Bobos v Deputy Commissioner of Taxation

THE COURT: This is an application by Mr Nicholas Bobos for leave to appeal from a judgment of Neilson DCJ of 5 February 2018 ([2018] NSWDC 34). By that judgment, his Honour dismissed Mr Bobos’ application to set aside a default judgment entered by the Deputy Commissioner of Taxation (the “ATO”) against him on 25 September 2014 in the amount of $421,727.09 inclusive of costs.

Mr Bobos requires an extension of time for leave to appeal to this Court as his Summons was not filed until approximately four months after the judgment below. It should have been filed within 28 days of the judgment (Uniform Civil Procedure Rules 2005 (NSW) r 50.12).

The default judgment related primarily to Mr Bobos’ liability as a director of Bobos Engineering Australia Pty Ltd in respect of income tax withheld by that company from its employees but not remitted to the Commissioner. The remainder related to personal income tax that Mr Bobos owed.

In his judgment the primary judge carefully considered, step by step, the dealings between Mr Bobos and the ATO. His Honour referred in detail to the extensive documentary evidence, principally in the form of letters, emails and file notes, of those dealings.

His Honour stated at [14] the following conclusions concerning the dealings that occurred prior to the entry of judgment:

In further response to Mr Bobos’ reliance upon his letters of 3 March and 27 August 2014, the primary judge concluded at [34]:

His Honour then examined the dealings that occurred after the entry of the default judgment. He concluded that “there [was] clearly no agreement whereby the ATO agreed to forego the debt which was owed to it by the applicant which forms the subject of the judgment entered in this Court, nor was there any estoppel” (at [31]).

As to Mr Bobos’ reliance upon communications in February 2015, his Honour concluded that “even if what occurred in February of 2015 could be construed in the manner argued by the applicant, that whole regime collapsed when the applicant defaulted in making the payment due on 5 April 2015, if not by failure to make the payment due on 23 February 2015 as argued by the ATO” (at [37]).

For these reasons, his Honour rejected Mr Bobos’ application to set aside the default judgment. He concluded that Mr Bobos had not established that he had any bona fide or arguable defence to the ATO’s proceedings, nor had he given any adequate explanation as to why it took him over two and a half years to apply to set aside the default judgment.

The principal points made by Mr Bobos in his submissions to this Court, and our observations in response, are as follows. Neither these nor any of the other points that Mr Bobos raised have any merit.

First, Mr Bobos relies again on communications in February 2015, in particular upon a letter (signed by him) that Bobos Engineering sent to the ATO on 12 February 2015 containing a proposal “to repay the ATO’s outstanding debt” as well as the ATO’s response of 16 February 2015 accepting “the payment plan put forward for Bobos Engineering Australia Pty Ltd”. The response continued:

Contrary to Mr Bobos’ submissions, this arrangement did not purport to affect his personal liability, as distinct from that of Bobos Engineering. In any event, as the primary judge pointed out, the arrangement ceased to have effect once Bobos Engineering defaulted in making the payments stipulated in the arrangement.

Secondly, Mr Bobos asserts in his submissions that he has suffered severe depression since 2002. Although regrettable, that condition does not provide any answer to the ATO’s claim. In particular, it would not have provided any defence under s 269-35(1) of the Taxation Administration Act 1953 (Cth) because, for illness to attract the operation of that provision, the illness has to have led to the director not taking part in the management of the company. Mr Bobos however clearly did participate in management at all relevant times.

Thirdly, Mr Bobos submitted, as he had below, that the ATO erred in its allocation of payments made to it by Mr Bobos or Bobos Engineering. For reasons given by the primary judge, the ATO was entitled to allocate payments as it thought appropriate.

Fourthly, Mr Bobos alleges, in general terms, that the ATO acted in such a way as to lead him to believe that it had agreed to “allow Bobos Engineering to complete the litigation with” a party to a construction contract with whom it was in dispute. As the primary judge found, in our view correctly, there was nothing in the dealings between Mr Bobos and the ATO to support that assertion.

In summary, we do not consider that Mr Bobos has demonstrated that he has any prospect of establishing error on the part of the primary judge. As a result, his application for an extension of time for leave to appeal and the application for leave to appeal, which he filed, should be dismissed with costs.