Joossee v Deputy Commissioner of Taxation [2002] VSCA 48

Court of Appeal (Vic)|2002-04-15|Before: BATT and BUCHANAN, JJ.A.

INCOME TAX - Unremitted group tax - Penalties on director - Whether company an employer - Service of penalty notice - Mode and date - Delegation not requisite - Imposition of penalty does not contravene s.51(ii) or s.55 of Commonwealth Constitution - Income Tax Assessment Act 1936, ss.222AOF, 222APB(2)(d), 222APC, and 222APE.

As the present application accepts, his Honour's order was interlocutory: Carr v. Finance Corporation of Australia Ltd (No.1)[1]. To obtain leave to appeal from such an order an applicant must ordinarily - and no reason has been suggested or suggests itself to me for departing from the norm - show, first, that the decision below is wrong or attended with sufficient doubt to warrant the grant of leave and, secondly, that substantial injustice will be done if the decision remains unreversed. It may be accepted that the second requirement is satisfied here. The question is as to the first.

An initial difficulty seemed to confront Mr Joossé in that the text of his Honour's reasons given orally at the conclusion of argument, and recorded on videotape only, was not available. Mr Joossé made an enquiry for them, but did not press that as perhaps he should have done, and when this Court had enquiries made recently it was informed by the County Court staff that in the interim the recording had been erased. So the absence of transcribed reasons is in fact explained, and sufficient appears from the affidavit of Mr Linden, the solicitor who appeared before Judge Holt for the present respondent, and indeed from Mr Joossé's third supplementary affidavit, to gather the substance of his Honour's reasons, which were no doubt brief.

Although complaint was made that the Rules of Court had been allowed to be the master rather than the servant of justice, it was not suggested that the default judgment was irregularly entered. In deciding whether in its discretion to set aside a regularly entered judgment factors relevant to a court's discretion are the explanation offered for the default, whether the defendant has applied promptly, what prejudice (if any) the plaintiff will suffer if the judgment is set aside and whether the defendant has a defence on the merits, by which is meant only an arguable defence, not one that is bound to succeed. No useful purpose is served in setting aside a judgment if the defendant has no possible defence. Judge Holt, it appears, was concerned about this last factor only, and in my view in that he was, on the facts disclosed, correct.

During argument on 5 November 2001 his Honour informed the defendant that his affidavit of 8 August 2001 did not address any of the issues that needed to be addressed. He informed him that an applicant seeking the setting aside of a judgment generally needed to show that the judgment was irregularly entered or that there was an arguable defence on the merits. The applicant then said that Bellhop Pty Ltd ("Bellhop"), the company on whose non-remittance of group tax deductions the applicant's alleged liability for penalties was based, was not an employer and had made no deductions. But there was no affidavit material to that effect. The defendant also raised some questions involving the interpretation of the Commonwealth Constitution. In due course, after hearing Mr Linden, his Honour dismissed the application.

It should be said immediately that on the material before him his Honour did not err. For the only evidence for the applicant, the affidavit of 8 August 2001, contained only assertions as to the applicant's divine creation, his loyalty and his honesty, and there was nothing in the Constitutional points, as will appear later.

Although his Honour did not err on the material before him, we have proceeded on the footing that we may consider additional affidavits and arguments: cf. D.A. Christie Pty Ltd v. Baker[2]. We have done this even though hardly any of the points so raised feature in the proposed notice of appeal. I have therefore considered all Mr Joossé's written material and, of course, his oral arguments.

I turn then to the defences put forward in argument and in affidavits and other documents filed by the applicant, passing by the question whether all of the purported affidavits were properly sworn or affirmed.

The material showed that the arguments dealt with in the Court's reasons given on Friday last for refusing an adjournment were relied on by way of defences on the merits. For the reasons I gave on Friday, which I do not repeat, neither is arguable.

I take then the other defences put forward so far as I understand them, though not necessarily in Mr Joossé's order. I naturally do not purport to deal with every asseveration or observation by the applicant, though I have considered them all so far as I understood them.

It was said that his Honour allowed the Rules of the County Court to stand in the way of the attainment of justice by denying the applicant a chance to defend himself and refusing an adjournment to file a further and proper affidavit. Since we have virtually re-heard the application to set aside the judgment, this argument, which is not itself a defence to the claim, has been overtaken by events. In any case the rules were not being allowed to do injustice, for they provided for, and his Honour in compliance with them heard, an application to set aside the default judgment. So far as any refusal of adjournment is concerned, the exercise of his Honour's discretion is not shown to have miscarried and in any event the applicant has relied before us on five affidavits filed successively during the pendency of the application until 22 February 2002. There can surely be no more material on which he might rely.

Then it was said - and this was a point of substance - that during the relevant period Bellhop had no employees and no bank account and paid no salaries or wages and made no deductions of tax. The one document exhibited by the applicant in support of this defence, an employment agreement in which Bellechic Pty Ltd is shown as the employer, is dated outside the relevant period, and in fact dated during a period when Bellhop was not registered as a group employer. More importantly, in his answers dated 24 November 1999 to, and contained in, the questionnaire of Bellhop's liquidator, Mr Joossé stated that that company had in 1997, 1998 and 1999 approximately 16, 14 and 9 employees respectively, and made other no less damaging admissions. His explanation of the document from the Bar table was completely implausible. By itself it gives the lie to this defence, but there is more. Further, although the four notices of estimates delivered to Bellhop, of which the applicant was then a director, each contained a note reflecting ss.222AGD and 222AGF of the Tax Act to the effect that the estimate would be revoked if the company gave the Commissioner a statutory declaration to the effect that no deductions were made during the relevant period, no such statutory declaration was lodged. Again, when Bellhop, through the applicant, applied to set aside a statutory demand served by the Deputy Commissioner of Taxation on Bellhop, there was no mention in the affidavits of Mr Joossé that Bellhop had no employees, paid no salaries or wages and made no deductions. Indeed no such point was raised at any time before 5 November 2001, according to the affidavit of David Ian Johnston sworn 6 December 2001. Quite apart from evidence on the question, the decision of Marshall, J. in the Federal Court in Textile Clothing & Footwear Union of Australia v. Bellhop Pty Ltd, Jaqueline Yvonne Joossé and Wolter Joossé operates to create an issue estoppel that Bellhop did have employees during the relevant period. For all these reasons this suggested defence is doomed to fail. In arriving at that conclusion I have no need to rely on the effect given to the averments in the amended statement of claim by s.255-50 in Schedule 1 to the Taxation Administration Act 1953 (Cth), nor do I suggest that I have referred to all the evidence supporting the conclusion. I have, however, considered all Mr Joossé put to us.

Next, another point of substance was taken. This related to service on the applicant of the third and fourth 14-day notices under s.222APE of the Tax Act, the giving of which is a prerequisite to recovery of penalties. This point, if good, answered, not all, but most of the claim - $160,000 of it and interest thereon. David Ian Johnston in his affidavit of 6 December last swore that he effected service of the two notices by placing each notice and a covering letter on 16 October 1999 in a letter box at the address that appeared from ASIC documents to be the applicant's place of residence. Mr Joossé undoubtedly received them personally, he and his wife say on 21 October 1999. Two points, as I understand it, are taken. First, it is said that the mode of service did not satisfy Regulation 107 of the Income Tax Regulations. It seems to have done so: see paragraph (1)(b). More importantly, s.222APE(2) makes applicable s.222AOF, sub-s.(1) of which authorises the mode of service adopted. Secondly, it was said that since the applicant did not personally receive the two notices until 21 October 1999, or, if one liked, since the earliest possible date of service was when the applicant's daughter found them, namely, 20 October 1999, and since Bellhop was wound up on 3 November 1999, which was within 14 days of 20 October, s.222APB(2)(d) meant that that section was complied with, so that the condition for the operation of s.222APC (which imposes the penalties) was not satisfied and the applicant was not liable to any penalties in respect of the periods covered by the third and fourth notices. But evidence that the notices were first found on 20 October is not inconsistent with their having been placed in the letter box on 16 October. Many possible explanations for late discovery come to mind. No attempt was made to prove that the box was cleared on any of the days from 16 to 19 October inclusive, nor was cross-examination of Mr Johnston undertaken or sought. There is no reason not to accept Mr Johnston's evidence. Where a notice may be given to a person by being left at an address for him or her, actual receipt is not necessary and the notice is given at the time it is so left: Lord Newborough v. Jones[3]; Kinch v. Bullard[4]; cf. Fancourt v. Mercantile Credits Ltd[5]; Alexander v. Stocks & Holdings (Sales) Pty Ltd[6]. Accordingly, subject to the next point, s.222APB was not complied with and s.222APC was therefore triggered.

But it was said that Mr Johnston was not shown to be a delegate of the Commissioner under s.8 of the Taxation Administration Act and so was not authorised to give the notices. The answer to that submission is to be found in the decision of the majority in O'Reilly v. State Bank of Victoria Commissioners[7], which is not affected on this point by Baker v. Campbell[8].

I should add that reliance was also placed on the filing on 15 September 1999 of the notice of motion for the winding-up of Bellhop in insolvency under s.459P of the Corporations Law as showing compliance with s.222APB. But, relevantly, winding-up did not commence until the winding-up order was made on 3 November: Corporations Law, s.513A(e). There was no relation back.

Mr Joossé claimed that he was not liable for the penalties on a number of constitutional grounds additional to those the subject of the judgment given on Friday last. He asserted that s.222APC violated s.51(ii) and s.55 of the Commonwealth Constitution. It does not do so, nor is it discriminatory, as was also suggested, though by a glide in the meaning of that word: Woodhams v. Deputy Commissioner of Taxation[9]. Compare generally Deputy Commissioner of Taxation v. Woodhams[10] in the High Court. Mr Joossé's rhetorical question, "Where is the Act imposing the tax?" is not directly relevant, for he is liable for penalties, but the relevant taxpayers are the employees, as the last-mentioned case shows[11], and Rates Acts impose tax on them. Mr Joossé asked another rhetorical question, which was to the effect, "How can one incur a civil debt without breaching the Tax Act?" Without conceding that he has not at least been party to a breach of the Tax Act, the answer is that legislation so provides: see, e.g., s.221R(1) of the Tax Act and s.255-5 in Schedule 1 of the Taxation Administration Act. Mr Joossé stated, correctly, that all are equal under the law. He then said that the Commissioner enjoys privileges no other creditor enjoys, implying, as I understood him, that equality under the law was thereby infringed. It is not. Mr Joossé also put an argument to the effect that the Tax Act could not impinge on a body created under the Corporations Law. There was nothing in the argument except confused thinking. In short, then, the relevant provisions of the Tax Act are not invalid.

I have found it unnecessary to consider whether s.222AHC(7) and s.222API preclude the raising of any of the factual defences I have examined and I express no opinion on that question.

18 I feel bound to say that quite a number of the matters asserted by Mr Joossé, whether or not in an affidavit, proved on investigation to be only half correct. One example taken from Friday morning's proceedings will suffice. It is his assertion that Sir Henry Winneke had signed the Bill for the 1975 Constitution Act. The Governor had done so, but not by way of assenting to it, as was implicit in the argument. Rather, he had reserved it for Her Majesty's pleasure.

In the light of the foregoing reasons I consider that Mr Joossé has no possible defence. His Honour's decision dismissing the application to set aside the default judgment is not attended with sufficient doubt to warrant the granting of leave to appeal and the taking up of the attention of a court of three. Indeed, in my opinion, it is not attended by any doubt at all as to its correctness.

I am conscious that these reasons are much longer than would ordinarily be given on an application to two judges. But Mr Joossé appeared in person and in addition he said that this proceeding was all about getting a "fair go". I have therefore thought it desirable to show that his arguments have not been rejected without having been fully considered. I may add that he was heard on Friday at far greater length than counsel would have been, in all from 11.15 to 4.30 p.m. excluding a one-hour 20-minute luncheon adjournment.

I would therefore dismiss this application. The stay granted pending the hearing and determination of the application will, if Buchanan, J.A. agrees in my conclusion, terminate of its own force.

I agree that this application should be refused. For the reasons stated by Batt, J.A., there is no doubt attending the decision of the County Court judge. His Honour was plainly correct in deciding that there was no arguable defence to the respondent's claim.

The points taken before the County Court judge and in this Court are not tenable. In particular the arguments relating to the validity of Acts of Parliament and the authority of courts are spurious. The arguments have no bearing on the facts or the law in this particular case. Civil liability is not to be avoided by arguments, which may be kindly described as far-fetched and misconceived, attacking the structure of our civil law system.

The order of the Court is that the application made by summons filed on 19 November 2001 is dismissed.

The Court is of the view that the usual order should be made after a contested hearing, namely, that the costs follow the event and should be paid by the unsuccessful party. Magna Carta, called in aid by Mr Joossé, does not preclude such an order. Accordingly the order of the Court will be that the application made by summons filed 19 November 2001 is dismissed with costs including reserved costs.

To make the order clear we will put it into paragraphs:

1. The application made by summons filed 19 November 2001 is dismissed.

2. The applicant pay the respondent's costs of the application including reserved costs.

3. The operation of paragraph 2 be stayed until 4 p.m. on 29 April 2002.

4. The judgment entered in the County Court on 2 August 2001 and any execution thereon be stayed until 4 p.m. on 29 April 2002.

[9] [1998] 4 V.R. 309 at 311-2, 318 and 321-2.

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