Cropper v Energy Action

1. The respondent's interlocutory application dated 8 November 2023 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

SNADEN J: 1 By an interlocutory application dated 8 November 2023, the respondent moves the court for leave under r 16.53 of the Federal Court Rules 2011 (Cth) to file a further amended defence. The pleading that is proposed in that respect is annexed to an affidavit that was affirmed by Liam Alexander Zisis on 8 November 2023, which was read in support of the application. 2 The amendment that is proposed is of short compass. By his amended statement of claim, the applicant alleges that he is a former employee of the respondent's; and that he was unlawfully dismissed from his employment. The respondent maintains, amongst other things, that it did not, in truth, employ the applicant; but, rather, engaged him as an independent contractor. 3 It seems to be common ground that, when it began in 2005, the working relationship between the parties was one of principal and contractor. By his pleading, the applicant alleges that that changed in January 2006, when an agreement was struck by which he would be employed on a part-time basis. That allegation is denied on the basis earlier identified; but the respondent now hopes to deny it on a further basis, specifically that any such contract as was created as the applicant alleges was void and/or unenforceable for reasons of illegality. 4 That allegation arises as a result of documents discovered - or, perhaps, not discovered - over the unusually long course of this proceeding to date. The respondent contends that it has recently uncovered evidence that tends to suggest that the contract that is alleged was entered into for the sole or dominant purpose of defeating tax obligations that are said to have attached to the applicant pursuant to the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (hereafter, the "GST Act"). Alternatively, it is suggested that the contract that is alleged was entered into with the principal effect of obtaining for the applicant a benefit of a kind that the GST Act proscribes. 5 Those allegations of purpose and effect are not themselves pleaded in the proposed amendment; but they do appear, howsoever improperly, amongst a suite of "particulars" of the proposed illegality plea. It is suggested that, in light of that purpose or effect, "…the said agreement was unlawful pursuant to Division 165 of the GST Act". 6 The principles governing the grant of leave to amend a pleading are notorious and are not presently disputed or in doubt. Significantly for present purposes, the court will refuse leave to amend a pleading so as to permit agitation of an issue that is without foundation: Hurst, in the matter of Lloyds Curry Shop Pty Ltd (in liq) v Prasad (No 3) [2023] FCA 1174, [14] (Cheeseman J) and the authorities to which her Honour there refers. 7 That is an apt description of the amendment that the respondent hopes here to agitate. Even assuming, as the court must at this juncture, that the respondent is able to establish the purpose or effect that it hopes to attribute to the January 2006 contract, it has nonetheless not explained how any part of Div 165 of the GST Act might operate, expressly or by implication, upon the enforceability of contracts entered into with that purpose or effect. More to the point, it is not apparent from the proposed pleading how such an end point is said to arise. 8 That is the question upon which the legality of the contract to which the proposed amendment relates falls to be determined: does the GST Act operate, either expressly or by implication, to prohibit the making of contracts such as the one that the proposed amendment describes? For the reasons that follow, the respondent has not shown that it has any prospect of establishing that it does. 9 Division 165 of the GST Act is headed, "anti-avoidance". It permits the Commissioner of Taxation to issue declarations in respect of schemes that are thought to be animated by or productive of identified objects or effects. A declaration so issued has effect according to its terms; and operates so as to require the meeting of tax obligations that would otherwise have arisen but for the scheme or arrangement in respect of which it was issued. 10 The proposed pleading identifies no provision in Div 165 of the GST Act (or, for that matter, anywhere in that or any other statute) that operates expressly to invalidate or void contracts entered into with the identified object or effect. None was identified in the course of the respondent's written or oral submissions, either. Instead, it was submitted that Div 165 of the GST Act operates implicitly so as to void contracts entered into with the objects or effects that might suffice to attract a declaration from the Commissioner. 11 In that respect, the respondent relied upon the following observations of McFarlan JA (with whom Beazley P and Gleeson JA agreed) in REW08 Projects Pty Ltd v PNC Lifestyle Investments Pty Ltd (2017) 95 NSWLR 458. En route to concluding that the contract there in focus was not one that, by operation of a revenue statute, was void for want of legality, his Honour referred (at 463-464) to what McHugh J said in Nelson v Nelson (1995) 184 CLR 538, namely: …courts should not refuse to enforce legal or equitable rights simply because they arose out of or were associated with an unlawful purpose unless: (a) the statute discloses an intention that those rights should be unenforceable in all circumstances; or (b)(i) the sanction of refusing to enforce those rights is not disproportionate to the seriousness of the unlawful conduct; (ii) the imposition of the sanction is necessary, having regard to the terms of the statute, to protect its objects or policies; and (iii) the statute does not disclose an intention that the sanctions and remedies contained in the statute are to be the only legal consequences of a breach of the statute or the frustration of its policies. 12 Nothing in that observation assists in affording the respondent a prospect of establishing that the contract that is the subject of its proposed amendment was "…unlawful pursuant to Division 165 of the GST Act". There is nothing in Div 165 of the GST Act that suggests or requires that contracts entered into with the purpose or effect identified in the proposed amendment are unenforceable for reasons of illegality. Moreover, given the availability of the Commissioner's power to issue declarations under that division, the objects or purposes underlying the statute - quite obviously being to protect and regulate the collection of state revenue - do not by implication require that such contracts be treated as void and unenforceable (see, as to the significance of revenue statutes, the observations of Gibbs ACJ in Yango Pastoral Company Pty Ltd v First Chicago Australia Ltd (1978) 139 CLR 410, 414). 13 Respectfully, the legal premise upon which the respondent's proposed amendment sits - namely, that the contract that is the subject of the applicant's pleading (assuming that it was entered into as alleged) was void for want of legality - is flawed. The most that might be said of it (assuming that the respondent can establish what it says that it can establish) is that the contract might attract a declaration of the Commissioner for Taxation under Div 165 of the GST Act; but there are two points to note in that respect. First and most basically, there is no suggestion that any such declaration has, in fact, been issued. Second, even if there had been one, it is not possible to see how (and I do not accept that) the availability or issuing of a declaration might operate to void what would otherwise be the valid creation of contractual relations. 14 Had the proposed amendment been incorporated into the respondent's defence from the outset, it would be liable to be struck out for want of reasonable prospects. It is not now in the interests of justice for the amendment to feature in the respondent's pleading. I decline to grant the relief for which the respondent moves and the interlocutory application of 8 November 2023 should and will be dismissed. I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Snaden.