Deputy Commissioner of Taxation v Price [2010] QSC 196

SUPREME COURT OF QUEENSLAND CITATION: Deputy Commissioner of Taxation v Price [2010] QSC 196 PARTIES: DEPUTY COMMISSIONER OF TAXATION (plaintiff) v ROBERT JAMES PRICE (defendant) FILE NO/S: BS 8910 of 2008 DIVISION: Trial Division PROCEEDING: Application ORIGINATING COURT: Supreme Court at Brisbane DELIVERED ON: 9 June 2010 DELIVERED AT: Brisbane HEARING DATE: 17 September 2009, last submissions received 29 April 2010 JUDGE: Peter Lyons J ORDER: 1. Judgment given in favour of plaintiff against defendant in the amount of $459,344.58. 2. The defendant is ordered to pay the plaintiff’s costs of the application in the amount of $12,328.50 CATCHWORDS: PROCEDURE - SUPREME COURT PROCEDURE - QUEENSLAND - PROCEDURE UNDER RULES OF COURT - SUMMARY JUDGMENT TAXES AND DUTIES – MISCELLANEOUS TAXES –- where the plaintiff made an “administrative overpayment” to the defendant – where the plaintiff established a Running Business Account for the defendant – where the plaintiff charged a general interest charge in the Running Business Account - whether the plaintiff can obtain summary judgment against the defendant for the balance of a Running Business Account Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473, cited Deputy Commissioner of Taxation v Salcedo [2005] 2 Qd R 232, cited Dey v Victorian Railways Commissioners (1949) 78 CLR 62, applied General Steel Industries Inc v Commissioner for Railways -- 1 of 7 -- 2 (NSW) (1964) 112 CLR 125, applied Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2010] QCA 119, applied A New Tax System (Goods and Services Tax) 1999 (Cth), s 195-1 Income Tax Assessment Act 1997 (Cth), s 995-1 Taxation Administration Act 1953 (Cth), s 2, s 3A, s 3AA, s 8AAB, s 8AAZA, s 8AAZC, s 8AAZD, s 8AAZF, s 8AAZI, s 8AAZN, Part IVC, Part 3-10 of Schedule 1, s 105-5 of Schedule 1, s 105-25 of Schedule 1, s 105-30 of Schedule 1, s 105-100 of Schedule 1, s 284-75 of Schedule 1, s 284-80, s 298-30 of Schedule 1, Uniform Civil Procedure Rules 1999 (Qld) r 292 COUNSEL: P A Looney for the applicant No appearance by or on behalf of the respondent SOLICITORS: Australian Taxation Office No appearance by or on behalf of the respondent Introduction [1] The plaintiff seeks summary judgment against the defendant for the balance of a Running Business Account (RBA) established under the Taxation Administration Act 1953 (Cth) (TAA 53). One of the liabilities which contributes to that balance is a liability for an “administrative overpayment”. Another is the General Interest Charge (GIC). A question which has been raised on behalf of the plaintiff is whether the GIC can be claimed in respect of an administrative overpayment, unless a notice has been given to the person to whom the overpayment was made, and the date for payment that has been specified in the notice has passed. Background [2] The defendant provided Business Activity Statements for the periods ended 31 March 2005, 30 June 2005 and 30 June 2006, in respect of which he claimed tax credits, being GST Input Tax Credits, and credits in respect of the Luxury Car Tax. In respect of the first two periods, he was paid $90,646.63 on 23 May 2005, and $31,336.87 on 22 July 2005. An assessment was made in respect of the period 31 March 2005, resulting in a Notice of Assessment recording a credit of $90,601.00. The amount paid in respect of this credit was slightly greater, being increased by an amount called the delayed refund interest. [3] Subsequently, the view was taken that the defendant was not entitled to the credits, or to the payments which had been made to him. On 26 April 2007 Notices of Assessment (the variation assessments) were issued to the defendant in respect of the three periods, identifying the credit for each period as nil. [4] On a date not identified in the material, the Commissioner of Taxation established an RBA for the defendant. The amounts paid to the defendant were treated as administrative overpayments, and were allocated to the RBA. There is no indication -- 2 of 7 -- 3 in the materials that, prior to the commencement of proceedings, notice was given to the defendant calling for repayment of the administrative overpayments. [5] Also on about 26 April 2007, the plaintiff served on the defendant a Notice of Assessment for administrative penalties in the amount of $178,773.60 (the penalties assessment). This amount has also been allocated to the RBA. [6] The GIC has been debited in the RBA on a regular basis in respect of outstanding amounts. [7] These proceedings were commenced on 10 September 2008. The plaintiff sued for the balance of the RBA, referred to as an RBA deficit debt, as at 8 September 2008 amounting to $399,016.27. [8] The defendant filed a defence. Essentially he did not admit the allegations in the Statement of Claim, and appeared to challenge the decision that he was not entitled to the credits. In her reply, the plaintiff relied on an RBA statement showing the debit balance of the amount claimed. Summary judgment application [9] The defendant did not appear on the hearing of the application. The only basis of defence which has been raised on his part is that pleaded in the defence, although there is no evidence in support of it. [10] Mr Looney of Counsel for the plaintiff raised the question which I have previously identified. Subsequent to the hearing, he provided additional written submissions on that question. In response to questions raised by me, he provided further written submissions on 29 April 2010. I have been informed that both sets of submissions were sent to the defendant’s address for service. There has been no suggestion of any further communication from the defendant. [11] Summary judgment is sought pursuant to r 292 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR). The language of the rule makes it necessary to consider whether a defendant has any “real prospect of successfully defending” a claim. In Deputy Commissioner of Taxation v Salcedo 1 it was held that this represented a departure from the approach taken under previous rules of court. Authorities there cited contrasted a real prospect of successfully defending a claim, with one which is merely fanciful; although reference was made to the need to keep in mind why the interests of justice usually require the issues to be investigated at a trial. More recently, the Court of Appeal has stated that propositions derived from Dey v Victorian Railways Commissioners2 and General Steel Industries Inc v Commissioner for Railways (NSW)3 are applicable to applications for summary judgment under the UCPR.. 4 The effect of those propositions is that summary judgment may only be granted in a case where there is a high degree of certainty about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. 1 [2005] 2 Qd R 232. 2 (1949) 78 CLR 62, 91. 3 (1964) 112 CLR 125, 130. 4 See Neumann Contractors Pty Ltd v Traspunt No 5 Pty Ltd [2010] QCA 119 at [81]. -- 3 of 7 -- 4 Claim for administrative overpayments [12] Section 8AAZN of the TAA 53 defines an “administrative overpayment” as an amount that the Commissioner has paid to a person by mistake, being an amount to which the person was not entitled. [13] The amounts paid to the defendant in May and July 2005 were paid on the basis that the defendant was entitled to GST Input Tax Credits and Luxury Car Tax Payments for the periods ending 31 March 2005 and 30 June 2005. [14] The variation assessments record that the defendant was not entitled to these payments. It was submitted on behalf of the plaintiff that by virtue of s 105-100 of Schedule 1 of the TAA 53, Notices of Assessment recording these assessments (which are included in the material relied on for the application) are conclusive of the relevant contents of each assessment. 5 [15] Schedule 1 of the TAA 53 takes effect under s 3AA of that Act. It provides that the production of a Notice of Assessment under Part 3-10 of Schedule 1 is conclusive evidence that the assessment was properly made, and that, except in proceedings under Part IVC of the TAA 53 on a review or an appeal related to the assessment, the amounts and particulars in the assessment are correct. [16] Part 3-10 includes s 105-5, which confers on the Commissioner the power to make a number of assessments. One is for a “net amount” for a tax period. Another is for a “net fuel amount” for a tax period. Another is for “the amount of indirect tax” payable by the taxpayer on an importation of goods. These terms are all defined in the Income Tax Assessment Act 1997 (Cth) (ITAA 97).6 The term “indirect tax” is defined in s 995-1 of ITAA 97 to mean GST, wine tax and the luxury car tax. The term “net amount” is there defined as having the same meaning as in s 195-1 of A New Tax System (Goods and Services Tax) 1999 (Cth) (GST Act). Relevantly, the GST Act states that the net amount for a tax period is worked out using the formula: GST – Input Tax Credits.7 By virtue of s 105-25 of Schedule 1 of TAA 53¸ there is power to amend an assessment at any time. Moreover, s 105-30 of Schedule 1 provides, in relation to a case where there is more than one assessment for a particular tax period, that, to the extent of any inconsistency, the later assessment prevails. [17] The Notices of Assessment on which the plaintiff relies are assessments of net amounts, being the difference between GST payable by the defendant and Input Tax Credits, to the benefit of which the plaintiff is entitled. This is reflected in the Notices, which state that they are made under s 105-5 of Schedule 1 to the TAA 53. That which related to the period ending 31 March 2005 prevailed over the earlier assessment for the same tax period. It follows that these Notices of Assessment are the subject of the “conclusive evidence” provisions found in s 105-100 of Schedule 1. In these proceedings, they are conclusive evidence that the assessments were properly made, and that the amounts and particulars in each assessment are correct. They demonstrate that, for the periods in respect of which payments were made to the defendant on the basis that there was a credit in his favour for each period, no 5 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [33]. 6 See s 3AA(2) of TAA 53. 7 See the definition of “net amount” in s 195-1 of the GST Act, together with s 17-5 of the GST Act. -- 4 of 7 -- 5 credit was in fact available to him; and that for the third period, no credit was available to the defendant. [18] The result, therefore, is that the defendant was not entitled to the amounts paid to him on 23 May and 22 July 2005. The only sensible inference which can be drawn from the history which appears in the material relied on in the application is that the amounts then paid were paid on the mistaken basis that the defendant was entitled to them. That the basis was mistaken is demonstrated by the variation assessments. It is unnecessary to consider whether the mistake was a mistake of fact, or a mistake of law; a payment can be made by mistake in either case 8 , and s 8AAZN does not limit its operation to either kind of mistake. It seems to me, therefore, that each of those payments was made by mistake, to a person not entitled to them; and each is an “administrative overpayment” for the purposes of s 8AAZN of TAA 53. [19] By virtue of s 8AAZN(1) of TAA 53, an administrative overpayment is a debt due to the Commonwealth by the person to whom the overpayment is made; is payable to the Commissioner; and may be recovered in a court of competent jurisdiction by the plaintiff. [20] The Commissioner is authorised by s 8AAZC to establish systems of accounts for “primary tax debts”. Each account within such a system is, by virtue of s 8AAZC, an RBA. [21] Under s 8AAZD of the TAA 53, the Commissioner is authorised to allocate a primary tax debt to an RBA that has been established for that type of tax debt. The evidence of Ms Long establishes that an RBA was created for the defendant. [22] The term “primary tax debt” is defined in s 8AAZA of the TAA 53 to mean any amount due to the Commonwealth “directly under a taxation law”. [23] The expression “primary tax debt” may be contrasted with the expression “secondary tax debt”, defined in s 8AAZA of the TAA 53 to mean an amount that is not a primary tax debt, that is due to the Commonwealth in connection with the primary tax debt. An example of a secondary tax debt is an amount due to the Commonwealth under an order of a court, made in proceeding for the recovery of a primary debt. A comparison of the definitions suggests that a primary tax debt is one where the obligation to pay arises solely by virtue of a taxation law; whereas a secondary tax debt one in relation to which the obligation to pay arises from some other authority, but that obligation arises because of the existence of a primary tax debt. [24] A “taxation law” is defined in s 2 of the TAA 53, by reference to the definition in the ITAA 97. In s 995-1 of the ITAA 97, the term “taxation law” is defined to mean an Act of which the Commissioner has the general administration. By s 3A of the TAA 53, the Commissioner has the general administration of that Act. [25] Since the liability of the defendant for administrative overpayments is created by TAA 53, it follows that such liability is a primary tax debt for the purposes of s 8AAZC, and may be allocated to an RBA9 . 8 See David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353. 9 See Broadbeach at [28]. -- 5 of 7 -- 6 [26] The affidavit of Ms Long establishes that the administrative overpayments were allocated to the defendant’s RBA. [27] Exhibited to the affidavit of Ms Long is a document identified as an RBA statement. Under s 8AAZI, that document is prima facie evidence that the RBA was duly kept and that the amounts and particulars in the statement are correct. The RBA statement records debit amounts which appear to reflect the liability of the administrative overpayments. Claim for administrative penalties [28] Under s 284-75 of the TAA 53 a person is liable to an administrative penalty if that person makes a statement to the Commissioner or to an entity acting under a Taxation law which is false or misleading in a material particular, and there is a “shortfall amount” as a result of the statement. There is a shortfall amount, under s 284-80, if as a result of a false or misleading statement, an amount that the Commissioner must pay or credit to a taxpayer worked out on the basis of the statement is more than it would be if the statement were not false or misleading. Under s 298-30, the Commissioner is required to make an assessment of the amount of such an administrative penalty; and the production of a notice of such an assessment (or a copy of it certified by or on behalf of the Commissioner) is conclusive evidence of the making of the assessment and of the particulars in it. Exhibited to Ms Long’s affidavit is a copy of a Notice of Assessment, which Ms Long’s affidavit establishes was certified on behalf of the Commissioner. It records the imposition on the defendant of a penalty because there is a “shortfall amount” as a result of a false or misleading statement. The document has the benefit of the conclusive evidence provisions found in s 298-30, and accordingly establishes that the defendant is liable for the administrative penalty amounting to $178,773.60. [29] The obligation to pay an administrative penalty arises under s 284-75 of Schedule 1 of the TAA 53. No other basis for the obligation has been identified. It follows that an administrative penalty is a primary tax debt, which may be allocated to an RBA. Ms Long’s evidence establishes that that occurred. The RBA statement exhibited to her affidavit shows a balance which reflects the defendant’s liability for the administrative penalty. The RBA statement has, again, the benefit of the “prima facie evidence” provisions previously referred to. Claim for GIC [30] Detailed provisions relating to the GIC are found in Part IIA of the TAA 53. Section 8AAB identifies provisions of the TAA 53 and other Acts which make a person liable to pay the GIC. However, the section speaks of a single “general interest charge”. Section 8AAC sets out how the amount of “the general interest charge” is to be calculated. Other provisions relevant to this charge constitute the balance of Part III of the TAA 53. The point of these references is to note that, although there are a number of statutory provisions which might give rise to a liability for this charge, the legislation speaks of a single charge. It would follow that if in respect of a particular liability, more than one provision renders a taxpayer liable to the general interest charge, the taxpayer is not liable to pay the charge more than once, in respect of a particular amount and period. That observation is of relevance in the present case. -- 6 of 7 -- 7 [31] Under s 8AAZN, an administrative overpayment is, as has been noted, a debt due to the Commonwealth. Under the same section, if the Commissioner has given a notice to the person who received the overpayment, specifying a date for its repayment in accordance with the section, then the GIC is payable, as from that date. In respect of the administrative overpayments made to the defendant, the GIC would thus be incurred had notice been given in accordance with s 8AAZN. [32] However, under s 8AAZF the GIC is also payable in respect of an RBA deficit debt. An RBA deficit debt is a balance in relation to an RBA, in favour of the Commissioner, based on primary tax debts that have been allocated to the RBA, and that are currently payable; and payments from and credits in favour of the entity to whom the RBA relates. 10 Effectively, therefore, s 8AAZF makes the GIC generally payable in respect of any balance of an RBA in favour of the Commissioner. [33] Mr Looney’s submission is that in respect of an RBA deficit debt, the GIC is payable, notwithstanding that that debt is the consequence of an administrative overpayment, in respect of which the Commissioner has not given a notice specifying a due date for payment under s 8AAZN. In my view, that submission is correct. It follows from the fact that there is a single GIC, liability for which may flow from one of a number of statutory provisions; though a liability under more than one provision does not create more than one charge. [34] Under s 8AAZF the GIC affects the balance of the RBA. Accordingly, liability for GIC is appropriately reflected in the RBA balance. As the evidence of Ms Long shows, the GIC has been taken into account in determining the current RBA balance. The inclusion of the GIC in the RBA statement does not affect its status as prima facie evidence under s 8AAZI of TAA 53. The defence [35] As previously indicated, there is no evidence advanced on behalf of the defendant to demonstrate that he has any prospect of successfully defending the action. The only document indicating a defence on which he might rely is his defence to the plaintiff’s statement of claim. That document seeks to assert that he carried on a business, apparently a condition of his entitlement to the amounts which resulted in the administrative overpayments.11 For the purposes of the present action, however, that question is conclusively determined adversely to the defendant by the Notices of Assessment exhibited to Ms Long’s affidavit which show that he was not entitled to those credits. Conclusion [36] Nothing has been advanced on behalf of the defendant to demonstrate that he has any real prospect of successfully defending the action. An examination of the material placed before me by the plaintiff, and a consideration of the statutory provisions to which I have been referred, leads to the conclusion that the defendant has no real prospect of defending the plaintiff’s claim. The material demonstrates that a high degree of certainty can be reached about the ultimate outcome of the proceeding if it were allowed to go to trial in the ordinary way. Accordingly, I propose to grant the plaintiff’s application. 10 See s 8AAZA of the TAA 53. 11 See Divisions 11 and 15 of the GST Act. -- 7 of 7 --