Federal Court of Australia

Deputy Commissioner of Taxation v Elzain (No 3) [2024] FCA 1445

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth) and rule 26.01 of the Federal Court Rules 2011 (Cth):

(a)    judgment be given for the applicant against the first respondent in the amount of $7,013,549.24 (inclusive of general interest charges calculated to 3 December 2024);

(b)    judgment be given for the applicant against the third respondent in the amount of $4,807,045.65 (inclusive of general interest charges calculated to 3 December 2024);

(c)    judgment be given for the applicant against the fourth respondent in the amount of $1,231,286.98 (inclusive of general interest charges calculated to 3 December 2024); and

(d)    judgment be given for the applicant against the fifth respondent in the amount of $3,959,377.76 (inclusive of general interest charges calculated to 3 December 2024).

2.    The proceeding against the second respondent be dismissed.

3.    The first, third, fourth and fifth respondents pay the applicant’s costs of the interlocutory application dated 5 July 2024.

4.    By 4.00 pm on 20 December 2024, the parties file and serve brief written submissions (of no more than 3 pages) addressing what (if any) further orders should be made in respect of the costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

HORAN J:

Introduction

1    The Deputy Commissioner of Taxation commenced these proceedings by an originating application dated 19 December 2023, seeking judgment against each of Raymond Elzain (the first respondent), Edward Elzain (the second respondent), Anthony Elzain (the third respondent), Joanne Elzain (the fourth respondent) and Carol Elzain (the fifth respondent) (collectively, the taxpayer respondents) in respect of their tax-related liabilities for income tax, shortfall interest charges, administrative penalties and general interest charges for the income year ended 30 June 2022 and (in respect of the third respondent) the income year ended 30 June 2023, upon those liabilities becoming payable.

2    On the same date, the Commissioner issued notices of assessment in respect of those liabilities, which became due and payable on 10 January 2024 or (in respect of the notice of assessment issued to the third respondent for the income year ended 30 June 2023) on 5 June 2024.

3    The taxpayer respondents are family members who operate a commercial construction business under the trading name “Maxcon”. As explained further below, the facts that give rise to the tax-related liabilities are not directly relevant to the substantive claims brought in these proceedings, by which the Commissioner seeks to enforce the debts arising from and consequent upon the notices of assessment served on the taxpayer respondents.

4    By an interlocutory application dated 5 July 2024, the Commissioner applies for summary judgment under s 31A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA Act) and r 26.01(1)(e) of the Federal Court of Australia Rules 2011 (Cth) against each of the first, third, fourth and fifth respondents for the following amounts, based on certificates issued under s 350-10(3) of Sch 1 of the Taxation Administration Act 1953 (Cth) (the TAA):

(a)    against the first respondent, a total amount of $7,013,549.24;

(b)    against the third respondent, a total amount of $4,807,045.65;

(c)    against the fourth respondent, a total amount of $1,231,286.98; and

(d)    against the fifth respondent, a total amount of $3,959,377.76.

5    For the reasons set out below, I find that the above taxpayer respondents have no reasonable prospect of successfully defending the proceeding. Accordingly, the Commissioner’s application for summary judgment is granted, and judgment is ordered for the Commissioner against each of the first, third, fourth and fifth respondents for the amounts set out above.

6    The first, third, fourth and fifth respondents should pay the Commissioner’s costs of the summary judgment application. In relation to any other costs in the proceedings, including reserved costs, the parties should file brief written submissions within 7 days addressing what (if any) other orders should be made in respect of such costs.

Background

The assessments

7    In broad terms, the assessed tax liabilities relate to payments made to each of the taxpayer respondents by a company registered in Singapore that the Commissioner has determined to be a “controlled foreign company”. The Commissioner assessed those receipts as assessable income of the taxpayer respondents in the relevant years under ss 47A and 109C of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936).

8    On 19 December 2023, the Commissioner issued the following notices of assessment and notices of amended assessment:

(a)    in respect of the first respondent, a notice of amended assessment for income tax, including shortfall interest charges, for the year ended 30 June 2022 in the amount of $4,352,458.55, and a notice of assessment for a shortfall penalty of $2,115,379.75;

(b)    in respect of the second respondent, a notice of assessment for income tax for the year ended 30 June 2022 in the amount of $2,401,244, and a notice of assessment for failing to produce a document penalty of $1,800,933;

(c)    in respect of the third respondent, a notice of amended assessment for income tax, including shortfall interest charges, for the year ended 30 June 2022 in the amount of $2,417,598.40, a notice of assessment for income tax for the year ended 30 June 2023 in the amount of $1,414,386.20, and a notice of assessment for a shortfall penalty of $1,175,000;

(d)    in respect of the fourth respondent, a notice of amended assessment for income tax, including notice of shortfall interest charges, for the year ended 30 June 2022 in the amount of $2,417,598.40, and a notice of assessment for a shortfall penalty of $1,175,000; and

(e)    in respect of the fifth respondent, a notice of amended assessment for income tax, including notice of shortfall interest charges, for the year ended 30 June 2022 in the amount of $2,417,598.37, and a notice of assessment for a shortfall penalty of $1,175,000.

9    Under s 5-5(7) of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997), each of the notices of amended assessment became due and payable 21 days after the notice was served, so that the due date for payment was 10 January 2024. Similarly, the shortfall interest charge was due and payable 21 days after the day on which the respondents were given notice of the charge: s 5-10 of the ITAA 1997. In respect of the original assessments of the second respondent for the income year ended 30 June 2022 and the third respondent for the income year ended 30 June 2023, pursuant to s 5-5(5) of the ITAA 1997, the due date for payment was 21 days after they were required to give an income tax return to the Commissioner for the relevant year of income, which was 7 August 2023 and 5 June 2024 respectively.

10    Each of the notices of assessment and the notices of amended assessment contained a misdescription of the date on which payment was due. By letter dated 25 January 2024, the Commissioner advised each of the taxpayer respondents of the correct dates by which the assessment or amended assessment became or would become due for payment, noting that the specification of an incorrect date for payment did not invalidate the notices (see Re Thai; ex parte Deputy Commissioner of Taxation (Cth) (1994) 50 FCR 127 at 131).

11    On 19 February 2024, the taxpayer respondents filed objections to the assessments. Those objections have not yet been determined. The Commissioner contends that this is a result of the failure by the taxpayer respondents to provide information and materials sought in respect of the objections: see Affidavit of William Logan affirmed 3 December 2024, para 27.

Commencement of proceedings and freezing orders

12    The present proceedings were commenced by an originating application filed on 19 December 2023, in which the Commissioner sought judgment against each of the taxpayer respondents for his or her tax-related liabilities together with general interest charges, as well as interlocutory relief in the form of a freezing order against each of the taxpayer respondents and two other respondents (Mad Maxx Pty Ltd and Feda Elzain) to whom it was claimed that property had been transferred by the taxpayer respondents.

13    On 20 December 2023, O’Bryan J made freezing orders following an ex parte hearing. Those orders were initially returnable by 29 December 2023, which was subsequently extended to a return date of 31 January 2024, at which time McElwaine J made modified freezing orders by consent.

Application for suppression and non-publication orders

14    By an interlocutory application filed on 31 January 2024, the respondents applied for interim and interlocutory suppression and non-publication orders in relation to a wide range of documents in the proceeding. That interlocutory application, with subsequent amendments, was ultimately determined by McElwaine J, who made orders under ss 37AF and 37AG(1)(a) of the FCA Act covering certain confidential or personal information, and otherwise dismissed the application.

15    The issues in relation to suppression and non-publication orders were the subject of further proceedings by way of an application for leave to appeal from the decision of McElwaine J, in so far as his Honour refused to make a suppression or non-publication order in respect of a range of documents and information the subject of the respondents’ interlocutory application. While that application for leave to appeal was dismissed by Moshinsky J on 7 August 2024, interim suppression orders remained in place to enable the respondents to make an application to the High Court of Australia for special leave to appeal from or judicial review of the decision by Moshinsky J to refuse leave to appeal.

16    Following the filing by the respondents of a judicial review application in the High Court, Moshinsky J made further interlocutory orders for the redaction of portions of his Honour’s reasons for judgment together with the reasons of McElwaine J and restricting publication of the transcript and evidence in the application for leave to appeal, pending the determination of the judicial review application in the High Court or further order. I understand from oral submissions made on behalf of the respondents that a further interlocutory application has since been made to the High Court for suppression or non-publication orders in relation to the entirety of the reasons for judgment of McElwaine J or possibly even the entirety of the court file in relation to these proceedings.

Application for summary judgment

17    At a case management hearing on 14 June 2024, orders were made fixing a timetable for the hearing of any interlocutory application by the Commissioner for summary judgment.

18    In accordance with that timetable, on 5 July 2024, the Commissioner filed this interlocutory application seeking summary judgment against the first, third, fourth and fifth respondents under s 31A(1) of the FCA Act and r 26.01(1)(e) of the Rules. The Commissioner no longer seeks any relief against the second respondent, in the light of amounts that have been recovered in respect of that debt pursuant to statutory garnishee notices issued under s 260-5 of Sch 1 to the TAA.

19    The respondents were required to file and serve any affidavit evidence on which they relied in response to the summary judgment application by 26 July 2024. No evidence was filed by that date.

20    On 9 August 2024, the Commissioner filed and served an outline of submissions in support of the summary judgment application. The respondents were required to file and serve an outline of submissions in response to the summary judgment application by 23 August 2024. No submissions were filed by that date.

21    On 10 and 11 September 2024, in advance of a case management hearing listed on 13 September 2024, the parties’ solicitors exchanged correspondence in relation to proposed orders. The Commissioner indicated that he would seek orders for the summary judgment application to be fixed for hearing, and requested confirmation that the respondents did not propose to file any evidence or submissions on the application. In response, the respondents’ solicitor proposed a new timetable for the filing of evidence and submissions, relevantly explaining that there had been “a change in instructions by the respondents in that they seek to rely on the in-principle agreement reached with [the Commissioner] on 31 January 2024 to oppose [the Commissioner’s] application and seek to put on evidence in relation to that”.

22    By consent orders made on 12 September 2024, the times by which the respondents were to file and serve their affidavit evidence and outline of submissions were extended to 25 September 2024 and 2 October 2024 respectively. Under those orders, the Commissioner was to file any evidence and submissions in reply by 30 October 2024. The summary judgment application was listed for hearing on 5 December 2024.

23    The respondents failed to file and serve any evidence or submissions in accordance with the revised timetable. In the light of that failure, the Commissioner’s solicitor wrote to the Court on 11 October 2024, requesting an early hearing of the summary judgment application. The respondents’ solicitor advised the Court that the respondents intended to file affidavit material and submissions “as soon as practicable”, and requested the Court “to retain the hearing date of 5 December 2024 at 10.15 am”.

24    By an email dated 16 October 2024, the Commissioner’s solicitor asked the respondents’ solicitor whether the respondents intended to make an application to extend the timetable for the filing and service of their material in response to the summary judgment application. On 28 October 2024, the Commissioner’s solicitor wrote to the respondents’ solicitor requesting a response “[a]s a matter of urgency”, failing which the Commissioner would seek to bring the matter before the Court. The respondents’ solicitor responded on the same day, stating that “[f]or the avoidance of any doubt, we reiterate that our clients intend to file affidavit material and submissions and will do so as soon as practicable”, and that they would write to the Commissioner’s solicitor seeking consent orders for the filing of the respondents’ affidavit material and submissions.

25    On 4 November 2024, the respondents’ solicitor provided to the Commissioner’s solicitor a copy of proposed consent orders under which the respondents were to file and serve any affidavit evidence by 12 November 2024 and any outline of submissions by 26 November 2024. It does not appear that the Commissioner’s solicitor responded to this email before 13 November 2024, when he wrote to the respondents’ solicitor in relation to the respondents’ failure to file or serve evidence by 12 November 2024, and gave notice that the Commissioner would approach the Cout to have the matter listed for directions if the respondents failed to file and serve their evidence by 15 November 2024. The Commissioner’s solicitor stated in his email that “the fact that orders have not be[en] regularized by the Court is no answer to having failed to file and serve evidence by your proposed deadline”, noting that the respondents remained in breach of the orders made on 12 September 2024.

26    On 15 November 2024, the respondents’ solicitor replied to the Commissioner’s solicitor, stating that the Commissioner had still not provided consent to the respondents’ proposed orders or indicated whether he objected to the further evidence that the respondents intended to file. The respondents’ solicitor stated that, if the Commissioner gave consent, the respondents’ evidence would be filed and served “as soon as possible next week”, which would “still give the parties ample time to be ready for the hearing on 5 December 2024”.

27    On 18 November 2024, the Commissioner’s solicitor advised the respondents’ solicitor that the Commissioner would seek to have the matter listed for directions, noting that “[a]s always, it is open to you to serve your clients[’] evidence at any time” before an approach was made to the Court. On the following day, the Commissioner’s solicitor wrote to my chambers requesting that the matter be urgently listed for a case management hearing in the light of the respondents’ failure to file or serve their evidence and submissions for the summary judgment application. In circumstances where the matter was listed for an interlocutory hearing on 5 December 2024, I considered that any case management issues could be raised and addressed at that hearing.

28    I have set out the background to the interlocutory hearing in such detail only to illustrate that the respondents have had ample opportunity to file their evidence and submissions in response to the summary judgment application, and in order to provide context for an adjournment application that was made at the commencement of the hearing on 5 December 2024.

29    The respondents’ solicitor sought an adjournment of the interlocutory hearing in order to allow the respondents to put on evidence and submissions in opposition to summary judgment. I refused to adjourn the hearing for reasons that I gave orally.

30    In summary, the respondents had been on notice for some time of the date on which the summary judgment application was listed for hearing, and had failed to file their materials when they were due, notwithstanding repeated assurances that they would do so “as soon as practicable” or “as soon as possible”. The respondents resisted the Commissioner’s attempts to have the matter listed for hearing or case management on an earlier date, insisting that their materials would be filed in sufficient time for the parties to be ready for the hearing, and without any suggestion that they needed additional time in order properly to respond to the summary judgment application. In so far as the respondents sought to explain their default by reference to their pending objections to the assessments, such matters are incapable of providing any defence to the claims brought against them in the current proceedings. The adjournment application was not made in a timely manner, and was not supported by any evidence. It was brought about largely as a result of the actions of the respondents or their legal representatives.

31    While the respondents’ solicitor submitted that the refusal of an adjournment would have severe consequences for the respondents, the application for summary judgment involves the enforcement of debts that are due and payable under the taxation legislation, and the respondents will retain their rights to object to the assessments and to appeal or seek review of any adverse determination of those objections. Further, it may be open to the respondents to apply for a stay in relation to the enforcement or execution of any judgment debt.

32    In so far as the respondents sought to rely on the fact that the Commissioner’s position would be protected by the extant freezing orders, I note that Bromwich J in Commissioner of Taxation v Ornelas [2016] FCA 457 at [15(c)], in considering whether to exercise the discretion to order summary judgment, agreed with a submission made by the Commissioner that the existence of freezing orders “was not the same as, nor a substitute for, judgment … not least because freezing orders go no further and, of course, cannot be enforced in satisfaction of a debt, yet enforcement is the very basis for the differential regime represented in the legislation and in the case law”. I have had regard to the freezing orders, but do not consider that they strongly militate in favour of the grant of an adjournment in the circumstances of the present case.

33    Having regard to all relevant matters (see e.g. Buurabalayji Thalanyji Aboriginal Corporation v Onslow Salt Pty Ltd (No 8) [2020] FCA 1488 at [8]-[12] (McKerracher J)), I did not consider that it was in the interests of justice to grant the “procedural indulgences” that were sought by the respondents, whether by way of an adjournment of the interlocutory hearing or by granting to the respondents a further opportunity to file evidence in opposition to the summary judgment application.

34    In relation to the latter, the respondents’ solicitor alleged in oral submissions that the parties had entered into an “in principle” agreement on 31 January 2024, in the context of the interim position regarding freezing orders and the provision of security, by which it was said that the Commissioner had undertaken not to apply for judgment in the proceedings. As addressed below, the material currently before the Court is not consistent with any such undertaking having been given by the Commissioner. Further, it was not made clear how the alleged “in principle” agreement would provide a defence to the claims made and the final relief sought in these proceedings. Finally, as set out above, the respondents have had many opportunities to put on evidence of the alleged “in principle” agreement, or at least some evidence in support of their application that they should be given a further opportunity to do so. The grant of any such indulgence now would require a fresh timetable for the filing of evidence by the parties, and would necessitate the adjournment and relisting of the hearing. At some point, case management principles and fairness to the Commissioner require a line to be drawn.

35    Accordingly, I proceeded to hear the interlocutory application on the material that was adduced by the parties. The Commissioner relied on the following evidence in support of the summary judgment application:

(a)    an affidavit of Puthmakara Hor affirmed 20 December 2023, which exhibits the notices of assessment and notices of amended assessment for income tax and the notices of assessment for shortfall penalty;

(b)    an affidavit of Dung Dinh sworn 5 July 2024, which relevantly addresses the due dates for payment of the amounts for which the taxpayer respondents were assessed, updates the outstanding tax-related liabilities and exhibits statements of account for each of the first, third, fourth and fifth respondents, and exhibits certificates issued by the Commissioner under s 350-10(3) in respect of each of those respondents;

(c)    an affidavit of William Logan affirmed 3 December 2024, which addresses the procedural history of the summary judgment application, and exhibits correspondence between the parties’ solicitors; and

(d)    an affidavit of Dung Dinh sworn 4 December 2024, which updates the outstanding tax-related liabilities and exhibits statements of account for each of the first, third, fourth and fifth respondents, and exhibits further certificates issued by the Commissioner under s 350-10(3) in respect of each of those respondents.

36    The respondents have not filed any defence or response to the claims for relief made by the Commissioner in the originating application, and did not file any evidence in response to the summary judgment application.

CONSIDERATION

37    Section 31A of the FCA Act relevantly provides as follows:

(1)     The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if:

(a)     the first party is prosecuting the proceeding or that part of the proceeding; and

(b)     the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding.

…

(3)     For the purposes of this section, a defence or a proceeding or part of a proceeding need not be:

(a)    hopeless; or

(b)    bound to fail;

for it to have no reasonable prospect of success.

38    Rule 26.01(1)(e) of the Rules provides that a party may apply to the Court for an order that judgment be given against another party if “the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding”.

39    While the power to give summary judgment against a respondent should not be exercised lightly, s 31A(3) of the FCA Act makes clear that it is not necessary to demonstrate that the respondent’s defence is “hopeless” or “bound to fail”. Assuming that the applicant has established a prima facie case for the relief sought, it is relevant to consider whether the respondent has a defence which raises real questions of fact or law that should be decided at trial: compare Australian Securities and Investments Commission v Cassimatis (2013) 220 FCR 256 at [46] (Reeves J). In deciding an application for summary judgment, the Court does not make any substantive findings of fact, but rather “determines, as a matter of law, whether there are any facts that need to be found such that a trial is required”: Imobilari Pty Ltd v Opes Prime Stockbroking Ltd [2008] FCA 1920; (2008) 252 ALR 41 at [6] (Finkelstein J), referring to Three Rivers DC v Bank of England (No 3) [2003] 2 AC 1 at 282; Deputy Commissioner of Taxation v Southgate Investments Funds Ltd [2010] FCA 1298; 81 ATR 220 at [7] (Kenny J).

40    In the present case, the Commissioner’s claims are based on tax-related liabilities, that is, pecuniary liabilities arising directly under a taxation law: see TAA, s 255-1(1). An amount of a tax-related liability that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner: TAA, s 255-5(1). The Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a tax-related liability that remains unpaid after it has become due and payable: TAA, s 255-5(2). For such purposes, this Court is a court of competent jurisdiction: Judiciary Act 1903 (Cth), s 39B(1)(c); Deputy Commissioner of Taxation v Songa Offshore Pte Ltd [2013] FCA 839; 95 ATR 779 at [23] (Gordon J).

41    In cases involving the recovery of tax-related liabilities, the Commissioner’s position is strengthened by specific legislative provisions which place him in a “position of special advantage”: see Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673 at 674-675 (Gibbs CJ). The effect of such provisions was summarised by Bromwich J in Ornelas at [7]. They reflect what has been described as the “manifest policy” of the tax legislation “to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review but on the other hand to require that in proceedings for the recovery of the tax the taxpayer will be concluded by the assessment and will not be entitled to go behind it for any purpose”: McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 270 (Dixon CJ, McTiernan and Webb JJ); see also Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [64] (Gummow, Hayne, Heydon and Crennan JJ); Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [41]-[45] (Gummow ACJ, Heydon, Crennan and Kiefel JJ); Widdup v Deputy Commissioner of Taxation [2023] FCAFC 145 at [27] (Logan, Wheelahan and Hespe JJ); Deputy Commissioner of Taxation v Lewer [2001] VSC 114 at [6] (Bongiorno J).

42    Section 350-10(1) of Sch 1 of the TAA relevantly provides that a notice of assessment under a taxation law is conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC of the TAA on a review or appeal relating to the assessment, that the amounts and particulars of the assessment are correct. This provision operates where there has been an “assessment” within the statutory description. There is no suggestion made by the respondents in the present case that notices of assessment and amended assessment were in any way tentative or provisional, or otherwise failed to answer the statutory description of an “assessment” for the purposes of s 350-10(1): compare Futuris at [25], [49]-[50] (Gummow, Hayne, Heydon and Crennan JJ).

43    Section 350-10(3) of Sch 1 of the TAA relevantly provides that the production of a certificate that is signed by the Commissioner or a delegate stating that an amount was payable under a taxation law from the time specified in the certificate is prima facie evidence that the amount is payable from that time and that the particulars stated in the certificate are correct. Under s 350-12, the particulars that may be stated in such a certificate include that a named person has a tax-related liability, that an assessment relating to a tax-related liability has been made under a taxation law, that notice of an assessment was served on the person under a taxation law, and that a specified sum is a debt due and payable by a person to the Commonwealth as at a specified date.

44    Sections 14ZZM(1) and 14ZZR of the TAA provide that the fact that a review or appeal 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 or appeal were pending. The position is no different where an objection to an assessment has not yet been determined: see e.g. Songa Offshore at [40] (Gordon J). As Kenny J stated in Southgate Investments at [30], “[t]he Commissioner is not prevented from suing for recovery of tax debts simply because the taxpayer has not had relevant objections determined or has not exhausted review or appeal rights”. Thus, her Honour considered (at [35]) that “[t]he authorities clearly establish that the policy of the taxation legislation in circumstances such as these should be given effect notwithstanding that the taxpayer’s challenge to the assessments in question may ultimately be vindicated in Part IVC proceedings”. The same point was made by Bromwich J in Ornelas at [9]:

Section 14ZZR is an important part of the ongoing legislative commitment to maintain the long-standing advantage of the Commissioner whereby the underlying basis for an assessment may be challenged, but in the meantime its enforcement ordinarily may not. If the taxpayer ultimately succeeds, then the remedy lies in reimbursement, and any other remedies that might arise, not in preventing recovery pending that outcome.

45    The Court has power to stay a judgment or order, or the execution of a judgment or order: rr 41.03 and 41.11 of the Rules. In appropriate circumstances, a stay might be granted until after an objection, or any review or appeal proceeding under Pt IVC of the TAA, has been determined. However, the power to grant a stay “is exercised sparingly in respect of any proceeding for the recovery of a tax debt based on the issue and service of an assessment, and … it is incumbent on the taxpayer to justify the exercise of power”, taking into account the legislative policy to give priority to the recovery of taxation revenue notwithstanding any pending objection, review or appeal: Southgate Investments at [38], [43]; Southgate Investment Funds Ltd v Deputy Commissioner of Taxation (2013) 211 FCR 274 at [77] (McKerracher, Jagot and Griffiths JJ); Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 at 135-139 (French J). The respondents have not made any application for a stay of the judgment in the present case.

46    As referred to in paragraph [8] above, the Commissioner has placed into evidence the notices of assessment and notices of amended assessment that were served on each of the taxpayer respondents, along with the notices of assessment of administrative penalties. Pursuant to s 350-10(1) of Sch 1 of the TAA, those notices of assessment are conclusive evidence in these proceedings that the assessments were properly made and that the amounts and particulars of the assessment are correct.

47    The tax-related liabilities of the taxpayer respondents in respect of which summary judgment is sought by the Commissioner are comprised of several different amounts.

(a)    Income tax: Each of the first, third, fourth and fifth respondents were assessed to income tax by notices of amended assessment for the year ended 30 June 2022. The third respondent was also assessed to income tax by a notice of assessment for the year ended 30 June 2023. The Commissioner is authorised by s 166 of the ITAA 1936 to make an assessment of income tax payable by a taxpayer, and by s 170 to amend such an assessment. Section 174 of the ITAA 1936 requires the Commissioner to serve a notice of assessment on the person liable to pay the tax. Service of the notice of assessment “fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment”: Federal Commissioner of Taxation v Prestige Motors Pty Ltd (1994) 181 CLR 1 at 13 (Mason CJ, Brennan, Deane, Gaudron and McHugh JJ), referring to Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 251-252 (Kitto J). While the notice of assessment gives rise to a present debt (see Deputy Commissioner of Taxation (ACT) v Sharp (1988) 91 FLR 70 at 74 (Kelly J)), the date on which the income tax is (or was) due and payable is governed by s 5-5 of the ITAA 1997.

(b)    Shortfall interest charge: The notices of amended assessment issued to each of the first, third, fourth and fifth respondents for the year ended 30 June 2022 included an amount of shortfall interest charge calculated up to 19 December 2023. Such amounts are payable under Div 280 of Sch 1 to the TAA, the object of which is (relevantly) “to neutralise benefits that taxpayers could otherwise receive from shortfalls of income tax … so that they do not receive an advantage in the form of a free loan over those who assess correctly”: s 280-50. Shortfall interest charge is payable on additional amounts of income tax that a taxpayer is liable to pay because the Commissioner amends the taxpayer’s assessment for an income year: s 280-100(1). The taxpayer is liable for shortfall interest charge for each day in the period beginning at the start of the day on which income tax under the original assessment was due to be paid and ending at the day before the Commissioner gave the notice of amended assessment: s 280-100(2). The amount of shortfall interest charge is calculated in accordance with s 280-105 by multiplying the additional amount of income tax by a daily rate which comprises a base interest rate plus 3 percentage points. The taxpayer is liable to pay shortfall interest charge whether or not he or she is liable to any administrative penalty under the TAA: s 280-103. A shortfall interest charge is due and payable 21 days after the day on which the Commissioner gives the taxpayer notice of the charge: ITAA 1997, s 5-10. A notice of shortfall interest charge is prima facie evidence of the matters stated in the notice: s 280-110(3).

(c)    Administrative penalties: Each of the first, third, fourth and fifth respondents have been assessed for an administrative penalty under s 284-75 of Sch 1 to the TAA, which imposes a liability to an administrative penalty where a taxpayer makes a statement to the Commissioner, or to an entity that is exercising powers or performing functions under a taxation law, that is false or misleading in a material particular. Section 298-30 of Sch 1 to the TAA requires the Commissioner to make an assessment of the amount of an administrative penalty under Div 284. The production of such a notice of assessment is conclusive evidence that the assessment was properly made, and that the amounts and particulars of the assessment are correct: s 350-10(1), item 2. In accordance with s 298-10 of Sch 1 to the TAA, a notice of assessment for a “shortfall penalty” under s 284-75 was served on each of the first, third, fourth and fifth respondents on 20 December 2023. The penalties are due for payment on the day specified in the notices: s 298-15.

(d)    General interest charge: The general interest charge is payable if an amount of income tax or shortfall interest charge that a taxpayer is liable to pay remains unpaid after the time by which it is due to be paid: ITAA 1997, s 5-15. The general interest charge is also payable on an amount of administrative penalty that remains unpaid after it is due: s 298-25 of Sch 1 to the TAA. The amount of the general interest charge is worked out under Part IIA of the TAA.

48    The Commissioner has adduced evidence of certificates issued under s 350-10(3) of Sch 1 of the TAA in respect of each of the first, third, fourth and fifth respondents, which constitute prima facie evidence that:

(a)    the assessments have been made, or are taken to have been made, under a taxation law in relation to the tax-related liabilities of each of those respondents;

(b)    the notices of assessment, notices of amended assessment and notices of administrative penalty were, or are taken to have been, served on the respondents;

(c)    the respondents have tax-related liabilities for each liability referred to in the certificates and for the general interest charge on the unpaid amount of each of those liabilities; and

(d)    from 4 December 2024, the following amounts were payable by each of the first, third, fourth and fifth respondents in respect of the tax-related liabilities referred to in the certificates (inclusive of the general interest charge):

(i)    in respect of the first respondent — an amount of $7,013,549.24;

(ii)    in respect of the third respondent — an amount of $4,807,045.65;

(iii)    in respect of the fourth respondent — an amount of $1,231,286.98;

(iv)    in respect of the fifth respondent — an amount of $3,959,377.76.

49    The taxpayer respondents have not filed any evidence on the summary judgment application. The effect of the certificates as prima facie evidence of the particulars stated therein is not met by any competing evidence, so that the certificates are sufficient to discharge the Commissioner’s onus to establish those facts on the balance of probabilities: compare Naumcevski v Deputy Commissioner of Taxation [2019] NSWCA 72 at [69] (Leeming JA).

50    Accordingly, the tax-related liabilities of the first, third, fourth and fifth respondents are established by the operation of the conclusive and prima facie evidentiary provisions set out above. To adapt the words of Bromwich J in Ornelas at [10], “[t]he overall effect of the legislation and case law is that [each of the first, third, fourth and fifth respondents] does not have any means in these proceedings, legal or factual, to resist judgment”.

51    In opposition to the summary judgment application, the respondents’ solicitor sought to rely on an “in principle” agreement that was said to have been made between the taxpayer respondents and the Commissioner on or about 31 January 2024, by which the Commissioner promised or undertook not to enforce or apply for judgment in relation to the tax-related liabilities of the taxpayer respondents. The respondents did not adduce evidence of any such agreement and, for the reasons set out above, I refused to grant an adjournment or leave to file further evidence.

52    Among other things, the allegation that the Commissioner entered into an enforceable agreement not to recover the debts owed by the taxpayer respondents is not consistent with the position that was adopted by the respondents at subsequent case management hearings in these proceedings. On 9 April 2024, senior counsel for the respondents stated that any settlement reached between the parties was only in relation to the freezing orders, and accepted that the proceedings were “in substance … debt collection proceeding[s] based on the assessments” in which the Commissioner was entitled to judgment “without quarrel” because of the conclusive evidence provisions. On 14 June 2024, senior counsel for the respondents referred to the “in principle settlement” as being “dependent upon the execution … and exchange of a deed of settlement”, and again conceded that if the Commissioner were to apply for summary judgment “in the face of the in principle settlement that has been reached … there’s nothing we can say against it”. Senior counsel also stated that there was “a very strong headwind in favour of the applicant for judgment in a debt case”, and that “[t]he evidence of the assessments is conclusive, and the only thing that might be up for argument is the prima facie evidence … of the ancillary calculations”.

53    While it may be assumed that those statements were made by senior counsel on instructions, they do not necessarily amount to formal admissions or concessions that are binding on the respondents in these proceedings. Nevertheless, one would not expect that such a position would have been adopted by the respondents at the case management hearings if in fact the Commissioner had previously agreed to defer taking any steps to obtain judgment or to enforce the debts owed by the taxpayer respondents. Rather than raising any such agreement at that time, the respondents did not oppose directions being made for the Commissioner to file an interlocutory application for summary judgment, and for the parties to file evidence and submissions in relation to such an application. The alleged “in principle” agreement was first raised in connection with the summary judgment application in correspondence from the respondents’ solicitor on 11 September 2024. However, the respondents have not adduced any evidence of the alleged agreement, despite having had multiple opportunities to do so.

54    In the circumstances, no findings can be made in relation to the existence or terms of any alleged agreement between the parties on or about 31 January 2024. In any event, it may be doubted whether any such agreement would be capable of providing any defence to these proceedings, or would have any bearing on the tax-related liabilities in respect of which judgment is sought, in the light of the conclusive and prima facie evidence provisions contained in the tax legislation.

55    For the reasons set out above, each of the first, third, fourth and fifth respondents has no reasonable prospect of successfully defending the proceeding, and summary judgment is given for the Commissioner against each of them for the amount of his or her tax-related liabilities, including the general interest charge calculated to 3 December 2024, as set out in the evidentiary certificates.

Associate:

Dated:    13 December 2024

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