Deputy Commissioner of Taxation v Terence J Chamberlain [1986] ACTSC 49 (18 June 1986)

SUPREME COURT OF THE ACT

DEPUTY COMMISSIONER OF TAXATION v. TERENCE J. CHAMBERLAIN
S.C. No. 755 of 1984
Income Tax Assessment Act 1936

COURT

IN THE SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY
Kelly J.(1)

CATCHWORDS

Income Tax Assessment Act 1936 - Action to recover unpaid tax as assessed and additional tax - Amount claimed less than that due - Judgment by consent for amount claimed - Amount of judgment debt duly paid - Second action commenced claiming balance of amount actually due - Particulars of assessment and additional tax exactly the same as those in first action but credit allowed for amount paid under judgment and correct balance claimed - Whether plaintiff estopped by agreement forming basis of consent judgment - res judicata - Whether cause of action in each action the same - Whether res judicata akin to true estoppel - Whether obligation upon plaintiff to claim tax due prevents, as would estoppel, the doctrine of res judicata operating against the plaintiff in circumstances - Meaning of "special circumstances" and "special cases" as used in Henderson v. Henderson by Wigram VC considered.

Income Tax Assessment Act 1936 - ss.166, 170(4), 174(1), 177, 207(1) and (2), 208 and 209.

Maritime Electric Company, Limited v. General Dairies, Limited (1937) AC 610

State of South Australia v. ATSA Pty. Ltd. (1980) 29 ALR 367

The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Limited [1938] HCA 69; (1938) 63 CLR 108

Port of Melbourne Authority v. Anshun Pty. Ltd. [1981] HCA 45; (1981) 147 CLR 589

Read v. Brown (1889) 22 QBD 128

Siebe Gorman & Co. Ltd. v. Pneupac Ltd. (1982) 1 All ER 377

In re South American And Mexican Company, ex parte Bank of England (1895) 1 Ch 37

Kinch v. Walcott (1929) AC 482

Huddersfield Banking Company, Limited v. Henry Lister & Son, Limited (1895) 2 Ch 273

Permanent Trustee Co. (Canberra) Ltd. v. Stocks & Holdings (Canberra) Pty. Ltd. (1977) 15 ACTR 45

Henderson v. Henderson (1843), 3 Hare 100; 67 ER 313

Rowe v. Rowe (1980) Fam 47

HEARING

CANBERRA
18:6:1986

ORDER

There be judgment for the plaintiff in the sum of $256,476.25.

DECISION

By writ of summons issued out of this Court on 26 July 1984 and numbered S.C. 679 of 1984 (the first action) the plaintiff Deputy Commissioner of Taxation began an action against the defendant claiming income tax said to be unpaid. The writ was indorsed with a claim which began:-

"THE PLAINTIFF'S CLAIM is for the sum of

$25557.92 being a debt due to the Crown from
the Defendant in respect of".

There followed seventeen items setting out tax claimed. I take five as examples:-

"Income tax assessment for the
year ended 30 June 1981 which
issued on 21 January 1982 and
was payable on 31 March 1982 $40513.57

Additional tax for late payment
calculated from the due date to
13 February 1983 at the rate of
10% per annum and thereafter to
4 April 1984 at the rate of 20%
per annum $14773.57

Income tax assessment for the
year ended 30 June 1982 which
issued on 10 February 1983 and
was payable on 31 March 1983 $31255.45

Additional tax for late payment
calculated from the due date to
4 July 1984 at the rate of 20%
per annum $ 7878.08

Amended income tax assessment
for the year ended 30 June 1980
which issued on 11 August 1983
and was payable on 12 September
1983 $ 27.47"

2. No total of the debts claimed to be due in respect of the 17 items was set out in the writ. In fact the total was $341,467.13. By the indorsement credits were allowed in the following way:-

"Less Credits:

Payment received 28 June 1976 $ 1281.94

Payment received 25 May 1976 $16000.00

Credit amendment for the year
ended 30 June 1976 $34736.30

Credit amendment for the year
ended 30 June 1977 $24089.80

Credit amendment for the year
ended 30 June 1978 $ 9779.89
---------
$85887.93"
---------

3. A balance of $25,557.92 was struck. The indorsement concluded:-

"And the Plaintiff claims the sum of
$25557.92 for debt and $115.00 for costs."

4. It will be noted that when the amount of the credits is deducted from the total of $341,467.13 a balance of $255,579.20, exactly 10 times the amount claimed in the indorsement, is obtained.

5. On 6 August 1984 an appearance was filed on behalf of the defendant. On the same day a document headed "Terms Of Settlement" and dated 3 August 1984 was also filed. It read:-

"By Consent and without admission of
liability:-

1. Judgment for the Plaintiff in the sum of
$25,557.92 together with costs to be
assessed and agreed at $115.00.

2. The settlement monies to be paid by the
Defendant to the Plaintiff forthwith."

6. The document was signed on behalf of the plaintiff Deputy Commissioner by a person whose signature is illegible without indication of his or her position. It is not, however, suggested that the signatory did not have authority to bind the Deputy Commissioner so far as this could lawfully be done. The terms of settlement were signed on behalf of the defendant by his solicitor.

7. Thereafter, again on 6 August 1984, judgment was entered in the following terms:-

"Terms of Settlement having been filed herein
IT IS THIS DAY ADJUDGED that the Plaintiff
recover against the Defendant the sum of
$25,557.92 for debt and $115.00 for costs."

8. On 10 August 1984 the plaintiff commenced this action. The claim indorsed on the writ began as follows:-

"THE PLAINTIFF'S CLAIM is for the sum of
$230,021.28 being a debt due to the Crown
from the Defendant in respect of"

The indorsement continued in exactly the same terms as the indorsement in the earlier writ save that there was added as a credit "Payment received 3 August 1984 $25557.92", the total of the credits was shown as $111445.85, the balance struck was $230021.28 and the indorsement concluded:-

"And the Plaintiff claims the sum of
$230,021.28 for debt and $223.00 for costs."

9. A statement of claim dated 27 August 1984 was filed on that date.

10. Paragraph 1 stated that the plaintiff's claim was for $230,021.28 for a debt due in respect of income tax and additional tax due and payable by the defendant to the Commissioner of Taxation pursuant to s.208 of the Income Tax Assessment Act 1936 (the Act).

11. Paragraph 2 alleged that by s.209 of the Act the plaintiff was competent to sue for the said debt.

12. Paragraph 3 listed the dates of eight original assessments and the amount of each of those assessments and one amended assessment and its amount.

13. Paragraph 4 alleged due service under s.174 of the Act of the nine assessments just referred to.

14. Paragraph 5 specified the dates upon which income tax allegedly became due pursuant to those assessments.

15. Paragraph 6 gave particulars of eight claims in respect of additional tax showing the commencement date of calculation of the additional tax for each item and the total amount said to be payable in respect of each item of additional tax claimed.

16. Paragraph 7 set out a list showing moneys received from the defendant including a payment of $25,557.92 received on 3 August 1984.

17. Paragraph 8 was in the following terms:-

"An amount of $230,021.28 remains due and
payable by the defendant to the plaintiff in
respect of the said income tax and additional
tax."

The statement of claim concluded:-

"AND the plaintiff claims from the defendant
the sum of $230,021.28 AND costs to be
taxed."

18. Each item particularised in the statement of claim had its exact counterpart in the indorsement on the second writ.

19. At the hearing an application to amend the statement of claim by adding the words "together with interest at the rate of 20 per centum per annum thereon from 10 August 1984 until judgment" immediately before the words "AND costs to be taxed" was granted.

20. Relying on s.177 of the Act, counsel for the plaintiff tendered documents under the hand of the plaintiff Deputy Commissioner purporting to be copies of the nine notices of assessment referred to above. These were not challenged and I am satisfied that the assessments were duly made and that the amounts and all particulars of each assessment are correct. I am satisfied, therefore, that the plaintiff has proved the allegations in paragraphs 3, 4 and 5 of the statement of claim.

21. Certificates under Regulation 53 of the Income Tax Regulations (Exhibit "B") constituted prima facie evidence, not challenged, that at the date when the hearing ended, 3 June 1986, the defendant owed a total of $255,305.50 which included additional tax for late payment and, particularly, an amount of $25,284.22 representing additional tax claimed for late payment from 10 August 1984 to 3 June 1986. The certificates indicated where additional tax for late payment was claimed on a continuing basis from the date of hearing to judgment.

22. By his defence filed 12 September 1984 the defendant denied that he was indebted to the plaintiff, did not admit paragraphs 3 and 4 of the statement of claim, denied paragraphs 5, 6 and 8 and admitted paragraph 7.

23. He went on to say in paragraph 6 of his defence that the plaintiff had, before this action was brought, entered judgment in the first action for the same debt and in respect of the same cause of action as alleged in the statement of claim and that the judgment in the first action remained in force. He claimed in paragraph 7 that the plaintiff was therefore estopped and precluded from maintaining its claim in this action against the defendant.

24. In paragraph 8 he pleaded alternatively that it had been agreed between the parties that, without admission of liability, the defendant would consent to judgment against him in the first action in the amounts claimed for debt and for costs and would forthwith pay those amounts to the plaintiff and withdraw all outstanding objections to income tax assessments issued to him in respect of income earned up to and including the financial year ended 30 June 1984 and that the plaintiff would accept payment under the judgment and withdrawal of outstanding objections in full and final satisfaction and discharge of any claim which he had or, but for the agreement, might have had against the defendant. He then pleaded in paragraphs 9 and 10 that pursuant to the agreement he paid the amounts claimed for debt and for costs on 3 August 1984, consented to the entry of judgment in the first action against him, withdrew, on 6 August 1984, the objections referred to and that in the premises the plaintiff was estopped and precluded from alleging that the defendant was further indebted to him.

25. In his reply the plaintiff traversed the allegations in paragraphs 6 and 7 of the defence. He denied the agreement pleaded in paragraph 8 but said that even if the agreement as pleaded had been made it would not support the estoppel pleaded by the defendant and that no estoppel lay against the plaintiff in the circumstances pleaded.

26. The defendant gave no evidence and the reply traverses the making of the agreement alleged. I cannot be satisfied, therefore, that the plaintiff and he had agreed, as alleged in sub-paragraphs 8(c) and (d) of the defence, that:-

"c. The defendant would forthwith withdraw all
outstanding objections to income tax
assessments issued to him in respect of
income earned up to and including the
financial year ended 30 June 1984; (and)

d. The plaintiff would accept . . . payment (of
$25,557.92 and $115) and withdrawal of
outstanding objections in full and final
satisfaction and discharge of any claims
which the plaintiff then had, or but for
the said agreement might have had, against
the defendant."

I am satisfied that there was an agreement that the defendant would, without admission of liability, consent to judgment and would forthwith pay the amounts claimed in the first action for debt and costs.

27. Section 166 of the Act is as follows:-

"From the returns, and from any other
information in his possession, or from any
one or more of these sources, the
Commissioner shall make an assessment of the
amount of the taxable income of any taxpayer,
and of the tax payable thereon."

28. By s.170(4) it is provided, inter alia, that no amendment effecting a reduction in the liability of a taxpayer under an assessment shall be made except to correct an error in calculation or a mistake of fact.

29. Section 174(1) provides that as soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing upon the person liable to pay the tax.

30. Section 207(1) provides that additional tax is due and payable by way of penalty for unpaid tax at the rate and from the time set out in the sub-section while by s.207(2) the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable.

31. By s.209 any tax, including additional tax under s.207, may be sued for and recovered in any court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.

32. Counsel for the plaintiff submitted that estoppel does not lie to prevent enforcement of a statute which is enacted to raise public revenue. He referred to Maritime Electric Company, Limited v. General Dairies, Limited (1937) AC 610 and to State of South Australia v. ATSA Pty. Ltd. (1980) 29 ALR 367, particularly at pp 376-7, 379-380 and 397-8. In the earlier case, Lord Maugham, delivering the judgment of their Lordships of the Privy Council, said at pp.620-1:-

"It cannot be doubted that if the appellants,
with every possible formality, had purported
to release their right to sue for the sums
remaining due according to the schedules,
such a release would be null and void. . . .
It may be asked with force why, if a
voluntary release will not put an end to the
obligation of the respondents, an inadvertent
mistake by the appellants acted upon by the
respondents can have the result of absolving
the appellants from their duty of collecting
and receiving payment in accordance with the
law. . . . It is . . . clear that to disallow
the estoppel will leave the respondents out
of pocket to the extent of the increased
amounts just referred to. It is an
unfortunate result; but the obligation to
obey a positive law is more compelling than a
duty not to cause injury to another by
inadvertence. In the present case it may be
observed that the injury is not a cause of
action. Their Lordships are unable to see
how the Court can admit an estoppel which
would have the effect pro tanto and in the
particular case of repealing the statute."

33. In The Commissioner of Taxes (South Australia) v. The Executor Trustee and Agency Company of South Australia Limited [1938] HCA 69; (1938) 63 CLR 108, Latham CJ, although in a dissenting judgment, touched more nearly upon the point at issue in this case when he said, at p.133:-

"But . . . the commissioner has no power to
excuse taxpayers from the duty of paying
taxes in accordance with the law unless the
statute expressly authorizes him to do so.
The commissioner is bound by the statute and
cannot, in the absence of express provision,
relieve citizens from their obligation to
obey the statute. If any other principle
were adopted the public revenue could be
prejudiced by mistakes on the part of the
commissioner which could never be corrected,
although it would still be open to taxpayers,
upon objection and appeal, to challenge any
act of the commissioner which was against
their interests. There is, in my opinion, no
reason for adopting a rule that a mistake of
the commissioner in favour of a taxpayer
cannot be corrected while an error of the
commissioner against a taxpayer may be
corrected. This opinion is in accordance
with the decision of the Privy Council in
Maritime Electric Co. v. General Dairies
Ltd. (1937) AC 610, where it was pointed
out that estoppel is only a rule of evidence
and that no estoppel can avail to release
persons from an obligation to obey a statute
which imposes a duty of a positive kind. The
statute there in question was a statute which
defined the charges to be made for the supply
of electric energy. A taxing statute is a
statute which imposes positive duties upon
taxpayers which cannot be reduced or
abolished at the will of the public officer
upon whom the duty of administering the
statute is imposed."

34. It is to be noted that the Act, far from providing expressly that the Commissioner may relieve taxpayers from their obligation to pay tax as assessed positively, by s.170(4), forbids such relief.

35. These authorities amply support the proposition put forward by counsel for the plaintiff. It follows, I think, that the plaintiff cannot be estopped from claiming the balance of the tax due the Crown from the defendant by any such agreement as is alleged in paragraph 8 of the statement of claim even had such an agreement been made.

36. The defendant relies principally, however, not on estoppel in pais but upon what may be called for convenience sake, although perhaps inaccurately in the light of Australian authority, estoppel per rem judicatam or estoppel by judgment recovered. As senior counsel for the defendant put it:-

"In this case we have not a question of issue
estoppel nor do we have a question of
estoppel by conduct or representation . . . ;
this is a stark question of res judicata and
if . . . the cause of action in the first
action is the same as the cause of action in
the second action then there must be judgment
for the defendant in this case."

He contended that the doctrine of res judicata applies to a judgment by consent.

37. In Port of Melbourne Authority v. Anshun Pty. Ltd. [1981] HCA 45; (1981) 147 CLR 589 the majority of the High Court, Gibbs CJ, Mason and Aickin JJ, said at p 597:-

"The distinction between res judicata (in
England called 'cause of action estoppel')
and issue estoppel was expressed by Dixon J
in Blair v. Curran [1939] HCA 23; (1939) 62 CLR 464, at
p 532, in these terms: 'in the first the
very right or cause of action claimed or put
in suit has in the former proceedings passed
into judgment, so that it is merged and has
no longer an independent existence, while in
the second, for the purpose of some other
claim or cause of action, a state of fact or
law is alleged or denied the existence of
which is a matter necessarily decided by the
prior judgment, decree or order.'

The distinction was restated by Fullagar J in
his dissenting judgment in Jackson v.
Goldsmith [1950] HCA 22; (1950) 81 CLR 446, at p466.
His Honour expressed the rule as to res
judicata by saying: 'where an action has been
brought and judgment has been entered in that
action, no other proceedings can thereafter
be maintained on the same cause of action.
This rule is not, to my mind, correctly
classified under the heading of estoppel at
all. It is a broad rule of public policy
based on the principles expressed in the
maxims "interest reipublicae ut sit finis
litium" and "nemo debet bis vexari pro eadem
causa".' His Honour went on to discuss issue
estoppel, citing the comment of Dixon J in
Blair v. Curran (1939) 62 CLR at p 531: 'A
judicial determination directly involving an
issue of fact or of law disposes once for all
of the issue, so that it cannot afterwards be
raised between the same parties or their
privies.'

The difference between res judicata (cause of
action estoppel) and issue estoppel has been
expressed in similar terms in the House of
Lords - see Carl Zeiss Stiftung v. Rayner &
Keeler Ltd. (1967) 1 AC 853, at pp 913, 964
et seq.

Subject to an examination of the application
of the principle in Henderson v. Henderson
(1843) 3 Hare 100 (67 ER 313), it is
evident from the discussion which has already
taken place that this is not a case of res
judicata."

38. "Cause of action" has been defined, sufficiently for the purposes of this case, as meaning "every fact which it would be necessary for the plaintiff to prove, if traversed, in order to support his right to the judgment of the Court". Read v. Brown (1889) 22 QBD 128.

39. In my opinion the cause of action in this action is the same as that in the first. The seventeen items claimed in the indorsement on the writ of summons in the first action have their exact counterparts and no more in the statement of claim in this. After allowing for the payment of $25,557.92 on 3 August 1984, the credits are exactly the same also. When the same debt and the same credits are put in issue in each of two actions it seems to me that each cause of action must be the same.

40. Although the plaintiff forebore, one assumes not designedly, to claim the balance now shown by unimpeachable evidence to have been actually due, I do not think that failure meant that a fact necessary to be proved was omitted from the indorsement in the first action. The balance which was due and which ought to have been claimed was readily calculable by simple arithmetic. As between private citizens, therefore, there would, in my opinion, have been an omission by "negligence, inadvertence, or even accident" of part of the plaintiff's case (Henderson v. Henderson (infra)). The plea of res judicata would therefore have been established in the absence of any action to have the consent judgment in the first action set aside for mistake or other appropriate cause.

41. It was submitted on behalf of the plaintiff that when a plea of res judicata is raised in a second action following a judgment by consent, the earlier judgment ought, in any event, to be scrutinized with, at the least, particular care. It is true that such a judgment must be examined to ensure that it is truly a consent judgment (see Siebe Gorman & Co. Ltd. v. Pneupac Ltd. (1982) 1 All ER 377) but a consent judgment duly entered after a true consent is as apt to found a plea of res judicata as a judgment duly entered after a complete contest on the merits. Counsel for the plaintiff sought to distinguish In re South American And Mexican Company, ex parte Bank of England (1895) 1 Ch 37 but in my opinion unsuccessfully. See Kinch v. Walcott (1929) AC 482 at p 493.

42. But the Court has jurisdiction to set aside a consent order upon any ground which would invalidate an agreement between the parties. So in Huddersfield Banking Company, Limited v. Henry Lister & Son, Limited (1895) 2 Ch 273 a consent order which had been completed and acted upon, but without affecting the interests of third parties, was set aside by the Court upon the ground of common mistake. It is clear, however, that, where a judgment is entered by consent and a party alleges that the agreement underlying the judgment is void or voidable, an application to set aside the judgment must ordinarily be made in a fresh action brought for the purpose. Permanent Trustee Co. (Canberra) Ltd. v. Stocks & Holdings (Canberra) Pty. Ltd. (1977) 15 ACTR 45 and the cases therein cited by Brennan J at p 48.

43. The plaintiff has not pleaded or alleged mistake in the first action nor does he seek in this action to set aside the judgment entered in the first on any ground that might be available to him. To succeed, therefore, he must defeat the plea of res judicata.

44. In Henderson v. Henderson (1843), 3 Hare 100, at pp 115; 67 ER 313 at p 319, Sir James Wigram VC said:-

"... where a given matter becomes the subject
of litigation in, and of adjudication by, a
Court of competent jurisdiction, the Court
requires the parties to that litigation to
bring forward their whole case, and will not
(except under special circumstances) permit
the same parties to open the same subject of
litigation in respect of matter which might
have been brought forward as part of the
subject in contest, but which was not brought
forward, only because they have, from
negligence, inadvertence, or even accident,
omitted part of their case. The plea of res
judicata applies, except in special cases,
not only to points upon which the Court was
actually required by the parties to form an
opinion and pronounce a judgment, but to
every point which properly belonged to the
subject of litigation, and which the parties,
exercising reasonable diligence, might have
brought forward at the time."

The principle so expounded retains its vigour. Port of Melbourne Authority v. Anshun Pty. Ltd. (supra); Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. (1975) AC 581; Brisbane City Council v. Attorney-General for Queensland (1979) AC 411 and Vervaeke v. Smith (1983) AC 145.

45. In Yat Tung Investment Co. Ltd. v. Dao Heng Bank Ltd. (supra) it was said at p 590:-

". . . there is a wider sense in which the
doctrine (of res judicata) may be appealed
to, so that it becomes an abuse of process to
raise in subsequent proceedings matters which
could and therefore should have been
litigated in earlier proceedings."

That passage was reaffirmed in Brisbane City Council v. Attorney-General for Queensland (supra) at p 425.

46. The authorities are of little help in ascertaining what constitute the "special circumstances" and "special cases" to which Sir James Wigram referred in Henderson v. Henderson (supra). Rowe v. Rowe (1980) Fam 47. However, it seems to me that the application of the principle that the Commissioner has no power to excuse taxpayers from the duty of paying taxes in accordance with the law unless expressly authorised to do so by statute (Commissioner of Taxes (South Australia) v. Executor Trustee and Agency Co. of South Australia Ltd. (supra) and Maritime Electric Co. Ltd. v. General Dairies Ltd. (supra)) constitutes special circumstances and makes this a special case. Accepting that res judicata is not a species of estoppel but rather the application of the principles that nobody ought to be harassed twice in the same matter and that there must be an end to litigation, it nevertheless seems to me that when considered in relation to the duty cast upon the Commissioner it is so nearly akin to estoppel that it ought to be applied in the same way to the circumstances as would the doctrine of estoppel. It follows that, to adapt with respect the words of Sir John Latham earlier quoted, no application of the doctrine of res judicata can avail to release persons from an obligation to obey a statute which imposes a duty of a positive kind.

47. There must therefore be judgement for the plaintiff for an amount which, using the figures provided in the certificates making up Exhibit "B", I calculate at $256,476.25 as at this day.