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Commissioner General of Internal Revenue v Bougainville Copper Ltd [2009] PGNC 238; N3988 (13 August 2009)

N3988

PAPUA NEW GUINEA
IN THE NATIONAL COURT OF JUSTICE

WS1344 of 2007

BETWEEN

COMMISSIONER GENERAL OF INTERNAL REVENUE
Plaintiff

AND

BOUGAINVILLE COPPER LIMITED
Defendant

Waigani: Lay J

2008: 10th & 11th September
2009: 13th August

Income Tax Act - application for summary judgment to enforce Notices of Assessment - whether particular defences available to resist judgment.

Facts

The defendant operated a copper mine on Bougainville which closed due to the war there. From 1990 and for the next 13 years the defendant filed tax returns based on the concept that it was still the owner of the mine assets and it claimed a deduction from taxable income of depreciation and of capital expenditure on assets held at the mine in reserve for production. The result was, on the calculation of the self-assessment contained in the defendant's tax returns, no tax was payable for those years. In 2002 the plaintiff conducted an audit and thereafter maintained that all of the assets of the defendant were lost in 1990. The plaintiff issued assessments on the basis that the defendant could claim loss of the assets for 7 years (Income Tax Act Section 101) and thereafter any remaining balance of the loss could not be offset against income. Some of the tax due as shown in the assessments was recovered by way of section 272 notices. The plaintiff sued for summary judgement for the balance being K42, 564,175 and additional tax of 20% on K17,902, 395. The defendant has resisted judgement on the basis that it has defences which ought to go to trial. Alternatively the defendant argued that if judgement was entered it was entitled to a stay of judgement pending appeal.

Held

1. The only basis on which an enforcement of a tax assessment can be stayed or restrained is restricted to cases of the Commissioner General of Internal Revenue abusing his discretion or making an assessment in bad faith and or where the enforcement would result in great personal hardship to the taxpayer;

2. The observation of Kirby J in the Australian High Court case of Commissioner of Taxation v Futuris Corporation Ltd (2008) HCA 32 at [126] is not authority for the proposition that the categories of case which would render an assessment not an assessment, is not closed;

3. Although "bad faith" may be, but is not always, "harsh and oppressive" within the meaning of section 41 of the Constitution, not every harsh and oppressive situation will amount to "bad faith";

4. In the absence of pleading of "bad faith" and supporting evidence, the following defences are not available to resist an application for summary judgement by the plaintiff;

a) that sections 260 and 361 of the Income Tax Assessment Act are unconstitutional;

b) that clause 6.2 of the Facility Agreement signed between the defendant and the State has the effect that BCL could not be rendered liable for taxation until mining operations resumed after the war;

c)that the assessments are in breach of the Bougainville, Agreement;

d) that the assessments issued by the plaintiff constitute " amended" assessments;

5. The words in the Facility Agreement " and any other liabilities determined by reference to that tax (the 1989 tax)" cannot include all taxable years after 1989 because the liability to taxation for a year of income is determined primarily by reference to the taxable income of that year, and not by reference to the tax liability or income from a prior year;

6. Taxation Adjustment Sheets cannot be characterised as assessments because they are provisional in nature and make no reference to the amount of tax due or the due date for payment;

7. until assessments within the meaning of the law are issued and served, the Commissioner General is entitled to review of all or any of the steps taken in his office in relation to the return of income and correct anything considered erroneous;

8. A "nil" assessment is not an assessment within the meaning of the Income Tax Act because there is no date upon which the tax became due and payable;

9. Where the only purpose of raising estoppel is to attack the correctness of an assessment, it cannot be argued to resist summary judgement because to do so would be to give no effect to the conclusiveness of the assessment pursuant to section 232 of the Income Tax Act;

10. Bad faith on the part of the Commissioner General is the only basis on which a stay of judgement to enforce taxation assessments might be granted;

Cases cited
PNG Cases Cited

William Duma v Eric Meier (2007) SC898; PGSC 34
Chief Collector of Taxes v Bougainville Copper Ltd (2/2/07) SC853
The Commissioner General of Internal Revenue and Chief Collector of Taxes v Bougainville Copper Ltd (2008) SC920; [2008] PGSC 13
OS No. 79 of 2004 Bougainville Copper Ltd v Chief Collector of Taxes, unpublished unreported decision of 29 April 2005 Salika J
Kenn Norae Mondiai & Anor v Wawoi Guavi Timbers (PNG) Ltd & Ors (2007) SC886
McHardy v Prosec Security & Communications Ltd [2000] PNGLR 279

Overseas Cases Cited

Home and Overseas Insurance Code Ltd v Mentor Insurance Co (UK) Ltd [1983] 3 All ER 74
Swain v Hillman & Anor [1999] EWCA Crim 2251
F. J. Bloeman Pty. Ltd v Federal Commissioner for Taxation [1981] HCA 27
Commissioner of Taxation v Futuris Corporation Limited (2008) HCA 32
Marjancevic v Mann [2008] FCAFC 161
Thai v DCT [1994] FCA 1287
Batagol v The Commissioner of Taxation of the Commonwealth of Australia [1963] HCA 51; (1963) 109 CLR 243
Federal Commissioner of Taxation v Ryan 2000 ATC 4079, 74A LJR 47
Ellison v Deputy Commissioner of Taxation [1997] WASCA 5
Federal Commissioner of Taxation v Wade (1990) 168 CLR 620
Wilson v Austral Motors [1983] 2 QdR 774
BBLT Pty Ltd & Ors v Chief Commissioner of State Revenue (NSW) [2003] NSWSC 1003
Federal Commissioner of Taxation v Winters & Anor 97 ATC 4967
Commonwealth v Verweyen (1990) 170 CLR 394
Mochkin v Deputy Commissioner of Taxation [2000] FCA 1503

References

Income Tax Act
Mining (Bougainville Copper Agreement) Act
National Court Rules

Counsel
N.M.Cooke, with M.M. Varitimos & K. Frank, for the Plaintiff
J.A. Griffin, with D.H. Katter & N. Pitoi for the Defendant

13th August, 2009

1. LAY J: The Commissioner General of Internal Revenue ("Commissioner General") has applied for summary judgment pursuant to National Court Rules O12 r38 for the outstanding balance of income tax assessments raised against Bougainville Copper Ltd ("BCL"), which amounts to in excess of K42,564,175.58 and 20% additional tax from 9 September 2008 calculated on K17,902,395.50.

2. BCL opposes the application and has cross applied for a stay of the judgment if I enter judgment against it.

3. The Defendant BCL operated a copper mine on Bougainville, which due to the war on Bougainville, closed, and BCL lost control of the physical assets of the mine in 1990. BCL has a sum of money (from insurance payments and other sources) which has been invested and has earned income after 1990.

4. In each of the years from 1990 up to 2005 BCL submitted tax returns on the basis that it was still the owner of the mine assets and in which it claimed as a deduction from its income, a sum for depreciation and capital expenditure from capital assets at the mine held in reserve for production; resulting in BCL's contention that there was no taxable income for each of those years. In 1997 the Commissioner General's office issued Income Tax Adjustment Sheets showing "no change" to the self-assessment of the tax due and payable contained in the tax returns submitted by BCL.

5. The Commissioner General conducted an audit in 2002 and thereafter contended that BCL was not entitled to claim depreciation and capital expenditure each year. After the audit the Commissioner General has maintained that the assets were all lost in 1990. The Commissioner General has assessed BCL's taxation obligations on the basis that BCL could claim the total loss in 1990 and the loss could be carried forward for seven years (Income-Tax Act ("ITA") s101, before it was amended to provide that losses can be carried forward for 20 years) offsetting the loss against income, and any remaining balance of the 1990 loss after 1997 would not be available as a deduction from income. Notices of Assessment were issued in 2003 on that basis.

6. The Commissioner General issued assessments for the years 1999 to 2001 and BCL's appeals from those assessments are pending before this Court (CIA/6 2005). Later assessments were issued for the years 2002-2005 and recently BCL has filed appeals in this Court against those assessments. None of the appeals have been heard.

7. Part of the amount due under the assessments issued was recovered by avenue of a garnishee issued under s 272 of the ITA and some from money paid into Court in earlier proceedings, pursuant to an order of the Supreme Court; a total of a little over K13 million.

8. BCL submits that judgment should not be entered because it has genuine defences against the claimed amount, which should go to trial.

9. This case is not about whether BCL's tax returns are correct or the Commissioner General's assessments are correct. It is about whether BCL's defences are maintainable against an application by the Commissioner General for summary judgment based on taxation assessments, or, as the Commissioner General contends, the assessments are conclusive evidence of BCL's indebtedness and BCL's defences can only be raised on the appeal within the appeal regime of the Income Tax Act and are of no avail to resist summary judgment.

10. The defences which BCL claims in its Further Amended Defence are:

(a). Sections 262 and 316 of the ITA provide for the imposition of penalties, are in breach of section 37 of the Constitution and void;

(b). The amendments made by the plaintiff in 2003 to the defendant's taxable income for years prior to 1997 constitute amendment of assessments and are ultra vires and a nullity because they purport to amend assessments outside the time permitted by section 232; of the ITA

(c). The Income-Tax Adjustment Sheets issued for the years to 2005 showing no change to the net loss returned by BCL were a promise or a representation by the Commissioner General that the returns were true and correct and that BCL had not disposed of its assets at the time the mine was closed;

(d). The assessments and commencement of these proceedings are:

(i). A breach of section 41 of the Constitution;

(ii). A breach of clause 7 and 17 of the Bougainville Copper Ltd agreement and section 4 (1) of the Mining (Bougainville Copper Agreement) Act;

(iii). a breach of cl.6.2 of the Facility Agreement

11. I must decide if any of those defences is available to resist this application for summary judgment. I will start with:

(a). The general propositions of law relating to ordinary summary judgment applications, and

(b). The law specifically relating to summary judgment applications by the Commissioner General to enforce a Notice of Assessment;

(c). Then address the specific defences.

The General Propositions of Law Relating to Ordinary Summary Judgment Applications

12. National Court Rules 012 r38 provide for summary judgment when there is (a) evidence of the facts, proving the essential elements of the claim; and (b) that the plaintiff or some responsible person gives evidence that in his belief there is no defence.

13. A recent Supreme Court decision setting out the principles is William Duma v Eric Meier (2007) SC898; PGSC 34, Injia DCJ, Batari and Gabi JJ where the Court said at [10]:

"The principles relating to applications for summary judgment are well settled in this jurisdiction. Summary judgment is a discretionary power and may be granted if there is evidence of facts on which the claim is based and evidence is given by some responsible person that in his belief the defendant has no defence to the claim or part of the claim (see Hornibrook Constructions Pty Ltd v Kawas Express Corporation Pty Ltd [1986] PNGLR 301 and Bruce Tsang v Credit Corporation (PNG) Limited [1993] PNGLR 112). The discretion conferred on the Court should be exercised in a clear case and with considerable care. Summary judgment should be granted only where there is no serious triable issue of fact or law. If there is no dispute as to fact and there is clear admissions of the claim or part of the claim then judgment must be entered for the plaintiff (see Chief Collector of Taxes v T.A. Field Pty Ltd [1975] PNGLR 144; Dep International Private Ltd v Ambogo Sawmill Pty Ltd [1987] PNGLR 117; Kumul Builders Pty Ltd v Post and Telecommunication Corporation [1991] PNGLR 299; and Curtain Brothers (Qld) Pty Ltd and Kinhill Kramer Pty Ltd v The State [1993] PNGLR 285)."

14. And in Bruce Tsang v Credit Corporation (PNG) Ltd [1993] PNGLR 112 at 117 and Curtain Brothers (Qld) Pty. Ltd and Kinhill Kramer Pty. Ltd v The State [1993] 285 at 288 the Supreme Court said:

"As to the second element, the plaintiff must show in the absence of any defence or evidence from the defendant, that in his belief, the defendant has no defence. If a defence is filed or evidence is given by the defendant, as in this case, the plaintiff must show that, upon the facts and / or the law, the defendant has no defence. The plaintiff will not be entitled to summary judgment if there is a serious conflict on questions of fact or law. Whether a case should go to trial on these issues will be determined on the facts of each case".

15. The United Kingdom courts have said that the procedure should not be used to obtain an immediate trial which requires determining points of law taking hours or days and requiring the citation of many authorities: Home and Overseas Insurance Code Ltd v Mentor Insurance Co (UK) Ltd [1983] 3 All ER 74 at 77; or the judge conducting a mini trial: Swain v Hillman & Anor [1999] EWCA Crim 2251 at [20], per Lord Woolf MR.

The law specifically relating to summary judgment applications by the Commissioner Geneal

16. Affidavit evidence has been filed by the Commissioner General to the fact that:

the assessments were issued and the calculations are not contested;

part of the tax has been recovered and the balance due calculated; and

the Commissioner General believes that BCL does not have a defence.

17. The ITA sets out a specific regime for the issuance of assessments and their enforcement. Tax is imposed on taxable income (s11), and the Commissioner General shall make an assessment of tax payable on that income (s228); a notice of assessment is conclusive evidence that the amount and all particulars of the assessment are correct (except in proceedings on appeal against the assessment) (s239(1)); the fact that an appeal or reference is pending does not affect the assessment which may be recovered as if no appeal were pending (s257). Additional tax at the rate of 20% is payable on tax unpaid after the due date for payment (s 262). Tax is a debt due to the State, payable to the Commissioner General (s263), and may be recovered in court (s264). if taxable income is omitted from a return, expenses included as deductions which are not, tax evaded etc the taxpayer is liable to additional tax as a penalty (ss316).

18. These provisions have been considered by the Supreme Court in the case of Chief Collector of Taxes v Bougainville Copper Ltd (2/2/07) SC853 Kapi CJ Sevua J. and Kandakasi J. In that case the court was considering whether assessments could be enforced while under appeal, the particular method of enforcement being a s272 garnishee: The Commissioner General of Internal Revenue and Chief Collector of Taxes v Bougainville Copper Ltd (2008) SC 920; [2008] PGSC 13, Injia DCJ, Lenalia and Cannings J. J. at [122].

19. In Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC 853 the following excerpts summarise the views of the court on the rights of the Commissioner General to enforce an assessment and the right of a taxpayer to challenge the assessment:

(a). At [62] "... once the Chief Collector of Taxes issues an income tax assessment, it becomes payable on the date specified in the assessment. Then from the date it becomes payable, it becomes a debt due and owing to the State. Unless paid the Chief Collector of Taxes may sue in any court of competent jurisdiction to recover the debt accruing....";

(b). At [56] "... the exception to the conclusiveness of an assessment arises and can only arise when an appeal is properly filed and the issue is raised in the appeal proceeding... whether or not any enforcement of assessed income tax is harsh and oppressive must be raised in the appeal against the assessment in question and not outside any appeal...";

(c). At [78] and [127] "... the only basis on which an enforcement of a tax assessment can be stayed or restrained is restricted to cases of the Chief collector of taxes abusing his discretion and or where the enforcement would result in great personal hardship to the taxpayer".

20. In summary, except within the very narrow compass described at [20(c)] there is no defence to the obligation to pay; the scheme of the legislation is to pay now and litigate completely separately from the obligation to pay.

21. The tests that have to be applied to each of the defences to determine whether the defence would prevent entry of judgment are, (1) is the defence arguable, and (2) does the issue raised by the defence fall into the category of "bad faith" referred to by the Supreme Court as the "Chief collector of Taxes abusing his discretion" (see [20 (c)]; there being no issue in these proceedings of great personal hardship. Or, as the Australian High Court said in F. J. Bloeman Pty. Ltd v Federal Commissioner for Taxation [1981] HCS 27; [1981] HCA 27; 147 CLR 360 at 375 per Mason & Wilson JJ was "... the Commissioner ... motivated in the exercise of his powers by improper or collateral purposes". Or as the Commissioner of Taxation v Futuris Corporation Limited (2008) HCA 32 case was analysed in Marjancevic v Mann [2008] FCAFC 161, Ryan, Kerry and Slowe JJ (8/9/08), whether there is any element of "conscious maladministration": see Futuris [25] of the assessment process "or some deliberate failure to administer the law according to its terms" (Futuris at [55]).

22. BCL has submitted that because the Supreme Court has found some defences arguable on the Tax Appeal, ergo those defences must be arguable in resisting the summary judgment application. This is a fallacy. Any number of issues can be argued on a tax appeal, including for example, whether the amount of the assessment is correct, which cannot be argued outside the tax appeal regime.

23. BCL's further submission is that the categories of case which would render an assessment not an assessment is not closed, relying upon the observation of Kirby J in Futuris at [126]. It was submitted that " Kirby J identified other categories of the circumstances in which, despite the issue of a document labelled an "assessment" the conclusively provisions would not apply. His Honour stated ( paragraph 126) that other provisions of the legislation "could not successfully breathe validity into a purported " assessment" that was not in law an "assessment" as contemplated by the Act". And BCL submits that it then follows that all of its arguments as to why the assessment are not valid are available in resisting the application for summary judgement. To understand what Kirby J was saying it is helpful to set out the whole of his paragraph[126]:

"In the generality of its language, s175 of the Act may be an over broad provision which could not successfully breathe validity into a purported "assessment" that was not in law an "assessment" as contemplated by the Act. This appears to have been acknowledged by this Court, at least so far as this Court has accepted the disqualifying consequences of assessments that are tentative or provision, or made with a lack of good faith. In such cases (and, as I am inclined to believe, others) a document that purports to be an "assessment" under the Act, if fundamentally flawed, is not a statutory "assessment" at all. Section 175 could not then, as the case authorities say, "touch it".

24. It is clear when the whole paragraph is set out that his Honour did not identify other cases to which the conclusivety provisions might not apply. He simply said that he believed that there were others, in rather tentative language without specifying any particular case. And he does not illuminate what he means by the phrase "fundamentally flawed". If he is referring back to his phrase "not in law an assessment as contemplated by the Act", in the context of the authorities previously referred to contemplated by the Act must surely mean an assessment issued in good faith in a genuine attempt to apply the Act which stipulates an amount certain to be paid and the due date for payment.

25. By itself the paragraph is not authority because it does not have the support of a majority of the court, and on its own terms I cannot read into the paragraph that the conclusivety provisions of the legislation would be impugned by every argument challenging the lawful basis of the validity of an assessment. In fact, the whole paragraph appears to me to be more a case of leaving the door open for future development of the law, rather than an attempt to make any statement of the law as it now applies. I do not consider that it is authority or in any way support for the proposition for which it is cited.

The Specific Defences

Constitution Section 41

26. BCL submits the assessments and commencement of these proceedings by the Commissioner General are "harsh and oppressive" within the meaning of Constitution s41 which provides:

" 41. Proscribed acts.

(1) Notwithstanding anything to the contrary in any other provision of any law, any act that is done under a valid law but in the particular case—

(a) is harsh or oppressive; or

(b) is not warranted by, or is disproportionate to, the requirements of the particular circumstances or of the particular case; or

(c) is otherwise not, in the particular circumstances, reasonably justifiable in a democratic society having a proper regard for the rights and dignity of mankind, is an unlawful act."

(2) The burden of showing that Subsection (1)(a), (b) or (c) applies in respect of an act is on the party alleging it, and may be discharged on the balance of probabilities.

(3) Nothing in this section affects the operation of any other law under which an act may be held to be unlawful or invalid."

27. It is not necessary for me to consider whether the ground is arguable as the Supreme Court has found that it is, see [20(b)]. It is only necessary for me to consider whether the ground raises any element of bad faith in the sense referred to at [20(c)] so that it is an available defence to resist summary judgment.

28. The relevant facts are those set out at [4] to [6]. Evidence was adduced by BCL as to the political climate in the years immediately after commencement of the war, and other matters, which induced it to adopt the tax treatment of its income which it did. A comprehensive background to BCL's trading, the outbreak of war, the loss of possession of the assets on Bougainville and how the income-tax assessments arose is given by Salika J. OS No. 79 of 2004 Bougainville Copper Ltd v Chief Collector of Taxes, unpublished unreported decision of 29 April 2005 at [9] to [44]. It is not necessary for me to repeat it here.

29. I have not found it necessary to find facts in relation to those issues in the approach I have taken. It is sufficient to say that there is no allegation that the Commissioner General has deliberately or intentionally misapplied the law or done anything other than exercise the powers given to him by the ITA.

30. In oral argument counsel for BCL submitted that for "bad faith" I should read Section 41 of the Constitution. In the primary written submissions of 29/5/08 it is submitted that, at [70], after referring to the Futuris "bad faith" principle "by analogy assessments issued in breach of s41 of the PNG Constitution would not be "assessments" for the purpose of s232 of the Income-Tax Act". It would follow, I assume on that submission, that any pleading of "harsh and oppressive" conduct supported by some evidence would give rise to jurisdiction to try the issue outside the Tax Appeal Regime and thus be sufficient to prevent entry of summary judgment.

31. To understand the breadth of that argument one has to consider what the Supreme Court has said about s41. The Section is of general application and each case turns on its own facts, the onus of proving which falls on the applicant: Bougainville Copper Ltd v The Chief Collector of Taxes And Commissioner General of Internal Revenue (2007) SC853 at [106-107].

32. It is at once obvious that the scope of s41 extends far beyond the bad faith concept referred to at [20(c)] and [22]. What is harsh and oppressive on the facts of a particular case and can attract the exercise of jurisdiction under s41 of the Constitution can, as the section clearly contemplates, be completely lawful, done honestly with no other motive than a genuine belief that the action taken is what the law requires.

33. I accept BCL's submission that where s41 is found to be applicable, in an appropriate case, its application could have the effect that an issued assessment is not a lawful assessment. That is however very different from the proposition that every allegation of a s41 fact situation can be argued as a defence on an application for summary judgment, when I consider the authorities restrict such argument to the "bad faith" circumstances, albeit that they may fall within the purview of s41 of the Constitution. I conclude that although "bad faith" may be, but is not necessarily always "harsh and oppressive" within the meaning of s41, not every harsh and oppressive situation will amount to "bad faith".

34. All that BCL here pleads is that (a) after 13 years relying on the Tax Adjustment Sheets the Commissioner General changed his mind about the tax treatment which BCL had adopted, and that (b) the Commissioner General is pressing enforcement of the assessments before hearing of the tax appeals. It is also alleged that the Commissioner General is treating BCL differently to other taxpayers. There is no allegation that the Commissioner General is acting outside the letter of the law or is motivated by collateral or improper motives. That is the same position the Supreme Court found was before it in Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853 at [81].

35. As to the Tax Adjustment Sheets, as I find elsewhere, the argument that the Tax Adjustment Sheets are assessments, cannot be sustained. The Commissioner General is not bound until assessments are issued and until that time, in law he is free to form his views on what the assessment should be in any manner he considers appropriate.

36. BCL has also sought to confine the ruling in Bougainville Copper Ltd v Commissioner General in respect of s41 of the Constitution to the issue of the s272 notices by the Commissioner General and/or, that the balance of convenience argument on the injunction application favoured refusal of injunctive relief (submissions of 29/5/08 at [40]). The Supreme Court in the subsequent case of Bougainville Copper Ltd v Chief Collector of Taxes and Commissioner General SC920 clearly considered that the issue before the Supreme Court in the former case was the wider one of whether enforcement proceedings could be affected while there was a tax appeal on foot: see [122] of SC 920.

37. The consideration of the various sections of the ITA makes clear why that view would be taken. Even though there is an appeal pending "income-tax may be recovered on the assessment as if no appeal... was pending": s257 and the Commissioner General may sue " in any court of competent jurisdiction": s264, or he may issue a s272 notice. Suing and issuing a s272 notice are simply alternate methods of doing the same thing, enforcing the assessment, and there is no reason why the principles on which a taxpayer may resist one method should be different from those applicable to the other. I consider that what the Supreme Court said as to general principles in Bougainville Copper Ltd v Chief Collector of Taxes and Commissioner General SC 853 is as applicable to resisting summary judgment as it is to resisting a s272 notice.

38. The allegations of facts supporting the s41 ground do not fulfill the "bad faith" test, consequently; firstly it is unnecessary for me to decide whether there is evidence to support the pleaded facts. Secondly while BCL may argue on the tax appeal that the Commissioner General's actions are harsh and oppressive under s41 of the Constitution, his actions have not been alleged by BCL to amount to bad faith and cannot be advanced in resisting a summary judgment application. The argument can only be advanced in the taxation appeals: SC853 at [56].

Unconstitutionality of ss262 & 316 of the ITA

39. BCL pleads that Section 262 and 316 of the ITA are unconstitutional because they offend various provisions of Section 37 of the Constitution, which provides some procedural matters with respect to protection of the law guaranteed by the Constitution. They appear to be arguable grounds of defence by analogy without any strict analysis, to the decision of the Supreme Court in SCA No.2 of 1990 [1991] PNGLR 211, where the court held that the collection of a penalty which was essentially a criminal matter, by civil proceedings which did not give the defendant the protection to which he was entitled under Section 37 of the Constitution, was unconstitutional. If BCL was successful on the argument it puts then the Commissioner General would have proceeded on an error of law. "... the taxation system necessarily assumes that the Commissioner may make errors of fact or law in assessments and that those errors will be corrected..." in the appeal process. But "in the meantime, the assessments are binding and may be enforced": Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC 853 at [86] & [92].

40. BCL is not alleging that the Commissioner General has exercised powers under those provisions knowing them to be unconstitutional and void. Nor could it do so because all legislation is valid until declared otherwise by a court of competent jurisdiction. I therefore conclude that the grounds do not raise matters of bad faith, which are available to resist a summary judgment application.

Facility agreement

41. BCL contends that clause 6 .2 of the facility agreement signed between it and this State has the effect that "BCL could not be rendered liable for taxation until mining operations resumed". The Supreme Court clearly disagreed with that proposition and made 2 points, firstly that the clause did not provide a general exemption from income tax or an exemption from income tax on non-mining income; and secondly it only provides an exemption for income tax on mining income earned in 1989: Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853 at [98]. While those observations were tentative the Supreme Court considered that the question would be decided on the tax appeal, at [92].

42. The core of the facility agreement argument comes from the following words:

"The State agrees with BCL and CRAF that BCL shall be entitled (without any liability to additional tax, interest, penalties or the like) to defer its liability with respect to the tax payable by BCL in respect of its income derived during the year ended 31 December 1989, and any other liabilities determined by reference to that tax or that income on the basis that such liabilities (the 'Liabilities) must be discharged on (but not before) a date not earlier than two months after, and no later than three months after, the date (if any) upon which the following conditions shall have been met:-"

43. BCL submits that the words "and any other liabilities determined by reference to that tax or that income" includes subsequent years of income. To my mind that argument cannot be sustained. The liability to taxation for a year of income is determined primarily by reference to the taxable income for the year. Taxable income may be affected by matters such as losses carried forward but in my opinion it would be putting a strain on those words to say that the income for one year or the tax liability of that year is determined by reference to the tax liability or income for a prior year.

44. There is no pleading of bad faith. If BCL succeeds on this ground on the tax appeal then the Commissioner General has made a mistake of law and the Tax Appeal regime clearly contemplates that mistakes can be made and can be corrected under that system as the Supreme Court held in Bougainville Copper Ltd v Chief Collector of Taxes (2007) SC 853 at [92]. In the absence of any pleading of bad faith against the Commissioner General I conclude that this ground of defence is not available to resist a summary judgment application. All issues of fact and law are taken up in the conclusivity of the Notice of Assessment.

Bougainville Copper Agreement

45. BCL contends that the assessments are a breach of the Bougainville Copper Agreement. I adopt what I have said in paragraphs [44]. The ground does not raise any allegation of bad faith on the part of the Commissioner General and thus is not available to resist a summary judgment application.

Validity of "Amended" Assessments

46. The argument that some of the assessments are amended assessments which were amended outside the time permitted by the ITA s232 is unsustainable. The argument is founded on the notion that documents headed "Taxation Adjustment Sheet" are assessments. Each of the Taxation Adjustment Sheets was conditional on its face on further information being provided to the Commissioner General. There is no reason to assume that these documents were anything more than what they were headed. They are clearly provisional as to amount. Secondly the Taxation Adjustment Sheets each referred to "net loss as assessed", they made no reference to the tax payable, whether by reference to a "nil" amount or otherwise.

47. The High Court of Australia has held an essential element of an assessment is for it to contain a fixed amount, a sum certain, a precise indebtedness of the taxpayer to the State: Commissioner of Taxation v Futuris (supra) at [49-50]. Because of the similarity of our legislation I adopt those observations. "The notice is the means whereby a taxpayer knows the amount of tax to which he has been assessed and when the tax is due and payable" Thai v DCT [1994] FCA 1287 Lockhart, Beaumont and Whitlam JJ. Until assessments within the meaning of the law issue and are served, the Commissioner General is entitled to review all or any of the steps taken in his office in relation to the return of income and to correct anything considered erroneous: Batagol v The Commissioner of Taxation of the Commonwealth of Australia [1963] HCA 51; (1963) 109 CLR 243. The Taxation Adjustment Sheets cannot be characterised as assessments because they are provisional in nature and make no reference to the amount of tax due or the due date for payment.

48. Another aspect of the argument is this, even if the Taxation Adjustment Sheets were treated as assessments, as BCL has contended that they should, they could be put no higher than "nil" assessments, that is that there would be no tax due and owing upon them. It would follow, adopting the views of the majority in the High Court of Australia in the case of Federal Commissioner of Taxation v Ryan [2000] HCA 4; 2000 ATC 4079, 74A LJR 471, Gleeson CJ Gumnow and Haynes J J at [15 ] Kirby J dissenting, that time would not run against the IRC pursuant to the Australian equivalent of section 232 to issue an assessment which required an amount of taxation be paid within a set time. That is because the words "the date upon which the tax became due and payable"" appearing in the section, which identifies the date on which time commences to run, cannot accommodate the case where no tax is due and payable. Where no tax is payable there is no commencement date from which time is to run. That case effectively overrules Ellison v Deputy Commissioner of Taxation [1997] WASCA 5 which at [67-70] held that the 30th day from service of the assessment was the notional date on which time commenced to run.

49. Finally, the ground does not raise "bad faith" of the Commissioner General; consequently it is not a ground available to resist a summary judgment application.

Estoppel

50. BCL's contention is that the Commissioner General is estopped from changing his position, which it alleges he adopted between 1990-2002, by the issuance of the Taxation Adjustment Sheets which did not challenge the basis of depreciation claimed by BCL in its tax returns as mentioned at [ 4]; and because BCL relied upon that position to order its affairs, to its detriment. The Supreme Court has said the ground can be argued on the tax appeal. Although Estoppel cannot run against a statutory obligation: Kenn Norae Mondiai & anor v Wawoi Guavi Timbers (PNG) Ltd & Ors (2007) SC886 at 84, and "No conduct of the Commissioner could operate as an estoppel; against the operation of the Act: Federal Commissioner of Taxation v Wade (1990) 168 CLR 620 at 631 per Kitto J; there are areas of fact in applying Statue law where estoppel can arise and be applied: Wilson v Austral Motors [1983] 2 QdR 774 @ 782.

51. Even though the estoppel contended for is confined to an area of fact, namely whether BCL had lost its assets or whether they were held in reserve for future production, still the consequences of the estoppel claimed go to the correctness of the assessments issued by the Commissioner General. Except on an objection or an appeal the amount of the assessment is deemed correct: s232, so that while an estoppel can be argued on the tax appeal as the Supreme Court has held, where the only purpose of raising it is to attack the correctness of an assessment, in my view it cannot be argued to resist summary judgement; because to do so would be to give no effect to the conclusiveness of the assessment pursuant to section 232 of the ITA.

52. As Gzell J noted in BBLT Pty Ltd & Ors v Chief Commissioner of State Revenue (NSW) [2003] NSWSC 1003 at [111] "... with few exceptions the courts have concluded that estoppel does not lie against a fiscal authority on the basis that the authority cannot be prevented from carrying out the public duties cast upon it by the legislation". His Honour makes reference to one exception, Federal Commissioner of Taxation v Winters & Anor 97 ATC 4967 when summary judgement was refused because the taxpayers contended that the Commissioner's officer had impliedly undertaken to exercise a discretion he had, to extend the time by which directors of the company might take action to avoid personal responsibility for the company's taxation debt. This single judge decision is the only case counsel has been able to cite. I think it turns on its own facts and is not authority for any general proposition. There are a number of distinguishing features from the present case, notably the estoppel arose from telephone and face to face conversations with a representative of the Commissioner; and the debt related to tax for which the company was primarily liable, and for which the directors became liable only if certain actions were not taken.

53. The general position as Gzell J noted is that estoppel does not lie, and I consider would not lie against the Commissioner General on a summary judgment application; the exception being the limited circumstances described in [20 (c)]. Although estoppel necessarily includes an allegation of unconscionable conduct (see the definition in Commonwealth v Verweyen (1990) 170 CLR 394 at 444-446 per Dean J (as he then was); BCL does not plead any allegation of deliberate maladministration. The evidence goes no further than an assertion that BCL is being treated differently to other taxpayers. "Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made...": Futuris at [60], and they have not been made in this case. The estoppel argument is not brought within the narrow window of dispute the law allows outside a tax appeal.

54. For these reasons I conclude that the Defences raised by BCL are not available to resist an application for summary judgment. I order summary judgment be entered for the Plaintiff, the precise terms and amount of judgment to be resolved in discussion with counsel after the Commissioner General has tendered a draft order in terms of the Civil Practice Rules 2005.

Stay Application

55. Extensive submissions were made by both parties on whether or not a stay of judgement should be granted. A key element to consideration of the grant of a stay is whether the applicant has demonstrated an arguable case: McHardy v Prosec Security and Communications Ltd.[2000] PNGLR 279. If BCL had demonstrated an arguable case then judgement would not have been entered against it.

56. I adopt from BCL's submissions that the general rule is that a stay will not be provided in an appeal to a taxation proceeding, but the court has a discretion to order a stay in an appropriate case.

57. The essence of the application for a stay is BCL's contention that its taxation appeals have good prospects of success. BCL points to the judgement of Ryan J in Mochkin v Deputy Commissioner of Taxation [2000] FCA 1503 where a stay of an application for judgment was granted. There, the circumstances were somewhat different to the present. The taxpayer's objections to assessments had been fully argued before the Court and judgement had been reserved. In separate proceedings the Commissioner applied for summary judgement. Ryan J held that in those circumstances it was appropriate that the summary judgement application be stayed pending the decision on the objections to the assessments.

58. The particular circumstances included that the hearing in the objection proceedings had been before Ryan J over a period of 4 days and he was in the process of considering his judgment. Also relevant was that a number of the issues canvassed in defence of the summary judgment application were the same issues argued in the objection proceedings, so that it would have been possible that any extempore ruling on the summary judgment application might prejudge matters on which his Honour had not had time to fully consider the arguments put forward in the objection proceedings. It is obviously undesirable that the same or different judges rule in separate proceedings on the same issues between the same parties.

59. I say that those circumstances are somewhat different to the present because here the appeals have been filed but not heard. At the time of hearing this application it appeared to me that there would be considerable time elapsing before the appeals were heard. Apart from confirming that the jurisdiction to stay judgment in an appropriate case exists, I do not consider the Mochklin v Deputy Commissioner of Taxation case of assistance in this case.

60. BCL submits that a stay should be granted because its tax appeals have merit. The Supreme Court has endorsed the view that consideration of prospects of success on appeal is not appropriate in considering a stay: Chief Collector of Taxes v Bougainville Copper Limited (2007) SC853 at [86]. Nor, it was said in the same case, is any claim that the taxpayer has no liability (at [102]).

61. BCL submits that "in the circumstances of this case it is not appropriate that the Commissioner should have judgment based on the "conclusively" of the assessment in advance of the determination of the merits." Parliament has of course quite clearly said that the Commissioner can have judgment before the merits of an appeal are decided. The same narrow basis on which judgment might be refused (see [20 (c)]), is the basis on which a stay might be granted. If there is no basis to refuse judgment, there is not likely to be any basis to grant a stay of judgment.

62. BCL's grounds of appeal may be eminently arguable, but I do not consider that any of those grounds, nor any of the surrounding circumstances, is so exceptional, as to permit me to over ride the clear intention of Parliament that the Commissioner General should be able to enforce payment of an assessment before the taxpayer's appeals are resolved.

ORDERS:

1. Application for summary judgment granted, terms of the Order to be settled in discussion with counsel upon presentation of a draft order by counsel for the Commissioner General;

2. BCL's application for a stay of judgment refused.
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Young & Williams: Lawyers for the Plaintiff
Gadens: Lawyers for the Respondent