The plaintiff, by statement of claim filed on 2 August 2016, claims for recovery of a debt arising from the defendant's unpaid tax related liabilities. As at 6 March 2018, the Running Balance Account ("RBA") deficit debt is $200,892.66. The tax related liability arises from the notices of assessment and notices of assessment of liability to pay a penalty is $219,563.55. The combined total is agreed to be $420,456.21. The claim before me is for this sum only; there is no claim for interest pursuant to s 100 Civil Procedure Act 2005 (NSW).
A defence was filed on 18 November 2016. I set out the relevant portions in full:
"1. In relation to paragraph 15 of the statement of claim the defendant denies the allegations contained in that paragraph.
2. In relation to paragraphs 1, 2, 3, 4, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15 (sic) 16, 17, 18, 19, 20, 21 of the statement of claim the defendant can neither confirm or deny the allegations contained in that paragraph (sic).
3. In relation to paragraph 5, paragraph (sic) 5 and 18 of the statement of claim the defendant denies the allegations contained in that paragraph (sic)."
I first note that the defendant has not attended court today. He was called three times outside the court at 10:06am and there was no appearance. Nor was any legal representative present. A Notice of Intention of Ceasing to Act was filed by his former legal representatives on 2 February 2018, which is more than one month prior to the hearing date, and thus compliant with r 7.29 Uniform Civil Procedure Rules 2005 (NSW) ("UCPR") as the first step in ceasing to act for a party. I therefore stood the matter down to 10:30am and requested the plaintiff, through the plaintiff's solicitors, to contact the defendant directly, there being a Notice of Ceasing to Act filed by his solicitors on Friday 2 March 2018, which means the defendant is no longer legally represented.
The emailed response of the defendant to that inquiry has been provided to the Court by counsel for the plaintiff. I will set it out in full:
"From: Charles Waterstreet [email address]
Sent: 7 March 2018 at 10:12:22 am
To: McGregor, Naomi
Subject: Fwd: ATO v Waterstreet [SEC=UNCLASSIFIED]
Dear Ms McGregor, as advised by my former clerk there is no one available to appear for me today. accordingly [sic] I ask you through your counsel to advise the court that I have been unable to obtain representation, and apologise to the court and yourself. I have been advised that I am in no position to defend this action and without prejudice withdraw further defence. I am advised to take action under the provisions of Bankrupcy Act and ope to do so. I had this matter down in diary for tomorrow and as usual the shoemakers children are worst shod. You can show this email and contents to court by way of explanation and meant no disrespect, Yours Sincerely, Charles Waterstreet .
Sent from my iPhone" (Exhibit A)
Underneath that there is a note from a person at Forbes Chambers which says:
"From: Ryan Coleiro [email address]
Date: 7 March 2018 at 9:10:48 am AEDT
To: Charles Waterstreet [email address]
Subject: RE: ATO v Waterstreet
Dear Charles,
I am sorry but I have not been able to find anyone who can go and do this.
Regards," (Exhibit A)
That email is dated 7 March 2018 at 9:10:48am.
By reason of the documentation tendered by the plaintiff (set out in more detail below), I am satisfied that the defendant is well aware of these proceedings being listed for hearing today. As I have already noted, he had legal representation up until at least last Thursday. These proceedings have been before the court on five occasions for directions since their commencement on 2 August 2016. I also note that the plaintiff has failed to comply with orders to file affidavits which were made as part of those directions, at a time when he was represented. He is a barrister by profession and is experienced in court proceedings, and should be taken to know both that the hearing was to commence today and that the relevant evidence should be filed beforehand.
I note the explanation of believing the hearing was tomorrow and not today. While this is a two day hearing, and that may perhaps be a part of the explanation for his thinking it was on tomorrow, he had not only legal representation but his own experience to draw upon to know that when a hearing is listed for two days it commences on the first day, and not on the second.
This brings me to the question of how I should deal with these proceedings in the absence of the defendant. He does not ask the court for an adjournment, so I do not need to deal with any application for these proceedings to be stood over to some later date.
However, just because a party is not present does not mean that a court merely rubber-stamps the other party's claims.The correct procedure to follow on such occasions is set out in UCPR r 29.7, which is in the following terms:
"29.7 Procedure to be followed if party is absent
(1) This rule applies when a trial is called on.
(2) If any party is absent, the court:
(a) may proceed with the trial generally or so far as concerns any claim for relief in the proceedings, or
(b) may adjourn the trial.
(3) If, in relation to a liquidated claim, the plaintiff appears, but a defendant does not appear, the court may, without proceeding to trial, give judgment against that defendant on evidence of:
(a) the amount then due to the plaintiff in respect of the cause of action for which the proceedings were commenced, and
(b) any payments made or credits accrued since the commencement of the proceedings in reduction of the amount of the plaintiff's claim or costs.
(4) If, in relation to any proceedings, the defendant appears, but the plaintiff does not appear, the court may dismiss the proceedings.
(5) Subrules (3) and (4) do not limit the court's powers under subrule (2)."
One issue to which I gave consideration is whether I should, having regard to the apparent admissions in the email, strike out the Defence and proceed to assessment pursuant to UCPR r 30.1. While Mr Waterstreet appears, from the text of his email, to make certain concessions in relation to his defence, these are expressed to be "without prejudice" and in unclear terms so, in the circumstances, I consider I should proceed to deal with the issues in the Defence as pleaded.
The next matter to determine is the question of the procedure to follow in the defendant's absence. Before taking the adjournment to enable the plaintiff's legal representative to find out what was happening, I drew the attention of counsel for the plaintiff to the observations of Barrett J in Satz v ACN 069 808 957 Pty Ltd [2010] NSWSC 365. Failure of one party to attend court for the hearing is not an uncommon occurrence in this court and, as I noted in my judgment in Prime Marble & Granite Pty Ltd (ACN 077 393 938) v Mehajer [2017] NSWDC 273 (where another defendant failed to appear before the court in similar circumstances), I have obligations to that missing party, as indeed does the plaintiff.
I am satisfied from the submissions of counsel for the plaintiff, in response to my raising this with her, that the plaintiff has discharged all his obligations to the defendant.
As the trial judge, I propose to take the same role as that adumbrated by Barrett J in Satz v ACN 069 808 957 Pty Ltd, which is that I must:
1. Ensure that the missing party has had full and proper notice of the hearing date;
2. Ensure that there is a level playing field; and
3. Have careful regard to the relevant evidence and ensure that all issues are considered in a manner that is fair to the missing party.
In relation to the defendant's knowledge of the proceedings being listed for today and the service of evidence, I have had regard to the correspondence which is set out in Exhibit C. It is clear that the plaintiff's affidavit material was served on Friday 28 July on the defendant's solicitor. I see also that on 1 March, a copy of the authorities and the court book which were to be tendered today was served on the solicitors for the defendant, and I see that in addition, a copy was provided to the defendant personally on 6 March 2018 by reason of the intervening notice of ceasing to act being served. I also note the content of the letter from the plaintiff to the defendant of 6 March 2018 which states:
"1. We refer to the above matter that is set down for hearing on 7 March 2018.
2. We enclose by way of service a sealed copy of the affidavit of Waael Mehana, affirmed today and a copy of the plaintiff's chronology.
3. Please note that the enclosed chronology was previously provided in the court book served on CLS legal on 1 March 2018.
4. The Commissioner does not intend to rely on any further material aside from those enclosed herein or otherwise previously served.
5. We have available a copy of the court book and list of authorities which we can provide to you at the hearing tomorrow.
6. If you have any questions please call Naomi McGregor [telephone number]."
I am satisfied that all of the obligations that both the court and the plaintiff owe to the defendant have been discharged.
This brings me to a consideration of the merits of the case. The claim is based on s 255-5(2) of Sch 1 to the Tax Administration Act 1953 (Cth) ("TAA"). The debts in question are debts due to the Commonwealth of Australia and payable to the plaintiff. In common parlance, these liabilities arise from the failure of the defendant to meet his taxation obligations. This includes lodgement of income tax returns and failure to make payment towards his GST and PAYG withholding and instalment obligations over what appears to have been an extended period of time.
The evidence in support of the claim is set out in the following documents:
1. Affidavit of Usha Ganapathy affirmed 25 July 2017 and filed 26 July 2017 and attachments.
2. The affidavit of Waal Mehana affirmed 6 March 2018 and attachments.
3. The income tax statement of account worksheet dated 28 February 2018 and the running balance account dated 28 February 2018, which together with the affidavits of Ms Ganapathy are set out in exhibit B.
There has been no evidence filed by the defendant. Notwithstanding orders made by Judicial Registrar Howard on 7 September 2017, the defendant served no evidence by 24 November 2017. No application for an extension of time to do so was ever sought. Looking at the orders that have been made to date, it is clear to me that this non-compliance is a significant difficulty to the defendant in any substantive defence to this claim, as there is simply no evidence before the court in support of his case.
Looking through the file, the defendant did serve two affidavits in these proceedings, but neither of those addresses substantive issues in the case. There is an affidavit sworn by the defendant on 1 May 2017 in which he sets out information about his busy workload and indicating the desirability of coming to an arrangement with the plaintiff. I also note an affidavit of Johnathon Perkins sworn 7 September 2017 which attaches some correspondence, but there is no relation between that correspondence and the substantive issues in this case.
The Defence itself, as is clear from the contents of the documents set out above, does not identify any defence by reason of the operation of any taxation legislation. The pleading in paragraph 15 is denied and is then the subject of an assertion in paragraph 2 that the defendant can neither confirm nor deny, and the same is the case in relation to paragraph 18. A statement that a party can neither confirm nor deny the allegations is not a form of pleading that is generally accepted.
As to the defence of denial of allegations in paragraphs 5, 15 and 18, I note the following:
1. Paragraph 5 of the statement of claim alleges that the defendant failed to pay income tax for the financial years ended 30 June 2012, 2013, 2014 and 2015. It does not appear to be in dispute that there has been no payment made in respect of income tax assessed for those periods, but the failure to file income tax is not supported by any evidence from the defendant. The documents produced by the plaintiff, including the RBA statement, indicate clearly that there were no payments received between those dates. Even if this were the subject of evidence from the defendant, I note the evidentiary effect of a certificate pursuant to s 255-45 of Sch 1 to the TAA, which clearly demonstrates that this sum has not been paid.
2. Paragraph 15 of the statement of claim provides that the defendant failed to give the plaintiff income tax returns for the periods 30 June 2012 to 2015, which of course is an obligation under s 161(1) Income Tax Assessment Act 1936 (Cth) ("ITAA"). Once again, there is no evidence and I note the conclusive evidentiary effect of the certificate. While the defendant has lodged some business activity statements for the periods from 1 July 2011 to 30 June 2015, the business activity statements did not fulfil the approved form requirements of an income tax return, nor do they contain all necessary information required to be provided by taxpayers under a system of self-assessment. The failure to lodge income tax returns on or before the due dates caused the defendant to be liable to pay the penalties for failure to lodge documents on time, and I note that these penalty notices are contained in the documents which have been tendered.
3. Paragraph 18 of the statement of claim sets out the penalties. The defendant denies that he failed to pay administrative penalties on or before the due dates specified. Once again, there is no evidence. The relevant penalty notices are set out in the evidentiary material and the due dates are specified. Again, I note the conclusive evidentiary impact of certificates issued pursuant to s 255-45 of Sch 1 to the TAA.
In her helpful submissions, counsel for the plaintiff has set out the manner in which s 350-10 of Sch 1 to the TAA (and in particular item 2 of the table in s 350-10(1)) work. She notes that there are two exceptions to the conclusiveness of the assessment provisions, neither of which has been or indeed could be raised in these proceedings, namely objections brought before the Federal Court of Australia or Administrative Appeals Tribunal, and proceedings which impugn the validity of the assessment.
She has also set out the provisions of s 8AAZC of the TAA. I note that Ms Ganapathy's affidavit identifies the amounts which remain unpaid, and that an RBA statement to this effect has been provided. Once again, there is no evidence from the defendant, and I accept the updated RBA statement dated 6 March 2018 attached to the affidavit of Mr Mehana (Exhibit D) as evidence of the plaintiff's entitlement to this sum.
I am satisfied that the plaintiff has made out entitlement to each of the sums claimed by reason of the documentation as set out above. There will accordingly be judgment for the plaintiff.
I should make some incidental observations in relation to interest and costs. First, the provisions of the statement of claim as set out in paragraph 21 identify the general interest charge which is calculated, and there is no separate claim before the court for interest from the date of the filing of the statement of claim.
Second, I have asked counsel for the plaintiff to indicate the basis upon which the costs order she seeks is made. Counsel for the plaintiff has indicated that costs are sought on the ordinary basis. There is no application for costs on any other basis such as, for example, a gross sum costs order or indemnity costs. If there had been, I would not have made such an order without drawing it to the attention of the defendant. I consider that he is sufficiently on notice, in relation to the general rule for costs following the event under UCPR r 42.1 for me to make a costs order on the ordinary basis without any further reference to him.
[2]
Orders
Accordingly, the orders I make are as follows:
1. Note: Defendant called outside the court three times at 10:06am - No appearance; matter stood down to 10:30am.
2. Judgment for the plaintiff for the sum of $420,456.21.
3. Defendant pay plaintiff's costs.
4. Exhibits retained for 28 days.
5. The plaintiff is to serve a copy of this judgment on the defendant at the address nominated in the Notice of Ceasing to Act filed by his former solicitors on 2 March 2018.
[3]
Amendments
08 March 2018 - Typographical errors at [1], [3], [15] and [20]
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: 08 March 2018