Snow v. Deputy Federal Commissioner of Taxation.Judges:
On 16 January 1986 the applicant, Peter Snow, received a bill for $429,955 from the respondent, the Deputy Commissioner of Taxation.
It came in the form of amended assessments of his income tax for the years ended 30 June 1974, 1975 and 1976. It included a figure of $276,381 additional tax for lodgment of incorrect returns for those years. It was payable on 17 February 1986. It has not been paid and additional tax for late payment is accruing at the rate of $253.53 per day.
The assessments have been objected to but the objections have been disallowed. The applicant has asked the respondent to refer his disallowance of the objections to the Administrative Appeals Tribunal under Pt V of the Income Tax Assessment Act 1936 (ITAA). This has not yet been done.
The applicant has also asked the respondent to grant him an extension of time for payment, to not impose additional tax for late payment, and to not issue any writ for recovery of the amounts due until he has exhausted his avenues of appeal against the amended assessments.
These requests have all been refused.
The applicant has therefore begun proceedings in this Court ("the primary proceedings") under the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act") seeking a review of the respondent's decisions refusing his requests.
Pending the hearing of the primary proceedings the applicant asks the Court to make an order suspending the operation of the respondent's decision to issue a writ for recovery of the tax.
In so doing his counsel relies upon sec. 15 of the Judicial Review Act and in the alternative sec. 23 of the Federal Court of Australia Act 1976.
In the primary proceedings the applicant seeks review of decisions of the respondent which are described in the application as follows:
"A. On or about 12th September 1986 he decided to refuse the Applicant's requests made by letter dated 19th August 1986 that the Respondent: -
- (a) Grant an extension of time pursuant to Section 206 of the Income Tax Assessment Act 1936 as amended (`ITAA') for payment of the tax assessed and notified in amended assessments of income tax, which issued to the Applicant for the years ended 30th June 1974, 1975 and 1976, until such time as each Assessment has been confirmed and no further avenue of appeal is available to the Applicant pursuant to Part V of the ITAA.
- (b) Determine that pursuant to Section 207 of the ITAA the date from which penalty tax shall be computed shall be the date upon which each amended Assessment is confirmed with no further avenue of appeal being available to the Applicant pursuant to Part V of the ITAA.
- (c) Defer the issue of a Writ or Writs for the recovery of tax assessed and outstanding pursuant to the said amended Assessments until such time as the said amended Assessments are confirmed with no further avenue of appeal being available to the Applicant pursuant to Part V of the ITAA.
B. On or about 15th September 1986 he decided to instruct his solicitor to proceed to cause a Writ or Writs to issue to the Applicant claiming payment of the said tax assessed."
The applicant is said to be "a person who is aggrieved by the decisions" within the meaning of that phrase in sec. 5 of the Judicial Review Act.
The respondent did not dispute his standing and no issue arises in that regard for present purposes.
The factual background
The background to the institution of the primary proceedings is set out in an affidavit sworn by the applicant on 20 November 1986. The contents of the affidavit were not challenged by the respondent.
The applicant deposed that in the years ended 30 June 1974, 1975 and 1976 respectively his income was comprised entirely of salary and director's fees, and in 1976 a payment on termination of employment.
He lodged income tax returns for each of these years "as requested by the respondent" although the Court was not told when the requests were made or the returns lodged.
The applicant said that in the returns he declared his total income and was assessed on it.
By amended assessments the respondent assessed additional income to the applicant for each of the three years in question.
The apparent basis for the assessments is set out in a report dated 15 November 1985 and signed by an officer of the Australian Taxation Office, J.F. Jancey. The applicant exhibited the report to his affidavit.
In that document addressed to a person designated "Supervisor", Mr Jancey reported the completion of an investigation into the affairs of the applicant for the years ended 30 June 1974 to 30 June 1980.
The report referred to the applicant's "involvement in the tax avoidance industry" during the years under review.
He was said to have derived significant income from the promotion of tax avoidance schemes in those years through his association with what was described in the report as the "West Australian branch of the Brian Maher organisation", an association which ceased in 1978.
The majority of his income during the years reviewed was said either not to have been returned as income or "manipulated so that little tax was paid". The report claimed that payments received by the applicant through his association with the Maher organisation were disguised as private company dividends. The commissions, according to the report, were earned progressively each year and periodically paid to the applicant by way of loans or advances.
At the end of each financial year a final accounting was completed and the total amount earned was determined. The amounts due were then said to be paid in a disguised form, usually in the following year and the loans previously received were repaid.
On this approach certain amounts of income were said to have been received by the applicant "from his tax avoidance activities" and on which tax was avoided.
For the years in question the relevant amounts were: 1974 - $29,200; 1975 - $112,200; 1976 - $103,600.
The report then set out an analysis of the alleged additional income for each of these years. In the body of his affidavit the applicant gave his own account of the payments.
(i) The 1974 financial year
With respect to the sum of $29,200 treated as income for the year ended 30 June 1974, Jancey said that this had taken the form of two dividend payments by a company called Demos Pty. Ltd.
Demos Pty. Ltd., he said, had been acquired by Brian Maher on 31 May 1974.
On 7 June 1974 it made allotments of redeemable preference shares and the next day resolved to pay a dividend on the shares.
The funds were held on deposit with B.J. Maher & Co. then paid out on 2 July 1974. $8,000 of the dividends so paid were paid to an entity described both in Jancey's report and the applicant's affidavit as "The Snow Family Trust".
This can be treated as a reference to a trustee of a trust whose beneficiaries include members of the applicant's family. The trustee is identified in another part of the report as Snow Nominees Pty. Ltd.
The sum of $8,000 so paid was, according to Jancey, distributed to members of the applicant's family "therefore involving very little tax".
The applicant did not deny this payment nor that it came by way of a dividend from Demos Pty. Ltd.
He added that the money was distributed to four beneficiaries of the trust and assessed as income in their hands by the respondent.
The balance of the $29,200 namely $21,200 regarded by Jancey as income received by the applicant was part of a dividend of $106,000 paid by Demos Pty. Ltd. to Federated Management Ltd. a West Australian company said to be controlled by Maher. $21,200 or 20% of the total dividend was treated as if paid to the applicant, for, according to Jancey, he had a 20% interest in the latter company.
The applicant agreed that the dividend was paid as alleged but said that although he was a
ATC 4081salaried director of Federated Management Ltd. he had "no direct shareholding" in it and had "only a 2% indirect beneficial interest in the company".
The reference to a 2% interest appears to be a typographical error for 20%. Later in the affidavit the applicant refers to a company called International Secretariat Pty. Ltd. which he evidently controlled and which had a 20% shareholding in Federated Management Ltd.
(ii) The 1975 financial year
The sum of $112,200 derived as income in the 1975 financial year was, on Jancey's analysis, comprised of three amounts, one of $9,000 and two of $51,600.
The $9,000 component was said to be one-half of a dividend of $18,000 paid by a company called Bonavista Securities Pty. Ltd. and described by Jancey as a "Maher Company".
The dividend was paid to Sotheby Securities Pty. Ltd. a Western Australian company in which the applicant "effectively held a 50% interest". Sotheby Securities filed a return including the dividend in 1975 and dividends were paid to its shareholders in 1976.
The applicant did not disagree with this account but added that the $9,000 was paid as a dividend by Sotheby Securities Pty. Ltd. to Snow Corporation Pty. Ltd. which brought the sum to account in its 1976 tax return. The money was paid through to the trustee of the Snow Family Trust and distributed with the net income of that trust to the trustee of another trust called the Shanadar Trust. It was distributed by that trustee to beneficiaries whom the applicant did not identify. He said that the amounts so paid were returned as income by the recipients and assessed accordingly.
As to the two sums of $51,600 Jancey reported that on 29 January 1975 two companies controlled by the applicant, namely Snow Nominees Pty. Ltd. as trustee of the Snow Family Trust and Management Consortiums Pty. Ltd., were allotted 10 shares each in Bedouri Pty. Ltd., a company incorporated on 17 July 1974 with two initial shareholders who were the applicant and a Mr Tolhurst.
It appears from the report that there were 100 shares in all in the company allotted to entities associated with Maher, a man called Donnelly, Tolhurst and the applicant.
The company lodged a return of income for the year ended 30 June 1975 declaring dividends totalling $516,740 comprising $217,740 received from Pastoral Properties Pty. Ltd. and $299,000 received from Bonavista Securities Pty. Ltd.
On 21 January 1976 Snow Nominees Pty. Ltd. and Management Consortiums Pty. Ltd. sold their 10 shareholdings for $51,600. This yielded a profit in each case of $51,590 which, as Jancey reported, was included as income in their returns under sec. 26AAA of the Income Tax Assessment Act.
According to Jancey both companies offset this income by participation in a share trading partnership named "Mahvista" which led them in each case to claim a loss of $51,590.
The respondent has evidently disallowed these losses and according to Jancey both cases have proceeded to the appeal stage.
The applicant in his affidavit says that the two companies did each receive $51,600 for the sale in each case of 10 shares in Bedouri Pty. Ltd. Each company brought the receipt into account as income pursuant to sec. 26AAA of the ITAA and was assessed accordingly.
In respect of tax assessed on this income the respondent has issued a writ out of the Supreme Court of Western Australia (No. 1949 of 1985).
As to the $51,600 derived by Management Consortiums Pty. Ltd. from the sale of its 10 shares in Bedouri Pty. Ltd. the applicant deposed that this sum was declared as income pursuant to sec. 26AAA of the ITAA and that the company was assessed on it.
Further, he said, the respondent had issued assessments to his wife and himself and other shareholders of Management Consortiums Pty. Ltd. in respect of the tax said to be due by the company in relation to the share sale proceeds, but not paid by it.
These assessments were issued under the Taxation (Unpaid Company Tax) Assessment Act (TUCT)). Proceedings to recover the tax so assessed have been instituted against the applicant's wife in the District Court of Western Australia (Action No. 2694 of 1985) and against the applicant himself in the Local Court.
The applicant also says that other former shareholders of Management Consortiums Pty. Ltd. have paid the tax on the assessments issued to them although he does not disclose the time and amounts of such payments.
As the applicant puts it, the respondent now seeks to sue him for tax on the same income on the basis that it was derived by him rather than by Management Consortiums Pty. Ltd.
(iii) The 1976 financial year
The sum of $103,600 which was treated as part of the applicant's income for the year ended 30 June 1976 represents 20% of a $518,000 dividend payment made to Federated Management Ltd. The 20% figure in turn represents what Jancey contended was the size of the applicant's interest in Federated Management Ltd. That company included the dividends in its income tax return for 1977 but the taxable income was fully rebatable under sec. 46 of the ITAA.
The applicant in his affidavit said that International Secretariat Pty. Ltd. was a 20% shareholder in Federated Management Pty. Ltd. International Secretariat Pty. Ltd. was, according to Jancey's report, controlled by the applicant.
In June 1978, according to Jancey, the shareholders in Federated Management Ltd. sold their shares to one Lloyd Faint.
International Secretariat Pty. Ltd. received $105,000 for this sale of 5,000 $1 shares, which was treated in its return as yielding a capital gain of $100,000.
In relation to the disposition Jancey's report said:
"The T(UCT) legislation will be applied in respect of the Division 7 Assessment for Federated Management to recoup the tax from the vendor shareholders."
After reciting events relating to the years 1977 to 1980 which are not relevant for present purposes, Jancey's report noted that "the only asset held in the Applicant's name" was a half interest in a residence at Greenwood valued at about $200,000 to $250,000.
This interest was said to be encumbered by a mortgage securing an advance of $250,000 from a company controlled by the applicant. He was on this basis said to have "an effective nil net asset position".
The applicant seems to agree with that assessment for at para. 9 of his affidavit he said:
"On page 6 of the Annexure `A' it is acknowledged that my only asset is a half share in the family residence in which because of a mortgage, I have no equity and effectively I have a nil net asset position."
Jancey said in his report that during the years 1974 to 1976 inclusive the applicant was employed full time by Federated Management Ltd. a company controlled by and forming part of the "Maher Organisation".
He contended that any commissions received by Snow were derived in the employment and should have been returned as income. Specifically in relation to the sum of $103,200 treated as income for the year 1976 Jancey said that this would be "followed up as part of the T(UCT) action on Federated Management Ltd.".
The report conceded that there would be "in effect a doubling up of assessments in regard to some of the income" but nevertheless expressed the disturbing recommendation "that this position should be retained until Mr Snow's reactions and intentions toward the assessment can be gauged".
Jancey then addressed the question of issuing amended assessments in respect of the years 1974 to 1976 which he described as "outside the 6 year period".
This was a reference to the provisions of subsec. 170(2) of the ITAA which as at the date of the issue of the amended assessments was in the following terms:
"Where a taxpayer has not made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and there has been an avoidance of tax, the Commissioner may -
- (a) where he is of opinion that the avoidance of tax is due to fraud or evasion - at any time; and
- (b) in any other case - within 6 years from the date upon which the tax 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
ATC 4083calculation or a mistake of fact or to prevent avoidance of tax as the case may be."
He set out various factors which the respondent could rely upon in forming an opinion that the applicant had avoided tax by fraud or evasion.
These factors were as follows:
- (a) The applicant was a known agent of the Brian Maher Tax Avoidance Organisation.
- (b) He has not made a full and true disclosure of all the material facts necessary for the making of an assessment for the years ended 30 June 1974, 1975 and 1976.
- (c) Commission income derived in 1974 to 1976 inclusive was knowingly disguised as private company dividends and/or profit on sale of shares and brought to account as income of related entities.
- (d) The applicant had knowingly understated his income in each of the years by so disguising the amounts received.
- (e) He has failed to keep records which would enable his assessable income to be readily ascertained, i.e. records of commissions received or due from the Maher organisation.
On this basis it was recommended that the assessments for the applicant for the three years in question should be amended by the inclusion of the sums mentioned above as part of his income for those years.
The amended assessments - issue, objection and recovery action
The recommendation was accepted and amended assessments issued on 16 January 1986 as follows:
1974 - $48,402.23 1975 - $203,429.29 1976 - $178,123.50 ----------- Total $429,955.02
Of this tax some $276,381 is by way of penalty for lodgment of incorrect returns.
Objections were lodged to the amended assessments and disallowed. Notice of the disallowance was given on 29 July 1986.
The applicant then requested, pursuant to sec. 187 of the ITAA, that the respondent refer the disallowance decision to the Administrative Appeals Tribunal. At the time of the hearing of this motion the respondent had not complied with the request.
I was however informed by counsel for the applicant that no notice had been given by the applicant to the respondent requiring him to refer the decision to the Tribunal under sec. 189A of the ITAA.
On 19 August 1986 the solicitors for the applicant wrote to the respondent making the requests referred to at the commencement of these reasons.
By a letter dated 24 September the respondent advised that legal action would not be deferred and a writ of summons would issue without further notice if payment was not received by 15 September.
In a statement of reasons dated 10 November 1986 and delivered pursuant to sec. 13 of the Judicial Review Act the respondent set out his reasons for the decision not to defer payment of the assessed tax as follows:
- (a) There was no express ground specified in the letter dated 19 August 1986 as justifying an extension of time for payment other than the fact that the requests for reference, lodged pursuant to Pt V of the Income Tax Assessment Act 1936, as amended, had yet to be determined.
- (b) There was no evidence that the taxpayer was unable to achieve payment of his income tax in full by the due date.
- (c) No acceptable proposal had been submitted by the taxpayer for payment within set office guidelines and there is no decision against the Commissioner in respect of the substantive issue in dispute.
- (d) It was considered that the matters raised in the taxpayer's objections related to an artificial scheme and did not constitute a genuine dispute The directions given in Taxation Rulings IT 2091 and IT 2156 were directly applicable to this case.
The letter also advised that as at 12 September 1986 additional tax for late payment assessed under sec. 207 was $48,764.08.
The total liability of the applicant for the three years in question, after a credit of $109.05 under a 1985 assessment, was $478,610.03.
The additional tax for late payment has been accruing at the rate of $253.53 per day since that time.
The grounds of the application
The application for an order of review set out a variety of grounds of review under the Judicial Review Act and included extensive particulars.
On the motion for interlocutory relief the applicant relied principally upon the following grounds:
"(a) Each decision involved an error of law.
(b) The making of each decision was an improper exercise of the power conferred by the relevant section of the ITAA by reason of the fact that: -
- (i) The respondent took irrelevant considerations into account;
- (ii) The respondent failed to take into account a relevant consideration in the exercise of his power."
The argument concentrated upon the alleged failure of the respondent to take into account relevant considerations itemised in the application as follows:
"(a) The tax assessed and outstanding was raised on income which had, at least in part, also been returned by, and assessed as the income of, another taxpayer or taxpayers.
(b) Part at least of the tax on the said income, having been assessed to a taxpayer other than the Applicant, had already been paid to the respondent by that person.
(c) Part at least of the tax on the said income was already the subject of legal recovery action instituted by the Respondent against a taxpayer other than the Applicant.
(d) The Applicant is already being sued by the Respondent pursuant to assessments raised under the Taxation (Unpaid Company Tax) Assessment Act which assessments are based upon the treatment by the Respondent of part at least of the said income as the income of an entity other than the Applicant.
(e) There is a genuine dispute between the Applicant and the Respondent as to whether the income the subject of the said assessments was derived by the Applicant or by others and as to whether the Applicant has been guilty of tax avoidance by fraud or evasion in the absence of which the issue of the amended assessment is statute barred.
(f) That the allegation that the applicant was a `known member of the Brian Maher Tax Avoidance Organisation' was relied upon by the Respondent as evidence of fraudulent intent so as to justify the issue of the amended assessments and whereas prior to the making of the decisions the subject of this application the Respondent well knew that the dismissal of charges of conspiracy to defraud the Commonwealth brought against the Applicant by reason of his involvement with Mr Brian Maher threw considerable doubt on the validity of the conclusion that that association was in itself a ground for concluding that the Applicant had fraudulently avoided tax. As a consequence the probability that the amended assessments would ultimately be set aside was increased.
(g) The objections to the amended assessments raise issues of such substance that it is probable that the amended assessments will ultimately be set aside.
(h) The Applicant does not have the means to pay the tax assessed.
(i) That exaction from the Applicant at this time of the tax assessed would, given the financial circumstances of the Applicant, seriously prejudice his ability to pursue the action which be has instituted under Part V of the ITAA to establish the amended assessments as excessive and invalid.
(j) Deferral of collection of the tax assessment would not, given the known present financial position of the Applicant, materially diminish the Respondent's prospects of recovery of the tax assessed.
(k) The imposition of s. 207 penalty cannot, given the present financial circumstances of the Applicant, reasonably be expected to produce the result that he will be encouraged to pay the debt arising from the amended assessments.
(l) The issue of the amended assessments demanding payment within one month of tax totalling $429,955.00 occurred 10, 11 and 12 years respectively after the years in
ATC 4085which the Applicant allegedly derived the income giving rise to the tax.
(m) The respondent has been requested to forward his decisions on the objections to the amended assessments to the Administrative Appeals Tribunal for review and he has to date failed to comply with his statutory duty in that regard.
(n) Valid requests that the Respondent refer to the Administrative Appeals Tribunal his decisions on the objections to the amended assessments for the years ended 30 June 1975 and 1976 as well as 1974 have been lodged by the Applicant.
(o) There are decisions against the Respondent in respect of the substantive issues in dispute."
The irrelevant considerations which the respondent was said to have taken into account in making the impugned decisions were particularised in the Application as follows:
- (a) There was no express ground specified in the letter dated 19 August 1986 as justifying an extension of time for payment other than the fact that the requests for reference lodged pursuant to Pt V of the ITAA had yet to be determined.
- (b) No acceptable proposal had been submitted by the applicant for payment within set office guidelines.
The errors of law identified were:
"(i) The fact that s. 206 of the ITAA requires the Respondent to ask himself the question `what do the circumstances warrant' and the Respondent has failed to ask this question or has in asking it failed to consider all relevant circumstances.
(ii) The fact that the Respondent took into account irrelevant considerations.
(iii) The conclusion that in each of the years in question the Applicant participated in an artificial scheme of tax avoidance."
The source of the discretion to order a stay
As indicated by his counsel, the applicant seeks interlocutory relief under either sec. 15 of the Judicial Review Act or sec. 23 of the Federal Court Act.
The motion therefore proceeds on the assumption that each provision is available as a source of the power to ground the relief sought.
Section 15 provides:
"(1) The making of an application to the Court under section 5 in relation to a decision does not affect the operation of the decision or prevent the taking of action to implement the decision but -
- (a) the Court or a Judge may, by order, on such conditions (if any) as it or he thinks fit, suspend the operation of the decision; and
- (b) the Court or a Judge may order, on such conditions (if any) as it or he thinks fit, a stay of all or any proceedings under the decision.
(2) The Court or a Judge may make an order under sub-section (1) of its or his own motion or on the application of the person who made the application under section 5."
Section 23 of the Federal Court Act provides:
"The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of, writs of such kinds, as the Court thinks appropriate."
Section 15 does not exclude the application of sec. 23 to proceedings brought under the Judicial Review Act -
Rifki v. Minister for Immigration and Ethnic Affairs (1983) 46 A.L.R. 301 at p. 303 per Toohey J.;
Unlugenc v. Minister for Immigration and Ethnic Affairs (1982) 43 A.L.R. 569 at p. 571 per Lockhart J.
These decisions each invoked sec. 23 where the conduct the subject of interlocutory relief did not fall within the description "proceedings under the decision" which may be stayed under sec. 15. The question remains whether sec. 23 may be invoked in judicial review proceedings to restrain conduct which could be the subject of a stay order under sec. 15.
It was a question addressed briefly and apparently by way of obiter in the joint judgment of Northrop and Pincus JJ. in
Dallikavak v. Minister for Immigration and Ethnic Affairs (1985) 61 A.L.R. 471. That was an appeal against a refusal by Keely J. of interlocutory relief pending the hearing and determination of proceedings under the Judicial Review Act in respect of the appellant's imminent deportation.
The appeal was dismissed by the Full Court. Northrop and Pincus JJ. did so on the basis that there was no reviewable decision for the purposes of sec. 5 of the Judicial Review Act (p. 476 at line 5).
They went on to express the view that even had the impugned decision been reviewable they would have dismissed the appeal. In doing so their Honours said at p. 478:
"The appellant submitted, rightly as it seems to us, that the learned primary judge had two sources of power to suspend or stay the decision sought to be reviewed. They were s. 15 of the Judicial Review Act and s. 23 of the Federal Court of Australia Act 1976 (Cth)."
The proposition was not further elaborated. The other member of that Full Court, Jenkinson J., observed that the application to the primary Judge had been made under sec.. 15 and said that if sec. 15 would not have authorised the orders sought the appellant would have had to invoke an exercise of the power conferred by sec. 23 (emphasis added).
In a number of cases members of this Court have said that the principles which have evolved to govern the grant of interlocutory injunctions will not necessarily be appropriate in the application of sec. 15 -
Perkins v. Cuthill and Ors (1981) 34 A.L.R. 669 at p. 671 per Keely J.;
Collins v. Minister for Immigration and Ethnic Affairs (No. 2) (1982) 5 ALD 32 at p. 33 per Bowen C.J.;
Gaillard v. Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.);
Gonaseela v. Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (Morling J.); and
Videto v. Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 (Toohey J.).
The propounded overlap of sec. 15 and 23 might be of little practical consequence if there were no circumstance in which the discretion under sec. 15 could be governed by more restrictive principles than those regulating the grant of interlocutory relief under sec. 23.
In my opinion however there may be cases where, for reasons peculiar to the administration of the Judicial Review Act and the particular legislative scheme on which it is operating, the establishment of a "serious question" to be tried and a balance of convenience in favour of an applicant, ordinarily sufficient to justify the grant of an interlocutory injunction, will be insufficient to warrant the making of an order under sec. 15.
It it unnecessary for present purposes to attempt an exhaustive definition of the boundaries within which the powers conferred by the two sections may operate.
Even if there be an overlap in the powers conferred by the two sections the existence of sec. 15 and its special operation would weigh against the exercise of any congruent general discretion arising under sec. 23.
In this case I am of the view that whether it is a matter of power or of discretion, the applicant's claim for interlocutory relief must stand or fall with the exercise of the discretion under sec. 15.
The principles on which that discretion should be exercised can now be addressed.
Principles governing the discretion under sec. 15 of the Judicial Review Act
Decisions of the Court on applications for suspensory or stay orders under sec. 15 of the Judicial Review Act have utilised a number of verbal formulae to describe the principles regulating the exercise of the discretion.
The first reported case was
Capello v. Minister for Immigration and Ethnic Affairs (1980) 49 F.L.R. 40; 2 ALD 1014.
Franki J. there suspended the operation of a deportation order for five days "to enable the applicant to present a case which would show that upon a final hearing of the matter there was at least a reasonable argument for the granting of relief under s. 16 of the Act".
No such argument being presented the suspense order was not renewed.
The decision indicates that in a case of urgency a suspense order or a stay may be granted under sec. 15 prior to any determination as to whether the applicant has a reasonable argument.
It is consistent with a broad discretion under sec. 15 to be applied according to circumstances which may change even within the one application.
The discretion was so characterised by Keely J. in Perkins v. Cuthill and Ors (1981) 34 A.L.R. 669. His Honour rejected a submission that in its exercise he should apply the
ATC 4087principles relevant to the grant of interlocutory injunctions. At p. 671 he said:
"In my opinion s. 15(1)(a) requires an applicant to satisfy the court that reasons or circumstances exist which make it just that the court should make the order sought, but it is not necessary for the applicant to show that those reasons or circumstances are in any sense `special' or `exceptional'."
In Collins v. Minister for Immigration and Ethnic Affairs (No. 2) (1982) 5 ALD 32, Bowen C.J. also took a broad view of the discretion. He did not consider standards imported from other areas of the law necessarily applicable in the administration of the Judicial Review Act.
At p. 33 his Honour said:
"Whether Section 15 requires an applicant to make out a prima facie case in the sense laid down in
Beecham Group Limited v. Bristol Laboratories Pty. Ltd. (1968) 118 C.L.R. 618 or whether it is sufficient to show an arguable case as mentioned in Capello v. Minister for Immigration and Ethnic Affairs (1980) 2 ALD 1014 might be a question. Each case I think will depend upon its own circumstances in the exercise of discretion. The Court will naturally be very concerned to see whether there are any prospects of success in the application; if the prospects of success are very high the Court will be more concerned to try and hold the position by way of a stay, if it can do so, than it will be if there appear to be virtually no prospects of success."
Collins was followed in Gaillard v. Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.) and Gonaseela v. Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (Morling J.).
A Full Court considered the operation of sec. 15 in
Faingold v. Zammit (1984) 1 F.C.R. 87. That case was an appeal against the refusal by Northrop J. to stay the appellant's removal from Australia pursuant to subsec. 36A(5) of the Migration Act.
The Court rejected the appellant's submission that Northrop J. had erred in applying to the exercise of his discretion under sec. 15 the test propounded for the grant of interlocutory injunctions by Gibbs C.J. in
The Australian Coarse Grain Pool Pty. Ltd. v. The Barley Marketing Board of Queensland (1983) 57 A.L.J.R. 425.
That test requires the applicant for relief to show that there is a serious question to be tried and that the balance of convenience favours the grant of the relief.
The appellant submitted that the appropriate test was that laid down in Perkins v. Cuthill (supra).
The Court said of this submission at p. 92:
"In our opinion it will be difficult for an applicant to show that reasons or circumstances exist which make it just that the court should make the order sought unless it is demonstrated that the applicant has a point of substance to argue which, if successful, will result in judgment in his favour. In this respect it does not appear to us that the two tests are, in practical terms, very different."
That response, in my respectful opinion, establishes what for many cases will be a necessary condition of the exercise of the discretion. Consistently with that decision however there are circumstances in which a short term "holding" order is warranted.
In that very case such an order was granted at first instance by Northrop J. Franki J. as already observed had made a similar short-term order in Capello (supra).
Videto v. Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 Toohey J. expressed strong reservations as to the appropriateness of applying the test for the grant of an ordinary interlocutory injunction to an application for a stay under sec. 15 of the Judicial Review Act.
His Honour there expressly approved the criterion enunciated by Keely J. in Perkins v. Cuthill (supra).
More recently in
Phang Yook Yah v. Mahoney (unreported) Pincus J. 1 May 1986. Pincus J. accepted that under sec. 15 a short stay can be ordered where its only purpose is to enable an interlocutory application to be brought on proper material.
There may also be cases as I have already said, where a "serious question" or a "point of substance" and a balance of convenience favouring the applicant are insufficient to warrant the making of an order. The nature of
ATC 4088the decision to be reviewed and the policy of its governing legislation may give rise to other considerations. Indeed the present is just such a case.
The discretion is broad and its scope best expressed by the kind of broad terminology used in Perkins v. Cuthill even though in many cases the practical application of that formulation may be little distinguishable from the application of principles governing the grant of interlocutory injunctions.
It is now necessary to consider the application of that discretion in the present case against the statutory framework which regulates the making and issuing of assessments and amended assessments and the institution of proceedings for the recovery of tax assessed.
The process of assessment is defined in sec. 6(1) of the ITAA in the following terms:
"`assessment' means -
- (a) the ascertainment of the amount of taxable income and of the tax payable thereon; or
- (b) the ascertainment of the amount of additional tax payable under a provision of Part VII."
The power of the Commissioner to make an assessment is set out in sec. 169:
"Where under this Act any person is liable to pay tax, the Commissioner may make an assessment of the amount of such tax."
The making of amended assessments is provided for in sec. 170 of the Act which, at the date of issue of the notices of amended assessments now in question, read in the relevant parts as follows:
"(1) The Commissioner may, subject to this section, at any time amend any assessment by making such alterations therein or additions thereto as he thinks necessary, notwithstanding that tax may have been paid in respect of the assessment.
(2) Where a taxpayer has not made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and there has been an avoidance of tax, the Commissioner may -
- (a) where he is of opinion that the avoidance of tax is due to fraud or evasion - at any time; and
- (b) in any other case - within 6 years from the date upon which the tax 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 tax as the case may be.
(3) Where a taxpayer has made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and an assessment is made after that disclosure, no amendment of the assessment increasing the liability of the taxpayer in any particular shall be made after the expiration of 3 years from the date upon which the tax became due and payable under that assessment."
The application to amended assessments of provisions of the Act relating to assessments is effected by sec. 173:
"Except as otherwise provided every amended assessment shall be an assessment for all the purposes of this Act."
The Commissioner is required under sec. 174 to serve notice of any assessment upon the person liable to pay the tax and to do so as soon as conveniently may be after any assessment is made.
The time at which tax assessed becomes payable is provided for in sec. 204 as follows:
"(1) Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.
(2) In sub-section (1), `income tax' includes additional tax under Part VII."
The time for payment may be extended and provision for such extension is contained in sec. 206:
"(1) The Commissioner may in any case grant such extension of time for payment of tax, or permit payment of tax to be made by such instalments and within such time as he considers the circumstances warrant; and in
ATC 4089such case the tax shall be due and payable accordingly."
The penalty for late payment is covered by sec. 207 which, in the relevant part provides:
"(1) If any tax remains unpaid after the time when it became due and payable or would, but for section 206, have become due and payable, additional tax is due and payable by way of penalty by the person liable to pay the tax at the rate of 20% per annum on the amount unpaid, computed from that time or, where, under section 206, the Commissioner has granted an extension of time for payment of the tax or has permitted payment of the tax to be made by instalments, from such date as the Commissioner determines, not being a date prior to the date on which the tax was originally due and payable.
(2) Notwithstanding anything contained in this section, the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable."
Section 208 renders income tax due and payable a debt due to the Commonwealth:
"(1) Income tax when it becomes due and payable shall be a debt due to the Commonwealth, and payable to the Commissioner in the manner and at the place prescribed.
(2) In sub-section (1), `income tax' includes additional tax under section 207 or Part VII."
The recovery of tax in any court of competent jurisdiction is provided for in sec. 209 which is in its terms a provision conferring power on the Commissioner or a Deputy Commissioner to institute and carry on proceedings:
"(1) Any tax unpaid may be sued for and recovered in any Court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name.
(2) In sub-section (1), `tax' includes additional tax under section 207 or Part VII."
The recovery of tax is not delayed by the fact that a review or appeal is pending and provision in this regard is contained in sec. 201 which reads:
"(1) The fact that a review or appeal is pending does not in the meantime interfere with, or affect, the assessment and income tax may be recovered as if no review or appeal were pending.
(2) In sub-section (1), `income tax' includes additional tax under section 207 or Part VII."
The recovery process is expedited by sec. 177(1) which provides:
"The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct."
The nature of the decision to be suspended
The suspensory order sought by the applicant relates to the decision of the respondent to issue a writ for the recovery of the tax due notwithstanding that the respondent has not exhausted his avenues of appeal against the amended assessments.
The decision is a decision to which the Judicial Review Act applies -
The Hell's Angels Ltd. v. D.F.C. of T. (No. 4) 85 ATC 4034 at pp. 4039-4040; (1984) 7 F.C.R. 311 at p. 318 per Northrop J.
His Honour in that case said that the decision to sue arises under sec. 8 and 208 of the ITAA.
Terrule Pty. Ltd. v. D.F.C. of T. 85 ATC 4173 at p. 4176; (1985) 5 F.C.R. 153 at p. 156 Jenkinson J. said he would regard sec. 8 and 208 as part of a legislative context in which sec. 209 is seen to afford the Commissioner and Deputy Commissioner power to bring curial proceedings for the recovery of income tax, and is seen to be the source of a power to decide that such a proceeding shall, and to decide that such a proceeding shall not, be instituted at a particular time against a particular person.
I would respectfully adopt the analysis by Jenkinson J. Section 209 in its terms confers the relevant decision-making power.
It is appropriate to have regard to the fact that the decision does not of itself create or affect rights or liabilities. It is also relevant to consider that a restraint upon the institution of recovery proceedings will bar for its duration, the respondent's access to a court invested with appropriate federal jurisdiction pursuant to sec. 39 of the Judiciary Act and sec. 75(iii) of the Constitution.
This Court of course has been prepared in the past in appropriate cases to exercise its powers under sec. 23 of the Federal Court Act or sec. 15 of the Judicial Review Act and to restrain litigants from taking steps in proceedings in the superior courts of the States.
St Justins Properties Pty. Ltd. v. Rule Holdings Pty. Ltd. (1980) 40 F.L.R. 282. Toohey J. at p. 285 rejected a submission that such orders are contrary to the public interest.
On the other hand a conservative approach to such a use of the power under sec. 15 is reflected in the judgment of Jenkinson J. in Terrule Pty. Ltd. v. D.F.C. of T. (supra) at ATC p. 4178; F.C.R. p. 158:
"... the exercise of that power should, in my opinion, extend no further in interference with proceedings in a superior court of record than can be seen to be necessary."
That is a proposition with which I respectfully agree.
Consistently with this conservative principle it is, in my opinion, proper for this Court to take into account the existence of a power in the superior courts of the States to restrain proceedings instituted in them. It is appropriate also to have regard to the way in which that power has been exercised in connection with proceedings to recover income tax.
For in exercising or declining to exercise the power the courts have explored the considerations to be taken into account in implementing the policy of the ITAA manifested by its legislative scheme in relation to recovery proceedings.
The inherent power of State courts to stay recovery proceedings
The Supreme Courts of the States pursuant to their own inherent jurisdictions have power to stay recovery proceedings instituted in them under the ITAA -
D.C. of T. v. Australian Machinery and Investment Co. (1945) 47 W.A.L.R. 9 at p. 17.
There have been numerous decisions on the criteria to be applied in the exercise of that power.
Generally speaking those decisions support the view that the legislative scheme established in relation to income tax recovery especially as manifested in sec. 201 of the ITAA, reflects a clear policy favouring the revenue against the taxpayer.
As the High Court said in
Clyne v. D.F.C. of T. 83 ATC 4532 at p. 4534, the Commissioner is placed by the legislature in a position of special advantage.
D.F.C. of T. v. The Hell's Angels Ltd. (No. 1) 84 ATC 4545 at p. 4547 in the Supreme Court of Victoria Beach J. said:
"That provision can only be consistent with an intention by the legislature that the Deputy Commissioner take all appropriate steps to recover tax due (including the institution of legal proceedings) despite the fact that an appeal is pending."
On this basis the power to grant a stay must be exercised sparingly -
Marina Estates Pty. Ltd. v. D.F.C. of T. 74 ATC 4166 at p. 4168 per Hoare J.
In the context of a petition by the Commissioner of Taxation to wind up a corporate taxpayer in respect of unpaid tax and penalties where the assessments were under appeal, Bowen C.J. (in Eq.) said:
- "... the provisions of sec. 201 of the Income Tax Assessment Act require me to treat the debt as in effect undisputed. Such a statutory provision may in some cases lead to hardship on a taxpayer, particularly where he has paid the amount of tax assessed and later wins his appeal, whereupon the money is repaid to him without interest. This led Higgins J. in
Hickman v. F.C. of T. (31 C.L.R. 232 at p. 245) to describe it as unjust and even baneful, but it remains in the Act...
- ... Whatever the merits or demerits of the provision may be, it will generally lead the Court to refuse a stay." -
Re Roma Industries Pty. Ltd. 76 ATC 4113 at p. 4116.
On the other hand, in
Fortuna Holdings Pty. Ltd. v. D.F.C. of T. 76 ATC 4312; (1978) V.R. 83, McGarvie J. was not sure that he would reach the same conclusion as Bowen C.J. At ATC p. 4326; V.R. p. 101 his Honour said:
"The decisions cited to me and those referred to in the article by Mr Castan, suggest to me that the particular circumstances of cases involving sec. 201 lead courts sometimes to grant and sometimes to refuse a stay, rather than that the section generally leads a court to refuse a stay."
D.F.C. of T. v. Bevz 81 ATC 4185; (1981) 54 F.L.R. 355 Jenkinson J. was not prepared to allow a stay of recovery proceedings where the prospects of success on an appeal under Pt V of the ITAA were remote. His Honour however left open the question whether a greater chance of success should attract an exercise of the discretion to grant a stay in favour of the taxpayer.
Mason A.C.J. in Clyne v. D.F.C. of T. 82 ATC 4510; (1982) 43 A.L.R. 342 was informed by counsel for the Deputy Commissioner that it was a somewhat unusual course for him to commence proceedings for recovery in a court relying on a notice of assessment which is under challenge in proceedings under Pt V of the ITAA.
His Honour observed at ATC p. 4512; A.L.R. p. 344:
"It is to be hoped that this is so. 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. Fortunately, and this is conceded by Mr Priestley Q.C., for the Deputy Commissioner, the Courts in which recovery is sought have a jurisdiction to stay or adjourn recovery proceedings when the notice of assessment is under challenge in Pt V proceedings, insisting, if it be appropriate, on the taxpayer giving suitable security or a suitable undertaking to meet the exigencies of the situation."
Section 201 as his Honour acknowledged is the Deputy Commissioner's "charter to commence proceedings notwithstanding a challenge in Pt V to the correctness of the assessment".
The New South Wales Court of Appeal in
D.F.C. of T. v. Mackey 82 ATC 4571; (1982) 64 F.L.R. 432 considered at some length the impact of sec. 201 on the discretion to order a stay in recovery proceedings.
In allowing an appeal against the decision of Yeldham J. granting a stay in a case involving reliance by the taxpayer on what was held to be "a contrived scheme" Moffitt P. accepted that great weight should be given to sec. 201 and the policy of the legislation implicit in it.
It might not be given the force warranted, he said, if the exercise of the discretion depended heavily or merely on whether the taxpayer had an arguable case and where the balance of convenience lay (at ATC p. 4574; F.L.R. p. 436):
"The policy of sec. 201 is that when an assessment has been made, the Deputy Commissioner has a right to have the tax paid, despite the pendency of an appeal. While hardship to the taxpayer and the merits of the appeal are relevant matters, other considerations are involved, including the Commissioner's right to have the tax assessed paid. The exercise of discretion may involve... some examination of the nature and basis of the liability on which the disputed tax has been assessed and the nature of the dispute."
His Honour was of the view that in a case where a taxpayer had been a party to a "contrivance" to avoid his liability to pay tax, then the Court should not, otherwise than in quite exceptional circumstances, intervene to stay proceedings. But he distinguished that case from the case in which, in the ordinary course of business, a situation arose giving rise to a dispute concerning the liability of the taxpayer for tax.
Hutley and Glass JJ.A. generally agreed with Moffitt P. although Hutley J.A. appears to have differed to the extent that he was of opinion that speculation as to the result of appeals was not a significant matter to be borne in mind.
Both Hutley and Glass JJ.A. also appeared to have stated the effect of sec. 201 on the exercise of the discretion rather more broadly than Moffitt P. who confined his remarks to the case of a taxpayer relying upon a contrived scheme.
Thus at ATC p. 4575; F.L.R. p. 437 Hutley J.A. observed that the power to stay should be exercised with great caution and only under special circumstances:
"In deciding whether to exercise it, there is no similarity whatsoever to the issue which faces the Court when it is asked to grant an interlocutory injunction. A person who applies for an interlocutory injunction is applying for an exercise of the Court's power in his favour, and the burden lies on him to establish his right to it.
The Commissioner starts off with rights under sec. 201 and the taxpayer is seeking on special bases to have a special discretion exercised in his favour. It is not possible to work out in advance all possible bases for the exercise of such a discretion and it would not be proper even to attempt to do so. It is an open-ended discretion."
His Honour identified what he said were the only two cases where it is clear that the Court would exercise its discretion:
- 1. Abuse of office by the Commissioner.
- 2. Extreme personal hardship to a taxpayer called on to pay.
Glass J.A. agreed that it was a misconception to treat an application for a stay in the same way as an interim injunction application. To use the metaphor of a scale the effect of sec. 201 was that the needle stood in the Commissioner's favour close to 100 and it would require a weighty case to be presented by the taxpayer to depress it below the halfway mark.
Further, the legislative scheme established in relation to income tax recovery, especially as manifested in sec. 177 and 201 of the ITAA, reflects a clear legislative intent favouring the revenue against the taxpayer.
On an application for a stay of execution in D.F.C. of T. v. The Hell's Angels Ltd. (No. 2) 84 ATC 4548 Beach J. declined the stay.
The grounds upon which it was sought were that hardship would be caused to the taxpayer and that he was likely to succeed on appeal.
Following Hutley J.A. in Mackey's case his Honour said that the obligation to pay tax cast upon the defendant by law was not a hardship of itself. Like Hutley J.A. also, but it seems contrary to Moffitt P. and Glass J.A. in Mackey's case, his Honour took the view that speculation as to the result of appeals was not to be taken into account in exercising the discretion to grant a stay.
D.F.C. of T. v. Ewen 84 ATC 4550 at p. 4552, O'Bryan J., relying upon Mackey's case, saw sec. 201 as imposing an onus on the taxpayer to show cause why the Court should intervene to stay proceedings.
Contrary to the views of Hutley J.A. in the Mackey case and Beach J. in The Hell's Angels Ltd. (No. 2) (supra), Needham J. in
D.F.C. of T. v. Glastonbury Steel Fabrications Pty. Ltd. 84 ATC 4639 accepted the relevance of evidence as to the substantive nature of the grounds of an appeal under Pt V of the ITAA in deciding whether to stay proceedings for the winding up of a company the subject of a disputed assessment to income tax.
The genuineness of a taxpayer's appeal against assessment has been clearly accepted as a relevant factor in the exercise of the Court's discretion to adjourn or dismiss a sequestration petition under sec. 52(2) of the Bankruptcy Act - Clyne v. D.F.C. of T. (1982) 45 A.L.R. 323 at p. 328 and
Re Verma; Ex parte D.F.C. of T. 84 ATC 4864 at p. 4868 per Beaumont J.
D.F.C. of T. v. Truhold Benefit Pty. Ltd. (No. 2) 85 ATC 4058 the taxpayer had been assessed under the Taxation (Unpaid Company Tax) Assessment Act 1982 and was the subject of a winding up petition by the Commissioner.
The company had demurred to the statement of claim in the recovery proceedings on the basis that the Act under which it was assessed was not a valid law of the Commonwealth. The demurrer was plainly going to be overruled at first instance and in the Full Court because of the decision of the High Court in
MacCormick v. F.C. of T. 84 ATC 4230; (1984) 58 A.L.J.R. 268. The avowed object of the demurrer was to persuade the High Court to reconsider the decision in MacCormick's case.
In staying the presentation of the winding up petition Connolly J. referred to sec. 177(1) and 201 of the ITAA and said at p. 4059:
"I am not... persuaded that either of those provisions would justify the winding up of the company in reliance on a statute the constitutionality of which the company, with whatever prospects of success, genuinely desires to challenge."
In my respectful opinion the view there expressed by his Honour should be seen as related to the nature of the proceedings in question, namely winding up proceedings. It should not be transposed as a proposition generally applicable to recovery proceedings.
D.F.C. of T. v. Manners & Anor 85 ATC 4294 Phillips J. on an application for a stay of execution after summary judgment for the Deputy Commissioner, agreed with O'Bryan J. in D.F.C. of T. v. Ewen (supra) that sec. 201 of the ITAA imposes an onus on a defendant to show cause why the Court should intervene to stay proceedings. He also agreed with the observations of Hutley J.A. in Mackey's case that a defendant might discharge this onus by demonstrating extreme personal hardship.
His Honour left open the question of the relevance of the merits of the Pt V appeal in such an application. He noted the differing views on that point expressed respectively by Moffitt P. in Mackey's case and Mason A.C.J. in Clyne's case on the one hand and Hutley J.A. in Mackey's case and Beach J. in The Hell's Angels Ltd. (No. 2) on the other.
In the event, assuming the relevance of the merits of the defendant's appeal, his Honour was unable to determine them and they did not therefore impinge upon the significance to be attached to the provisions of sec. 201 in the exercise of his discretion.
Koadlow v. D.F.C. of T. 85 ATC 4147 at p. 4151 the Victorian Full Court accepted that a request for reference of an objection to a Board of Review was a factor relevant to the exercise of the discretion to stay proceedings.
Another relevant factor they said was the prospect of success on such a reference in the sense that if it were shown that a taxpayer's objection were frivolous or hopeless no stay of proceedings would be granted.
D.F.C. of T. v. Trower 86 ATC 4157 McGarvie J. declined to grant a stay of execution in recovery proceedings although the taxpayer had genuine and substantial grounds of objection to the assessment and the Commissioner had delayed in referring the decision to a Board of Review. In so deciding his Honour took into account the fact that the taxpayer relied substantially on contrived tax avoidance schemes.
It is, in my opinion, important to note what his Honour said at p. 4163, namely:
"The considerations relevant to the exercise of discretion on an application for a stay are different from those on the determination of whether a taxpayer is liable for income tax. On the latter issue, if the use of an artificial contrivance results in law in a taxpayer being not liable for tax, it makes no difference that this result was reached by the artificial contrivance."
In the decision of the Queensland Full Court in
D.F.C. of T. v. Jonrich Pty. Ltd. 86 ATC 4560 Connolly J. at p. 4573, stated correctly in my respectful opinion, that sec. 201 was in one sense otiose in providing that income tax might be recovered notwithstanding the pendency of an appeal or reference. Section 204, as already noted, makes income tax due and payable on the dates set out in the notice of assessment or thirty days after service. His Honour said at p. 4574:
"The real effect of sec. 201 was to state a policy; and its practical consequence was to provide a powerful factor influencing the courts against staying proceedings pending appeal or reference."
It may generally be concluded from the preceding review, that the power of State courts to stay recovery proceedings instituted in them under the ITAA is well established and that courts exercising it have regard to the following propositions:
- 1. The policy of the ITAA as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.
- 2. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.
- 3. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion (although some judges have expressed different views on this point).
- 4. Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.
- 5. A stay may be granted in a case of abuse of office by the Commissioner or extreme
ATC 4094personal hardship to the taxpayer called on to pay.
- 6. The mere imposition of the obligation to pay does not constitute hardship.
- 7. The existence of a request for reference of an objection for review where appeal is a factor relevant to the exercise of the discretion.
Limits of accountability
It may be thought significant that the decision to institute recovery proceedings falls into the class of decisions described in para. (f) of the Second Schedule to the Judicial Review Act. It is, therefore, by operation of sec. 13(11) of the Act excluded from the classes of decision in respect of which the decision maker can be required to provide a statement of reasons.
It was suggested by Fox J. (Beaumont J. agreeing) in
Murphy and Ors v. K.R.M. Holdings Pty. Ltd. (1985) 8 F.C.R. 349 at p. 351 that the general idea behind para. (f) of the Second Schedule is that civil procedure will itself take care of what sec. 13 seeks to achieve when it requires reasons to be given and that civil procedure is not to be complicated by the sec. 13 procedure.
It might seem that that rationale could constitute an argument against the availability of judicial review of such classes of decision at all.
Such decisions are reviewable, but their inclusion in the Second Schedule may indicate that the legislature did not intend such review to be easily pursued - see
Murchison v. Keating (1984) 1 F.C.R. 341 at pp. 343-344.
On the other hand Toohey J. in Ryder v. Morley (unreported) Toohey J. 19 January 1987 did not infer from sec. 13 and Sch. 2 any clear legislative policy in regard to the use of interlocutory procedures, whether by way of countenancing or precluding them.
In my opinion, it is not appropriate to draw any clear conclusion one way or the other as to the legislative policy underlying the limits on official accountability for this class of decision which is, after all, reviewable under the Act. This difficulty is compounded by the fact that the decision under sec. 206 of the ITAA refusing to grant an extension to pay tax assessed does not appear to fall within any of the classes mentioned in the Second Schedule.
Judicial review of decisions to institute recovery proceedings
The Judicial Review Act applies to a wide range of decisions of Commonwealth ministers and officials each within a particular statutory framework.
The Act is not designed to affect the substantive legislative policies expressed by the enactments in respect of which it operates.
As the Full Court said in
Lamb v. Moss and Anor (1983) 49 A.L.R. 533 at p. 557, its broad purpose was to invest the Court with jurisdiction to supervise administrative action in the Commonwealth sphere in all its aspects. Such a broad purpose encompassing as it does many classes of decision and differing statutory context is necessarily accompanied by broad discretions in the granting or withholding of relief, be it interlocutory or final:
"... this court has conferred upon it a wide discretion to grant or refuse relief in a particular case. It is in the exercise of that discretion that the court will exercise control over the circumstances in which and the stage at which judicial review will be embarked upon. Furthermore, it should be understood that the court's discretion is not limited to what is to occur when it comes to the question of whether to grant or refuse final relief. By s. 15 of the Act there is no automatic stay of the operation of a decision upon the making of an application to the court. It will always be for the court carefully to consider whether a stay should be granted."
Within the wide discretions so created it is open to the Court, in appropriate cases, to identify general approaches to particular classes of decision based upon their nature and the policy of the legislation under which they arise.
In respect of the class of reviewable decisions relating to committal proceedings for criminal offences against laws of the Commonwealth, the Court in Lamb v. Moss (supra) stated a general approach to the exercise of its discretion in the following terms at p. 564:
"The power to make an order of review under the Act in respect of committal proceedings should be exercised only in most exceptional cases, especially in respect of a decision in the course of proceedings."
In my opinion, a general approach not dissimilar in its effect should be applied to applications to restrain the commencement or continuance of recovery proceedings under the ITAA.
A proper recognition of the legislative policy embodied in sec. 201 of the ITAA as explained in the cases referred to above will weigh significantly in the balance against the grant of the restraint order sought. So too does the existence of the power in the State courts to stay recovery proceedings and their preparedness to take into account the existence of a pending appeal or review and its merits in doing so.
The fact that the mere institution of such proceedings is itself determinative of no rights or liabilities also weighs against the making of a restraining order.
To some extent the strength of that consideration is lessened by the preclusive operation of sec. 177 of the ITAA and the comparative rapidity and ease with which, in most cases, the Commissioner can proceed to obtain summary judgment.
It has already been noted that on at least some if not the preponderance of authority, the merits of the taxpayer's objection to the assessments may be taken into account by the Court in which recovery proceedings are instituted when such Court is moved for a stay of those proceedings.
However, the weight of such considerations in the exercise of the Commissioner's discretion to extend time or hold his hand with respect to recovery proceedings is attenuated by the fact that it is his assessment whose strength is in question.
That is not to say that there may not be cases where it is appropriate for the Commissioner to take into account the strength of an objection to an assessment in determining whether or not to extend time or to institute proceedings.
However, it is not necessary or desirable for present purposes to exemplify those possibilities.
In my opinion, while there is a serious question as to the merits of the applicant's objections in this case, they do not, for the purposes of the interlocutory restraint sought, displace the legislative policy and other factors referred to.
Weighing against him also in this case is the apparently contrived nature of the arrangements he has made to minimise his liability to pay income tax. That is not to say of course that those arrangements will not prove to be legally effective.
Further, although the applicant claims he will suffer hardship if recovery proceedings go ahead, it is difficult to reconcile that contention with his assertion of a nil net asset position.
Further there is nothing on the materials before the Court to justify a restraint of the scope and extent sought which evidently contemplates that the respondent should be prevented from instituting recovery proceedings until the applicant has exhausted all avenues of appeal against the assessments up to and including an application for special leave to appeal to the High Court.
In the end and taking account of the various factors which I have mentioned and on the assumption that there is substance in the applicant's objections, I am not prepared to grant the suspensory orders sought by him.
I recognise that in so doing the applicant's claim for final relief, at least in so far as it relates to the institution of recovery proceedings, may be rendered nugatory and have for that reason given the matter extended consideration.
I have been troubled by the fact that as at the date of the hearing of the motion the applicant had requested that the disallowance of his objections be referred to the Administrative Appeals Tribunal and that request had not been complied with.
It is, in my opinion, quite unacceptable, in the absence of explanation, that the respondent should fail to refer an objection in accordance with a request by the applicant under sec. 187 of the ITAA and yet seek immediately to institute recovery proceedings.
It is difficult to imagine circumstances, though no doubt they may exist, in which such conduct could not be described as oppressive.
Of course I acknowledge that in this case the respondent gave the Court an undertaking not to institute recovery proceedings pending its decision on the claim for interlocutory relief.
The applicant contends in his grounds for review that the existence of his request for a
ATC 4096reference of the objections to the Tribunal and the failure by the respondent to act upon it was relevant to the exercise of the discretions in question in this application.
In my opinion that is a legitimate although limited basis for obtaining review of the decisions impugned.
If it be the case that as of the date of delivery of this decision the respondent has still not referred the applicant's objections to the Administrative Appeals Tribunal, then I will be prepared to make an order restraining him from instituting recovery proceedings until the objections have been referred to the Tribunal in accordance with the applicant's request or until the determination of the application whichever is the earlier.
Otherwise the applicant's motion will be dismissed.
THE COURT ORDERS THAT:
1. The respondent be and is hereby restrained from instituting proceedings against the applicant for the recovery of income tax the subject of notices of amended assessment dated 16 January 1986 until he shall have referred to the Administrative Appeals Tribunal in accordance with the applicant's request his decision to disallow the applicant's objection to the amended assessments or until the determination of this application whichever is the earlier.
2. The applicant's claim for interlocutory relief is otherwise dismissed.
3. The costs of the claim for interlocutory relief be reserved.