Harrington Park v Chief Commissioner of State Revenue [2008] NSWSC 266 | Case summary

3536/07 HARRINGTON PARK CHILDREN SERVICES (NSW) PTY LTD v CHIEF COMMISSIONER OF STATE REVENUE JUDGMENT 1 The defendant, the Chief Commissioner of State Revenue, carried out an investigation as to whether ABC Developmental Learning Centres Pty Ltd and approximately 134 companies in its group, including the plaintiff, Harrington Park Children Services (NSW) Pty Ltd, were liable under the now repealed Pay-roll Tax Act 1971. 2 The Chief Commissioner issued approximately 295 assessments to members of the group. A global notice of objection was lodged with respect to the assessments. The Chief Commissioner disallowed the objections. So far, only Harrington Park has applied to the court for a review of that decision of the Chief Commissioner. 3 The gravamen of the Chief Commissioner's assessments is that all the companies constitute one group under the now repealed Part 10A of the Taxation Administration Act 1996. Payroll tax is subject to a tax-free threshold within which no pay-roll tax is payable (Payroll Tax Act 2007, Sch 1). Grouping prevents an employer splitting its payroll to take advantage of the threshold. 4 The Chief Commissioner seeks an order that ABC be joined as a party to the proceedings or that he be given leave to serve a cross-claim on it. 5 The Chief Commissioner pointed to the Civil Procedure Act 2005, s 56. It states that the overall purpose of the Act and rules of court is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. That principle is enlarged in s 57: proceedings are to be managed having regard to their just determination, the efficient disposal of the business of the court, the efficient use of available judicial and administrative resources and the timely disposal of proceedings in the court at a cost affordable by the respective parties. Section 58 provides that in deciding whether to make any order or direction for the management of proceedings the court must seek to act in accordance with the dictates of justice. 6 It was submitted by the Chief Commissioner that these principles should permeate the application of the rules of court. There is no doubt that that is so. 7 The Civil Procedure Rules 2005, r 6.24(1) provides that if the court considers that a person ought to have been joined as a party, or is a person whose joinder as a party is necessary to the determination of all matters in dispute in any proceedings, the court may order that the person be joined as a party. The Chief Commissioner seeks an order under that provision. 8 The Civil Procedure Act s 22(1) provides that the court may grant to a defendant in any proceedings such relief against any person, whether or not a plaintiff in the proceedings, as the court might grant against that person in separate proceedings commenced by the defendant for that purpose. Section 22(2) provides that relief may not be granted under the section against a person who is not a plaintiff in the proceedings unless the relief relates to, or is contacted with, the subject of the proceedings. In the alternative, the Chief Commissioner invokes that provision. 9 The Chief Commissioner submitted that the real issues in the proceedings, or the matters in dispute in the proceedings, revolve around the true nature of the business relationship between ABC and Harrington. The Chief Commissioner relied upon the former grouping provisions in the Taxation Administration Act. Section 106G provided that corporations constituted a primary group if they were related corporations within the meaning of the Corporations Act 2001 (Cth). The former s 106H provided that if two persons had an agreement under which an employee of one of them worked solely or mainly in connection with a business carried on by the other or both of them, the two persons constituted a primary group. And the former s 106I(1) provided that if a person, or set of persons, had a controlling interest in each of two businesses, the persons who carried on those businesses constituted a primary group. 10 The Chief Commissioner invited Harrington to join ABC as a party to its proceedings. That invitation was declined. The Chief Commissioner submitted that whatever reasons or strategy were adopted in singling out Harrington for the purpose of these proceedings and opposing the joinder of ABC, those reasons or strategy were not consistent with the Civil Procedure Act, s 56, s 57 and s 58. 11 Harrington denied that ABC controlled the composition of its board; that its manager worked solely or mainly in connection with the childcare business carried on by ABC, or by both ABC and Harrington; and that ABC operated the childcare business, and Harrington managed that business, on its own behalf and on behalf of ABC. 12 Those issues will need to be resolved in the proceedings. If they are resolved in favour of the Chief Commissioner, he points out that he is entitled to collect the tax from ABC. The Pay-roll Tax Act, s 16LA(1) provided that if a member of a group failed to pay an amount that the member was required to pay under the Act, every member of the group was liable jointly and severally to pay the amount to the Chief Commissioner. And the Taxation Administration Act, s 45(1) provides that if two or more persons are jointly or severally liable to pay an amount under a taxation law, the Chief Commissioner may recover the whole of the amount from them, or any of them, or any one of them. As it stood at the relevant time, s 4 of the Taxation Administration Act included the Pay-roll Tax Act in its definition of a taxation law. 13 The Chief Commissioner submitted that ABC has a real interest in the proceedings, not only because Harrington will have to adduce evidence of the business relationship between it and ABC if it has any chance of success, it also has the potential legal liability to pay Harrington's tax. Further, except to the extent that ABC can convince this court or the Administrative Decisions Tribunal in further expected proceedings that the business relationship between it and any of the other companies in its group is factually different in significant and relevant respects, such other challenges will fail. 14 It was further submitted that if the issues in these proceedings are resolved in favour of the Chief Commissioner without hearing from ABC, it would have grounds to complain about a denial of natural justice. 15 Harrington, on the other hand, submitted that if it did not adduce detailed evidence of the relationship between it and ABC, its review would fail. That was a question of the extent of the evidence adduced by it and not a basis for joinder of a third party in its proceedings. 16 Draft statements of facts, issues and contentions have been exchanged between the parties. It is common ground that Harrington's draft reveals a high level of acceptance of the Chief Commissioner's view as to the relevant facts with the issues being directed more to the applicability or otherwise of the former grouping provisions in Part 10A of the Taxation Administration Act. It was submitted that in those circumstances there was no need for the joinder of ABC in the proceedings. 17 Harrington also submitted that the non-joinder of ABC in its proceedings was not a question of strategy but the result of the exclusive code for dealing with taxpayer objections under the legislation. 18 I agree with the submission that the legislation contains an exclusive code for the review of adverse decisions by the Chief Commissioner on notices of objection by taxpayers against assessments made under the former Pay-roll Tax Act. 19 Section 86(1)(a) of the Taxation Administration Act provides that a taxpayer who is dissatisfied with an assessment shown in a notice of assessment served on the taxpayer may lodge a written objection with the Chief Commissioner. ABC and the affected members of its group, including Harrington, lodged a global written objection with the Chief Commissioner. 20 Section 91(1) of the Taxation Administration Act provides that the Chief Commissioner must consider an objection and either allow it in whole or in part or disallow it. The Chief Commissioner disallowed the global objection. 21 Each of the above provisions is to be found in Division 1 of Part 10 of the Taxation Administration Act. 22 Section 97(1)(a) of the Taxation Administration Act provides that a taxpayer may apply to the Supreme Court for a review of a decision of the Chief Commissioner that has been the subject of an objection if the taxpayer is dissatisfied with the Chief Commissioner's determination of its objection. Under that provision Harrington's proceedings were commenced in this court. 23 As an alternative to a review under s 97 of the Taxation Administration Act, s 96(1)(a) provides that a taxpayer may apply to the Administrative Decisions Tribunal for a review of a decision of the Chief Commissioner that has been the subject of an objection if the taxpayer is dissatisfied with the Chief Commissioner's determination of its objection. 24 Each of the above provisions is to be found in Part 10 of the Taxation Administration Act. 25 The Taxation Administration Act, s 103A(1) is in the following terms: "No court or tribunal (or other body or person) has jurisdiction or power to consider any question concerning an assessment or other decision of the Chief Commissioner under a taxation law (including the determination of an objection under Division 1) except as provided by this Part."

There are a number of exceptions to this provision, irrelevant for present purposes. The section is to be found in Part 10 of the Act. 26 The clear purpose of s 103A(1) of the Taxation Administration Act is to exclude any form of challenge to the Chief Commissioner's decision on an objection to an assessment or other decision other than the procedures set forth in Part 10. Whether in this court or in the Administrative Decisions Tribunal, proceedings in relation to an assessment are limited to those initiated by a dissatisfied taxpayer. And the proceedings are confined to a review of the Chief Commissioner's decision on that taxpayer's objection to its assessment. 27 There is no scope for the introduction to these proceedings of a consideration of the adverse decision on ABC's notice of objection to the assessments of pay-roll tax against it. Section 103A(1) of the Taxation Administration Act forbids such a course. The court's power of review under s 97, and the Administrative Decisions Tribunal's power of review under s 96, are limited to the initiation of such proceedings by a relevant taxpayer. 28 ABC has taken no action for review of the adverse decision on its notice of objection to the assessments against it. Unless and until it does so, s 103A(1) of the Taxation Administration Act denies power in this court to consider any question concerning its assessment. 29 The exclusive code in Part 10 of the Taxation Administration Act makes pleas to the general provisions in the Civil Procedure Act, s 56, s 57 and s 58 of no effect. The code prevails. 30 In those circumstances it cannot be a denial of natural justice to ABC for this court to determine Harrington's proceedings without inviting ABC to be heard. 31 The Chief Commissioner points to s 106(1) of the Taxation Administration Act as an answer to this line of argument. It is found in Part 10. It provides as follows: "The Chief Commissioner may, if the Chief Commissioner thinks fit, state a case on any question of law concerning the assessment or refund of tax and forward the case to the Supreme Court for its opinion." 32 The Chief Commissioner submitted that he could state a case with respect to the assessments against ABC and seek to have those proceedings heard at the same time as Harrington's review. It was submitted that since that course was open to him, Part 10 of the Taxation Administration Act, and in particular s 103A(1), should not be construed narrowly and should not be treated as a bar to the relief sought by him in this application. 33 The short answer to that proposition is that the Chief Commissioner has not taken that course. 34 And there may be impediments to that course. It has been said that a case stated is an unsuitable vehicle for a detailed consideration of factual matters (Commissioner of Stamp Duties (Qld) v Westpac Banking Corporation 93 ATC 4,335 at 4,338). A case stated that seeks to investigate the detailed factual circumstances surrounding the business relationship between ABC and Harrington may well founder since s 106(1) of the Taxation Administration Act is limited to a case stated on a question of law. It may also be a futile exercise. Unless and until ABC seeks a review and is successful in having the assessments against it set aside, it is liable for the pay-roll tax assessed and the case stated may serve no useful purpose. A case stated under s 106(1) may be a useful vehicle where the Chief Commissioner wishes to assess a taxpayer, the assessment depends upon the correct interpretation of a provision of the legislation, and the Commissioner wishes to seek the court's interpretation before making the assessment. 35 However, these are matters that I am not required, presently, to decide. It is, in my view, a sufficient answer to the Chief Commissioner's contention that he has not sought to utilise s 106(1) of the Taxation Administration Act. 36 This Court is bound by the terms of s 103A(1) of the Taxation Administration Act not to consider any question concerning the Chief Commissioner's assessment of ABC in Harrington's review. 37 The Chief Commissioner's motion fails. I dismiss the notice of motion. The Chief Commissioner must pay Harrington's costs.

Harrington Park v Chief Commissioner of State Revenue

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Judgment (12 paragraphs)

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