Commissioner General of Internal Revenue v Bougainville Copper Limited (2009) N3857

• Jurisdiction: Papua New Guinea
• Court: National Court
• Date: 13 August 2009
• Citation: (2009) N3857
• Docket Number: WS1344 of 2007
• Year: 2009

Full Title: WS1344 of 2007; Commissioner General of Internal Revenue v Bougainville Copper Limited (2009) N3857

National Court: Lay J

Judgment Delivered: 13 August 2009

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

PNG Cases Cited

William Duma v Eric Meier (2007) SC898; Chief Collector of Taxes v Bougainville Copper Ltd (2007) SC853; Commissioner General of Internal Revenue of Taxes v Bougainville Copper Ltd (2008) SC920; OS No. 79 of 2004 Bougainville Copper Ltd v Chief Collector of Taxes, unpublished unreported decision of 29 April 2005 Salika J; Kenn Norae Mondiai v Wawoi Guavi Timber Co Ltd (2007) SC886; Gary McHardy v Prosec Security and Communication 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) 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

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 s272 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) s262 and s316 of the ITA provide for the imposition of penalties, are in breach of s37 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 s232; 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 s4 (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 O12 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...