The plaintiff, the Deputy Commissioner of Taxation, claims against the defendant income tax debts of $4,317,316.07, inclusive of general interest charge ("GIC") up to and including 13 February 2019. This amount is alleged to arise from assessments and amended assessments for the financial years ended 30 June 2002 to 30 June 2013 inclusive. I will refer to these financial years hereafter as FY 2002, FY 2003 and so on. The defendant resists the Deputy Commissioner's claim on grounds pleaded in a defence filed 12 July 2018.
The debt claimed includes the following components:
1. for each of FY 2002 to FY 2013 inclusive, primary tax and Medicare levy;
2. for each of FY 2002 to FY 2008 inclusive, administrative penalties for tax shortfall (pursuant to Divs 284 and 298 of the Taxation Administration Act 1953 (Cth)("TAA"));
3. for each of FY 2005 to FY 2008 inclusive, shortfall interest charge on the difference between the amount of tax initially assessed by the Commissioner and the greater amount payable under the amended assessments (pursuant to s 280-100 of the Schedule to the TAA);
4. for FY 2013, an administrative penalty for non-lodgement of a return (pursuant to ss 286-75 and 286-80 of the Schedule to the TAA) and
5. for each of FY 2002 to FY 2013, GIC on amounts outstanding from time to time, pursuant to s 204 of the Income tax Assessment Act 1936 (Cth) ("ITAA1936") (up to 30 June 2010) and pursuant to s 5-15 of the Income tax Assessment Act 1997 (Cth) ("ITAA97") and Pt IIA of the TAA (from 1 July 2010).
The defendant has been self-represented in the proceedings at all times. He appeared in person at the hearing. At its commencement he announced that he was present "under duress, protest and threats of menace". Upon my enquiry he particularised the allegation of "menace" by stating that his property was "under threat" by the plaintiff. As best I could understand this, he was referring to the legal steps by which the plaintiff is, apparently, progressing towards recovery and enforcement of judgment. That could not amount to "menace" or "duress". The defendant did not seek to elaborate this allegation any further or seek any relief in relation to it and I disregarded it.
Deputy Commissioner of Taxation v Lamont [2019] NSWSC 92 | Case summary | Zoe
The defendant then sought to file an appearance nominating Mr Mark Andrews as his attorney. Mr Andrews was present and informed the Court that he is not a legal practitioner. By force of rr 1.3 and 7.1(1) of the Uniform Civil Procedure Rules the defendant is not entitled to be represented in the proceedings by a person other than an admitted legal practitioner. I therefore refused leave for the appearance to be filed in Court. For completeness of the record I marked a copy of the document "MFI-1" and had it placed on the file.
Having unsuccessfully proffered this notice of appearance, the defendant provided five pages of "Written Submissions - Supplemental". These included biblical references in support of a proposition that the income tax legislation of the Commonwealth of Australia is ineffective because the relevant Acts do not:
refer to or define a man or a woman and hence, Parliament did not pass statutes that apply to a man nor a woman.
The document also cited a 1796 decision of the Supreme Court of North Carolina to support an argument that the defendant is not bound by any laws or institutions except those to which he gives his consent. At par 7 of the "Written Submissions - Supplemental" the defendant named the principal income tax assessment and administration statutes of the Commonwealth and continued (at par 13):
I no longer consent to the statutes in par 7 above apply to me, the living man.
The "Written Submissions - Supplemental" included statements that the defendant did not consent to "doing business with the plaintiff" or with the plaintiff's legal representative and did not "consent to these proceedings". Those statements were repeated orally. I consider the matters referred to in this and the two preceding paragraphs to be frivolous and insubstantial and I have dismissed them from my consideration of the case.
The balance of the written submissions contained an argument that by some operation of the Bills of Exchange Act 1909 (Cth) there had arisen between the plaintiff and defendant a contract supported by an alleged "accompanying promissory note". It did not become necessary for me to consider this part of the submissions any further because the defendant did not tender any documents to provide an evidentiary basis for it. In any event the submissions are incoherent and I have been unable to divine from them anything meaningful.
The plaintiff's counsel sought to read two affidavits of Edelfredo Juatan sworn 3 October 2018 and 13 February 2019. The defendant was asked whether he took objection to any part of the affidavits and it was explained that this was an invitation to identify any basis upon which, according to the rules of evidence, the affidavits or any of part of them should not be admitted. His response was to reiterate that he did not "consent" to the proceedings. He refused to answer directly my question whether he raised any evidentiary objection. Upon my indicating that I would treat his response as a "No", the defendant protested but still did not articulate any position which I could treat as an objection. Accordingly, the affidavits were read. In my judgment they are entirely admissible.
At a later stage of the hearing the defendant made generalised assertions about hearsay. I explained to him that I considered the documents exhibited and annexed to the plaintiff's affidavits were business records, admissible under the Evidence Act 1995 (NSW). The defendant did not particularise, elaborate or otherwise pursue his sweeping statements concerning hearsay. The defendant is not legally trained. In all of his oral and written submissions in this case he has deployed legal terminology with no apparent understanding of the underlying concepts.
The defendant was asked whether he wished to cross-examine the plaintiff's deponent. He responded by reiterating that he did not "consent to the proceedings". He further said "I have no interest in the proceedings". I took this to mean that he would not cross-examine. Aside from the defendant's formulaic response of not consenting, he gave no indication, either in lay terms or by his conduct, that he wished to challenge the plaintiff's witness. Further, I found nothing in the defence to indicate that there was any potentially arguable issue upon which the defendant might need, in his own interests, to question deponent or to seek concessions.
The defendant was asked whether he wished to read any affidavit or give or tender evidence. He did not, which was again signified by his reiteration that he did not "consent to the proceedings" and that he had "no interest in the proceedings" and by his refraining from seeking to provide any affidavit or other document to me or requesting any opportunity to give oral evidence. I informed him that the evidence was therefore closed and that I would proceed to hear closing argument, commencing with submissions from the plaintiff. I stated that I would in due course decide the case on the plaintiff's evidence.
The plaintiff's affidavits and documents establish the facts pleaded in the statement of claim. Exhibited to the first affidavit are the assessments, amended assessments and notices of penalty issued by the Deputy Commissioner of Taxation for the subject tax years. Conclusive effect is given to these assessments and notifications by statutory provisions. The deponent also identifies the plaintiff's running account generated by the plaintiff's ATO Integrated System ("AIS") (for entries up to 14 January 2010) and by the Australian Taxation Office Integrated Core Processing System ("ICP") (for entries on and from 15 January 2010).
On this running account there are debited all of the assessments and amended assessments of primary tax and the assessments of penalties. All payments by the defendant, remissions of GIC and other adjustments in his favour are brought to account as credits. The AIS and ICP compute and debit GIC and shortfall interest charges. The first affidavit of Edelfredo Juatan also exhibits a certificate under s 255-45 of the TAA to the effect that assessments (of tax and of penalty) and the amended assessments upon which the plaintiff relies were made and are taken to have been served. A further certificate under the same section exhibited to the deponent's second affidavit certifies that the sum claimed by the plaintiff "is at 13 February 2019 a debt due and payable by John Lamont to the Commonwealth of Australia". The effect of s 255-45 is to constitute the certificate prima facie evidence of the matters stated in it, for the purposes of these proceedings.
With respect to component (1), primary tax, the defence admits that the Deputy Commissioner made the relevant assessments, that he served them in accordance with the TAA and the Income Tax Regulations 1936, that income tax for the years in question became due and payable on dates as alleged in the statement of claim and that the defendant failed to pay the income tax on or before the due dates. However, pars 2, 3, 4 and 9 of the defence purport to put in issue the correctness of the assessments with respect to the amount of the defendant's assessable income in the relevant years and the amount of income tax which should have been assessed thereon. At par 9 the defendant denies he is indebted in the amount claimed for income tax and GIC for overdue payment.
Paragraphs 2, 3, 4 and 9 of the defence are misconceived. The amounts of tax assessed are payable as debts due to the Commonwealth: pursuant to s 255-5 of Sch 1 to TAA53. The Deputy Commissioner of Taxation is entitled, in his official name, to sue for these debts: s 255-50 of Schedule 1 of the TAA. Tax debts so arising cannot be contested in this Court in a recovery proceeding such as the present. The assessments and amended assessments are conclusive evidence that the amounts which they show as due to be paid are correct: s 350-10(1) of Sch 1 of the TAA53 and item 2 in the table under that section.
The defendant had open to him the statutory right to object to any assessment or amended assessment pursuant to s 175A of the ITAA1936. I was informed from the bar table that he exercised that right with respect to amended assessments relevant to the present action. The Commissioner disallowed the objections and the defendant appealed to the Administrative Appeals Tribunal ("AAT") in exercise of his rights under Pt IVC of the TAA53. I was informed that the appeals were subsequently withdrawn.
There is no jurisdiction in this Court to go behind the assessments to examine their merits according to competing contentions regarding how much income was derived in the subject years: F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360; [1981] HCA 27 at 375 (Mason and Wilson JJ); Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32. The scheme of Commonwealth income tax legislation is clear. Assessed amounts are recoverable by the Deputy Commissioner as debts due to the Commonwealth.
With respect to component (2), administrative penalties for tax shortfall, at par 12 of the defence the defendant denies liability on the basis that the amended assessments are erroneous, having been made upon incorrect attribution to him of assessable income. This ground of defence is not open to him for the reasons given above.
With respect to component (3), shortfall interest charge, at par 10 the defendant admits notices respecting this charge for FY2005-2008 were served and that he has not paid the amounts. At pars 9 and 11 the defendant disputes liability for the shortfall interest charge on the basis that the additional amounts of income brought to account in the amended assessments are erroneous. This again attempts to raise the ground of defence which is not available at law for reasons given above.
The interest on shortfall in tax, that is, on the additional tax for which the defendant became liable on the amended assessments, has been assessed and claimed only from FY2005 because this category of interest on shortfall was only introduced, by legislative amendment, from that financial year. For FY2002-2004 the legislation imposed GIC upon shortfall in tax. For those three years GIC has been calculated on the shortfall and included in component (5) of the plaintiff's claim. For FY2005-2008 no GIC has been calculated on the shortfall between the original assessment of tax and the amended assessment. Instead the specific provisions for shortfall interest charge have been applied. For FY2009-2013 there were no amended assessments and therefore no shortfall in tax upon which any form of interest had to be calculated.
With respect to component (4), the administrative penalty for failure to lodge the FY2013 return, the defendant admits in pars 5-17 of the defence that he failed to lodge the return for that year and that he became liable to an administrative penalty. However he asserts the omission was due to delay on the part of his tax agent and that he "genuinely believed" the penalty assessment was erroneous and "would be corrected in due course". On this basis he disputes the GIC calculated on the penalty but not the penalty itself. This belief on his part does not give rise to a defence to the calculation of GIC and in any event the defendant has adduced no evidence in support of it.
At pars 13 and 14 of the defence it is alleged the defendant discharged any liability he had to the plaintiff by delivering "a completed non-negotiable contract and accompanying promissory note made out for $5,000,000". As no evidence was tendered by the defendant this assertion is unsupported.
At par 15 the defence alleges that the plaintiff's claim is "vexatious, spurious, frivolous, is an abuse of the Court process and is hopeless". In the absence of supporting evidence this paragraph can only be treated as a submission. I reject it having regard to the evidence tendered by the plaintiff and the statutory provisions which underpin the plaintiff's claim.
At pars 16 and 17 it is alleged that the plaintiff's "conduct and behaviour giving rise to these proceedings is malicious and unconscionable" and that the pursuit of the claim "is evidence in itself of its intent to mislead the Court". It was recognised in Commissioner of Taxation v Futuris Corporation Limited at [66] that the provisions of the income tax legislation which make the assessments and amended assessments conclusive as to the amount payable, in recovery proceedings, do not "conclude against [the taxpayer] curial consideration of alleged deliberate maladministration of the Act with respect to" those assessments. However an allegation of deliberate maladministration can only be raised and litigated in proceedings for judicial review of the assessments under s 75(v) of the Constitution or s 39B of the Judiciary Act 1903 (Cth): Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation [2017] NSWCA 17 at [42].
Accordingly as a matter of law the allegations in pars 16 and 17 of the defence cannot be agitated in the present recovery proceedings. In any event the allegations are entirely unsupported by evidence or by any inference which might be drawn from the entire context of the claim.
Orders
For these reasons the following orders of the Court will be entered:
1. Judgment for the plaintiff against the defendant in the sum of $4,317,316.07.
2. The defendant is to pay the plaintiff's costs.
[2]
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Decision last updated: 14 February 2019