Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Ltd

REASONS FOR JUDGMENT 1 This is an interlocutory application seeking a stay of enforcement of orders made by Robertson J on 11 March 2013 relating to the applicants, as well as stays of the various winding up orders of the applicants that Robertson J made on that day. 2 On 11 March 2013 in the matter of Deputy Commissioner of Taxation v Bayconnection Property Developments Proprietary Limited (No 2) [2013] FCA 208 (Bayconnection No 2) Robertson J had before him by each of the applicant companies an application for an adjournment of the applications by the Deputy Commissioner of Taxation to wind up each applicant company. By orders of that day Robertson J refused to adjourn the winding up applications. 3 In his reasons for judgment Robertson J referred to his earlier decision in Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Ltd [2012] FCA 363 in which his Honour did adjourn the winding up applications primarily because there was then on foot an appeal under Part IVC of the Taxation Administration Act 1953 (Cth) (the Taxation Administration Act) before the Administrative Appeals Tribunal (the AAT). However, the circumstances had changed by the time of his subsequent decision on 11 March 2013. As his Honour set out at [3] of his reasons for judgment published on that date, the AAT gave its decision in each appeal on 29 January 2013 and affirmed the decision under review in each matter: see Re Bayconnection Property Developments Pty Ltd v Commissioner of Taxation [2013] AATA 40. 4 As set out in Bayconnection No 2 at [5] the applicant companies lodged appeals to the Federal Court from the AAT's decision. These are appeals relying on s 44 of the Administrative Appeals Tribunal Act 1974 (Cth) which, as Robertson J later explains, is limited to an appeal on a question of law. Robertson J noted the principles set out in Southgate Investment Fund Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10 (Southgate) at [77] which related to a case about whether or not execution of a judgment debt should be stayed where there had been no hearing on the merits, a prospective appeal and a Part IVC of the Taxation Administration Act not having been heard. Robertson J noted numerous factors relevant to the decision of whether or not an adjournment as sought should be granted. They included: The fact that the taxpayer bears the onus of persuading the court that a stay ought to be granted in particular circumstances as well as each of the other factors set out in Southgate; at [15]. The fact that the appeal to this court is limited to an appeal on the question of law; at [16]. The questions of law sought to be raised by the applicant companies in the appeal; at [17] - [27]. Whether any of those grounds of appeal raise a reasonably arguable case that the Tribunal's decision is vitiated by the error of law; at [17] - [27]. The applicant's reliance on alleged contraventions by the Deputy Commissioner of Taxation of the model litigant obligations; at [28] and [29]. The legislative scheme which, according to Robertson J, gives priority to the recovery of taxation revenue notwithstanding that the taxpayer has an appeal on foot; at [30]. The findings of the Tribunal; at [31] - [34]. The weighing of the legislative policy to which his Honour referred against the merits of any appeal to this court on questions of law even assuming reasonable arguability in favour of the applicants; at [35]. The fact that irrespective of the merits of the appeal under s 44 on questions of law his Honour would not have exercised his discretion in favour of the applicant companies in any event because the substance of their arguments before the Tribunal were in his Honour's opinion entirely without foundation; at [36]. That Ms Caporale, who has appeared today on behalf of the applicant companies, would be precluded from being a director of any company in the event of the winding up which was a factor that his Honour considered but did not ultimately give any weight to because such preclusion is not automatic having regard to s 206D of the Corporations Act 2001 (Cth); at [37]. 5 Having taken into account each of these matters his Honour concluded that he was not persuaded to exercise his discretion to adjourn the applications to wind up each company. In consequence orders were made on 11 March 2013 that the company in question be wound up. Robertson J granted to the applicants a short stay in respect of these orders so that the applicants would have the opportunity to come before another judge in relation to any application for a further stay. This is the application that is before me. 6 When the matter first came before me a few days ago Ms Caporale informed me that she had not yet had an opportunity fully to consider her position and I made an order extending the stay until today on the basis that Ms Caporale should have a few more days to work out her position so that she could put to me all of the argument she wished to put in respect of the applications for the stay as now sought. Ms Caporale did this primarily by way an affidavit of 20 March 2013 which sets out: (i) many of the arguments which she would wish to make on any appeal against Robertson J's orders, leave for any such appeal being required to be filed and served by about 25 March 2013, (ii) the grounds on which it is proposed that there be an application for leave to appeal, and (iii) that presumably leave should be granted as set out in [64] of Ms Caporale's affidavit albeit on the basis, as she puts it, that she has not finalised her review of the decision of Robertson J not to grant the further adjournment. The grounds which she does identify nevertheless are set out in her affidavit, as follows: a. That the judge erred in law by denying natural justice and procedural fairness to proceed with the Notice of Appeal application b. That the judge erred in law by applying to high standard to the legal principal of "carrying on an enterprise" c. That the judge erred in law by not applying the legal principals of the Tax Administration Act, The Broadbeach Property Pty Ltd, Deputy Commissioner of Taxation, The Futuris Corporation Pty Ltd v Deputy Commisioner of Taxation d. That the judge erred in law by not applying the meaning of consolidation of entitles within the meaning of the Tax Act and Precedence caselaw e. The judge erred in law by failing to find that the ATO is not entitled to rely on the Tax Administration Act, The Broadbeach Property Pty Ltf v Deputy Commissioner of Taxation and the meaning of consolidation of entities within the meaning of the Tax Act and Precedence caselaw as it did not act in good faith, acted unlawfully and deliberately within the taxation act f. Failed to find that the ATO has interfered with judicial process in order to influence the outcome of the judgments against the companies by i. Refusing to provide documents to the applicant via subpoenas that it requested ii. Refusing to notify of the facts that it had before it iii. Taking advantage of a litigant who lacks the resources to litigate the matters. 7 Having reviewed Ms Caporale's affidavit and those grounds I am unable to see any arguable basis for the assertion that Robertson J's exercise of discretion miscarried in any way consistent with the reasoning about the requirements for appellate review of the exercise of a discretion as set out in House v The King (1936) 55 CLR 499 (House v The King). In particular it must be kept in mind in this case that what was before Robertson J was an application for an adjournment of the winding up of the applicant companies. What is now sought is a stay of the orders that his Honour made for the winding up of the companies on the basis that his Honour allegedly erred in the exercise of his discretion to refuse the adjournment. In other words, the substantive effect of granting a stay would be to deny the effect altogether of Robertson J's decision that an adjournment should not be granted. 8 On these facts, although there is plainly a power to grant a stay and the power is available in what has been said to be quite a wide variety of circumstances, (see Practice and Procedure High Court and Federal Court of Australia at 33030.5), the factor of whether an arguable ground has been raised on the appeal takes on particular significance in this context. Robertson J gave a discretionary decision. As House v The King makes clear there are limited circumstances in which a discretionary decision is subject to appellate intervention. None of the factors which are set out in the affidavit disclose any basis upon which the exercise of discretion could be said to have miscarried. 9 For example, without addressing every way in which the same points are put in the affidavit of Ms Caporale, it is said that the Deputy Commissioner's conduct has been illegal and has invalidated the grounds upon which the Deputy Commissioner relies to wind up the companies. No doubt this allegation of illegal conduct is hotly disputed by the Deputy Commissioner, but be that as it may the AAT had to make a decision based on the material it had before it. It did so and in so doing rejected the appeals. In an appeal limited to a question of law there are only very limited grounds upon which fresh evidence could be admitted and nothing in Ms Caporale's affidavit that suggests any basis that the discretion to do that would be exercised in favour of the applicant companies. In other words, ultimately the allegations that are made go nowhere. 10 Second, and again, only for example, it is said in the affidavit that Robertson J erred by placing too high a threshold on the applicants in circumstances where they were not legally represented before him. There is no basis to suggest that Robertson J imposed any different threshold on the applicants, nor that the lack of legal representation is somehow relevant to the threshold which might be relevant. Another example is that there is a reference to an alleged failure by Robertson J to find that the penalties were a significant amount compared to the overall tax but his Honour's point at [26] was that the grounds of alleged error by the AAT were simply not reasonably arguable. It is said that his Honour made other errors of tax law which are variously described in Ms Caporale's affidavit but, again, the issue with which his Honour was dealing was the arguability of any of the grounds of appeal against the AAT decision which the applicant had identified. 11 Third, reliance by the applicant companies on the Deputy Commissioner's alleged breaches of the model litigant provisions are said to mean that Robertson J erred in law by failing to consider those provisions. That submission is unsustainable. His Honour, clearly, did consider the model litigant provisions but quite correctly, as it appears to me, dismissed those issues in [28] and [29] of his reasons for decision and I cannot see any arguable basis upon which it might be said that his Honour erred in principle in those paragraphs. 12 The notion that Robertson J denied the applicant's procedural fairness and natural justice in refusing the adjournment application in order to allow the applicants to file an application to the Attorney-General in relation to the alleged non-compliance with the model litigant provisions is simply wholly misconceived. There cannot possibly have been a denial of procedural fairness in the decision which Robertson J made. 13 Fourth, the submission that Robertson J failed to apply the legislative policy of the tax laws can only arise because of the apparently idiosyncratic views that the applicants have about the legislative policy. His Honour considered issues of legislative policy at [30] in orthodox terms which recognise that the true legislative policy is to give priority to the recovery of taxation revenue as identified in that paragraph. The same conclusions can be drawn in respect of each of the other points which are sought to be made by the applicants as set out in Ms Caporale's affidavit and otherwise amplified by her in her oral submissions before me today. 14 The fact is that I am unable to see that there is any arguable ground upon which it might be said that the decision in Bayconnection No 2 involved some error which would warrant the setting aside of that decision, recognising its essentially discretionary character. In terms of the balance of convenience all of the considerations to which Ms Caporale refers in her affidavit about there being no assets in the applicant companies and no real prejudice to the Deputy Commissioner fail to recognise the underlying legislative policy and the public interest in these matters being resolved with due expedition. Accordingly, the balance of convenience does not favour the grant of a stay. Indeed, the case for a stay seems to me to be extraordinarily weak and unfounded on the material before me. 15 For these reasons I make the following orders: 1 The interlocutory application filed 15 March 2013 be dismissed. 2 The applicant's pay the respondent's costs of that interlocutory application as agreed or taxed. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot .