Federal Commissioner of Taxation v Westgarth
(1950) 81 CLR 39624 ALJ 129
[1950] ALR 439
(Judgment by: Fullagar J)
Between: Federal Commissioner of Taxation
And: Westgarth
Judges:
McTiernan J
Latham CJ
Williams J
Webb J
Fullagar J
Subject References:
Estate Duty (Cth)
Judgment date: 23 December 1949
Judgment by:
Fullagar J
Ina Mary Campbell died on 15th October 1945. An asset in her estate was a cottage at Rose Bay, which was included in the estate duty return and therein valued at 2,750 pounds. That value was the value put upon it by the Valuer-General of New South Wales. The Commissioner accepted this value, although he increased the value of certain shares comprised in the estate, and on 28th May 1946 assessed duty accordingly. The duty became due and payable on 27th June 1946. On 29th July 1946 the property was sold for 3,200 pounds, the approval of the delegate to the Treasurer under the National Security (Economic Organization) Regulations being given to a sale at that figure on a valuation made by Mr. W. E. Newton. On 30th September 1946 the commissioner amended the assessment of duty by increasing the value of the cottage from 2,750 pounds to 3,200 pounds. The consequent increase in the duty assessed was 40 pounds 16s. 10d. The administrators appealed to the Board of Review, which held that the amendment of the assessment was not authorized by the Estate Duty Assessment Act 1914-1942.
An appeal from the Board's decision was dismissed by McTiernan J., and the commissioner now appeals to this Court. The sole question arising is the question of law whether the making of the amendment was authorized by the Act. The commissioner submits that it was authorized by sub-s. (2), or alternatively by sub-s. (3) of s. 20 of the Act. A further argument based on sub-s. (8) of s. 20, which was submitted to the Board and rejected by it, was not put before McTiernan J. or before this Court. (at p413)
Sub-sections (2) and (3) of s. 20 are in the following terms:
- "(2)
- Where an administrator has not made to the commissioner a full and true disclosure of all the material facts necessary for the making of an assessment, and there has been an avoidance of duty, the commissioner may -
- (a)
- where he is of opinion that the avoidance of duty is due to fraud or evasion - within twelve years from the date upon which the duty became due and payable under the assessment; and
- (b)
- in any other case - within three years from the date upon which the duty became due and payable under the assessment,
- amend the assessment by making such alterations therein or additions thereto as he thinks necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of duty, as the case may be.
- (3)
- Where an administrator has made to the commissioner a full and true disclosure of all the material facts necessary for the making of an assessment, and an assessment is made after that disclosure, no amendment of the assessment increasing the liability of the estate in any particular shall be made except to correct an error in calculation or a mistake of fact, and no such amendment shall be made after the expiration of three years from the date upon which the duty became due and payable under that assessment." (at p414)
Since one of the two critical expressions in these sub-sections occurs also in sub-s. (4), it is desirable to set out that sub-section also. It is in the following terms:
- "(4)
- No amendment effecting a reduction in the liability of an estate under an assessment shall be made except to correct an error in calculation or a mistake of fact, and no such amendment shall be made after the expiration of three years from the date upon which the duty became due and payable under that assessment." (at p414)
No suggestion of "fraud or evasion" is - or, so far as the evidence goes, could possible be - made. Paragraph (a) in sub-s. (2) is, therefore, not directly relevant. (at p414)
Since sub-s. (2) deals with all cases in which "a full and true disclosure of all the material facts necessary for the making of an assessment" has not been made, and sub-s. (3) with all cases in which such a disclosure has been made, the two sub-sections between them cover all possible cases. The period within which an amendment may be made is the same in each case - three years from the date upon which the duty became payable under the original assessment. But the power of the commissioner, in a case where the "disclosure" required has not been made, is wider in two respects than his power in a case where such disclosure has been made. In the latter case an amendment may only be made "to correct an error in calculation or a mistake of fact." In the former case amendments may be made "to correct an error in calculation or a mistake of fact or to prevent avoidance of duty," and the amendments which may be made are such amendments as the commissioner "thinks necessary" for any of those purposes, so that, within limits defined by law, the commissioner's opinion is the decisive factor. The word "avoidance" is, I think, to be contrasted with the word "evasion." It involves, I think, no notion of escaping by any device or artifice, but conveys simply the notion of actually escaping through not being called upon to pay. (at p414)
The position then is this. The case must fall within either sub-s. (2) or sub-s. (3). If it falls within sub-s. (2), it seems clear that the commissioner had power to make the amendment in question: he could reasonably think it necessary to make it in order to prevent avoidance of duty. The first question, therefore, is whether the case does fall within sub-s. (2), and this depends on whether the administrators made to the commissioner a full and true disclosure of all the material facts necessary for the making of an assessment. If they are held not to have made such a disclosure, that is the end of the matter. If they are held to have made such a disclosure, the case falls automatically within sub-s. (3), and the second question arises, which is whether the amendment was an amendment "to correct a mistake of fact" It was not, and could not be, suggested that it was "to correct an error in calculation." (at p415)
I will consider first sub-s. (2) of s. 20. The "disclosure" which is required to be made is a disclosure of "all the material facts necessary for the making of an assessment." The assessment contemplated is (s. 15) an assessment "for the purpose of ascertaining the amount upon which duty shall be levied." The duty is imposed (s. 8 (1)) upon "the value, as assessed under the Act, of the estates of persons dying." It seems to me that the value of each asset in the estate must be a "material fact necessary for the making of an assessment." The two things which it is essential to know before an assessment can be made are (1) the assets comprised in the estate and (2) the value of each of those assets. And s. 10 accordingly requires the administrator to "furnish" a statement setting forth "the descriptions and values of the items comprising the estate." When s. 20 (2) refers to a "full and true disclosure of all the material facts necessary for the making of an assessment," it must, I think, have in contemplation the statement required by s. 10. And it must, therefore, I think, have in mind the "values" as well as the "descriptions" of assets. It could hardly be doubted that a fraudulent understatement of value would attract the attention of par. (a) in s. 20 (2). But this cannot be so unless "value" is a "material fact" required to be fully and truly disclosed. In my opinion, the value of an asset is a "material fact" within the meaning of s. 20 (2). (at p415)
In the present case the value of the asset in question was set forth in the statement as being 2,750 pounds. And for the purposes of this appeal it must be assumed that the true value was 3,200 pounds. It does not, however, follow, in my opinion, that the value of the asset was not fully and truly "disclosed" within the meaning of s. 20 (2). The critical word in this sub-section is, indeed, I think, the word "disclosure." Apart from the ancient saying that "lex non cogit ad impossibilia," both the etymology of the verb "disclose" and its normal and popular use involve, in such a context, the idea of revealing to others something which is known to oneself. If I honestly and reasonably believe (perhaps even if I honestly but unreasonably believe) that fact A exists, and I accordingly assert that fact A exists, I may, when it is proved that fact A does not exist, be properly said to have asserted something which was not true. But I cannot, if any regard is to be had either to natural fairness or to propriety of language, be said to have failed to disclose that fact A did not exist. So far as statements as to value are concerned, I am of opinion that the most that is required by s. 10 and contemplated by s. 20 (2) is that the administrator shall honestly form an opinion as to value and truly state the opinion which he has formed. These things it is conceded that the administrators did in the present case. The case therefore falls, in my opinion, outside sub-s. (2) of s. 20. (at p416)
It necessarily follows, as I have shown, that it falls within sub-s. (3). But the power of the commissioner under that section, so far as material, is only a power to make an amendment "to correct a mistake of fact." It must be assumed, as I have pointed out, for the purposes of this appeal, that the true value of the asset in question was 3,200 pounds. The assessment was based on a value of 2,750 pounds. There was, therefore, a mistake on the part of the commissioner as to the value of the asset in question. Was this mistake a mistake of fact? I cannot see any escape from the view that it was. The value of a piece of land or of a chattel is matter of fact. It is peculiarly a matter on which opinions may differ, and it is matter on which expert opinions are admissible and may be violently in conflict. So are such matters as the cause of death in a murder trial, or the nature of the inventive step taken by a holder of letters patent in an action for an infringement of the granted monopoly. In each case there is an ultimate question at issue, and the question is a question of fact. There are different degrees of difficulty, the nature of the evidence that is admissible will vary, and the degree of confidence that can be felt in the finding will vary also.
But there is, in actuality as well as in theory, a fact to be ascertained. Where the value of an asset is in question, we are told by Spencer v. The Commonwealth (1907) 5 CLR 418 and other cases just what the question is that has to be decided. That question is a question of fact. There is a value, and the value is a fact. Neither the difficulty of its ascertainment nor the controversial character of any finding upon it can affect the position that he who assesses a value finds a fact. If he makes a mistake in assessing it, I think that he makes a mistake of fact within the ordinary meaning of that expression and within the meaning of sub-s. (3) of s. 20 of the Estate Duty Assessment Act 1914-1942. (at p417)
I would add two observations. The first is that s. 20, which was inserted by s. 8 of the Act of 1942, took the place of a defective predecessor, and was obviously the result of considerable care in conception and draftsmanship. I cannot help thinking that it would be remarkable if the case of an error in the valuation of an asset, made in good faith by the administrator and accepted by the commissioner, were not dealt with by the section. The second is that the opposite view to that which I have taken would seem to make it impossible for the commissioner to correct, in favour of the taxpayer, an excessive valuation of an asset in an estate, however clearly it might be established that the asset had been over-valued, and however gross the over-valuation. For s. 20 (4) prohibits an amendment in favour of the taxpayer unless there be "an error in calculation or a mistake of fact." Unless "mistake of fact" included "mistake as to value," sub-s. (4) could operate in a very unfair way to the taxpayer. (at p417)
In my opinion, this appeal should be allowed, the judgment of McTiernan J. and the decision of the Board of Review set aside, and the appeal of the respondents to the Board of Review dismissed. (at p417)
The question of costs remains. It is obvious that the matter is of vastly greater importance to the revenue than to the respondents, and the commissioner - very properly, I thought - undertook, by his counsel, Mr. Kitto, to abide by any order which this Court should see fit to make as to costs, and I took the undertaking to apply to all costs incurred by the parties. I think, on the whole, that it is proper to order the commissioner to pay the costs of the appeal to McTiernan J. and of the appeal to this Court. No such order could, of course, have been made if the commissioner had not given the undertaking which I have mentioned, but, in all the circumstances, I do not think that there is anything fundamentally unjust about such an order. (at p417)