HER HONOUR: The plaintiff by amended statement of claim filed on 21 March 2016 brings proceedings for three amounts payable in respect of income tax for which the mathematically agreed total is $193,248.99. The defendant filed a defence on 14 June 2016, and I will set out its contents further below.
By way of overall general summary of the case, the liquidated claim that the plaintiff brings against the defendant is quite simple:
1. First, the plaintiff put in tax returns for the periods 30 June 2005, 30 June 2006, 30 June 2008 and 30 June 2009, but did not pay the sums in question. In other words, tax returns were lodged but the amount assessed was unpaid.
2. Secondly, the defendant failed to lodge tax returns at all for the years 2010, 2011, 2012 and accordingly an administrative penalty applies.
3. The third head of damage is for the total of a running balance account ("RBA") in relation to a series of non‑contiguous periods of time between 1 October 2010 and 30 June 2012. In other words, the defendant paid his BAS on some of the occasions over this period but, on five occasions, he did not.
I will first set out the relevant statutory provisions for each of these claims.
[2]
Income tax
As is set out the amended statement of claim at paragraph 6, Mr Johns failed to pay income tax for each of the financial years 2006, 2008, 2009. By reason of that failure he becomes liable to pay the general interest charge in the manner set out in Mr Jay's helpful written submissions.
The relevant legislation is set out at s 204 Income Tax Assessment Act 1936 (Cth) and Part IIA Taxation Administration Act 1953 (Cth). I note there has been a change in the legislative structure (see the Tax Laws Amendment (Transfers of Provisions) Act 2010 (Cth) and the Income Tax (Transitional Provisions) Act 1997 (Cth)) which, while it was intended to be seamless, has unfortunately resulted in a great deal of legislation. It is, however, not necessary for me to set all of this complex legislation out, as the relevant legislation is not in dispute.
The current amount outstanding in relation to this claim is set out in paragraph 8 of the affidavit of Maria Di Re affirmed on 13 September 2016; namely, $131,544.20.
A statement by the plaintiff relied upon for initiating proceedings constitutes prima facie evidence of those facts and matters for the reasons set out in Deputy Commissioner of Taxation v Falzon [2008] QCA 327 at [27]. The amount in question becomes payable 21 days after the due date for lodgement. The provisions for resisting such claims are set out in s 350‑10 of the Act, and it is acknowledged by the defendant that those periods have long since expired. Section 350‑10 replaces the conclusive evidence provisions of the repealed legislation but, as already indicated, I do not consider it necessary to set this out in more detail.
I accept the plaintiff's submission that, once the notices of assessment are produced, which is the case here in terms of the affidavit of Ms Tiku (Exhibit A), the defendant is precluded from contesting that the Deputy Commissioner of Taxation ("the Deputy Commissioner") has made an assessment, and is similarly precluded from contesting that, in making the assessment, the Deputy Commissioner has complied with the statutory formalities: see F J Bloemen Pty Ltd v Commissioner of Taxation (Cth) (1981) 147 CLR 360. I note, in any event, there is in fact no challenge to these matters in in the defence.
[3]
Failure to lodge tax returns
The second liquidated claim relates to administrative penalties for the defendant's failure to lodge tax returns for the years 2010, 2011 and 2012.
The relevant provisions are s 286‑75(1) in Schedule 1 to the Act and the method for working out the amount of penalty is explained in Evans v Deputy Commissioner of Taxation [2012] NSWCA 396.
By reason of the failure to lodge income tax returns for each of these three years on or before their due dates, the defendant became liable to pay those penalties pursuant to s 286‑75 of the Taxation Administration Act. Notices of the administrative penalty for failure to lodge have been served on Mr Johns as is set out in Ms Tiku's affidavit at para 12. It is acknowledged that those penalties were not paid, and the defendant is accordingly liable to pay the GIC pursuant to s 298-25 of Schedule 1 of the Taxation Administration Act.
[4]
The RBA deficit debt
Five BAS forms were lodged for the tax periods:
1. 1 October to 31 December 2010,
2. 1 July to 30 December 2011,
3. 1 October to 31 December 2011,
4. 1 January to 31 March 2012, and
5. 1 April to 30 June 2012.
A running balance account ("RBA") was created in relation to the BAS taxation liabilities. The Deputy Commissioner relies on the quarterly PAYG instalment notices, the RBA statement (which was $60,845.12 as at 15 July 2016, which is, I think, updated in the affidavit of Ms Di Re) and a certificate under s 8AAZJ of the Act.
Section 8AAJI of the Act provides that production of a signed RBA statement is prima facie evidence that the RBA was duly kept and the amounts and statements in it are correct: Deputy Commissioner of Taxation v Brilliant Homes Management Pty Ltd [2011] FCA 1539 at [14]. I also note that the Deputy Commissioner can proceed by way of an evidentiary certificate as to these matters, and I note the evidence set out in this regard in Ms Di Re's affidavit.
None of these deponents were required to attend for cross‑examination, and the facts in those affidavits are essentially unchallenged.
[5]
The defendant's defence and evidence
This brings me to Mr Johns' defence and his evidence.
Mr Johns, the defendant, has tendered his affidavit sworn on 5 September 2016. He sets out in that affidavit, in considerable detail in the 23 paragraphs and annexures therein, the difficulties in his life since he first embarked on a career to fulfil his childhood dream to be a futures and options trader.
He commenced this work in about 1990, after working as a private investigator from the age of 19. He completed stock market-related courses in 1996 and spent about two years or more fulltime on the floor of the Sydney Futures Exchange trading SPI futures. He was classified with the ATO as a trader as opposed to an investor and states that:
"As such, this attracted slightly different rules of accounting."
He then sets out that he suffered "capital losses from my futures and options trading activities," some of which were accounted for in his tax returns, but a large portion of which were not fully carried forward over the years because he did not make profits.
I note that an objection was taken to the form of this material by the plaintiff, but I allowed it pursuant to s 190 Evidence Act 1995 (NSW), having regard to the general difficulties that litigants in person such as the defendant find themselves in.
The plaintiff thereafter had personal difficulties after he provided some information for a court case. He separated from his wife and then he met a woman on an internet dating site, who moved into his home without telling him and later made some false allegations about him to the police. He thereafter had further difficulties in relation to court proceedings involving this lady.
These problems are unfortunate, but they do not constitute the basis for a defence in these proceedings.
The defendant also had communication problems with his accountant who, he tells me, did not reply to numerous letters he sent. He then asked for some assistance from an employee of the ATO in or about 23 November 2010. He is unhappy with the advice he received from the ATO.
The difficulty is that the burden lies upon the defendant to take care of his own tax affairs and if his accountant fails to follow his instructions, he has potential remedies against the accountant, rather than a defence to claims by the ATO.
Having noted the evidence, I next consider the basis upon which the defence is pleaded. The absence of a defence to the claim known to the law is perhaps best demonstrated by setting out the defence in full:
"[1] The plaintiff has considered this defendant's special circumstances and wrongly dismissed them.
[2] The plaintiff has acted unfairly and in a manner where the defendant feels intimidated.
[3] The plaintiff has acted in a manner that contradicts with its advertised and promoted strategies and aims.
[4] The plaintiff with its vast resources that includes the ATO Review and Dispute Resolution Department has chosen to litigate against the defendant thus far taking over 26 months to do so instead of allowing the defendant three months to make amendments to his tax returns as requested by the defendant on 11 February 2014.
[5] The plaintiff has acted in an unjust and intimidating manner given knowledge of the defendant's special circumstances.
[6] The plaintiff knows full well that the defendant has zero propensity to pay $150,000, has special circumstances, and therefore should act with good business principles to resolve a situation.
[7] The plaintiff is in breach by wrongly using the defendant as a means, by funding its lawyers, to send a warning to the broader community at the community's expense.
[8] The plaintiff should use its resources in good faith to resolve the situation with a view to allowing the defendant's wishes to be a good paying client of the ATO with a positive return for the ATO rather than expend huge sums to litigate when the know there is zero possibility to make a return by choosing this course of action when other better and suitable and cheaper remedies are available.
[9] The defendant denies he owes the plaintiff monies as alleged by the plaintiff."
Mr Johns has made submissions to me in support of his defence and the material in his affidavit.
The difficulty I have is that Mr Johns' own accountant lodged his tax returns for the years ending 2005, 2006, 2008, 2009, but lodged no income tax returns at all for 2010, 2011 and 2012. Similarly, Mr Johns and/or his accountant failed to lodge the necessary BAS forms for the periods set out in the third head of damage.
In those circumstances, the defendant should look to himself as the responsible party and accept responsibility for his own financial situation. There is nothing in the material before me to suggest that the Deputy Commissioner's servants or agents have acted towards the defendant with anything other than courtesy and kindness. I could not find anything amongst the documents attached to the defendant's affidavit to suggest to the contrary.
Mr Jay's written submissions put to me that this litigation has been pursued in the absence of any realistic attempts by the defendant to attend to his tax affairs or resolve the proceedings. The defendant has, in fact, not lodged a tax return since 2009. Although he has been on notice of a claim for several years, he has not lodged documents or taken other steps in support of his defence. While I note that Mr Johns blames his accountant for this in his submissions to me this morning, I accept the correctness of Mr Jay's submissions.
There is no defence to any of the sums claimed and, accordingly, I propose to enter judgment in favour of the plaintiff for the claimed sum.
My orders, therefore, will be judgment for the plaintiff in the sum of $193,248.99.
Before I make a costs order, I will ask Mr Johns, the defendant, if there is any reason why costs should not follow the event.
HER HONOUR: Mr Johns, do you have anything to say in relation to why costs should not follow the event and you should not be the subject of an order to pay costs?
DEFENDANT: No, I don't.
HER HONOUR: Do you have anything to say as to the costs order; is it just to be the usual costs order?
JAY: Just the usual order.
HER HONOUR: In those circumstances, the order I make is for the defendant to pay the plaintiff's costs. The third order I make is exhibits retained for 28 days.
[6]
Orders
1. Judgment for the plaintiff for the sum of $193,248.99.
2. Defendant pay plaintiff's costs.
3. Exhibits retained for 28 days.
[7]
DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.
Decision last updated: 13 October 2016
Parties
Applicant/Plaintiff:
Deputy Commissioner of Taxation
Respondent/Defendant:
Johns
Legislation Cited (6)
Tax Laws Amendment (Transfers of Provisions) Act 2010(Cth)