Holmes & Ors v. Deputy Federal Commissioner of Taxation

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 13 May 1988.

Davies J.

These are applications under sec. 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (``the ADJR Act'') for orders of review with respect to the issue and service upon the applicants of five notices under sec. 264 of the Income Tax Assessment Act 1936 (Cth) (``the Assessment Act'') requiring their attendance for examination before officers of the Taxation Office, New South Wales and also for orders of review with respect to the institution of prosecutions against the applicants Wright and Holmes with respect to their failure to comply with such notices. In brief, officers of the Taxation Office have sought to have Messrs Wright, Holmes and Wouters assist them with their inquiries and have considered that the co-operation received was less than satisfactory.

By way of cross-claim, the respondent seeks declarations of validity.

In an interlocutory decision, given on 23 December 1987, reported
Holmes & Ors v. D.F.C. of T. 88 ATC 4010, I expressed the view that the prosecution proceedings should be stayed pending the hearing and determination of these proceedings. The prosecution proceedings were accordingly adjourned.

Section 264 of the Assessment Act, an original section, reads inter alia:

``(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority -

  • ...
  • (b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto.''

The new sec. 8C of the Taxation Administration Act 1953 (Cth) (``the Administration Act'') provides:

``8C A person who refuses or fails, when and as required under or pursuant to a taxation law to do so -

  • ...
  • (f) to attend before the Commissioner or another person,

to the extent that the person is capable of doing so is guilty of an offence.''

The first notice directed to Mr Wright was in these terms:

``Mr Kerry M Wright

PO Box 518

MONA VALE NSW 2103

NOTICE TO GIVE EVIDENCE

PARAGRAPH 264(1)(B): INCOME

TAX ASSESSMENT ACT 1936

Take notice that in exercise of the powers and functions conferred upon me as acting Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under the provisions of the Taxation Administration Act 1953, I, John Wilfred Osborne, do by this notice require you to attend at the Australian Taxation Office, 13th Floor, 7-13 Hunter Street, Sydney, on Monday 30 March 1987 at 10 o'clock in the forenoon and give evidence on oath before Keith Gregory Johnson and Brian Stephen Fague, officers employed in the Australian Taxation Office whom I hereby authorise in that behalf, concerning the income or assessment of Grundy


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Television Pty Limited for the period from 1 July 1980 to 30 June 1986.

Dated this 9th day of March 1987.

(JW Osborne)

ACTING DEPUTY COMMISSIONER OF

TAXATION AND DELEGATE OF THE

COMMISSIONER OF TAXATION''

Mr Holmes was given a similar notice requiring attendance for examination on 1 April 1987.

Each of the applicants was a director or officer of Grundy Television Pty. Limited, the taxpayer whose affairs were to be the subject of the examinations.

The notices of 9 March 1987 were served upon Messrs Wright and Holmes by being posted to the address for service of each for which provision is made in reg. 27, 28 and 29 of the Income Tax Regulations, which state:

``27 Every person who furnishes a return shall, in the return, give an address in Australia for service.

28 Every person who has given an address for service and who subsequently changes his address shall, within one month after the change, give to the Commissioner, at the place where he furnished his return, notice in writing of his new address in Australia for service.

29 The address for service last given to the Commissioner by any person shall, for all purposes under the Act and Regulations, be his address for service, but where no address for service has been given to the Commissioner, or where the departmental records disclose that such person has subsequently changed his address and he has not notified the Commissioner, either in the return or by separate written advice, of such change, then the address of the person, as described in any record in the custody of the Commissioner, shall be his address for service.''

In each case, the sec. 264 notice was posted to the address stated in the last personal return of income lodged and stated therein in the space providing for [``Postal Address for Service of Notices'']. In neither case was this the residential address, which was also stated.

Provision for the service of notices by post at an address for service is made by reg. 59 of the Income Tax Regulations which provides:

``59 Any notice or other communication by or on behalf of the Commissioner may be served upon any person -

  • (a) by causing it to be personally served on him; or
  • (b) by leaving it at his address for service; or
  • (c) by posting it by pre-paid letter post, addressed to him at his address for service;

and in any case to which paragraph (c) of this regulation applies, unless the contrary is proved, service thereof shall be deemed to have been effected at the time when it would, in the ordinary course of post, have arrived at the place to which it was addressed.''

It was submitted by Mr A.P. Webb Q.C., with whom Mr B.S.J. O'Keefe Q.C. and Mr D. Bloom Q.C. appeared for the applicants, that reg. 59 applied only to notices given to a taxpayer in his capacity as such. Mr Webb submitted that the regulation applied to matters such as notices of assessment, decisions upon objections and the like and not to a sec. 264 notice which was delivered to a person not in his capacity as a taxpayer but merely as a person who could give information about the affairs of a taxpayer.

Mr Webb also submitted that, while reg. 59 had been consistent with the now repealed sec. 223 and 237 of the Assessment Act, it was inconsistent with the provisions of sec. 8C and 8ZJ of the Taxation Act. I reject this particular submission as reg. 59 is not concerned with prosecutions and its meaning and operation are not affected by the new provisions.

Mr R.P. Meagher Q.C., with whom Mr A. Robertson and Mrs P. Sharp appeared for the respondent, submitted that the regulation had an ample operation, that reg. 29 and 59 were to be read literally and that while an obligation to give an address did not arise until a person furnished a return of income, the address for service when furnished in a return was deemed by reg. 29 to be that person's address for service for all purposes under the Act and Regulations.

Notwithstanding the wide words of reg. 29, I am of the opinion that an address for service specified in a return is an address of the person who furnishes the return only for limited purposes. The capacity in which the person


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furnishes the return, e.g., as a taxpayer personally, as a trustee, or as an agent, is the determining factor. Each form of return provided by the Commissioner under reg. 9 requires the person who furnishes the return to specify an address for service. Regulations 27 to 29 appear in Pt IV of the Regulations, the heading of which is ``Returns and Assessments''. I do not read the Regulations as requiring that a person who furnishes returns in several capacities have only one address for service. A trustee of several trust estates may furnish returns showing separate addresses for each of the trust estates and those addresses may be separate from his own. A person who furnishes a return on behalf of a partnership may specify an address for service different from that appearing in his own personal return. And so on. I read the provisions with respect to address for service accordingly and as relating to the capacity of the person in respect of which the return was furnished.

It follows, in my opinion, that an address for service specified in a taxpayer's personal return is an address for service for all purposes under the Act and Regulations with respect to documents requiring service upon him in that capacity. Thus, all notices, assessments and demands which are referable to the person as an individual taxpayer may be served at that address for service.

However, the sec. 264 notices served upon Messrs Wright and Holmes did not relate to their personal tax affairs but to the affairs of Grundy Television Pty. Limited. The address for service which Messrs Wright and Holmes had each given in their personal returns was a post office box and notices directed thereto would have been received by Mrs Sue McIntosh, who was their tax agent. That address was not, in my opinion, an address for service of notices concerning not their own affairs but the affairs of Grundy Television Pty. Limited.

For these reasons, I am of the view that, in the circumstances of the case, the service authorised by reg. 59 was personal service.

Mr Meagher submitted that service of the notices could otherwise be established. However, although the evidence of their solicitor Mr J.R.D. Bowman shows that the notices came to the attention of Messrs Wright and Holmes, it does not disclose that the notices actually came into their hands or were read by them. Accordingly, the service of the notices was invalid.

On 6 April 1987, further notices under sec. 264 of the Assessment Act were issued to Messrs Wright, Holmes and Wouters which required the attendance of Mr Wright on 14 April 1987, of Mr Holmes on 2 June 1987 and of Mr Wouters on 30 April 1987. The notices were served personally on Messrs Wright, Holmes and Wouters. On 8 April 1987, the notice requiring Mr Wright's attendance on 14 April, when he would be overseas, was withdrawn and on the same day another notice was issued requiring his attendance on 24 April. This notice was served personally on Mr Wright on 10 April 1987 just before he left for overseas.

A ground of attack on all five sec. 264 notices was that they each required attendance before and the giving of evidence before two officers. Mr Webb submitted that sec. 23(b) of the Acts Interpretation Act 1901 (Cth) did not apply as a contrary intention could be inferred from sec. 264 from the fact that there was only one Commissioner of Taxation and, therefore, that the alternative ``any officer'' was to be read in the singular. Mr Webb referred to the like terms in sec. 8C(f) of the Taxation Administration Act. Mr Webb submitted that sec. 23(b) of the Acts Interpretation Act did not in the context permit the words ``before any officer'' to be read in the plural.

In my opinion, the ordinary rule applies. There is nothing in the context which shows an expression on the part of Parliament that the examination shall be by one person alone. On the contrary, the nature of the power conferred by sec. 263, where a similar expression appears, is such that one would expect it on occasions to be exercised by more than one officer. In my opinion, sec. 263 and 264 both permit the Commissioner to authorise more than one officer to carry out the specified function.

Mr Webb further submitted that Mr J.W. Osborne had not been duly appointed as acting Deputy Commissioner of Taxation and was not authorised to issue the sec. 264 notices.

On 20 February 1987, the then Deputy Commissioner, Sydney, D.J. Cortese, sent the following memorandum to the Commissioner:


ATC 4333

``SYDNEY OFFICE: DEPUTY COMMISSIONER LEVEL 4

TEMPORARY TRANSFER

As a result of my involvement in the Program Management Performance Review it will be necessary to temporarily transfer an officer to the position of Deputy Commissioner, Sydney.

Both Mr J. Osborne and Miss J. Brady could perform the duties of the position. You will recall that at the time of transferring Miss Brady to the position of Deputy Commissioner, Queensland, on a temporary basis both these officers were considered. The decision to transfer Miss Brady was based on the desire to afford her the developmental experience.

During the next two months the office will be moving into the peak of the lodgment enforcement and collection programmes. For this reason I would recommend that Mr Osborne be temporarily transferred to the position in my absence.

If you agree it is also recommended that Mr P. Hilder, Executive Officer, Class 11, Operations Division be temporarily transferred to the position of Senior Assistant Deputy Commissioner, Level 2, Operations Division vice Mr Osborne. Mr Hilder has acted in the position on a number of occasions. Given the circumstances he is considered to be the most efficient officer available for the position.

Your approval to the above recommendations is requested. The period of temporary transfer to be from 24 February 1987 to date of completion of the Review.

(D.J. Cortese)

DEPUTY COMMISSIONER''

On that memorandum, the Commissioner, Mr Trevor Boucher, wrote the word ``Approved'', his initials and the date.

Section 51A of the Public Service Act 1922 (Cth) provides, inter alia:

``51A(1) The regulations may make provision for or in relation to the temporary performance of the whole or a part of the duties of an office (whether vacant or not) in a Department other than an office of Secretary by an officer performing duties in that Department or another Department, including provision for or in relation to -

  • (a) the selection of an officer to perform temporarily the duties of an office; and
  • (b) appeals by officers in relation to such a selection of an officer.''

Regulation 108(1) of the Public Service Regulations then provided:

``108(1) The Secretary of a Department may give a direction in writing to an officer to perform for a specified period, or an indefinite period, the whole, or a specified part, of the duties of a Senior Executive Service office in that Department.''

Mr Boucher exercised the powers of a Secretary of a Department. The issue therefore is whether the above memorandum carrying Mr Boucher's initials was a direction in writing given by Mr Boucher directing Mr Osborne to perform temporarily the duties of Deputy Commissioner, Sydney. Mr Osborne in fact acted as Deputy Commissioner, Sydney from 24 February 1987.

After some hesitation on the point, I reject Mr Webb's submission. The word ``approved'' is commonly used by Ministers of the Crown and senior officers of the Public Service to express their decisions. The practice accords with the following meanings given by the Shorter Oxford English Dictionary:

``...

2. To attest with some authority, to confirm -

...

4. To confirm authoritatively...''

I therefore accept that, by the word ``Approved'', Mr Boucher expressed his authoritative decision. I read the memorandum of 20 February 1987, endorsed by the Commissioner, as a direction in writing by him directing Mr Osborne to undertake the duties of Deputy Commissioner, Sydney, notwithstanding that the document was not addressed to Mr Osborne, did not in terms direct him to do any act and was only initialled, not signed, by the Commissioner.

Mr Webb submitted that the appointment was invalid as it was not an appointment limited by date. However, I think there is nothing in that point. The appointment was temporary and was certain, for it was to come to an end on a specific occurrence, namely, the


ATC 4334

return of Mr Cortese to the duties of his office. Regulation 108(1) permitted the making of temporary appointments for an indefinite period.

Mr Osborne therefore lawfully undertook the duties of the Deputy Commissioner, Sydney. As such, he was a delegate of the Commissioner for the issue of sec. 264 notices.

Mr Webb next submitted that sec. 264 did not confer upon the Commissioner a power to nominate a time and place at which the person to whom the notice was directed was to attend for examination. This submission is inconsistent with the reasoning of the Court of Criminal Appeal in New South Wales in
Ganke v. D.F.C. of T. 75 ATC 4097, which I shall later discuss in another context and with the decision of Sheppard J. in
Claude and Kann v. D.F.C. of T. 83 ATC 4764 at p. 4772; (1983) 50 A.L.R. 351 at p. 360. I therefore reject the submission. The grant of a statutory power, like the grant of a non-statutory power, carries with it by necessary implication the power to do whatever is necessary to give effect to the power expressly conferred. As Lockhart J. said in
Re Sterling; Ex parte Esanda Ltd. (1980) 30 A.L.R. 77 at p. 83, ``a power conferred by Parliament carries with it the power necessary for its performance or execution''. See also Farwell on Powers, 3rd ed., pp. 56-59.

Mr Webb further submitted that the notices were invalid because the dates specified for attendance were not reasonable. There was no evidence directly from Mr Wright or Mr Holmes on this point, but I draw no adverse inference from that as they are facing prosecution for failure to attend.

The brief history of the matter is that in December 1985 Grundy Television Pty. Limited became the subject of an audit by the Taxation Office. On 13 February 1986, Mr Wouters was interviewed and on 6 March 1986, Mr Wright was interviewed. Mr Wright asked that questions be put in writing and this step was agreed to, though certain questions were put to him orally. On a number of days in May 1986 and in June 1986 taxation officers were given access to records of the company at Grundy House. On 2 April 1986, the department wrote to Grundy Television Pty. Limited stating a number of questions which related particularly to the overseas exploitation of television products which had been developed in Australia by Grundy Television Pty. Limited. That letter was responded to on 14 May 1986 but not in the detail which had been hoped for, for it appeared that Grundy Television Pty. Limited took the view that such exploitation and distribution as took place overseas was done by companies or organisations other than itself. To demonstrate this point, Mr Webb put into evidence a copy of an agreement between Grundy Television Pty. Limited and Carnation Films b.v., a company incorporated in the Netherlands, dated 1 January 1984. Clause 1 of the agreement assigned to Carnation all Grundy's ``right title and interest including such copyright as it owns in the product for the consideration set out in this agreement...''. However, as p. 2 of the agreement is missing from the exhibit (notwithstanding that the exhibit appeared complete with the pages numbered consecutively from 209 to 216), and as the missing page contains important parts of cl. 2 and 3, I have not been able to form an opinion on this matter. Were the Taxation Office likewise provided with a defective copy of the agreement, that might explain some of the apparent misunderstanding between the parties.

On 9 October 1986, a further letter was sent by the Taxation Department to Grundy Television Pty. Limited asking further questions of which the following are examples:

``3. Provide a detailed explanation of the steps by which the distribution rights assigned to Carnation b.v. have been dealt with or reassigned up to the point where the product is distributed to telecasters or exhibitors.

4. State the name and address of each company or entity which subsequently dealt with or was assigned the rights to which question 3 refers.''

That letter was responded to on 23 December 1986. The response would not have greatly assisted the Commissioner. The response to questions 3 and 4 set out above was ``These questions should be addressed to the parties to contracts of which enquiry is made''.

On 20 January 1987, the Taxation Department wrote again to Grundy Television Pty. Limited seeking further information and on 2 February 1987 an officer of the department, Mr K.G. Johnson, rang Mr Wright and asked


ATC 4335

for an early response. On the following day, Mr Johnson drafted notices under sec. 264. There were some brief communications between Mr Johnson and Mr Wright in the following days. On 19 February 1987, Mr B.S. Fague and Mr Johnson interviewed Mr Wright who handed them a letter in response to the letter of 20 January. There were some subsequent brief communications between Mr Wright or his secretary and Mr Johnson. On 9 March 1987, the sec. 264 notices to Messrs Wright and Holmes were issued and posted to their address for service, a matter I have already discussed. The notices were posted on 10 March 1987. On that day Mr Wright was overseas. On 10 March, Mr Wright telephoned Mr Johnson from New York. Mr Wright advised that he would phone Mr Johnson on his return to Australia, probably at the end of the following week. Mr Wright returned to Australia on 20 March 1987. Mr Holmes was in Australia throughout this period. On 27 March 1987, Diamond Peisah and Co., solicitors for Messrs Wright and Holmes, wrote to the Taxation Department as follows:

``We act for Ian Holmes and Kerry Wright and are instructed that you may have forwarded to their tax agent letters which purport to be Notices under S. 264(1)(b) of the Income Tax Assessment Act.

Our clients have been advised that the letters do not constitute valid Notices pursuant to S. 264; and that even if they did, they have not been served upon our clients. Furthermore, the time allowed is clearly unreasonable. In this regard, we note that you sent these letters in the clear knowledge that Mr Wright, who is also a company solicitor, was overseas at the time.

Nonetheless, our clients are prepared - without prejudice however to their rights in relation to the above - to volunteer to attend your offices. In this regard, they however wish to have Counsel with them; and in particular, Counsel who has been briefed in relation to the affairs of Grundy Television Pty. Limited at all material times.

The dates you have indicated are not convenient to Counsel. Please contact us to organise both a date suitable to Counsel and our clients as well as yourselves.

It would be preferable to avoid unnecessary legal proceedings. However each of our clients is a person aggrieved within the terms of Section 5 of the Administrative Decisions (Judicial Review) Act and each of them requires you to provide him with a Statement in writing pursuant to Section 13(1) of that Act setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for each such decision to so issue a notice pursuant to Section 264 of the Income Tax Assessment Act.''

Neither Mr Wright nor Mr Holmes attended for examination on the specified dates, 30 March and 1 April.

On 30 March 1987, statements under sec. 13(1) of the ADJR Act were furnished to Diamond Peisah and Co. These statements did not address the question of the dates specified for attendance.

On 2 April 1987, Diamond Peisah and Co. wrote to the Taxation Office as follows:

``We refer to your letter of the 30th March, 1987 and to the telephone conversation between your Mr Johnson and our Mr Bowman on the morning of 1st April, 1987.

We note that you have suggested that you would propose to issue new notices directed to our clients and have them served personally upon our clients and that in so doing you would be contemplating that these notices would require attendance by our clients in Sydney, on dates to be agreed between the 6th and 13th May, 1987.

We appreciate the opportunity afforded by your offer, but regretfully, on the dates mentioned, both Mr Holmes and Mr Wright will be out of Australia on business.

As indicated to you, Mr Holmes attends the annual Cannes Television Festival and will have other business commitments overseas. He will be absent from Australia from mid April, 1987 until the end of May, 1987.

Mr Wright also will be leaving Australia in mid to late April and will be absent overseas until the end of May, 1987.

We have made enquiry from Counsel and it would appear that the earliest dates


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convenient to our clients and Counsel are the 24th and 25th June, 1987.

Should you wish to serve new notices pursuant to Section 264(1)(b) of the Income Tax Assessment Act upon our clients Mr Wright and Mr Holmes, requiring their attendance on the 24th and 25th June, 1987 respectively, we could obtain instructions as to whether we would be able to accept service on their behalf and thereby, avoid the necessity of affecting personal service upon them.''

On 6 April 1987, further notices under sec. 264 of the Assessment Act were issued to Messrs Wright, Holmes and Wouters which required the attendance of Mr Wright on 14 April 1987, of Mr Holmes on 2 June 1987 and of Mr Wouters on 30 April 1987. The notice addressed to Mr Wright required his attendance before Mr Fague and Mr C.H. Crown, an officer who had had little connection with the investigation, for on that day Mr Johnson, who was the officer principally responsible for the investigation, was to be on leave. The notices were served personally on Messrs Wright, Holmes and Wouters.

Mr Wright left for overseas on 12 April, returned on 22 April and departed again on 27 April. Mr Johnson was on leave from 3 April to 24 April 1987.

On 8 April 1987, the notice requiring Mr Wright's attendance on 14 April, when he would be overseas, was withdrawn and on the same day another notice was issued requiring his attendance on 24 April, again before Mr Fague and Mr Crown. This notice was served personally on Mr Wright on 10 April 1987 just before he left for overseas.

Mr Wright did not attend on 24 April. Mr Wouters did not attend for examination as required on 30 April 1987 but no prosecution has been instituted with respect thereto. Mr Holmes attended on the day appointed for his examination, 2 June 1987, but no questions were asked of him.

The Taxation Office did not take up the suggestion that Messrs Wright, Holmes and Wouters should attend with counsel on 24 and 25 June 1987.

It appeared from the cross-examination of Mr Fague that the ordinary practice of the Taxation Department in specifying a date in a sec. 264 notice is to allow a period of at least 28 days. This was not done in the present case. Nor at the start did the Taxation Department seek agreement as to suitable dates for attendance, notwithstanding that the officers of the Department were aware that the matters were complex and that solicitor and counsel had given advice as to the nature of the questions that should be answered. In his cross-examination, Mr Fague conceded that a delay until 24 and 25 June, when Messrs Wright, Holmes and Wouters had offered to attend with counsel, would not significantly have delayed the investigation.

From the point of view of Messrs Wright, Holmes and Wouters, I would not hold that their conduct was unreasonable. The case put to the Taxation Department on behalf of Grundy Television Pty. Limited at all times was that the matters to which most questions were directed concerned activities of companies or organisations other than Grundy Television Pty. Limited, that there was no obligation to answer questions concerning the activities overseas of non-residents, that attendance for examination in May was unsuitable as Messrs Wright and Holmes would be overseas for most or all of the month, but that they were prepared to attend with counsel on 24 and 25 June to answer proper questions. On these facts, I do not consider that their actions were unreasonable, particularly as the investigation of Grundy Television Pty. Limited had commenced in early 1986 and no reason for urgency was shown.

However, the question at issue is not whether the actions of Messrs Wright, Holmes and Wouters were reasonable but whether the time specified in each notice was reasonable.

The matter should first be considered under sec. 5(2)(g) of the ADJR Act which provides, as a ground for the making of an order of review, that there be an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power. This principle of administrative law was enunciated by Lord Greene M.R. in
Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation (1948) 1 K.B. 223. At p. 228, his Lordship said:

``When an executive discretion is entrusted by Parliament to a body such as the local authority in this case, what appears to be an exercise of that discretion can only be


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challenged in the courts in a strictly limited class of case. As I have said, it must always be remembered that the court is not a court of appeal. When discretion of this kind is granted the law recognizes certain principles upon which that discretion must be exercised, but within the four corners of those principles the discretion, in my opinion, is an absolute one and cannot be questioned in any court of law.''

A ground of the Court's intervention, as his Lordship explained, was that the decision was ``so unreasonable that no reasonable authority could ever have come to it''. At p. 233, when discussing the judgment of Atkin J. in
Theatre De Luxe (Halifax) Ltd. v. Gledhill (1915) 2 K.B. 49, his Lordship said:

``I do not find in the language that he used any justification for thinking that it is for the court to decide on the question of reasonableness rather than the local authority. I do not read him as in any way dissenting from the view which I have ventured to express, that the task of the court is not to decide what it thinks is reasonable, but to decide whether what is prima facie within the power of the local authority is a condition which no reasonable authority, acting within the four corners of their jurisdiction, could have decided to impose.''

Those passages have often been referred to with approval. Indeed the principle of law there expounded and adopted in sec. 5(2)(g) of the ADJR Act is now referred to as the Wednesbury principle. A detailed examination of the operation of the principle is found in the judgment of Mason J. in
Minister for Aboriginal Affairs and Anor v. Peko-Wallsend Ltd. and Ors (1986) 66 A.L.R. 299 at p. 310.

I need not discuss the interesting paper by Sir Robin Cooke entitled The Struggle for Simplicity contained in the group of papers collected under the title Judicial Review of Administrative Action in the 1980's, presented at the University of Auckland on 20-21 February 1986. His Honour there proposed, at p. 17, the view that ``the administrator must act in accordance with law, fairly and reasonably''. That view was rejected by the House of Lords in
Chief Constable of North Wales Police v. Evans (1982) 1 W.L.R. 1155 and was not adopted by sec. 5(2)(g) of the ADJR Act.

Both in the Wednesbury principle and in sec. 5(2)(g) of the ADJR Act, the word ``unreasonable'' is founded on the principle that an administrative decision should be based upon reason, that is to say, well founded in law after taking into consideration only relevant factors, not made for an ulterior or improper purpose, and rational, being within the range of decisions that a reasonable authority could make. The Wednesbury principle and sec. 5(2)(g) of the ADJR Act turn to this last point and find error in decisions that appear arbitrary, not founded on reason. They do not defeat decisions that are within the choice or discretion conferred upon the decision-maker. As D.J. Galligan said in his paper ``Arbitrariness and formal justice in discretionary decisions'' in Essays in Legal Theory (M.U.P. Victoria 1984), p. 145 at p. 149:

``Reasons are impermissible if they lack a rational basis, or are unrelated to objects, or are empirically insupportable... Alternatively, a decision may be so unreasonable as to be arbitrary where only permissible reasons have been relied on, and yet the outcome is itself totally unreasonable. Lord Greene's famous formulation of the residual standard of unreasonableness as something that no reasonable authority would countenance is an attempt to capture that idea.''

In the present case, the dates specified in the notices were not so unreasonable that no reasonable administrator could have specified them, though I would not describe some of the dates as either fair or reasonable, using those terms in a neutral, objective sense. Wide-ranging issues of fact were to be the subject of inquiry and in respect of some of these Messrs Wright, Holmes and Wouters might very well have wished to refresh their memories. There were complex issues of law and of obligation and on these matters Messrs Wright, Holmes and Wouters might well have wished to have advice and assistance at the hearing, as indeed they did. In these circumstances, the appointment of 24 April, when Mr Wright was between flights and the failure to discuss mutually convenient dates prior to the sending of the first notices do not seem fair and reasonable acts.

Mr Meagher referred to
Smorgon v. Australia and New Zealand Banking Group Ltd. & Ors (1976) 134 C.L.R. 475 at p. 492,


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in which Stephen J. said:

``The position of a person required to attend and give evidence and who does not know in advance what precise topics will be inquired after is not necessarily the invidious one which has been suggested. He will only be able to answer such questions as are within his unrefreshed recollection and will suffer no penalty either for want of knowledge or for failure of recollection. Nor does the inclusion of the names of even very large numbers of taxpayers in the one notice appear to me to go at all to the question of unreasonableness; to receive one composite notice rather than many separate notices can, I would have thought, make no practical difference.''

However, the matters to be inquired of in the present case were difficult matters. Two lengthy questionnaires had not been answered satisfactorily in the view of the Taxation Office. It was scarcely fair to enter upon the proposed examinations without giving to Messrs Wright, Holmes and Wouters a reasonable opportunity to prepare and to be advised.

But that is not to say that the dates appointed were so unreasonable that no officer of the Taxation Office could have appointed them. Dates were chosen when Messrs Wright, Holmes and Wouters would be in Australia. Section 264 confers a wide discretion. There is nothing in the section which requires a period of 28 days to be adopted as the norm or which limits the discretion in any way. Although I have the impression that the action taken by the Taxation Office against Mr Wright in April 1987 was prompted to some extent by feelings of frustration and hostility, I do not hold that the dates were chosen from malice and ill will but rather from a desire to close the investigation as soon as possible and probably with a feeling that his examination would reveal little, if any, additional material.

In a matter of pure administration, such as the issue of a notice under sec. 264 of the Assessment Act, it is difficult to demonstrate unreasonableness unless improper motive or other abuse of the power be shown. In issuing a sec. 264 notice, the decision-maker has a discretion as to the date appointed and a reasonable decision-maker may choose one convenient to him. In my opinion, the dates selected in the present case did not transgress the range of choice which was reasonably open to the Deputy Commissioner and no abuse of power has been shown.

The notices were not bad under sec. 5(2)(g) of the ADJR Act.

Mr Webb further contended that it was a condition of the power to give a sec. 264 notice that the period of time specified therein be objectively a reasonable one. Mr Webb referred in particular to the decision in Ganke v. D.F.C. of T., cited above. The Court, in that case, specifically held that an accused could not be found guilty of an offence under the then sec. 223 of the Assessment Act, the predecessor to sec. 8C of the Taxation Administration Act unless it be proved that a reasonable time was allowed by the sec. 264 notice. At p. 4101, Nagle J., with whom Sweet C.J. and Begg J. agreed, said ``I feel that where one implies into the section a giving of time or a prescribing of time, that time must be `a reasonable time'''. At p. 4102, his Honour further said:

``In my opinion it is upon the Commissioner to prove that the time he has allowed is a `reasonable time'.''

However, in Ganke's case, the Court gave a limited denotation to the word ``reasonable''. At p. 4101, Nagle J. referred with approval to the words of Wallace P. in
R. v. Skurray (1966) 86 W.N. (Pt 1) (N.S.W.) 1 that ``It is well settled, and good sense, that where a penal provision requires an act to be done either without a time being stipulated or even where the act must be done `forthwith', a reasonable time is implied sufficient to enable performance to be effected'' (the emphasis is mine). Nagle J. pointed out that whether this implication be drawn or whether one took the view that there could not be a failure to comply if sufficient time for performance were not allowed did not matter. At p. 4102, his Honour said:

``It is unnecessary to decide which is the more acceptable approach to the present problem, namely, whether the offence is not committed because the time allowed by the Commissioner is not a reasonable time to allow for compliance with his request, or whether it is not committed because the time prescribed is of such a limited duration as to indicate that there has been no `failure' on the part of the defendant to comply with the


ATC 4339

request. Whichever the approach adopted, the question for consideration by the Court is an objective one and does not depend on the subjective views of the Commissioner. To adopt a contrary view would give rise to such a Draconian situation as to demand the clearest and most explicit words in s. 264, and this I do not find.''

Section 8C of the Administration Act now specifically provides that there is an offence where there has been a failure to comply with a requirement imposed by the Commissioner when it was practicable to comply with it. That was, I think, the intent of the Court in Ganke's case and the term ``reasonable'' was there used in the sense that the time allowed must be sufficient to enable compliance. In the present cases, it would have been practicable for Messrs Wright, Holmes and Wouters to comply with the notices for they were in Australia. The only notices which required attendance at a time when Mr Wright was out of Australia, the notice of 6 April 1987, was withdrawn.

No other basis for implying a requirement as to a reasonable time was put forward by Mr Webb and, in my opinion, there is no basis for making that implication. The ordinary principle as to reasonableness in relation to administrative action, the Wednesbury principle, applies.

Another ground of attack upon the notices was that the decision-maker, in arriving at his decision to issue the notices, took into account facts that were wrong. Mr Webb relied upon the approach taken by Stephen J. in
Duggan and Ryall v. F.C. of T. 72 ATC 4239; (1972) 129 C.L.R. 365. His Honour was considering the formation by the Commissioner of an opinion under sec. 99A of the Assessment Act. At ATC p. 4243; C.L.R. p. 370, his Honour said:

``However if the Commissioner selects factors on which he bases his opinion and in describing them makes it clear that he has misconceived the relevant facts, that is, facts which he has chosen to treat as relevant and to elevate to the status of factors on which his opinion is based, his opinion then ceases, in my view, to be of any legal effect. It is as if he has failed to reach any opinion or has reached it upon the basis of irrelevant facts.''

However, his Honour was not there concerned with proceedings by way of judicial review. His Honour was hearing an appeal under Div. 2 of Pt V of the Assessment Act. Such an appeal is an appeal by way of rehearing. The present proceedings are analogous not to such an appeal but to an appeal in the strict sense.

Under the ADJR Act, the Court will interfere with the decision under review only if it be shown, for example, that the decision-maker took into account immaterial considerations or failed to take into account a material consideration. See sec. 5(2)(a) and (b) of the ADJR Act. In
Thanaporn Ruangrong v. Minister for Immigration and Ethnic Affairs, delivered 29 March 1988, I said:

``The material considerations which a decision-maker must take into account are those which were before him at the time he made his decision or which, if not actually before him, were or should have been in the hands of his officers and ought to have been brought to his attention. In judicial review proceedings, it is not permissible to adduce other material for, ex hypothesi, that was not before and ought not to have been before the decision-maker when he made his decision.

It is not the function of a court in judicial review proceedings to reconsider the material which was before the decision-maker and to come to its own view of the facts as disclosed by that material. As Diplock L.J. said in
R. v. Deputy Industrial Injuries Commissioner; ex parte Moore (1965) 1 Q.B. 456 at p. 488:

  • `If it (the evidence) is capable of having any probative value, the weight to be attached to it is a matter for the person to whom Parliament has entrusted the responsibility of deciding the issue. The supervisory jurisdiction of the High Court does not entitle it to usurp this responsibility and to substitute its own view for his.'

See also
Chief Constable of the North Wales Police v. Evans, (1982) 1 W.L.R. 1155, in which Lord Brightman said, at p. 1173:

  • `Judicial review is concerned, not with the decision, but with the decision-making process. Unless that restriction on the power of the court is observed, the court will in my view,

    ATC 4340

    under the guise of preventing the abuse of power, be itself guilty of usurping power.'

More recently, Forster J. said in
Singh & Anor v. Minister for Immigration and Ethnic Affairs (G17 and G12 of 1987, delivered 12 June 1987):

  • `Persons who make submissions to Ministers or any other authority have no absolute right to have what they say on matters of fact believed nor are they entitled to have a reasonable expectation that this will be so. A person who makes written submissions or on behalf of whom written submissions are made is no doubt entitled to expect that his assertions of fact will not be disbelieved without reason. If assertions of important facts were disbelieved without reason then I should suppose that the decision maker would be guilty of `failing to take a relevant consideration into account'.
  • ... correct or incorrect facts are not to be equated with relevant/irrelevant facts.'

In an analogous context, in
Waterford v. The Commonwealth (1987) 61 A.L.J.R. 350, at p. 359, Brennan J. pointed out that:

  • `There is no error of law simply in making a wrong finding of fact.'

Although sec. 5(3) of the ADJR Act deals with the situation that `(b) the person who made the decision based the decision upon the existence of a particular fact, and that fact did not exist', this ground is merely an elaboration of ground 5(1)(h) namely `that there was no evidence or other material to justify the making of the decision'. When sec. 5(3)(b) refers to the situation where there was a finding of fact and that fact did not exist, it refers to the situation where that fact was not open on the evidence or other material that was, or ought to have been, before the decision-maker when the decision was made.''

Mr Webb sought to challenge material which was before Mr Osborne to the effect that ``the company participates in a treaty shopping scheme'' and that there had been ``possible large scale transfer pricing of royalty payments''. Mr Webb submitted that a number of the matters put by Mr Johnson to Mr Osborne for his consideration were wrong, e.g. that ``the issues are too complex to resolve by further correspondence'' and ``the case is being unduly delayed'' and ``The company and Mr Wright have a history of previous tax avoidance scheme participation'' and ``Mr Wright and Mr Holmes are fully aware of the matters I wish to pursue with them''. But in judicial review proceedings, the factual truth of such statements may not be reviewed, provided they were views which the decision-maker ought to have taken into account, as indeed they were. See generally the reasons in Thanaporn Ruangrong v. Minister for Immigration and Ethnic Affairs, cited above, and also the decision of Wilcox J. in
Television Capricornia Pty. Ltd. v. Australian Broadcasting Tribunal & Ors (1986) 70 A.L.R. 147.

Moreover, the truth or otherwise of such matters was not material even for Mr Osborne. What was material was that allegations against the company with respect to such matters had been made and, therefore, that there were matters with respect to which inquiry by way of oral examination should be made.

Mr Webb submitted that the inquiries which the taxation officers were making were irrelevant to any assessment of the situation of Grundy Television Pty. Limited and that there were no further questions which could usefully be put to Messrs Wright, Holmes and Wouters concerning the affairs of that company. However, the inquiries were being made in good faith for the purpose of considering the taxation position of Grundy Television Pty. Limited. Messrs Fague and Johnson thought that Messrs Wright, Holmes and Wouters could assist them. In my opinion, they had adequate grounds for their view.

Mr Webb particularly submitted that there was no further material that Mr Wouters could supply. He referred to the fact that Mr Wouters has not been prosecuted for non-attendance. However, I accept Mr Johnson's evidence that, although Mr Wright was the person with the greater knowledge, there was information which Mr Wouters could supply.

It was further submitted that the decision to issue the second group of sec. 264 notices took into account a wrong and irrelevant matter, namely the alleged failure of Messrs Wright and Holmes to attend for examination in answer to the notices dated 9 March 1987. However,


ATC 4341

the second set of notices was not issued as a punishment, but with a view to obtaining answers to questions. The fact that Messrs Wright and Holmes had not responded to the first notices was necessarily a factor which influenced the decision to issue the further notices. There was no error in this regard.

It follows that, on the claim, I shall declare that the service of the notices dated 9 March 1987 issued to Messrs Wright and Holmes under sec. 264 of the Act was invalid. On the cross-claim, I shall declare that the notices issued to Messrs Wright, Holmes and Wouters under sec. 264 of the Assessment Act were valid notices. I shall not make the declaration sought, namely:

``A declaration as to the cross-claimant's right, in accordance with section 264 of the Act, against the cross-respondent to have compliance with each of the notices.''

This declaration seeks to deal with matters which should be considered, if at all, in the prosecution proceedings. In those proceedings, the onus will be on the informant to prove the elements of the offence charged, including the fact that compliance was practicable.

I turn now to the prosecutions that were instituted. On 23 April 1987, Mr D.W.C. Laird, a taxation officer, laid informations against Messrs Wright and Holmes with respect to their failure to attend for examination on 30 March and 1 April respectively. One basis of attack upon these informations was that the sec. 264 notices were invalid. For the reasons I have given, I uphold the submission that the notices of 9 March 1987 were invalidly served and, therefore, that Messrs Wright and Holmes were not required to attend on the days nominated but I otherwise reject this ground.

Another ground of attack was that the informations were laid and served on 23 April 1987 with a view to placing pressure upon Mr Wright to answer questions on the new date appointed for his attendance, 24 April 1987. However, evidence was given by Mr Laird, which I accept, that he was not aware that further notices had been issued and served. I therefore reject the ground that there was an abuse of power.

Another ground of attack was that Mr Laird failed to take account of material matters, e.g. that further notices requiring the attendance of Messrs Wright and Holmes had been issued and served personally upon them. Mr Laird had not been made aware of this matter by any other officer of the Taxation Department, including Ms L.M. Bosley, who appears to have been the co-ordinating officer between the Audit and Prosecution sections of the Department.

Ms Bosley was not a decision-maker. Yet she gave evidence as to her views on all matters pertinent to the prosecution, including whether the times specified in the notices were reasonable, whether the prosecution should proceed having regard to the offer to attend for examination on 24 and 25 June 1987 and whether the prosecutions should be launched having regard to the issue of the new notices in April 1987.

Mr Laird was the officer authorised to institute the prosecutions against Messrs Wright and Holmes. He obtained his knowledge of the matter from Ms Bosley. Ms Bosley gave him only an advice from the Director of Public Prosecutions, which is not in evidence, and two draft informations and summonses which contained the averment that the period of time specified in each notice was reasonable. Though Ms Bosley had several conversations with Mr Laird, she did not show him or inform him of the letters from Diamond Peisah and Co. which alleged that the dates for the examinations were unreasonable and which offered attendance with counsel on 24 and 25 June. Nor did Ms Bosley inform Mr Laird that new sec. 264 notices had been issued and that Mr Wright had been called upon to attend for examination on 24 April and Mr Holmes on 2 June. It was because of that lack of knowledge that Mr Laird laid the informations and gave out the summonses for service on 23 April.

I am satisfied from the evidence of both Ms Bosley and Mr Laird that the information which Ms Bosley withheld was material to Mr Laird's decision to prosecute when he did.

In the result, Mr Laird failed to give consideration to matters which were material to his consideration and which, while not brought to his knowledge, ought to have been, for they were within the knowledge of the officer of the Taxation Office who informed him of the facts.

Indeed, in the circumstances, Mr Laird acted as a mere cipher for Ms Bosley. Effectively, she made the decision to prosecute, after considering the relevant factors, and after


ATC 4342

deciding that the averments were appropriate. Mr Laird laid the informations on 23 April 1987, but his decision to do so resulted, not from the weighing up of all material factors, but from lack of knowledge of some of those factors. I am satisfied that he would not have instituted the prosecutions when he did if he had known the facts. Indeed, had he known the facts, he may have decided not to prosecute at all. Mr Holmes, for example, attended in answer to the second notice and was asked no questions.

Mr Meagher submitted that, in a matter such as this, where there was a wide discretion, it was for the decision-maker, not for the Court, to decide what factors should be taken into account as influencing the making of the decision. He referred to the statement of Mason J. in Minister for Aboriginal Affairs and Anor v. Peko-Wallsend Ltd. and Ors (1986), cited above, at p. 308 that:

``(A) The ground of failure to take into account a relevant consideration can only be made out if a decision-maker fails to take into account a consideration which he is bound to take into account in making that decision (
Sean Investments Pty. Ltd. v. MacKellar (1981) 38 A.L.R. 363 at p. 375;
CREEDNZ Inc. v. Governor-General [1981] 1 N.Z.L.R. 172 at pp. 183, 196-197;
Ashby v. Minister of Immigration [1981] 1 N.Z.L.R. at pp. 225, 230, 232-233). The statement of Lord Greene M.R. in
Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 K.B. 223 at p. 228, that a decision-maker must take into account those matters which he `ought to have regard to' should not be understood in any different sense in view of his Lordship's statement on the following page that a person entrusted with a discretion `must call his own attention to the matters which he is bound to consider'.''

Mr Meagher also referred to the decision of Sheppard J. in Claude & Kann v. F.C. of T., cited above, at 83 ATC pp. 4771-4773; 50 A.L.R. at pp. 359-361 which applied this principle with respect to the issue of a sec. 264 notice.

However, the present is not a case such as the above where the decision-maker rejected as immaterial, or of little or no weight, a matter which he was not bound to take into account. Mr Laird did not disregard the matters to which I have referred from choice or discretion. In the present case, the matters were not considered by Mr Laird solely because he was not informed of them. He would have regarded them as material and he would have taken them into account if he had known of them, as indeed did Ms Bosley. By withholding the information from Mr Laird, Ms Bosley prevented him from taking into account and weighing up a material factor. His decision was flawed accordingly.

Nevertheless, leaving apart the question whether Mr Laird's decision to prosecute was a decision ``under an enactment'' for the purposes of sec. 3(1) of the ADJR Act, as to which I say nothing, the authorities make it clear that this is not a case such that the Court should interfere. As Fox J. said in
Newby v. Moodie & Anor 88 ATC 4072 at p. 4074:

``Following well-established authority, the exercise of the discretion to prosecute is not open to review in the courts (
Hill v. Chief Constable of West Yorkshire (1987) 2 W.L.R. 1126 at pp. 1133-1134;
The Queen v. Toohey; Ex parte Northern Land Council (1980-1981) 151 C.L.R. 170 at p. 283;
Barton v. The Queen (1980) 147 C.L.R. 75 at pp. 94, 96, 107 and 109-110;
The Queen v. McAulay; Ex parte Fardell (1979) 41 F.L.R. 267 at p. 274;
R. v. Commissioner of Police of the Metropolis; Ex parte Blackburn (1968) 2 Q.B. 118 at p. 136).''

His Honour also referred to
Lamb v. Moss (1983) 49 A.L.R. 533 and said that, if the matter were one for the discretion of the Court, he would exercise his discretion not to intervene.

Similarly, the present is not a case where it is necessary for the Court to intervene to prevent an abuse of process or to ensure a fair trial. There is no exceptional element which warrants the Court's interference in the ordinary processes of the prosecution of an offence. I take the same view as did Fox J., namely that an order of review ought not to be made with respect to the decision to initiate the prosecutions. If the matter is one for discretion, I exercise that discretion against intervention. The declaration I shall make with respect to the service of the notices of 9 March 1987 will, however, bind Mr Laird, as informant, for he is an officer of the Taxation Office, New South


ATC 4343

Wales and subject to the declaration, as is the respondent, the Deputy Commissioner, Sydney.

Counsel may address me on the question of costs. I direct that, within 14 days, counsel for the applicants bring in short minutes of order giving effect to these reasons, after consulting with counsel for the respondent.

There is one final matter to be mentioned. In my interlocutory order of 23 December 1987, cited above, I ordered in para. 6 [at p. 4019] that the respondent pay the applicants' costs. It was subsequently brought to my attention, before the order had been taken out, that two affidavits dealing with the aspect of discovery of documents had been overlooked, perhaps because not all of the documents were in each of the three files, and that the matters referred to in para. 2 and 3 [at p. 4019] of my orders [had] been substantially complied with. In the circumstances, it is appropriate to reconsider the order made as to costs.

In the result, the applicants and the respondent both succeeded in part and lost in part on the day. The applicants obtained an adjournment of the prosecutions but failed to obtain relief in respect of discovery of documents save that I inspected certain documents to ascertain whether production was required. No further documents were ordered to be produced for inspection on behalf of the applicants.

In these circumstances, I am of the view that the costs of the matters then dealt with should be part of the general costs of these proceedings. I shall therefore revoke para. 6 of the orders made on 23 December 1987. This matter shall also be included in the short minutes.


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