IN THE HIGH COURT OF FIJI
AT LAUTOKA
CIVIL JURISDICTION

Civil Action No: HBJ 3 of 2011L

BETWEEN:

GENERAL MACHINERY HIRE LIMITED
PRAUSHILA DEVI SINGH
ALVIN KUMAR SINGH
AJNIL KUMAR SINGH
Applicants

AND:

CHIEF EXECUTIVE OFFICER of FIJI REVENUE AND CUSTOMS AUTHORITY
Respondent

JUDGMENT ON JUDICIAL REVIEW

Judgment of: Inoke J.

Counsel Appearing: Mr B C Patel and Ms V Lidise (Applicants)
Mr B Solanki (Respondent)

Solicitors: Young & Assocs (Applicants)
 In-house solicitors (Respondent)

Dates of Hearing: 28 March 2012
Date of Judgment: 5 April 2012

INTRODUCTION

[1]	On 15 December 2011 I gave leave to the applicants to apply for judicial review. That judgment is reported in General Machinery Hire Ltd v Chief Executive Officer of Fiji Revenue and Customs Authority [2011] FJHC 805; HBJ03.2011L (15 December 2011).

[2]	This is my judgment after hearing the application for judicial review.

THE DECISIONS FOR REVIEW AND THE RELIEF SOUGHT

[3]	The respondent’s decisions that were sought to be reviewed were:

(a)	Decision dated 25 February 2011 to terminate the Deed of Settlement dated 9 July 2010; and

(b)	Decision dated 18 May 2011 to issue Notices of Garnishee in respect of the second, third and fourth applicants; and

(c)	Decision dated 24 May 2011 to issue Departure Prohibition Order (“DPO”) against the second, third and fourth applicants.

[4]	The applicants listed 13 prayers for relief in its application. However, at the hearing, their counsel had asked the Court to consider only 10 which are as follows:

(a)	A declaration that the Deed of Settlement dated 9 July 2010 is valid and binding on the respondent.

(b)	An order of certiorari to remove into this Honourable Court and quash the said decisions of the respondent, namely, dated 25 February 2011 to repudiate the Deed of Settlement, dated 18 May 2011 to issue the Notices of Garnishee in respect of the second, third and fourth applicants and dated 24 May 2011 to issue DPOs against the second, third and fourth applicants.

(c)	A declaration that there was an overpayment by the applicants of $100,186.57 under the Deed of Settlement dated 9 July 2010 as at 31 May 2011.

(d)	An order that the respondent pay to the applicants $100,186.57 being the amount of overpayment under the Deed of Settlement dated 9 July 2011 together with interest thereon at the rate of 12% per annum compounded monthly or at such other rate as my seem just to this Honourable Court.

(e)	A declaration that the respondent whether by himself or by his servants or agents has acted unfairly and/or arbitrarily and/or without lawful justification and/or in bad faith in the manner or by the tactics used to deal with the applicants between 25 November 2010 and 30 June 2011.

(f)	An order that the Notices of Garnishee issued to Bank of Baroda in respect of the second, third and fourth applicants on 18 May2011 are unlawful and null and void.

(g)	An order that the DPOs issued against the second, third and fourth applicants on 24 May 2011 are unlawful and null and void.

(h)	Damages for acting without jurisdiction and unlawfully under s 27 and s 31 of the Tax Administration Decree 2009.

(i)	Damages for acting unlawfully and/or in bad faith between 25 November 2010 and 30 June 2011 in demanding tax and penalties and further information for income years ending 31 December 2000 to 31 December 2007 when no such tax or penalty was owed and when no such further information was warranted by reason of the Deed of Settlement dated 9 July 2010 and when the manner or tactics used to deal with the applicants during the said period was unprofessional and intimidating.

(j)	Cost of these proceedings on an indemnity basis.

[5]	For convenience, I summarise the applicants’ claim as follows:

A.	Declaration that the Deed of Settlement dated 9 July 2010 is valid and binding on the respondent [paragraph (a)].

B.	Judicial review and orders in respect of the respondent’s decision of 25 February 2011 to terminate the Deed [paragraphs (b) and (e)].

C.	Orders in respect of overpayment of taxes [paragraphs (c) and (d)].

D.	Judicial review and orders in respect of the issue of the Notices of Garnishee and DPOs [paragraphs (b), (f) and (g)].

E.	Damages in respect of the issue of the Notices of Garnishee and DPOs [paragraphs (h) and (i)].

F.	Indemnity costs [paragraph (j)].

THE BACKGROUND FACTS

[6]	General Machinery Hire Limited has been engaged in the freight and cartage business since 1983 from Lautoka. The other applicants are the directors of the company being the mother and her two sons, respectively. Following an audit of the respondent’s tax affairs, the respondent issued Notices of Amended Assessment to the company on 4 May 2010 and to each of the directors on 21 May 2010 for the tax years ending 31 December 2000 to 31 December 2007. They were assessed with additional income taxes and penalties. The parties then entered into negotiations eventually coming to an agreement contained in a Deed of Settlement which they executed dated 9 July 2010. The Deed provided for payment of the total tax liability of $1,729,952.00 by payment of $500,000 upon signing and periodic payments of $50,000 per month for four months with full settlement on 15 December 2010. The applicants paid the $500,000 and made payments of $52,360 for August and $50,000 for each of the months of September and October 2010.

[7]	The Deed also provided for review by 31 October 2010. However, the respondent’s representative was not able to meet with the applicants on that day so further arrangements were made for that review. They eventually met on 25 November 2010. At that meeting the fourth applicant handed the respondent’s representative, Mr Nata, a letter dated 24 November 2010 requesting an extension of the deadline of 15 December 2010 to the end of June 2011 and payments by monthly installments of $50,000. The reasons given in the letter were the down turn of the economy and company business. The letter admits that the company could not meet the deadline of 15 December 2010.

[8]	I accept that at the meeting Mr Nata agreed to extend the deadline but not as suggested by the fourth applicant. I find that Mr Nata agreed to extend the deadline but only to 24 February 2011 on which date he would review the agreement because this is what he wrote by hand on the letter:

“… accept the payments as it is ok.
Apportion the $50,000 amongst the directors equally.
I will meet and review all arrangements on 24/2/2011”.

[9]	It should be noted that this $50,000 payment was for the month of November 2010 which was then due.

[10]	However, about two weeks before the promised 24 February 2011 meeting took place, the respondent, by one of its other officers, wrote to the applicants on 11 February 2011 stating that “in view of your default in the payment of taxes due, 25% late payment penalty has been charged under the provisions of s 44 of the Tax Administration Decree” and demanded payment of income tax and VAT arrears and penalties. The applicants continued to make payments towards the tax and penalty liability throughout this time including a payment on 24 February 2011. The respondent then faxed a letter to the applicants on the afternoon of 24 February 2011 (the letter was dated 25 February 2011) stating that they had breached the Deed of Settlement and that the respondent “will no longer comply with the deed since it is null and void of any legality soon after the company breached (the) clause (for full settlement by 15 December 2010). Therefore the audit of your company directors for the years from 2000 to 2007 and thereafter will continue from now”. The applicants then tried to contact the respondent’s representative and a meeting was arranged for 1 March 2011. They met on 1 March 2011 and further agreed to meet on 10 March 2011 but did not resolve anything. On 16 March 2011, the respondent wrote to the applicants reaffirming its earlier position that the Deed was null and void as far as it was concerned. The applicants continued to make payments and the respondent, pursuant to garnishee orders, obtained payment from the applicants’ bank accounts in March, April and May 2011. The applicant’s previous solicitors wrote several letters to the respondent in April and May and the applicants’ accountant and solicitor met with the respondent’s representative on 31 May 2011 but were told that no further discussions would be entered into in respect of the Deed of Settlement. The applicants now say that they have overpaid the amount due under the Deed by over $100,000.

[11]	On 25 October 2011, the respondent revoked the DPOs issued against the second, third and fourth applicants. The application for leave to issue judicial review was filed on 15 August 2011 and by the time the judicial review was heard the DPOs had already been revoked. Similarly, for the Notices of Garnishee.

THE RESPONDENT’S AFFIDAVIT IN REPLY

[12]	Counsel for the applicant pointed out that:

Only 3 of the 65 paragraphs of the first (4th applicant’s) Affidavit are “denied” i.e. paragraphs 57 (summary of payments) and 61 and 62; paragraphs 45, 60, 63 & 64 are “no comments”; paragraphs 12, 13, 14, 23, 32, 34, 36 & 39 are “cannot recall”; and remaining 49 paragraphs are “admitted”.

[13]	I agree that the respondent’s affidavit in reply did not satisfactorily address some of the pertinent issues raised in the applicants’ affidavits. However, I feel unable to find that this was through lack of rebuttal evidence. It seems to me that the facts of this case and the nature of the relief sought highlight the inappropriateness of the procedure adopted in this case, namely, judicial review and evidence by affidavits rather than writ of summons and viva voce evidence, especially in respect of the claim for damages.

THE DEED OF SETTLEMENT

[14]	The Deed of Settlement, so far as relevant, provided as follows:

THE PARTIES AGREE AS FOLLOWS:

A.	General Machinery Hire Limited and its directors will pay the amount of FJ$1,729,952.00 to FIRCA (on signing of this Deed) representing income taxes in respect of the years 2000 to 2007.

B.	In relation to (A) above the settlement to be effected as follows:

(i)	FJ$500,000 as part payment of the outstanding tax liability of FJ$1,729,952.00.

(ii)	The balance to be paid FJ$50,000 per month for four months for review by 31st October 2010 in view of full settlement.

(iii)	The full settlement to be cleared by 15th December 2010 for Company and its directors.

C.	Departure Prohibition Orders to be revoked upon settlement of part payment as in clause B(i) above.

D.	Garnishee Orders to be revoked upon settlement of part payments as in clause B(i) above.

E.	Full waiver of penalties upon settlement of full tax liability of FJ$1,729,952.00 as in clause (A) above by 15th December 2010.

F.	VAT audit to be suspended until full settlement of income taxes by 15th December 2010.

G.	The tax audits by FIRCA on General Machinery Hire Limited and its directors in respect of income tax issues for the years 2000 to 2007 are now closed.

[15]	It is not in dispute that the tax liability of FJ$1,729,952.00 is the total amount of tax assessed by the respondent. What is in dispute is how much the respondent can impose as penalties. It is clear however from the Deed that the agreement reached by the parties was that so long as the applicants paid the full amount of the tax owing as provided for in the Deed, the penalties would be waived: see clause E. It is also clear that the full amount of tax had to be paid by 15 December 2010 unless extended by the respondent.

CONSIDERATION OF THE APPLICATION FOR JUDICIAL REVIEW

[16]	In Satala v Bouwalu [2008] FJSC 20; CBV0005.2006S (13 October 2008), the Supreme Court said:

Broadly speaking, judicial review is available on one or more of three general grounds: illegality (such as absence of power), irrationality, and procedural impropriety (usually a denial of natural justice): Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374, 410 per Lord Diplock.

[17]	The grounds put forward by the applicants were illegality (absence of power) and procedural impropriety (failure to act with procedural fairness)

Judicial Review of the decisions to issue DPOs and Notices of Garnishee

[18]	I will deal first with the decisions regarding the issuing of the DPOs and the Notices of Garnishee. Counsel for the respondent submitted that these are now moot so the Court should not grant the relief sought in respect thereof. Counsel for the applicants on the other hand, submitted that these issues are relevant to the claims for damages and are therefore live and the Court should consider them and grant the declarations sought.

[19]	I agree with counsel for the respondent. These issues are now moot. The Court will therefore not grant the relief sought in respect thereof. However, that does not mean that the applicants are precluded from pursuing these issues in other more appropriate proceedings in respect of their claim for damages.

[20]	It follows that prayer for relief paragraph (b), in so far as it relates to the issue of Notices of Garnishee and DPOs, and paragraphs (f) and (g) are refused.

Judicial Review of the decision to terminate the Deed of Settlement

[21]	The first issue which the Court needs to decide is whether the respondent had the power to enter into the Deed. I find that power in s 25 of the Tax Administration Decree 2009 which provides:

25. — (1) A taxpayer may apply, in writing, to the CEO for an extension of time to pay tax due under a tax law.

(2)	If an application has been made under this section, the CEO may, having regard to the circumstances of the case — 

(a)	grant the taxpayer an extension of time for payment of the tax due; or

(b)	require the taxpayer to pay the tax due in such instalments as the CEO may determine, 

and the CEO must serve the taxpayer with written notice of the decision.

(3)	If a taxpayer permitted to pay tax by instalments defaults in the payment of an instalment, the whole balance of the tax outstanding, at the time of default, is immediately payable. 

[22]	Counsel for the respondent argued that the Deed in this case was not permitted by s 25 because what the respondent agreed to do in paragraphs F (suspension of VAT audit) and G (closure of tax audit) are not permitted by the section. The argument is based on the decision of the Court of Appeal in Punjas v Commissioner of Inland Revenue [2006] FJCA 66; ABU0099U.2005S (10 November 2006) where it was held that the Commissioner could not enter into a settlement to forego the collection of tax. The Court there set out ten general taxation principles which I take guidance from in deciding this application and I quote them here for ease of reference:

[47]	We next set out a number of relevant general taxation principles which have emerged from the decided cases over the years and which affect the operation of the VAT Decree.

(1)	The Commissioner has the role of administering the VAT Decree 1991 and the control and the management of collection of the taxation charged thereby and all matters incidental thereto. Section 6 VAT Decree. See also Paul Finance Limited v. Commissioner of Inland Revenue (1995) 17 NZTC 12379 (CA) especially at 12382 as to the New Zealand Goods and Services Act 1985.

(2) 	The VAT Decree, like the Income Tax Act, imposes an imperative statutory duty on the Commissioner which is not amenable to judicial restraint CIR v Lemmington (1982) 1 NZLR 517 CA at page 521 per Richardson J. delivering the joint judgment of himself and Woodhouse P.

(3) 	The charge for VAT on the supply in Fiji of goods and services (not including an exempt supply) is imposed by the decree itself, namely section 15(1), and the tax is payable independently of assessment Lemmington at page 521.

(4) 	The VAT Decree, like the Income Tax Act, proceeds on the premise that in the interests of the community the Commissioner is to ensure that VAT is properly assessed and paid. Brierley Investments Ltd v CIR (1993) 15 NZTC 10212 (CA) at 10215.

(5) 	Every tax payer should be treated alike with no concession being made to one to which another is not equally entitled. Reckitt v. Coleman (NZ)Ltd v. The Taxation Board Review [1966] NZLR 1032 CA per Tuner J at page 104. See also Brierley Investments Ltd v. CIR (Supra) at page 1021 per Richardson J.

(6) 	The Commissioner is not able to contract out of his statutory obligations Brierley Investments Ltd v. CIR (Supra) at page 10215 per Richardson J. He cannot tie his hand. He cannot create no go areas for himself Brierley Investments v Bouzaid [1993] 3 NZLR 655 CA page 698 per Richardson J.

(7) 	A forward tax agreement cannot be characterized as a collection of tax and is ultra vires the statutory powers and duties of the Commissioner under the Decree. Fayed v. CIR (2003) SC 1 especially at page 25.

(8) 	The Commissioner does not have a general dispensing power. He is unable to opt out of the obligation to make a statutory judgment of liability of every tax payer under the Decree Brierley Investments Ltd v. CIR (Supra) at page 10215 per Richardson J. The special dispensing powers of the Commissioner to grant relief from tax contained in the Section 70 of the VAT Decree (to which we have already referred) are not applicable to the present case as it does not involve any questions of additional tax or penal tax or penalty. S.70 can therefore be ignored.

(9) 	The Commissioner is free to resile from a position hitherto taken up by him:

"It is his judgment that counts under the statutory scheme in all these situations and it is a judgment which must be exercised from time to time unfettered by any views that he may have previously expressed either generally or in relation to a particular tax payer or matter and unconstrained by an assessment he may have previously made." Lemmington at page 522 per Richardson J.

(10) 	The doctrine of estoppel does not operate to preclude the Commissioner from pursuing his statutory duty to assess tax in accordance with law AGC Investments Limited v. FTC (1991) ATR 1379 at page 1396 per Hill J. Likewise Lemmington at page 523 per Richardson J:

"As we have said, the Commissioner cannot be estopped by past conduct from performing his statutory obligations to make assessment as and when he thinks proper. It is his present judgment as to the statutorily imposed liability for tax that counts. The correctness of that judgment and of the Commissioner's view of the law and facts which lead him to make his assessment cannot be challenged outside the objection procedures."

See also Brierley Investments v. Bouzaid (Supra) at page 662 per Richardson J.

[23]	It is to be noted that the VAT Decree 1991 did not have provisions similar to those in s 25 of the Tax Administration Decree 2009. However, what is significant in my view is that paragraph F of the Deed did no more than suspend the VAT audit. The respondent did not agree not to pursue the audit if the payment deadline was not met. Similarly, paragraph G does not in my view make the Deed unlawful because it is superfluous. The total amount of tax to be paid under the Deed is the exact amount assessed by the respondent so there was no need to continue with the tax audit, unless of course the tax is not paid in full by 15 December 2010. The respondent's argument that the Deed as entered was not authorised under the Decree fails. I find that the Deed was validly entered into by the parties.

[24]	It should also be noted that under s 48 of the Decree, the respondent can waive penalties in this case.

[25]	The next issue for determination is whether on the facts of this case, the respondent extended the time for payment beyond 15 December 2010. As I have found above, Mr Nata, on behalf of the respondent, only extended the time for payment to 24 February 2011 at which date he was to review. Is this binding on the respondent? If it is, then the letter of 11 February 2011 terminating the Deed would be of no effect. Similarly, for the letter dated 25 February 2011.

[26]	The respondent is free to resile from a position he had previously taken: principle 9 of Punjas (supra). The doctrine of estoppel does not apply here: principle 10 of Punjas (supra). The application of these principles leaves me with no alternative but to find that on the facts as I have found them, the respondent was free to resile from the position that he took on 25 November 2010, that is to say, to review the deadline on 24 February 2011. It also follows that the respondent was free to terminate the Deed on 11 February 2011 or on 25 February 2011 or on any other date for that matter. There was no lack of power to terminate or failure to give the applicants procedural fairness.

[27]	In any event, the applicants had admitted that it could not meet the 15 December 2010 deadline. They were in anticipatory breach of the agreement under Deed which would have entitled the respondent to terminate it.

[28]	I therefore conclude that the respondent's decisions to terminate the Deed on 11 February 2011 or on 25 February 2011 are not amenable to judicial review.

[29]	The applicants are entitled to prayer for relief (a) only in so far as to declare that the Deed of Settlement dated 9 July 2010 was validly entered into by the parties. They are not entitled to a declaration that the respondent is bound by it.

CLAIM FOR OVERPAYMENT OF TAX

[30]	The applicants argue that they have paid more than what was required under the Deed. The amount that was required to be paid under the Deed was the applicants' total amount of tax assessed by the respondent. I have found that the respondent entered into the agreement under the Deed on the basis that no penalties would be imposed if the tax was paid by 15 December 2010. The applicants could not do that. The respondent is therefore free to impose penalties. He has a discretion to waive or enforce payment of penalties under s 48 of the Decree. That is now open to him. Prayers for relief (c) and (d) relate to the payment of penalties and are therefore refused.

THE CLAIM FOR DAMAGES

[31]	The claim for damages hinges on whether the Notices of Garnishee and DPOs were validly issued. Those issues have not been decided in this application and the applicants are free to pursue them in other proceedings if they wish.

[32]	Apart from that I take the view that originating motion or summons is not the appropriate procedure for such a claim.

[33]	I therefore decline prayers for relief in paragraphs (h) and (i).

THE STAY GRANTED ON 15 DECEMBER 2011

[34]	On 15 December 2011, in addition to granting leave to the applicants to apply for judicial review, I ordered a stay of all actions by the respondent in respect of the matters dealt with under the Deed. The outcome of this application makes it necessary for me to lift the stay so I order accordingly.

COSTS

[35]	The applicants ask for indemnity costs. They have only partially succeeded. They are not entitled to costs. In any event, this is not a case for indemnity costs. Instead the normal rule applies. The respondent has succeeded to a large extent. He is entitled to his costs which I summarily assess as $3,000.

THE ORDERS

[36]	I therefore make the following orders:

(a)	The Court declares that the Deed of Settlement dated 9 July 2010 was validly entered into by the parties but not enforceable against the respondent.

(b)	The application for judicial review of the respondent's decisions of 11 February 2011 and 25 February 2011 is otherwise dismissed.

(c)	The applicants' claim for overpayment of taxes is dismissed.

(d)	The applicants' claim for damages is refused but the applicants are free to pursue them in other proceedings if they wish.

(e)	The stay granted on 15 December 2011 is lifted forthwith.

(f)	That the applicants shall pay the respondent's costs of $3,000 within 28 days.

……………………………………………………
Sosefo Inoke
Judge