FEDERAL COURT OF AUSTRALIA

ACCC v Institute of Taxation Research Pty Ltd [2001] FCA 1366

PRACTICE AND PROCEDURE – Application for final relief, on notice, on the basis that the respondents have no defence to the claim, in accordance with O 20 r 1 of the Federal Court Rules - failure to file defence – application that judgment be entered in default of delivery of defence in accordance with O 11 r 23

TRADE PRACTICES – Misleading or deceptive conduct – whether engaged in conduct that is misleading or deceptive, or likely to mislead or deceive pursuant to s 52 of the Trade Practices Act 1974 (Cth) – whether representation as to uses and benefits of services in contravention of s 53(c) of the Trade Practices Act

Federal Court Rules

Trade Practices Act 1974 (Cth) ss 52, 53

AUSTRALIAN COMPETITION AND CONSUMER COMMISSION v INSTITUTE OF TAXATION RESEARCH PTY LTD AND ANOR

Q168 OF 2000

COOPER J

21 FEBRUARY 2001

BRISBANE

THE COURT DECLARES THAT:

1.             The first respondent, by representing in trade or commerce since March 2000 until 15 December 2000, in connection with the supply or possible supply or the promotion of its taxation advice and consultancy services, to members of the public that the following conclusions of law are correct, namely:

(a)          that the Australian legal system has no basis in law;

(b)          that the Australian Constitution is invalid;

(c)          that there is no basis in law for the exercise of the legislative powers of the state and federal Parliaments;

(d)          that there is no basis in law for the exercise of the executive powers of Australian governments; and

(e)          that Australian taxation legislation is invalid;

and that arguments leading to those conclusions can be successfully advanced and relied upon by persons who acquire its services to avoid payment of taxes, or to defend or challenge proceedings for the recovery of taxes imposed by a Commonwealth or State authority, without also informing those persons that:

(i)            none of the conclusions of law referred to above has been held to be correct by any Australian Court;

(ii)           in each of the cases listed in schedule 1 to these orders which had been decided by the time the representation was made, arguments made to establish those conclusions of law were unsuccessful and the persons advancing those arguments did not obtain the relief they sought and/or were unsuccessful in avoiding payment or recovery of the taxes;

(iii)         individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iv)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid;

has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Trade Practices Act 1974 (“the Act”), and has represented that its services have uses or benefits they do not have, contrary to section 53(c) of the Act.

2.             The first respondent, by representing in trade or commerce since March 2000 until 15 December 2000, in connection with the supply or possible supply or the promotion of its taxation advice and consultancy services, to members of the public, that its services will enable persons who acquire them to avoid payment of any Commonwealth or State imposed tax under the current taxation system by lawful means, without also informing those persons that:

(i)            none of the legal proceedings brought by the first respondent on behalf of its clients to avoid payment of tax has been successful;

(ii)           individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iii)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid;

has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Act, and has represented that its services have uses or benefits they do not have, contrary to section 53(c) of the Act.

3.             The second respondent, by representing via the internet in trade or commerce since 10 March 2000 until 18 December 2000, in connection with the supply or possible supply or the promotion of his taxation advice, consultancy and legal services, to members of the public that the following conclusions of law are correct, namely:

(a)          the Australian legal system has no basis in law;

(b)          the Australian Constitution is invalid;

(c)          there is no basis in law for the exercise of the legislative powers of the state and federal Parliaments;

(d)          there is no basis in law for the exercise of the executive powers of Australian governments; and

(e)          Australian taxation legislation is invalid;

and that arguments leading to those conclusions can be successfully advanced and relied upon by persons who acquire his services to avoid payment of taxes, or to defend or challenge proceedings for the recovery of taxes imposed by a Commonwealth or State authority, without also informing those persons that:

(i)            none of the conclusions of law referred to above has been held to be correct by any Australian Court;

(ii)           in each of the cases listed in schedule 1 to these orders, arguments made to establish those conclusions of law were unsuccessful and the persons advancing those arguments did not obtain the relief they sought and/or were unsuccessful in avoiding payment or recovery of the taxes;

(iii)         individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iv)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid;

or such of those matters as were known by him at the time the representation was made, has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Act, and has represented that his services have uses or benefits they do not have, contrary to section 53(c) of the Act.

4.             The second respondent, by representing via the internet in trade or commerce since 10 March 2000 until 18 December 2000, in connection with the supply or possible supply or the promotion of his taxation advice, consultancy and legal services, to members of the public, that his services will enable customers to avoid payment of any Commonwealth or State imposed tax under the current taxation system by lawful means, without also informing those persons that:

(i)            none of the legal proceedings brought by the first or second respondent on behalf of their clients to avoid payment of tax has been successful;

(ii)           individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iii)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid;

or such of those matters as were known by him at the time the representation was made, has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Act, and has represented that his services have uses or benefits they do not have, contrary to section 53(c) of the Act.

5.             The second respondent, by representing via the internet in trade or commerce since 29 January 2000 until 18 December 2000, in connection with the supply or possible supply or the promotion of his taxation advice, consultancy and legal services, to members of the public, that a former Justice of the High Court of Australia endorses or agrees with the conclusion of law that the Australian legal system has no basis in law and/or that the Australian Constitution is invalid, whereas these representations are false, has engaged in conduct that is misleading or deceptive, or likely to mislead or deceive, contrary to section 52 of the Act.

6.             The second respondent was knowingly concerned in or party to the contravention of the first respondent referred to in paragraph 2 above, such conduct occurring at a seminar on 22 August 2000, and being conduct of the kind referred to in section 75B of the Act.

AND THE COURT ORDERS THAT:

7.             The first respondent be restrained, whether by its directors, employees, agents, servants or otherwise, from making representations, in trade or commerce, to any person, expressly or by implication, including representations made via the internet, to the effect that the following conclusions of law are correct, namely:

(a)          that the Australian legal system has no basis in law;

(b)          that the Australian Constitution is invalid;

(c)          that there is no basis in law for the exercise of the legislative powers of the state and federal Parliaments;

(d)          that there is no basis in law for the exercise of the executive powers of Australian governments; and

(e)          that Australian taxation legislation is invalid;

and that arguments leading to those conclusions can be successfully advanced and relied upon by persons who acquire its services to avoid payment of taxes, or to defend or challenge proceedings for the recovery of taxes imposed by a Commonwealth or State authority, unless at the same time and with at least equal prominence the person to whom the representation is made is specifically informed that:

(i)            none of the conclusions of law referred to above has been held to be correct by any Australian Court;

(ii)           in each of the cases listed in schedule 1 to these orders, arguments made to establish those conclusions of law were unsuccessful and the persons advancing those arguments did not obtain the relief they sought and/or were unsuccessful in avoiding payment or recovery of the taxes;

(iii)         individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iv)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid.

8.             The first respondent be restrained, whether by its directors, employees, agents, servants or otherwise, from making representations in trade or commerce, to any person, expressly or by implication, including representations made via the internet, that its taxation advice and consultancy services will enable persons who acquire them to avoid payment of any Commonwealth or State imposed tax under the current taxation system by lawful means, unless at the same time and with at least equal prominence the person to whom the representation is made is specifically informed that:

(a)          none of the legal proceedings brought by the first respondent on behalf of its clients to avoid payment of tax has been successful;

(b)          individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(c)          the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid.

9.             The second respondent be restrained from making representations via the internet or for or on behalf of any corporation, in trade or commerce, to any person, expressly or by implication, to the effect that the following conclusions of law are correct, namely:

(a)          that the Australian legal system has no basis in law;

(b)          that the Australian Constitution is invalid;

(c)          that there is no basis in law for the exercise of the legislative powers of the state and federal Parliaments;

(d)          that there is no basis in law for the exercise of the executive powers of Australian governments; and

(e)          that Australian taxation legislation is invalid;

and that arguments leading to those conclusions can be successfully advanced and relied upon by persons who acquire his services to avoid payment of taxes, or to defend or challenge proceedings for the recovery of taxes imposed by a Commonwealth or State authority, unless at the same time and with at least equal prominence the person to whom the representation is made is specifically informed that:

(i)            none of the conclusions of law referred to above has been held to be correct by any Australian Court;

(ii)           in each of the cases listed in schedule 1 to these orders, arguments made to establish those conclusions of law were unsuccessful and the persons advancing those arguments did not obtain the relief they sought and/or were unsuccessful in avoiding payment or recovery of the taxes;

(iii)         individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(iv)         the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid.

10.         The second respondent be restrained from making representations via the internet or for or on behalf of any corporation, in trade or commerce, to any person, expressly or by implication, that his taxation advice, consultancy and legal services will enable persons who acquire them to avoid payment of any Commonwealth or State imposed tax under the current taxation system by lawful means, unless at the same time and with at least equal prominence the person to whom the representation is made is specifically informed that:

(a)          none of the legal proceedings brought by the first or second respondent on behalf of their clients to avoid payment of tax has been successful;

(b)          individuals, companies and other entities who do not pay their tax liability when it is due and payable may be liable for additional charges under the Income Tax Assessment Act 1936;

(c)          the Commissioner of Taxation or Deputy Commissioner of Taxation has brought and will bring proceedings against persons who do not pay their tax liability when it is due and payable. The consequences of such proceedings may include liability to pay legal costs (in addition to penalties and interest) and may result in bankruptcy or winding up proceedings if the tax due remains unpaid.

11.         The second respondent be restrained from making representations via the internet or for or on behalf of any corporation, in trade or commerce, to any person, expressly or by implication, to the effect that a former Justice of the High Court of Australia endorses or agrees with the conclusion of law that the Australian legal system has no basis in law and/or that the Australian Constitution is invalid.

12.         Within 10 days of the date of service of this order on the first respondent, the first respondent shall forward to each person or corporation who has since 10 March 2000 agreed to acquire taxation advice or consultancy services where such advice or services is based on, or is referrable to, the representations contained in paragraphs 6, 7, 8, 9, 31 and 39 of the statement of claim, a letter in the form contained in schedule 2 to these orders.

13.         Within 4 days of the dispatch of the last of the letters ordered to be sent in Order 12 above, the first respondent will provide to the applicant, by causing the same to be delivered to Level 3, 500 Queen Street, Brisbane, a list of all persons and/or corporations to who a letter was dispatched specifying the name to whom it was sent, the address to which the letter was sent, and the date of dispatch of the letter.

14.         The first and second respondents pay the applicant’s costs of and incidental to these proceedings, to be taxed if not agreed.

15.         The parties have liberty to apply.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

SCHEDULE 1

SCHEDULE 2

[Date]

Dear [client or former client]

ACCC v Institute of Taxation Research Pty Ltd and Wayne Ronald Levick, Q168  Of 2000

1.             The Australian Competition and Consumer Commission (“ACCC”) has brought legal proceedings against the Institute of Taxation Research Pty Ltd and obtained certain orders from the Federal Court of Australia. A copy of such orders maybe perused at the office of the Australian Competition and Consumer Commission at Level 3, 500 Queen Street, Brisbane during normal business hours.

2.             We have represented that there are arguments available to avoid payment of taxes and defend proceedings brought by the Commissioner of Taxation that establish certain propositions, namely:

(a)           the Australian legal system has no basis in law;

(b)          the Australian Constitution is invalid;

(c)           there is no basis in law for the exercise of the legislative powers of the state and federal Parliaments;

(d)          there is no basis in law for the exercise of the executive powers of Australian governments;

(e)           Australian taxation legislation is invalid.

3.             We have also represented that our services can make the payment of any Commonwealth or state imposed tax optional under the current taxation system by the proper application of current legal procedures.

4.             The Federal Court has declared that by making these representations we have engaged in misleading and deceptive conduct concerning the services we offer and that we have represented our services have uses or benefits they do not have. In doing this we have contravened the Trade Practices Act 1974.

5.             We have been ordered to let you know that our arguments have never been held to be correct in any Australian Court. In fact, in each of the cases in the schedule attached, those arguments have been unsuccessful. We have brought proceedings for about half of our 700 clients and have never won any of them. If you use these arguments, which is your right, but the courts continue to say that they are wrong, then you can be liable for and ordered to pay additional charges and the Commissioner’s legal costs as well as the original debt. If these amounts remain unpaid this can lead to bankruptcy or winding-up proceedings.

6.             Now that you are aware that this is so, you should immediately seek independent legal advice before proceeding with these arguments in an attempt to delay legal action taken against you, as to continue the proceedings may amount to an abuse of process of the Court and may expose you to an order for the payment of costs on an indemnity basis.

7.             If you would like any further information about the case, or what rights you might have, you can contact the ACCC in Brisbane on (07) 3835 4666.

Yours sincerely

[name]
Director
Institute of Taxation Research Pty Ltd

SCHEDULE OF CASES

EX TEMPORE REASONS FOR JUDGMENT

1                     This is an application for final relief, on notice, pursuant to the statement of claim filed by the applicant on 19 December 2000.

2                     An order for substituted service was made on 9 February 2001 as against the second respondent.

3                     The motion, filed 14 February 2001, seeks final relief on the basis that the respondents have no defence to the claim in accordance with O 20 r 1 of the Federal Court Rules. In the alternative, the motion seeks that judgment be entered in default of delivery of a defence by the respondents, in accordance with O 11 r 23.

4                     Adam William Beggs, a process server, swears that on Thursday, 15 February 2001 at approximately 4.15pm he served the Institute of Taxation Research Pty Ltd with a covering letter, the notice of motion and the supporting affidavit. This service was effected at 7 Peninsula Boulevard, Seaford, Victoria the company’s registered office. There has been no response from, and no attendance at Court today of the first respondent.

5                     Gerald Frederick Upsdell, a licensed commercial sub-agent, swears that on Thursday, 15 February 2001 at approximately 6.30pm, he served Mr and Mrs Levick, the second respondent’s parents, at 20 Livingstone Road, Lidcombe, Victoria with a covering letter, the notice of motion, further affidavit of A D P Bruce sworn 8 February 2001, further affidavit of A D P Bruce sworn 14 February 2001, further affidavit of D Uglesic sworn 7 February 2001, and the orders made in relation to substituted service on 9 February 2001. This method of service was in accordance with the orders for substituted service made on 9 February 2001.

6                     Alexander Donald Paul Bruce, a senior investigator with the Australian Competition Consumer Commission, swears that in his opinion, having regard to material before the Court, the respondent would have no defence. At the time of this hearing, no defence had been filed by the respondent.

7                     The matter was before the Court on Friday, 9 February 2001 for directions and for the hearing of interlocutory relief. According to O 11 r 20 the defence must be filed seven days after the directions hearing. The defence was therefore due by 16 February 2001.

8                     Having considered the allegations in the statement of claim and the draft orders sought by the applicant, I am prepared to make some of the declarations and orders sought.

9                     I am satisfied that in respect of the representations pleaded, they were made by the respondents either directly in trade or commerce or in relation to the second respondent, being a party knowingly concerned with those representations. I am further satisfied that these representations, other than those in paragraphs 32 and 33 which I shall return to, were false and misleading. The applicant is entitled to the declaratory and injunctive relief sought.

10                  I am also satisfied that the representations alleged in relation to the seminars were made and that the injunctive and declaratory relief sought, is appropriate.

11                  The allegations made by the applicant in paragraphs 32 and 33 of the statement of claim, in my view, are argumentative. I do not endorse the view that what is stated is correct, however on this application for a summary judgment I am not prepared to make the injunctive and declaratory relief sought, in relation to these allegations.

Associate:

Dated: 21 February 2001