Singh v Khan

1. The applicant's statement of claim filed on 17 December 2020 is struck out.
2. The applicant is to file and serve a new statement of claim on or before 24 March 2021.
3. Costs are reserved.
4. The matter is listed for further case management on 30 March 2021. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

STEWART J: 1 This proceeding was commenced by originating application and statement of claim, both filed on 17 December 2020. Those documents seek to assert a claim that has previously been referred to in two judgments of this Court. Mr Singh is self-represented in the proceeding, as he was in the previous two proceedings. 2 In Singh v Fobupu Pty Ltd, in the matter of Singh [2020] FCA 886, Gleeson J dismissed an application by Mr Singh to set aside a bankruptcy notice. The bankruptcy notice had been issued on the application of the respondents in the present case on the basis that they were judgment creditors of Mr Singh. One of Mr Singh's grounds for seeking to set aside the bankruptcy notice was that he had a counter-claim, set-off or cross demand as referred to in s 40(1)(g) of the Bankruptcy Act 1966 (Cth), against the respondents. Her Honour identified that the claim was for $470,000 of withholding tax paid in error to the respondents: [52]. The argument was based on the proposition that Mr Singh paid rent to the respondents in cash; that the first respondent was prepared to accept that cash; there was no evidence of any tax invoices for the cash payments made by Mr Singh; and the first respondent has not given any evidence on the topic: [53]. Mr Singh identified the legal basis for the claim as Tax Ruling GSTR 2013/1, particularly paragraph 23, and Tax Ruling TR 2002/9: [54]. TR 2002/9 refers to s 12-190(1) of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA). I will return to those provisions. 3 Her Honour then concluded that even assuming all of the facts in Mr Singh's favour, as well as an obligation to retain 47% of all cash paid by him to the respondents, he does not have a relevant claim because there is no basis for the contention that his non-compliance with any withholding obligation creates a right pursuant to which he can seek reimbursement from the respondents of the amount that was not withheld. Her Honour concluded that Mr Singh did not identify any statutory or contractual rights to any such reimbursement: [60]. 4 Mr Singh then appealed her Honour's judgment. The appeal was dismissed in Singh v Fobupu Pty Ltd, in the matter of Singh [2021] FCAFC 14. On this particular point, the Full Court reasoned as follows. 5 The Court referred to earlier proceedings between Mr Singh and the respondents in which NCAT found that the reason that Mr Singh personally could not claim the set-off money, being the same claim presently under consideration, was that NCAT had no jurisdiction to determine his claim to reimbursement of money paid as rent as he was not a party to the lease in respect of which a rental payment was made: [38]. 6 The Court reasoned that what Mr Singh claimed was the source of "his" right to withhold or retain payments of rent was unclear: [39]. Whilst a corporation controlled by Mr Singh, Anmol Pty Ltd, had been the lessee at least for the period until its deregistration in 2012, any such right or duty under s 12-190(1) of Sch 1 to the TAA had to have been Anmol's, not Mr Singh's: [39]. What happened afterwards depended on identifying what arrangements were in place, whether there was a retail lease or not and who the lessee was. Those were matters for Mr Singh to establish sufficiently to discharge his onus under s 40(1)(g) of the Bankruptcy Act to show that he had a claim that he could maintain in some other proceeding, being a counter-claim, set-off or cross demand, of the kind that he sought to assert: [39]. 7 The Court concluded that her Honour was not in error in not being satisfied that Mr Singh (as opposed to any of his companies) had a relevant entitlement to withhold money, or a legally recognisable claim that he could enforce against the creditors, or one or more of them, to make out that he had a right to claim a set-off, cross-claim or cross demand under s 40(1)(g): [42]. On that basis, the appeal on that issue was dismissed. 8 The present proceeding is the proceeding in which Mr Singh now seeks to have that claim determined, being the claim which on two previous occasions was found to have been too poorly articulated or substantiated to be able to be upheld. The principal lesson from those judgments is that if the claim is a good claim, it needs to be properly and clearly articulated. 9 The statement of claim, which runs to 61 paragraphs, contains a number of irrelevant background assertions and other extraneous material. Leaving those to one side for the moment, doing the best that I can, I identify the following material allegations which might be said to sustain a cause of action: (1) From November 2006 to the end of July 2019, the applicant personally or through his company, Anmol, from commencement in 2006 to October 2009, was a tenant in premises owned by the third respondent: [2]. (2) The first and second respondents were directors of the third respondent: [3]. (3) For the period November 2006 to October 2017, the respondents did not provide tax invoices and receipts for the vast majority of rent paid and other payments made for supplies, plant and equipment and other items: [5]. (4) When the applicant sought tax invoices and receipts from the respondents for that 11-year period, and for payments in the order of $1 million paid largely in cash with some cheques, the respondents would not provide them: [6]. (5) That money was paid by the applicant unaware of his obligations under the "Income Tax Assessment Act and other Federal tax legislation and rules" that in the absence of tax invoices he was obliged to withhold 47% of those payments and account to the Australian Taxation Office (ATO) for those funds: [14]. (6) Instead, in the absence of tax invoices and receipts, the applicant paid the amounts in full to the respondents: [14]. (7) The claim is for reimbursement of the withholding tax: [16]. (8) The applicant contends that he has three relevant causes of action ([20]), namely: (a) set-off on the basis of overpayment: [21]; (b) the common law remedy for money had and received, referencing Clayton's case, i.e., Devaynes v Noble (1816) 35 ER 781, and French Caledonia Travel Service Pty Ltd (in liq) [2003] 59 NSWLR 361: [24], [25]; and (c) an implied constructive trust, being that where money is paid to which the recipient has no lawful entitlement, equity imports trust obligations in relation to holding the money, which generates an entitlement to recovery of monies when there is no further debt to the respondents: [26]. (9) The foundation of the claim is found in Tax Rulings GSTR 2013/1 and TR 2002/9: [30]. (10) The result of those rulings is that there is an obligation for a supplier to provide tax invoices and in the absence of a tax invoice, the payer (in this instance, the applicant) has an obligation to retain 47% of the contended entitlement and account to the ATO for that withholding: [31]. (11) The "Formulation of the amount of the claim" is put as follows: 56. The applicant perceives two components which require attention under this heading. 57. The first is, who is owed this reimbursement. In that respect, the applicant contends that the operation of Clayton's case produces the result that payments are to be analysed on a first on first off basis. For the first three years of the tenancy, the tenant was Anmol. 58. The applicant contends, thereafter, he was the tenant. There is no doubt that from February 2012, he was the tenant. 59. Applying a first on first off analysis (which the applicant will provide in a detailed breakdown in the course of the conduct of this matter), it will become clear that by February 2012, the involvement of all prior parties has passed and the reimbursement applies only to payment to the applicant. 60. The second consideration is precision in the amount. That detailed breakdown will also provide a basis for precise definition of the amount. 61. The amount of $470,000 is generated by applying the 47% withholding tax factor to the amount of one million dollars as an amount paid, which is less than the amount actually paid. The detailed breakdown will produce an amount of withholding tax for repayment that is marginally larger than $ 470,000. 10 On the basis of those allegations I am unable to discern that the applicant has a reasonable cause of action against each of the respondents. I raised this with the applicant in the first case management hearing and gave him the opportunity to try to explain the cause of action. As with the previous courts, I was unable to properly understand it despite asking several questions by which I sought to have the cause of action elucidated. 11 By way of example, the statement of claim fails to identify who the lessor was and who the lessee was throughout the 11 years in respect of which the claim is asserted, and how it is that in respect of rental payments when the lessee was Anmol, Mr Singh can make the claim for "overpayment". The statement of claim says that Mr Singh can make that claim because of the rule in Clayton's case, namely that payments are to be appropriated to the oldest debt first, the so-called "first in first out" rule, but none of the details of the payments is given which makes it impossible for the respondents to know the case that they have to meet. 12 The source of the quoted withholding obligation being at the rate of 47% is also not identified. It is presumably "the product of the top rate and the amount of the payment" as referred to in reg 38(2) of the Taxation Administration Regulations 2017 (Cth) by virtue of s 15-10(2) of Sch 1 of the TAA. The "top rate" is defined in reg 5 of the Regulations by reference to Pt 1 of Sch 7 of the Income Tax Rates Act 1986 (Cth) and s 6(1) of the Medicare Levy Act 1986 (Cth), but at least the first component of the "top rate" changes regularly. It is not clear whether the applicant contends that the rate of 47% applied throughout the 11-year period that is the subject of his claim, or whether he applies that rate because it is the current "top rate". The respondents should not have to dig around, as I have done, to try and discern these matters. They are required to be clearly and specifically pleaded so that they can be responded to. 13 Since it appears to be accepted that the third respondent was the lessor for the whole period, or at least for a substantial part of it, it is not made apparent what the basis is for any claim against the first and second respondents. The fact of them being directors of the third respondent, which is asserted, would not establish that liability. Also, since the alleged obligation to withhold from the rental and other payments arises from a "supply that the other entity has made" (s 12-190 of Sch 1 of the TAA), any withholding obligation arose in respect of the "supply" of the rental premises by the lessor. It does not appear to be to the point that it is said that some of the payments were in fact made to the first or second respondents; on the face of it they would have received such payments on behalf of the third respondent and any claim for recovery of money paid under a mistake (see David Securities Pty Ltd v Commonwealth Bank of Australia [1992] HCA 48; 175 CLR 353) would still be against the third respondent. No factual basis is pleaded as to why the position is said to be different. 14 The statement of claim also does not deal with the obligation of a party who withholds payment on account of their obligation under s 12-190 (the payer) to send the withheld amount to the ATO and to account for it in their Activity Statement. Also, the payer is required to provide the supplier with a payment summary that sets out the amount of tax that the payer has withheld from the supplier. The payment summary must cover that payment only and should be provided at the time of payment or as soon as practicable thereafter. See s 16-167 of Sch 1 of the TAA. It may be that these aspects have a bearing on the cause of action and are required to be pleaded, although I make no finding on that at this stage. These considerations are merely illustrative of the complexity of the cause of action and why it is required to be pleaded clearly. 15 The simple point is that it is required that the statement of claim "state the material facts on which a party relies that are necessary to give the opposing party fair notice of the case to be made against that party at trial, but not the evidence by which the material facts to be proved" (see r 16.02(1)(d) of the Federal Court Rules 2011 (Cth)). That requirement applies to the claims asserted against each of the respondents. 16 Pleadings and particulars have a number of functions. They "furnish a statement of the case sufficiently clear to allow the other party a fair opportunity to meet it …; they define the issues for decision in the litigation and thereby enable the relevance and admissibility of evidence to be determined at the trial …; and they give a defendant an understanding of a plaintiff's claim in aid of the defendant's right to make a payment into court": Dare v Pulham [1982] HCA 70; 148 CLR 658 at 664 per Murphy, Wilson, Brennan, Deane and Dawson JJ (citations omitted). Mr Singh's statement of claim falls woefully short of that standard. 17 Mr Dicembre, who appeared for the respondents, indicated that he had intended to ask for a timetable to be set for the respondents to file an application for summary dismissal of the applicant's claim. I pointed out that such an application would invite evidence and would have the potential to become lengthy and drawn out, covering much the same ground that has been covered in many lengthy previous affidavits in the NCAT proceeding and in the previous proceedings before this Court. I suggested to Mr Dicembre that a better course might be to apply for the statement of claim to be struck out so that a properly understandable claim can then be pleaded. Any summary dismissal application that the respondents, or any one of them, might thereafter decide to bring could be more targeted and efficient. 18 Mr Dicembre then made an application on behalf of the respondents to strike out the statement of claim. Mr Singh was given the opportunity to respond, which he did. He said that it was unfair that I had suggested the strike out course to the respondents, but I reject the contention that that is a relevant consideration. It is the Court's objective to manage the case so as to facilitate the just resolution of the dispute according to law and as quickly, inexpensively and efficiently as possible: Federal Court of Australia Act 1976 (Cth), s 37M(1). In my assessment, striking out the statement of claim and giving the applicant the opportunity to re-plead it will best serve that objective. 19 In that regard, I am satisfied that the statement of claim should be struck out as failing to disclose a reasonable cause of action. However, it is possible that in the factual morass to which the applicant refers, there is a tenable cause of action. I accordingly regard it as appropriate to give the applicant the opportunity to seek to re-plead his cause of action in a fresh statement of claim. He has said that he would be able to do this within four weeks, which is accordingly the time that I will give him. I have urged him to get skilled legal assistance for this purpose as it will greatly enhance the prospects of his case if he can get his cause of action properly pleaded. Whether or not he is able to get such assistance remains to be seen. 20 I should add that there are many other respects in which the statement of claim is deficient and fails to comply with the requirements of Div 16.1 of the Rules which also justify it being struck out. It contains much irrelevant, scandalous, frivolous or vexatious material that is likely to cause prejudice, embarrassment or delay in the proceeding, or material that is simply inappropriate to a pleading. Without intending to be comprehensive, such material includes the following: (1) allegations that the respondents "became aggressive and hostile": [6]; (2) paragraphs [7]-[13] which deal with various points of history in NCAT and an appeal that is said to have been "commenced in the Supreme Court and is presently blocked by fee waiver considerations in that court"; (3) the references to case law referred to above: [24]-[25]; (4) paragraphs [33]-[44] which deal at length with, as the heading to that section puts it, "Previous dealings with these issues in state jurisdiction", and traverse such issues as disputes about physical damage to leased premises and other matters that do not appear on any view to have any bearing on the cause of action that is sought to be asserted; and (5) paragraphs [45]-[55] which deal at length with, as the heading to that section puts it, "The events involving the dealings between the parties". 21 The parties were agreed that I should reserve the costs. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Stewart.