Evans v Deputy Commissioner of Taxation

Judgment 1MACFARLAN JA: I agree with Gzell J. 2TOBIAS AJA: I agree with Gzell J. 3GZELL J: A Deputy Commissioner of Taxation sued Peter Ronald Evans for a tax liability due to the Commonwealth. Williams DCJ entered judgment for the Deputy Commissioner in the amount of $499,366.55 plus costs. From that judgment Mr Evans appeals to this Court. 4The Taxation Administration Act 1953 (Cth) (Administration Act), s 8AAZC provides that the Commissioner may establish one or more systems of accounts for primary tax debts, each of which is to be known as a Running Balance Account (RBA). A number of RBAs were established with respect to Mr Evans. 5Under A New Tax System (Goods and Services Tax) Act 1999 (Cth) (GST Act), s 31-5 a person registered or required to be registered under that Act must give to the Commissioner a GST return for each tax period. Due dates for the return are specified in s 31-8. 6The approved form of return is the Business Activity Statement (BAS). It brings together in the one form the reporting of the entitlements and obligations under the GST Act, the PAYG system of instalments (PAYG Instalments), the PAYG withholding from wages of employees (PAYG Withholdings) and a number of other reporting obligations not relevant for present purposes. 7Each of the reported liabilities is an amount due to the Commonwealth under a taxation law. They are thus primary tax debts for the purposes of s 8AAZC of the Administration Act because that term is defined in s 8AAZA to mean any amount due to the Commonwealth directly under a taxation law. 8One of the RBAs established with respect to Mr Evans related to his BAS associated debits and credits (BAS RBA). 9An RBA deficit debt is defined in s 8AAZA of the Administration Act to mean a balance in favour of the Commissioner based on primary tax debts that have been allocated to the RBA and that are currently payable, and payments made in respect of current or anticipated primary tax debts of the entity and credits to which the entity is entitled under a taxation law that have been allocated to the RBA. 10If there is an RBA deficit debt at the end of a day, the tax debtor is liable to pay the Commonwealth that amount under s 8AAZH of the Administration Act. 11Another consequence of a balance of an RBA in favour of the Commissioner is the imposition of the general interest charge (GIC). Section 8AAZF of the Administration Act provides that if there is an RBA deficit debt at the end of a day, the GIC is payable by the tax debtor on that RBA deficit debt for that day and the balance of the RBA is altered in the Commissioner's favour by the amount of the GIC. From time to time the GIC was raised in Mr Evans' BAS RBA. 12In like manner, an administrative penalty was, from time to time, debited to Mr Evans' BAS RBA for late lodgement of BAS forms. Section 286-75(1) in Schedule 1 to the Administration Act provides that a person is liable to an administrative penalty if required under a taxation law to give a return to the Commissioner by a particular day and the return is not given by that day. The amount of the penalty is worked out under s 286-80. 13Mr Evans lodged with the Australian Taxation Office (ATO) BAS forms in which he had made handwritten entries. Kalliani Sreedharan, the case officer, affirmed an affidavit in which she explained that in most cases BAS forms are scanned and stored in electronic format on a computer system called the Instalment Processing System (IPS). In other cases the information shown on the BAS form is manually keyed into the IPS. Where the BAS form has been scanned, a copy of it can be printed from the Image Viewer screen. Where the information has been keyed in, details can be printed from the View and Print Business Activity Statement screen. 14Ms Sreedharan annexed to her affidavit details from Mr Evans' BAS RBA from 1 April 2001 to 30 June 2009. Each document was printed from the View and Print Business Activity Statement screen indicating that the information from the BAS forms lodged by Mr Evans had been manually keyed into the IPS. 15The Administration Act s 8AAZG provides that the Commissioner may at any time prepare a statement for an RBA, containing such particulars as the Commissioner determines. 16Section 8AAZI provides as follows: "(1) The production of an RBA statement: (a) is prima facie evidence that the RBA was duly kept; and (b) is prima facie evidence that the amounts and particulars in the statement are correct. (2) In this section: RBA statement includes a document that purports to be a copy of an RBA statement and is signed by the Commissioner or a delegate of the Commissioner or by a Second Commissioner or Deputy Commissioner." 17Ms Sreedharan annexed to her affidavit an unsigned copy of the RBA statement of Mr Evans' BAS RBA (BAS RBA statement) showing its debits and credits, its running balance and the then amount of the RBA deficit debt. Since the copy was unsigned, it lacked the benefit of s 8AAZI of the Administration Act. 18Section 8AAZJ of the Administration Act is in the following terms: "(1) In proceedings for recovery of an RBA deficit debt, a Commissioner's certificate stating any of the following matters in respect of a specified RBA is prima facie evidence of those matters: (a) that no tax debts (other than general interest charge on the RBA deficit debt) were allocated to the RBA after the balance date shown on a specified RBA statement for the RBA; (b) that general interest charge is payable on the RBA deficit debt, as specified in the certificate; (c) that payments and credits were allocated to the RBA as specified in the certificate; (d) that a specified amount was the RBA deficit debt on the date of the certificate. (2) In this section: Commissioner's certificate means a certificate signed by the Commissioner or a delegate of the Commissioner, or by a Second Commissioner or Deputy Commissioner." 19Ms Sreedharan annexed to her affidavit a certificate signed by a Deputy Commissioner certifying that no tax debts other than the GIC on the RBA deficit debt were allocated to the BAS RBA after the balance date, said to be 23 July 2020 and said to be the date of the issue of the statement of claim in these proceedings. It certified that credits of $29,858.21 had been allocated to the BAS RBA since 23 July 2010. And it certified that as at 13 January 2011 the BAS RBA deficit debt owed by Mr Evans was $450,555.69. 13 January 2011 was the date Ms Sreedharan affirmed her affidavit, the date of the certificate and the balance date of the BAS RBA statement. 20The reference to 23 July 2020 was obviously an error. But so, too, might 23 July 2010 be, for the statement of claim, while dated 23 July 2010, was filed on 29 July 2010. 21Mr Evans swore an affidavit in which he complained that the RBA deficit debt was excessive because of alleged errors in entries, or the lack of them, that he specified. I will return to these alleged errors in due course. 22Ms Sreedharan affirmed a second affidavit correcting an error in her table of GST liabilities in her first affidavit. A deal of the statement of claim and Ms Sreedharan's first affidavit were devoted to a claim for a superannuation guarantee charge deficit. In her second affidavit, Ms Sreedharan said that her review of the ATO records revealed that a judgment in favour of the Deputy Commissioner in July 2003 included the superannuation guarantee charge deficit and in those circumstances the Deputy Commissioner did not press any claim to recover the same debt in the current proceedings. 23Ms Sreedharan said that the records of the ATO showed that a Deputy Commissioner had obtained judgment against Mr Evans in respect of another RBA deficit debt in the amount of $117,377.13 on 20 October 2005. She annexed an unsigned copy of the RBA statement with respect to that account. It lacked the benefit of s 8AAZI of the Administration Act. 24While a judgment debt may have been charged to an RBA in respect to Mr Evans, the $117,377.13 entry is demonstrably not a recording of a judgment debt. The RBA statement commenced with a credit of $7,617 on 13 November 2000. With a GIC of $651.02 on 28 October 2005 the balance in the RBA statement stood at $118,028.15. With the remission of that GIC on 24 March 2006 the balance stood at $117,377.13, the entry misinterpreted by Ms Sreedharan. 25There was a judgment interest charge of $48,398.50 on 4 March 2010. The balance of the account then stood at $166,275.63. There is no other reference to a judgment. The RBA was cleared by the transfer of credits and the remission of GIC. Ms Sreedharan annexed the ATO practice statement on the transfer of credits. 26Ms Sreedharan made no attempt in her second affidavit to deal with Mr Evans' complaints beyond saying that the ATO had conducted an audit of his BAS RBA, had concluded that he was not entitled to input tax credits and had revised the claimed credits to nil. 27Mr Evans swore a second affidavit in which he repeated the complaints in his first affidavit in different terms. 28The hearing in the District Court was adjourned twice. For the actual hearing, Ms Sreedharan affirmed a third affidavit. It merely brought the RBA deficit debt up to date. Ms Sreedharan made no attempt to address Mr Evans' complaints. Annexed was an unsigned copy of the BAS RBA statement with balance date the same as the date of affirmation of her third affidavit and the date of a new certificate under s 8AAZJ of the Administration Act signed by a Deputy Commissioner. Again, since the copy of the BAS RBA statement was unsigned, it lacked the benefit of s 8AAZI. 29Mr Evans made a third affidavit in which he expressed his complaints in the first affidavit in different terms. He said it made it easier to understand his complaints. The affidavit was not sworn. It was over 200 pages. It was handed to Mr Jay, counsel for the Deputy Commissioner, on the morning of the hearing. Mr Evans appeared in person at the hearing and on this appeal. 30On the two previous occasions the matter was before the District Court, Mr Evans served lengthy affidavits on the morning of each hearing. On the second occasion, Elkaim DCJ made an order that no further evidence be served less than seven days prior to the hearing date. Mr Jay objected to Mr Evans reading his third affidavit and Williams DCJ rejected it. His Honour said: "Mr Evans, I'm not prepared to allow you to rely on your latest affidavit but subject to any objections, I'll allow you to read the earlier affidavits. My reasons for doing that are, whilst it's true that you are self-represented and some latitude needs to be given to you, this is a taxation matter, you're an accountant. Given the fact that on 19 October 2011, Judge Elkine [sic] made an order that you were to serve any material you relied on not less than 7 days before today and that hasn't occurred, the matter has been in the list several times before for hearing, I don't think its fair on the plaintiff to have to meet at the last minute anything that hasn't already been dealt with or that could have been dealt with by you filing an affidavit within time. So I'm not prepared to allow you to rely on this affidavit of 18 November but, as you've heard Mr Jay say, he's not caught by surprise by the earlier two affidavits, so you can rely upon those." 31In his notice of appeal Mr Evans claimed that his Honour erred in refusing to allow him to file his third affidavit in Court and in failing to provide reasons for refusing to allow him to rely upon it. 32These grounds are without merit. His Honour did give reasons. They are set out above. The order of Elkaim DCJ was appropriate and his Honour, Williams DCJ, was entitled to give effect to it in the exercise of his discretion. 33Besides, the matters of complaint are set out in Mr Evans' first affidavit and are repeated in different form in his second affidavit. Of the rejected affidavit, Mr Evans said: "I'd like to propose your Honour, that the affidavit that I've submitted today is merely a reinstatement of all the facts, all the facts that I've provided in early affidavits, dated 14 October and 21 June your Honour. The affidavit more clearly identifies the issues and the disputed liabilities and amounts and those other affidavits your Honour and I believe in its entirety, provides a much clearer and better picture of the claims that I am making in my defence of this matter before the Court your Honour." 34Furthermore, Mr Evans had the opportunity of addressing the trial judge orally in the terms he had used in the rejected affidavit. 35In his notice of appeal Mr Evans claimed his Honour erred in failing to grant an adjournment to allow proceedings in the Administrative Appeals Tribunal (AAT) to be heard and finally determined prior to the hearing and determination of the proceedings at first instance. 36In effect, Mr Evans sought a stay of the current proceedings pending a review and determination by the AAT. 37Division 4 of Part IVC of the Administration Act applies to the review of a reviewable objection decision by the AAT. Section 14ZZM is within that Division. It is in the following terms: "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." 38Division 5 of Part IVC of the Administration Act deals with appeals to the Federal Court of Australia. It contains a like provision in s 14ZZR. 39In Deputy Commissioner of Taxation v TDE Nominees Pty Ltd (No 2) [2011] NSWSC 1528, Gzell J analysed the authorities on this topic, at [18]-[32], as follows: "18 The legislative scheme established in relation to tax recovery, as manifested in provisions like s 14ZZR of the Taxation Administration Act reflects a clear policy in favour of the Revenue and against the taxpayer. The Commissioner is placed in a position of special advantage and is, in general, free to pursue recovery of proceedings, despite outstanding appeals and reviews against disallowance of an objection: Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191; (2006) 64 ATR 316 at [19]; 322, referring to Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1983) 48 ALR 545 at 547. 19 The policy of the Income Tax Assessment Act 1936 as reflected in its provisions gives priority to recovery for the Revenue against the determination of the taxpayer's appeal against the assessment. 20 The effect of s 177 of the Income Tax Assessment Act 1936 and s 14ZZR of the Taxation Administration Act is to give primacy to the general right of the Deputy Commissioner to have tax paid irrespective of the pendency of an appeal and its merits: Deputy Commissioner of Taxation (NSW) v Mackey (1982) 13 ATR 547 at 550; Deputy Commissioner of Taxation v Ho (1996) 131 FLR 188 at 191; Deputy Commissioner of Taxation v Feldman [2006] NSWSC 378; (2006) 62 ATR 253 at [15]; 256. 21 The mere fact that an appeal or review is pending is not sufficient to grant a stay: Trade World at [20]-[21]; 322. 22 Liability to pay the assessed tax is not suspended pending the outcome of the review: Deputy Commissioner of Taxation v Alvaro (1990) 21 ATR 726. 23 Great weight must be given to the effect of provisions such as s 14ZZM and s 14ZZR of the Taxation Administration Act: Trade World at [20]; 322; Mackey at [550]; Feldman at [15]; 256; Ho at 190. 24 The Court has jurisdiction to stay recovery proceedings pending a review of or an appeal against an assessment, but the power is discretionary and should be exercised with great caution and only, in my view, in special or exceptional circumstances: Feldman at [15]; 256; Ho at 191; Deputy Commissioner of Taxation v Gergis (1991) 22 ATR 1 at 3; Trade World at [21]; 322. 25 The onus is on the applicant to demonstrate sufficient circumstances to warrant the grant of a stay: Ho at 192. The power to grant a stay is exercised sparingly and the onus is on the taxpayer to justify it. 26 The effect of s 14ZZM and s 14ZZR of the Taxation Administration Act is said to preclude the Court from considering the prospects of success of any review or appeal by a taxpayer to either the Administrative Appeals Tribunal or the Federal Court: Feldman at [15]; 256, although there are statements to the contrary. 27 Hardship to the taxpayer is a relevant matter: Trade World at [21]; 322. If the taxpayer can establish "extreme personal hardship" a stay may be granted: Cywinski v Deputy Commissioner of Taxation [1990] VR 193 at 197; Ho at 193; Deputy Commissioner of Taxation v Enal Pty Ltd (1987) 19 ATR 23 at 24. 28 The mere obligation to pay the assessment, however, is not hardship in itself: Cywinski at 197; Ho at [193]. The possibility that the taxpayer may be bankrupted is not, of itself, an extreme personal hardship: Ho at [194]; Deputy Federal Commissioner of Taxation v Akers 89 ATC 4725 at 4727. 29 The extreme personal hardship must be in relation to the taxpayer called on to pay: Mackey at 551. 30 In exercising the discretion to grant a stay, whether the Commissioner has abused his or her position, is a relevant matter: Cywinski at 197. Delay by the Commissioner is also a relevant matter: Deputy Commissioner of Taxation (Vic) v Trower (1986) 17 ATR 473 at 478. 31 If a taxpayer has been party to a contrivance to avoid his or her liability to tax, the Court should not stay proceedings or execution otherwise than in the most exceptional circumstances: Trade World at [21]; 322; Gergis at 3; Mackey at [550]. 32 The principles are conveniently summarised by French J in Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 139: 'It may generally be concluded from the preceding review, that the power of State courts to stay recovery proceedings instituted in them under the ITAA is well established and that courts exercising it have regard to the following propositions: