Deputy Commissioner of Taxation v Miraki

1. Under r 26.01 of the Federal Court Rules 2011 (Cth), summary judgment be entered for the applicant against the respondent in the sum of $5,844,558.03 plus General Interest Charge from the date of filing the originating application to the date of judgment.
2. To the extent necessary, the freezing orders made by Wigney J on 22 March 2021, as subsequently extended and varied, continue in effect until further order, this order having effect from the making of the order for summary judgment in the applicant's favour. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 By an interlocutory application dated 10 August 2021, the applicant (the Deputy Commissioner of Taxation) seeks summary judgment against the respondent (Ms Miraki) pursuant to r 26.01(1)(e) of the Federal Court Rules 2011 (Cth) in the sum of $5,844,558.03 plus General Interest Charge from the date of filing the originating application to the date of judgment. Rule 26.01(1)(e) provides: 26.01 Summary judgment (1) A party may apply to the Court for an order that judgment be given against another party because: … (e) the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding. 2 Although the respondent by her written submissions opposed the making of an order for summary judgment, Senior Counsel for the respondent on the hearing of this application indicated that there was no further resistance to that course. This concession, properly made, was only made after the evidence was read and after the Commissioner had made submissions on his application. 3 Summary judgment will be entered in favour of the Commissioner under r 26.01 of the Federal Court Rules. 4 I am satisfied that there is no reasonable defence to the Commissioner's claim. The relevant principles may be stated by reference to the decision of Bromwich J in Commissioner of Taxation v Ornelas [2016] FCA 457. Mr Ornelas had conceded that the jurisdictional threshold for summary judgment had been met: Ornelas at [6]. Bromwich J considered the concession to be appropriate. His Honour explained at [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 [Taxation Administration Act 1953 (Cth)] on a review or appeal relating to the assessment, which is not these proceedings [see also: Commissioner of Taxation v Hua Wang Bank Berhad (2010) 273 ALR 194; [2010] FCA 1014 at 199 at [15] (Kenny J)]; (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 [see also: Deputy Commissioner of Taxation v Shi [2018] FCA 1915 at [19] (Yates J)]; (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, [review by] … the Administrative Appeals Tribunal or [appeal to] 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]. 5 To these observations may be added a reference to ss 14ZZM (relating to a review of an objection decision in the Tribunal) and 14ZZR (relating to an appeal from an objection decision to the Court) of the Taxation Administration Act 1953 (Cth). Those provisions are in the following terms: 14ZZM Pending review not to affect implementation of taxation decisions The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending. … 14ZZR Pending appeal not to affect implementation of taxation decisions The fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal were pending. 6 In their written submissions, counsel for Ms Miraki had submitted that the evidence only established that copies of redacted amended assessments and penalty assessments had been proved to have been served rather than the originals of the amended assessments and penalty assessments with the result that s 174 of the Income Tax Assessment Act 1936 (Cth) had not been satisfied. Section 174 of the Income Tax Assessment Act 1936 (Cth) provides that: [a]s soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax. 7 I am satisfied that the notices of assessment were served. The notices of amended assessment for the years ended 30 June 2014 to 30 June 2017 and a notice of assessment of shortfall penalty, each issued on 18 March 2021, were served by express post on 22 March 2021. The affidavit of service relied upon in obtaining the freezing orders attached redacted versions of the relevant notices when indicating what had been placed in the express post envelope. The redactions removed reference to Ms Miraki's tax file number. The appropriate inference to draw, in the particular circumstances, is that the redactions were made to what was included in the affidavit, but not to the documents placed in the envelope. The redactions to what was included in the affidavit were made out of a desire not to breach s 8WB(1)(c) of the Taxation Administration Act 1953 (Cth) which provides that it is a criminal offence to "divulge or communicate another person's tax file number to a third person". 8 I note that the assessments would still have been drawn to Ms Miraki's attention if the notices placed in the express post envelope had been redacted by removal of the tax file number; it was plain on the face of each of the notices (even if redacted) that the assessments were directed to Ms Miraki and she could not reasonably have understood otherwise - see: Batagol v Federal Commissioner of Taxation [1963] HCA 51, (1963) 109 CLR 243 at 251-252; Deputy Commissioner of Taxation v Taylor (1983) 2 NSWLR 139 at 143D-144B; Federal Commissioner of Taxation v Prestige Motors Pty Ltd [1994] HCA 39, (1994) 181 CLR 1 at 14. 9 I also note that the Commissioner relied on three certificates issued under s 350-10(3) of Schedule 1 to the Taxation Administration Act 1953 (Cth). That section provides: Prima facie evidence (3) The production of a certificate that: (a) is signed by the Commissioner, a *Second Commissioner, a *Deputy Commissioner or a delegate of the Commissioner; and (b) states that, from the time specified in the certificate, an amount was payable under a *taxation law (whether to or by the Commissioner); is prima facie evidence that: (c) the amount is payable from that time; and (d) the particulars stated in the certificate are correct. 10 In summary the three certificates establish that: (1) Under notices of amended assessment for income tax which were issued on 18 March 2021 for the income years ended 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017, an amount of $2,870,912.29 was payable by Ms Miraki under a taxation law to the Commissioner from 9 August 2021 (inclusive of associated general interest charge). (2) Ms Miraki has a tax-related liability in respect of shortfall interest charge in respect of the additional amount of income tax for the years ended 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017, and a general interest charge on the unpaid amount of each shortfall interest charge. Under notices of amended assessment for income tax which were issued on 18 March 2021 for the years ended 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017, in respect of those tax-related liabilities, an amount of $569,062.17 was payable by Ms Miraki under a taxation law to the Commissioner from 9 August 2021 (inclusive of associated general interest charge). (3) An assessment has been made, or is taken to have been made, under a taxation law, in relation to tax-related liabilities of Ms Miraki for administrative penalties for a statement in relation to a shortfall amount for the years ended 30 June 2014, 30 June 2015, 30 June 2016 and 30 June 2017. Under a notice of assessment of administrative penalty for a shortfall amount for the period 1 July 2013 to 30 June 2017 which was issued on 18 March 2021, from 9 August 2021, an amount of $2,538,726.36 was payable by Ms Miraki under a taxation law to the Commissioner (inclusive of associated general interest charge). 11 I am satisfied that Ms Miraki has no reasonable prospects of successfully defending the proceeding, or part of the proceeding, that the concession ultimately made by her counsel was appropriate and that summary judgment should be granted. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Thawley.