Chief Collector of Taxes v TA Field Pty Ltd [1975] PGSC 9; [1975] PNGLR 144 (7 August 1975)

Papua New Guinea Law Reports - 1975

[1975] PNGLR 144 - Chief Collector of Taxes v T.A. Field Pty. Ltd.

[1975] PNGLR 144

PAPUA NEW GUINEA

[SUPREME COURT OF JUSTICE]

THE CHIEF COLLECTOR OF TAXES

V

T. A. FIELD PTY. LIMITED

Port Moresby

Raine J

5 August 1975

7 August 1975

INCOME TAX - Recovery of tax - Summary proceedings for recovery - Summary judgment sought - Taxpayer precluded from raising validity of assessment in those proceedings - Income Tax Act 1959, ss. 239[clxxvii]¹, 257[clxxviii]², 259[clxxix]³.

PRACTICE AND PROCEDURE - Summary judgment - Leave to enter final and summary judgment - To be invoked in clear case only - Rules of Court O. XVIII r. 1.

A taxpayer, wishing to contest the validity of an assessment of income tax made under the Income Tax Act 1959, must pay the assessment before appealing: it is not appropriate to raise the issue of the validity of the assessment in summary proceedings by the Chief Collector of Taxes, for recovery of income tax, in which proceedings, production of the notice of assessment pursuant to s. 239 of the Income Tax Act 1959 is conclusive and together with ss. 257 and 259 of that Act effectively precludes the taxpayer from going behind the notice of assessment for any purpose in those proceedings.

McAndrew v. Federal Commissioner of Taxation [1956] HCA 62; (1956), 98 C.L.R. 263; 11 A.T.D. 131 referred to.

Accordingly, where, in proceedings instituted by specially endorsed writ, by the Chief Collector of Taxes for recovery of income tax assessed under the Income Tax Act 1959 the defendant taxpayer delivered a defence alleging that the assessment sued upon was void and contrary to law on a number of grounds, and where the plaintiff sought pursuant to O. XVIII r. 1 of the Rules of Court, leave to enter final and summary judgment;

Held

That the summary jurisdiction conferred by O. XVIII r. 1 of the Rules of Court which should only be invoked in clear cases, was applicable and leave to enter judgment should be granted.

Burnstein v. Lynn (1955), 73 W.N. (N.S.W.) 111 and Pearch v. Gyucha (1953), 73 W.N. (N.S.W.) 122 at p. 124 applied.

Motion

This was a notice of motion for an order under O. XVIII r. 1 of the Rules of Court for leave to enter summary judgment in the action in which the Chief Collector of Taxes as plaintiff had issued a specially indorsed writ addressed to the defendant company and claiming $77,750 being income tax assessed under the Income Tax Act 1959, and to which the defendant had delivered a defence alleging that the assessment sued upon was “void and contrary to law” for a number of reasons.

Counsel

P. Benson, for the plaintiff (applicant).

J A. Griffin, for the defendant (respondent).

Cur. adv. vult.

7 August 1975

RAINE J: The Chief Collector of Taxes issued a specially indorsed writ addressed to the defendant company claiming the sum of $77,750.00, being tax on income derived by the defendant for the tax year ending 30th June, 1973. The company filed an appearance on 29th July and has delivered a defence to the plaintiff, which is in the following terms:

“The assessment sued upon is void and contrary to law by reason that:

(a)      At all material times the defendant was a resident of Australia (within the meaning of that expression contained in the Income Tax Act 1959) but not of Papua New Guinea.

(b)      The income upon which the tax was subject of the assessment was assessed was derived by the defendant from sources in Papua New Guinea during a year of income, namely that ended 30th June, 1973 which tax, but for section 217 of the said Act, would have exceeded the amount of tax that would have been payable by the defendant under the Commonwealth Income Tax Act, 1936 in respect of that income.

(c)      The plaintiff should have, in the lawful exercise of the Administrative functions of his office, formed the opinion required of him under the said section 217, in or to the effect of sub-paragraphs (a) and (b) hereof with the consequence that the plaintiff should not have made the assessment sued upon but instead should have allowed the defendant a full rebate in respect of the totality of the amount of tax otherwise payable by the defendant in respect of such income.

(d)      The failure of the plaintiff to form such opinion occurred by reason of the plaintiff taking into account extraneous matters of failing to take into account material matters, and in consequence the assessment is and always has been void and of no effect.”

(NOTE: In the formal sense, the pleadings are not before me, but no point is made of this.)

The plaintiff has applied by way of notice of motion for an order under O. XVIII r. 1, namely, that he should be given leave to enter final and summary judgment in the action. In my opinion the summary jurisdiction conferred by the rule should only be invoked in a clear case. Great care should be taken not to shut out a defendant unless it is quite clear upon the facts and/or the law that he has no defence. Summary proceedings in ejectment in New South Wales under the old Rules in that State were only made use of by the Judges of the Court in very clear cases. See Burnstein v. Lynn[clxxx]⁴ and Pearch v. Gyucha[clxxxi]⁵, where Street CJ said:

“Jurisdiction under this Order does not entitle the Court to deprive the parties of their right to proceed to a hearing before a jury if there is a serious conflict on questions of fact — and that, of course, involves not only the surrounding facts themselves, but inferences of fact to be drawn from the evidence. If there is no such serious question between the parties, then I think that this Court should exercise the power which it has to determine the matter summarily and prevent continuous litigation over a claim which has little or no substance.”

There are other cases in New South Wales to which I could refer, but I believe that the above references will demonstrate that I am not unaware of the serious responsibility that is borne by me, should I decide to accede to the application. I do not believe this was argued before me, but it is a matter of importance.

The plaintiff claims that because of certain provisions in the Income Tax Act of 1959 there is no defence, and can be no defence, to the action. The Income Tax Act, although differently numbered, is similar to the Australian statute insofar as the provisions relied upon by the Chief Collector apply to this application for summary judgment. The plaintiff relies upon s. 239[clxxxii]6 of the Income Tax Act 1959 which is the equivalent of s. 177 in the Australian Act.

Annexed to one of the affidavits is such a notice of assessment stating that the amount payable by the defendant is the same sum as that claimed in the writ of summons.

Other sections relied upon by the plaintiff are ss. 229[clxxxiii]7, 257[clxxxiv]⁸, 258[clxxxv]⁹, 259[clxxxvi]¹⁰ and 261[clxxxvii]¹¹.

Thus, on the face of it, the Chief Collector is placed in a more privileged position than is the ordinary plaintiff. It is not particularly surprising that the Legislature has both here and in Australia so provided. In Commissioner of Taxation of the Commonwealth of Australia v. Cook[clxxxviii]¹² Latham CJ said:

“It is clear on the language of s. 201 that the policy of the Legislature is that all taxes claimed by the Commissioner are liable to be paid by the taxpayer before his appeal is heard by the High Court.”

Section 201 in the Australian Act is the equivalent of our s. 257. On the face of it, s. 239, in combination with the other sections I have quoted, makes it very easy for the Chief Collector to have resort to the summary procedures provided by O. XVIII r. 1. Referring to the Australian equivalent of s. 239 in McAndrew v. Federal Commissioner of Taxation[clxxxix]¹³ Dixon CJ, McTiernan and Webb JJ said:

“Then in our opinion the meaning and effect of s. 177 (1) is to give evidentiary effect to such an assessment over the whole ground which by law it is the function of an assessment to cover. Over part of that ground its evidentiary effect is absolutely conclusive, over the rest of the ground it is conclusive except in proceedings on appeal against the assessment. It is given such evidentiary effect by the production of a notice of the assessment or of a copy under the hand of the Commissioner, Second Commissioner or a Deputy Commissioner. The ground over which s. 177 (1) gives conclusiveness to the assessment is described as the due making of the assessment and the correctness of the amount and all the particulars of the assessment. But that appears to me to comprise the whole ground. It is the manifest policy, one may now almost say the historical policy, of the legislation on the one hand 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.”

In addition, the judgment of Richardson J in Deputy Commissioner of Taxation (N.S.W.) v. Hissink[cxc]¹⁴ also demonstrates the strong position in which, as I have said, the statute apparently places the Chief Collector.

Mr. Griffin of counsel for the defendant submits that s. 239 (1) does not apply to this particular case, because under defence (d) (supra) it is claimed that the assessment was and is void and of no effect. He makes a distinction between this situation and the normal situation where a taxpayer is merely saying, in effect, “You say I owe $X, I say I owe $X minus $Y”. I see the point that Mr. Griffin makes but with great respect to him I quite fail to agree that this is a valid argument. Mr. Griffin also draws attention to the fact that the defendant is not resident in Papua New Guinea and submits that s. 239 does not apply to non-Papua New Guinea residents. I fail to see the force of this argument. It seems to ignore s. 217, but even the former presence of this section, so it seems to me, is not needed to assist the plaintiff, at any rate, at this stage, immediately prior to Independence. Nor can I agree that Mr. Griffin’s submissions with respect to s. 257 and the words “income tax may be recovered on the assessment” appearing in the section, which he suggests means that the tax may only be recovered if the Collector can establish the defendant’s liability to pay the tax, have validity. See s. 239 (1). It may later turn out that the assessment was void, but the sub-section is in absolute terms, and, so it seems to me, one must pay up protesting, and live in hope that it will later be established that the Chief Collector was wrong, and have one’s wrongly levied tax repaid.

Notwithstanding Mr. Griffin’s arguments, it seems quite clear to me that the plaintiff must succeed. The Notice of Assessment that is before me clears the factual decks. The statute is clear enough. Turning back to what I quoted earlier from the judgment of Sir Kenneth Street, I see no “serious conflict on questions of fact”, or any conflict at all.

At first blush some might be offended at the situation I believe should be arrived at. But if one takes pause, and remembers that Parliament must have money to support its many existing operations and projects, to cite a few, hospitals, schools, defence, rural improvements, and the police, then it is not surprising to find provisions in the Income Tax Act that attempt to ensure that the money believed owing to the Chief Collector is not lost to the country while lengthy and difficult appeals are embarked upon. I can imagine taxpayers being very irritable in cases where they are sure, on good grounds, if you like, that the assessment is wrong, because they still have to hand over the amount they are sure was wrongly assessed, at least temporarily. But there are cases, or could be cases, where, but for the effect of s. 257, in combination with other provisions, many assessments would never be paid, people would leave the jurisdiction, money channelled off, companies despoiled, and so on.

There will, of course, be cases where the Chief Collector would, or should, see the need to compromise, on terms that would preserve the amount assessed, if the assessment was later upheld on appeal, and, at the same time, allow a company or individual to continue to operate pending appeal.

I am clearly of opinion that the orders should be made as asked, with costs.

I should add that I ignored Mr. Benson’s suggestion that after Independence there will be, in all probability, no reciprocity “qua” enforcement of judgments, between this country and Australia. I do not say this critically of counsel, in fact, it might well be the case, and, even if there is some Convention after 16th September, it will take time for it to be formulated and put into force. This is a political matter. As I said to counsel, I simply do not know. And, further to this, the defendant company, weighing the amount of the assessed tax, (if it stands) on the one hand, and future trade with the newly independent country on the other, might not, as Mr. Benson rather seems to fear, thumb its nose at the assessment because of jurisdictional advantages consequent on Independence.

I hasten to add that I do not suggest that this well known and long established defendant company would behave like this in any event. However, I must say, the directors might have serious and personal legal problems, “qua” their shareholders, in authorising payment of tax here, on what might be described as an almost “ex gratia” basis.

Leave to enter judgment granted.

Solicitor for the plaintiff/applicant: B. W. Kidu, Crown Solicitor.

Solicitors for the defendant/respondent: Craig Kirk & Wright.

> R>

[clxxvii]<Infra pp. 146-7 footnote.

[clxxviii]Infra p. 147 footnote.

[clxxix]Infra p. 147 footnote.

[clxxx](1955) 73 W.N. (N.S.W.) 111.

[clxxxi] (1953) 73 W.N. (N.S.W.) 122, at p. 124.

[clxxxii]Section 239 of the Income Tax Act provides as follows:—

N1>239. — (1) The production of a notice of assessment, or of a document under the hand of the Chief Collector or an Assistant Collector purporting to be a copy of a notice of assessment, is conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct.

N1>(2) The production of a Gazette containing a notice purporting to be issued by the Chief Collector is conclusive evidence that the notice was so issued.

N1>(3) The production of a document under the hand of the Chief Collector or an Assistant Collector purporting to be a copy of a document issued by either the Chief Collector or an Assistant Collector is conclusive evidence that the document was so issued.

N1>(4) The production of a document under the hand of the Chief Collector or an Assistant Collector purporting to be a copy of or extract from a return or notice of assessment is evidence of the matter set forth in the document to the same extent as the original would be if it were produced.

[clxxxiii]229. If —

N1>(a) a person makes default in furnishing a return;

N1>(b) the Chief Collector is not satisfied with the return furnished by a person; or

N1>(c) the Chief Collector has reason to believe that a person who has not furnished a return has derived taxable income,

N1>the Chief Collector may make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of the last preceding section.

[clxxxiv]257. The fact that an appeal or reference is pending does not in the meantime interfere with or affect the assessment the subject of the appeal or reference and income tax may be recovered on the assessment as if no appeal or reference were pending.

[clxxxv]258. If the assessment is altered on the appeal or reference, a due adjustment shall be made, for which purpose amounts paid in excess shall be refunded, and amounts short paid shall be recoverable as arrears.

[clxxxvi]259. Subject to this Part, any income tax assessed is due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than thirty days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.

[clxxxvii]261. The Chief Collector may in any case grant such extension of time for payment, or permit payment to be made by such instalments and within such time, as he considers the circumstances warrant and in any such case the tax is due and payable accordingly.

[clxxxviii] (1940) 1 A.I.T.R. 551, at p. 552.

[clxxxix][1956] HCA 62; (1956) 98 C.L.R. 263, at p. 269; [1956] HCA 62; 11 A.T.D. 131, at p. 133.

[cxc] (1966) 10 A.I.T.R. 102.