Consideration
7 The application for summary judgment was brought pursuant to s 31A of the FCA Act and r 26.01 of the FCR. The Court may give summary judgment if the Court is satisfied that the first respondent has no reasonable prospect of successfully defending the part of the proceedings for which judgment is sought by the Commissioner: s 31A(1) of the FCA Act; r 26.01(1)(e) of the FCR. A defence need not be hopeless or bound to fail for it to have no reasonable prospect of success: s 31A(3) of the FCA Act.
8 In Commissioner of Taxation v Ornelas [2016] FCA 457 (Ornelas), Bromwich J considered an interlocutory application by the Commissioner for summary judgment against a taxpayer. His Honour set out the principles as follows:
[7] On this application for summary judgment, I am able to be satisfied that Mr Ornelas has no reasonable prospect of successfully defending the claim at paragraph 1 of the originating application, for the following reasons:
(a) section 175 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) and s 350-10(1) of Schedule 1 to the TAA (which is in substantially similar terms to the former s 177 of the ITAA 1936) and related provisions have the effect that production of a notice of assessment is conclusive evidence of the due making of the assessment and that the amounts and particulars in the notices of assessment are correct other than in proceedings under Part IVC of the TAA on a review or appeal relating to the assessment, which is not these proceedings;
(b) the production of a notice of assessment gives rise to a present debt, not one that arises in future if payment is not made by the date specified in the notice: Deputy Commissioner of Taxation (ACT) v Sharp (1988) 91 FLR 70; (1988) 19 ATR 1515 at 1519;
(c) in any event, the certificate under s 255-45 of the TAA establishes that each of the three notices of assessment, plus a notice of assessment of shortfall penalty for the financial years ended 30 June 2012 and 30 June 2013, plus a notice of assessment of penalty for failing to provide a document for the financial year ended 30 June 2014, all notices having been issued on 2 March 2016, were, as at 24 March 2016, debts due and payable to the Commonwealth by Mr Ornelas;
(d) none of the three jurisdictional error limitations on the various assessments taking effect according to their terms are applicable, in that it is not contended, and there is no basis for me to conclude, that any of them are tentative, provisional or the product of maladministration: Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; (2008) 237 CLR 146 at 157 [24]-[25]; Roberts v Deputy Commissioner of Taxation [2013] FCA 1108; (2013) 228 FCR 280 at 285 [19]; see also Pratten v Commissioner of Taxation [2015] FCA 1357 at [24]-[26];
(e) the matters excluded from the challenge to the correctness of an assessment by way of objection, appeal to the Administrative Appeals Tribunal or this Court are not narrowly confined, this being in accordance with legislative policy to give a full opportunity to object by contesting liability in every respect;
(f) as this is not a Part IVC appeal, the presumptive effect of the provisions referred to above must be given full force and effect: see Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 621-622;
(g) no defence has been filed in these proceedings to the relief claimed in paragraph 1 of the originating application by Mr Ornelas and none has been foreshadowed, with it being conceded that he has no defence in this forum;
(h) the manifest and historical policy of tax legislation in Australia has been to give a taxpayer a full opportunity to object to an assessment and to contest liability, while at the same time to require that in proceedings for the recovery of the tax, the taxpayer will be bound by the assessment and will not be able to go behind it: McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 270;
(i) the overall legislative regime continues to be: "a clear policy in favour of the revenue against the taxpayer": Trade World Enterprises Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191; (2006) 64 ATR 316 at 322 [19];
(j) the legislation places the Commissioner in a "position of special advantage": Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673 at 674-675; and
(k) the Commissioner is generally free to pursue recovery proceedings despite the pendency of Part IVC proceedings: Southgate Investment Funds Ltd v Deputy Commissioner of Taxation [2013] FCAFC 10; (2013) 211 FCR 274 at 293-295 [77].
9 These observations are correct and have subsequently been adopted and applied: see for example, Deputy Commissioner of Taxation v Miraki [2021] FCA 1361 at [4].
10 In support of the application for summary judgment, the Commissioner relied upon the service on the first respondent of the notices of assessment in respect to both income tax and penalties, as well as certificates pursuant to s 350-10(3) of sch 1 to the Taxation Administration Act 1953 (Cth) (TAA). Copies of the notices of assessment were produced in these proceedings by the Commissioner as exhibits to the First Morelande Affidavit. I am satisfied that the notices of assessment have been served. Copies of the certificates dated 1 November 2023 were produced as exhibits to the Second Morelande Affidavit. I am satisfied that, as at 1 November 2023, the first respondent had a tax-related liability of $18,026,881.25.
11 By virtue of item 2 of s 350-10(1) of sch 1 to the TAA, production of the notices of assessment was conclusive evidence that the assessments were properly made and that - save in Part IVC proceedings, which these proceedings are not - the amounts and particulars of the assessments were correct: see also FJ Bloeman Pty Ltd v Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360 at 376.
12 Upon service of the notices of assessment, a cause of action in debt accrued to the Commissioner against the first respondent, and the first respondent became liable to pay the tax assessed and shown as due to the Commonwealth: Batagol v Federal Commissioner of Taxation [1963] HCA 51; (1963) 109 CLR 243 at 251-2; see also Deputy Commissioner of Taxation (Cth) v Naidoo (1981) 55 FLR 245 at 256; Deputy Commissioner of Taxation v Chemical Trustee Limited [2010] FCA 1297; (2010) 81 ATR 237 (Chemical Trustee) at [51]; Deputy Commissioner of Taxation (ACT) v Sharp (1988) 19 ATR 1515 at 1519.
13 Additionally, s 350-10(3) of sch 1 to the TAA provides that the production of a certificate under that provision is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct. It follows that the certificates issued to the first respondent under that provision establish that each of the notices of assessment were debts due and payable to the Commonwealth by the first respondent.
14 As the first respondent had not commenced proceedings under Part IVC of the TAA, the presumptive effect of s 350-10 of sch 1 to the TAA was required to be given full force and effect: Ornelas at [7] citing Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614 at 621-622. In Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296; (2010) 81 ATR 40, Kenny J considered the predecessor to s 350-10(1) of sch 1 to the TAA and summarised its effect as follows:
[43] The effect of s 177(1) is that notices of assessment have a conclusive evidentiary character both in respect of the due making of the assessment and, save in Pt IVC proceedings, that the amount and all the particulars of the assessment are correct: see McAndrew v FCT (1956) 98 CLR 263 at 281-282; [1956] ALR 1008 at 1017-1019 per Taylor J and FJ Bloemen Pty Ltd v FCT (1981) 147 CLR 360 at 376; 11 ATR 914 at 923; 55 ALJR 451 at 456; 81 ATC 4280 at 4288-4289; 35 ALR 104 at 113-114. Part IVC proceedings are review proceedings in the Administrative Appeals Tribunal and appeals to this court concerning an objection decision. The present proceedings are not proceedings under Pt IVC.
[44] In Bloeman (at CLR 376; ATR 923; ALJR 456; ATC 4288-4289; ALR 113-114), the High Court held that the effect of ss 175 and 177 was to confine a taxpayer to the appeal procedures for which the taxation legislation provides. As French J said in DCT v Warrick (No 2) (2004) 56 ATR 371 at 392 [84]; 2004 ATC 4779 at 4796 [84]: "…[t]he weight of High Court authority in relation to the operation of ss 175 and 177 stands against any challenge to the validity of an assessment where the purported assessment is a bona fide attempt to exercise the powers conferred by the Act, relates to the subject matter of the Act and is reasonably capable of reference to those powers."
[45] In their joint judgment in Bloemen, Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed, said (at CLR 376; ATR 923; ALJR 456; ATC 4288-4289; ALR 113-114) that the production of a notice of assessment:
… will put beyond contention the due making of the assessment so that the court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose.
15 There was also no suggestion, and there was no basis to conclude, that the notices of assessment were tentative, provisional or the product of maladministration: Ornelas at [7] citing Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; (2008) 237 CLR 146 at [24]-[25]; Roberts v Deputy Commissioner of Taxation [2013] FCA 1108; (2013) 228 FCR 280 at [19] and Pratten v Commissioner of Taxation [2015] FCA 1357 at [24]-[26]; see also Chemical Trustee at [49].
16 The Commissioner also claimed GIC on the amounts which were due and payable pursuant to s 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997) and s 298-25 of sch 1 and Part IIA of the TAA. In relation to the accruing of GIC on unpaid income tax and penalties, the GIC was payable from the beginning of the day on which the amount was due to be paid until the end of the last day on which, at the end of the day, the amount was unpaid: s 5-15 of the ITAA 1997; s 298-25 of sch 1 to the TAA.