Bougainville Copper Ltd v Commissioner General of Internal Revenue (2009) SC1020

• Jurisdiction: Papua New Guinea
• Judge: Injia, CJ
• Judgment Date: 19 October 2009
• Citation: (2009) SC1020
• Docket Number: SCA NO. 111 OF 2009
• Court: Supreme Court
• Year: 2009
• Judgement Number: SC1020

Full Title: SCA NO. 111 OF 2009; Bougainville Copper Ltd v Commissioner General of Internal Revenue (2009) SC1020

Supreme Court: Injia, CJ

Judgment Delivered: 19 October 2009

SC1020

PAPUA NEW GUINEA

[IN THE SUPREME COURT OF JUSTICE]

SCA NO. 111 OF 2009

BETWEEN:

BOUGAINVILLE COPPER LTD

Appellant

AND:

COMMISSIONER GENERAL OF INTERNAL REVENUE

Respondents

Waigani: Injia, CJ

2009: 19th October

SUPREME COURT - practice and procedure – application for stay made pending determination of appeal of National Court’s decision to grant summary judgment – principles on grant of stay considered – refusal or grant of stay is discretionary and exercised on proper principles and grounds – no arguable case on appeal demonstrated – trial judge did not err in the interpretation and application of the conclusivity provisions of ITA – on overall exercise of discretion applicant has made out an arguable case – stay order granted – s.19 Supreme Court Act, ss.262 & 316 Income Tax Act, Order 12 rule 38 National Court Rules

Cases Cited:

Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC 853.

Gary McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279

Post PNG Ltd v Westpac Bank Ltd (1999) SC 608

Niusik Holdings Ltd v Yapao Lawyers (2003) SC 703

Counsel:

F Griffin QC with D Katter, for the appellant

M Cooke QC with F Griffin, for the respondent

19th October, 2009

1. INJIA, CJ: This is the appellant’s (BCL) application for stay made under s 19 of the Supreme Court Act. It is made pending determination of an appeal against the National Court’s decision to grant summary judgment in the sum of K45,899,606.49 in WS No.1334 of 2007 in favor of the respondent (IRC). The amount in the summary judgment represents the total sum due under various notices of tax assessments (including amended assessments) issued by IRC for the years 1995 – 2005. The application is contested by IRC. Both parties filed affidavits and made oral and written submissions and I reserved my ruling to consider the material and submissions put before me. This is my ruling on the application.

2. The principles on grant of stay are settled. The leading case is Gary McHardy v Prosec Security and Communication Ltd [2000] PNGLR 279 (McHardy case). The grant or refusal of stay is discretionary and it is exercised on proper principles and on proper grounds. The Court must start from the basic premise that the judgment creditor is entitled to enjoy the benefit of the judgment. There are ten (10) other considerations which are enumerated in that case. In exercising its discretion, the Court must consider all relevant and appropriate circumstances in determining whether it is just and reasonable that the order ought to be stayed. In my view, it is not intended that the discretion should be exercised on all or selected considerations and factors enumerated in McHardy; rather the Court is required to consider the totality of those relevant factors and circumstances, in order to do justice in the circumstances of the case before it. The circumstances of a particular case may warrant greater or less or even no weight to a particular relevant factor(s) and then again, that is a matter of discretion. Also in exercising its discretion the Court is to have regard to the evidence or material placed before the Court by the parties: Post PNG Ltd v Westpac Bank Ltd (1999) SC 608; Niusik Holdings Ltd v Yapao Lawyers (2003) SC 703. The onus is on the applicant for stay to persuade the Court to exercise its discretion in his or her favor.

3. Counsel made submissions on the application of the principles in McHardy to this case and I deal with them in the course of my ruling.

4. The summary judgment was sought and granted under O 12 r 38 of the National Court Rules (NCR). Both parties treat this particular summary judgment as a special one based on the construction of relevant provisions of Income Tax Act (ITA) but more particularly what is described as the conclusivity provisions of ITA. The application ought to be determined against the criteria for grant of summary judgment under NCR O 12 r 38, otherwise the nature of the application and judgment granted may be easily taken out of context and misconstrued as a judgment after trial on the merits which attracts different standards of scrutiny of the judgment.

5. Under NCR O 12 r 38, summary judgment is available where there is evidence of facts supporting the claim or part of the claim and there is evidence given by the plaintiff or some responsible person that in his or her belief the defendant “has no defence to the claim or part of the claim”. In proceedings before the National Court, both parties relied on affidavit evidence on the claim and the lack of defence to the claim. The trial judge considered the evidence. The parties also advanced their respective cases on the construction and application of the conclusivity provisions to support their respective positions on the case. The trial judge considered the notices of tax assessments issued under ITA and concluded that they were conclusive as to BCL’s tax liability and granted summary judgment in the total amounts represented in the notices.

6. In considering the application of the different factors set out in McHardy case, and after considering submissions of counsel, I consider that the special nature of the summary judgment given in this case demands that paramount considerations be given to four factors namely, the advantage enjoyed by the respondent as the beneficiary of the judgment, error(s) in the judgment, whether that error(s) is sufficient to raise an arguable case on appeal and the overall interest of justice. The error must relate to the main defences raised by BCL to resist the application for summary judgment. A copy of the Amended Defence filed in WS 1334 of 2007 is before me for my consideration.

7. The trial judge considered the evidence in relation to BCL’s primary tax liability and BCL’s additional tax liability imposed under s 262 and s 316 of ITA. In respect of primary tax, the judge found that there was no contest on BCL’s primary tax liability. The primary tax liability was between K1,041,974.50 (BCL’s calculation) or K4,777,963.01 (IRC’s calculation). Therefore in terms of the issue of liability on the claim, there was admission from BCL that it owed IRC primary tax of at least K1,041,974.50. The dispute was therefore on the amount of extra primary tax assessed (K3,735,988 .51). In relation to additional tax, BCL contested the whole of the tax imposed under s 262 tax ( BCL’s calculation was K27,987,212.99 & IRC’s calculation was K29,029,187.49) and s 316 tax ( BCL said K16,860,606.49 & IRC’s calculations was K 12,082,455.99).

8. The appellant’s contention before me is that the primary tax was only a small proportion of the total tax assessment compared with a huge tax for additional s 262 and 316 taxes. The conclusivity provisions applies only to primary tax liability and but not to s.262 & s.316 taxes which were disputed. The notice of assessment does not include those additional taxes. The judge erred in law when he determined that s.239 (1) notice of assessment do include additional taxes. The judge failed to distinguish between the primary tax and additional taxes and granted summary judgment in respect of the disputed additional taxes as well.

9. The appellant’s main point of contention in the appeal is on the application of the conclusivity provisions to the facts of this case. Indeed seven (7) of the twelve grounds of appeal (grounds 4.1 – 4.7) relate to the conclusivity provisions.

10. There is no question that the primary tax assessment amount made under s.231 is posted on the notice of assessment issued under s.236. This notice of assessment is valid and conclusive for all tax purposes by virtue of the conclusivity provisions. The main conclusivity provisions which are relevant in this case are ss 239 (1) & 257 but other conclusivity provisions are ss 237, 238, 259, 263, 264, 264 & 312. Section 237 is an important provision. Section 237 provides that the “validity of an assessment is not affected by reason that any of the provisions of this Act have not been complied with.” It is clear from these provisions that upon issue of notice of tax assessment, it is valid for all intention purposes, that the tax assessed becomes a debt that is due and payable, and if it is unpaid the debt is recoverable in a Court of law irrespective of whether an appeal against the assessment has been filed and pending determination by the National Court. The principle of “pay now litigate later” is the dominant principle that underlies these conclusivity provisions.

11. Under ss 257 & 259, the tax amount fixed on the notice of assessment is due and payable by the taxpayer named in the notice on the date specified in the notice. The tax is payable irrespective of whether the assessment is the subject of an appeal or reference is pending before the National Court and “as if no appeal or reference were pending.” There are good underlying reasons for this principle. The principle has been judicially affirmed in this jurisdiction: Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC 853. The solvency of the State is imputed by law and that no amount of pre-paid tax is beyond the State’s capacity to repay or refund if the assessment is found to be erroneous or excessive by the Tax...