FEDERAL COURT OF AUSTRALIA Hoszowski v Parliamentary Secretary to the Minister for Finance and Administration [2001] FCA 1587 PROCEDURE – respondent's motion to dismiss application – whether reasonable cause of action exists – whether respondent made decision – whether no debt to which a decision could relate – whether applicant entitled to default judgment Administration Decisions (Judicial Review) Act 1977 (Cth) s 13 Federal Court of Australia Act 1976 (Cth) s 23 Financial Management and Accountability Act 1997 (Cth) s 34 Federal Court Rules O 10 r 7(1)(b), O 20 r 2 ZBIGNIEW HOSZOWSKI v PARLIAMENTARY SECRETARY TO THE MINISTER FOR FINANCE AND ADMINISTRATION W 259 of 2001 RD NICHOLSON J 9 NOVEMBER 2001 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 259 of 2001 BETWEEN: ZBIGNIEW HOSZOWSKI APPLICANT AND: PARLIAMENTARY SECRETARY TO THE MINISTER FOR FINANCE AND ADMINISTRATION RESPONDENT JUDGE: RD NICHOLSON J DATE OF ORDER: 9 NOVEMBER 2001 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The respondent's notice of motion dated 12 September 2001 be granted. 2. The application be dismissed pursuant to O 20 r 2 of the Federal Court Rules. 3. The applicant's motion for default judgment be dismissed. 4. The applicant pay the respondent's costs on the respondent's notice of motion and on the applicant's notice of motion. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W 259 of 2001 BETWEEN: ZBIGNIEW HOSZOWSKI APPLICANT AND: PARLIAMENTARY SECRETARY TO THE MINISTER FOR FINANCE AND ADMINISTRATION RESPONDENT JUDGE: RD NICHOLSON J DATE: 9 NOVEMBER 2001 PLACE: PERTH REASONS FOR JUDGMENT 1 The respondent brings a motion that an application by the applicant be dismissed pursuant to O 20 r 2 of the Federal Court Rules or alternatively pursuant to s 23 of the Federal Court of Australia Act 1976 (Cth) ("the Act"). The powers in the Court under that rule include the power to dismiss an action generally where it appears to the Court that no reasonable cause of action is disclosed; it is frivolous or vexatious, or is an abuse of the process of the Court. No reliance was placed on the statutory provision in the submissions for the respondent. 2 The application to which the motion is directed is an amended application to review what is said to be the failure of the respondent to decide whether to waive an alleged debt owing by the applicant to the Commonwealth. The applicant claims to be aggrieved by the failure because he has no debt to the Commonwealth. The grounds on which the amended application is based are that the respondent has failed to make the decision and that the decision was affected by fraud. The fraud is particularised as follows: "(a) A fraud has been committed against the applicant by former Deputy Commissioner of Taxation for the Commonwealth at Perth, R. Webb; he had done it on behalf and for the Commonwealth. (b) The fraud had been acknowledged by R. Webb and then confirmed by the Australian Taxation Office at Northbridge. (c) The respondent represents the Commonwealth. there is proof of (a) and (b) in the applicant's request for waiver of an alleged debt towards the Australian Taxation Office dated 10 March 2001." 3 By notice of motion dated 18 September 2001 the applicant has moved the Court for default judgment pursuant to O 10 r 7(1)(b) of the Federal Court Rules. The default relied upon was that the respondent had not complied with orders 4 and 5 made on 17 July 2001 requiring the respondent to file and serve any notice of opposition setting out the grounds of such opposition by 12 September 2001 and also that the respondent file and serve an affidavit annexing all documents relevant to the decision referred to in the application for review. Background circumstances 4 By a summons issued out of the Local Court at Armadale on 30 January 1998 the Deputy Commissioner of Taxation claimed a total amount of $9,522.05 against the applicant in respect of his outstanding income tax liability for the income years ended 30 June 1984, 30 June 1991, 30 June 1992 and 30 June 1995. 5 On 25 February 1998 an agreement was reached between the applicant and Brendan Francis D'Arcy representing the Deputy Commissioner of Taxation whereby the applicant was to repay his taxation debt by an initial payment of $1,000.00 on 26 February 1998 with the balance of the debt payable by instalments of $30.00 per fortnight. Pursuant to that agreement the applicant made a payment of $1,000.00 on 26 February 1998 and commenced making fortnightly payments of $30.00 on 5 March 1998. 6 On 24 March 1998 the applicant and Mr D'Arcy agreed that the applicant would make an immediate payment of $300.00 in respect of his taxation debt, and would continue to pay the balance by fortnightly instalments of $30.00. By September 1998 the applicant had made payments totalling $1,720.00 which left a balance of $7,910.75 outstanding in respect of his taxation debt. 7 On or about 1 October 1998 the applicant advised Stan Szycman, an officer of the Australian Taxation Office, that he would not pay the balance of his taxation debt. The Deputy Commissioner of Taxation did not take action at that time to enter default judgment as the applicant was entitled to appeal the Deputy Commissioner of Taxation's decision disallowing his claim for a deduction of $4,500.00 in respect of his taxation return for the year ended 30 June 1998. 8 On 30 December 1998 the applicant made an application pursuant to s 265 of the Income Tax Assessment Act 1936 (Cth) to be released from payment of his taxation debt on the ground of serious financial hardship. His application was refused by the Taxation Relief Board on 29 April 1999 on the grounds that he had purchased a unit for $127,000.00 and a car for $13,000.00 while he was aware that he had an outstanding tax liability. 9 By letter dated 17 May 1999 the applicant objected to his tax assessments for the years ended 30 June 1988 to 30 June 1998 inclusive. His objections were disallowed on 3 June 1999, and the applicant lodged an appeal to the Federal Court but did not pursue that appeal. 10 By letter dated 22 June 1999, the former Deputy Commissioner of Taxation at Perth, R Webb, wrote to the applicant concerning his request at a meeting on 9 June 1999 with Mr D'Arcy for a response to the letter which he gave to Mr D'Arcy on 25 February 1998. 11 On 25 August 1999 the applicant made a further application for release from his taxation liability, but that application was refused by the Taxation Relief Board on 14 October 1999. 12 On 27 October 1999 Mr Jonathan Petite of the Australian Taxation Office wrote to the applicant outlining to him the procedure for making application to the Department of Finance and Administration for waiver of his taxation liability. 13 On 3 April 2000 Mr D'Arcy wrote to the applicant to negotiate a payment arrangement in respect of the applicant's outstanding taxation liability, but no response was received from the applicant. On 7 July 2000 Mr Petite advised Mr D'Arcy to proceed with legal action to recover the applicant's unpaid tax liability. 14 On 27 December 2000 the Deputy Commissioner of Taxation obtained an order in the Local Court of Western Australia granting leave to enter judgment against the applicant. The application for judgment had been supported by an affidavit of Mr D'Arcy. 15 By a letter dated 6 January 2001 the applicant wrote to a Mrs J Grainger at the Australian Taxation Office and declared that he owed no money to the Australian Taxation Office, and requested a meeting with appropriate officers. 16 On 10 January 2001 the Australian Taxation Office, under the signature of Mrs J Grainger, sent a letter to the applicant requesting him to apply for a waiver of his debt by 12 January 2001 failing which legal action to recover the debt would be commenced. 17 On 12 January 2001 the applicant attended at the Australian Taxation Office and spoke with an Australian Taxation officer, Ms Tracey Kelly. Ms Kelly asked the applicant whether he would be lodging a waiver application to which he replied that he did not owe any debt. 18 On 17 January 2001 judgment was entered in the Local Court of Western Australia in favour of the Deputy Commissioner of Taxation against the applicant in the sum of $7,833.11. 19 On 14 March 2001 the Australian Taxation Office received a facsimile from Mr Henry Craft of the Department of Finance and Administration which enclosed a letter dated 10 March 2001 with attachments from the applicant to the respondent applying for his outstanding debt to the Australian Taxation Office to be waived. 20 On 2 April 2001 Mr Petite forwarded a report and attachments to the Department of Finance and Administration recommending that the applicant's debt not be waived. One of the attachments to Mr Petite's report was a copy of Mr D'Arcy's affidavit in support of the Deputy Commissioner of Taxation's application for judgment in the Local Court. 21 The respondent declined to waive the applicant's taxation liability, and his decision was communicated to the applicant by letter dated 4 May 2001. 22 By letter dated 19 May 2001 the applicant requested the respondent to provide written reasons for his decision pursuant to s 13 of the Administration Decisions (Judicial Review) Act 1977 (Cth) ("the ADJR Act"). The respondent responded to that request by providing the applicant with a statement of reasons dated 18 June 2001. 23 It was on 25 June 2001 that the amended application seeking review for alleged failure to decide whether to waive the alleged debt was lodged. Whether respondent failed to decide whether to waive applicant's alleged debt 24 When the applicant applied on 10 March 2001 for waiver of his outstanding debt to the Australian Taxation Office he was seeking to have invoked in his favour a power provided for in s 34 of the Financial Management and Accountability Act 1997 (Cth) ("the FMA Act"), which reads: "(1) The Finance Minister may, on behalf of the Commonwealth: (a) waive the Commonwealth's right to payment of an amount owing to the Commonwealth; (b) postpone any right of the Commonwealth to be paid a debt in priority to another debt or debts; (c) allow the payment by instalments of an amount owing to the Commonwealth; (d) defer the time for payment of an amount owing to the Commonwealth. (2) If a proposed waiver under paragraph (1)(a) involves, or is likely to involve, a total amount of more than $100,000, the Finance Minister must consider a report of an Advisory Committee set up under section 59 before taking action on the waiver. (3) A waiver may be made either unconditionally or on the condition that a person agrees to pay an amount to the Commonwealth in specified circumstances. (4) In this section: amount owing to the Commonwealth includes an amount that is owing but not yet due for payment." 25 In his oral submissions the applicant contended that the respondent had not made any decision in respect of his request to waive his debt to the Deputy Commissioner of Taxation because of the respondent's letter to him dated 4 May 2001. The applicant addressed this issue in par 2 of his written submissions dated 22 October 2001 in which he stated: "The attention should be focused on the decision made by the respondent dated 4 May 2001. The Department of Finance and Administration recommended to "…the client to waive…". The respondent does not use, in the decision, the recommended terms. It means that there is some serious disagreement between the department and the respondent as far as my request is concerned. The respondent, indeed, refused (failed) to make the decision … and any attempt to delude anybody into the belief that is otherwise, is merely a primitive trick." 26 The terms of the respondent's letter of 4 May 2001 were as follows: "Dear Mr Hoszowski Thank you for your letter of 10 March 2001 asking that I waive your alleged income tax debt. The Australian Taxation Office (ATO) has advised that you have an income tax debt of $7,883.07. I have noted, however, that you consider that, on the contrary, you should have no such debt. The question of waiver of an income tax liability is, however, a matter properly considered by the Taxation Relief Board, which has the statutory authority to release a taxpayer from a tax liability. It may do so if payment would create serious hardship. I understand that, in fact, you have twice unsuccessfully applied to the Board. As the matters raised in your letter are properly considered by the ATO or the Taxation Relief Board, it would not be appropriate for me to consider them under the Financial Management and Accountability Act 1997. I regret I am not able to assist you in this matter. Yours sincerely" 27 The respondent's letter of 4 May 2001 clearly indicates that the respondent made a "decision". However, it is conceded for the respondent that if simply read in isolation, the letter suggests that the respondent made a decision not to "consider" waiver of the applicant's debt under the FMA Act. I accept the submission for the respondent that in determining the nature of the decision made by the respondent on 4 May 2001, it is necessary to have regard to other relevant documents, namely the Ministerial Briefing dated 11 April 2001, the respondent's letter to the applicant dated 18 June 2001 in response to the applicant's request for a statement, and the respondent's Statement of Reasons dated 18 June 2001 in respect of the decision which he made on 4 May 2001. 28 The Ministerial Briefing states that its purpose is "To recommend that you decline to waive Mr Hoszowski's debt". Further, the Briefing sets out at pars 3 to 9 various matters relevant to whether or not Mr Hoszowski's debt to the Deputy Commissioner of Taxation should be waived. Those matters are summarised as follows: " · Although Mr Hoszowski believes that he has not been properly treated by the ATO, there is no evidence of maladministration. · As Mr Hoszowski is unemployed, the ATO has advised that it would accept repayments of $10.00 a week. It would remit interest on the debt if an agreement is reached about repayment. · Mr Hoszowski has previously sought release from his tax debt from the Taxation Board of Relief. In April 1999, the Board decided not to release him from his tax liability, noting that Mr Hoszowski had purchased a house and a car while owing his tax debt. · We suggest that Mr Hoszowski had not established a case for waiver on the basis of financial hardship. He is 51 years old, owns his own home, and has not referred to any physical illness." [Emphasis added] 29 In his letter to the applicant dated 18 June 2001 in response to the applicant's request for a statement of reasons "of the decision" pursuant to s 13 of the ADJR Act, the respondent described the decision which he had made as "my decision, made under section 34 of the Financial Management and Accountability Act 1977, declining to waive your alleged income tax debt". In his Statement of Reasons dated 18 June 2001, the respondent states in par 1 that: "This statement concerns my decision of 4 May 2001, pursuant to sub-section 34(1) of the Financial Management and Accountability Act 1977 (the FMA Act), to decline to waive a debt owed by Mr Hoszowski to the Commonwealth, that debt being an income tax debt of $7,883.07…" Paragraphs 12, 15 and 16 of the Statement of Reasons were in the following terms: "12. I was satisfied that Mr Hoszowski had a debt to the Commonwealth and that I had a discretion to waive that debt under sub-section 34(1) of the FMA Act. 15. Mr Hoszowski provided no evidence of other circumstances that might have warranted the exercise of my discretion in sub-section 34(1) of the FMA Act in his favour. 16. Having considered the evidence before me, I concluded that it would not be appropriate to exercise my discretion in sub-section 34(1) of the FMA Act in favour of Mr Hoszowski." 30 The respondent's letter to the applicant dated 18 June 2001, and his Statement of Reasons also dated 18 June 2001, make clear that the decision in fact made by the respondent on 4 May 2001 was a decision that he not exercise his discretion under s 34(1) of the FMA Act in favour of Mr Hoszowski, ie that he declined to waive the debt due by Mr Hoszowski to the Deputy Commissioner of Taxation, based upon his consideration of the matters put to him in the Ministerial Briefing on 11 April 2001. 31 Construing the decision of the respondent in its context I accept that the respondent clearly made a decision on 4 May 2001. 32 Even if, contrary to the above submission, the decision made by the respondent on 4 May 2001 was a decision not to consider whether to exercise his discretion to waive the applicant's debt to the Deputy Commissioner of Taxation under s 34(1) of the FMA Act, that would also be a "decision to which the Act applies" within the meaning of that expression in s 3 of the ADJR Act, and such a decision is reviewable pursuant to s 5(1) of the ADJR Act. Accordingly, s 7 of the ADJR Act in relation to the failure to make a decision would equally have no application, and the amended application in relation to the alleged failure to make a decision should be dismissed as disclosing no reasonable cause of action. 33 Accordingly, I agree with the respondent that his notice of motion dated 12 September 2001 that the application be dismissed should be allowed, as the first ground of the applicant's amended application dated 5 August 2001, that the respondent has failed to make a decision, cannot succeed. 34 The applicant's amended application appears in the alternative to seek to review the respondent's decision made on 4 May 2001 because ground 2 of the amended application is that "The decision was affect by fraud". 35 In seeking to review the decision made by the respondent on 4 May 2001 on the ground that the decision was affected by fraud, the only basis provided by the applicant for the allegation of fraud is the matters set out in subpars 2(a), (b) and (c) of the amended application. No basis has been disclosed for this allegation of fraud on the part of former Deputy Commissioner of Taxation at Perth, R Webb. Accordingly, I agree with the respondent that no reasonable cause of action has been disclosed in relation to a review of the respondent's decision of 4 May 2001, and the amended application in relation to ground 2 should be dismissed pursuant to O 20 r 2(1) of the Federal Court Rules. Whether applicant has debt to Deputy Commissioner 36 In his oral submission the applicant referred to his letter dated 6 January 2001 to Deputy Commissioner of Taxation, Mrs J Grainger, as establishing that he does not have a debt to the Deputy Commissioner of Taxation. The matters raised in the applicant's letter of 6 January 2001 provide no basis whatsoever for the applicant's claim that he does not have any debt to the Deputy Commissioner of Taxation. 37 The applicant addressed this issue in par 1 of his written submissions dated 22 October 2001 as follows: "It is not a matter between the Australian Taxation Office and Zbigniew Hoszowski, therefore any attempt to delude anybody into the belief that there is a debt is a complete waste and abuse of time. Besides, the Affidavit of Jonathon Kennedy Petite, dated 25 September 2001, is null and void, as Erin Kathleen Holland was assigned the duties of Deputy Commissioner of Taxation from 1 August 2001." 38 The first sentence of par 1 of the applicant's submissions set out above provides no basis for the applicant's claim that he does not have a debt to the Deputy Commissioner of Taxation. Further, the applicant's debt of $7,883.11 is the subject of a judgment of the Local Court at Armadale entered on 17 January 2001. The existence of such a judgment debt is conclusive evidence that the applicant has a debt due to the Deputy Commissioner of Taxation save and until either the judgment is set aside by an order of the Local Court or some higher court, or payment of the debt is effected. 39 The copy of the Armadale Local Court's judgement against the applicant is an attachment to the affidavit of Jonathan Kennedy Petite sworn on 25 September 2001. In par 1 of his submission set out above, the applicant alleges that Mr Petite's affidavit is "null and void" because Deputy Commissioner of Taxation, Erin Kathleen Holland, was assigned the duties of Deputy Commissioner of Taxation from 1 August 2001. However, there is no basis for this submission. 40 In his affidavit of 25 September 2001, Mr Petite deposes at par 4 that he is authorised by Deputy Commissioner of Taxation, Erin Kathleen Holland, to make the affidavit on her behalf and a copy of the relevant Instrument of Authorisation is attached to his affidavit. In his affidavit Mr Petite deposes that the Commissioner of Taxation assigned Erin Kathleen Holland the duties of Deputy Commissioner of Taxation, Client Account Management, effective from 1 August 2001 to 30 November 2001. That assignment did not preclude Mr Petite from deposing as to events which occurred prior to 1 August 2001, and provides no basis for the applicant's submission that his affidavit is null and void. Further, even without any authorisation from Ms Holland, Mr Petite is able to swear an affidavit in these proceedings as to matters within his knowledge concerning the applicant. There is no basis for the assertion that his affidavit is "null and void". Applicant's motion for default judgment 41 There is no reasonable basis upon which the Court could order default judgment against the respondent. While the respondent did not file and serve a notice of opposition by 12 September 2001 as required by order 4 of the orders made on 17 July 2001, he filed a notice of motion and supporting affidavit seeking to have the application dismissed pursuant to O 20 r 2 of the Federal Court Rules or s 23 of the Act on 13 September 2001. Mr Neely has deposed that he endeavoured to file the notice of motion and supporting affidavit on 12 September 2001, but overlooked the applicable filing fee and therefore arranged for the documents to be filed the following morning. 42 The respondent's notice of motion seeking dismissal of the application and the supporting affidavit of Mr Neely meet the requirements of order 4 of the orders made on 17 July 2001 for the respondent to file and serve notice of its opposition to the application. Further, and in any event, that order was subsequent to order 2 made on 17 July 2001 requiring the applicant to include full particulars of the grounds of any amended application filed pursuant to order 1. The amended application does not comply with order 2 as it has not included particulars of the ground of review that the decision was affected by fraud. The particulars provided by the applicant do not demonstrate any arguable basis of fraud on the part of the former Deputy Commissioner of Taxation at Perth, R Webb. 43 Further, as the respondent submits, the amended application disclosing no reasonable cause of action, or being frivolous or vexatious, or otherwise an abuse of the process of the Court the applicant's notice of motion for default judgment should be dismissed. Conclusion 44 For these reasons I consider that the respondent's notice of motion seeking dismissal should be allowed and the applicant's motion for default judgment should be dismissed. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson. Associate: Dated: 9 November 2001 Counsel for the Applicant: Applicant appeared in person Counsel for the Respondent: Mr P Macliver Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 18 October 2001 Submissions filed: 5 November 2001 Date of Judgment: 9 November 2001