Deputy Commissioner of Taxation v Feldman; Deputy Commissioner of Taxation v Rozenstein

LEGISLATION CITED : Income Tax Assessment Act 1936 (Cth) Taxation Administration Act 1953 (Cth)

Dey v Victorian Railway Commissioners (1949) 78 CLR 62 General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 Webster v Lampard (1993) 177 CLR 598 CASES CITED : Cosmos E-C Commerce Pty Ltd v Bidwell & Associates Pty Ltd [2005] NSWCA 81 F J Bloemen Pty Limited v Federal Commissioner of Taxation (1980-1981) 147 CLR 360 Deputy Commissioner of Taxation v Richard Walter Pty Limited (1995) 183 CLR 168 Deputy Commissioner of Taxation v Ho (4 April 1996, unreported, BC9601074) Deputy Commissioner of Taxation v Mackey (1982) 45 ALR 284

Deputy Commissioner of Taxation (Plaintiff) PARTIES : Svetlana Feldman (Defendant) Vladislav Rozenstein (Defendant)

FILE NUMBER(S) : SC 10382/05 (Feldman); 10383/05 (Rozenstein)

Ms N Nizam for Plaintiff (Australian Government Solicitor) SOLICITORS : Ms S Feldman (in person) Mr V Rozenstein (in person)

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION

10382/05 - Deputy Commissioner of Taxation v Svetlana Feldman

10383/05 - Deputy Commissioner of Taxation v Vladislav Rozenstein

1 JOHNSON J: By Statement of Claim filed in each of these matters on 4 February 2005 the Plaintiff, the Deputy Commissioner of Taxation, seeks judgment against each Defendant, namely Svetlana Feldman in proceedings 10382 of 2005, and Vladislav Rozenstein in proceedings 10383 of 2005. The Plaintiff seeks to recover from each Defendant sums which are said to be owing in respect of income tax, administrative penalties and business activity statement liabilities.

2 On 17 March 2005, a Defence was filed by each Defendant. On 9 September 2005, Notices of Motion were filed by the Plaintiff in each matter seeking that the Defence be struck out and that judgment be entered in the Plaintiff's favour.

3 On 19 September 2005, the Notices of Motion came before Hoeben J. At that time, his Honour was informed that both Defendants were serving sentences of imprisonment with respect to matters that did not relate to the subject matter of these proceedings. In those circumstances, and to allow the Defendants an opportunity to prepare for the hearing of the Notices of Motion following their release from custody, his Honour adjourned the Notices of Motion to 27 February 2006.

4 On that day, the Notices of Motion once again came before Hoeben J. His Honour heard submissions for the Plaintiff and the Defendants and made orders in each case that the Defence be struck out and that the further conduct of the proceedings on behalf of the Plaintiff be stayed for a period of 28 days pending further order of the Court. In each case, the Defendant was ordered to pay the Plaintiff's costs of that day.

5 The Plaintiff's Notices of Motion came before me as Duty Judge on 5 April 2006. On that day, Ms Nizam, for the Plaintiff, sought the entry of judgment in the Plaintiff's favour in each case. The Plaintiff read, in each case, an affidavit of Grahame Wilson sworn 5 April 2006 which revealed the amounts said to be due as at 4 April 2006. In the case of Ms Feldman the sum due as at that date was said to be $6,395,394.31. In the case of Mr Rozenstein, the sum due as at that date was said to be $6,355,371.41.

6 The evidence before the Court in support of the present applications demonstrates that s.177(1) Income Tax Assessment Act 1936 (Cth) has been complied with in each case. It is that section in particular, together with other provisions within that Act and the Taxation Administration Act 1953 (Cth), which serve to explain the calculations of unpaid income tax and additional charges that give rise to the substantial sums which are sought against each Defendant.

7 The Defence of each Defendant having been struck out, the position is reached where the Plaintiff seeks summary judgment against each Defendant. Those orders are sought under Pt 13 r 1 Uniform Civil Procedure Rules.

8 Before a Court will give summary judgment to a Plaintiff, it is necessary for the Court to reach a high level of satisfaction that the orders should be made. The principles are well known - a very clear case is required before summary judgment is granted and the power to order summary judgment should be sparingly employed: Dey v Victorian Railway Commissioners (1949) 78 CLR 62 at 91; General Steel Industries Inc v Commissioner of Railways (NSW) (1964) 112 CLR 125 at 129; Webster v Lampard (1993) 177 CLR 598 at 602-3; Cosmos E-C Commerce Pty Ltd v Bidwell & Associates Pty Ltd [2005] NSWCA 81 at paragraphs 37-38.

9 Ms Nizam submits that summary judgment ought be granted in this case. It is submitted that the operation of s.177 Income Tax Assessment Act 1936 (Cth) places the Court in the position where there is, in effect, conclusive proof that the sums sought are due and payable by the Defendants to the Plaintiff. In this respect, I have been referred to F J Bloemen Pty Limited v Federal Commissioner of Taxation (1980-1981) 147 CLR 360 at 375, and Deputy Commissioner of Taxation v Richard Walter Pty Limited (1995) 183 CLR 168 at 184. These cases provide ample authority for the proposition advanced by Ms Nizam, and a foundation for the orders sought by the Plaintiff against each Defendant.

10 The Defendants appeared unrepresented both before Hoeben J and before me. Although represented at an earlier time in the proceedings, they have not had the benefit of legal representation since mid-2005. Each Defendant submits that there should, in effect, be a stay of the proceedings and no judgment entered at this time. In each case, the Defendant has placed before me documentation which shows that letters have been written both to the Australian Tax Office and to the Australian Government Solicitor which complain about aspects of the assessments which provide the foundation for these proceedings.

11 In the case of Ms Feldman, letters was sent by her on 11 March 2006 which question aspects of the process which had apparently been followed by the Plaintiff in making the relevant assessments. In the case of Mr Rozenstein, a letter was sent on his behalf, on 6 March 2006 by an accountant, Mr Garry Kastanias, of ATAXA, which queried aspects of the assessment which had been made with respect to him.

12 The letters sent by or on behalf of the Defendants are not stated expressly to be objections to the assessments.

13 An avenue is open to taxpayers whereby an objection in writing may be lodged with the Commissioner of Taxation under Pt 4C of the Taxation Administration Act 1953 (Cth). Where such objection is lodged, the Commissioner must determine whether to allow or disallow the objection in whole or in part: Div 3 of Pt 4C. A taxpayer who is dissatisfied with the Commissioner's decision in relation to an objection may apply to the Administrative Appeals Tribunal for a review of the Commissioner's decision (Div 4 of Pt 4C), or appeal to the Federal Court of Australia in respect of the Commissioner's decision (Div 5 of Pt 4C).

14 There is a broad parallel between the present application by the Defendants to stay the proceedings for a period whilst they pursue a pathway of complaint about the assessments with the Commissioner, and an application determined by Ireland J in this Court in Deputy Commissioner of Taxation v Ho (4 April 1996, unreported, BC9601074). In that case, the Plaintiff sought recovery of a large sum of money which was said to be due by way of unpaid income tax and penalties. The Defendant sought ultimately a stay of the proceedings pending a determination of his objections against the notices of assessment issued by the Deputy Commissioner of Taxation, or alternatively a stay of any judgment obtained against the Defendant by the Deputy Commissioner of Taxation. Ireland J refused the Defendant's application.

15 The following helpful summary of principles emerges from the judgment of Ireland J: (a) upon production of the notices of assessment in recovery proceedings, s.177(1) Income Tax Assessment Act 1936 (Cth) operates to preclude the taxpayer from impugning their veracity in those proceedings: F J Bloemen Pty Ltd at 375; Ho at 3-4; (b) the veracity of the assessments can only be impugned in proceedings by way of appeal or review under Divisions 4 and 5 of Part 4C Taxation Administration Act 1953 (Cth) : Ho at 4;

(c) the power to grant a stay of recovery proceedings is discretionary and should be exercised with great caution and only in special or exceptional circumstances: Deputy Commissioner of Taxation v Mackey (1982) 45 ALR 284 at 287, 289; Ho at 5;

(d) in exercising such discretion, great weight must be given to the terms of, and intention and policy embodied in s.14ZZM and s.14ZZR Taxation Administration Act 1953 (Cth) , formerly s.201 Income Tax Assessment Act 1936 (Cth) , a provision that which been referred to in a number of decisions of this Court and the Federal Court of Australia: Mackey at 287; Ho at 5-6; (e) sections 14ZZM and 14ZZR provide that the fact that an appeal to the Federal Court of Australia or review by the Administrative Appeals Tribunal is pending in relation to a taxation decision does not, in the meantime, interfere with or affect the decision, the subject of the appeal or reference, and income tax may be recovered on the assessment as if no appeal or reference were pending: Ho at 5-6; (f) the effect of these sections is to give primacy to the general right of the Commissioner to have tax paid irrespective of the pendency of an appeal and its merits: Mackey at 287; Ho at 6; (g) the effect of ss.14ZZM and 14ZZR must be to preclude the Court from considering the prospects of success of any review or appeal by a taxpayer to either the Administrative Appeals Tribunal or the Federal Court of Australia: Ho at 6; (g) any speculation as to the prospects of the taxpayer on review or appeal is entirely inappropriate in recovery proceedings - such matters fall necessarily for determination by the appropriate forum, which will have before it all relevant and necessary evidence, upon appeal or review under Divs 4 and 5 of Pt 4C Taxation Administration Act 1953 (Cth) : Mackey at 289; Ho at 6-7.

16 Ireland J observed in Ho that there was no current review before the Administrative Appeals Tribunal nor an appeal pending before the Federal Court of Australia in relation to the assessments issued to that taxpayer. There was some doubt as to whether a valid objection had, in fact, been lodged. Ireland J considered that the existence of a valid objection was not a question for determination in those proceedings. In substance, his Honour concluded that this was not a relevant matter for consideration and determination by the Supreme Court in recovery proceedings having regard to the statutory scheme: Ho at 7-9.

17 In my view, ss.14ZZM and 14ZZR, as explained and applied by Ireland J in Ho, constitute a complete answer to the stay application made by the Defendants today. No other argument has been advanced by the Defendants as to why the Court should not proceed to enter judgment having regard to this statutory scheme.

18 In these circumstances, I find that the Plaintiff has satisfied the stringent requirements for an order by way of summary judgment in each case.

19 The Plaintiff seeks an order for costs against each Defendant. The Plaintiff has succeeded in obtaining relief on the Statement of Claim in each case. The Defendants have not advanced any argument as to why, in the exercise of the Court's discretion, an order for costs should not be made in favour of the Plaintiff. It is appropriate, in my view, that costs follow the event in this application.

20 Accordingly, in matter number 10382 of 2005, being the proceedings brought by the Plaintiff against Svetlana Feldman, I order that judgment be entered against the Defendant in the sum of $6,395,394.31. I order Ms Feldman to pay the Plaintiff's costs of these proceedings.

21 In matter number 10383 of 2005, being the proceedings by the Plaintiff against Vladislav Rozenstein, I order that judgment be entered against the Defendant in the sum of $6,355,371.41. I order the Defendant to pay the Plaintiff's costs of these proceedings.

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