Commissioner of Taxation v Multiflex Pty Ltd

REASONS FOR JUDGMENT 1 On 11 November 2011 a Full Court of this Court dismissed the appeal of the Commissioner of Taxation ('Commissioner') ([2011] FCAFC 142) from the judgment and orders of Jessup J ([2011] FCA 1112), dated 30 September 2011, which included the following order: '1. A writ of mandamus issue directing the respondent to comply with s 35-5 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and s 8AAZLF of the Taxation Administration Act 1953 (Cth) by forthwith paying to the applicant the net amount notified to the respondent in the applicant's GST return for each of the tax periods January, February, March, April and May 2011.' 2 On that last mentioned date, the learned primary judge, after hearing from the parties and on the undertaking of the Commissioner, by his counsel, to pay the costs, as taxed or agreed, of the respondent ('Multiflex') of any appeal the Commissioner may lodge conformably with the order below, ordered: '1. Subject to any further order of the Court or a Judge, the operation of the orders made by the court this day be stayed - (a) until 4.00 pm on 3 October 2011; and (b) if an appeal be lodged before that time, thereafter until the hearing and determination of that appeal.' 3 On 11 November 2011, Stone J, after hearing from the parties, ordered: '1. That the order of the Full Court made today be stayed until 5.00 pm on Wednesday, 16 November or until further order. The application for a stay is listed at 2.15 pm before Edmonds J on 16 November.' 4 On 15 November 2011 the Commissioner filed an interlocutory application seeking an order in the following terms: '1. The orders of the Full Court given on 11 November 2011 are stayed until the hearing and determination of the Appellant's application for special leave to appeal to the High Court of Australia and, in the event that special leave is granted, the hearing and determination of the appeal.' 5 At the outset of the hearing of the stay application I indicated to senior counsel for the Commissioner that I was not prepared to make an order in those terms because it contained the potentiality of extending the stay to a date unknown, but well beyond 30 November 2011, a date previously indicated by the Commissioner as being a date by which his investigation into the GST affairs of Multiflex would be complete: [2011] FCA 1112 at [27]. 6 I was informed by senior counsel for the Commissioner that an application for special leave to appeal to the High Court had that day been filed in the High Court Registry in Sydney and an application for expedition was to be filed today, 17 November 2011. I was also informed that if the application was given expedition, it might be heard on 9 December 2011 but if not, the special leave application would likely be heard on 10 February or 9 March 2012. 7 On receipt of that information, I informed counsel for the Commissioner that I was not prepared to grant a stay on terms that the order of the Full Court given on 11 November 2011 be stayed until the special leave application was determined; I would however, be prepared to entertain an application for a stay until shortly after 9 December 2011 or, in the alternative, for a further seven days to enable a stay application to be made to the High Court. That offer was embraced and the hearing of the stay application proceeded on the basis of the Commissioner proffering the usual undertaking as to damages. At the conclusion of the hearing, I extended the stay order of Stone J until 5.00 p.m. on Thursday, 17 November 2011 or further order, and indicated to the parties that I would deliver judgment later today. 8 Whatever might be the position in the High Court - see Jennings Construction Limited v Burgundy Royale Investments Pty Ltd (1986) 161 CLR 681 per Brennan J (as his Honour then was) at 684 where his Honour observed: 'A stay to preserve the subject-matter of litigation pending an application for special leave to appeal is an extraordinary jurisdiction and exceptional circumstances must be shown before its exercise is warranted.' (Emphasis added.) The threshold in this Court would not seem to require some 'exceptional' or 'special' reason for the stay, merely a requirement on the part of an applicant for a stay pending the determination of an appeal to demonstrate 'a reason or an appropriate case to warrant the exercise of discretion in his favour': Powerflex Services Pty Ltd v Data Access Corporation (1996) 67 FCR 65 at 66; Peterson v Merck Sharpe & Dohme (Aust) Pty Ltd (No 5) [2010] FCA 605 per Jessup J at [37]; Deputy Commissioner of Taxation v Ansett Resources & Industries Pty Ltd [2010] FCA 833 per Reeves J at [12]. 9 The starting point is that a successful party is entitled to the fruits of his or her judgment and some good reason to hold that entitlement in abeyance must be shown: Peterson at [37]. 10 While the prospect that execution of a judgment appealed from would render any appeal negatory is usually regarded as a substantial factor in favour of a stay, it is not a necessary condition of the exercise of the jurisdiction to grant a stay. 11 As Jessup J said in Peterson at [37]: 'Where the judgment to be appealed from obliges one party to pay a sum of money - particularly a substantial sum - to the other party, the considerations to which the court should advert in the exercise of its discretion include the prospect of the intending appellant being restored to his or her original position, if the appeal succeeds, and the hardship or prejudice which would be visited upon the party who was successful at first instance if he or she were denied the fruits of the judgment, and yet the appeal fails.' 12 While the threshold requirement for a stay of a judgment of this Court may be less than what it is in the High Court (see [8] above), in Jennings, Brennan J said at 684 - 685: 'When an application for special leave to appeal is made to this Court, a jurisdiction to stay may be exercised by the court below and it is to that court - the court in which the matter is pending and which is familiar with the matter - that an application to stay should first be made. … In exercising the extraordinary jurisdiction to stay, the following factors are material to the exercise of this Court's discretion. In each case when the Court is satisfied a stay is required to preserve the subject-matter of the litigation, it is relevant to consider: first, whether there is a substantial prospect that special leave to appeal will be granted; secondly, whether the applicant has failed to take whatever steps are necessary to seek a stay from the court in which the matter is pending; thirdly, whether the grant of a stay will cause loss to the respondent; and fourthly, where the balance of convenience lies.' 13 In George v Fletcher (Trustee) (No 2) [2010] FCA 655, Logan J at [13] indicated that these factors or considerations referred to by Brennan J as pertinent in Jennings, 'also have relevance to whether or not, where [the] intermediate appellate court is approached on the subject of a stay, a stay should be granted'. I agree. It is implicit in his Honour's indication that he did not include the second of the factors referred to by Brennan J. 14 However, in the present case, I am far from satisfied on the evidence before the Court that a stay is required to preserve the subject matter of the litigation. In other words, I am not satisfied on the evidence that if the judgment of the Full Court is executed, the Commissioner will not be in a position, if he issues assessments totally reversing the negative amounts for the relevant months and ultimately succeeds in defending these assessments, to recover the amounts paid in execution of the judgment. 15 The only material which senior counsel for the Commissioner could point to in this regard is: (1) The observations of the learned primary judge at [24] to [27] of his reasons concerning the evidence of a Mr Channell from the Australian Taxation Office that other companies under common ownership and control had gone into liquidation with GST and related liabilities of $26 million; and (2) evidence led by Multiflex that it was relying on the refunds for the months in question to fund its ongoing working capital requirements and that the Commissioner's refusal to make the refunds put pressure on its working capital capacity in carrying on its activities in the ordinary course of its business. To some extent, the Commissioner conceded this, but nevertheless suggested that the prospect of Multiflex becoming insolvent had been exaggerated. 16 Whether that be correct or not, I am not satisfied that either of these matters lead to the conclusion that a stay is required to preserve the subject matter of the litigation. The more so where, until a contrary assessment issues, the subject matter of the litigation is not the amount of the refund, but when the refund is to be paid. 17 If I am wrong in that view, the considerations, or at least three of the four considerations, referred to by Brennan J in Jennings become relevant.