The Deputy Commissioner of Taxation seeks judgment for income tax owing in the period June 2010 to June 2015 under the Income Tax Assessment Act 1936 (Cth), together with interest and penalties payable under that Act. The defence filed in August 2017 did not deny any part of what was claimed by the Commissioner, but each paragraph of the statement of claim was not admitted.
By motion filed in March 2018 the Deputy Commissioner sought summary judgment under r 13.1 of the Uniform Civil Procedure Rules 2005 (NSW) in the sum of $6,179.921.66, plus costs of the motion. The supporting affidavits sworn by Mr Zafiriou, an employee of the ATO, in December 2017 and March 2018 attested to his belief that there was no defence to the Deputy Commissioner's claim.
By motion filed in March 2018 Mr Hawatt sought orders staying or adjourning the proceedings, pending finalisation of his March 2017 objection to the assessments on which the Deputy Commissioner's claims were pursued. His supporting affidavit referred to amended assessments served in January 2017 on him, his former wife Ms Chemaissem and a company named Talco Pty Ltd. It was the accuracy of those assessments which he had challenged by the objections filed by a tax agent, Mr Agha. Further information sought by the ATO about those objections had been later supplied, most recently in March 2018. When the motion was filed, decisions on the objections were pending.
The parties advanced written submissions as to what was in issue on the motions, but when they came on for hearing on 14 June, it was common ground that the hearing should be adjourned, because an Objection Decision had been issued on 8 June, very considerably reducing what Mr Hawatt owed, many of his objections having succeeded. Amended assessments and penalty notices reflecting that decision were issued on 15 June.
When the matter came into the list again on 2 July, it was common ground that the amended assessments were payable the following day, but Mr Hawatt was considering challenging them in the Administrative Appeals Tribunal. The hearing of the motions was adjourned to 5 July.
It emerged in a statement of facts and issues which the parties later agreed, that:
1. As at 4 July 2018, Mr Hawatt's total liability as the result of the amended assessments was $1,347,249.22.
2. Under the legislative scheme, the notices of assessment and amended notices of assessment, which had been properly given, were conclusive evidence of the quantum of the claim and could only be challenged in proceedings brought under Pt IVC of the Taxation Administration Act 1953 (Cth);
3. The 60 day limitation period for such proceedings to be brought expired on 8 August;
4. The certificate issued under s 255-45 of Schedule 1 to the Taxation Administration Act was prima facie evidence of the matters there referred to, including the quantum of what Mr Hawatt owed;
5. Taken together, the Notices and Certificate meant that there was no triable issue in respect of the recovery of the outstanding $1,347,249.22, pressed by the Deputy Commissioner.
At the hearing on 5 July, Deputy Commissioner thus pressed for entry of judgment for that sum, together with an order for costs and the dismissal of Mr Hawatt's motion.
Mr Hawatt then sought and without objection, was granted leave to amend his motion, seeking a stay of these proceedings, pending the filing and pursuit of objections in the AAT. He also sought to have the hearing of the motion further adjourned, until he had received further advice as to his complex tax affairs and a challenge to the amended notices in the AAT, advancing delay, hardship and the need to consider whether proceedings should be brought in the AAT, to support the adjournment application. He also relied on what he had deposed in his March affidavit. There he had said at paragraphs 16 - 19:
"16. I currently reside at my home at XXXX XXXXX Road lllawong. The property is owned equally by myself and my former wife.
17. I would say that the property is worth about $2,600,000.00 I would say that the current mortgage is about $1,500,000.00.
18. I reside there with two daughters [J] aged 18 and [L] aged 14. [J] is at university studying nursing. [L] is currently being home schooled by her older sisters.
19. If the proceedings are not stayed pending the outcome of the objection procedure it is likely that the plaintiff would obtain judgment against me. I do not have the ability to raise the funds the[sic] meet the judgment claimed against me. I fear that I will lose the home that my children and I live in should this occur."
Whether that had established hardship in relation to the original assessments pursued had earlier been in issue and addressed in the parties' written submissions. That this evidence established any hardship in relation to the significantly reduced June assessments, or an explanation as to why an adjournment of the hearing of the stay application was required, was also in issue, as was the question of delay.
There was, however, no issue that prospects of success on a challenge to a tax assessment was not a relevant consideration on a stay application. In this case no decision to advance a challenge has yet even been made.
What Mr Hawatt sought was a further opportunity to consider his options. On a stay application, hardship is a relevant consideration, albeit on the authorities what must be established is "extreme personal hardship": Cywinski v Deputy Commissioner of Taxation [1990] VR 193 at 197. Further, in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473; [2008] HCA 41 it was observed:
"But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue. In Deputy Commissioner of Taxation v Niblett, Asprey J struck out pleas of non-liability to a recovery action instituted by the Deputy Commissioner in the Supreme Court of New South Wales while objections were pending under what was then s 185 of the Assessment Act. His Honour observed:
"It may be thought to be a hardship that a taxpayer should have to pay the tax assessed when an objection to the assessment has not been decided upon but there are obvious financial considerations of high policy that must be weighed in the balance against cases of individual hardship with which the Commissioner through the appropriate use of his powers under [the Assessment Act] can cope ... Where the meaning of the words of a statute is clear 'it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like' - Attorney-General v Carlton Bank." [footnotes omitted]
In the circumstances in which the adjournment application was made, these authorities and the requirements of s 56 of the Civil Procedure Act 2005 (NSW) were thus relevant to take into account. That section requires that the overriding purpose there specified, the just quick and cheap resolution of the real issues in the proceedings, be borne in mind whenever the Court's discretions are exercised.
Further, s 58 required that in exercising its discretions, that what the dictates of justice required be borne in mind by the Court, as well as the matters specified in s 58(2). They include matters such as the degree of expedition with which the respective parties had approached the proceedings; the degree to which they had been timely in their interlocutory activities; and the degree to which any lack of expedition had arisen from circumstances beyond their control.
The evidence did not establish any relevant delay on the part of the Deputy Commissioner. The amended January 2017 assessments were concerned with tax owing for years going back to 2010. Mr Hawatt's objection was made in March 2017; the Deputy Commissioner commenced the proceedings in May 2017; Mr Hawatt provided further information as recently as March 2018; and the Objection Decision was given in June 2018.
Nor did the evidence establish relevant hardship. Mr Hawatt had a fair opportunity, after the June Objection Decision, to file any further evidence on which he wished to rely, to establish hardship in relation to the $1,347,249.22 which the Deputy Commissioner finally pursued at the 5 July hearing, following the success Mr Hawatt had achieved by the pursuit of the objections. While it is open to him to pursue his right to challenge that decision in the AAT, the possibility that he might do so, does not establish hardship. Nor did the matters to which he had earlier deposed in his March affidavit, given the reduced amount of the June assessment and the limited information provided in the March affidavit as to his financial circumstances, about which there were, in any event, issues lying between the parties.
Nor was there any explanation as to why no further affidavit had been sworn by Mr Hawatt, in support of the adjournment application, made at the 5 July hearing, to address those matters, or the consequences of the Objection Decision and the amended assessments, on his financial position. There is no question that Mr Hawatt had a fair opportunity to put on such evidence, given the adjournments on 14 June and 2 July.
In the circumstances which had arisen, to grant Mr Hawatt's application would undoubtedly have had the effect of staying the proceedings until 3 August 2018. There was simply no evidentiary basis on which that outcome could justly be granted.
In the result, there being no issue between the parties that on the evidence, there was no triable issue between them and there being no evidence on which an adjournment of the hearing of the stay application could be granted, I was satisfied that justice demanded that the orders which the Commissioner pressed be made and Mr Hawatt's motion dismissed.
[2]
Costs
In that event the Deputy Commissioner sought orders for costs, including in relation to Mr Hawatt's motion. Mr Hawatt's case was that the Court should order that each party bear the other's costs, given the significantly reduced tax finally pursued against him.
In the circumstances which have arisen, I am satisfied that there must be some departure from the usual costs order, to have proper regard to all that has unfolded in these proceedings.
The original hearing of the motions on 14 June was adjourned because of the delivery of the 8 June Objection Decision. The Deputy Commissioner having decided to press the motion in proceedings commenced in May 2017, in the face of the impending Objection Decision, in circumstances where s 56 imposed obligations on the parties to assist the Court to facilitate the just, quick and cheap resolution of the real issues in the proceedings, the result was the adjournment of the hearing of the motions.
It seems to me that in these circumstances, justice requires that the Commissioner bear Mr Hawatt's costs thrown away as the result of the adjournment.
Otherwise, Mr Hawatt having resisted as he did the entry of judgment which the Commissioner still had to pursue even after the Objection Decision was given and the amended notices were issued, and having failed on his adjournment application, in circumstances where he led no evidence on which that application could have been justly granted and while he had not taken the necessary steps to prepare himself to advance his application for a stay at the adjourned hearing, there should be no other departure from the usual order under the Rules, that costs follow the event.
[3]
Orders
Accordingly, I order that:
1. Judgment be entered in favour of the Deputy Commissioner in the sum of $1,347,249.22.
2. Mr Hawatt's motion be dismissed.
3. The Deputy Commissioner bear Mr Hawatt's costs thrown away of the hearing on 14 June, as agreed or assessed.
4. Otherwise Mr Hawatt bear the Deputy Commissioner's costs, as agreed or assessed.
[4]
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Decision last updated: 12 July 2018