Grapsas v. Unger (Deputy Federal Commissioner of Taxation).

Members:
Young CJ
Murray J
Murphy J

Tribunal:
Supreme Court of Victoria (Full Court)

Decision date: Judgment handed down 15 August 1985.

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Young C.J.

I have had the advantage of reading the reasons for judgment prepared by the other members of the Court. Murray J. has set out an account of the proceedings before us and of the facts upon which those proceedings depend and there is no need for me to repeat them.

Seven of the eight orders nisi before us concern sec. 230 of the Income Tax Assessment Act 1936 subsec. (1) of which at the relevant times read as follows:

``Any person who, or any company on whose behalf the public officer, or a director, servant or agent of the company in any return knowingly and wilfully understates the amount of any income or makes any misstatement affecting the liability of any person to tax or the amount of tax shall be guilty of an offence.

Penalty: Not less than Fifty dollars, or more than One thousand dollars and, in addition, the court may order the person to pay to the Commissioner a sum not exceeding double the amount of tax that would have been avoided if the statement in the return had been accepted as correct.''

In respect of the orders nisi which are concerned with informations charging offences against that subsection, I have the misfortune to differ from the conclusions arrived at by the other members of the Court. In my opinion, sec. 230(1) does not apply to a tax agent who only prepared a draft return and does not make a return on behalf of a taxpayer. I shall give my reasons for this conclusion as briefly as possible.

It is, I think, essential to notice that sec. 230(1) operates only when the understatement or misstatement is ``in any return''. In other words, the section must mean that an offence is only committed if an understatement or a misstatement is made in a return .

The primary obligation to furnish a return is to be found in sec. 161(1) and it is to be noticed that a return must be signed by the person making it. Of course, there are provisions for returns to be made by some persons on behalf of others such as sec. 252(1)(f) which makes the public officer of a company answerable for the doing of all such things as are required to be done by the company. But there are many other cases.

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ATC 4492

The first question to answer is who ``makes the return''? The only answer to that question is the person who signs it. The next question is, when does a document containing the details of a taxpayer's income become a ``return''? I should have thought that the answer to that question was upon the lodging of the signed document with the Commissioner of Taxation. It can then be said that a return has been ``made'' by the person who signed the document, that it is ``his return''.

So much might not be in controversy. But it is said that someone who inserts figures into a document which becomes a return may be guilty of an offence under sec. 230 even though the document never becomes ``his'' return, even though he does not ``make the return'' and even though he does not sign it on behalf of the person ``making the return''. Signature of the tax agent's certificate provided for on the form of return is irrelevant for present purposes.

The only person who can be said to ``make a return'' in the strict sense is the person who signs the return and if this be so, it seems to me to follow that the only person who can understate in a return the amount of any income or make any misstatement in a return affecting the liability of any person to tax is the person who signs or ``makes'' the return. A person who does not sign the return neither ``makes'' the return, nor understates any income in it nor makes any misstatement in it.

It is clear, of course, that a person may be guilty of an offence under the subsection by understating income or by making a misstatement in a return of some person's income other than his own. As Dixon J. said in
Mallan v. Lee (1949) 80 C.L.R. 198 at p. 214 :

``The expressions `any person' and `any income' in s. 230(1) were adopted so as to cover cases where the person making the return did so in a representative capacity and did not derive the income.''

(emphasis added)

But that does not mean that a person who does not sign the return and thus ``make'' the return, commits an offence by making in the document which becomes a return an understatement or misstatement of the relevant kind. It is quite contrary to principle that liability for an offence should be attached in such a way.

Of course, it is well known that very many taxpayers employ registered tax agents to prepare for them the documents which become their returns. Many taxpayers, no doubt, pay little attention to the documents which their tax agents prepare for them to sign as their returns of income. Equally it may be assumed that some dishonest tax agents have been guilty of presenting to their clients for signature and lodgment as returns, documents which contain understatements or misstatements of the kind referred to in sec. 230(1). But reprehensible though their conduct may be, such dishonest tax agents are not to be attached with liability for an offence unless the statute clearly prescribes the circumstances under which that liability is to attach. If Parliament intended to impose upon registered tax agents a particular responsibility for the accuracy of ``returns'' which they prepare - a course which many would regard as wholly reasonable - then Parliament should have said so in clear language. So far from doing so, the Act as it stood at the relevant times, was remarkable for the absence of any provisions attaching specifically to registered tax agents responsibility for the accuracy of ``returns'' bearing their certificates. The Act might have provided, for instance, that where there was in a return which carried a tax agent's certificate, though the return was ``made'' by another person, a misstatement and the tax agent knowingly and wilfully inserted such misstatement he was guilty of an offence. Section 228(1) of course is confined to the correctness of the tax agent's certificate or the failure to sign it.

It has been suggested, in effect, that a wider meaning might be given to sec. 230(1) without fear of bringing within it those who should not be fixed with liability for an offence because it is only if the understatement or misstatement is ``knowingly and wilfully'' made, that an offence is committed. Whilst such a thought might be comforting, the words ``knowingly and wilfully'' cannot in my opinion expand the class of persons who are comprehended by the section. On the contrary the words tend to limit the class rather than expand it. The words ``knowingly and wilfully'' are directed to the mental element in the offence. ``Knowingly'' indicates that knowledge is an essential ingredient and ``wilfully'' means ``deliberately and intentionally''.

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ATC 4493

I turn to the authorities to see whether they require me to take a different view of the section than that which I have suggested is correct. The clearest analysis of the section which I have seen is in Dixon J.'s judgment in Mallan v. Lee (supra) . So far from requiring a different view from the one I have suggested, that judgment appears to me to support my opinion.

In Mallan v. Lee, a company and its public officer were charged together. The company was charged with contravening sec. 230 in that the public officer on its behalf understated the amount of its income in a return. The public officer was charged with being directly concerned in the commission of the company's offence and reference was made to the Crimes Act 1914-1946 (Cth), sec. 5, the aiding and abetting section. Dixon J.'s view was that although the information disclosed an offence by the public officer, it was as offence against sec. 230 and that the reference to the aiding and abetting section was misconceived. In examining the text of the section his Honour said of sec. 230(1) (at pp. 213-214):

``The provision may be divided into two parts. The one part says that any person who in any return knowingly and wilfully understates the amount of any income or makes any misstatement affecting the liability of any person to tax or the amount of tax shall be guilty of an offence. The other part says that any company on whose behalf the public officer or a director servant or agent of the company in any return knowingly and wilfully understates the amount of any income or makes any misstatement affecting the liability of any person to tax or the amount of tax shall be guilty of an offence. A public officer cannot, I think, make his company responsible under the second part of the provision without himself becoming liable under the first part. The first part is not confined to a taxpayer making a return of his own income. This is designedly done because there are many cases in which persons may or must make returns of income in which they have no beneficial interest or which they do not derive. A trustee or an agent may as a result of s. 254 make a return of the income of others, and an executor of a deceased taxpayer may make a return of the deceased's income. A partner may make a return of the income of the partnership. The master, agent or other representative in Australia of the owner or charterer of a ship may be called upon to make a return of freight or passage money: s. 130.''

The next sentence I have already quoted.

A little later his Honour said (at pp. 214-215):

``I understand the policy of the more general part of s. 230(1) to be to place upon all persons who make in a return a wilful understatement of income or misstatement, a penal responsibility whether they do so on behalf of themselves or of others.''

I would emphasize the words ``on behalf of themselves or of others''. I think Dixon J. was being careful to confine the operation of the section to cases where a return was made either by a taxpayer on his own behalf or by someone making a return on behalf of another taxpayer. I do not think that there is anything in the judgments of either of the other members of the Court ( Latham C.J. and McTiernan J.) to suggest that they took a different view from that of Dixon J. Their judgments were more concerned with reasons why sec. 5 of the Crimes Act was not an appropriate section under which to charge the public officer. I agree, however, that the Court was of the opinion that the public officer of a company fell within the description ``any person'' where first appearing in the section (see per Dixon J. at p. 213). The company was only vicariously responsible for the public officer's act. But this does not help to give to the words ``any person'' where first appearing a meaning which goes beyond a person who furnishes a return whether on behalf of himself or of someone else.

The next case to which I wish to refer is
Bell v. Canny (1973) V.R. 156 . In that case a tax agent employed to prepare and lodge a taxpayer's return, procured his client's signature on a blank form of return. He then caused the return to be completed with details of expenditure which were false to his knowledge but he did not physically take part in the preparation of the return except by signing the tax agent's certificate. Gowans J. held that the tax agent was rightly convicted under sec. 230. It was contended before his Honour that no one could make a misstatement in a return except the taxpayer who signs the

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ATC 4494

return or someone who signs the return on behalf of the taxpayer. His Honour was referred to Mallan v. Lee but held that the dicta did not go sufficiently far to solve the case before him. His Honour concluded (at pp. 159-160):

``I think it is reasonably clear that where a person physically preparing a return (albeit not his own) inserts in it matter which is false, and he inserts it knowingly and wilfully, it falls within the sub-section. And, in my view, where a person knowingly and wilfully supplies information which is false to another, and that other is his agent, for the insertion of that matter in the contents of the return, being authorized and directed to insert that matter in the return, then the person supplying the information and authorizing and directing it to be inserted in the return, commits an offence against the sub-section.''

With the greatest respect to Gowans J. from whom I would differ only after great hesitation, I do not find the view he expresses to be clear. On the contrary, for the reasons I have attempted to give I think that it is only a person who ``makes'' a return whether on behalf of himself or on behalf of another person who can be guilty of an offence against the section. The fact that the section expressly refers to a director, servant or agent of a company as well as to the public officer is curious, for the public officer is ordinarily the person who furnishes a company's return. But clearly the intention was that a company was not to escape liability under the section because the company's return contained an understatement or misstatement made by some person other than the public officer. The inclusion of ``director servant or agent'' does not assist the interpretation of that part of the section with which we are concerned. Were I sitting alone, I would follow Gowans J.'s decision, but sitting as a member of the Full Court, I would overrule his Honour's decision, as we were invited to do.

We were also referred to
McGovern (F.C. of T.) v. S.M. Chaplain & Ors (1951) 9 A.T.D. 351 and
Aoun v. D.F.C. of T. 82 ATC 4195 but beyond finding in those cases support for the view that a return is made by the person who signs it and not by the person who signs it and not by the person who prepares it, I gain no particular assistance from them.

The conclusion I have expressed would make it unnecessary for me to consider the other argument advanced; but as the other members of the Court do not share my view, I might add that upon those other arguments I agree in the conclusions of Murray J. and in his Honour's reasons for them. I also agree in the conclusion that the attack on the conviction under sec. 228(1) of the Act should fail.

It follows that I would make absolute the seven orders nisi and quash the seven convictions in respect of all the informations based upon sec. 230(1). I would discharge the order nisi which relates to the information under sec. 228(1).