ELLISON v DFC of T
Members:Wallwork J
Murray J
Steytler J
Tribunal:
Supreme Court of Western Australia (Full Court)
MEDIA NEUTRAL CITATION:
[1999] WASCA 5
Wallwork J
The respondent sued the appellant in the District Court at Perth for sums of money allegedly owing by the appellant under the Income Tax Assessment Act 1936 (Cth) (``the Act''). An application for leave to enter summary judgment was made by the respondent on 16 June 1997. It was held by a learned Deputy Registrar that the evidence which had been adduced by the respondent in support of the application established that amended notices of assessment which had been issued by the respondent dated 6 September 1996 and 18 November 1996 had been served on the appellant. The Deputy Registrar held that the assessments having been produced and their service being admitted, the respondent had established a prima facie entitlement to judgment in the amounts of the assessment together with interest. He found that the appellant had failed to establish any triable issue and ordered that judgment be entered for the respondent.
2. The appellant had defended the application firstly on the basis that the first assessment in question had been for income in the year ending 30 June 1992. The original assessment for that year was dated 10 August 1992. An amended assessment had been issued on 6 September 1996. That was more than four years after the date of the original assessment. The power in the Act to amend an assessment allowed a term of four years from the date upon which the tax had become due and payable in which to amend an assessment.
ATC 4578
3. The assessment issued on 10 August 1992 had shown a credit balance in the appellant's favour of $4,021.94. The appellant contended that s 221H(4) of the Act had the effect that where an employer had made income tax instalment deductions in respect of an employee and a credit was due at the time of the assessment, the tax payable by the taxpayer under the assessment was deemed to be paid at the instant following when the Commissioner had applied the taxpayer's credit in payment of the tax payable. Accordingly, the date when such a taxpayer's tax was due and payable had to be no later than the date on which the tax was paid in consequence of the Commissioner's application of the taxpayer's credits in payment of the tax payable, in this case no later than 10 August 1992, being the date of the assessment. On that basis, the amended assessment issued on 6 September 1996 had been issued outside the four year period allowed by s 170(2)(b)(ii). Hence that assessment was invalid.
4. Section 221H(4) provided:
``If the sum [ of the deductions] is more than the tax, the Commissioner must:
- (a) credit so much of the sum as is required in payment of:
- (i) firstly, the tax; and
- (ii) secondly, any other liability of the employee or purchaser to the Commonwealth that arises under or because of an Act of which the Commissioner has the general administration; and
- (b) pay to the employee or purchaser an amount equal to the excess.''
5. Section 204 provides:
``(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 the 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) ...''
6. It was contended for the appellant that on its face, s 204 could not apply to the situation where instalments had been deducted by the employer and that the section should be read to contain an implied term to the effect that:
``... except where the Commissioner pursuant to s 221H(4) has applied credits in full payment of the tax due and payable, in which case the date when the tax is due and payable is the date of the notice of assessment, or some such earlier date on which the assessment was made.''
7. On the application for summary judgment, the Deputy Registrar held that for the purposes of the Act, the date upon which the tax was deemed to be due and payable, in the absence of a date being specified within the notice, was 30 days after the service of the notice. He held that the defence raised in this regard was not arguable.
8. The appellant had also relied upon a second defence which he said arose out of a conversation on about 12 March 1997 between himself and an officer employed by the Deputy Commissioner. The appellant said it had been agreed between an officer of the Department and himself that the Deputy Commissioner would forego taking legal action against the appellant in relation to the assessments until, in his words, ``the appeal process had taken its course.'' The Deputy Registrar held that it was not arguable that this alleged agreement had created an estoppel defence.
9. On appeal by the appellant to a Judge of the District Court, the learned Judge agreed with the reasoning of the learned Registrar. His Honour said that it was clear that the original assessment dated 10 August 1992 did not specify a date upon which tax was due and payable. Therefore the tax in respect of the year ended 30 June 1992 was due and payable 30 days after the service upon the appellant of the notice of assessment dated 10 August 1992, which at the very earliest was 10 September 1992. Accordingly, he held that the notice of amended assessment was issued within the relevant four year period. His Honour also agreed that there was no arguable case on the estoppel ground. He dismissed the appeal.
10. The appellant appeals to this Court firstly on the ground that that finding of the learned Judge concerning the validity of the amended notice of assessment was wrong. He also appeals on the estoppel point arising from the alleged conversation already referred to with the officer employed by the Deputy Commissioner.
11. The details of the estoppel ground are that the appellant had contended that in reliance
ATC 4579
upon the alleged undertaking that the Deputy Commissioner would not take legal action against him in relation to the assessments until the appeal process had taken its course, he had lodged appeals at the Federal Court which he intended to prosecute. The Deputy Registrar held that he was unable to see how the appellant had in any way relied upon the representation said to have been given to him. That it must have been clear to the appellant before he lodged his appeal that the alleged representation would not be honoured because, before the appellant had lodged his appeal, he had been advised in writing that the request for additional time to pay had been considered and refused. Secondly, before the appellant had commenced his appeal, he had been served with a writ claiming the amount owing.12. The Deputy Registrar held that he was unable to see how the appellant could seriously argue that he had been induced to appeal against the disallowance of his objections by virtue of the alleged representations which were said to have been made in March 1997.
13. The learned Deputy Registrar said:
``At best I consider that the representations allegedly made by Mr Lambert would have been no more than an indication of indulgence which could be withdrawn at any time before the defendant had actively relied on the representation. On the defendant's version that is what happened. I therefore find the defendant has not made out a satisfactory case of estoppel binding upon the plaintiff which would prevent it from pursuing these proceedings.''
14. When the question of estoppel was raised on appeal before the learned District Court Judge, his Honour held it was necessary for the purposes of the appeal to accept the appellant's version of events where any inconsistency appeared. On that basis it had to be assumed that, on or about 12 March 1997, Mr Lambert and the appellant had agreed that the Deputy Commissioner would not take legal action against the appellant until the appeal process had been completed, that is, until the appellant's appeals against the amended assessments had been determined by the Federal Court.
15. His Honour held that notwithstanding any agreement as alleged, the Deputy Commissioner had clearly brought proceedings before the appellant had lodged the notices of appeal in the Federal Court. That even if the appellant could establish that an estoppel had arisen, that would only attract such relief as was necessary to do justice between himself and the Deputy Commissioner. His Honour held that the appellant could not show an entitlement to relief of such a nature as would have precluded the entry of judgment against him. The appellant had been aware before he lodged the appeals against the amended assessment in the Federal Court that the Deputy Commissioner was prosecuting the claim against him despite anything which Mr Lambert might have said to the contrary. Mr Lambert's promise, if it was one, had not been supported by consideration and was not enforceable. Further, he did not consider that the appellant had demonstrated that he had suffered any detriment or harm so as to justify the conclusion that it would be unconscionable to allow the Deputy Commissioner to proceed. His Honour held that this was not a case such as
The Commonwealth of Australia
v
Verwayen
(1990) Aust Torts Reports
¶
81-036
;
(1990) 170 CLR 394
where it could be said that the appellant had suffered, or would suffer anything such as psychological injury. At its highest, all that might be said was that the appellant had incurred costs which could have been avoided and which the Court was able to compensate him for. His Honour held that he did not consider that the appellant made out an arguable case that the Deputy Commissioner was estopped from proceeding. He was further of the view that there was no issue which should go to trial. In his view, the Deputy Commissioner was entitled to judgment.
16. It is stated in the respondent's outline of submissions on this appeal that, whatever the merits of the appellant's arguments which have been referred to above, in any event, by the operation of s 177(1) of of the Income Tax Assessment Act , the certified copy of the amended notice of assessment which had been produced to the court, was conclusive evidence that the amended assessment was duly made and that the amount claimed and all particulars of the assessment were correct. It was submitted that in the District Court, the court could not go behind the assessment.
17. At the hearing of this appeal, the parties were given leave to file further written submissions concerning the effect of s 177(1). That matter should have been raised by notice
ATC 4580
pursuant to O 63 r 9(2) of the Supreme Court Rules (WA). However, leave can be given to allow argument on this question - O 63 r 9(3).18. Section 173 of the Act provides that every amended assessment is an assessment for all the purposes of the Act. Section 177(1) provides:
``The production of a notice of assessment, or of a document under the hand of the 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 under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.''
19. In
DFC of T
v
Richard Walter Pty Ltd
95 ATC 4067
at 4074-4075;
(1994-1995) 183 CLR 168
at 186
, Mason CJ said:
``In theory, in proceedings other than Pt IVC proceedings, the validity of the notice is contingent upon its production or production of a copy. Nonetheless, it was plainly contemplated that, in such proceedings, production would take place as a matter of course. Indeed, it is difficult to suppose that the Commissioner would fail to produce the notice once an assessment was made complete and finalized by the service of the notice. And it is equally difficult to suppose that a person could seek to challenge the validity of an assessment or proposed assessment before service of the notice of assessment because, as already mentioned, it is only after service of the notice that the taxable income and the tax payable are ascertained. Unless and until service takes place, the Commissioner has not discharged his statutory responsibility to make an assessment.''
20. At ATC 4075; CLR 187, the Chief Justice said:
``This last statement, which goes further than anything said before, proceeds upon the footing that the paramount purpose of the Act is to ascertain the liability of taxpayers to tax and that the Act, with that object in view, sets up a legislative regime whereby the Commissioner assesses a taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunal or an appeal under Pt IVC to the Federal Court. In such an appeal, it is for the taxpayer to show that the assessment is excessive.''
21. His Honour continued:
``... The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax.''
22. At ATC 4075; CLR 188, Mason CJ said:
``... Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose....
It follows that the first limb of s 177(1) is effective to preclude a challenge by the taxpayer in proceedings in the Federal Court under s 39B of the Judiciary Act to the validity of the assessment on the ground that the Commissioner has included the same amounts in the taxable income of more than one taxpayer.''
23. At ATC 4078; CLR 192 of the same decision, Brennan J said:
``By bringing the process of assessment to an end, service of the notice of assessment has two effects: first, it crystallizes the taxpayer's liability under the Act and makes the tax assessed due and payable at a certain date (section 204) and, secondly, it enlivens the objection, review and appeal procedures prescribed by s 175A of the Act and Pt IVC of the Administration Act.''
24. At ATC 4081; CLR 197, Justice Brennan said that:
``... The taxpayer may elect either to apply for a review of the decision to the Administrative Appeals Tribunal or to appeal against the decision to the Federal Court. But the conclusive evidence provision of s 177(1) of the Act arms the Commissioner with a weapon by which other attacks on the assessment based on non-compliance with the general provisions of the Act may be repelled.''
ATC 4581
25. At ATC 4081; CLR 198, Brennan J said:
``... So construed, the immunity from review produced by the `conclusive evidence' provision of s 177(1) is co-extensive with the validity of assessments produced by operation of s 175 or, when s 175 has no work to do, by the general provisions of the Act. The `notice of assessment' to which s 177(1) attaches a conclusive evidentiary effect is a notice of an assessment which is either valid under the general provisions of the Act or is validated by s 175.''
26. After stating that the Administrative Appeals Tribunal or the Federal Court have the power to give effect to the general provisions of the Act governing the ascertainment of the taxpayer's taxable income and tax liability, his Honour said that [ at 4081]:
``... Section 177(1) presents no impediment in proceedings under Pt IVC of the Administration Act to giving full effect to those general provisions. In
FC of T v Dalco 90 ATC 4088 at 4091; (1989-1990) 168 CLR 614 at 621-622 the Court subscribed to the view that -`It is... open to a taxpayer to attack not only the calculation of the amount of an assessment but the authority of the Commissioner to make the assessment. Thus it was held in McAndrew's case that it was open to a taxpayer on appeal to challenge the fulfilment of the conditions mentioned in sec 170(2) governing the power of the Commissioner to impose a tax liability by amendment of an assessment.'''
His Honour said that the jurisdiction of the Federal Court on appeal from, or the Administrative Appeals Tribunal on review of, a decision on an objection extends to every issue which affects the amounts ultimately included in the taxable income or tax liability of a taxpayers. At ATC pages 4081-4082; CLR page 199 he said:
``... The width of that jurisdiction and the evident purpose of the Act to channel all issues as to the true tax liability of the taxpayer into the objection, review and appeal procedures found the clearest implication that exceptions to the broadest literal application of s 175 must be narrowly confined and a corresponding operation must be attributed to s 177(1).''
27. It is apparent from these observations that the respondent's contention is correct and that in this case the District Court was unable to go behind the amended assessment. Leave should be granted to the respondent pursuant to O 63 r 9(3).
28. Concerning the question as to when the assessed tax became due and payable, in
Clyne
&
Anor
v
DFC of T
81 ATC 4429
at 4432;
(1981) 150 CLR 1
at 9
, Gibbs CJ said:
``... At the latest when tax is assessed it becomes a debt due to the Crown although it is not payable until the later date specified in the notice of assessment.''
29. The provisions of s 204 of the Act were discussed by Merkel J in
FC of T
v
Ryan
98 ATC 4323
at 4330;
(1998) 153 ALR 300
at 307-308
. His Honour quoted from the joint judgment of the Full Court of the Federal Court in
Thai
v
DFC of T
94 ATC 4489
at 4493;
(1994) 53 FCR 252
at 266-267
, where Lockhart, Beaumont and Whitlam JJ said, amongst other things:
``... The notice is the means whereby a taxpayer knows the amount of tax to which he has been assessed and when the tax is due and payable.''
30. In Ryan at ATC 4344; ALR 324, Merkel J quoted from the Second Reading Speech of the then Treasurer, Sir Arthur Fadden, at the time of the amendment to s 204 of the Act, by Act No 43 of 1954, when Sir Arthur Fadden said:
``... If no date were specified in the notice of assessment, there would be no commencing point for the period within which the assessment might be amended. It is proposed, therefore, that, where no date is specified in the notice of assessment, the thirtieth day after service of the notice shall be a notional due date for payment, from which the period for amendment of the assessment may be reckoned.''
31. Merkel J said [ at 4344-4345]:
``Although the Treasurer was referring to a situation where the assessed tax is not payable by reason of offsetting credits such as tax instalments and provisional tax, nevertheless he was accepting the necessity for a notional date for payment where no tax is payable under a notice of assessment and as a consequence no payment date is specified. There is nothing in s 204(1) as
ATC 4582
amended or in the explanation of the amendment that precludes the notion of an assessment by a notice of assessment, under which no tax is assessed or payable on the taxable income, having the notional date for payment provided for in the second limb of s 204 for the purposes of s 170 and in particular s 170(3). Indeed in my view there are compelling reasons for adopting a construction of s 204 that has that effect.''
32. Applying the reasoning of Merkel J, in my view, grounds 2 and 3 of the grounds of appeal which contend that the notice of assessment was out of time would not be correct.
33. Ground 1 of the appeal is that the learned Judge erred in law in ``not allowing the appellant leave to defend in the matter''. That ground does not need to be discussed.
34. Grounds 4 and 5 of the appeal contend that the respondent was estopped from proceeding with the recovery action until the appellant's appeals against the 1992 and 1993 notices of amended assessment were heard by the Federal Court due to the representations ``of an officer of the respondent in his dealing with the appellant in March 1997''.
35. It was the appellant's submission that although there cannot be an absolute estoppel against the Commissioner in relation to the recovery of tax, there is a discretion vested in the Commissioner to delay proceeding to judgment pending the disposition of the appeals. Section 14ZZR of the Taxation Administration Act 1953 provides that the fact that an appeal is pending in relation to a taxation decision ``... does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal was pending''. The appellant contended that the words ``may be recovered'' indicate a discretion. It was stated by counsel that the Commissioner for Taxation exercises that discretion in favour of the taxpayer frequently and quite properly. It was submitted that the question for decision was the extent to which the Commissioner might change his mind, having in mind the decision in The Commonwealth of Australia v Verwayen ( supra ).
36. The appellant submitted that two of the four majority judgments in Verwayen were based on waiver rather than estoppel.
37. At Aust Torts Reports 67,996; CLR 473, Toohey J said:
``... Detriment is not an essential attribute of waiver, though it will often be found as a consequence. Within the adjudicative process at any rate, it is enough that the defendant `renounces' a defence which is available to him and which is there for his benefit.''
38. At Aust Torts Reports 67,996; CLR 473 of his reasons, Toohey J said:
``... The stance of the Commonwealth from the beginning, consistent with its communications to Mr Verwayen's advisers, was that it was not relying on the Limitation Act, indeed that it was not defending the action, save as to the amount of damages to be awarded to Mr Verwayen. It was on that footing that the plaintiff pursued his action for damages right through to the listing of the action for the assessment of damages. To uphold a limitations plea in those circumstances would be to permit the Commonwealth to rely upon a defence which it had unequivocally renounced.''
39. At Aust Torts Reports 67,997; CLR 475, Toohey J said:
``... Because waiver, in this sense, involves unequivocal renunciation or abandonment of a defence, it may occur at any stage of the adjudicative process. In the ordinary course, proof that there has been such a renunciation or abandonment will be the harder to establish, the earlier the stage reached in that process. But that is an evidentiary problem; it does not mean that a particular stage in the adjudication process much be reached before waiver of a defence may occur.''
40. It was contended for the appellant that, in the same case, Deane and Dawson JJ had relied on a detriment in the form of ``dashed expectations'', rather than what was described as ``a reliance detriment''.
41. In Verwayen at Aust Torts Reports 67,982; CLR 448, Deane J said:
``... The assumption upon which Mr Verwayen acted was knowingly and deliberately induced and the resulting material relationship of wrongdoer and wronged was deliberately established so that the action could proceed expeditiously to the assessment of damages. The evidence discloses that the Commonwealth had, to the
ATC 4583
knowledge of Mr Verwayen, admitted its liability to pay damages to at least one other injured serviceman in comparable circumstances. The confinement of the dispute to the assessment of damages had, no doubt, the advantage from the Commonwealth's point of view, that it avoided the public impression of a mean- spirited and technical approach to those injured in the performance of their duties as members of their country's defence forces.''
42. His Honour said [ at 67,982]:
``... If the Commonwealth were now allowed to depart from the assumed state of affairs, the detriment which Mr Verwayen would sustain could not be measured in terms merely of wasted legal costs. The past stress, anxiety, inconvenience and effort which were involved in the pursuit of the proceedings would be rendered futile. More important, Mr Verwayen would be subjected to the potentially devastating effects of a last-minute denial of an expectation of just compensation for his injuries in circumstances where those injuries were sustained in the course of the service of the Commonwealth by reason of the negligence of another or others in that service and where that expectation of just compensation had been deliberately induced by the Commonwealth. In that regard, the learned primary Judge was expressly informed, without objection or dissent, that the relevant detriment included `increased ill health' and that part of Mr Verwayen's `problems are of a psychiatric nature and medical evidence is that this... has had and will continue to have... severe consequences upon the ill health produced by the defendant's negligence' (ie the original accident).''
43. At Aust Torts Reports 67,982; CLR 449, his Honour said:
``More important, the absence of such detailed evidence is not really to the point in circumstances where the relevant detriment to Mr Verwayen would obviously extend far beyond any question of legal costs and be of such a nature and extent that it cannot properly be said that it exceeds the requirements of good conscience or is unjust to the Commonwealth to hold it to the assumed state of affairs upon the basis of which it deliberately induced Mr Verwayen to act.''
44. It can be seen that Verwayen's case was a very different case to the present one.
45. In my view, there was nothing ``unconscionable'' in this case which would require the Court to intervene to vindicate ``the requirements of good conscience'' - Deane J, at Aust Torts Reports 67,981; CLR 446.
46. In answer to a question from the court, the appellant's counsel submitted that the High Court in Verwayen has taken the doctrine of estoppel to a point where a person does not have to show detriment should the promise not be adhered to. The appellant expressly relied upon the reasons in Verwayen and not the earlier cases.
47. In my view, counsel for the appellant's contention that the ratio of the Verwayen case is that ``where a party holding a right manifests an objective intention to abandon that right, then that abandonment is binding'' without more cannot be extracted from the reasons in Verwayen .
48. Counsel for the appellant submitted that the only inference which could be drawn from the affidavit of the appellant was that he had suffered ``dashed expectations'', but if leave to defend were granted ``then presumably further affidavit material would be adduced in respect of a broader detriment of the sort that had been discussed in Verwayen ''. It was said that in any event there was an issue to be tried concerning this question and it was not immediately apparent that there was no defence. It was not the sort of case where there should have been summary judgment in the District Court.
49. Reliance was placed by counsel for the respondent on the decision in
FC of T
v
Winters
&
Anor
97 ATC 4967
where Moynihan J said, at 4969:
``Estoppel of the kind the defendants seek to rely on here precludes a party who has induced another party to rely on a promise and thereby act to that second party's detriment from resiling from its promise unless the detriment is avoided... At Aust Torts Reports p 67,962; CLR p 413 of Verwayen Mason CJ says -
`... The result is that it should be accepted that there is but one doctrine in estoppel, which provides that a court of common law or equity may do what is
ATC 4584
required, but not more, to prevent a person who has relied on an assumption as to a present, past or future state of affairs (including a legal state of affairs), which assumption the party estopped has induced him to hold, from suffering detriment in reliance upon the assumption as a result of the denial of its correctness. A central element of that doctrine is that there must be a proportionality between the remedy and the detriment which is its purpose to avoid.'Here the defendants set up a case that they were induced not to appoint an administrator during the 14 day period by the plaintiff's conduct so that the plaintiff cannot now take advantage of that failure.
In my view, depending of course on the resolution of factual issues in their favour, the defendants are capable of making out the elements founding an estoppel of the kind for which they contend.''
50. Counsel for the respondent submitted that there was nothing in the way of a detriment which could be demonstrated by the appellant and therefore the doctrine of estoppel did not apply. It was further contended that although the Deputy Commissioner had power to enter into a compromise concerning the payment of tax, which authority is to be found in s 8 of the Act, there is normally consideration given by the taxpayer for such a compromise, such as arrangement to make payments at certain periods of time. In this case, it was said that there had been no consideration offered or given by the appellant. If an agreement had been reached, it was not contractual.
51. Counsel also made the point that the respondent had decided to take legal proceedings well before the appellant had commenced any appeal. The appellant had not taken an action similar to that in the Verwayen case, where proceedings had continued after the representation was made that the relevant defences would not be raised. There had been no similar relationship between the parties in this case to the legal relationship in Verwayen . The representation by the officer of the Commonwealth at best had been an expression of his intention not to proceed to recover the debt at that time. The appellant had later commenced proceedings in the Federal Court knowing that the officer had changed his mind. There had not been any unconscionable conduct by the respondent's officer. There had not been any change in the essential relationship between the appellant and the Deputy Commissioner of Taxation other than the dashing of the expectation of the appellant. In this case, there had been no reason for the Commissioner not to change his mind and to take action to protect the revenue which it was his public duty to protect.
52. In my view, the respondent's contentions should be upheld. Grounds 3-5 of the appellant's appeal concerning the estoppel point have not been made out.
53. For the above reasons the appeal should therefore be dismissed.
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