Southgate Investment Funds Ltd & Ors v Deputy Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 826 of 2012)
Judgment date: 12 February 2013
Date published: 9 April 2013

Summary of decision:
Outlines the ATO's response to the taxpayer's appeal from the refusal by Perram J to grant a stay of execution of a summary judgment in circumstances where the taxpayer had parrallel Part IVC proceedings on foot.

Overview of facts:
The taxpayer appealed from the decision of Perram J, refusing a stay of enforcement of a charging summons made in favour of the Deputy Commissioner of Taxation in furtherance of ss.14ZZM & 14ZZR of Schedule 1 of the Taxation Administration Act 1953 . His Honour relied upon Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 as authority that in the exercise of his discretion to grant a stay, he was prevented from considering the merits of a Part IVC application as a relevant factor. | The Commissioner issued assessments against five taxpayers and then obtained freezing orders against their Australian assets, being listed shares on the ASX. The Commissioner obtained summary judgment in respect of the tax debts and filed charging summonses to sell the shares the subject of the freezing orders. At the outset of the appeal, four of the five taxpayers no longer pressed their appeals, leaving the remaining appellant, Derrin Brothers Properties Limited. | The appeal was heard before the Full Court on 21 November 2012. | Issues decided by the court | The Full Court accepted the Commissioner's submissions that the merits of a Part IVC proceeding are a relevant consideration in the exercise of the discretion to grant a stay; and, that a Court should not attempt to determine the merits of a Part IVC proceedings unless it has sufficient material to do so and it could not speculate on the outcome of a Part IVC appeal. | The Full Court at [75] accepted that the test for granting a stay requires something more than merely an "arguable" Part IVC case; that the trial judge has an obligation to consider all of the material before him to determine if there existed sufficient material to assess the merits of the Part IVC proceedings [76], and that the weight attached to the merits will vary in each case [77].

Issues decided:
The Full Court accepted the Commissioner's submissions that the merits of a Part IVC proceeding are a relevant consideration in the exercise of the discretion to grant a stay; and, that a Court should not attempt to determine the merits of a Part IVC proceedings unless it has sufficient material to do so and it could not speculate on the outcome of a Part IVC appeal. The Full Court at [75] accepted that the test for granting a stay requires something more than merely an "arguable" Part IVC case; that the trial judge has an obligation to consider all of the material before him to determine if there existed sufficient material to assess the merits of the Part IVC proceedings [76], and that the weight attached to the merits will vary in each case [77].

ATO view of decision:
The ATO's view of the decision is that the Full Court has identified the relevant principles for an exercise of discretion to grant a stay. These principles confirm the scheme of the taxation laws includes assessment and recovery of tax debts. | The Full Court distinguished Broadbeach in context [68], and has not restricted the analysis of Broadbeach in any way. | The ATO view accepts there may be discrepencies between when there is a "merely arguable case" in respect of Part IVC proceedings and what will amount to "speculation" on the outcome of the proceedings. | The Full Court acknowledged at [77(i)(ii)] that if a person was able to demonstrate that the execution of a judgment would lead to a stultification of that person's ability to exercise Part IVC rights, that might be a further factor relevant to the exercise of the discretion. In effect, the Full Court in making this statement has reinforced the statements of principle espoused by the Queensland Court of Appeal in Deputy Commissioner of Taxation v Denlay (2010) 80 ATR 109. | Implications for ATO precedential documents (Public Rulings & Determinations etc) | N/A | Implications for Law Administration Practice Statements | Practice Statement Law Administration PS LA 2011/4 - Recovering disputed debts

Administrative treatment:

Legislative references: Taxation Administration Act 1953 14ZZM 14ZZR Part IVC Federal Court of Australia Act 1976 31A
Case references: Australian Machinery and Investment Co Pty Ltd v Deputy Commissioner of Taxation (No. 2) (1945) 20 ALJR 326 47 WALR 9 8 ATD 133 3 AITR 236 Clyne v Deputy Commissioner of Taxation (NSW) (1983) 48 ALR 545 14 ATR 563 83 ATC 4532 Cywinski v Deputy Commissioner of Taxation [1990] VicRp 17 [1990] VR 193 20 ATR 672 89 ATC 4512 Deputy Federal Commissioner of Taxation v Akers 89 ATC 4725 Deputy Commissioner of Taxation v Bayconnection Property Developments Pty Limited [2012] FCA 363 127 ALD 64 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 237 CLR 473 69 ATR 357 2008 ATC 20-045 Deputy Commissioner of Taxation v Chemical Trustee Ltd [2010] FCA 1297 81 ATR 237 Deputy Commissioner of Taxation v Denlay [2010] QCA 217 80 ATR 109 Deputy Commissioner of Taxation (NSW) v Mackey (1982) 45 ALR 284 13 ATR 547 82 ATC 4571 Deputy Commissioner of Taxation v Warrick (No. 2) [2004] FCA 918 56 ATR 371 2004 ATC 4779 Esquire Nominees Ltd v Federal Commissioner of Taxation [1973] HCA 67 129 CLR 177 3 ATR 105 72 ATC 4076 Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 18 ATR 439 87 ATC 4078 Trade World Enterprises Pty Ltd v Deputy Commissioner of Taxation [2006] VSCA 191 64 ATR 316
Subject references: Application to stay execution Part IVC appeal pending Merits review Effect of Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd Discretion to stay execution of judgment debt