Woods v Australian Taxation Office
[2016] QDC 198
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- Unreported Judgment
- Appeal Determined (QCA)
- Woods v Australian Taxation Office[2016] QDC 198
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Woods v Australian Taxation Office[2016] QDC 198
Woods v Australian Taxation Office[2016] QDC 198
DISTRICT COURT OF QUEENSLAND
CITATION: | Woods v Australian Taxation Office & Ors [2016] QDC 198 |
PARTIES: | Sonya Joanne Woods v Australian Taxation Office abn 51 824 753 556 Robert Ravanello Deputy Commissioner of Taxation David Diment Erin Holland Peter Butler Chris Jordan Elizabeth Menere |
FILE NO/S: | 124/16 |
DIVISION: | Civil |
PROCEEDING: | Application |
ORIGINATING COURT: | District Court at Southport |
DELIVERED ON: | 10 August 2016 |
DELIVERED AT: | Southport |
HEARING DATE: | 1 August 2016 |
JUDGE: | Kent QC DCJ |
ORDERS: |
|
CATCHWORDS: | PROFESSIONS AND TRADES – LAWYERS – UNQUALIFIED PERSONS AND DISQUALIFIED PRACTITIONERS – ACTING FOR PARTY – where the plaintiff sought leave to be represented by two persons who had no legal qualifications – where the plaintiff described those unqualified persons as her friends – where the plaintiff was present in court, but was too nervous to speak – where written submissions of the plaintiff had been prepared by one of the two unqualified persons – where the plaintiff could not offer any reason for not instructing a solicitor, in a matter that was complex and serious – whether leave should be granted to the two unqualified persons to assist as friends of the court BANKING AND FINANCE – INSTRUMENTS – BILLS OF EXCHANGE – INCOMPLETE AND INCHOATE BILLS – where the plaintiff had an outstanding tax debt to the Australian Taxation Office – where the plaintiff made notations on documents sent to her by the Australian Taxation Office – whether the altered documents constituted an “inchoate instrument” under the Bills of Exchange Act 1909 (Cth) BANKING AND FINANCE – INSTRUMENTS – PROMISSORY NOTES – DEFINITIONS – where the alleged promissory notes were said to be payable on demand, but also at a fixed future time – whether the alleged promissory notes were promissory notes as defined under the Bills of Exchange Act 1909 (Cth) BANKING AND FINANCE – INSTRUMENTS – PROMISSORY NOTES – LIABILITIES OF PARTIES – where the plaintiff had an outstanding tax debt to the Australian Taxation Office – where the plaintiff attempted to discharge said liability by way of alleged promissory notes – whether the plaintiff could discharge her tax liability by way of promissory notes – whether Part II of the Bills of Exchange Act 1909 (Cth) applied to the promissory notes CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – FORMATION OF CONTRACTUAL RELATIONS – where the Australian Taxation Office sent a running balance account to the plaintiff – where the plaintiff marked the running balance account statement with the words, “acknowledged statement of the transaction giving rise to payment and acknowledged offer of contract between the parties disclosed” – whether there was an offer – whether there was acceptance – whether a contract had been formed between the plaintiff and the defendants PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – PLEADINGS – STRIKING OUT – DISCLOSING NO REASONABLE CAUSE OF ACTION OR DEFENCE – where the statement of claim plead the existence of a contract that did not exist – where the statement of claim disclosed no reasonable cause of action – whether the statement of claim should be struck out PROCEDURE – CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS – COSTS – INDEMNITY COSTS – where the plaintiff was put on notice as to the futility of its case, prior to issuing proceedings – where the plaintiff was not legally trained – whether the court should exercise its discretion to award indemnity costs Bills of Exchange Act 1909 (Cth), s 25, s 50(1), s 89, s 90, s 95 Taxation Administration Act 1953 (Cth), s 16A Taxation Administration Regulations 1976 (Cth), r 18(1) Uniform Civil Procedure Rules 1999 (Qld), r 171, r 293 Atkinson v Commissioner of Taxation [2014] FCA 1217, cited Atkinson v Commissioner of Taxation (2015) 318 ALR 585; [2015] FCAFC 18, cited Deputy Commissioner of Taxation v Sproule [2012] FMCA 1188, cited Ross v Hallam [2011] QCA 92, cited Thompson v Kane (No. 2) [2012] FCA 763, applied Walsh v Toyota Finance Australia Limited ABN 48002435181 trading as Toyota Financial Services [2016] QDC 92, cited Wilmink as Trustee for the Bengarra Trust v Westpac Banking Corporation [2014] FCA 872, cited |
COUNSEL: | The plaintiff appeared on her own behalf with A Evans and M Andrew assisting M Hanson (sol) for the defendants |
SOLICITORS: | The plaintiff appeared on her own behalf with A Evans and M Andrew assisting Australian Government Solicitor for the defendants |
Background
- [1]The plaintiff commenced proceedings, by a claim and statement of claim filed 18 May 2016, for money said to be due and owing to her pursuant to two contracts said to have arisen between herself and, essentially, the third defendant, together with interest thereon and costs. The circumstances under which these debts are said to arise on the plaintiff’s pleadings are, if not novel, certainly inventive. I pause to note that the claim and statement of claim were also filed with a document appointing Anthony William Evans as the plaintiff’s attorney for “the specific purpose of overseeing the matters pertaining to the attached current proceedings”. I will return to the topic of Mr Evans shortly.
- [2]The statement of claim sets out the basis of the claim as follows. The pleading acknowledges, in paragraph 10, that the third defendant had forwarded to the plaintiff running balance account statements for her tax liabilities. These amount, on the third defendant’s case, to $77,521.21 and on the plaintiff’s case to somewhat less than that. The pleading sets out the plaintiff’s case that the balance of tax owing was dealt with by the plaintiff creating two promissory notes, which were delivered to the third defendant in November 2015 and were said to be for amounts that more than discharge her “former” liabilities. The pleading further alleged a contract had been created on 23 November 2015, whereby it was said that the third defendant had agreed (as a “defaulting party”) to accept the promissory notes and pay the plaintiff $216,000 for some unspecified breach of the alleged contract. The pleading also alleged a second contract arose at the same time as the second promissory note, on the same day, to similar effect, except that the award for “breach” of the contract was on this occasion $80,400.
- [3]Although it is not made quite clear in respect of the first contract, in respect of the second contract it appears that the amount of the claim is calculated by way of multiplying the amount of the tax debt by four and imposing that amount as a penalty for some perceived breach of the alleged contracts.[1] It is in this, somewhat mysterious, way that the apparent tax debt owed by the plaintiff is converted into a much larger debt owed by the third defendant to the plaintiff without any tax having been paid.
- [4]Not surprisingly, these ideas prompted some resistance by the defendants. The matter has been conducted essentially by the third defendant, the Deputy Commissioner of Taxation, as the responsible entity. On 15 June 2016, the third defendant filed the present application for orders that the pleading be struck out and for costs. The matter was originally to be heard on 21 June 2016, but was heard on 1 August 2016. In the meantime, the plaintiff made an application for default judgment on the basis that the defendants had not filed a defence, despite having been served with the application to strike out.
Factual matrix
- [5]The third defendant submits that the plaintiff had tax liabilities owing of $77,521.21. Further, that she was not enabled to discharge those liabilities by delivery of promissory notes, nor was she able to bind the third defendant to alleged contractual rights as I have outlined above.
- [6]In August 2014, the third defendant indicated to the plaintiff that:[2]
- (a)her present tax liability was $51,744.90;
- (b)she had available funds totalling $121,500.83; and
- (c)she was not to be released from paying her tax.
- [7]The correspondence with the Australian Taxation Office (the ‘ATO’) continued and, from August 2015, the plaintiff raised various issues concerning her debt including the alleged operation of the Bills of Exchange Act 1909 (Cth) (the ‘Act’).
- [8]On 3 December 2015, the plaintiff gave the third defendant a number of documents:
- (a)a “notice of tender of payment”;
- (b)a “promissory note” quoting the amount of $21,600 “redeemable on demand at 85 Spencer Road, Nerang, Queensland…on the third day of December 2015”;
- (c)an attached marked-up running balance of account notice (i.e. the third defendant’s notice to her, amended by handwriting) dated 31 October 2015 with the following features:
- (i)the words, “acknowledged statement of the transaction giving rise to payment and acknowledged offer of contract between the parties and the suppliers” written on the notice;
- (ii)Sonya Woods’ signature written above the words “accepted as endorsed”;
- (iii)various references to an “acknowledged” party against the defendants who were referred to in the statement;
- (d)a “default and liability clause and notice” with a stamp duty stamp attached;[3]
- (e)a second “promissory note” in the amount of $54,000, also “redeemable on demand at 85 Spencer Road, Nerang, Queensland… on the third day of December 2015”, i.e five minutes after the first promissory note was redeemable;[4]
- (f)another marked-up RBA notice with the words “acknowledged statement of the transaction giving rise to payment and acknowledged offer of contract between the parties disclosed” written on the notice and various references to an “acknowledged” party against the defendants;[5] and
- (g)another “default and liability clause and notice” with a stamp duty stamp.[6]
- [9]
- (a)a promissory note is as good as cash and must be treated as such;
- (b)a three day limit was placed on any challenge to the promissory notes; and
- (c)unless the promissory notes were accepted at the time, date and place stipulated in the notes they were to be accepted as sufficient consideration to discharge liabilities to the ATO.
Further, it was asserted (unilaterally, without any acceptance by the defendants) that, failing these arrangements, the third defendant would be in “commercial default of the contracts”. Thus, presumably, giving rise to the damages claims referred to above.
- [10]On 4 December 2015, correspondence was sent in reply by the ATO advising the plaintiff that payment by way of promissory note was not sufficient to discharge a tax debt, referring to Atkinson v Commissioner of Taxation [2015] FCAFC 18. In Atkinson, an attempt to mark up an ATO statement of account to convert it to a bill of exchange or similar was, unsurprisingly, unsuccessful.[8] The similarities with the present case are consistent with a possible trend growing amongst a small subset of taxpayers seeking to avoid their liability; I am not aware of whether or how this may be publicised or organised.
- [11]It seems that the ATO has given the plaintiff garnishee notices to recover the debts.[9]
The position of Mr Evans
- [12]At the commencement of the hearing on the application, there was an application by Mr Evans to, in effect, appear on behalf of the plaintiff. The plaintiff was present in court, but said that she was too nervous to speak on her own behalf. The proceedings name Mr Evans as acting for the plaintiff “as power of attorney”. Mr Evans had apparently been the author of written submissions filed on behalf of the plaintiff concerning this application. I was helpfully referred by the legal representative for the third defendant to authorities concerning representation by persons who are not legally qualified. I was assisted by consideration of Thompson v Kane (No. 2) [2012] FCA 763. At paragraph 47 of the judgment, there are guidelines for considering whether to hear from a legally unqualified person, including consideration of their conduct, demeanour, attitude or disposition, their ability to isolate material facts in a disciplined and dispassionate way and to isolate the relevant issues and their ability to respond to questions from the court. Even so, it may be exceptional to grant leave to such a person. I was also assisted by the remarks of Chesterman JA in Ross v Hallam [2011] QCA 92 at paragraphs 20 to 21, concerning the court’s interaction with self-represented litigants.
- [13]In the event, questioning of Mr Evans and the plaintiff revealed the following:
- (a)Ms Woods could not offer any reason for not having approached a solicitor to represent her in a matter that was obviously of some seriousness and complexity (and in which she is the plaintiff);
- (b)Mr Evans has no legal qualifications and described himself as a farmer;
- (c)Mr Evans was further assisted at the bar table by a Mark Andrew, also apparently not legally qualified; and
- (d)neither Mr Evans or Mr Andrew were being paid for their assistance,[10] and both described themselves as friends of the plaintiff.
- [14]I had regard to the written outline of submissions signed by Mr Evans, which was at least reasonably concise and attempted to engage with the issues. In the end, I concluded that I should permit Mr Evans to be heard on the plaintiff’s behalf. I note, however, that later during submissions he became somewhat argumentative and unhelpful.
The submissions
- [15]As outlined above, the position of the applicant third defendant is twofold. Firstly, by operation of s 16A of the Taxation Administration Act 1953 (Cth) and, particularly, regulation 18(1) of the Taxation Administration Regulations 1976 (Cth), tax liabilities are to be paid in Australian currency using a method approved by the Commissioner and in accordance with any instructions provided by the Commissioner. Payment by promissory note is not specified or permitted.[11] One way of looking at this is that regulation 18(1) requires a person who pays a tax related liability to pay it in Australian currency, not promise to do so. Thus, the promissory notes failed to extinguish the plaintiff’s tax liability and, accordingly, the alleged contractual instruments, which relied thereon, correspondingly fell away, without further analysis.
- [16]Secondly, the procedure of allegedly making notations on the documents sent by the ATO, so that they were “inchoate instruments” as referred to in s 25 of the Act, were, apart from being prima facie nonsensical, dealt with by cases such as Atkinson v Commissioner of Taxation [2014] FCA 1217, which was upheld in Atkinson v Commissioner of Taxation [2015] FCAFC 18. In Atkinson, Justice Jagot dealt with these matters at paragraphs 45 to 47. To paraphrase his Honour’s observations, how the third defendant’s notice of a running balance account statement could be regarded as an inchoate instrument under s 25 of the Act defies common sense. Such a statement cannot be regarded as a signed blank stamped paper delivered by the signer in order that it may be converted into a bill of exchange. It seems that the procedure was then to attempt to engage s 50(1) of the Act such that, where a bill of exchange was not presented for payment, the drawer and indorsees may be discharged. Justice Jagot dealt with these matters by observing that none of the relevant propositions made sense; the statement of account was not a bill of exchange and the applicant was not authorised to do anything with the statement under the Act. Writing and putting various stamps on it had no legal effect. The Act was simply not engaged by the facts of the case. Unsurprisingly, the applicant in Atkinson failed. Similar arguments were unsuccessful in Walsh v Toyota Finance Australia Limited ABN 48002435181 trading as Toyota Financial Services [2016] QDC 92, referring in part to Atkinson.
Promissory notes
- [17]In the present case, an attempt was made to distinguish the procedure from that in Atkinson and Walsh by resort to promissory notes rather than the stratagem of a bill of exchange. However, I do not accept that the delivery of the notes was a valid exercise:
- (a)Section 95 of the Act provides that, with some exceptions, the Act, as it relates to bills of exchange, applies with necessary modifications to promissory notes. By s 95(2) of the Act, in applying those provisions, the maker of a note shall be deemed to correspond with the acceptor of a bill, and the first endorser of a note shall be deemed to correspond with the drawer of an accepted bill payable to the drawer’s order; however the notes in this case were not endorsed. The normal rules of acceptance are removed by s 95(3)(b); however validity by delivery is provided for, a matter to which I shall return;
- (b)The notes sent to the third defendant were not truly promissory notes within the meaning of the Act. A promissory note is defined in s 89(1) of the Act as an unconditional promise in writing made by one person to another, signed by a maker, engaging to pay, on demand or at a fixed or determinable future time, a sum certain in money, to or to the order of a specified person, or to the bearer. In the present case, the notes were said to be payable on demand but also at a fixed future time, namely on 3 December 2015 at 10.45 am and 10.50 am respectively. I interpret this to be an engagement to pay, not on demand, but at a fixed future time, and the time of payment was limited to one minute, or, at best, in respect of the first note, perhaps five minutes.[12] It was to be redeemed at the plaintiff’s unilaterally chosen (and apparently inconvenient) location, reminiscent of the situation in Wilmink as Trustee for the Bengarra Trust v Westpac Banking Corporation [2014] FCA 872. It was submitted by the third defendant, and not contested by the plaintiff, that the documents were not given to the third defendant until 3 December 2015. Thus, the notes were not unconditional promises in writing to pay on demand nor were they to pay at a determinable future time. There is no evidence that they were given to any relevant officer of any of the defendants at a time prior to 10.45 am and 10.50 am on 3 December 2015;
- (c)This is particularly so when regard is had to s 90 of the Act. Delivery of the note is necessary. The note is inchoate and incomplete until delivery thereof to the payee or bearer. It is not pleaded, and on the evidence the notes were not delivered at any time prior to the “future time” when payment was required.[13]
Regulations
- [18]In any case, I do not accept that the unilateral delivery of a promissory note, as occurred here, was a payment of a tax related liability within the meaning of regulation 18 of the Taxation Administration Regulations 1976 (Cth). The regulation requires payment of the liability, not a promise to pay; and a promissory note is not a method approved by the Commissioner for payment.[14] The third defendant had not agreed to the discharge of the tax liability in this eccentric way; nor, as the third defendant submits, could he have, consistently with regulation 18(1).
- [19]In any case, the problems with the purported procedure may be more basic. The payment of an obligation by promissory note would normally be pursuant to an agreement of a contractual kind. There was nothing contractual about the relationship between the defendants and the plaintiff. The third defendant is the collector of tax, a statutory obligation.
Contracts
- [20]Moving, then, to the alleged creation of the contracts referred to in the pleadings. There is no basis on which it could be determined that any kind of contract arises. The essence of formation of a contract is, of course, offer and acceptance; a contractual obligation cannot be created unilaterally (and certainly not to supervene a statutory obligation to pay tax). Thus, where the statement of claim alleges that the first contract arose, in paragraph 14 of the pleading, it is said that there was an agreement in writing between the plaintiff and the defendants where the plaintiff agreed to discharge its liability to the third defendant by tender of payment by promissory note, and it is said that the defendants agreed to accept the promissory notes. This is quite simply untrue. The defendants did not accept any such thing and, as the third defendant points out, they could not do so because it would be in contravention of regulation 18(1). In a similar way, in paragraph 18 dealing with the second alleged contract, it is said that the defendants agreed to accept promissory notes. There is simply no evidence that they did so; indeed it is contrary to the evidence as, for example, the letter of Mr Butler, dated 4 December 2015, makes clear.[15]
- [21]The plaintiff attempted to transform the ATO’s statement of account, and deliver it back to the ATO, so to discharge the plaintiff’s indebtedness by delivery of an alleged promissory note, which was redeemable for a very short time at the plaintiff’s premises. The plaintiff asserted that, as a result of the third defendant’s failure to redeem the alleged note at that time and place, the plaintiff’s indebtedness was discharged and the third defendant was liable to pay the plaintiff four times the original amount owed to the ATO plus interest. This notion is a fantasy unconnected to the operation of the Act or any other legal principle, as is made clear by the aforementioned reasons of Justice Jagot in Atkinson. Similar endeavours have been dismissed in Sproule and Wilmink, supra, and attracted descriptions such as “cynical ploy” and “hopeless nonsense”.[16]
- [22]In the result, there is no true pleading of a payment of the tax, which was an essential element anterior to the formation of any alleged contracts, and there was in fact no payment of the tax, such that the liability was not extinguished. Further, there were no contracts formed as the pleading alleges. It follows that, in terms of r 171 of the Uniform Civil Procedure Rules 1999 (Qld) (the ‘UCPR’), the pleadings disclose no reasonable cause of action and are frivolous and vexatious. They are struck out in their entirety.
Procedure
- [23]It is noteworthy that the third defendant has applied under r 171 of the UCPR, rather than filing a defence and applying under r 293 of the UCPR for summary judgment; thus, the focus is on the pleading rather than the broader evidentiary merits of the case. However, in my view, the case is so clear that this is not an impediment. The pleading of the reliance on the promissory notes, paragraph 10, does not plead any facts that address the payment requirements of the regulations. It does not plead a payment and it does not plead a proper delivery of the promissory notes or any transfer of money pursuant thereto. Furthermore, it does not plead any facts relating to any purported default by the defendants in failing to comply with the arbitrary, unilaterally imposed deadline for them to allegedly enforce the promises (i.e. the 10.45 and 10.50 am attendance times on the faces of the alleged promissory notes). It therefore does not disclose a reasonable cause of action. There was no application to respond by amendment, but in any case such an application would be futile because any such amendment would be unsustainable. The balance of the pleading falls with this element.
- [24]As to costs, it is clear the plaintiff was put on notice by correspondence, including Mr Butler’s letter dated 4 December 2015, that the ATO did not accept the promissory notes as payment, that the “contracts” could not be relied on and of Atkinson’s case. The plaintiff nevertheless issued these proceedings in May 2016. As indicated above, she did so without seeking any legal advice despite apparently having the means to do so. R 171(2) of the UCPR refers to a discretion to award indemnity costs and I consider this an appropriate case to do so.
Orders
- [25]The orders are:
- The statement of claim is struck out;
- The plaintiff’s applications, for default judgment and for dismissal of the third defendant’s application, are dismissed; and
- The plaintiff pay the third defendant’s costs of the application, including reserved costs, on an indemnity basis
Footnotes
[1] It is not presently necessary to discuss whether such an arrangement, if otherwise valid, would be an unenforceable penalty.
[2] Affidavit of Hannah O'Connor filed 15 June 2016, exhibit HO-1, Folio 4.
[3] Ibid, exhibit HO-4, folios 54-56.
[4] Ibid, exhibit HO-4, folio 57.
[5] Ibid, exhibit HO-4, folios 58-59.
[6] Ibid, exhibit HO-4, folios, 60-62.
[7] Ibid, exhibit HO-4, folio 50.
[8] Ibid, exhibit HO-5, folio 70-72.
[9] Ibid, exhibit HO-11, folio 98 and exhibit HO-12, folio 104.
[10] I note that a Mr Andrew was involved in a similar scheme in Deputy Commissioner of Taxation v Sproule [2012] FMCA 1188. It may be that there are a number of people floating these eccentric ideas.
[11] See, for example, Affidavit of Hannah O'Connor filed 15 June 2016, exhibit HO-4 at folio 53 – the printed payment slip setting out methods of payment.
[12] The plaintiff and her “acting notary’, Mr Andrew, remained at the location until 11.05am; paragraph 38 of the plaintiff’s affidavit filed 15 July 2016.
[13] Affidavit of Hannah O'Connor filed 15 June 2016, exhibit HO-4, folio 57.
[14] A promissory note may be regarded not as a payment, but rather as a conditional payment having the effect of suspending the transaction; see Rocky Castle Finance Pty Ltd v Taylor; Rocky Castle Finance v Gillen [2014] SASFC 1 at paragraphs [16] – [19]; but of course in this case the notes were in any case not accepted, or alternatively not properly delivered.
[15] Affidavit of Hannah O'Connor filed 15 June 2016, exhibit HO-5, folios 70-72.
[16]Atkinson v Commissioner of Taxation [2014] FCA 1217, [25] and [35].