BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRALIA

Practice and procedure - Application to stay action for recovery of tax when assessment subject to review - Principles applicable to stay application - Summary judgment application by plaintiff

Income Tax Assessment Act 1936 s 208, s 209

AFCO v Tobacco Institute (1988) 81 ALR 701

Australian Machinery and Investment Co Pty Ltd v Deputy Commissioner of Taxation (No 2) (1945) 20 ALJ 326

Deputy Commissioner of Taxation (Cth) v Ewen (1984) 15 ATR 818

Deputy Commissioner of Taxation (Vic) v Sheehan (1986) 86 ATC 4718

Deputy Commissioner of Taxation v Collie (1995) ATC 4764

Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23; (1995) 183 CLR 168

Effem Foods Pty Ltd v Trawl Industries of Australia Pty Ltd (1993) 43 FCR 519

F J Bloeman Pty Ltd v Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360

Lawrance v Lord Norreys [1890] 15 AC 210

Shackleton v Swift [1913] 2 KB 304

Snow v Deputy Commissioner of Taxation (1987) 87 ATC 4078

Snow v Deputy Commissioner of Taxation (Cth) 14 FCR 119

Stephenson v Garnett [1898] 1 QB 677

Yat Tung Investment Co Ltd v Dao Heng Bank Ltd [1975] AC 581

1 MASTER SANDERSON: This is the return of two applications. The first in time is the defendant's application for a stay of the action. The second application is a summary judgment application brought by the plaintiff pursuant to O 14. The plaintiff requires leave to bring that application because it is made more than 21 days after the entry of the defendant's appearance. At the commencement of the hearing counsel for the defendant conceded that if the stay was not granted and if leave to bring the summary judgment application was obtained, then judgment should be entered. On that basis the defendant's application for a stay of the action was dealt with first.

2 The amount sought by the plaintiff in its summary judgment application is $5,026,916.15. This amount is said by the plaintiff to be owing by way of tax, interest and penalties pursuant to the Income Tax Assessment Act 1936 ("the Act"). Pursuant to s 208 of the Act a tax, when due and payable subsequent to an assessment, is rendered a debt due to the Commonwealth and payable to the plaintiff. By virtue of s 209 of the Act the plaintiff is empowered to recover any unpaid tax from the defendant. The fact that the taxpayer challenges the assessment, whether that be by way of review by the plaintiff or through the courts is no impediment to the recovery by the plaintiff of the unpaid tax pursuant to the provisions of the Act. The defendant in this case did not raise any argument to the contrary. However, it was submitted that in the particular circumstances of this case it was an abuse of the process on the part of the plaintiff to proceed with recovery action and a stay ought be granted.

3 The defendant's application was supported by two affidavits sworn by him - the first sworn 30 November 1999 and the second sworn 24 January 2001. What emerges from these affidavits is as follows. On 28 April 1995 the plaintiff issued notices of assessment against the defendant in respect of income tax for the years ended 30 June 1988 to 1992 ("the personal assessments"). The total amount payable in respect of the personal assessments was $5,744,252.75. The defendant lodged objections to the personal assessments and on 15 May 1996 each of the objections was disallowed. The defendant then applied to the Administrative Appeals Tribunal ("AAT") for a review of the objection decisions. These applications for review have not yet proceeded beyond the stage of lodgment with the AAT of documents as required under the Administrative Appeals Tribunal Act and preliminary conferences.

4 On 14 November 1995 the plaintiff issued to the defendant further assessments with respect to the years ended 30 June 1989 and 1990. These assessments, which are referred to in the affidavits of the defendant as the "agency assessments" are based upon the premise that the amounts the subject of the personal assessments, if they are assessable amounts as income derived, were not in fact derived by the defendant but by a non-resident individual who is a former associate of the defendant. It is conceded by the plaintiff that there is a degree of overlapping between the personal assessments issued to the defendant and the agency assessments.

5 On 12 May 1995 the plaintiff obtained against the defendant a mareva injunction. The injunction was obtained ex parte and prior to the issue of the writ. In fact, the writ was not issued until some four years after the injunction had been obtained and now forms the basis of this action. For the sake of completeness I should add that the injunction was discharged on 18 May 1995 upon the defendant's undertaking not to dispose of certain real estate within the jurisdiction.

6 On 12 February 1997, just prior to a hearing in the AAT on the defendant's applications in relation to his personal assessments, the Australian Federal Police acting on a search warrant seized a large number of documents concerning the defendant's financial affairs from his home and various other addresses. The defendant claimed that a number of the documents seized were covered by privilege. On 18 December 1998 Justice French of the Federal Court declared that 181 of the seized documents were subject to legal professional privilege. The court ordered that these privileged documents be returned to the defendant. The defendant alleges that some of these privileged documents were passed on to officers of the debt recovery section of the office of the plaintiff. The defendant alleges that among those who saw these privileged documents was Alexander Mark Dunn. Mr Dunn has sworn two affidavits in support of the summary judgment application dated 22 November 2000 and 8 February 2001. Subsequent to the seizure of documents the defendant issued proceedings in the Federal Court against the plaintiff in this action and the Commissioner of the Australian Federal Police. It was in the context of these Federal Court proceedings that Justice French made his order with respect to the seized documents. The plaintiff's Federal Court Action is still pending. In those proceedings the plaintiff seeks the following relief (exhibit "BS 1" to defendant's second affidavit):

"An injunction requiring the First Respondent to prevent any servant or agent located in any Western Australian office of the Australian Taxation Office, including but not limited to Mr Martin Keating, Mr Jones, Mr Dunn and Ms Johnston, from being in any way involved in the conduct of any civil litigation between the First Respondent and the Applicant relating directly or indirectly to the Notices of Assessment."

7 The defendant contended that it is well settled that the Supreme Court has jurisdiction to stay proceedings initiated by the plaintiff to recover unpaid tax which is due and owing. Reliance was placed upon Deputy Commissioner of Taxation (WA) v Australian Machinery and Investments Co Pty Ltd (1945) 3 AITR 236; Deputy Commissioner of Taxation (NSW) v Mackey (1982) 45 ALR 284 and Deputy Commissioner of Taxation v Ho (1996) 131 FLR 188. Counsel for the plaintiff did not concede that the court had power to grant a stay. However, counsel indicated that he was prepared to deal with this matter on the basis that if the power to grant a stay of proceedings rests with the court, it is a discretion which should be exercised with great caution and only in special or exceptional circumstances: See Held v Deputy Commissioner of Taxation (Vic) (1988) 19 ATR 1213. There was no dispute between the parties as to the circumstances in which the discretion should be exercised.

8 Once that position is reached it is clear, in my view, that there is no basis in this case upon which it would be proper to stay the proceedings. Properly analysed the defendant's application relies on two grounds. First, it is said that there is overlap between the personal assessments and the agency assessments. To seek to enforce the personal assessments in such circumstances may, it is said, result in payment of tax which is properly payable pursuant to the agency assessments. That inconsistent assessments have been issued against a taxpayer is neither unusual nor impermissible and is not a matter which can justify a stay: See Held v Deputy Commissioner of Taxation (supra) at 1214. If the plaintiff was seeking summary judgment with respect to both the personal assessments and the agency assessments the position may well be different. But the mere fact of inconsistent assessments is no basis for the grant of a stay.

9 The second line of argument relates to the Federal Court proceedings. It is said that so long as those proceedings are extant and the question of whether Mr Dunn should be in any way involved in recovery of tax from the defendant is unresolved, it is an abuse of the process to allow the plaintiff to proceed with the summary judgment application or indeed to take any further steps in the proceedings. To that there is a simple answer. First, since the documents were seized by the Australian Federal Police the amount of tax claimed from the defendant has been reduced, not increased. It is difficult to see that if any documents improperly in the possession of the plaintiff were used in relation to the calculation of tax, that it has done any more than benefit the defendant. Secondly, the purpose of the affidavits sworn by Mr Dunn in these proceedings is simply to enliven the court's jurisdiction under O 14. All that is required for a summary judgment application is that an authorised officer of the plaintiff verify that the assessments have been issued and the amount of those assessments. Thereafter the claim for summary judgment is unanswerable. Even if at some stage in the future Mr Dunn were to be prevented from taking any part in the recovery of tax from the defendant, it can hardly be said that his swearing an affidavit in support of a summary judgment application is in some way an abuse of his position. It is true that in his affidavit of 22 November 2000 Mr Dunn deals with the question of whether leave to bring this application ought be granted by providing a chronology which sets out the history of the dispute between the plaintiff and the defendant. There is nothing to suggest that history draws upon privileged documents, nor does it deal with matters which are in any sense contentious. It simply sets out in a straightforward manner the nature of the dealings between the plaintiff and the defendant.

10 I am not satisfied that the circumstances of this case are special or exceptional such as would justify a grant of a stay of proceedings. I would dismiss the defendant's application.

11 That then leaves the plaintiff's summary judgment application. Based upon the affidavit evidence of Mr Dunn I am satisfied that leave to bring this application out of time ought be granted. The delay in bringing the application is adequately explained, such as would justify the grant of leave pursuant to O 14 r 1(1). Having reached that point I am satisfied that there is no basis upon which summary judgment could properly be refused and I would enter judgment for the plaintiff. I will hear the parties as to the precise amount of the judgment sum and as to any further orders which should be made.