CONSIDERATION
37 Section 31A of the FCA Act relevantly provides as follows:
(1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:
(a) the first party is prosecuting the proceeding or that part of the proceeding; and
(b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.
…
(3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:
(a) hopeless; or
(b) bound to fail;
for it to have no reasonable prospect of success.
38 Rule 26.01(1)(e) of the Rules provides that a party may apply to the Court for an order that judgment be given against another party if "the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding".
39 While the power to give summary judgment against a respondent should not be exercised lightly, s 31A(3) of the FCA Act makes clear that it is not necessary to demonstrate that the respondent's defence is "hopeless" or "bound to fail". Assuming that the applicant has established a prima facie case for the relief sought, it is relevant to consider whether the respondent has a defence which raises real questions of fact or law that should be decided at trial: compare Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256 at [46] (Reeves J). In deciding an application for summary judgment, the Court does not make any substantive findings of fact, but rather "determines, as a matter of law, whether there are any facts that need to be found such that a trial is required": Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920; (2008) 252 ALR 41 at [6] (Finkelstein J), referring to Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 at 282; Deputy Commissioner of Taxation v Southgate Investments Funds Ltd [2010] FCA 1298; 81 ATR 220 at [7] (Kenny J).
40 In the present case, the Commissioner's claims are based on tax-related liabilities, that is, pecuniary liabilities arising directly under a taxation law: see TAA, s 255-1(1). An amount of a tax-related liability that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner: TAA, s 255-5(1). The Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable: TAA, s 255-5(2). For such purposes, this Court is a court of competent jurisdiction: Judiciary Act 1903 (Cth), s 39B(1)(c); Deputy Commissioner of Taxation v Songa Offshore Pte Ltd [2013] FCA 839; 95 ATR 779 at [23] (Gordon J).
41 In cases involving the recovery of tax-related liabilities, the Commissioner's position is strengthened by specific legislative provisions which place him in a "position of special advantage": see Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673 at 674-675 (Gibbs CJ). The effect of such provisions was summarised by Bromwich J in Ornelas at [7]. They reflect what has been described as the "manifest policy" of the tax legislation "to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review but on the other hand to require that in proceedings for the recovery of the tax the taxpayer will be concluded by the assessment and will not be entitled to go behind it for any purpose": McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 270 (Dixon CJ, McTiernan and Webb JJ); see also Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [64] (Gummow, Hayne, Heydon and Crennan JJ); Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [41]-[45] (Gummow ACJ, Heydon, Crennan and Kiefel JJ); Widdup v Deputy Commissioner of Taxation [2023] FCAFC 145 at [27] (Logan, Wheelahan and Hespe JJ); Deputy Commissioner of Taxation v Lewer [2001] VSC 114 at [6] (Bongiorno J).
42 Section 350-10(1) of Sch 1 of the TAA relevantly provides that a notice of assessment under a taxation law is conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC of the TAA on a review or appeal relating to the assessment, that the amounts and particulars of the assessment are correct. This provision operates where there has been an "assessment" within the statutory description. There is no suggestion made by the respondents in the present case that notices of assessment and amended assessment were in any way tentative or provisional, or otherwise failed to answer the statutory description of an "assessment" for the purposes of s 350-10(1): compare Futuris at [25], [49]-[50] (Gummow, Hayne, Heydon and Crennan JJ).
43 Section 350-10(3) of Sch 1 of the TAA relevantly provides that the production of a certificate that is signed by the Commissioner or a delegate stating that an amount was payable under a taxation law from the time specified in the certificate is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct. Under s 350-12, the particulars that may be stated in such a certificate include that a named person has a tax-related liability, that an assessment relating to a tax-related liability has been made under a taxation law, that notice of an assessment was served on the person under a taxation law, and that a specified sum is a debt due and payable by a person to the Commonwealth as at a specified date.
44 Sections 14ZZM(1) and 14ZZR of the TAA provide that the fact that a review or appeal is pending in relation to a taxation decision "does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered" as if no review or appeal were pending. The position is no different where an objection to an assessment has not yet been determined: see e.g. Songa Offshore at [40] (Gordon J). As Kenny J stated in Southgate Investments at [30], "[t]he Commissioner is not prevented from suing for recovery of tax debts simply because the taxpayer has not had relevant objections determined or has not exhausted review or appeal rights". Thus, her Honour considered (at [35]) that "[t]he authorities clearly establish that the policy of the taxation legislation in circumstances such as these should be given effect notwithstanding that the taxpayer's challenge to the assessments in question may ultimately be vindicated in Part IVC proceedings". The same point was made by Bromwich J in Ornelas at [9]:
Section 14ZZR is an important part of the ongoing legislative commitment to maintain the long-standing advantage of the Commissioner whereby the underlying basis for an assessment may be challenged, but in the meantime its enforcement ordinarily may not. If the taxpayer ultimately succeeds, then the remedy lies in reimbursement, and any other remedies that might arise, not in preventing recovery pending that outcome.
45 The Court has power to stay a judgment or order, or the execution of a judgment or order: rr 41.03 and 41.11 of the Rules. In appropriate circumstances, a stay might be granted until after an objection, or any review or appeal proceeding under Pt IVC of the TAA, has been determined. However, the power to grant a stay "is exercised sparingly in respect of any proceeding for the recovery of a tax debt based on the issue and service of an assessment, and … it is incumbent on the taxpayer to justify the exercise of power", taking into account the legislative policy to give priority to the recovery of taxation revenue notwithstanding any pending objection, review or appeal: Southgate Investments at [38], [43]; Southgate Investment Funds Ltd v Deputy Commissioner of Taxation (2013) 211 FCR 274 at [77] (McKerracher, Jagot and Griffiths JJ); Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 135-139 (French J). The respondents have not made any application for a stay of the judgment in the present case.
46 As referred to in paragraph [8] above, the Commissioner has placed into evidence the notices of assessment and notices of amended assessment that were served on each of the taxpayer respondents, along with the notices of assessment of administrative penalties. Pursuant to s 350-10(1) of Sch 1 of the TAA, those notices of assessment are conclusive evidence in these proceedings that the assessments were properly made and that the amounts and particulars of the assessment are correct.
47 The tax-related liabilities of the taxpayer respondents in respect of which summary judgment is sought by the Commissioner are comprised of several different amounts.
(a) Income tax: Each of the first, third, fourth and fifth respondents were assessed to income tax by notices of amended assessment for the year ended 30 June 2022. The third respondent was also assessed to income tax by a notice of assessment for the year ended 30 June 2023. The Commissioner is authorised by s 166 of the ITAA 1936 to make an assessment of income tax payable by a taxpayer, and by s 170 to amend such an assessment. Section 174 of the ITAA 1936 requires the Commissioner to serve a notice of assessment on the person liable to pay the tax. Service of the notice of assessment "fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment": Federal Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1 at 13 (Mason CJ, Brennan, Deane, Gaudron and McHugh JJ), referring to Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 251-252 (Kitto J). While the notice of assessment gives rise to a present debt (see Deputy Commissioner of Taxation (ACT) v Sharp (1988) 91 FLR 70 at 74 (Kelly J)), the date on which the income tax is (or was) due and payable is governed by s 5-5 of the ITAA 1997.
(b) Shortfall interest charge: The notices of amended assessment issued to each of the first, third, fourth and fifth respondents for the year ended 30 June 2022 included an amount of shortfall interest charge calculated up to 19 December 2023. Such amounts are payable under Div 280 of Sch 1 to the TAA, the object of which is (relevantly) "to neutralise benefits that taxpayers could otherwise receive from shortfalls of income tax … so that they do not receive an advantage in the form of a free loan over those who assess correctly": s 280-50. Shortfall interest charge is payable on additional amounts of income tax that a taxpayer is liable to pay because the Commissioner amends the taxpayer's assessment for an income year: s 280-100(1). The taxpayer is liable for shortfall interest charge for each day in the period beginning at the start of the day on which income tax under the original assessment was due to be paid and ending at the day before the Commissioner gave the notice of amended assessment: s 280-100(2). The amount of shortfall interest charge is calculated in accordance with s 280-105 by multiplying the additional amount of income tax by a daily rate which comprises a base interest rate plus 3 percentage points. The taxpayer is liable to pay shortfall interest charge whether or not he or she is liable to any administrative penalty under the TAA: s 280-103. A shortfall interest charge is due and payable 21 days after the day on which the Commissioner gives the taxpayer notice of the charge: ITAA 1997, s 5-10. A notice of shortfall interest charge is prima facie evidence of the matters stated in the notice: s 280-110(3).
(c) Administrative penalties: Each of the first, third, fourth and fifth respondents have been assessed for an administrative penalty under s 284-75 of Sch 1 to the TAA, which imposes a liability to an administrative penalty where a taxpayer makes a statement to the Commissioner, or to an entity that is exercising powers or performing functions under a taxation law, that is false or misleading in a material particular. Section 298-30 of Sch 1 to the TAA requires the Commissioner to make an assessment of the amount of an administrative penalty under Div 284. The production of such a notice of assessment is conclusive evidence that the assessment was properly made, and that the amounts and particulars of the assessment are correct: s 350-10(1), item 2. In accordance with s 298-10 of Sch 1 to the TAA, a notice of assessment for a "shortfall penalty" under s 284-75 was served on each of the first, third, fourth and fifth respondents on 20 December 2023. The penalties are due for payment on the day specified in the notices: s 298-15.
(d) General interest charge: The general interest charge is payable if an amount of income tax or shortfall interest charge that a taxpayer is liable to pay remains unpaid after the time by which it is due to be paid: ITAA 1997, s 5-15. The general interest charge is also payable on an amount of administrative penalty that remains unpaid after it is due: s 298-25 of Sch 1 to the TAA. The amount of the general interest charge is worked out under Part IIA of the TAA.
48 The Commissioner has adduced evidence of certificates issued under s 350-10(3) of Sch 1 of the TAA in respect of each of the first, third, fourth and fifth respondents, which constitute prima facie evidence that:
(a) the assessments have been made, or are taken to have been made, under a taxation law in relation to the tax-related liabilities of each of those respondents;
(b) the notices of assessment, notices of amended assessment and notices of administrative penalty were, or are taken to have been, served on the respondents;
(c) the respondents have tax-related liabilities for each liability referred to in the certificates and for the general interest charge on the unpaid amount of each of those liabilities; and
(d) from 4 December 2024, the following amounts were payable by each of the first, third, fourth and fifth respondents in respect of the tax-related liabilities referred to in the certificates (inclusive of the general interest charge):
(i) in respect of the first respondent - an amount of $7,013,549.24;
(ii) in respect of the third respondent - an amount of $4,807,045.65;
(iii) in respect of the fourth respondent - an amount of $1,231,286.98;
(iv) in respect of the fifth respondent - an amount of $3,959,377.76.
49 The taxpayer respondents have not filed any evidence on the summary judgment application. The effect of the certificates as prima facie evidence of the particulars stated therein is not met by any competing evidence, so that the certificates are sufficient to discharge the Commissioner's onus to establish those facts on the balance of probabilities: compare Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72 at [69] (Leeming JA).
50 Accordingly, the tax-related liabilities of the first, third, fourth and fifth respondents are established by the operation of the conclusive and prima facie evidentiary provisions set out above. To adapt the words of Bromwich J in Ornelas at [10], "[t]he overall effect of the legislation and case law is that [each of the first, third, fourth and fifth respondents] does not have any means in these proceedings, legal or factual, to resist judgment".
51 In opposition to the summary judgment application, the respondents' solicitor sought to rely on an "in principle" agreement that was said to have been made between the taxpayer respondents and the Commissioner on or about 31 January 2024, by which the Commissioner promised or undertook not to enforce or apply for judgment in relation to the tax-related liabilities of the taxpayer respondents. The respondents did not adduce evidence of any such agreement and, for the reasons set out above, I refused to grant an adjournment or leave to file further evidence.
52 Among other things, the allegation that the Commissioner entered into an enforceable agreement not to recover the debts owed by the taxpayer respondents is not consistent with the position that was adopted by the respondents at subsequent case management hearings in these proceedings. On 9 April 2024, senior counsel for the respondents stated that any settlement reached between the parties was only in relation to the freezing orders, and accepted that the proceedings were "in substance … debt collection proceeding[s] based on the assessments" in which the Commissioner was entitled to judgment "without quarrel" because of the conclusive evidence provisions. On 14 June 2024, senior counsel for the respondents referred to the "in principle settlement" as being "dependent upon the execution … and exchange of a deed of settlement", and again conceded that if the Commissioner were to apply for summary judgment "in the face of the in principle settlement that has been reached … there's nothing we can say against it". Senior counsel also stated that there was "a very strong headwind in favour of the applicant for judgment in a debt case", and that "[t]he evidence of the assessments is conclusive, and the only thing that might be up for argument is the prima facie evidence … of the ancillary calculations".
53 While it may be assumed that those statements were made by senior counsel on instructions, they do not necessarily amount to formal admissions or concessions that are binding on the respondents in these proceedings. Nevertheless, one would not expect that such a position would have been adopted by the respondents at the case management hearings if in fact the Commissioner had previously agreed to defer taking any steps to obtain judgment or to enforce the debts owed by the taxpayer respondents. Rather than raising any such agreement at that time, the respondents did not oppose directions being made for the Commissioner to file an interlocutory application for summary judgment, and for the parties to file evidence and submissions in relation to such an application. The alleged "in principle" agreement was first raised in connection with the summary judgment application in correspondence from the respondents' solicitor on 11 September 2024. However, the respondents have not adduced any evidence of the alleged agreement, despite having had multiple opportunities to do so.
54 In the circumstances, no findings can be made in relation to the existence or terms of any alleged agreement between the parties on or about 31 January 2024. In any event, it may be doubted whether any such agreement would be capable of providing any defence to these proceedings, or would have any bearing on the tax-related liabilities in respect of which judgment is sought, in the light of the conclusive and prima facie evidence provisions contained in the tax legislation.
55 For the reasons set out above, each of the first, third, fourth and fifth respondents has no reasonable prospect of successfully defending the proceeding, and summary judgment is given for the Commissioner against each of them for the amount of his or her tax-related liabilities, including the general interest charge calculated to 3 December 2024, as set out in the evidentiary certificates.
I certify that the preceding fifty-five (55) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Horan.