Guss v. DCT

[2006] FCAFC 88
63 ATR 31

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(Judgment by: Greenwood J.) Court:

Judges: Gyles J
Edmonds J

Greenwood J

Subject References:
TAXES AND DUTIES
income tax and related legislation
prompt recovery, through estimates and payment agreements, of certain amounts not remitted
where Commissioner empowered to make estimate of amount
where making of estimate created liability upon company
where obligation imposed upon directors to cause company to pay estimate or enter administration or be wound up
where obligation enforced by penalty imposed upon directors
where Commissioner not entitled to recover penalty unless statutory notice given
whether decision to give notice reviewable under the Administrative Decisions (Judicial Review) Act 1977 (Cth).

Legislative References:
Administrative Decisions (Judicial Review) Act 1977 - 3; 5; 6
Income Tax Assessment Act 1936 - Part IV Div 9; 222AGA; 222AHA; 222APB; 222APC; 222APE

Case References:
Attorney-General (Cth) v Queensland - (1990) 25 FCR 125
Carmody v Mackellar - (1997) 76 FCR 115
DFCT v McArdle - (2003) 53 ATR 302
Federal Commissioner of Taxation v Pilnara Pty Ltd - (1999) 96 FCR 82
Forsyth v DCT - (2004) 62 NSWLR 132
Pacific Century Production Pty Ltd v Watson - (2001) 113 FCR 466
Re Excel Finance Corporation Ltd (rec and mgr apptd) -
Worthley v England - (1994) 52 FCR 69
Ross v Costigan - (1982) 59 FLR 184
Southern Farmers Group Ltd v Deputy Federal Commissioner of Taxation (SA) - (1989) 21 FCR 66
Australian Broadcasting Tribunal v Bond - (1990) 170 CLR 321
DFCT v Woodhams - (1999) 199 CLR 370
Evans v Friemann - (1981) 53 FLR 229
Griffith University v Tang - (2005) 221 CLR 99
Industrial Equity Ltd v Commissioner of Taxation - (1990) 170 CLR 649
Ricegrowers Co-operative Mills Ltd v Bannerman and Trade Practices Commission - (1982) 38 ALR 535
Hutchins v Collins, Deputy Commissioner of Taxation - (1996) 65 FCR 269
Director-General for Social Services v Chaney - (1980) 31 ALR 571
Salerno v National Crime Authority - (1997) 75 FCR 133
Scharer v State of New South Wales - (2001) 53 NSWLR 299
Woodhams v DCT - [1998] 4 VR 309
Guss v Deputy Commissioner of Taxation - [2005] FCA 1499

Judgment date: 8 June 2006

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Judgment by:
Greenwood J.

Introduction

[45] This appeal involves answering the question of whether the giving of a penalty notice by the respondent pursuant to ss 222APE(1) of the Income Tax Assessment Act 1936 (Cth) ('ITA Act') to the applicant concerning a liability in the applicant arising under s 222APC of the ITA Act arising out of an undischarged liability to the respondent by a company of which the applicant is a director, is a decision to which the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('ADJR Act') applies.

[46] His Honour Justice Sundberg took the view that the ADJR Act had no application to the decision in question and dismissed as incompetent an application for an order of review. His Honour took the view that the respondent's election to give the applicant a notice on or about 28 June 2004 under the subsection was not the expression of a decision of an administrative character made or required to be made under an enactment.

[47] I have had the benefit of reading draft reasons for judgment formulated by Edmonds J which identify the background facts, the statutory provisions and which provide an analysis of the reasons of his Honour Justice Sundberg in dismissing the application. I have also had the benefit of reading the draft reasons for judgment formulated by his Honour Justice Gyles.

[48] In my view, the decision on the part of the respondent to issue the notice is not a decision of an administrative character for the purposes of the ADJR Act.

Background

[49] For the purposes of these reasons, I do not propose to set out the provisions of the legislation usefully dealt with by Edmonds J. The foundation facts are that the addressee of the notice, Mr Guss was at all material times the sole director of a company called Bongania Pty Ltd ('Bongania'). On 24 June 2004, the respondent made an estimate of the amount of an undischarged liability on the part of Bongania to the Commissioner under a remittance provision of the ITA Act. In making that estimate, the Commissioner exercised a power conferred by ss 222AGA(1) of the ITA Act to make, in the circumstances of the section, a reasonable estimate of the unpaid amount of the liability of Bongania.

[50] In making that estimate, the Commissioner was entitled to have regard to anything the Commissioner thought relevant and some examples of relevant information are contained in ss 222AGA(2).

[51] Having made the estimate, the Commissioner was by force of s 222AGB under an obligation to send written notice of the estimate to Bongania. On or about 24 June 2004, the respondent sent written notice of the estimate to the company.

[52] Having made the estimate and sent notice of it to Bongania, a liability arose in Bongania to 'pay to the Commissioner the amount of the estimate': ss 222AHA(1). The subsection describes the liability thus arising as 'a liability to pay an estimate'.

[53] Subsection 222APB(1) cast an obligation upon Mr Guss as the sole director of Bongania to cause the company to do one of four possible things within 14 days after the day on which the Commissioner sent Bongania notice of the estimate. Those four choices involved paying the Commissioner the amount of the estimate, making an agreement with the Commissioner for payment of Bongania's liability, appointing an administrator to Bongania under s 436A of the Corporations Act 2001 (Cth) or taking steps to begin the winding up of Bongania under the Corporations Act. If subs (1) was not complied with within the time limited, Mr Guss by operation of subs (3) continued to be under the obligation cast upon him by subs (1).

[54] Section 222APC gives rise to a certain consequence for Mr Guss. It provides that if s 222APB is not complied with before the expiration of the 14 day period stipulated by s 222APB(1), each person who is a director of the company at any time during the 14 days is liable to pay to the Commissioner, by way of a penalty, an amount equal to the unpaid amount of the estimate.

[55] On or about 28 June 2004, the respondent sent a notice to Mr Guss pursuant to s 222APE setting out details of the unpaid amount of the estimate. The notice is described as 'a penalty notice'. Subsection 222APE(1) provides:

The Commissioner is not entitled to recover from a person a penalty payable under this Subdivision until the end of 14 days after the Commissioner gives to the person a notice ("the penalty notice") that:

(a)

sets out details of the unpaid amount of the estimate; and

(b)

... and (d). (Emphasis added)

Subparagraphs (a) and (b) of the subsection deal with the following situation. If the penalty notice, as here, is given within 14 days after the Commissioner sends notice of the estimate to the company, the notice must state that at the expiration of 14 days, the addressee will become liable to pay an amount equal to the unpaid estimate by way of a penalty unless the company's liability has been discharged, an agreement is in force with the Commissioner, the company is under administration or is being wound up. The penalty notice must state that the penalty will be remitted if, at the end of 14 days after the giving of the penalty notice, one of the previous four things has occurred.

[56] Section 222APC gives rise to the liability on the part of Mr Guss upon the event of non-compliance by Bongania with s 222APB.

[57] That liability is a debt due to the Commonwealth in an amount equal to the unpaid amount of the Commissioner's estimate as a 'tax-related liability' for the purposes of the Taxation Administration Act 1953 (Cth) ('the Act'): see Pt 4-15 of Sch 1 to the Act (ss 250-1 to 265-65) and s 255-5 and s 250-10 of the Act. The debt is due and payable upon the occurrence of the event contemplated by the section. The Commissioner has an entitlement to be paid the debt so due and sue in a court of competent jurisdiction to recover the amount of the debt that remains unpaid after it has become due and payable (s 255-5(2) of the Act). In the ordinary course of events, the Commissioner in exercising powers for the purpose of the Act and the administration of the ITA Act, would seek to exercise enforcement or take recovery steps to secure payment of the debt due to the Commonwealth. By subs 222APE(1), the Commissioner is not entitled to recover the amount of the liability until the expiration of 14 days after the giving of a notice which meets the statutory requirements. In the absence of a notice under the subsection, a director would have a complete answer to any enforcement proceeding for recovery of the debt.

The Capacity to Affect Legal Rights and Obligations

[58] In that sense, it seems to me that the decision affects legal rights and obligations albeit primarily an entitlement on the part of the Commissioner rather than Mr Guss. In Griffith University v Tang (2005) 221 CLR 99, the question for determination was whether a decision of Griffith University to exclude Ms Tang from the PhD candidature program conducted by the University was a decision made under the Griffith University Act 1998 (Cth). Their Honours Gleeson CJ and, in a separate joint judgment, Gummow, Callinan and Heydon JJ concluded that it was not. In the joint judgment, their Honours observed that there is conceptual risk in analysing the elements of a 'decision', 'of an administrative character' and made 'under an enactment' separately because notions inherent in each inform the other collectively. In particular, the question of whether a decision in question is a 'decision of an administrative character' informs whether the decision is one 'made under an enactment'.

[59] In addressing the notion of whether a decision is 'of an administrative character', their Honours, Gummow, Callinan and Heydon JJ in the joint judgment, said this at [79] and [80]:

[79]

The decision so required or authorised must be "of an administrative character". This element of the definition casts some light on the force to be given by the phrase "under an enactment".What is it, in the course of administration , that flows from or arises out of the decision taken so as to give that significance which has merited the legislative conferral of a right of judicial review upon those aggrieved?[80] The answer in general terms is the affecting of legal rights and obligations . Do legal rights or duties owe in an immediate sense their existence to the decision, or depend upon the presence of the decision for their enforcement ? [ R v Commonwealth Court of Conciliation and Arbitration ; Ex parte Barrett (1945) 70 CLR 141 at 154]. To adapt what was said by Lehane J in [ Australian National University v Lewins (1996) 68 FCR 87 at 103], does the decision in question derive from the enactment the capacity to affect legal rights and obligations ? Are legal rights and obligations affected not under the general law but by virtue of the statute? [ General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 169]. (Emphasis added)

[60] It is important to keep in mind the precise question their Honours were seeking to elucidate in reflecting upon the 'affecting of legal rights and obligations' arising out of the decision. That question was whether the particular decision of the University to exclude Ms Tang, derived from the enactment (that is, Griffith University Act 1998), the capacity to affect legal rights and obligations so as to lead logically to the conclusion that the decision was 'made under an enactment'. The conjunction of the 'affect upon legal rights and obligations' (or the capacity to so affect) and the derivation of that affect from an enactment under which the decision is made, gives rise to the justiciable significance contemplated by their Honours that merits a right of judicial review in those aggrieved.

[61] The answer to the question as a matter of general principle is reflected at [80] of their Honour's reasons. At [89], their Honours said this:

[89]

The determination of whether a decision is "made ... under an enactment" involves two criteria: first, the decision must be expressly or impliedly required or authorised by the enactment; and, secondly, the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment. A decision will only be "made ... under an enactment" if both these criteria are met. It should be emphasised that this construction of the statutory definition does not require the relevant decision to affect or alter existing rights or obligations, and it will be sufficient that the enactment requires or authorises decisions from which new rights or obligations arise. Similarly, it is not necessary that the relevantly affected legal rights owe their existence to the enactment in question. Affection of rights or obligations derived from the general law or statute will suffice.

[62] In the application of those principles, although the committees of the University depended for their existence and powers upon delegations by the University Council under the Act, the exclusion decision was not made under the Act. The decision had no impact upon matters to which the enactment gave legal force and effect.

[63] In this case, the legal right or entitlement of the Commissioner to recover the amount of the debt due to him is the subject of an absolute prohibition until a notice satisfying the statutory requirements is given under the section to the addressee and a period of 14 days expires after the Commissioner has given the penalty notice. Legal rights and entitlements in the Commissioner to seek recovery of the debt in a court of competent jurisdiction depend upon the presence of the decision to give the penalty notice.

[64] Consistent with the views of their Honours, it seems difficult to conclude that the decision to issue the penalty notice is not a decision 'of an administrative character made under an enactment' having regard to the conjunction of the decision, the rights and obligations to which the enactment gives force, ss 222APE(1) and the capacity to affect legal rights and obligations. Should the Commissioner wish to free himself from the statutory prohibition erected against him by the section, he must give Mr Guss the penalty notice and in that sense the notice is made or required to be made under the ITA Act.

[65] A question arises as to whether the giving of the penalty notice which removes the prohibition upon the entitlement of the Commissioner is a relevant effect or whether the decision must affect the legal rights or obligations of Mr Guss. Mr Guss has no right to receive a penalty notice. The failure to give a penalty notice, in effect, immunizes Mr Guss from recovery proceedings. However, the continuing obligation of Mr Guss to pay the debt remains to be discharged from the moment it arises. The giving of or failure to give the penalty notice would no doubt affect the disposition of the addressee to discharge the obligation. Since no recovery action could be competent without the giving of the notice (and the expiration of the time limited by the notice), the obligation to pay the debt may well not be discharged without the giving of the notice. In that practical sense, the giving of the notice has an effect upon the obligation arising in Mr Guss to pay the debt due to the Commonwealth.

[66] It is true that the challenged decision to give the penalty notice does not effect the content of the obligation or the legal character of the obligation as a debt due to the Commonwealth or give rise to a liability that does not otherwise arise under the ITA Act. However, it seems to me that the decision to issue the penalty notice has an effect upon the rights and entitlements of the Commissioner and a practical affect upon the legal obligation of the addressee to pay the debt due to the Commonwealth as that obligation is unlikely to be discharged by a director of a defaulting company, without the notice.

[67] In Deputy Commissioner of Taxation v Woodhams (1999) 199 CLR 370 at 384, their Honours Gleeson CJ, McHugh, Gummow, Kirby and Callinan JJ described in a way entirely applicable to a penalty notice pursuant to s 222APE, the purpose of a notice of this kind. Their Honours observed that such a notice does not create a liability in the addressee to pay an amount by way of penalty. The source of the liability here is s 222APC. The question of whether a decision is one of an administrative character made under an enactment is not simply to be determined by whether legal rights and obligations owe their existence to the statutory instrument but also whether a decision to issue the notice derives from the statute the capacity to effect legal rights and obligations. Since the decision to give the penalty notice does have the relevant affect, the entirely correct recognition that the penalty notice is not the source of the liability is not, it seems to me, necessarily decisive of the incompetence of the application for an order of review.

[68] It seems to me the decision to issue a penalty notice derived from ss 222APE(1) the capacity to effect legal rights and obligations that, in this case, involved a right in the Commissioner to recover a debt due to the Commonwealth and an obligation of Mr Guss to discharge that debt. That obligation arose under the ITA Act and the capacity or entitlement of the Commissioner to recover the debt was made dependent upon the giving of the notice and the expiration of the relevant time.

[69] For the reasons identified at [6] to [8] of the reasons for judgment of Gyles J, I am not satisfied that the authorities relied upon by the primary judge establish that the decision to give the penalty notice was merely procedural or did not, having regard to what I have already said, have the capacity to affect legal rights and obligations of the parties. I am not satisfied that it is a sound approach to characterise the decision to give the penalty notice as a 'conclusion reached as a step along the way' in the sense contemplated by Mason CJ at 337 in Australian Broadcasting Tribunal v Bond & Ors (1990) 170 CLR 321 at 337.

A 'Decision' of an Administrative Character

[70] Mindful of the important cautionary observations of their Honours in the joint judgment in Griffith University v Tang (above) concerning the risks necessarily inherent in a disjunctive consideration of each element comprising the expression 'a decision of an administrative character made or required to be made under an enactment', it nevertheless remains important to consider the true colour of the phrase 'decision of an administrative character' and in particular whether the decision to give a penalty notice is a 'decision' for the purposes of the ADJR Act. Just as 'decision of an administrative character' casts light on the force to be given to the phrase 'under an enactment', the deliberative processes inherent in administrative decision-making crystallising in a final and conclusive decision informs the force to be given to the notion of a 'decision' for the purposes of the ADJR Act. Plainly enough, the decision by the responsible officer of the respondent is a decision in the sense that the officer turned his (in this case) mind to the giving of the notice. There is no suggestion that the penalty notice is incompetent in the sense that it lacked authority. However, a question arises as to whether the decision to give the penalty notice involved a decision 'reflecting something in the nature of a determination of an application, inquiry or dispute or, in the words of Deane J, "a determination effectively resolving an actual substantive issue"': Australian Broadcasting Tribunal v Bond (above) per Mason CJ at 336. Recognising that the notion of a decision for the purposes of the ADJR Act has a 'relatively limited field of operation' ( Australian Broadcasting Tribunal v Bond , per Mason CJ at 336), a question arises whether the decision, the subject of the present application, is a decision that attracts the operation of the ADJR Act.

[71] Only two matters were required to be determined by the decision-maker in giving the penalty notice under ss 222APE(1). First, whether an estimate had been made by the Commissioner under ss 222AGA(1) of the ITA Act and notice of that estimate given to Bongania. Secondly, whether Mr Antony David Guss was, at the material time, a director of Bongania. Since the same decision-maker gave both notices, he was the source of the knowledge as to the first. No further inquiry or assessment of fact was required. The determination of the material fact that Mr Guss was, at the relevant time, a director of Bongania, did not give rise to any element of analysis, weighing of competing considerations by reference to any statutory criteria, assessments of the weight or balance to be struck in examining a body of fact or contention, the assessment of the proper application of policy considerations, the evaluation of conflicting merits or other such matters. It simply involved examining the records of the Australian Securities and Investment Commission to isolate, based upon returns Bongania was required to lodge for just such a purpose, whether Mr Antony David Guss was recorded as a director of that company.

[72] In one sense, it is of no matter to the Commissioner whether Mr Guss or his wife, neighbour or any other person is a director of Bongania at the material time. All that matters is the giving of a penalty notice to the person who occupies the office at the material time and who is the subject of a liability under the Act by force of s 222APC (or a potential liability subject to the remission of the penalty in the circumstances contemplated by ss 222APE(1)). Of course, once Mr Guss is identified as the relevant person by reason of the Australian Securities and Investment Commission's records, it is critical that the penalty notice is addressed and given to the individual who corresponds with those details because the penalty notice has the capacity to affect the bilateral legal rights and obligations of the Commissioner and that particular individual. Importantly, the question of whether the Commissioner, in exercising the power conferred by ss 222AGA(1), reached a "reasonable estimate" of the amount of the undischarged liability of Bongania to the Commissioner under a remittance provision of the ITA Act or whether, for the purposes of ss 222AGA(2), the Commissioner took into account relevant considerations as the Commissioner was required so to do, is something which no doubt required the relevant measure of deliberation, assessment of statutory criteria and evaluation of particular facts so far as that decision affected Bongania.

[73] The provisions of the ITA Act confer certain defences and entitlements upon the company in relation to a notice addressed to it. However, the decision the subject of the challenge in these proceedings is a decision to issue a notice under ss 222APE(1), to Mr Guss. Does that decision reflect the characteristics of a decision for the purposes of the ADJR Act?

[74] In Australian Broadcasting Tribunal v Bond , Mason CJ, with whom Brennan and Deane JJ agreed, considered that a decision must reflect something in the nature of a resolution or determination of matters the subject of inquiry or dispute and those matters ought to reflect an actual issue of substance. His Honour considered the examples of the subject matter listed in s 3(2) of the ADJR Act and characterised those matters as 'also indicative of a decision having the character or quality of finality, an outcome reflecting something in the nature of a determination of an application, inquiry or dispute' at 336. His Honour regarded the characterisation of that subject matter as indicative of the essential notion inherent in the primary sense in which the term 'decision' is used in the ADJR Act and also observed that an 'essential quality of a reviewable decision is that it be a substantive determination' at 337.

[75] It seems to me, consistent with authority, that a 'decision of an administrative character' in its primary sense (leaving aside for the moment the extended meaning of the term by force of s 3(2) of the ADJR Act) must exhibit two central features. First, there must be a determination, a resolution, a position taken, a judgment made by a decision-maker. Secondly, that determination must be the emanation of a consideration by the decision-maker or structural organs of an organisation charged with making a determination, of a matter of substance that necessarily involves some feature of deliberation, assessment or analysis that, in the ordinary course, would comprehend those facets of decision-making behaviour described at [71].

[76] In a number of cases in the Federal Court of Australia, considerable important intellectual effort has been engaged in seeking to plot the point on the continuum at which a decision arose. Was the 'decision' the overt act of communication such as the despatch of a letter, the making of a ruling, the granting of a bylaw, the issue of a notice or, was the decision to be found in the pre-existing deliberative behaviour or 'mental process' ( Evans v Friemann (1981) 53 FLR 229 at 233, per Fox ACJ) or 'thought processes taking place in the mind of the person when considering whether or how to exercise a power or to perform a duty of an administrative character under an enactment' ( Ricegrowers Cooperative Mills Ltd v Bannerman and Trade Practices Commission (1981) 38 ALR 535 at 544 per Northrop J). In Ricegrowers, Northrop J took the view that a decision for the purpose of the ADJR Act must reflect a conjunction of such thought processes and 'some overt act by which the conclusions reached as a result of those thought processes are manifested'. His Honour further observed at 544 that:

The manifestation may take many different forms. It may take the form of a verbal or written communication of the conclusion to the person affected. It may take the form of no action being taken when otherwise a definite action would have been taken. In the present case, the conclusion reached by the Chairman of the Commission was that a notice under s 155 of the Trade Practices Act be served on Ricegrowers. The manifestation of that conclusion took the form of the service of the s 155 notice on Ricegrowers.

[77] His Honour also said at p 544:

I do not need to decide whether the issue of an s 155 notice is a sufficient manifestation to constitute a decision prior to that notice being served on the person to whom it is directed. It is sufficient to say that in the present case the notice was in fact served. In my opinion the determination by the Chairman to serve the s 155 notice on Ricegrowers carried into effect by the service of that notice, constitutes a decision within the meaning of that word where it appears in s 13(1) of the Judicial Review Act.

[78] The point of immediate relevance is that the giving and service of the notice under s 155 of the Trade Practices Act 1974 (Cth) reflected both a determination of the chairman and the overt act of the giving of the notice. In other words, the giving of the notice, taken as the decision, was the emanation of a very important evaluation and deliberation of those facts and circumstances which caused the chairman to have 'a reason to believe' that Ricegrowers may have information going to the question of whether a contravention of the Trade Practices Act had occurred which enabled a determination to be made and thus a valid notice to issue. Although the notice was the expression of the decision, it reflected two essential features. First, an evaluation of the critical statutory matters leading to the determination and the overt act of giving and serving the notice. Their Honours, Bowen CJ, Franki and Northrop JJ found it unnecessary to decide the precise content of the 'decision' because the schedule to the ADJR Act operated to exempt the subject matter from the operation of the Act and, accordingly, the Commission was not required to provide reasons for the decision pursuant to s 13(1) of the ADJR Act.

[79] In Evans v Friemann (above), the question was whether a written notification from the Secretary of the Board of Examiners advising Mr Evans that he had passed one and failed two written examinations required of a candidate for admission as a patent-attorney, was susceptible to challenge as a decision for the purposes of the ADJR Act. His Honour examined the notion of a 'decision' and the 'making of a decision' and concluded that the subject matter of the evaluation was something of significance which led to a reasonably definite, final and conclusive (for immediate purposes) determination expressed in the letter from the Secretary but arising out of the processes of evaluation of the candidate's papers. In Salerno v National Crime Authority & Ors (1997) 75 FCR 133 at 138, their Honours von Doussa, Drummond and Mansfield JJ, observed that the formulation in Bond and Attorney-General (Cth) v Queensland (1990) 25 FCR 125 of the characteristic of finality or operative effect which a determination must have, could be traced to the judgment of Fox ACJ in Evans v Friemann .

[80] In 1980, his Honour Justice Deane, in Director-General for Social Services v Chaney (1980) 31 ALR 571, as a member of a Full Court comprised of Northrop, Deane and Fisher JJ, considered the notions inherent in the meaning of the word 'decision' in the context of s 44(1) of the Administrative Appeals Tribunal Act 1975. His Honour found the definition of the term in the legislation of little assistance and expressed these observations:

The word "decision" is a word of indeterminate meaning. In some contexts, it can refer to the mental process of making up one's mind. In the context of judicial or administrative proceedings, the word will ordinarily refer to an announced or published ruling or adjudication. In such a context, the word "decision" may be apt to include the determination of any question of substance or procedure, including, for example, rulings on procedural questions such as whether particular evidence should be received, or the meaning of the word may be limited to a determination effectively resolving an actual substantive issue. When the word "decision" has the last mentioned limited meaning it can refer to any such determination whether final or indeterminate (see, eg, Registrar of Workers' Compensation Commission v FAI Insurances Ltd [1977] 1 NSWLR 422 at 448) or be limited to referring only to a determination which effectively disposes to the matter in hand (see, eg, Winter v Winter (1933) NZLR 289 at 295; Penniel v Driffill [1980] WAR 30 at 32).

[81] Justice Deane's notion that a decision ought to reflect a determination effectively resolving an actual substantive issue, was adopted by Mason CJ in Australian Broadcasting Corporation v Bond (above) in explaining the characteristics of a 'decision' for the purposes of the ADJR Act in defining the 'relatively limited field of operation' of that term. The notion of a resolution or a determination bringing a substantive issue to finality was contrasted with a procedural step which exhibited none of those characteristics and might properly be described as merely a conclusion reached along the way in the course of reasoning leading to an ultimate decision. His Honour, Mason CJ, expressed the view at 338, consistent with the opinion expressed by Ellicott J in Ross v Costigan (1982) 59 FLR 184 that the word 'decision' means an ultimate or operative determination. However, his Honour observed at 338 that to characterise a reviewable decision as one reflecting an ultimate or operative determination does not mean that antecedent conclusions or findings which contribute to the ultimate or operative decisions are beyond reach. A review of the ultimate or operative decision will necessarily 'expose for consideration the reasons which are given for the making of the decision and the processes by which it is made'.

[82] It seems to me that what follows from these observations is that the resolution of an issue (particularly an issue of substance) leading to an operative determination must necessarily engage a process of reasoning. In order for a decision to attract the operation of the ADJR Act as a 'decision' of an administrative character, the decision must reflect a conjunction of these features (see also [75]). If an immediately final decision reflected in the issue of a penalty notice does not exhibit the characteristics of a resolution or a determination of a matter in issue deriving from a process of reasoning whether that resolution engages a complex or an entirely unsophisticated process of reasoning, there is no 'decision' for the purposes of the ADJR Act, in this primary sense of the word.

[83] Notices issued under the much litigated ss 263 and 264 of the ITA Act are said to be illustrations of the issue of a notice which attracts the operation of the ADJR Act even though those notices are issued unilaterally by the Commissioner and are the exercise of the power untrammelled by any deliberative process. In Industrial Equity Ltd v Deputy Commissioner of Taxation (1990) 170 CLR 649, Industrial Equity Limited ('IEL') and Bankers Trust Australia Ltd ('Bankers Trust') sought to set aside a decision made by the Deputy Commissioner of Taxation and an officer of the Deputy Commissioner, Mr Crawley, to issue a document to another officer of the Deputy Commissioner, Mr Carroll, authorising that officer to exercise a right of full and free access to premises occupied by Bankers Trust and documents held by Bankers Trust. IEL also sought to set aside decisions of the Deputy Commissioner requiring IEL to produce particular records for inspection. Those orders were sought by way of order of review pursuant to the ADJR Act. Each application for an order of review resolved ultimately into a question of whether the exercise of the power was for a purpose under the ITA Act.

[84] In those proceedings, it was not disputed that a decision to invoke the power under ss 263 and 264 is a decision to which the ADJR Act applies. That concession seems entirely correct as the decision to invoke the power was an operative determination of a matter of substance involving a deliberative consideration of matters central to the exercise of the power. In that sense, the issue of the notices under the sections was the emanation of a quite serious deliberative process. At 655, their Honours Mason CJ and Brennan, Deane, Dawson, Toohey and McHugh JJ described the features or factual matrix of that deliberation in these terms:

... Mr Crawley said that the Commissioner of Taxation "was and is conducting an audit" into the taxation affairs of IEL and associated entities for the period 1 July 1984 to 30 June 1988; that IEL was a client of Bankers Trust during the period; that Mr Crawley believed Bankers Trust held records relevant to the affairs of IEL during the period in question; that Mr Crawley believed gaining access to those papers would assist in the taxation audit; and that: "It is most important that the Commissioner be in possession of all the material facts and information necessary to determine the taxation liability of Industrial Equity Ltd and associated entities".

[85] Southern Farmers Group Ltd v Deputy Commissioner of Taxation & Ors (1989) 21 FCR 66 is to similar effect.

[86] Having considered those matters, the decision-maker reached an operative resolution or determination as the emanation of a deliberative process directed to the relevance and utility of the notices in the conduct of the particular tax audit of the taxation affairs of IEL, and issued the notices.

[87] To similar effect is the decision in Salerno v National Crime Authority (above) where the Full Court of the Federal Court (von Doussa, Drummond and Mansfield JJ) concluded that a decision of the National Crime Authority ('NCA') to utilise a general warrant (pursuant to s 67 of the Summary Offences Act 1953 (SA)) as the basis of a power to enter and search premises and seize material was a determination of sufficient operative effect, materially affecting the legal rights of the addressee of the warrant so as to constitute a 'decision' for the purposes of the ADJR Act. The determination to utilise the warrant was grounded upon an evaluation of those facts and circumstances which enabled a proper warrant to issue. A warrant under the section could not issue without the NCA first being satisfied of the relationship between the conduct of the respondent to the warrant and the investigation in question. A further question involved the utility of the general warrant for the purposes of investigations undertaken by the NCA. No warrant could issue as a unilateral step on the part of the decision-maker without undertaking not only a deliberative process leading to the issue of the warrant but a careful and responsible deliberative process.

[88] It is true that there are many examples in the authorities of a notice being issued or an instrument being brought into existence affecting legal rights and obligations which is taken to be the decision of the decision-maker. However, in each of those cases the issue of the notice or the instrument is a decision because it reflects an operative determination or resolution of a question in issue (normally of substance) arising out of a process of deliberative evaluation of relevant facts and circumstances upon which the issue of the instrument or notice is predicated. His Honour Justice Gyles in his draft reasons for judgment has identified a number of authorities concerning notices and instruments (such as warrants) which are examples of a unilateral decision not exhibiting any element of deliberation. However, it seems to me that these examples cited by his Honour are, with respect, consistent with the principle identified at [75] and [82] of these reasons.

[89] For example, the decision of the Full Court of the Federal Court in Federal Commissioner of Taxation v Pilnara Pty Ltd (1999) 96 FCR 82 involved a question concerning the validity of a notice issued by the Commissioner pursuant to s 264A of the ITA Act. That section conferred a power upon the Commissioner to issue a notice requiring the provision of information or documents relevant to the assessment of a taxpayer being documents outside Australia and information within the knowledge of a person outside Australia. In order for the Commissioner to issue a valid notice, that is, make a valid decision, it was necessary for the Commissioner subjectively to hold the relevant belief concerning a range of particular matters and also for there to be an objective reason for that belief. The issue of the notice was, in every sense, an operative determination arising out of a process of deliberative evaluation of the matters required to be considered upon which the issue of the notice depended.

[90] The same position obtains in respect of the warrants issued under the Customs Act 1901 (Cth) and the Telecommunications (Interception) Act 1979 (Cth) in Carmody v McKellar & Ors (1997) 76 FCR 115 (Black CJ, Lindgren and Sackville JJ) where particular connecting factors had to be assessed and a view formed before the warrants could issue. In Pacific Century Production Pty Ltd v Watson (2001) 113 FCR 466 (Whitlam, Dowsett and Stone JJ) the decision to order into quarantine all citrus and grape plants, plant material and plant products located on a particular property under s 35 of the Quarantine Act 1908 (Cth) was the emanation of deliberative evaluation of the conduct of the appellant company in smuggling plant cuttings into Australia and the grafting of those cuttings to plants at the relevant property. The decision did not issue as a unilateral determination divorced from any operative determination upon important deliberative matters upon which the exercise of the power depended.

[91] There may be very few circumstances of administrative decision-making where there is no evident operative determination or resolution emanating from an engaged process of reasoning or a consideration of particular facts and circumstances the resolution of which are required to enable a document, notice or instrument to issue as the overt manifestation of the decision.

[92] It seems to me that the issue of a penalty notice to Mr Guss is one such decision.

[93] The pre-existing and independent decision on the part of the Commissioner to make and serve an estimate of the amount of the undischarged liability on the part of the company to the Commissioner under a remittance provision of the ITA Act is of an entirely different character. The bilateral relationship between the Commissioner and Bongania does involve deliberative considerations and the Act itself makes express provision for the considerations the Commissioner must take into account and particular steps open to Bongania in responding to such an estimate.

[94] The decision under challenge in these proceedings to issue the penalty notice does not involve any of those considerations and is secondary in nature. It represents a consequential but independent decision to issue a notice to a man who occupied the position of director of the company at the material time and is the subject of a liability to the Commonwealth by operation of the ITA Act. The effect of the penalty notice is to remove (upon the expiration of the relevant time) the prohibition upon enforcement proceedings. In those proceedings, the Commissioner must establish the debt due to the Commonwealth. In that forum, the defendant is entitled to raise any matter that relevantly answers the Commissioner's claim. The process contemplated by the ITA Act is that the Commissioner will seek to recover debts due to the Commonwealth by taking enforcement proceedings once the constraint of the prohibition no longer applies.

The Extended Definition of a Decision

[95] Section 5(1) of the ADJR Act gives standing to a person aggrieved by a decision of an administrative character made, proposed to be made or required to be made under a relevant enactment, to seek an order of review on particular grounds. Section 3(2) of the ADJR Act provides that a reference to the 'making of a decision' includes a reference to seven classes of particular subject matter. They are:

(a)

making, suspending, revoking or refusing to make an order, award or determination;

(b)

giving, suspending, revoking or refusing to give a certificate, direction, approval, consent or commission;

(c)

issuing, suspending, revoking or refusing to issue a licence, authority or other instrument;

(d)

imposing a condition or restriction;

(e)

making a declaration, demand or requirement;

(f)

retaining, or refusing to deliver up, an article; or

(g)

doing or refusing to do any other act or thing;and a reference to a failure to make a decision is to be construed accordingly.

[96] As Fox ACJ observed in Evans v Friemann (above) at 233, the classes of subject matter in s 3(2) 'place emphasis upon the manifestation, that is, on the conduct from which the making of a "decision" will be presumed. In this sense, the subsection could be said to be largely evidentiary in effect'. In that sense, it is not necessary so far as the seven classes of conduct are concerned, to identify whether the decision is the act comprehended by s 3(2) or some other pre-existing deliberative outcome of which the act is the overt manifestation. The making of a decision includes each class of conduct.

[97] However, s 3(2) has the effect that a reference to the making of a decision includes a reference to the seven classes of subject matter. Section 3(2) does not bring each class of conduct within the scope of a 'decision' unless engaging in the nominated subject matter also involves an operative determination of a matter in issue derived from an engaged process of reasoning. The act falling within s 3(2) must be the emanation of a deliberative process of the kind described at paras [75] and [82] reflecting the characteristics identified by his Honour the Chief Justice in Australian Broadcasting Tribunal v Bond (above). His Honour, at 336, gave consideration to the characterisation of the subject matter in s 3(2) and relied upon that characterisation as indicative of the meaning of 'decision' in its primary sense. The extended inclusive reference to the making of a decision does not have the effect that an act relied upon as presumptive evidence of the decision can be relied upon as a decision for the purpose of the ADJR Act notwithstanding that the act within s 3(2) fails to exhibit the essential features of a decision in the primary sense of the term. In other words, if the act relied upon is not an operative determination of a matter of substance emanating from a deliberative process of reasoning, sophisticated or unsophisticated, there is no decision for the purposes of the ADJR Act.

[98] If, however, it is, then the act within s 3(2) is the decision.

[99] As to the extended definition, Mason CJ said this in Australian Broadcasting Tribunal v Bond (above) at 336 in considering the essential elements of a 'decision':

Secondly, the examples of a decision listed in the extended definition contained in s 3(2) are also indicative of a decision having the character or quality of finality, an outcome reflecting something in the nature of a determination of an application, inquiry or dispute ...' (see the extended observations at [62] of these reasons).

[100] At 337 in relation to s 3(2) and specifically s 3(2)(g), his Honour the Chief Justice said this:

Another essential quality of a reviewable decision is that it be a substantive determination. With the exception of s 3(2)(g), the instances of decision mentioned in s 3(2) are all substantive in character. Moreover, the provisions in subss (1), (2), (3) and (5) of s 3 point to a substantive determination. In this context the reference in s 3(2)(g) to "doing or refusing to do any other act or thing " (emphasis added) should be read as a reference to the exercise or refusal of exercise a substantive power.

[101] Consistent with his Honour's observations, a decision for the purposes of the extended definition must reflect those features described in these reasons.

[102] The decision to issue the notice is not a 'decision' which is susceptible of an order of review. The decision to issue the penalty notice flows from a clinical fact that Mr Antony David Guss was a director of Bongania at the material time and by operation of s 222APC a liability would arise in him upon non-compliance by Bongania with s 222APB within the time limited by the section. No process of reasoning, even a rudimentary process, was involved in the election to give a penalty notice to Mr Guss.

[103] As to the submission of the appellant that the imposition of a liability upon the appellant director to pay an amount equal to the unpaid amount of the estimate 'by way of a penalty' is, in essence, the imposition of a tax, I adopt the reasoning of Edmonds J on that question and am satisfied the amount of the tax is a true penalty.

[104] Accordingly, I would dismiss the appeal and order the appellant to pay the respondent's costs of the appeal.