Re O'Reilly; Ex parte Australena Investments Pty. Ltd. & Ors.Judges:
High Court of Australia
These are applications for orders nisi for mandamus directed to the Federal Commissioner of Taxation. The applicants are Mr. Huston, his wife and two companies controlled by them called Australena Investments Pty. Ltd. and Australena Computer Services Pty. Ltd. I adjourned the applications in order that notice be given to the Commissioner, who was represented at the adjourned hearing, and opposed the applications. The Hustons failed to file income tax returns for the years ending June 1981 and June 1982, in respect of their own incomes, their partnership, and certain trusts. The two companies also did not file returns for those years. In November and December 1982 default assessments were made under sec. 167 and garnishee notices issued under sec. 218 of the Income Tax Assessment Act 1936 (``the Act''). This resulted in $421,859.54 being paid to the Commissioner.
The applicants, under sec. 185 of the Act, lodged with the Commissioner an objection to the default assessments on 26 January 1983. Section 186 of the Act provides:
``The Commissioner shall consider the objection, and may either disallow it, or allow it either wholly or in part, and shall serve the taxpayer by post or otherwise with written notice of his decision.''
The Commissioner has not yet allowed the objections or disallowed them in whole or in part. The outstanding income tax returns were lodged on 24 March 1983.
The first question is whether the Commissioner has a public duty to allow or disallow within a reasonable time. The Commissioner suggested that the duty to ``consider the objection'' under sec. 186 of the Act, at its highest, is a duty to give diligent and honest consideration to objections. He contended that there is no
ATC 4808time limit, reasonable or otherwise, in which he is required to determine an objection.
Where time limits have not been specified in other sections of the Act a reasonable time has been implied (see
Ganke v. D.F.C. of T. 75 ATC 4097; (1975) 1 N.S.W.L.R. 252). Without a time limit any duty would be illusory. I interpret sec. 186 of the Act as requiring the Commissioner to allow or disallow an objection in whole or in part within a reasonable time.
The next question is whether the Commissioner has failed to do so. The Commissioner contended that, in all the circumstances, a reasonable time had not elapsed. In
Thornton v. Repatriation Commission (1981) 35 A.L.R. 485, in determining whether there was unreasonable delay by the Repatriation Commission in making a statutory decision, Mr. Justice Fisher stated:
``The question is whether there are circumstances which a reasonable man might consider render this delay justified and not capricious... a delay for a considered reason and not in consequence of neglect, oversight or perversity''
That statement is equally applicable here. The applicant's affairs were very complicated. They were so interrelated that separate consideration would be difficult. They operated some 28 bank accounts. These consisted of several accounts from which Mr. Huston and his wife conducted their own banking business, three accounts set up as trusts for their children, a trust account for the Huston Family trading as Australena Holdings, a trust account in the name of Golden Valley Trust the beneficiary of which is yet to be discovered by the Commissioner and two company accounts in which the taxpayer and his wife have controlling interests. Over about the last year the Commissioner has allocated to the investigation of these affairs two very experienced full-time officers, and, at various intervals, up to six additional officers, who have spent at least 3,000 man hours in investigation. The bank accounts investigation has involved detailed examination of thousands of transactions. It has been complicated by incomplete bank deposit books, cheque butts and other records of the character of the transactions.
The officers have also been engaged in defending unsuccessful actions by Mr. and Mrs. Huston in the Federal Court and the Queensland Supreme Court concerning the sec. 218 notices and money held on behalf of Mr. Huston in his solicitor's trust account. They have also been examining Mr. Huston's promotion of Hamidan Pty. Ltd., a company involved in an oil exploration tax avoidance scheme, in connection with which fraud charges have been instituted by the Queensland police against him under sec. 430 and 438 of the Criminal Code 1899 (Q.). The Commissioner is also investigating other bank accounts which he suspects had been operated by the Hustons under false names. The investigations include matters arising out of evidence given by Mr. Huston to the Costigan Royal Commission into the Painters and Dockers Union concerning a possible payment to him of $1.35 million.
Perhaps the most important feature of the evidence is that Mrs. Huston, Australena Computer Services Pty. Ltd. and Australena Investments Pty. Ltd. in their notices of objection admitted that there had not been true and full disclosure to the Commissioner of all material facts necessary for their assessments. They claimed that this was because ``legal process'' had prevented them ``from assessing the records and primary documents necessary for such disclosure''. By ``legal process'' they were referring to the Costigan Royal Commission which held many of their documents. Mr. Huston in his objection stated ``Alternatively... even if I did not make a full and true disclosure to the Commissioner of all the material facts necessary for my assessment..., which is not admitted, there has been no avoidance of tax...''.
Another important feature is that the objections do not relate simply to some item of income or deduction. They are objections to the whole of the assessment, so that the Commissioner is obliged in each case to reconsider the whole of the assessment.
Mr. Huston admitted that at the time the Commissioner issued the default assessments he had booked a one-way airline ticket to the United States and had either liquidated, or was in the course of liquidating, all his assets.
ATC 4809He stated that his intention was to live in the United States for at least two years and ``work in the church''. He contemplated this move without making provision for paying any tax, including the amount which he considered was payable.
Counsel for applicants said of the objection:
``My client does not particularly care which way it is determined. Obviously he would like it determined in his favour but, from his point of view, all he wants is a decision so then he can come to Court.''
Counsel alleged that Mr. Huston was being deprived ``of the sinews of war for a major court battle involving serious criminal charges''. Mr. Huston also claimed that he was so destitute that he was reduced to selling his car, household furniture and fittings to survive and to eat, and had applied for unemployment relief. However, in cross-examination he admitted that he and his wife had travelled first class by air from Brisbane to this hearing. I do not accept his evidence about his lack of means, but this is not important on this application.
In the ordinary case the requirement that the Commissioner determine an objection within a reasonable time means that he should act promptly. A delay of 12 months would, unexplained, involve a failure to perform his public duty. This is especially so where the Commissioner has exercised his powers to collect the tax assessed. As Mr. Justice Mason observed:
``The institution of proceedings for recovery on a notice of assessment which is challenged in proceedings under Pt. V may operate oppressively and unfairly to a taxpayer''
Clyne v. D.F.C. of T. 82 ATC 4510 at p. 4512).
Allowance or disallowance of the objection by the Commissioner is a prerequisite for challenging an assessment by way of review or appeal under the Act, so that undue delay is impermissible. However in this case the delay is adequately explained. The circumstances, which are not really in doubt, do not disclose any basis from which it might be concluded that the Commissioner has failed to perform his duty to determine the objections within a reasonable time.
The applications for orders nisi for mandamus are refused.