Cumins v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT THE COURT: Introduction 1 On 15 June 2005 a summary judgment was entered against the appellant, Brian Cumins, in the Supreme Court of Western Australia in proceedings brought against him by the Deputy Commissioner of Taxation. Judgment was for the sum of $38,084,522.24 together with general interest charged pursuant to s 204 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) and Pt IIA of the Taxation Administration Act 1953 (Cth) (TAA). Mr Cumins was ordered to pay the Deputy Commissioner's costs. Mr Cumins did not consent to the judgment but did not oppose it. 2 On 17 March 2006 the Deputy Commissioner issued a bankruptcy notice against Mr Cumins requiring payment, within 21 days after service, of the amount of $38,051,066.24. The amount demanded comprised the sum of the judgment less an amount of $33,456 described in the bankruptcy notice as "payments made and/or credits allowed since date of judgments or orders". 3 On 14 July 2006 a Registrar of the Federal Magistrate's Court made an order for substituted service of the bankruptcy notice and directed that subject to compliance with the steps required for substituted service the bankruptcy notice would be deemed to be served on Mr Cumins on 4 August 2006. 4 On 21 July 2006 the Deputy Commissioner issued a notice of assessment to Mr Cumins for the financial year 2004/05. It showed tax on taxable income of zero and PAYG withholding credits of $9,516. The balance of the assessment was a credit of $9,516. However the assessment noted other amounts payable in the sum of $43,381,460.10, leaving a net amount of $43,371,944.10 payable on 11 August 2006. 5 On 14 August 2006 Mr Cumins filed an application in this Court to set aside the bankruptcy notice. The application was heard by Stanley DDR on 18 September 2006 and dismissed on that day. Mr Cumins then sought review of the Deputy District Registrar's decision by a judge. His application was heard by Siopis J on 1 December 2006 and dismissed on that day with costs. Mr Cumins lodged a notice of appeal from his Honour's judgment. 6 The argument before his Honour involved the proposition that, at the time the bankruptcy notice issued, the Commissioner should have recognised a credit in favour of Mr Cumins in the amount of $9,516 being the PAYG withholding credits referred to in the subsequent notice of assessment for the year ended 30 June 2005. The credit which was recognised in the assessment was recognised pursuant to s 18-15 of Div 18 of Pt 2-5 of Sch 1 of the TAA. That section provides for such credits to be given at the time of issue of the assessment. The argument before his Honour was that the Commissioner could and should have given credit for the withheld PAYG payment at the time he issued the bankruptcy notice and that it was therefore invalid as overstating the amount owed. 7 A different argument, not put before Siopis J, was raised on appeal. It depended upon the proposition that the Commissioner was obliged to establish a running balance account (RBA) in respect of the taxpayer under Pt IIB of the TAA and that a credit for the withheld PAYG payment properly arose pursuant to the RBA scheme. The credit, for the amount of $9,516, should have been offset against the judgment sum in the bankruptcy notice. 8 For the reasons that follow we regard the argument as unsustainable. The appeal will be dismissed with costs. Evidence before the primary judge 9 The materials before the learned primary judge included affidavit evidence which had been before Stanley DDR and further affidavits which were put before his Honour. The material before Stanley DDR comprised three affidavits sworn by Mr Cumins on 14 August, 23 August and 5 September 2006. There was an affidavit of Nola Kathryn Rice, of the Australian Taxation Office (ATO), sworn 28 August 2006 and two affidavits of Shannon Jayne Caporn, Mr Cumin's solicitor, sworn 4 September and 9 October 2006. The affidavits of Ms Caporn and Ms Rice were not reproduced in the appeal book. In addition, there were before his Honour two affidavits of Ms Rice sworn 2 and 16 November 2006 and two affidavits of Ms Caporn sworn 10 and 14 November 2006. Much of Mr Cumins' evidence on the review was not material to the appeal. He did say that in the period May 2005 to 14 March 2006 he had paid the Commissioner an amount of $10,500 which he believed may not have been credited against the amount of the judgment debt. On that basis he asserted his belief that the bankruptcy notice exceeded the amount of the judgment debt due and payable and relied upon for the bankruptcy notice. 10 Nola Kathryn Rice is an APS Level 6 officer in the Australian Public Service employed in the Debt Complex Case Management Section of the ATO. She deposed to the issue of the bankruptcy notice which demanded payment of $38,051,066.24 being the judgment sum less payments and credits amounting to $33,456. The sum of $33,456 was made up of credits and payments. The credits comprised two sums: