that in the circumstances in which the assessments were issued it was difficult to contemplate any circumstance where the present appellant could possibly allege that the Deputy Commissioner, in issuing the assessments, acted in some way fraudulently, or did not act bona fide such that the assessments might be set aside pursuant to an application under s 75(v) of the Constitution or s 39B of the Judiciary Act 1903 or that Ms Caporale had some set-off or cross-claim for damages. 44 It appears that the appellant also relied in this respect on a proposition that, on 3 October 2012 in a Local Court prosecution for non-compliance with a security bond demand notice, on her contention the ATO deliberately provided false and fraudulent evidence to the effect that a company called Sappia Investments Pty Ltd (a Caporale company) was involved in an "enterprise" in respect of a purported development at Dapto. 45 The Federal Magistrate said that in his view the Local Court proceedings concerning Sappia Investments Pty Ltd were not relevant to the current proceedings. 46 It was not explained to me how any concession by an officer of the ATO in those proceedings as to that company, if made, bears upon the present appeal. The proposition seemed to be that those proceedings demonstrated wrongdoing on the part of the ATO in relation to Sappia Investments Pty Ltd and this therefore established or tended to establish wrongdoing by the ATO in relation to the present appellant. I reject that submission. If allegations of abuse of power are to be made then they must be made specifically and clearly proved. I repeat the observations of the High Court in Commissioner of Taxation v Futuris Corp Ltd (2008) 237 CLR 146 at [60]: Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld. 47 As to whether Ms Caporale was solvent, the Federal Magistrate found that Ms Caporale had failed to provide evidence to establish her solvency. His Honour held that the affidavit of Mr Cavanagh sworn on 5 November 2012: • referred to cash flows of a highly speculative nature that may be available to Ms Caporale in the future but not presently; • disclosed no assets of Ms Caporale, only liabilities (and without giving any details of the bank loans and other creditors of Ms Caporale, except to say that those debts are not currently due and payable); • made a statement to the effect that Ms Caporale is solvent based on an incorrect assumption that the liability to the Deputy Commissioner is not currently due and payable; and • seemed to have been prepared without taking into account the judgment debt of $2,372,326.07 obtained by the National Australia Bank against Ms Caporale on 31 August 2012, or the additional amended assessments issued to Ms Caporale for an amount of approximately $1.3 million for the 2004 to 2008 income years; and the affidavit of Mr Peter Spring sworn on 6 November 2012. 48 The Federal Magistrate held that Ms Caporale had failed to establish that her assets were sufficient to pay her debts as and when they became due and payable and that she appeared to be clearly insolvent. 49 The Federal Magistrate said he granted a number of adjournments on the hearing of the petition to permit Ms Caporale to agitate her concerns in the Tribunal but she was unsuccessful. Ms Caporale required an extension of time to further dispute the default assessments and that was refused. 50 The Federal Magistrate made findings of fact by reference to the following chronology. It was not put to me that it was inaccurate, although I have corrected one apparently obvious and immaterial error which I have marked. DATE EVENT 22 March 2002 Ms Caporale objects against s 167 of the Income Tax Assessment Act 1936 default assessments of income tax for the years of income ended 30 June 1995, 1996, 1997, 1998, 1999 and 2000 (original objection) 10 March 2003 Ms Caporale signs income tax returns for the years of income ended 30 June 1997 and 1998 7 April 2003 Ms Caporale signs income tax returns for the years of income ended 30 June 1995 and 1996 6 May 2003 Ms Caporale signs income tax returns for the years of income ended 30 June 1999 and 2000 24 December 2003 Deputy Commissioner sends notices of decision on objection to Ms Caporale for the years of income ended 30 June 1995, 1996, 1997, 1998, 1999 and 2000 (the objection decisions) 14 February 2004 Ms Caporale files with the Administrative Appeals Tribunal (the Tribunal) applications (NT 2004/52-57) for review of the objection decisions 3 March 2006 Deputy Commissioner and Ms Caporale execute a Request for a Decision requesting the Tribunal, pursuant to s 42C(1)(b) of the AAT Act, to make a decision in accordance with the request in respect of the objection decisions 28 April 2006 Tribunal makes decisions, pursuant to s 42C(2) of the AAT Act, in respect of the objection decisions and sends a copy to the Deputy Commissioner and Ms Caporale 25 June 2010 Deputy Commissioner files a Statement of Claim against Ms Caporale in the District Court of NSW (recovery proceedings) 11 August 2011 Judgment for the Deputy Commissioner against Ms Caporale in the recovery proceedings 16 August 2011 Ms Caporale files with the Tribunal an Application for Review of Decision and attaches the objection decisions 16 September 2011 Ms Caporale files with the Tribunal an Application for Extension of Time for the "Tax Years 1995-2002 inclusive" in respect of the objection decisions 4 October 2011 A bankruptcy notice (BN 7399) was issued by the Official Receiver against Ms Caporale 11 October 2011 By consent the Tribunal dismisses the Application for Extension of Time 14 October 2011 Ms Caporale lodges a notice of objection in respect of the 1995 to 2010 income years (new objection) 19 October 2011 Ms Caporale was personally served with the bankruptcy notice 9 November 2011 Ms Caporale files an application seeking to set aside the bankruptcy notice 1 December 2011 Deputy Commissioner refuses extension of time for new objection 12 December 2011 Deputy Commissioner Ms Caporale files an Application for Review of Decision with Tribunal 20 December 2011 Registrar Hedge made orders which included the dismissal of Ms Caporale's application to set aside the bankruptcy notice 24 April 2012 Ms Caporale filed an application for review of Registrar Hedge's decision of 20 December 2012 7 May 2012 The application for review was dismissed by the Federal Magistrate 10 May 2012 Deputy Commissioner filed a creditor's petition in the Court against Ms Caporale 19 May 2012 The petition was personally served on Ms Caporale 14 June 2012 The petition was adjourned to 2 August 2012 30 July 2012 Ms Caporale filed a Notice of Grounds of Opposition to the petition and an affidavit in support arguing amongst others that a sequestration order would be a denial of natural justice and procedural fairness 2 August 2012 The proceedings were listed for hearing on 7 November 2012 with an evidence timetable 17 September 2012 Ms Caporale filed an Amended Notice of Grounds of Opposition to the petition 8 October 2012 Ms Caporale filed a notice of interim application seeking to vacate the hearing listed for 7 November 2012 and enter into a new evidence timetable 25 October 2012 Tribunal affirmed the Deputy Commissioner's decision to refuse the extension of time requests made by Ms Caporale 31 October 2012 The interim application was dismissed with order for Ms Caporale to file any further amended grounds by 2 November 2012 and all evidence by 5 November 2012 2 November 2012 Ms Caporale filed a further amended Notice of Grounds of Opposition to the petition 5 November 2012 Ms Caporale filed a further three affidavits and 28 exhibit folders

The Notice of Appeal 51 I have summarised the further amended notice of appeal at [6] above.

Submissions and further consideration of those submissions 52 Because the proceedings before the Federal Magistrates Court, and the present appeal, were not proceedings under Part IVC of the Taxation Administration Act 1953 much of the appellant's evidence and submissions were misdirected. 53 The appellant relied on s 52 of the Bankruptcy Act 1966 which provides, relevantly: 52 Proceedings and order on creditor's petition (1) At the hearing of a creditor's petition, the Court shall require proof of: (a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient); (b) service of the petition; and (c) the fact that the debt or debts on which the petitioning creditor relies is or are still owing; and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor. (1A) … (1B) … (2) If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor: (a) that he or she is able to pay his or her debts; or (b) that for other sufficient cause a sequestration order ought not to be made; it may dismiss the petition. 54 The appellant submitted that the Federal Magistrate was in error in failing to be satisfied by her that for other sufficient cause a sequestration order should not be made. The appellant's contention was that the 28 arch lever folders which the Federal Magistrate admitted into evidence subject to relevance established "other sufficient cause" or would have established "other sufficient cause" if the Federal Magistrate had allowed the appellant further time to summarise the content of those folders. In my opinion, having considered the content of those folders, that submission fails even on the assumption, which for the reasons I have given I consider to be incorrect, that matters of consciousness maladministration could establish "other sufficient cause". I agree with the Federal Magistrate that there is no substance in those materials which make out the appellant's claim in this respect. 55 Insofar as the present appellant sought to persuade the Federal Magistrate that as a matter of general discretion he should not make a sequestration order by reason of the public interest, again, in my opinion, there is no substance in those materials which make out the appellant's claim. A generalised claimed that a project in which the appellant is involved is in the public interest, even if established, would not outweigh the public interests to which the Bankruptcy Act 1966 gives effect. 56 The appellant also sought to raise as a ground of appeal, going to the correctness of the assessments issued to her, a $200,000 credit alleged to have been made by the Commissioner. The appellant accepted that such a claim had not been made by her before the Federal Magistrate. In my opinion, the appellant should not be permitted to raise that matter for the first time on the second day of the hearing of the appeal. On the assumption favourable to the appellant that she intended to seek leave to raise that matter I refuse leave for the reasons I have given. 57 The appellant's submissions were otherwise directed in a most general way, in substance by way of headings, to the matters I have set out in [6] above. 58 In my opinion, for the reasons I have given, the applicant has failed to make good any of the grounds raised on the appeal. 59 No appellable error on the part of the Federal Magistrate was established. 60 For completeness I note that no basis has been made out by the appellant before me to establish that the relevant assessments were made in bad faith. Propositions were put at a high level of generality. There has been no pleading of material facts necessary to ground such a claim. 61 In addition, no persuasive reason has been advanced by the appellant as to why the alleged bad faith has not been advanced in a properly pleaded case and in properly constituted proceedings before now. 62 As to any proposed common law proceedings against the Commissioner for damages, no such proceedings had been commenced when the present appeal was heard. Again there would need to be specific pleading of the material facts necessary to ground such a claim. No persuasive reason has been advanced by the appellant as to why this alleged cause of action has not been advanced in a properly pleaded case before now. I also note it would not be enough for the appellant to formulate a claim in sweeping conclusory terms: see ICM Agriculture Pty Ltd v Young [2009] FCA 109 at [78] and the authorities there cited. 63 Similarly, to make out "other sufficient cause" within s 52(2)(b) of the Bankruptcy Act 1966, the appellant was required to establish that her claims were likely to succeed: ICM Agriculture Pty Ltd v Young (2009) 260 ALR 515 at [85], Totev v Sfar (2009) 230 ALR 236 at [37]-[44]. This she had not done in relation to either future claim. Neither had she established that either claim was arguable.

Conclusion and orders 64 The appeal is dismissed. The appellant is to pay the respondent's costs as agreed or taxed. I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Rulings on the admissibility of the 28 arch lever folders tendered in the Federal Circuit Court but not the subject of rulings in that Court but admitted subject to relevance 1 I reject the folders which are no more than duplications of other material. 2 I reject as irrelevant the volumes and tabs which do not relate to the tax affairs of any entity but which were tendered in order to establish the contention of "other reasonable cause" within s 52(2) of the Bankruptcy Act 1966. 3 I reject as irrelevant the volumes and tabs which relate to the tax affairs of persons and entities other than the present appellant. 4 I accept as potentially relevant the volumes and tabs which relate to the taxation affairs of the present appellant. It appears that this material was put before the Federal Magistrate for the purpose, first, of providing a basis for an adjournment application by her so as to indicate her foreshadowed case against the respondent for maladministration and, although this was less clear, her case for damages at common law against the respondent. The second purpose of putting this material before the Federal Magistrate was to establish the present appellant's contention of "other reasonable cause" within s 52(2) of the Bankruptcy Act 1966. 5 I admit that material as potentially relevant, as shown below. I have ruled as irrelevant some of the documents which do relate to the affairs of the present appellant but which do not relate to any matter in the appeal. Volume Tab Brief description Ruling Number Numbers 1 1-19 Apart from tab 17, the entirety of these tabs and the entirety of the volume, being documents relating to the affairs of taxpayers other than the appellant. Apart from tab 17, irrelevant - rejected and not to form part of the evidence on the appeal. 2 20-30 The entirety of these tabs and the entirety of the volume. The volume contains irrelevant transcript of hearings in the Administrative Appeals Tribunal (AAT) or documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 3 31 14 January 2002 letter from ATO to appellant as to failure to lodge income tax returns for 30 June 1994 to 2000. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 32 22 March 2002 letter to ATO objecting to default assessments for 30 June 1995 to 2000. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 33 1995 Group Certificate. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 34 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 35 Amended Statement of Claim in the District Court of New South Wales. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 36 Affidavit of Michael Cavanagh sworn 19 July 2012. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 37 Irrelevant or excluded under s 135 of the Evidence Act 1995 (Cth). It is not to form part of the evidence on the appeal. 38 Decision of Tribunal in the matter of Rosa Caporale refusing extension of time. Relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 39-48 Documents relating to the affairs of taxpayers other than the appellant. Irrelevant. It is not to form part of the evidence on the appeal. 49 There is no document under this tab. 3A 50-61 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 3B 61A Affidavit of Michael Cavanagh sworn 8 August 2012. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 61B-C There is no document under each of these tabs. 61D-P Each of these documents is irrelevant to the proceedings in the lower Court. They are tax returns of the appellant, some in draft. Rejected. These tabs are not to form part of the evidence on the appeal. 4 62 Affidavit of Michael Cavanagh sworn 8 August 2012. Rejected as a duplicate. 63 Affidavit of Michael Cavanagh sworn 7 May 2012. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 64 There is no document under this tab. 65-76 If relevant this material is excluded under s 135. It is not to form part of the evidence on the appeal. 77 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 78-79 This material is a duplicate of other material in these folders. Rejected. 80 Irrelevant - rejected. 81-83 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 84 Irrelevant - rejected. 85 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 86 Irrelevant - rejected. 87-88 This material is a duplicate of other material in these folders. Rejected 89-102 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 102 Irrelevant - rejected. 103 If relevant this material is excluded under s 135 of the Evidence Act 1995. 104-105 Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere. 106, 108 and 109 Irrelevant - rejected. It is not to form part of the evidence on the appeal. 107 There is no document under this tab. 5 110-142 This volume contains duplicates or is excluded under s 135 of the Evidence Act 1995. Rejected. It is not to form part of the evidence on the appeal. 6 143-168 This volume contains duplicates or is excluded under s 135 of the Evidence Act 1995. Rejected. It is not to form part of the evidence on the appeal. 7 169-181 This volume does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected It is not to form part of the evidence on the appeal. 8 182-215 This volume does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 9 216-238 Apart from tab 232, this volume does not deal with the appellant's tax affairs or contains duplicates. Apart from tab 232, this material is irrelevant - rejected. It is not to form part of the evidence on the appeal. 10 239-287 This volume does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 11 288-301 This volume, except for tab 301, does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. I reject tab 301 as irrelevant because it concerns events in the AAT which the AAT had dealt with. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 12 302-348 This volume contains duplicates. Rejected. It is not to form part of the evidence on the appeal. 13 349-382 This volume contains duplicates. Rejected. It is not to form part of the evidence on the appeal. 14 383-410 This volume contains duplicates. Rejected. It is not to form part of the evidence on the appeal. 15 411-441 This volume contains duplicates. Rejected. It is not to form part of the evidence on the appeal. 16 413-440 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. 17 441-463 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 18 464-469 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 19 470-471 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 20 472 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 21 473-487 This volume does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 22 488-504 This volume does not deal with the appellant's tax affairs but contains documents relating to the affairs of taxpayers other than the appellant. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 23 505-530 With the exception of tab 519, this volume does not deal with the appellant's tax affairs, but contains documents relating to the affairs of taxpayers other than the appellant. Except tab 519, irrelevant - rejected. Apart from tab 519 the volume is not to form part of the evidence on the appeal. 24 531-533 This volume does not deal with the appellant's or any other person's tax affairs. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 25 534-582 Many of the tabs in this volume do not deal with the appellant's or any other person's tax affairs. Others deal with the affairs of taxpayers other than the appellant. The few tabs which refer to the appellant's affairs do so only in passing. Irrelevant - rejected. It is not to form part of the evidence on the appeal. 26 unnumbered This volume apparently contains copies of the appellant's tax returns for 1995 to 2010 apparently lodged with the ATO in December 2012. Potentially relevant, and admitted as part of the evidence on the appeal, if not included elsewhere.

Judiciary Act 1903(Cth)ss 39B, 55ZG

Caporale v Deputy Commissioner of Taxation

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (11)

Cited By (1)