Trade World Enterprise Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191

1 This is an appeal by Trade World Enterprise Pty Ltd ("Trade World") against the decision of a judge in the Practice Court made on 30 September 2005. On that day his Honour dismissed the appeal of Trade World - brought pursuant to r. 77.05 of the Supreme Court Rules - against the orders of Master Evans made on 2 September 2005. The Master had ordered that there be judgment against Trade World in favour of the respondent, the Deputy Commissioner of Taxation ("the Commissioner") in the amount of $1,096,602.18, reflecting various taxes, penalties and interest that were assessed against Trade World. The Master had also refused the company's application that the summary judgment proceeding be "stayed or adjourned" until the determination of criminal proceedings against the director of Trade World, Hoang Hai Chiem ("Chiem"). Thus, his Honour effectively decided that Trade World's application for adjournment or stay of the summary proceeding be refused and that there be summary judgment for the Commissioner in the above sum. His Honour also ordered a stay of execution of the judgment for 30 days.

2 Before considering the matter it is necessary to summarise the context in which it comes before us. Trade World is a company that owns and operates a duty free business trading as "Box Hill Duty Free" which sells goods, including tobacco and alcohol products, to travellers departing Australia temporarily or permanently, by aircraft or ship. Between 19 July 1999 and 1 July 2001, Chiem was a director of the company and, since 2 August 2002, has been its sole director. By various assessments made by the Commissioner, Trade World was assessed to various taxes to which reference will be made later, amounting to approximately $1,000,000. On 10 December 2003 Trade World lodged objections with the Commissioner in respect of the assessments. The objections were disallowed on 5 February 2004 and, on 27 February 2004, Trade World applied to the Administrative Appeals Tribunal ("the Tribunal") for review of the Commissioner's decision in relation to GST and related assessments. I mention for completeness that a like application was made to the Tribunal by Sago Duty Free Pty Ltd ("Sago") in respect of GST that was claimed by the Commissioner in respect of goods sold by that company. Its sole director at the relevant times was Chiem.

3 By writ filed on 21 June 2004, the Commissioner sought to recover from Trade World tax liabilities that comprised superannuation charges, Pay As You Go - PAYG - withholding amounts, assessed Goods and Services Tax ("GST"), penalties for failing to file Business Activity Statements ("BAS") and administrative over-payments, essentially being input tax credits, and various penalties.

4 On 12 May 2005 Chiem was charged under s.29D of the Crimes Act 1914 (Cth) with defrauding the Commonwealth by failing to pay customs duty that was said to be payable pursuant to s.15 of the Customs Tariff Act 1995 (Cth) in relation to goods that were imported into Australia between 1 November 1999 and 23 May 2001 and failing to pay excise duty that was allegedly payable pursuant to s.5 of the Excise Tariff Act 1921 (Cth) in respect of goods that had been produced or manufactured in Australia during this period. The charges related to his directorships of Trade World and Sago.

5 On 30 June 2005, the Commissioner filed a summons for summary judgment against Trade World in the sum of $1,096,602.18. The application was supported by the affidavit of Chantal Gardiner, sworn 30 June 2005, in which she explained, by reference to exhibits and relevant legislation, the assessments that had been issued by the Commissioner against Trade World and said that the amounts in question remained outstanding. One of the exhibits produced by the deponent was a certificate of the Commissioner, issued pursuant to s.255-45 of Schedule 1 of the Taxation Administration Act 1953 (Cth) to the effect that the amounts claimed by the Commissioner in the proceeding were unpaid assessments as against Trade World. By summons dated 31 August 2005, Trade World sought, as has been noted, an adjournment or stay of the Commissioner's application for summary judgment pending the hearing and determination of the criminal proceedings against Chiem. As I have said, the Master rejected the application for adjournment or stay of the summary proceeding and ordered that Trade World pay the Commissioner the amount of $1,096,602.18 and, on 30 September 2005, the judge in the Practice Court dismissed Trade World's appeal against those decisions, after hearing the matter de novo.

6 Following his Honour's decision, on 28 November 2005, Trade World and Sago sought a stay of the review proceeding in the Tribunal, contending first that, by hearing the matter, the Tribunal might be in contempt of the pending criminal proceedings against Chiem and, secondly, that the Tribunal should, in any event, grant a stay pursuant to s.33(1)(a) of the Administrative Appeals Tribunal Act 1975 (Cth) on the ground that a substantial injustice would be caused to the applicants if the review proceedings were heard before the criminal proceedings. I will deal with that application in more detail later, but I note for present purposes that, on 23 December 2005, the Tribunal granted a stay of the proceedings until the conclusion of Chiem's committal proceedings. Thereafter, on 24 July 2006 he was committed to stand trial in the County Court and, on 22 August 2006, the Commissioner consented to a stay of the Tribunal proceedings until the conclusion of Chiem's trial.

7 In its notice of appeal Trade World seeks orders that his Honour's order be set aside, the summary judgment proceeding be stayed (and/or that it be given leave to defend the Commissioner's claim). On 15 September 2006, three days before the appeal was due to be heard, Trade World gave notice that it would seek leave to file an Amended Notice of Appeal, pursuant to which the same orders would be sought, but proposing to delete grounds 1 to 7, and to add ground 12 alleging that his Honour's discretion is vitiated because he failed to give adequate reasons for his decision to refuse the adjournment. Trade World also sought, pursuant to r.64.22 of the Rules of the Supreme Court, leave to adduce further evidence on affidavit in relation to matters that occurred subsequent to his Honour's decision, essentially, that Chiem has been committed to stand trial in the County Court and that the matter is listed for pre-trial conference on 1 October 2006. Reference is also made in the new material to the stay of the proceeding before the Tribunal, as earlier described, until the determination of the criminal proceedings against Chiem. Yet a further affidavit was sought to be filed at the commencement of the hearing of the matter this morning that went to the financial difficulties of Trade World and Chiem.

8 We permitted Trade World to proceed on the new material and rely on the new ground, but reserved the question whether the material should be admitted and the amendment granted. We said that those matters would be dealt with at the time of the resolution of the matter before us. Some time prior to Trade World filing its new material, the Commissioner gave notice that she would argue that the appeal is incompetent in so far as it seeks to challenge his Honour's refusal to grant the adjournment, given that his Honour's decision in that regard was interlocutory and no leave to appeal has been obtained as is required by s.17A(4)(b) of the Supreme Court Act 1986. In the end, it became common ground, rightly, I think, that the order that there be summary judgment was a final order and that his Honour's refusal to adjourn the summary proceeding was interlocutory.[1]

9 It is plain enough that Trade World is well out of time in filing its application for leave to appeal and, therefore, at the outset, it must obtain an appropriate extension of time to do so. Although no such applications have been filed in Court, we permitted Mr Wilson, for Trade World, to apply ore tenus for an extension of time to file an application for leave to appeal and, if such application were granted, for leave to appeal against his Honour's orders. Ms Mavroudis, for the Commissioner, agreed to this course. In considering the application for extension of time it is clear that mere delay in making it would not deprive Trade World of such an entitlement in this case because no material prejudice has been caused to the Commissioner by such delay. But it is necessary to consider what are Trade World's prospects of obtaining leave to appeal against the impugned decision, because if there are no realistic prospects it would be pointless to extend the time for the making of such an application.[2] In order to obtain leave, Trade World must establish that the orders were wrong or attended with sufficient doubt to justify leave being granted and that substantial injustice would be done by leaving the decision undisturbed.[3]

10 I will come back to the question whether Trade World should have leave to appeal against his Honour's refusal to adjourn the summary judgment proceeding and, if so, whether the appeal should be upheld. First, however, I will deal with the appeal relating to the decision that the Commissioner is entitled to summary judgment. As Mr Wilson pointed out, the bulk of the Commissioner's claim against Trade World related to GST assessments. Counsel informed the Court that there was no issue as to the Commissioner's entitlement to summary judgment in respect of assessments other than the GST assessments. As to the latter, Mr Wilson also accepted, correctly, I think, that the Commissioner's assessments of Trade World to GST and penalties, that were produced to the court under cover of relevant certificates of the Commissioner, amounted to conclusive evidence in the court as to the amounts due and owing to the Commissioner in relation to those assessments.[4] Counsel nevertheless argued that his Honour did not have any or any sufficient regard as to whether "there ought to be some other reason" to give Trade World leave to defend the proceeding within the meaning of r.22.06(1)(b). Counsel pointed to circumstances that he said were relevant to this issue, such as the difficult financial position of the company and Chiem and the likelihood that Trade World will not have the opportunity to demonstrate at the Tribunal that the Commissioner's relevant assessments were wrong, given that the hearing before it has been stayed until the determination of Chiem's criminal trial. Mr Wilson argued that the justice of the situation required that leave to defend ought to have been given.

11 In my view, there are a number of reasons why this submission does not demonstrate error by his Honour. First, it was not put to the learned judge for his consideration. Secondly, and in any event, the terms of the Rule on which counsel relied have generally been held to apply in a situation where the circumstances satisfy the court that the merits of the claim or defence should be examined more closely than can be done in the summary judgment context, or where the circumstances indicate that the plaintiff ought to be put to proof of its claim.[5] That is not the case here. Given the admitted conclusive nature of the Commissioner's assessments, Trade World cannot challenge in the recovery proceeding the correctness of the relevant assessments. This it seeks to do before the Tribunal. Moreover, hardship is not a reason for ordering leave to defend in a debt recovery case, although it may go to the question whether the judgment should be stayed. I will say something more about the question of stay a little later. In the circumstances, Trade World plainly had no defence to the Commissioner's claims and, therefore, there was no error in his Honour rejecting the appeal against the order for summary judgment. Consequently, I think this appeal should fail. I have come to this conclusion notwithstanding that Trade World has sought to review the Commissioner's assessment relating to GST input credits and other GST assessments, but it is plain enough that the liability to pay the assessed tax is not suspended pending the outcome of this review.[6]

12 I now turn to the question whether there was relevant error by his Honour in refusing to adjourn the consideration of the summary judgment proceeding until the hearing and determination of the criminal charges against Chiem. The principles applicable to the exercise of discretion on an application for adjournment or stay of civil proceedings, where it is said that there are pending against the defendant criminal charges that traverse essentially the same factual matters that arise in the civil proceeding, are conveniently set out in the decision of Young, C.J. in Philippine Airlines v. Goldair (Aust) Pty Ltd.[7] Essentially, they require that such a claimant establish, at least, that real injustice would result if the civil proceedings were not stayed or adjourned until the determination of the criminal proceedings.[8]

13 Trade World claimed that real injustice will arise here because Chiem effectively will be prevented from giving evidence in support of Trade World's challenge to the assessments in so far as they relate to factual matters that also arise in his criminal proceedings. But the claim is plainly without merit, in my view. For reasons given, Chiem could not give evidence in the recovery proceeding even if he wanted to do so because Trade World cannot contest the Commissioner's relevant assessments, so that Chiem could not be placed in the position in this proceeding where he has to make the choice between giving evidence, which may be prejudicial to his position in the context of the criminal charges, or not giving evidence at all, which would be disadvantageous to Trade World. There is no risk here of Chiem giving evidence in the proceeding and thereby incriminating himself. As I have said, the forum where there could be an overlap in the relevant factual matters that relate to Trade World's challenge to the assessment and those relevant to the criminal proceeding is the Tribunal, but the proceeding before it has been stayed until the determination of the criminal proceeding against Chiem. Thus, as I have said, no relevant injustice could have arisen to Trade World by reason of the Commissioner pressing the claim for summary judgment.

14 I mention for completeness that I consider that there is no inconsistency between the Commissioner pressing her claim in the Supreme Court and her consenting to the Tribunal's proceeding being stayed pending the outcome of Chiem's trial on fraud charges, as was asserted for Trade World. It is important to consider the circumstances in which the Commissioner gave her consent. As has been mentioned, in December 2005, Trade World sought to have its review process at the Tribunal adjourned pending the then committal proceedings against Chiem. It is not apparent from the decision of the Tribunal of 23 December 2005, whereby it adjourned the matter, what factual issues relevant to the proceeding before it were also raised in the criminal charges against Chiem. Be that as it may, it is apparent that the Commissioner strongly opposed the adjournment, claiming that the issues in the criminal proceedings differed materially from those before the Tribunal and that any perceived prejudice to Chiem said to arise out of the latter proceedings was fanciful rather than real. Nevertheless, the Tribunal adjourned the matters as I have said. Given the Tribunal's reasons for granting the stay, albeit only to the resolution of the committal proceeding, it is unsurprising that the Commissioner consented to the extension of it to the conclusion of Chiem's trial. Thus, I consider that there is no inconsistency between the consent and the Commissioner's opposition to the application for the adjournment of the Supreme Court proceeding.

15 I also note for completeness that Mr Wilson did not proceed with ground 12 and, again, I think he was correct in adopting that course. His Honour's reasons make it apparent that he came to his conclusion because the conclusive certificate provisions applied so that such factual dispute as may be said to exist in the summary judgment proceeding did not overlap with any factual issue in the criminal proceeding.

16 A number of matters were put by Mr Wilson that may go to the question whether there should be a stay of the execution of the judgment pending the resolution of the review process in the Tribunal. Thus, counsel stressed unfairness to Trade World of having to bear the judgment yet not be able for some time to demonstrate, at the Tribunal level, errors in the Commissioner's relevant assessments. I consider that any such application for a stay should be made in the Practice Court, supported by relevant evidence, such as that going at least some distance to showing that Trade World's claim at the Tribunal has some merit, and other circumstances that would make it appropriate to grant a stay of the execution of the judgment. No sufficient material is before us to enable the matter to be assessed on the merits even if were minded so to do. Consequently, I think it would be inappropriate for this Court to consider if the judgment in question should be stayed.

17 Mr Wilson has responsibly said all that could be said for Trade World. Although I would give Trade World leave to amend its notice of appeal as sought and to rely on the new material to which I have referred, for the reasons given I would dismiss the appeal against his Honour's decision that there be summary judgment for the Commissioner and refuse to extend the time for seeking leave to appeal against his Honour's decision not to adjourn the summary judgment proceeding.

18 I agree, but I wish to add a few words concerning the appellant's alternative argument that the judge should have stayed the proceeding on the grounds of hardship.

19 As the High Court stated in Clyne v. Deputy Commissioner of Taxation (N.S.W.),[9] the legislative scheme established in relation to tax recovery, as manifested in provisions like s.14ZZM of the Taxation Administration Act 1953, reflects a clear policy in favour of the Revenue against the taxpayer. The Commissioner is placed by the legislature in a position of special advantage and thus in general is free to pursue recovery proceedings, despite outstanding appeals and reviews against the disallowance of objections.

20 So to say is not to deny that this court has jurisdiction to stay recovery proceedings pending review of a disallowance of objection against assessments. It is clear that it does. But high authority makes plain that the policy of the legislation, as stated in provisions like s.14ZZM, is a matter to which great weight must be attached.

21 Accordingly, as the New South Wales Court of Appeal said in Deputy Commissioner of Taxation (N.S.W.) v. Mackey,[10] it would be too narrow a view of the discretion to grant a stay of proceedings or execution merely because an appeal or review were pending, or because on examination of a pending appeal or review there may appear to be an arguable case, or perhaps complex questions which the Administrative Appeals Tribunal or the Federal Court can determine. While hardship to the taxpayer and the merits of the appeal or review are relevant matters, other considerations are involved, including the Commissioner's right to have tax assessed paid. Furthermore, as that court said, if a taxpayer has been party to a contrivance to avoid his or her liability to tax, the court should not intervene in exercise of its overriding discretion to stay proceedings or execution otherwise than in the most exceptional circumstances.

22 In Cywinski v. Deputy Commissioner of Taxation, the predecessor of this Court embraced the principles adumbrated in Mackey, and so held that a stay of execution simply to facilitate contesting an assessment should be refused as something which would defeat the policy of the legislation. Kaye, J., who delivered the leading judgment, referred with apparent approval to the observations of Hutley, J. in Mackey that:

"The Commissioner starts off with rights under s.201 [of the Income Tax Assessment Act 1936] and the taxpayer is seeking on special bases to have a special discretion exercised in his favour. It is not possible to work out in advance all possible bases for the exercise of such a discretion and it would not be proper even to attempt to do so. It is an open-ended discretion.

But there are only two cases where it is clear the court should exercise that discretion: First the comparatively rare case where the Commissioner abuses his [or her] position, for example by assessing and endeavouring to collect tax in defiance of a decision of the High Court or other superior court precisely in point. Second, in cases of extreme personal hardship to a taxpayer called upon to pay. The obligation to pay which has been cast upon him by law is not a hardship of itself and the mitigation of the effect of inflation and the burden of interest is a matter for the legislature, not for the court." [11]

23 Consistently with Mackey, Kaye, J. went on to point out that the degree of merit of the appeal or review may also be relevant to the exercise of the discretion, and he contrasted by way of example cases in which it is clear that an appeal or application for review is without merit and, at the other end of the spectrum, cases where the assessment complained of has been made by the Commissioner contrary to a decision of the High Court or is otherwise manifestly wrong. As his Honour observed, however, between those two extremes lies the bulk of cases, in which the objection is neither totally without merit nor incontestable, and thus in which a judge in recovery proceedings may be unable to form even a tentative view of the chance of success of the appeal or review. In such cases, it was said, a judge's discretion in refusing a stay does not miscarry by reason only of the judge being unable on the material before him or her to reach a view as to the taxpayer's prospects of success in overturning the assessment.

24 Different considerations may apply once judgment is obtained and the dispute comes before the court by way of an application to adjourn proceedings for the winding up of the taxpayer. It has been held that, in general, a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of the debtor where an appeal is pending against the judgment which is the foundation of the bankruptcy proceedings.[12] Similar considerations operate in applications to wind up companies on the grounds of insolvency. But that is not this case.

25 As matters stand at the moment, the taxpayer has the benefit of a stay of 30 days' duration. If nothing happens, the stay will lapse and the Commissioner will be free to proceed. If, therefore, the taxpayer is to prevent that occurring, it is incumbent on the taxpayer to apply to the judge below, or to another judge of the

Trial Division, for an order to extend the stay or to grant a fresh stay pending the review.

26 I agree, with respect, with the learned presiding judge that it would be inappropriate for this court to consider such an application at this stage. To my way of thinking it would also be unfair. As at present advised, I think that an application based on the material now before the court would be likely to fail. But it occurs to me that, once the applicant has had regard to the principles which govern the stay of proceedings and execution pending appeal or review of a disallowance of objection against assessment, the applicant may be able to adduce further material which would warrant a stay. Fairness dictates that the applicant be given that chance for whatever it may be worth.

27 For now, however, it suffices to say that I too would dismiss the appeal.

28 For the reasons given by the learned presiding judge and Nettle, J.A., I agree that the appeal against the decision of Bell, J. should be dismissed.

1. Trade World Enterprises Pty Ltd ("Trade World") have leave to amend its notice of appeal as sought and to rely on the affidavits of Felipe Tellez of 14 and 15 September 2006 and on the affidavit of Hoang Hai Chiem sworn 18 September 2006.

2. The application of Trade World for extension of time for leave to appeal against his Honour's order refusing to adjourn the summary judgment proceeding is refused.

3. Trade World's appeal as reflected in its notice of appeal of

4. Trade World pay the costs of the appeal of the Deputy Commissioner of Taxation.

[1] The decision that there be summary judgment for the Commissioner was final, not so much because of the terms of s.17A(5) of the Supreme Court Act 1986 - see Thomson v. Deputy Commissioner of Taxation (Unreported, Court of Appeal, 16 June 2000, Brooking and Batt, JJ.A.) at 3 - but because the legal effect of the order is to determine finally the parties' respective rights in the principal proceeding: see Hall v. Nominal Defendant [1966] HCA 36; (1996) 117 C.L.R. 423 at 443 per Windeyer, J. and Dodoro v. Knighting [2004] VSCA 217; (2004) 10 V.R. 277 at 281 per Callaway, J.A. On the other hand, by parity of reasoning, the order refusing to grant an adjournment of the summary judgment proceeding was interlocutory and leave to appeal against it is required if Trade World is to pursue an appeal in relation to it.

[2] Jackamarra v. Krakouer [1998] HCA 27; (1998) 195 C.L.R. 516 at 521 per Brennan, C.J. and McHugh, J. and at 540, 542 per Kirby, J.

[3] Niemann v. Electronic Industries Ltd [1978] VicRp 44; [1978] V.R. 431.

[4] See s.59 of the Taxation Administration Act 1953, Deputy Commissioner of Taxation v. Richard Walter [1995] HCA 23; (1994) 183 C.L.R. 168, Platypus Leasing Inc. v. Commissioner of Taxation (No.3) [2005] NSWSC 388; (2005) 59 A.T.R. 84 at 88-89 per Gzell, J.

[5] See, for example, Miles v. Bull [1969] 1 QB 258 at 265-266 per Megarry J., Hill v. Sklivas [1995] VicRp 37; [1995] 1 V.R. 599 and Pico Holdings Inc v. Voss [2002] VSC 119.

[6] See ss.14ZZM and 14ZZR of the Taxation Administration Act and Deputy Commissioner of Taxation v. Alvaro (1990) 21 A.T.R. 726.

[7] [1990] VicRp 34; (1990) V.R. 385 at 387-388.

[8] See also Deputy Commissioner of Taxation v. Ahern (1986) 17 A.T.R. 535 at 538 per Ryan, J., DCT v. Alvaro (1990) 21 A.T.R. 726, Hurley v. Commissioner of Taxation [1992] FCA 427; (1992) 37 F.C.R. 11, Chambers v. Commissioner of Taxation [1999] FCA 163; (1999) 41 A.T.R. 233 and Golden City Car & Truck Centre Pty Ltd and Anor v. Deputy Commissioner of Taxation [1999] FCA 922; (1999) 42 A.T.R. 379.

[9] (1983) 48 A.L.R. 545 at 547.

[10] (1982) 64 F.L.R. 432 at 435.

[11] [1990] VicRp 17; [1990] V.R. 193 at 197.

[12] Provided the appeal is based on genuine and arguable grounds.