Reported Decision : 67 ATR 569 New South Wales Supreme Court CITATION : Paspaley v Chief Commissioner of State Revenue [2007] NSWSC 1048 HEARING DATE(S) : 15/08/07 JUDGMENT DATE : 20 September 2007 JUDGMENT OF : Gzell J DECISION : Notices of Motion to strike out pleadings dismissed save for an order for consolidation. CATCHWORDS : TAXES AND DUTIES - Land Tax - Whether a decision to which an objection may be made under the Taxation Administration Act 1996, s 86(1) is limited to one affecting a taxpayer's substantive liability to land tax - Whether a decision not affecting substantive liability can be subject to judicial review - Whether the Taxation Administration Act 1996, s 103A(1) prevents judicial review of an assessment in the absence of an objection - Principles in relation to striking out a pleading - Whether fresh facts not before the Chief Commissioner when making a decision can be the subject of an amended objection rather than a fresh application - Whether the objection regime, including the Commissioner's discretion to receive an objection out of time under the Taxation Administration Act 1996, s 90(1) applies to an election with respect to a prinicpal place of residence under the Land Tax Management Act 1956, Sch 1A, cl 12 Land Tax Management Act 1956 LEGISLATION CITED : Taxation Administration Act 1996 Administrative Decisions Tribunal Act 1997 Dey v Victorian Railways Commissioners (1948-1949) 78 CLR 62 General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 CASES CITED : Penthouse Publications Ltd v McWilliam, unreported, NSWCA, 14 March 1991 Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628 McDonald's Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 McNally & Anor v Commissioner of State Revenue (NSW) 2004 ATC 4,007 PARTIES : Nicholas Theodore James Paspaley - Plaintiff Chief Commissioner of State Revenue - Defendant FILE NUMBER(S) : SC 1267/06; 6008/06; 3772/07 COUNSEL : Mr C Bevan - Plaintiff Mr M Robertson - Defendant SOLICITORS : Bartier Perry - Plaintiff Crown Solicitor - Defendant 13 IN THE SUPREME COURT OF NEW SOUTH WALES EQUITY DIVISION GZELL J 20 September 2007 1267/06 NICHOLAS THEODORE JAMES PASPALEY v CHIEF COMMISSIONER OF STATE REVENUE 6008/06 NICHOLAS THEODORE JAMES PASPALEY v CHIEF COMMISSIONER OF STATE REVENUE 3772/07 NICHOLAS THEODORE JAMES PASPALEY v CHIEF COMMISSIONER OF STATE REVENUE JUDGMENT 1 Nicholas Theodore James Paspaley has commenced three proceedings against the Chief Commissioner of State Revenue claiming that land assessed to land tax under the Land Tax Management Act 1956 is exempt as his principal place of residence. Notices of Motion have been filed in each matter. I deal with them hereunder. Notice of motion of 17 March 2006 2 This notice of motion was filed in proceedings numbered 1267 of 2006. It sought leave to file an amended summons. After its filing, the Chief Commissioner raised further objections to the competency of the proceedings under the original summons and Mr Paspaley filed a further notice of motion seeking leave to amend the summons by adding further grounds of appeal. That notice of motion superseded the earlier one which is no longer pressed. 3 I dismiss this notice of motion. Notice of motion of 24 March 2006 4 This notice of motion seeks to strike out those portions of the summons in proceedings numbered 1267 of 2006 that seek orders and declarations in relation to the 1997 to 2004 tax years with respect to the refusal of Mr Paspaley's application for permission to lodge objections against the assessments for those years out of time. 5 The Taxation Administration Act 1996, s 89(1) provides that an objection must be lodged with the Chief Commissioner not later than 60 days after the date of service of the notice of assessment. Under s 90(1), however, the Chief Commissioner may permit a person to lodge an objection after the 60-day period. In this case, the Commissioner rejected the application. 6 The Taxation Administration Act 1996, s 86(1) enables a taxpayer who is dissatisfied with an assessment or any other decision, within the meaning of the Administrative Decisions Tribunal Act 1997, s 6, of the Chief Commissioner to lodge a written objection. The Chief Commissioner argued that no written objection was lodged with respect to the Chief Commissioner's refusal to allow written objections to be lodged out of time. But if a written objection had been lodged, the Chief Commissioner argued that Mr Paspaley was not entitled to do so under s 86(1). 7 The term "decision" is broadly defined in the Administrative Decisions Tribunal Act 1997, s 6(1) to include making, suspending, revoking or refusing to make an order or determination, giving, suspending, revoking or refusing to give a certificate, direction, approval, consent or permission, issuing, suspending, revoking or refusing to issue a licence, authority or other instrument, imposing a condition or restriction, making a declaration, demand or requirement, retaining, or refusing to deliver up, an article, doing or refusing to do any other act or thing. Notwithstanding this width, the Chief Commissioner argues that it is only a decision that affects a taxpayer's liability to land tax that falls within the provision. Since a refusal to permit a person to lodge an objection out of time does not go to the taxpayer's substantive liability, it is not a decision that enlivens the right of objection under the Taxation Administration Act 1996, s 86(1). 8 The Taxation Administration Act 1996, s 86(2) contains a number of exceptions to the entitlement to lodge an objection with respect to an assessment or a decision. In particular, s 86(2)(d) provides that a taxpayer may not lodge an objection with respect to a decision not to reassess the taxpayer's liability where the taxpayer seeks to lodge the objection more that 60 days after the date of service of the notice of initial assessment. The Chief Commissioner submitted that this provision supported his contention that it was only a decision affecting the substantive liability of a taxpayer with respect to which a taxpayer was entitled to object. Since the decision not to accept an objection out of time was not a decision that affected the substantive liability of Mr Paspaley and, in particular, was not a decision not to reassess Mr Paspaley's tax liability the decision neither fell within s 86(1)(b) nor s 86(2)(d). 9 The Taxation Administration Act 1996, s 90(3) provides that the Chief Commissioner might grant permission to lodge an objection out of time unconditionally or subject to conditions or he might refuse permission. Section 90(4) provides that the Chief Commissioner must give notice of his decision and include in the notice the reasons for refusing to grant permission or for imposing a condition of the permission. The Chief Commissioner submitted that this provision had a role to play notwithstanding his submission that a decision under the provision could not be the subject of a written objection under s 86(1). The argument was that it was open to a taxpayer dissatisfied with such a decision to seek judicial review. 10 The Taxation Administration Act 1996, s 103A(1) provides, relevantly for present purposes, that no court has jurisdiction or power to consider any question concerning an assessment or other decision of the Chief Commissioner under a taxation law, including the determination of an objection under Div 1, except as provided by Pt 10. Section 86(1) is within Div 1 of Pt 10. It was argued on behalf of the Chief Commissioner that since his decision not to permit Mr Paspaley to lodge an objection out of time under s 90(1) was not a decision to which s 86(1)(b) applied, it was also not a decision, a challenge to which was limited by s 103A(1). 11 There was an additional ground of attack by the Chief Commissioner. The summons sought an order revoking the assessments of the Elizabeth Bay property for the 1997 to 2004 tax years and declarations that the property was used by Mr Paspaley as his principal place of residence and he was thus exempt from land tax with respect to it. 12 The Chief Commissioner argued that these were matters going to substantive liability which could only be challenged in terms of the Taxation Administration Act 1996, s 103A(1) as provided in Pt 10 and the assessments of land tax with respect to the 1997 to 2004 land tax years could only be challenged before this court under s 97(1) if there was a determination of a notice of objection with which Mr Paspaley was dissatisfied. He submitted that that procedure had not been adopted and the relief claimed was outside the scope of Pt 10 and this court was prevented from dealing with the matter. 13 On Mr Paspaley's behalf it was argued that there had been a decision not to reassess to which a written objection was lodged and the court had jurisdiction to review the decision on the written objection in terms of the Taxation Administration Act 1996, s 97(1)(a). On Mr Paspaley's behalf a notice of objection was lodged on 12 September 2005. The first part of it objected to the Chief Commissioner's refusal to be satisfied that the Elizabeth Bay property was occupied as a principal place of residence. On 14 December 2005, the Chief Commissioner rejected the objection. It was clearly a decision that invoked s 97(1). But the objection was limited to the 2005 tax year. It did not deal with the 1997 to 2004 tax years. 14 However, a further objection was lodged on 29 March 2006 in response to the decision of 14 December 2005 the first part of which referred to the 1997 to 2005 tax years. The matter is confused in the sense that the objection refers to the decision of 14 December 2005 to refuse Mr Paspaley's application to lodge out of time objections against assessments for the 1997 to 2005 tax years. To that objection the Chief Commissioner responded on 24 October 2006 stating that he had already responded to the earlier objection on 14 December 2005. 15 Notwithstanding the confusion in paragraph 1 of the objection of 29 March 2006, I think it is arguable that it constituted written objection for the purposes of the Taxation Administration Act 1996, s 86(1)(a) and the Chief Commissioner either made a decision with respect to the objection invoking s 97(1)(a), or he did not determine the objection, thereby invoking s 97(1)(b). 16 The principles applicable to summary termination are well understood. The case must be very clear to justify summary intervention to prevent a plaintiff submitting a case for determination in the usual way (Dey v Victorian Railways Commissioners (1948-1949) 78 CLR 62 at 91). The court's powers of summary dismissal should not be exercised to deny a plaintiff access to the courts unless the lack of a cause of action is clearly demonstrated (General Steel Industries Inc v Commissioner for Railways (NSW) (1964) 112 CLR 125 at 129). It is for the applicant to demonstrate that the statement of claim is beyond saving by legitimate amendment (Penthouse Publications Ltd v McWilliam, unreported, NSWCA, 14 March 1991, citing Mutual Life & Citizens Assurance Co Ltd v Evatt (1970) 122 CLR 628 at 631). 17 The Chief Commissioner's interpretation of the Taxation Administration Act 1996, s 86(1) is not so convincing that he has brought his application to strike out within the above principles. 18 Furthermore, in McDonald's Australia Ltd v Chief Commissioner of State Revenue [2005] NSWSC 6 at [47] I rejected a submission on behalf of the Chief Commissioner that only a decision with duty consequences entitled a taxpayer to lodge an objection under the Taxation Administration Act 1996, s 86(1)(b). I see no reason to change my view at this stage. Section 86(1) enables a taxpayer to lodge a written objection against an assessment or any other decision of the Chief Commissioner under a taxation law. A term "decision" is defined broadly in the Administrative Decisions Tribunal Act 1997, s 6 and I see no reason to construe down that meaning from the context of the Taxation Administration Act 1996, s 86(1) or the other provisions within Pt 10. 19 Secondly, and more fundamentally, the Chief Commissioner's stance is that if Mr Paspaley seeks judicial review of the decision not to receive objections out of time there would be no objection from him to the appropriateness of that course. 20 Counsel for Mr Paspaley submitted that the decision not to permit the objection to be lodged out of time was the subject of a written objection within the Taxation Administration Act 1996, Pt 10. But if that were not so, Mr Paspaley seeks leave to amend his summons to seek judicial review. 21 And it is arguable that there was an objection to the assessments for the 1997 to 2004 tax years. 22 In those circumstances, I grant leave to Mr Paspaley to amend the summons to seek judicial review of the Chief Commissioner's refusal to permit him to lodge, out of time, written objections against the assessments of land tax in respect of his property at Elizabeth Bay, Sydney, for the 1997 to 2004 tax years and I dismiss the notice of motion. Notice of motion of 28 November 2006 23 This motion is for leave to amend the summons in proceedings 1267 of 2006. Most of the amendments have been made in the later summonses and are the subject of strike out applications to which reference will be made later in these reasons. As I see it, the only relevant amendments now sought are those in proposed paragraphs 7A and 7B in relation to the 1997 to 2004 tax years. 24 The proposed paragraphs raise new grounds on which an extension of time under Taxation Administration Act 1996, s 90 is sought. It is alleged that Mr Paspaley relied on the advice of the general manager (finance and administration) of Paspaley Pearls Group who lacked practical experience with the consequence that Mr Paspaley was not informed about, and was unaware of, his rights of objection and appeal. Notwithstanding that Mr Paspaley obtained the benefit of the exemption for the principal place of residence for 1995 and 1996 tax years, it is alleged that he ceased to have the benefit of New South Wales solicitors with the consequence that he was unaware of his rights of objection and appeal. In both cases it is alleged that this explained Mr Paspaley's failure to lodge objections within the 60 day period provided under the Taxation Administration Act 1996, s 89(1). 25 The Chief Commissioner argues that this is a substitution of facts for those upon which the Chief Commissioner's decision not to allow the lodging of an objection out of time was based and it is not open to review the decision by reference to new grounds. If the court determines that the Chief Commissioner's refusal to extend time should be set aside and the matter remitted for a fresh determination, Mr Paspaley is then at liberty to raise the altered factual situation. The Chief Commissioner submitted that the appropriate course was for Mr Paspaley to apply again for an extension of time rather than to allow the amendments. 26 On Mr Paspaley's behalf it was submitted that the Chief Commissioner was aware of the lodgement of objections with respect to the 1995 and 1996 year because he said so in his decision of 14 December 2005. Further, the altered factual material is relevant to a judicial review application. It was common ground that the factual basis upon which the original application for lodgement out of time was made was incorrect. 27 In my view, whether or not Mr Paspaley amends his summons to include judicial review, the factual basis for the application for permission to lodge an objection out of time having been incorrect, the appropriate course is for Mr Paspaley to make a fresh application. Amending the summons to raise grounds that were not argued originally is fraught with difficulty, not the least being the underlying proposition that the Chief Commissioner's decision was wrong for his failure to consider facts that were not put before him at the time. 28 I dismiss the notice of motion. Notice of motion of 10 August 2006 29 In proceedings 6008 of 2006, Mr Paspaley expanded his grounds for objecting to the assessment of land tax for the 2005 tax year and he raised objections with respect to the assessment for the 2006 tax year. 30 This notice of motion seeks to strike out the allegations with respect to both tax years that Mr Paspaley made a valid election to treat the Elizabeth Bay property as the principal place of residence of all members of his family and in default of such an election the Chief Commissioner was bound to regard the Elizabeth Bay property as the principal place of residence of his family. 31 These arguments do not apply to the 1997 to 2004 tax years as the applicable provisions did not apply in those years. 32 The Land Tax Management Act 1956, Sch 1A, cl 12(2) provides that if members of a family own, whether jointly or separately, more than one residence used and occupied by any of them as a principal place of residence, the Chief Commissioner is to treat the one place of residence elected as the principal place of residence of the family as the principal place of residence of all members of the family in respect of a tax year. Schedule 1A, cl 12(5) provides that if an election is not made, the Chief Commissioner is to treat the residence that has the highest land value for land tax purposes as the principal place of residence of all members of the family. 33 The Chief Commissioner argues that the election cannot be made. First, the Land Tax Management Act 1956, Sch 1A, cl 12(4) provides that an election may be made in respect of a tax year by the end of the period allowed for the lodging of an objection to a notice of assessment of land tax liability for that tax year. That period has long since passed with respect to the 2005 and 2006 tax years. 34 Secondly, the Chief Commissioner argues that the review to which the Taxation Administration Act 1996, s 97(1) relates is confined to the decision of the Chief Commissioner on the objection then before him (McNally & Anor v Commissioner of State Revenue (NSW) 2004 ATC 4,007 at [27]-[35]). The decision of the Chief Commissioner was not concerned with any election under the Land Tax Management Act 1956, Sch 1A, cl 12. Nor was it concerned with the consequence of no election being made in terms of cl 12(5). Those were not matters addressed in the objection with respect to which the decision was made. 35 Thirdly, the Chief Commissioner argues that the Land Tax Management Act 1956, Sch 1A, cl 12 does not convert a property that does not fall within the definition of "principal place of residence" in s 3(1) into a principal place of residence. Clause 12 is only enlivened when two or more properties owned by family members fall within the definition. It was a legislative response to my decision in McNally. 36 Fourthly, the Chief Commissioner argues that the amendment raises no new issue. If Mr Paspaley convinces the court that the Elizabeth Bay property was his principal place of residence that is the end of the matter. There is no need to consider the Land Tax Management Act 1956, Sch 1A, cl 12. Likewise, if Mr Paspaley fails to convince the court that the Elizabeth Bay property was his principal place of residence there is no scope for the operation of cl 12. 37 It was submitted on behalf of Mr Paspaley that the Chief Commissioner had not taken the point that the application was out of time until shortly before the current hearing. Had he taken the point earlier the application would have been coupled with an application for an extension of time because the Land Tax Management Act 1956, Sch 1A(12)(3) provides that an election is to be in writing and must be lodged with the Chief Commissioner within the period for lodging of objections under the Taxation Administration Act 1996, s 89. It was argued that that introduces by reference the objection regime including the discretion in the Chief Commissioner to permit a person to lodge an objection out of time under s 90(1). It was submitted that procedural fairness demanded that Mr Paspaley be given the opportunity to make an application to the Chief Commissioner that he permit the election to be made out of time and that, accordingly, the paragraphs of the summons should not be struck out. 38 In light of this argument, I am not prepared, at this stage, to strike out the paragraphs in question. If Mr Paspaley makes an application for permission to lodge an election out of time, there will be a need to re-plead depending upon the result of that application. I would defer consideration of this matter until that time. 39 As the summons in 6008 of 2006 is likely to be the subject of an amended pleading, there is no utility in standing over the present notice of motion and I dismiss it. Notice of motion of 15 August 2007 40 With respect to the disallowance of Mr Paspaley's objection against the Chief Commissioner's assessment of land tax for the 2007 tax year, fresh proceedings numbered 3772 of 2007 were commenced. 41 By this notice of motion the Chief Commissioner seeks to strike out the allegations with respect to the election for the 2007 tax year and the consequence of non-election under the Land Tax Management Act 1956, Sch 1A, cl 12. 42 For the reasons expressed above with respect to the notice of motion of 10 August 2007, I am of the view that consideration of this application should await the outcome of any application by Mr Paspaley for permission to lodge an election out of time with respect to the 2006 or the 2007 tax years. 43 For the same reason that any such application with respect to the 2007 tax year may call for re-pleading, I see no utility in standing the notice of motion over. 44 I dismiss the notice of motion. Notice of motion of 26 July 2007 45 On 2 March 2007, I made an order consolidating proceedings numbered 6008 of 2006 with proceedings numbered 1267 of 2006. 46 By this notice of motion in proceedings numbered 3772 of 2007, Mr Paspaley seeks an order to consolidate them with the earlier consolidated proceedings. 47 There is no objection to this course from the Chief Commissioner. 48 I make an order in terms of paragraph 1 of the notice of motion. Conclusion 49 I will hear the parties on costs. I direct the parties to bring in short minutes of order reflecting these reasons. ********** DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. 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