22 This chronology of events, it was contended on behalf of Mr Seller, was to be considered (inter alia) against the background of the relevant policy of the Australian Taxation Office, namely Chapter 28 of the "ATO Receivables Policy" entitled "Recovering Disputed Debts". In part that policy contains the following provisions:
Where 50/50 arrangement not accepted
28. Should the tax debtor choose not to enter into a 50/50 arrangement, collection action is unlikely to be commenced prior to the determination of the objection unless the circumstances of the case indicate an unacceptable level of risk.
29. Similarly, at review or appeals stage, collection action is unlikely to be commenced prior to the decision of the AAT or Court, unless the circumstances of the case indicate an unacceptable level of risk.
30. It should be noted, however, that the fact that the Commissioner has not instigated collection action for whatever reason while an objection, Tribunal review or appeal remains unresolved does not in itself amount to an agreement by the Commissioner to defer recovery of the disputed debt under section 255-5 of the TAA.
31. The Commissioner will only agree to a deferral of recovery action where:
• the tax debtor has entered into a 50/50 arrangement
• the Commissioner considers that a genuine dispute exists in regard to the assessability of an amount, or
• the Commissioner is pursuing arguments which are inconsistent with a previous Public or Private Ruling/Binding Oral Advice, or going against the weight of precedent cases (that is, the Commissioner is challenging the previously accepted position).
Such an agreement will usually be expressed in writing.
32. Where a 50/50 arrangement has not been accepted, GIC will accrue at the statutory rate on any of the disputed debt that remains unpaid after its due date.
Submissions proceeded upon the basis that Mr Seller had not chosen to enter into a "50/50 arrangement".
23 Such evidence as there was as to consideration being given to the application of this policy or the consideration given to whether a bankruptcy notice should issue was within a limited compass. A Notice to Produce had been given to the Respondent and documents were produced at the hearing. The terms of the Notice to Produce, however, were unknown. But documents produced were for the period from February to May 2011 and entitled "Case Comments Report". The "Report" for 3 February 2011 stated in part as follows:
Approval required for a Bankruptcy Notice:
On 24 December 2010 default judgment has been obtained in Supreme Court of NSW for the amount of $6,790,121.53 (IT $6,270,490.39, CAC $518,828.14 and $803 court costs).
I now recommend that a Bankruptcy notice be issued to Mr Ross Seller based on the following:
• The disputed debt is a significant amount and will continue to escalate while his level of compliance will deteriorate;
• The taxpayer did not wish to enter into a 50/50 arrangement;
• Section 260-5 of Schedule 1 to the TAA were issued to banks as well as companies that the taxpayer is a director of. The Commissioner was only able to receive an amount of $1,226.26 from CBA as most of the bank accounts are in joint names or in the name of his companies;
• There is also a concern that the taxpayer is limiting his liability to pay by transferring assets in the name of his partner or his companies. The assets that the debtor has transferred my [sic] be recoverable by the bankruptcy trustee; and
• Bankruptcy, will enable the trustee to conduct a public examination into the affairs of the taxpayer.
• 1. final judgment(s) / final order(s) $6790121.53
• 2. legal costs $803 ($749 filing fee & $54 service fee) - included in final order
• 3. judgment interest $78,123.64
• 4. sub total $6,868,245.17
• 5. payments/credits
• 6. total. $6,868,245.17
What other "Reports" stated is also not known.
24 At the outset of his submissions as to an abuse of process, Counsel on behalf of Mr Seller accepted that it was open to the Deputy Commissioner to commence proceedings in the Supreme Court as a step in seeking to enforce the assessment that had been issued. He also accepted that the mere fact that review had been sought of the assessment was not in itself a reason to conclude that the subsequent issue of a bankruptcy notice constituted an abuse of process. Indeed, in respect to those cases where review is sought before the Administrative Appeals Tribunal, s 14ZZM of the Taxation Administration Act 1953 (Cth) provides as follows:
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.
Where an appeal has been brought in this Court, similar provision is made in s 14ZZR.
25 To make out an abuse of process, Counsel for Mr Seller accepted that he must establish more than the mere obtaining of a judgment; the issue of a bankruptcy notice and the existence of a proceeding in this Court challenging the decision disallowing his objections.
26 To lay the foundations for his abuse of process argument, repeated emphasis was placed upon:
the severe impact that a bankruptcy notice may have upon a debtor.
Although Counsel frequently elided the impact that the making of a sequestration order may have, as opposed to the impact that a bankruptcy notice may have, the severe consequences that follow from a failure to comply with a bankruptcy notice may readily be accepted. Those consequences may not be confined to those set forth in the Bankruptcy Act itself; they may also prejudice (for example) credit facilities that a debtor may have: cf. Conway v Jackson [2001] FCA 230 at [19], 107 FCR 201 at 207 per Moore, Mathews and Mansfield JJ. The fact, however, remains that "the commission of an act of bankruptcy is ... of a different order of gravity from the change of status brought about by the making of a sequestration order": Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270 per Lehane J.
27 In addition to reliance placed upon the impact on Mr Seller of a failure to set aside the Bankruptcy Notice, Counsel further submitted that an "abuse of process" - or perhaps an "abuse of power" - should be inferred from the following matters, namely:
non-compliance with paragraphs [28] and [29] of the "ATO Receivables Policy";
a failure to consider the "ATO Receivables Policy" when approval was sought to have a bankruptcy notice issued;
a failure to consider the impact of a bankruptcy notice upon Mr Seller when approval was sought to have a bankruptcy notice issued; and
the delay that had occurred between the making of objections to the assessments and the resolution of those objections, and action being taken only when the Deputy Commissioner was "pressed" by Mr Seller's legal representatives to make a decision.
The "abuse of process" in taking the course that was pursued by the Deputy Commissioner is said to be further supported by the observations of Mason ACJ in Clyne (No 4) (1982) 43 ALR 342.
28 From such limited evidence as was available, it is not considered that there was any failure to take into account the policy of the Australian Taxation Office to recover debts where a debtor had chosen not to enter into a "50/50 arrangement". Nor is it open to conclude that the personal impact of the issue of a bankruptcy notice upon Mr Seller was not taken into account.
29 It is not considered that Mr Seller has established any abuse of process on the part of the Deputy Commissioner. No inference should be drawn that the Deputy Commissioner was doing anything other than bona fide invoking the bankruptcy regime set forth in the Bankruptcy Act. No inference should be drawn that the Deputy Commissioner was only seeking to invoke that regime to exert pressure upon Mr Seller to satisfy the monies said to be due and payable under the assessment. Nor should any inference be drawn that the Deputy Commissioner was otherwise abusing the power vested in him to recover monies said to be due and payable. Even if it be accepted that a failure to comply with paragraphs [28] and [29] of the "ATO Receivables Policy" goes some way towards establishing an abuse of process, such consideration as was given to the particular circumstances of Mr Seller in the "Case Comments Report" for 3 February 2011 exposes to a limited extent the basis upon which approval was sought for the issue of a bankruptcy notice. In the absence of further evidence, there is no basis for concluding that proper consideration was not given to the "ATO Receivables Policy" and the particular circumstances relevant to Mr Seller.
30 The drawing of any such inference is made even more difficult when, as is submitted on behalf of the Deputy Commissioner:
the solicitors for Mr Seller wrote on 14 February 2011 seeking a "stay of enforcement of your judgment" and where that request was denied on 17 February 2011;
and it was not until thereafter that:
applications were filed in this Court challenging the objection decisions; and
an application was made to stay the Supreme Court judgment.
Mr Seller was plainly put on notice that his request for a stay of enforcement action had been refused. The letter dated 17 February 2011 expressly "reserve[d] all rights to commence enforcement of the Judgment after 25 February 2011 without further notice". It was only thereafter that the Bankruptcy Notice was served and served prior to the applications filed in this Court and the Supreme Court. Presumably the application made in June 2011 for a stay of the proceedings in the Supreme Court was brought in full knowledge of the fact that the power to grant such a stay is a power which "must be exercised sparingly": Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 135 per French J (as His Honour then was). The legislative scheme, His Honour there noted, "reflects a clear policy favouring the revenue against the taxpayer… [T]he Commissioner is placed by the legislature in a position of special advantage". See also: Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432; Cywinski v Deputy Commissioner of Taxation [1990] VR 193.
31 Given the response communicated in the 17 February 2011 letter it is surprising that an application to stay the Supreme Court judgment was only made after the Bankruptcy Notice had been issued and served. Section 40(1) of the Bankruptcy Act, it will be recalled, sets forth the circumstances in which an act of bankruptcy is committed and s 40(1)(g) refers to those circumstances in which a judgment creditor has obtained "a final judgment or final order, being a judgment or order the execution of which has not been stayed …". Whatever prospects a judgment debtor may have in seeking a stay of a judgment obtained by the Deputy Commissioner in reliance upon an assessment may be left to one side; that which is presently of importance is that the Deputy Commissioner did not seek to issue a bankruptcy notice without putting Mr Seller on notice that he reserved his "rights to commence enforcement". The provision of such advance notice is not the hallmark of a creditor seeking to engage in an abuse of process. Different considerations may have applied had a bankruptcy notice been sought after an application had been made to stay the judgment or order relied upon and prior to that application being heard and determined.
32 It must, however, be noted that the Deputy Commissioner exercises considerable power. He occupies a position very different to that of any other creditor by reason of the extensive powers vested in him by the Legislature: W Gumley and K Wyatt, 'Are the Commissioner's Debt Recovery Powers Excessive?' (1996) 25 Australian Tax Review 186. Assessments, for example, may be issued and are rendered conclusive (Income Tax Assessment Act 1936 (Cth), s 177) thereby facilitating applications for summary judgment. See also: F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168. Given the extensive powers that may be exercised, it is to be expected that this Court will carefully scrutinise the conduct of the Deputy Commissioner where he does seek to issue a bankruptcy notice. Subject to the supervisory jurisdiction of this Court to ensure that there has been no abuse of process in issuing a bankruptcy notice, the Deputy Commissioner may nevertheless do so - just as any other creditor may do so.
33 Notwithstanding that degree of scrutiny, no finding should be made in the present proceeding that the Deputy Commissioner issued the Bankruptcy Notice for the purpose of pressuring Mr Seller into paying the amount claimed rather than issuing it for the purpose of genuinely invoking this Court's jurisdiction in respect to bankruptcy. No finding as to an abuse of process - or an abuse of power - is open on the facts presented.
34 Different considerations may well apply should the point be reached where a sequestration order is sought. It is at that stage when more detailed consideration may have to be given (for example) to the consequences of Mr Seller being deprived of an entitlement to pursue his objections to the assessments and the prospect of a trustee not pursuing those proceedings: Cummings v Claremont Petroleum NL (1996) 185 CLR 124; McCallum v Commissioner of Taxation (1997) 75 FCR 458. Although that consideration more immediately arises when a sequestration order may be sought, it nevertheless remains of some relevance to an assessment as to there being an existing abuse of process. Its relevance in the present proceeding, it is concluded, is marginal.
35 When prior reliance upon the form of the Bankruptcy Notice was abandoned, an abuse of process remained the only basis upon which the application to have the Bankruptcy Notice set aside was advanced. That application so advanced is rejected.