General Machinery Hire Ltd v Chief Executive Officer, Fiji Islands Revenue and Customs Authority [2012] FJHC 1158; HBJ3.2011 (8 June 2012)

IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No HBJ 3 of 2011

BETWEEN:

GENERAL MACHINERY HIRE LIMITED

a limited liability company having its registered office at 21 Bouwalu Street, Lautoka.
1st Applicant

AND:

PRAUSHILA DEVI SINGH

of Lautoka, Company Director.
2nd Applicant

AND:

ALVIN KUMAR SINGH
of Lautoka, Company Director.
3rd Applicant

AND:

AJNIL KUMAR SINGH
of Lautoka, Company Director.
4th Applicant

AND:

CHIEF EXECUTIVE OFFICER of FIJI REVENUE AND CUSTOMS AUTHORITY
Respondent

Appearances:
C.B. Young with Ms. Lidise for the Applicant
B. Solanki & I. Ratuvuku for the Respondent

ORDER on stay pending appeal

1. On the 19th of April 2012 the Applicants in this action for Judicial review filed a Summons for Stay of Judgment seeking the "decision of the Honourable Mr. Justice Sosefo Inoke delivered on 5 April 2012 be stayed until the appeal there from of which the Applicants have given notice of Appeal dated 17 April 2012 shall have been heard and decided by the Court of Appeal". The hearing into that Summons was held on the 25th May 2012, before me as Inloke J has since retired. Stay of a judgment pending appeal is expected to be moved at the first instance before the original Court for one good reason among many being that the Judge who heard the evidence and had more time with the case would be in a better position to determine whether the judgment creditor ought to be deprived of the fruits of the judgment pending appeal, than the Court of Appeal. However in this particular instance Inoke J who heard and delivered the judgment in this matter, which constitutes a record almost 12 inches or more thick, has retired from the judiciary and the task has fallen upon me to familiarize my self with this matter within a very short period of time. The task is even more confounded as I have to now deal with the additional work that used to be diverted to 3 other civil judges prior to the retirement of two civil judges recently and another judge declining to take civil matters in Lautoka. In some months having concluded more matters than the number of working days this Court had many judgments and order to be delivered and the few judgments after trial remaining now to be delivered is delayed due to the additional unanticipated work that has fallen upon this Court. The recent bad weather in the western division, and administrative peculiarities did not help either. Of the old pre 2000 era cases that were in my roll I have concluded all except one case that is awaiting a survey of the corpus (land). There are two such other cases left in Inoke J's roll. I am sure Inoke J would have concluded those two matters had he not retired. The High Court in Lautoka has successfully dealt with the civil backlog that was present when I was first posted to Lautoka in late 2009. In addition, I need to remind myself in this case that I have to place myself in the shoes of Inoke J adopting his observations as far as they are recorded, except when deciding on any new material presented, and proceed to make my order. Both parties in addition moves for an early order. I shall endeavor to do my best as follows.
   
2. In this 'action' for judicial review Inoke J delivered his judgment on the 5th April 2012 (which was sealed on the 19th April 2012) whereby his Lordship ordered;
   
   1. The Court declares that the Deed of Settlement dated 9 July 2010 was validly entered into by the parties but not enforceable against the respondent.
      
   2. The application for judicial review of the respondent's decisions of 11 February 2011 and 25 February 2011 is otherwise dismissed.
      
   100. The applicants' claim for overpayment of taxes is dismissed.
        
   4. The applicants' claim for damages is refused but the applicants are free to pursue them in other proceedings if they wish.
      
   5. The stay granted on 15 December 2011 is lifted forthwith.
      
   6. That the applicants shall pay the respondent's costs of $3,000 within 28 days.
      
3. In lifting the stay granted, his Lordship made the following observations;
   

"THE STAY GRANTED ON 15 DECEMBER 2011

[34] On 15 December 2011, in addition to granting leave to the applicants to apply for judicial review, I ordered a stay of all actions by the respondent in respect of the matters dealt with under the Deed. The outcome of this application makes it necessary for me to lift the stay so I order accordingly."

4. In holding that the decisions canvassed by the applicants are not amenable to judicial review Inoke J made the following observations;
   

"[23] It is to be noted that the VAT Decree 1991 did not have provisions similar to those in s 25 of the Tax Administration Decree 2009. However, what is significant in my view is that paragraph F of the Deed did no more than suspend the VAT audit. The respondent did not agree not to pursue the audit if the payment deadline was not met. Similarly, paragraph G does not in my view make the Deed unlawful because it is superfluous. The total amount of tax to be paid under the Deed is the exact amount assessed by the respondent so there was no need to continue with the tax audit, unless of course the tax is not paid in full by 15 December 2010. The respondent's argument that the Deed as entered was not authorised under the Decree fails. I find that the Deed was validly entered into by the parties.

[24] It should also be noted that under s 48 of the Decree, the respondent can waive penalties in this case.

[25] The next issue for determination is whether on the facts of this case, the respondent extended the time for payment beyond 15 December 2010. As I have found above, Mr Nata, on behalf of the respondent, only extended the time for payment to 24 February 2011 at which date he was to review. Is this binding on the respondent? If it is, then the letter of 11 February 2011 terminating the Deed would be of no effect. Similarly, for the letter dated 25 February 2011.

[26] The respondent is free to resile from a position he had previously taken: principle 9 of Punjas (supra). The doctrine of estoppel does not apply here: principle 10 of Punjas (supra). The application of these principles leaves me with no alternative but to find that on the facts as I have found them, the respondent was free to resile from the position that he took on 25 November 2010, that is to say, to review the deadline on 24 February 2011. It also follows that the respondent was free to terminate the Deed on 11 February 2011 or on 25 February 2011 or on any other date for that matter. There was no lack of power to terminate or failure to give the applicants procedural fairness.

[27] In any event, the applicants had admitted that it could not meet the 15 December 2010 deadline. They were in anticipatory breach of the agreement under Deed which would have entitled the respondent to terminate it.

[28] I therefore conclude that the respondent's decisions to terminate the Deed on 11 February 2011 or on 25 February 2011 are not amenable to judicial review.

[29] The applicants are entitled to prayer for relief (a) only in so far as to declare that the Deed of Settlement dated 9 July 2010 was validly entered into by the parties. They are not entitled to a declaration that the respondent is bound by it."

(Emphasis mine.)

5. Inoke J made a further pertinent observation and the inappropriateness of the procedure at paragraph 13 of his judgment as follows;
   

"[13] I agree that the respondent's affidavit in reply did not satisfactorily address some of the pertinent issues raised in the applicants' affidavits. However, I feel unable to find that this was through lack of rebuttal evidence. It seems to me that the facts of this case and the nature of the relief sought highlight the inappropriateness of the procedure adopted in this case, namely, judicial review and evidence by affidavits rather than writ of summons and viva voce evidence, especially in respect of the claim for damages."

6. The Applicants annexed as ASK1 to the affidavit of Ajnil Kumar Singh the Notice of Motion and Grounds of Appeal bearing No.ABU0020 of 2012, which set out the grounds of appeal as follows;
   

" UPON THE GROUNDS:

1. In view of Sections 25 and 48 of the Tax Administration Decree 2009 the learned Judge erred in law in relying upon Punjas v Commissioner of Inland Revenue [2006] FJCA 66 to hold:

(i) That the Deed of Settlement dated 9 July 2010 although validly executed was not binding on the Respondent; and

(ii) That the variation made on 25 November 2010 extending the time to pay until further review on 24 February 2011 was not binding on the Respondent because the Respondent was free to resile from a position he had previously taken.

2. The learned Judge overlooked to consider the undisputed evidence about the crucial meeting of 10 March 2011 between the Appellants and the Respondent when the Respondent asked the Appellants to continue with the monthly payment of $50,000.00 in terms of the arrangement made with Mr. Nata on 25 November 2010.

3. The learned Judge was wrong in law to hold that because the Respondent had withdrawn the DPOs before the hearing the issues concerning the Respondent's decision dated 24 May 2011 (to issue DPOs) as well as the Respondent's decision dated 18 May 2011 (to issue Garnishees) was moot.

4. The learned Judge erred in law in not determining the Appellants claim for damages pleaded under Order 53 Rule 7 (1) of the High Court Rules 1988.

5. The learned Judge was wrong in law and in fact in refusing to Order the Respondent to pay to the Appellants the agreed overpayment of $100,187.57 and interest."

7. The grounds of appeal do not appear to clearly and directly impugn Inoke J's finding that the executive decisions complained against are not amenable to judicial review.
   
8. The Applicants in addition to the first affidavit of Ajnil Kumar Singh which had AKS1-AKS2 annexed, filed another supplementary affidavit by the same person (4th Applicant) annexing another set of documents again marked as AKS1- AKS5.
   
9. The Respondent filed an affidavit in reply by Visvanath Das annexing VD1-VD3. At the hearing Counsel for the Applicant admitted the factual position in VD1-VD3.
   
10. In reply to the Affidavit of Visvanath Das the Applicants filed another affidavit of Alvin Kumar Singh (3rd Applicant) annexing different documents marked yet again as AKS1-AKS5.
    
11. Counsel Mr. Young for the Applicants submitted Dymocks Franchise Systems (NSW) Pty Ltd v Bilgola Enterprises Ltd. (1999) 13 PRNZ 48, urging 7 criteria for consideration in issuing a stay pending appeal as follows:
    

(a) Whether, if no stay granted, the applicant's right of appeal will be rendered nugatory,

(b) Whether the successful party will be injuriously affected by the stay,

(c) The bona fides of the applicants as to the prosecution of the appeal,

(d) The effect on third parties,

(e) The novelty and importance of questions involved,

(f) The public interest in the proceedings,

(g) The overall balance of convenience and the status quo.

12. In Natural Waters of Viti Ltd v. Crystal Clear Mineral Waters (Fiji) Ltd (Civil Appeal No.11 of 2004) as quoted by Calanchini J in Chand v. Prakash (2011) FJHC 84, the Court of Appeal referred to the principles summarized in the New Zealand text McGechan on Procedure (2005) as follows;
    

"On a stay application the Court's task is carefully to weigh all of the factors in the balance between the right of a successful litigant to have the fruits of a judgment and the need to preserve the position in case the appeal is successful.."

13. The Respondents Counsel Mr. Solanki submitted yet another 7 criteria applicable in tax recovery proceedings citing SNOW v DEPUTY COMMISSIONER OF TAXATION (WA) FEDERAL COURT OF AUSTRALIA – GENERAL DIVISION (FRENCH J) as follows;
    
    1. The policy of the ITAA as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment. (ITAA – Income Tax Assessment Act)
       
    2. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.
       
    100. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion (although some Judges have expressed different views on this point).
         
    4. Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is a party to contrivance to avoid his liability to pay tax.
       
    5. A stay may be granted in a case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.
       
    6. The mere imposition of the obligation to pay does not constitute hardship.
       
    7. The existence of a request for reference of an objection for review where appeal is a factor relevant to the exercise of the discretion.
       
14. Mr. Solanki further cited Deputy Commissioner of Taxation v. Gergis (Supreme Court of Victoria) 22 ATR 1 and submitted that unlike in the Gergis case where the taxpayer was a mother of 4 dependant children with her husband in custody awaiting trial, in this case there was no such hardship disclosed.
    
15. In almost every jurisdiction the burden is on the assessed party to prove the assessment unreasonable during the appeals within the recovery process from the assessor to the Commissioner and thereafter to the special Court or to the Board of Review. As such the criteria in such proceedings where the tax needs to be paid while proceedings continue, is stricter than the criteria in some respects applicable to other proceedings as referred to in the Dymocks case. However the current proceedings are that of judicial review, and the judgment sought to be stayed is a result of such proceedings outside of the narrow tunnel of tax recovery. The Dymocks case may on the other hand not have suggested criteria meant to apply specifically in the event of an appeal from a Judicial Review matter. Therefore the applicable criteria could well be a hybrid version, with at least fairness, predictability and certainty in mind.
    
16. Both Counsel agreed at the hearing that the "full tax" of $1,729,952/- had been paid (however) after the payable date (of 15/12/2010) in the Deed of Settlement of 9th July 2010. They further agreed that what the stay of the judgment intends to achieve is the stay of the recovery of the penalty being a sum of $800,963/59, and the issuance of any Departure Prohibition Orders or Garnishee orders by the Respondent in the event, as perceived by the applicants, that the applicants fail to pay the said full penalty immediately. Departure Prohibition Orders or Garnishee orders are 'remedies' though legitimately available to the Respondent ought not to be utilized in terrorem while at the same time the Applicants ought to provide security where possible to avoid the Respondent from being forced to resort to such 'remedies'.
    
17. Mr. Young for the applicants agreed that there is no application to judicially review the decision of the Respondent to recover the penalty, which decision apparently had been taken after Inoke J's judgment. However Mr. Solanki graciously admitted that it is the stay issued by Inoke J that prevented them from recovering the penalty, and as such if a stay is issued the original stay issued by Inoke J would become operative and would effectively stay the hand of the Respondent in recovering the penalty.
    
18. However the stay issued by Inoke J on 15th December 2011, is couched as follows; "That there be a stay of all actions by the respondent, its servants or agents in respect of the said deed of settlement or the matters contained therein until further order or final determination of the application for judicial review." (emphasis mine).
    
19. Order 53 Rule 3(8) states as follows;
    

(8) Where leave to apply for judicial review is granted, then-

(a) if the relief sought is an order of prohibition or certiorari and the Court so directs, the grant shall operate as a stay of the proceedings to which the application relates until the determination of the application or until the Court otherwise orders;

(b) if any other relief is sought, the Court may at any time grant in the proceedings such interim relief as could be granted in an action begun by writ.

20. Therefore it is clear that it is an interlocutory stay that Inoke J has issued pending the final determination of the application for judicial review. Therefore even if Inoke J had not "lifted the stay" as he did in his judgment it could well be argued that by Inoke J's Judgment the final determination of the application for judicial review has taken place and in holding that the executive decisions are not amenable to judicial review and the assumption upon which the said stay issued had ceased, the interlocutory stay as such would automatically lapse. Therefore even if this Court issues a stay still, it may not prevent the Respondent from recovering the penalty as such a stay may not give life to an interlocutory stay that would in any event have lapsed on Inoke J delivering the judgment. At the same time this Court is mindful of the fact that Inoke J has consciously and affirmatively lifted the stay he had granted and as such had this stay application been supported before Inoke J he no doubt would be reluctant to re-impose a stay he had lifted. As observed by this Court there is no direct challenge to Inoke J's finding that the decisions complained of are not amenable to judicial review, in the grounds of appeal.
    
21. On being reminded of the often forgotten cannon in taxation that "one should not forget to spare the goose that lays the golden egg", not to be out done Mr. Solanki reminded Court that the Respondent in fact had offered the Applicants relief to pay the penalty in monthly installments of $50,000/- and that the Applicants had agreed to comply till they were allegedly advised not to do so by their Lawyers. In Mr. Young admitting VD1-VD3 the position so submitted by Mr. Solanki appears to be a fact, though not necessarily on 'the advice of their Lawyers'.
    
22. The Applicants application for stay by and large appears to be motivated by the fear that the Respondent is seeking immediate payment of the penalty of $800,963/59, as evident from the first affidavit of Ajnil Kumar Singh the 4th Applicant. It is the position of the applicants in their affidavits that they do have the assets if liquidated to pay the penalty. As such it became somewhat obvious that the Applicants could by offering their assets as security obtain a bearable monthly installment scheme to pay the penalty pending the appeal. In fact Mr. Young suggested that Court may grant a stay subject to such security and subject to the condition that appeal be proceeded with expeditiously. Mr. Solanki for the Respondent was not averse to such an order provided the monthly payment is not less than $50,000/=.
    
23. Even upon applying the criteria in the Dymocks case the applicant's need to stay pending appeal does not clearly outweigh the Respondents duty to recover the penalty given the fact that even if the Applicant succeeds in appeal still he will be able to recover the money paid from the Respondent (the state). Even if the Court of Appeal holds that the Deed of Settlement is binding on the Respondent, the fact that the Applicant was in anticipatory breach of the term in the said Deed to pay the tax before a particular date, as held by Inoke J, and not clearly challenged in the grounds of appeal, the Applicants may not be on any better ground in respect of the penalty in any event. On the other hand there are business commitments overseas for the Applicants as disclosed in their affidavits, and it is fair for them to expect predictability and certainty from the Respondent which no doubt can be achieved by providing the security for payment that the Respondent is well entitled to seek. Parties appear to have moved in that direction to some extent. The dispute appears to be as to the quantum of installments between $50,000/= per month and $25,000/= per month.
    
24. This Court is also mindful that even when exercising Judicial Review the Court should not replace the impugned decision with its own decision and it is the process by which that impugned decision is arrived at that the Court shall be more concerned with. In Chief Constable of North Wales Police v. Evans [1982] UKHL 10; [1982] 1 W.L.R 1155 at p. 1160, Lord Hailsham stated as follows:
    

"But it is important to remember in every case that the purpose of the remedy of judicial review is to ensure that the individual is given fair treatment by the authority to which he has been subjected and that it is no part of that purpose to substitute the opinion of the judiciary or of individual judges for that of the authority constituted by law to decide the matters in question."

25. If this Court grants a stay on terms that the Court thinks fit, this Court would effectively commit the error cautioned against by Lord Hailsham, even though there is no application for judicial review of the decision to recover the penalty, as such a stay would effectively change that decision. Court is also mindful that Court itself could be functus officio after issuing a stay as observed in Re V.G.M Holdings Ltd (1941) 3All ER 417, and may lay helpless thereafter to vary or vacate same. Therefore in the interim till the parties seek further relief from the Court of Appeal this Court is inclined only to grant a temporary stay for a period of 3 months subject to the conditions that ( conditions that the Respondent is already agreeable to and not in variance with the Respondent's decision made ) the Applicants pay a sum of $50,000/= immediately to the Respondent and provide to the Respondent a Bank Guarantee (or a security acceptable to the Respondent) to the value of the balance penalty due thereafter ($750963/59 or the balance due) within 14 days of this order and the Respondent may stay its hand provided the Applicant pays the monthly installment of $50,000/= or any lesser sum thereafter to be determined by the Respondent during the subsistence of the said Bank Guarantee (or a security acceptable to the Respondent). The Bank Guarantee could be reduced from time to time to reflect the balance penalty due. On the Applicant failing to comply with any one of the above conditions the limited stay will cease forthwith. Within the 14 days after this order the Respondent is not stayed, and the stay will commence to run only upon both conditions above been complied with and run for the limited period of 3 months thereafter on the continuation of the payment of the $50,000/= per month installment thereafter.
    
26. Given the fact that the Respondent was willing to give the Applicants installments and flexibility and some ability in negotiations on the part of the Applicant may well have not made this application necessary, I consider it appropriate that the Respondent be entitled to costs of this current application for stay pending appeal which I summarily assess at $1000/=. Therefore Applicants to pay the Respondent costs in $1000/= within 14 days.
    

Orders;

1. A temporary stay limited for a period of three months to commence subject to the following conditions;
   
2. The Applicants to pay a sum of $50,000/= as a first installment against the penalty of $800,963/59 on or before the 13th of June 2012,
   

100. The applicants to provide a Bank guarantee or any other security acceptable to the Respondent for the balance penalty of $750,963/59 within 14 days of this order,
     

4. The Applicant to pay the 2nd installment of $50,000/= per month beginning on the 13th of July 2012 and the subsequent such installments on or before the 13th of each and every month thereafter during the stay,
   
5. The stay aforesaid to lapse in any event on the 13th September 2012,
   
6. The stay to commence only upon the Applicants complying with above conditions (b) and (c),
   
7. Parties are at liberty to negotiate and vary terms by mutual agreement by motion signed and filed of record,
   
8. All above orders subject to further orders of Court,
   
9. Applicants to pay the Respondent $1000/= as costs summarily assessed within 14 days of this order.
   

Yohan Fernando.
JUDGE.

High Court of Fiji
At Lautoka
8th June 2012.