Clyne v. Deputy Federal Commissioner of Taxation.

Judges:
McGregor J

Court:
Federal Court of Australia

Judgment date: Judgment handed down 15 December 1982.

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McGregor J.

Peter Leopold Clyne (applicant) has applied for an order in the following terms:

``1. That it be declared that the abovenamed Applicant has a set-off cross-demand or counter-claim against the abovenamed Respondent and/or against William O'Reilly the Commissioner of Taxation and/or against the Commonwealth of Australia

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ATC 4649

and/or against Her Majesty the Queen equal to or in excess of the amount of the judgment on which the said bankruptcy notice was based which could not have been set up in the action in which the said judgment was obtained.

2. Such further or other orders as may seem appropriate.''

The Deputy Commissioner of Taxation (respondent) has been named as respondent to the application.

The Bankruptcy Act 1966 (the Act) sec. 40(1)(g) states:

``(g) if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not -

• (i) where the notice was served in Australia - within the time fixed by the Registrar by whom the notice was issued; or
• (ii) where the notice was served elsewhere - within the time fixed for the purpose by the order giving leave to effect the service,

comply with the requirements of the notice or satisfy the Court that he has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up in the action or proceeding in which the judgment or order was obtained;.''

The Bankruptcy Notice referred to in the application No. B3645 of 1982 was issued at the request of the respondent against the applicant on 13 August 1982, based on a judgment obtained by the respondent on 11 March 1982 in the sum of $334,826.25, being the sum of income tax and additional tax for late payment claimed by the respondent to be due for the financial years 1977, 1978 and 1979 (including provisional tax for the 1980 year) less certain credits. The figures are set out in the judgment of Lockhart J. in
Clyne v. D.F.C. of T. 82 ATC 4484, delivered 11 October 1982. It is not necessary to refer to them in any detail.

Though the expression ``counter-claim set-off or cross demand'' has been used, the matter has been argued upon the basis that merely a cross demand is what has arisen. The circumstances of it have been referred to in evidence. The applicant claims that he is entitled to damages for defamation perpetrated by Mr. William O'Reilly, the Commissioner of Taxation, in a speech made by him on 4 November 1982 at a so-called symposium on taxation reform. On 12 November 1982 applicant filed a Statement of Claim in the Supreme Court of New South Wales claiming damages for this alleged defamation, and naming as defendants the Commonwealth of Australia, the Federal Commissioner of Taxation and John A. Fairfax & Sons Pty. Limited. His causes of action include the publication of the relevant words by the first two defendants (para. 5) and the publication of the said words by the third defendant. Mr. William O'Reilly, the Commissioner of Taxation was one of those who addressed the symposium under the title ``The Tax Gatherer''. During the course of that address he uttered the words set out below, beginning ``But perhaps...'' So that they may be seen in context, the preceding statements by Mr. O'Reilly are quoted:

``There was a backlog of outstanding tax objections and appeals and the Taxation Office was looking for ways to overcome it. `But there is no doubt that some people in the profession are contributing to what is an unsatisfactory situation. The fact that Taxation Boards and Courts have backlogs, is exploited to postpone the resolution of disputes and thus the payment of tax. In the administrative law division of the Supreme Court of N.S.W., for example, procedures exist for the leading of evidence on affidavit. Dates fixed by the court for the filing of affidavits on behalf of taxpayers are hardly ever met. Further time is continually being sought because witnesses are said to be unavailable, or because requests for particulars are not served on the Taxation Office until just before the witnesses' affidavits are due to be filed. But even when dates for hearings have been fixed it is not uncommon for the Tax Office to receive settlement

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ATC 4650

overtures on the steps of the Court - indeed, sometimes after the hearing has begun.' The result of all this was that days which could be made available for hearing cases in which taxpayers were genuinely willing to proceed was wasted. `The name of the game here is delay because, in these inflationary times, tax deferred is tax avoided. But perhaps the classic example of how legal processes can be exploited is that man... Peter Clyne. There is probably no other taxpayer who has been as unsuccessful, I stress unsuccessful, in arguing substantial matters with the Taxation Office in the Courts as Mr. Clyne has been. However, his skill in exploiting the procedures of the Courts has meant that he has been able to delay very desirable action quite considerably.''

These words, according to the Statement of Claim, contain the following imputations each of which is said to be defamatory of him. Thus:

``8. The matter referred to in each of Para. 5 and 7 hereof, in its natural and ordinary meaning, contained the following imputations, each of which was defamatory to the Plaintiff:

• (i) that the Plaintiff does, and is prepared to, exploit the procedures of the Courts for improper purposes;
• (ii) that the Plaintiff was unskilful and incompetent in the conduct of legal proceedings against and in dealings with the Taxation Office in the Courts.''

This Court has power to make declaratory orders. See the Act sec. 30(1)(b). The effect of an order in the terms sought would be that the applicant would be entitled to have the time for compliance with the Bankruptcy Notice referred to earlier extended until the Court, meaning the Bankruptcy Court, determined that it was satisfied that the applicant had the counter-claim set-off or cross demand referred to being one (sec. 40(1)(g)):

``... equal to or exceeding the amount of the judgment debt or sum payable under the final order...''

It is not contested that assuming, for the purpose of argument, that the applicant does have such a cause of action, which would otherwise satisfy sec. 40(1)(g) that, since it did not arise until after the date of the judgment, he could not have set it up in the action or proceeding in which the judgment was obtained.

The applicant's arguments include that:

• 1. The cause of action is properly to be described as a ``cross-demand'' - see In
  re Judd (1924) 24 S.R. (N.S.W.) 537.
• 2. What the applicant must show in this application is authoritatively described in
  Ebert v. The Union Trustee Company of Australia Limited (1960) 104 C.L.R. 346 at p. 350.

His submissions included that the words constituted a serious libel causing tremendous damage to his practice as a tax consultant; that this was done deliberately and at a time when such words would do most damage; that reading the words as a whole they involve two imputations, i.e. of incompetence and of dishonesty or impropriety. I observe that the introduction of a contention as to dishonesty to the submissions may perhaps go beyond the so called imputation as stated in the Statement of Claim; however, no objection to this has been taken in argument. I shall assume that the submission should be accepted as being within the terms of the Statement of Claim. He submits that an award of damages of the quantum necessary to satisfy sec. 40(1)(g) would be, on the evidence, to be expected from a jury; that the defamatory words involve not merely an imputation against him personally but also in respect of his ability in his ``trade calling or occupation''. As a guide to what might be the amount of damages, he points to what is alleged by the respondent to have been his assessable income for the year ended 30 June 1979, 1980 and 1981. He referred to
Andrews v. John Fairfax & Sons Ltd. (1980) 2 N.S.W.L.R. 225. He submitted that without drawing any close comparisons, his reputation in the tax fighting area may be as good as the plaintiff's reputation in that case, i.e. as an architect; that the libel against him is very similar to that against Andrews.

Further, he submitted that the making by the Commissioner of Taxation of this speech about the department's policies and problems was just as much carrying on his ``job'' as was issuing assessments to tax and

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ATC 4651

proceeding to judgment where necessary; the respondent in such situations acted in the same right. Further, he submitted that another way of looking at the matter was that the true creditor for income tax in this instance is (or the debt is due to) the Commonwealth of Australia (Income Tax Assessment Act 1936 sec. 208 (Tax Act)); that the respondent was employed by the Commonwealth of Australia; made his speech in the course of his employment and therefore the Commonwealth was vicariously liable for his tort. Thus, he said, the defamation proceedings (the ``cross-demand'') was being asserted in the Statement of Claim filed in the Supreme Court against the defendants including Commonwealth of Australia being the ``true creditor'' in the bankruptcy proceedings. He submitted that the fact that the defamatory speech to which he referred was made by the Commissioner for Taxation whilst the bankruptcy proceedings had been initiated by a Deputy Commissioner of Taxation was not significant, those two officials being designated as alternatives in relation to the commencement of recovery actions. He referred to the Tax Administration Act 1953 sec. 8(1), the Tax Act sec. 209. In the end he said, ``all roads lead back to the Commonwealth''.

Senior counsel for the respondent did not contest that the cause of action, if any, which arose (not conceded) was a ``cross demand'' within the meaning of para. (g) subsec. (1) of sec. 40 of the Act; nor did he argue that there was any significance in the fact that the judgment was in the title of the respondent to this application; yet the alleged defamatory words were said to be spoken by the Commissioner for Taxation.

His submission which is summarised included that the words complained of really were not defamatory. The implication from them was that although the applicant had not been successful in arguing substantial matters with the Taxation Office in the Courts, yet he had been able to achieve very great delay; that this was therefore or might be thought to be of great advantage to a (potential client) taxpayer; that the publicity, if there was any, brought about by the words, would assist applicant in his business of a tax consultant. He submitted that in order to justify such an award of damages in the amount contended for, applicant would have to prove that:

• 1. he would have continued to live in Australia, carrying on the sort of work he had previously undertaken indefinitely or for some period of years;
• 2. he would but for the defamation have earned large sums of money;
• 3. because of the defamation he would suffer a large loss of income.

He summarised the criticisms he made of the applicant's credit and reputation by reference as part of applicant's history as to the conviction he had suffered in the United States of America (Texas), utterances in his published works, and certain evidence which had been given in the Board of Review hearing in September 1982, in reasons for judgment there and by Lockhart J. (which, by consent, is treated as evidence before me). He submitted a schedule setting out the references to that evidence with headings ``Credit'' and ``Reputation''. That summary was referred to in a schedule handed up during argument and is annexed hereto. I do not need to refer to it in detail. He referred to applicant's published works, two of which were in evidence. He submitted that the applicant would not be able to show that his reputation was good or such that damage to it would attract a large award of damages.

He submitted, further, that the respondent, appointed to his office pursuant to the Taxation Administration Act 1953 sec. 4 had the duties which were set out in the Tax Act - see, e.g. sec. 8, 166. These duties or functions did not include addressing seminars; accordingly, when Mr. William O'Reilly delivered his address referred to earlier, he was not acting as Commissioner of Taxation but in his private capacity albeit as an informed person. Thus, he said the cross demand or any liability which might be incurred by Mr. O'Reilly would not be available as a cross demand in respect of the judgment obtained by the respondent. Further, he submitted that in carrying out his duties, the respondent was exercising an independent duty cast upon him by the Tax Act; therefore, the Commonwealth was not vicariously responsible for any tort he might commit. He referred to
Field v. Knott (1939) 62 C.L.R. 660 (Field), per Latham C.J. at p.

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ATC 4652

669; per Starke J. at p. 672; per Dixon J. (as he then was) at p. 675; and per Evatt J. at p. 678; per McTiernan J. at p. 685. He referred to the Tax Act sec. 208; since the amount of the judgment was a debt due to the Commonwealth though payable to the Commissioner as noted in the section, no damages payable by any person whose acts did not vicariously implicate the Commonwealth of Australia in liability could operate to reduce the amount of the debt.

He submitted that the applicant had failed to show that he was entitled to the declarations sought; or that if he did have such a cross demand as is referred to in sec. 40(1)(g); that any damages which he conceivably could recover would not be of such an amount as would meet the requirements of that section.

I propose to deal with this matter in the way it has been argued. So I refrain from expressing any opinion on any issue not litigated, e.g. that the cross demand under sec. 40(1)(g) would not be available to an applicant where the liability flowing from it, if any, was incurred by the Commissioner of Taxation; whereas the judgment creditor was the Deputy Commissioner of Taxation.

However, I accept the argument that the counter-claim, set-off or cross demand and judgment debt must be in the same right. Relevant authorities are referred to in Australian Bankruptcy Law and Practice McDonald Henry & Meek, 5th ed. para. 203; to which I would add
James v. Abrahams (1981) 34 A.L.R. 657 at p. 667 per Fisher J. where further authorities were cited. See also The Law and Practice in Bankruptcy Williams and Muir Hunter, 19th ed. at p. 38.

In my opinion there is no master-servant relationship or contract between the Commissioner of Taxation and the Commonwealth of Australia; nor does the control or organisation principle operate to advance applicant's argument. See generally ``Vicarious Liability'', Fleming on Torts 5th ed. ch. 18. Erle J., delivering the judgment of the Court, in
Tobin v. R. (1864) 16 C.B.N.S. 310 at p. 351, referring to certain actions of the captain of a naval vessel which were said to involve the Queen in liability, said: ``When the duty to be performed is imposed by law, and not by will of the party employing the agent, the employer is not liable for the wrong done by the agent in such employment.''

I do not stay to question, anyway, whether the captain of a naval vessel can be said to be employed. But the principle expressed was approved, e.g. Griffith C.J. and O'Connor J. in
Enever v. R. (1906) 3 C.L.R. 969 at pp. 979 and 993, being a case in which it was sought to make the Government of Tasmania liable for actions of a police constable. The headnote in that case states, inter alia:

``A peace officer is himself responsible for unjustifiable acts done in the intended exercise of his lawful authority; but the responsibility for his acts does not extend to the person or body whereby he was appointed to his office, whether his acts were done in the exercise of the common law powers of an officer of the peace or of those powers as extended by Statute.

...

Nor is the peace officer an `agent or servant' of the person or body appointing him, for in the preservation of the peace his authority is original, not delegated, and is exercised at his own discretion by virtue of his office, and on no responsibility but his own...''

See also per Barton J. at p. 982.

To the like effect, is
Baume v. The Commonwealth (1906) 4 C.L.R. 97 where it was sought to make the Commonwealth of Australia liable for actions of certain officers of the Customs Department. See, e.g. per O'Connor J. at p. 123.

In Field, Starke J. said at p. 672:

``It has long been settled that the wrongful acts of public officers in the performance or supposed performance of duties imposed upon them by law or by statute or by regulations made under the authority of a statute do not involve the Crown in any legal responsibility.''

(Authorities cited).

Dixon J. (as he then was) said at p. 675:

``The first branch of the question must, I think, be answered against the appellant upon a principle, by now familiar, affecting the civil responsibility of the Crown for the acts of public officers. When a public officer, although a servant

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ATC 4653

of the Crown, is executing an independent duty which the law casts upon him, the Crown is not liable for the wrongful acts he may commit in the course of his execution. As the law charges him with a discretion and responsibility which rests upon him in virtue of his office or of some designation under the law, he alone is liable for any breach of duty. The Crown is not acting through him and is not vicariously responsible for his Tort (
Tobin v. R. (1864) 16 C.B.N.S. 310 at p. 351;
Raleigh v. Goschen (1898) 1 Ch. 73;
Enever v. R. (1906) 3 C.L.R. 969 at pp. 979, 980, 986, 987, 994;
Baume v. The Commonwealth (1906) 4 C.L.R. 97 at pp. 110, 123;
Fowles v. Eastern and Australian Steamship Co. Ltd. (1916) 2 A.C. 556; (1913) 17 C.L.R. 149;
Zachariassen v. The Commonwealth (1917) 24 C.L.R. 166.''

A.G. for New South Wales v. Perpetual Trustee Co. (Ltd.) (1955) A.C. 457 was concerned with an action commenced by the Attorney-General for New South Wales in respect of the actions of tortfeasors whose negligence caused disabling bodily injury to a member of the Police Force. The plaintiff Attorney-General brought the action per quod servitium amisit. The action failed. At pp. 489-490 their Lordships in the Privy Council said:

``Their Lordships can now express their final opinion upon the case. They repeat that in their view there is a fundamental difference between the domestic relation of servant and master and that of the holder of a public office and the State which he is said to serve. The constable falls within the latter category. His authority is original, not delegated, and is exercised at his own discretion by virtue of his office: he is a ministerial officer exercising statutory rights independently of contract. The essential difference is recognized in the fact that his relationship to the Government is not in ordinary parlance described as that of servant and master.''

Relevant cases are collected in Liability of the Crown (Hogg) at p. 104. The statements in the authorities cited apply, in my view, to the nature of the office of the Commissioner of Taxation. The appointment of the Commissioner of Taxation and the Deputy Commissioner of Taxation is provided for by Taxation Administration Act 1953, sec. 4. They are appointed to an office from which they may be suspended or removed - sec. 6. Their function is referred to in the Tax Act sec. 8; 13. It may be relevant to observe that some of the duties of the Commissioner of Taxation call for an exercise of judgment and authority and responsibility by the Commissioner of Taxation including, e.g. sec. 16, 26AAAA, 36A(9), 40, 82AAL, 82AN, 82EK, 99A, 124AP, 128X, 135, 136, 160(7), Pt. IV, sec. 221M. I consider that the authorities referred to apply to the status of the Commissioner of Taxation. He exercises his function by virtue of his appointment and as conferred upon him by the Tax Act. He is the holder of a public office and not in a master servant or agency relationship with the Commonwealth of Australia. So it would not become liable to pay any damages which might be awarded in respect of the statements made on 4 November 1982. Were the Commissioner of Taxation in a master servant relationship with or an agent of the Commonwealth of Australia so that the latter could incur liability by his tortious actions, I am of the view that on the evidence before me the making of the speech on 4 November 1982 was not an act which could be said to have been made in the course of any such employment or when acting as agent of the Commonwealth of Australia.

If the argument of the applicant that the relevant words were defamatory of him, as to which I refrain, for present purposes, from expressing any opinion, it is necessary not to overlook that there might be available to the defendants in the Supreme Court action defences under the Defamation Act, 1974 (N.S.W.). It is convenient, however, for my purposes, to treat the matter without reference to any such defences. I agree that I should not and I therefore will not engage in an exercise of trying to finality in this hearing the action for defamation instituted in the Supreme Court of New South Wales. But it is appropriate to form some view of the possible award of damages in the action. In so doing, I am aware of, and leave aside for present purposes, the interlocutory proceedings which are pending in that Court and referred to in a letter dated 8 December 1982 relating to an application pending to strike out parties and imputations.

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ATC 4654

Applicant claims the speech disparaged him personally and in his trade, calling or occupation. His reputation could be a relevant matter for the jury. See, e.g. Gatley on Libel and Slander 7th. ed. at pp. 501, 540. Assistance as to this might be found in the material referred to in the schedule mentioned earlier. His credit, e.g. on the question of intention and likely earnings, might very well be in issue. One must not overlook the present climate of public opinion in which those who avoid payment of taxes might be thought to be in disrepute, as are, one might expect, those who assist in such activity. The position of the applicant in relation to the non-payment of tax, his utterances in his published works, the material referred to in the schedule and his cross examination in this application, might be expected to be submitted to the jury in the notional hearing of any defamation case. Overall I accept that he has gained a certain notoriety in the pejorative sense, and that he might well not be regarded favourably. His present occupation as a ``tax fighter'' as he describes himself, seen against the background of the evidence before me and in the Board of Review, may not assist him in the eyes of a jury. I am not satisfied on the evidence before me that applicant would be likely to be able to show that he had a good reputation. I am not satisfied that if applicant did recover a verdict against the persons or any of them named as defendants in the proceedings in the Supreme Court, the amount of it would be for any sum approaching the amount sufficient to meet the requirements of sec. 40(1)(g) of the Tax Act. My conclusions on the evidence before me are:

• 1. The Commissioner of Taxation is not a servant or agent of the Commonwealth of Australia so that it is liable for any damages his words on 4 November 1982 might bring as a verdict.
• 2. The Commissioner of Taxation is a public officer or ministerial officer holding an independent public office carrying out duties referable to his appointment, the Taxation Administration Act 1953 and the Tax Act.
• 3. If he is a servant or agent of the Commonwealth of Australia he was not on 4 November 1982 acting in the course of his ``employment'' or as agent of the Commonwealth of Australia.
• 4. Any verdict against ``The Federal Commissioner of Taxation'' or Mr. William O'Reilly could not be a cross demand; it is not one in the same right as the entity entitled to the judgment debt, viz. the Commonwealth of Australia.
• 5. Assuming that a verdict for the applicant might eventuate I am not satisfied that any such verdict would be equal to or exceed the relevant amount due to the Commonwealth of Australia.

The applicant is not entitled to the declaration sought.

The Orders I make are:

1. The application is dismissed.

2. Applicant is to pay respondent's costs.