Deputy Commissioner of Taxation for the Commonwealth of AUSTRLALIA v King

[2005] WADC 163

DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRLALIA -v- KING & ANOR [2005] WADC 163

Last Update:  25/08/2005

DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRLALIA -v- KING & ANOR [2005] WADC 163
Jurisdiction:	DISTRICT COURT OF WESTERN AUSTRALIA	Citation No:	[2005] WADC 163
Case No:	CIV:1448/2004	Heard:	15 JULY 2005
Coram:	DEPUTY REGISTRAR HARMAN	Delivered:	24/08/2005
Location:	PERTH	Supplementary Decision:
No of Pages:	6	Judgment Part:	1 of 1
Result:	Application dismissed
[Click here for Judgment in Adobe Acrobat Format ]

Parties:	DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRLALIA WALLACE FREDERICK KING NICHOLAS CHARLES HART
Catchwords:	Practice Western Australia Practice under the Rules of the Supreme Court of Western Australia Application to set aside judgment entered in default of defence
Legislation:	Income Tax Assessment Act 1936 Taxation Administration Act 1953
Case References:	Nil Anderson v Commissioner of Taxes (Vic) (1937) 57 CLR 233 Collins Book Depot Pty Ltd v Bretherton [1938] VLR 40 Deputy Commissioner of Taxation v Saunig [2002] NSWCA 390 Hepples v Federal Commissioner of Taxation (1991) 102 ALR 497 Palmer v Prince [1980] WAR 61 Western Australian Trustee Executor & Agency Co v Commissioner of Taxation (WA) (1980) 147 CLR 119

JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA

IN CHAMBERS

LOCATION : PERTH CITATION : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRLALIA -v- KING & ANOR [2005] WADC 163 CORAM : DEPUTY REGISTRAR HARMAN HEARD : 15 JULY 2005 DELIVERED : 24 AUGUST 2005 FILE NO/S : CIV 1448 of 2004 BETWEEN : DEPUTY COMMISSIONER OF TAXATION FOR THE COMMONWEALTH OF AUSTRLALIA

Plaintiff

AND

WALLACE FREDERICK KING
First Defendant

NICHOLAS CHARLES HART
Second Defendant

Catchwords:

Practice - Western Australia - Practice under the Rules of the Supreme Court of Western Australia - Application to set aside judgment entered in default of defence

(Page 2)

Legislation:

Income Tax Assessment Act 1936
Taxation Administration Act 1953

Result:

Application dismissed

Representation:

Counsel:

Plaintiff : G A Archer
First Defendant : M J Feutrill
Second Defendant : M J Feutrill

Solicitors:

Plaintiff : Deputy Commissioner of Taxation
First Defendant : Tang Lawyers
Second Defendant : Tang Lawyers

Case(s) referred to in judgment(s):

Nil

Case(s) also cited:

Anderson v Commissioner of Taxes (Vic) (1937) 57 CLR 233
Collins Book Depot Pty Ltd v Bretherton [1938] VLR 40
Deputy Commissioner of Taxation v Saunig [2002] NSWCA 390
Hepples v Federal Commissioner of Taxation (1991) 102 ALR 497
Palmer v Prince [1980] WAR 61
Western Australian Trustee Executor & Agency Co v Commissioner of Taxation (WA) (1980) 147 CLR 119

(Page 3)

1 DEPUTY REGISTRAR HARMAN: Judgment was entered for the plaintiff in default of defence on 29 September 2004. By application made on 7 December 2004 the defendants seek to have the judgment set aside. That application is before me for determination.

2 The onus in the application is upon the defendants. The court will only set aside a default judgment if it is persuaded that there is good reason to do so. What would amount to good reason depends on the evidence presented by the application.

3 The plaintiff's claim in the action was brought to recover penalties from the defendants as directors of Andalee Pty Ltd as a consequence of their failure to comply with the provisions of s 222 AOC of the Income Tax Assessment Act 1936. It was pleaded that the circumstances that gave rise to that non compliance were that Andalee Pty Ltd had withheld specified amounts of money for the purposes of Division 12 of Sch 1 to the Taxation Administration Act 1953; that in contravention of s 222 AOB of the Income Tax Assessment Act 1936 it had failed to comply with (1) or (2) of that provision; and that each of the defendants was a director of the corporation at the relevant times.

4 In opposing the application the plaintiff filed an affidavit of Deborah Jayne Thiele sworn 9 May 2005. At par 9 she provides what I take to be an evidentiary basis for the pleading. It is that Andalee was in partnership with Delfield Holdings Pty Ltd and that the partnership was an employer liable to withhold payments to employees pursuant to Division 12 of Sch 1 of the Taxation Administration Act 1953. At par 12 she deposes that the plaintiff had been notified by the partnership of the fact that specified amounts had been so withheld during the relevant period.

5 It is the defendants' submission that the plaintiffs pleading and evidence are inconsistent. The pleading refers to Andalee as the relevant entity in default whereas the evidence would establish the partnership as the entity in default.

6 The defendants may accept that a partnership is an entity is wide of the mark set by common law but contend that it is the provisions of the Act that should determine their liability. The defendants submit that the Act provides for the result that a partnership is to be treated as if it were a legal entity. They also draw support from the plaintiff's evidence. I understand that the defendants would contend that as much as the acts of withholding and reporting were undertaken in accordance with the Act other than by Andalee it would be open to conclude that such amounts so

(Page 4)

withheld and reported would be payable under the Act other than by Andalee.

7 The first significant point to consider is that the defendants would contend that the Act recognises that a partnership is an entity. The second is that by the acts of withholding and reporting the partnership has been brought within the scope of the Act as such an entity. I suspect that the plaintiff may not have too much difficulty with those propositions; the plaintiff would probably be more interested in the fact that the provisions of the Act had been complied with. The third point to consider is that following upon such compliance comes the obligation to make payment to the plaintiff of the money so withheld. Section 444-5 of Sch 1 to the Taxation Administration Act provides as follows: -

(1) This Schedule applies to a partnership as if the partnership were a person, but with the changes set out in this section.

(2) An obligation that this Schedule would otherwise impose on the partnership:

(a) is imposed instead on each partner; but

(b) may be discharged by any of the partners.

8 On the evidence before me it would be appropriate for the court to find in terms of the first and second propositions that I have outlined above. At that point the defendants would be confronted by s 444-5, which although convoluted expresses the liability of partners. That provision brings the statutory scheme of withholding reporting and remitting into line with the common law. At that point I struggle to see that the defendants' case is arguable. It is appropriate to record that I accept that a court hearing an application that may have some claim to be interlocutory in nature is not generally regarded as providing an appropriate forum to determine matters that call for interpretation. If I considered that the defendants had a prospect of success at trial of the issue of interpretation it would be incumbent upon me to allow them to put such a case forward for determination. In my opinion the fact that the statutory scheme requires payment of money withheld from the employees of the partners to be remitted by partners to the plaintiff is unarguable. In my opinion the defendants have no prospect of success.

9 The alternative proposition put by the defendants that they took all reasonable steps to ensure that Andalee complied with its obligations involves consideration of the circumstances whereby the liability of the corporation was incurred and the opportunities open to the defendants to

(Page 5)

remedy its statutory default. At that point the defendants also seek to rely upon evidence to the effect that Andalee was simply a capital contributor to the partnership and that it assumed no role in the management of the partnership business. By way of summary the defendants' submissions are along the lines that the corporations entered into a commercial transaction as a result of which Delfield Holdings assumed a primary role in the business enterprise. There had been nothing to suggest to the defendants that Delfield Holdings had failed discharge of the responsibilities of the partnership and indeed the circumstances which would give rise to the liability of Andalee and the defendants under the terms of the penalty notices did not come to the attention of either Andalee or the defendants until well after the event.

10 It is my appreciation that the defendants' submission should be looked at in the light of the plaintiff having judgment. Despite the fact the judgement is in place as a consequence of an administrative process, it remains a judgement. Simply because a defendant seeks to have a judgement set aside does not mean that the court is predisposed to either conducting an analysis of the circumstances that gave rise to the plaintiff's claim or whether the failure of the defendants to act as prescribed by the Act was reasonable. It is for the defendants to satisfy the court that it is appropriate to set aside the judgment.

11 I recognise that in order to justify setting aside the judgement on that basis would require the defendants to undertake what would probably be both a difficult and enormous evidentiary task. The fact that I recognise those considerations would not translate into any justification for considering that the standard of proof would be any lower in this case than would apply in the case of any other party against whom default judgment had been entered. On the scant material before me, the context in which the court would be called upon to consider any case put by the defendants is one in which Andalee and thereby the defendants chose to be exposed to the consequences of actions taken by Delfield Holdings. The evidence in support of the application does not add much to that perception other than to the extent that the business relationship between the parties to the partnership broke down. On that simple analysis it is difficult to see that there could be any justification for setting aside the judgment. On the case before me I would simply observe that the defendants allowed for the result that transpired to be either deliberately established or be permitted to evolve.

12 In my opinion the defendants' propositions are without merit and the application should be dismissed.

(Page 6)

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