National Court of Papua New Guinea

As a direct result of the conduct of the plhe plaintiff, Mr Leach had to resettle in Australia. Costs of resettlementto haen borne by his ehis employer, however, due to the fact that that his employer had been served with a s.272 notice, he was not able to be paid any resettlement costs. He therefore claimed the sum of K5,000.00. However, there is no evidence of the actual cost. In my view, Mr Leach has to provide evidence of costs of airfares for himself and his family and removal of personal or household items etc. There is no evidence before me of these costs except an estimated sum of K5,000.00. Whilst I accept that he had incurred some costs, I am not satisfied that he has proved this amount. He is therefore not entitled to the sum of K5,000.00

The defendant cross claimant in my view, is entitled to both general and exemplary damages. The basis for this can be basically summarised hereunder.

Mr Leach’s uncontested evidence is that there was no basis at all for the Internal Revenue Commission’s assessment of his taxable income at K1.5m. This evidence is uncontested and I accept it. No evidence of this assessment has been produced in this Court. In any event, the Internal Revenue Commission had, in Septemer 1995, amended its assessment of Mr Leach’s taxable income from K1.5m to K71,496.00. However, even then, all the s.272 notices were not withdrawn or revoked. There could be no lawful justification for this at all. In all the circumstances, the non-revocation of the s.272 notices in respect of the sum of K2,687,384.94 was quite unreasonable and without any legal basis or justification.

Despite the fact that an objection had been lodged against the assessment of taxable income of K1.5m, the plaintiff proceeded with legal proceedings, WS 681 of 1992, against Mr Leach claiming the sum of K2,687,384.94.

The writ in that action was issued in the National Court, Waigani on 7^th September, 1992. Whilst the plaintiff had exercised its right to institute legal proceedings, it failed to consider that the defendant had a statutory right pursuant to s.245(1) of Income Tax Act, to lodge an objection, which he had exercised, and the objection was yet to be dealt with. As it were, the plaintiff proceeded to obtain default judgment against the defendant which was subsequently set aside by Amet, J (as he then was) on 16^th July, 1993. And as if that was not adequate, a restraining order was taken out against Mr Leach’s boat, the “Lahara”. The boat, valued at K220,000.00, was subsequently sold. Whilst I am told that is the subject of a separate pending suit, I mention it here to highlight a series of conduct by the plaintiff which clearly had no basis in law.

The Internal Revenue Commission subsequently reassessed the defendant’s taxable income at K71,496.00. It follows therefore, in my view, that the whole conduct of the plaintiff had no basis whatsoever in law. To me, common sense, fair play, fairness and indeed justice were not accorded Mr Leach. I consider that there was a breach of s.59(2) of Constitution in that the Internal Revenue Commission failed in its duty to act fairly, under the circumstances.

It seems obvious to me that the Internal Revenue Commission was out to destroy Mr Leach at all cost, and clearly there was no legal basis at all for the series of conduct by the Commission. It set out on a campaign to crucify Mr Leach for reasons that it has not brought before this Court by way of evidence. Consequently, the Internal Revenue Commission completely destroyed Mr Leach’s life, his business, good credit and financial standing and his prospect of an investment valued at more than K200,000.00. His assets like debts owed to him, boat, salary, etc were affected.

Surely, all these must have greatly affected the life of Mr Leach. He must have endured great stress and mental anxiety at what seemed to him to be a never ending saga, and I accept this evidence that all these affected his life, both personal and business.

I refer to parts of his evidence which clearly reveal the traumatic experience of what I consider as unnecessary stress and anxiety.

“Well, it has been very difficult for me to lose my job. Just to be in to see the taxation department, I don’t know how many times I have been in to see officers of the taxation department to try and sort this matter out. I spent thousands, with accountants and lawyers. I got about my fifth legal company now trying to sort this affair out. It is nearly 6 years, it will be 6 years this year since the problem started..........I have probably flown back here, I would say, 18 times in that period, constantly in and out of Court trying to get this matter sorted out. It has been very difficult for me.”

Mr Leach was asked, has it caused you personal stress or anxiety? His reply was:

“Yes it did. I mean, at the start, I didn’t know what the hell was going on. Everyday, there was either a new tax bill or a new seizure notice or a new 272 order and I just could not get anywhere with the tax department. Like I said, I have visited that office so many times.

I mean I virtually know everyone in the whole office...............Everytime we start to get things sorted out, an officer would go finish and with that someone else trying to sort the case out and it just got anywhere. The last time when this WS 250 started, we were going to get somewhere, then I ended up with another writ on my table.”

Mr Leach’s ability to obtain employment in Australia was affected as well. He could not afford to get a full time job because of his constant travel back to PNG to sort out this matter. He spent the whole of 1993 trying to do that then gave up and went to Australia. He came to PNG about four times in 1997. He therefore could not maintain a full time job.

Despite the Internal Revenue Commission having agreed that the defendant’s income was only K71,496.00, and despite the fact that Mr Leach had requested the Commission to revoked these s.272 notices, the Commission has not done so. In my view, there can be no lawful justification for this. I mean, if it is money that the Internal Revenue Commission wants, why can’t it revoke the s.272 notices so that Mr Leach could organise himself and resume his business and pay whatever he owes? It seems so unfair, unreasonable and oppressive for the Internal Revenue Commission to continue to maintain the s.272 notices, when, by its own concession, Mr Leach did and does not owe them K2,687,384.94. In the circumstances, the Internal Revenue Commission’s failure to revoke the s.272 notices was so unreasonable that no reasonable person or responsible authority could have acted in that manner.

Having alluded to what had transpired here, the conduct of the Internal Revenue Commission could, in my view, be best described as outrageous, unfair and unconstitutional. The Commission had a duty to act fairly but failed to act fairly. Not only was the requirement of the principle of natural justice not done, but it was not seen to be done in this case.

It was not one single act or conduct of the Internal Revenue Commission, but a series of conduct which were oppressive and arbitrary in nature. Not only did the business and assets of Mr Leach were affected, but his whole life was disrupted as well, and all I can say is that Mr Leach, must be a very strong willed and spirited man, who had endured all these sufferings.

Section 245(1) of the Income Tax Act gives a taxpayer a right to lodge an objection within 60 days from the date of service of a notice of assessment if he is not satisfied with that assessment. As alluded to, without the plaintiff considering the defendant cross claimant’s statutory right, it proceeded to sue him in WS 681 of 1992 on 7^th September, 1992, six days after the notice of assessment and s.272 notices were given. It succeeded in securing default judgment for the sum of K2,687,384.94. That judgment was set aside on 16^th July, 1993 by His Honour Amet, J (as he then was).

I cite what His Honour said in page 4 of his unnumbered judgment. “In these circumstances then I am of the view that whilst that statutory review process has been invoked by the aggrieved taxpayer and has not yet been constituted to consider that objection, it is inappropriate for the Commissioner General to then proceed to exercising the right to sue for the assessed income tax in the Court. It is furthermore quite inappropriate to have issued notice specifying that the assessed income tax was due and payable on the same date as the notice was issued and to proceed to the issuing of the Writ on the basis of that notice of the assessed income to be due and payable."

His Honour continued, “it seems to me to be quite simply a matter of common sense and fairplay and indeed justice to enable the objection to be considered with expedition and then following the decision of the review tribunal, should the assessed taxpayer then delay or default in paying the assessed tax if there be no other appeal provisions or process available to the taxpayer which might be invoked, to then issue writ out of the National Court to compel payment.”

With respect, I adopt these statements here. I therefore find that there was a failure by the Internal Revenue Commission to take into account relevant considerations, infact, I find that the Commission simply ignored the taxpayer’s right and its own process of review in respect of the objection.

Whilst this Court acknowledges the Commission’s right to sue, that right does not confer a licence to the Commission to proceed to issuing a writ to compel payment without recognizing the taxpayer’s statutory right under s.245(1) and giving effect to the due process of law by reviewing the assessment following an objection.

I find that the manner in which the Internal Revenue Commission had dealt with Mr Leach was not only oppressive and arbitrary, but clearly capricious and whimsical. He had lost his business, assets, credit standing in the community and good financial reputation with his bank, and really, there was no justification for all these. The plaintiff, just had no right in law or under the Constitution to threaten, intimidate and harrass a taxpayer in the manner it did with Mr Leach.

Although the Commissioner General has a right and a duty under s.272 of the Act to collect monies from person owing money to a taxpayer, in my view, s.272 was never intended to become an instrument of oppression, capricious and arbitrary conduct to be utilised for extorting money from other sources, such as the defendant cross claimant’s debtors, employer and bank by making it impossible for the taxpayer to earn his living by the ordinary conduct of his business or profession.

Some of these issues were considered by Burchett, J in Edelsten -v- Wilcox & Anor (1988) 88 ATC 4484 and I have adopted some of his views here as I consider them appropriate and applicable in this case.

I therefore consider that Mr Leach is entitled to general and exemplary damages including damages for stress and anxiety or mental distress.

Mr Payne submitted in relation to exemplary damages that one third of the compensatory damages would be an appropriate figure. I agree that the loss suffered by Mr Leach was more an economy wrong than a personal wrong, nevertheless, I am of the view that he is entitled to both general and exemplary damages under these circumstances.

Counsel have not found any authority to assist me in my assessment and I, too, have been unable to find any authority to assist me in this assessment. However, I consider that a global figure of less than one third of the compensatory damages would be appropriate in the circumstances, taking into account, the number of years Mr Leach has suffered and the immense effect the whole saga had had on his business and his personal life.

It is not easy to quantify in money terms the loss suffered by the defendant, however, when considering the conduct of the Internal Revenue Commission, the number of years Mr Leach has had to endure and the suffering etc, I consider that a global figure of K110,000.00 for general and exemplary damages is a substantial sum, adequate and fair in this case. That sum equates to approximately K20,000.00 per year that the defendant had suffered, and he had suffered for five years and six months. Some assistance can be derived from Apa & Ors -v- The State [1995] PNGLR 43.

In respect of damages for mental distress, I adopt what the former Chief Justice said in Harding -v- Teperoi Timbers Pty Ltd [1988] PNGLR 128 at 136. His Honour applied the nominal sum of K1,000.00 equivalent to 500 pounds in the English jurisdiction. His Honour said, the more serious and intense the degree of mental distress and frustration, the higher the amount of damages to be awarded. I agree with that approach. I consider that in this case, the stress and anxiety suffered over five years six months was quite intense that the award for mental distress should be higher than the nominal sum of K1,000.00. I consider that a figure of K10,000.00 for damages for mental distress is fair in the circumstances.

In respect of the loss resulting from unpaid debts owed to Mr Leach, interest has already been calculated on the rates agreed to by the parties. That is, the loans to Mr Beckingham and Mr Shackles were with an interest rate of 15%, whilst the loan to Mr Braddock was at an interest rate of $500.00 per month.

In respect of interest on the loss of salary claim, Mr Leach was lawfully entitled to the salary which he lost. He is therefore entitled to interest at the normal rate of 8% from 10^th September, 1992 to 22^nd April, 1998.

In conclusion, damages suffered by the defendant cross claimant can be summarised as follows: