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13 Feb 13 Judge's discretion miscarried in application for stay of execution - Southgate (Derrin)

The Full Federal Court (McKerracher, Jagot and Griffiths JJ) has upheld the taxpayer's appeal from the decision of Perram J in Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 3) [2012] FCA 594.

In his decision, Perram J refused the application, by Derrin Brothers Properties Limited (Derrin), for a stay of execution of a summary judgment of another Federal Court judge, under which Derrin was required to pay the Commissioner outstanding income tax and related administrative charges in an amount of $9,624,253.17.

Perram J refused the application, so far as is relevant, on the grounds that, in exercising his discretion whether or not to grant a stay, both the provisions of s 14ZZR of the Taxation Administration Act 1953 (Cth) (TAA) and the decision of the High Court in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41 (Broadbeach) required him to have no regard to the merits of the taxpayer's appeal to the Court under the objection and appeals provisions of Part IVC of the TAA, which were then on foot.

Section 14ZZR provides that the "fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax, or other amount may be recovered as if no appeal were pending".

In its judgment, the Full Federal Court held that Perram J had overstated the effect of Broadbeach and went on to distinguish the issues in Broadbeach (involving a statutory demand under the Corporations Act 2001 from the issues in the present case (a stay of execution of a judgment debt).

Although the High Court refused to set aside the statutory demand in Broadbeach, the Full Federal Court noted that the Commissioner made a concession in Broadbeach that the merits of Part IVC proceedings would be a relevant consideration to the exercise of the discretion whether or not to make a winding up order against a company in insolvency proceedings. The Full Federal Court said, at para 73:

"In our view, the High Court’s acceptance of the Commissioner’s concession necessarily means that the High Court did not intend in Broadbeach to formulate an absolute rule which requires the merits of Part IVC proceedings to be disregarded in any case where a court is asked to exercise a discretionary power which could have some impact upon the Commissioner’s recovery of a taxation debt."

The Full Federal Court therefore held that Perram J's exercise of his discretion miscarried. Their Honours then set out at para 77 of their judgment the criteria which may apply in determining whether or not execution of a judgment debt should be stayed.

The Full Federal Court upheld Derrin's appeal, set aside the order of Perram J refusing the stay, and remitted the matter to Perram J for reconsideration.

Southgate Investment Funds Limited v Deputy Commissioner of Taxation [2013] FCAFC 10 ( Full Federal Court; McKerracher, Jagot and Griffiths JJ; 12 February 2013).

 


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