SARROFF v DEPUTY COMMISSIONER OF TAXATION SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MASON P, PRIESTLEY and MEAGHER JJA 15 April 1997 [1997] NSWCA 275 Mason P This matter was argued from the appellant's point of view as if it was an appeal, the appellant contending that there was a right to appeal. The respondent disputed this, arguing that leave to appeal was necessary. However the respondent had not lodged a notice of objection to competency. I think it is desirable that the substance of the matter be addressed without too much concern about whether or not there is a present appeal as of right. The respondent sued the appellant in the District Court claiming $107,621. About $51,000 of this sum related to primary tax as assessed. The balance relates to additional tax pursuant to s207 of the Income Tax Assessment Act accruing on amounts of primary and provisional tax outstanding from time to time. The claim also included continuing additional tax accruing after the date of the statement of claim. Default judgment was entered on 22 March 1995 in the sum of $108,951.36. A bankruptcy notice issued shortly thereafter. The appellant moved on notice of motion to set aside the default judgment. The respondent countered with a notice of motion filed on 17 July 1995 seeking an order for summary judgment. Affidavits directed to each notice of motion were filed. The two notices of motion came before Garling DCJ on 5 September 1995. By consent the default judgment was set aside on the basis that a sum of $3,000, which had been received by the respondent on 21 March 1989, had not been credited to the appellant's income tax account. This error had not been in dispute since the time that the respondent filed his notice of motion for summary judgment. By consent, the default judgment was set aside for the reason I have just given. However Judge Garling entered summary judgment in favour of the respondent in the sum of $105,954.57. It is that judgment which is challenged in this appeal. One issue raised by the appellant is of a procedural nature. It is contended that Garling DCJ ought to have required the statement of claim to have been amended formally and then served afresh in the light of the concession that the $3,000 had not been credited. There is no merit in this point. It was open to the judge to enter summary judge for a sum less than that claimed in the statement of claim without even amending the statement of claim (see Ptl1A r2). It was also open to the judge to dispense with the rules (see Pt! r5). Since the appellant was on notice as to what the respondent intended to seek from the time of the service of the respondent's notice of motion, there was no prejudice suffered by the appellant nor any basis for interference with the manner in which his Honour treated the claim as amended. In the hearing before Garling DCJ the appellant did not disclose a draft defence in the sense of a proffered pleading. However he sought to rely upon paral0 and para25 of his affidavit dated 26 May 1995 as disclosing arguable defences sufficient to repel the claim for summary judgment. Those paragraphs state: 2 UNREPORTED JUDGMENTS "10. Between August 1988 and June 1989 the following amounts were paid: 19 August, 1988 $3,723.00 19 September, 1988 $3,000.00 19 October, 1988 $3,000.00 21 November, 1988 $3,000.00 19 December, 1988 $3,000.00 19 January, 1989 $3,000.00 20 February, 1989 $3,000.00 21 March, 1989 $3,000.00 In or about the month of April, 1989 I had a conversation with a Mr Chris Robson of the Australian Government Solicitor who said to me: Robson. It will not be necessary for you to send any more money. You' ve paid off the tax and interest'. I did not pay any further moneys to the Plaintiff on account of this debt." "25. The Defendant seeks to challenge the accuracy of the Plaintiff's claims given: (a) the payments to the Plaintiff referred to in Para(10) above. (b) the unexplained variations in the "other amounts owing". (c) the statement of Mr Robson referred to in paral0 above. (d) the contested suit for the same amounts of money owing." Para25 did not in terms challenge the assessments. Indeed it is clear that s177 bars a challenge in the District Court to so much of the assessments as relate to primary tax. The assessments are prima facie evidence that the amount of provisional tax and all particulars relating thereto are correct: see s221 Y H and Kinny v Deputy Commissioner of Taxation (1987) 11 NSWLR 657. As regards additional tax accruing on unpaid primary and provisional tax, the obligation to pay this, unless relieved by the Commissioner, stems from s207 according to its terms. The capacity to challenge a liability to additional tax, claimed pursuant to s207, would exist in District Court proceedings. However there was, by the time the matter came before Garling DCJ, no issue that the sums paid had been paid. In other words nothing was advanced by way of evidence to suggest that with exception of the $3,000, which was the subject of the correction, the accounts in monetary terms as between the parties, were not correct. That would dispose of the foreshadowed defence in para25A(a)of the affidavit. In para25(b) it was stated that the defendant, the appellant here, seeks to challenge the accuracy of the plaintiffs claims given "the unexplained variations in the 'other amounts owing"'. This foreshadowed defence was not the subject of any argument in this court but was referred to in the written submissions and would appear to be groundless in the light of the principle stated in Webb v Deputy Commissioner of Taxation (1993) 27 ATR 459 at 466. This would appear to leave three issues, one raised squarely before Garling DCJ and two raised for the first time in the Court of Appeal. The first was the so-called estoppel defence which is said to tum upon the evidence in pare 10 of the appellant's affidavit in which the appellant deposed to a conversation in about April 1989 with a Mr Chris Robson of the Australian Government Solicitor who said to him: URJ SARROFF v DEPUTY COMMISSIONER OF TAXATION (Meagher JA) 3 "Tt will not be necessary for you to send any more money you have paid off the tax and interest". The deponent continued: "T did not pay any further monies to the plaintiff on account of this debt". In my view this does not ground a defence by way of estoppel either in point of fact or point of law. It certainly does not establish an accord and satisfaction, it does not establish any act of reliance that would be necessarily part of any estoppel and in point of law I, like Garling DCJ, do not see any legal basis upon which a solicitor from the Australian Government Solicitor could make a representation, the effect of which would be to estop the application of the provisions of the Income Tax Assessment Act. The second substantive point raised in the appeal, and raised for the first time it would appear, was a challenge to so much of the judgment as related to the additional tax dependent upon the provisional tax assessments. Relying on Kinny's Case we were informed, and I would accept, that the tax assessments are only prima facie evidence and not conclusive evidence of the provisional tax referred to therein. To the extent that his Honour appears in judgment to have concluded otherwise he was in error. However nothing turns upon this because the liability to provisional tax and attendant additional tax was established on the evidence and nothing was put before his Honour nor indeed before us to rebut that. The evidentiary formalities of that part of the Rules dealing with entry of summary judgment were duly complied with. The third point raised, and again something that appears to have surfaced only today, relates to the circumstances in which the judgment sum was reduced from $108,951.36 to $105,065.47, a difference of about $3,886. It was argued that this difference must involve some miscalculation because the interest that would flow on a sum of $3,000 from 1989 to 1995 must be more than $886. I think there were a number of answers to this contention. One is that I would read the judgment as indicating that it was common ground below that this was the correct mathematical alteration to make. But in any event it was proved by evidence that was unchallenged that the sum outstanding was $105,065.47. There are a number of possibilities as to why that sum may be a correct amount having regard to the Commissioner's capacity to appropriate payments towards outstanding amounts of tax, and it certainly was not shown to have been involved an error to have entered judgment for the amended sum. Accordingly I am of the view that no basis has been advanced to challenge the judgment that was entered and I would propose that the appeal be dismissed with costs. Priestley JA I agree. Meagher JA I agree. Appeal dismissed with costs.