Deputy Federal Commissioner of Taxation v. Sheehan.

Judges:
Tadgell J

Court:
Supreme Court of Victoria

Judgment date: Judgment handed down 16 September 1986.

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Tadgell J.

I have for trial two actions in which the Deputy Commissioner of Taxation seeks to recover tax against Mr Norman Oswald George Sheehan. In one action, which was begun in this Court on 29 January 1986, the plaintiff alleged a liability of the defendant under the Income Tax Assessment Act in respect of each of the 1977 and 1978 years of income for primary income tax, including provisional tax, additional tax under sec. 226, and additional tax for late payment under sec. 207. In the other action, which was begun in the County Court on 20 December 1985, but later transferred to this Court, the plaintiff alleged a liability of the defendant in respect of each of the 1979 and 1980 years of income for primary income tax and additional tax for late payment under sec. 207. In respect of the 1979 year there is also a claim for additional tax under sec. 226, and in respect of the 1980 year there is also a claim for provisional tax.

Upon a summons for final judgment in each action under O. 14, Master Barker ordered that the plaintiff have leave to enter judgment for part of his claim relating to each of the 1977 and 1980 years of income, and that the defendant have leave to defend for the balance of the claim for each of those years and for the whole of the claims for the 1978 and 1979 years. The actions were before me on Wednesday last, 10 September, not for trial, but for the determination of certain questions of

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ATC 4720

law before trial as ordered by the Master, apparently pursuant to O. 34 r. 2. For reasons I then indicated and need not now rehearse, I declined to decide the specified questions, but offered to try the actions to the extent that the plaintiff's claims had not already been determined by the Master on the O. 14 proceedings.

In the event, the parties consented to orders in each action that each proceed to trial without pleadings or further pleadings, and without discovery or interrogatories, the trial to commence before me on 11 September, each action being tried concurrently with the other. It was further ordered that evidence upon the trials be by the affidavits already filed, with a right of cross-examination and the further right to apply for leave to adduce oral evidence. Upon the trials there was no oral evidence, but two further affidavits were filed for the defendant. There were also certain facts and documents agreed in addition to what was proved by affidavit.

The plaintiff sought to prove his claims essentially by resort to certificates under reg. 53 of the Income Tax Regulations and certified extracts from notices of assessment, in association with the provisions of sec. 177 of the Act. It was, I think, common ground that if the plaintiff was entitled to rely on reg. 53 and sec. 177, those provisions should see him home so far as concerned his undetermined claims for primary tax and provisional tax. The defendant argued, however, that some of the various assessments that the plaintiff sought to prove, and to prove conclusively in reliance on reg. 53 and sec. 177, namely those for the 1978 and 1979 years, were not properly to be regarded as assessments at all. To the extent that this argument was made good the plaintiff would necessarily fail.

Counsel for the defendant also presented separate arguments upon the plaintiff's claims for additional tax and these arguments do not depend upon the invalidity of the assessments or any of them.

I turn first to the submission for the defendant that there was no valid assessment of his tax for either of the 1978 or 1979 years of income. It was common ground and, indeed, there is no room for argument about it, that once the plaintiff produces a notice of assessment or an extract from it, relying if necessary on the regulations that facilitate its production, the taxpayer is precluded from contesting that the assessment has been duly made. The High Court so decided in F.J. Bloemen Pty. Ltd. v. F.C. of T. and Simons v. F.C. of T., which were decided and reported together at 81 ATC 4280; (1980-1981) 147 C.L.R. 360.

The plaintiff here produced what purported to be extracts from his notices of assessment of the defendant's tax for the years 1978 and 1979. Copies of the actual notices were in fact also in evidence so it was, in strictness, unnecessary to rely on extracts. Counsel for the defendant recognised, as he had to, the effect of subsec. (1) of sec. 177 in accordance with the interpretation it had received in Bloemen's case, but pointed particularly to the following passage at ATC p. 4289; C.L.R. p. 378 of the report in the joint judgment of Mason and Wilson JJ.:

``In a given case a question may arise as to whether the notice produced by the Commissioner is a notice of assessment, e.g. a notice expressed to relate to a definitive assessment as distinct from a provisional or tentative assessment. Unless it can be characterized as a notice of an `assessment', sec. 177(1) will have no operation.''

The question for decision in respect of the 1978 year is whether the 1978 notice of assessment primarily relied on by the plaintiff qualifies as such or whether it is merely provisional or tentative so that it is not, in truth, properly to be treated as a notice of assessment at all.

The facts which bear upon the determination of this question are essentially these. By notice dated 30 October 1978, sent to the tax agent of the plaintiff, Mr W.A. Lovett, at a post office box at Hay in New South Wales, the plaintiff required that within 14 days of the date of the notice the defendant furnish a return in writing setting forth a full and complete statement of all income derived by him during the year ended 30 June 1978. According to an affidavit sworn by the defendant, that requirement could not be complied with because the necessary information was not available either to the defendant or to his tax agent. An extension of time within which to comply with the notice was sought and refused.

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Accordingly, a return was submitted on behalf of the defendant dated 28 November 1978, signed on his behalf by his agent. The return referred to a number of claims in respect of partnership losses and stated that the defendant's annual loss on trading for the 1978 year to be carried forward was $245,046. The return bore a note in these terms:

``This return is being lodged in compliance with a final notice requesting lodgment issued by the Deputy Commissioner of Taxation, Melbourne, on 30th October, 1978, and a refusal by the said Deputy Commissioner to allow further time to lodge requested by the taxpayer's agent in October, 1978, and by further letter dated 6th November, 1978. The impossibility of preparing a complete and accurate return was referred to in such letter and also in correspondence directed to the Deputy Commissioner of Taxation by the taxpayer himself. In spite of these matters, the Deputy Commissioner has refused to allow further time to lodge and by letter dated 14th November, 1978 (received in this office on 22nd November, 1978) has demanded immediate lodgment. Accordingly, in order to comply with the demand, it has been necessary to prepare the return on an estimated basis as not all requisite information is to hand in respect of the numerous partnerships in which the taxpayer is a partner. An amended return will be lodged when all necessary information has been received.''

A second return was in fact lodged in January 1979 which was, I think, to the same general effect as the earlier one although it contained more detail and showed that the trading loss for the year was a reduced figure of $219,854. The notice of assessment on which the plaintiff now primarily relies in respect of the 1978 year of income issued on 15 May 1979. It was accompanied by an adjustment sheet, substantially handwritten, which referred to the loss as returned by the defendant's first return of $245,046. To that was added a series of figures by way of adjustment of losses claimed for three specified partnerships and, in addition, a claimed loss from the partnership of Norman Sheehan & Associates was disallowed. The figures added back by the plaintiff amounted to $350,892 producing a taxable income of $105,846. This was specified in the notice of assessment as the taxable income assessed.

The notice of assessment, which was headed ``Notice of Assessment made pursuant to the Income Tax Assessment Act 1936 as amended'', referred to the year ended 30 June 1978, and stated amounts of income tax and provisional tax that had been assessed and debited. It also referred to amounts credited, including an amount for provisional tax assessed in a previous year, and showed that the amount owing by the defendant to the plaintiff, after the various adjustments by way of debits and credits had been made, was the sum of $139,594.55. The notice also specified a date for payment of 19 June 1979.

In addition to the calculations shown on it, the adjustment sheet contained in handwriting the following note: ``N.B. You are advised that the assessment will be reviewed upon confirmation of partnership losses.'' Dispatched together with the notice of assessment and adjustment sheet, it seems, and bearing the date also of 15 May 1979, were three letters in the form of questionnaires, each of five pages, seeking information from the defendant in relation to three of the partnerships in respect of which he had claimed losses and which losses had been adjusted as stated in the adjustment sheet.

On 19 August 1983 the plaintiff issued what purported to be a notice of amended assessment for the 1978 year. In the accompanying adjustment sheet, which referred to ``taxable income as previously notified, $105,846'', that is to say, the amount of the taxable income specified in the earlier notice of assessment, there was the statement: ``amended to include additional income - add $15,450''. The amended taxable income as shown on the adjustment sheet and on the notice of amended assessment was therefore $121,296. That was payable, in accordance with the notice of amended assessment, on 21 September 1983.

On 22 November 1985 the plaintiff issued a further notice of amended assessment for the 1978 year. According to the accompanying adjustment sheet, the loss which had earlier been claimed from the trading of the Norman Sheehan & Associates partnership, and which had been disallowed, was now allowed, resulting in a reduction of the taxable income, notified by the earlier notice of amended

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ATC 4722

assessment of $21,491. The resulting amended taxable income of $99,805 was stated in the second notice of amended assessment and a reduction of the defendant's indebtedness to the plaintiff was indicated accordingly.

The defendant sought to assimilate the first notice of assessment to that which was considered by the High Court in
F.C. of T. v. Hoffnung & Co. Ltd. (1928) 42 C.L.R. 39. The Court held there that the assessment was merely tentative and not definitive, and therefore not an assessment properly so-called. The plaintiff, on the other hand, in the present case, sought to equate the first notice of assessment to that considered by the High Court in Simons v. F.C. of T., which had been accompanied by an adjustment sheet which read, ``Your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977''.

The Court in the case of Simons held that the adjustment sheet did not render the notice of assessment which it accompanied other than definitive, and distinguished Hoffnung's case on its facts. Counsel for the plaintiff here further submitted that, even if the first notice of assessment was in the same category as that in Hoffnung's case, the two so-called amended assessments for 1978 were unquestionably valid; and the plaintiff relied on those to the extent necessary. A rejoinder to that was that, if there was no valid assessment in the first place, there could be no valid amended assessment, so that the plaintiff was left with no assessment at all of the defendant's taxation liability for the 1978 year.

I was much pressed by counsel on either side with a close analysis of the facts of Hoffnung's case and of Simons' case. Counsel respectively sought to refer to points of similarity to, or points of difference between, one or other of those cases and the present one, which were said to dictate the true character of the notice of assessment on which the plaintiff here principally relies.

It is usually unwise to set about deciding one case by making undue use of the facts of others, and I think the present is no exception. The case before me bears little, if any, factual resemblance to Hoffnung's case and, while there is some superficial similarity to the facts of Simons' case, I think it is different from that, too. I need not catalogue the various points of difference or similarity because in the end that would be relatively unproductive. What I must do is decide this case on its own facts, taking guidance from the authorities as to what a valid assessment and a valid notice of it involve.

Counsel for the defendant submitted that the nature of the so-called notice of assessment could only be properly determined if it were regarded in the context of all relevant surrounding facts. He submitted that these included the rushed circumstances in which the return was of necessity prepared, the lack of full information available to the defendant and his tax agent, the protestations in the return that it had been prepared on the basis of estimates, and that it was in effect subject to revision and amendment. Counsel referred also to the fact that an amended return was in fact lodged in January 1979, reducing the claimed loss by over $25,000 but that, so far as appears, the assessment dated 15 May 1979 had not been made by reference to it since the loss referred to in the adjustment sheet was that originally claimed. Most particularly, counsel for the defendant relied on the note at the foot of the adjustment sheet which pointed out that the assessment would be ``reviewed upon confirmation of partnership losses''. This, he said, betrayed in all the circumstances uncertainty and a lack of finality or definitiveness, and this particularly in view of the dispatch with the notice of the three questionnaires which were presumably designed to procure information on which the plaintiff might make the promised or threatened review. The argument was that the facts, taken as a whole, show that the plaintiff had not finally made up his mind on the availability to the defendant of the claimed partnership losses. Indeed, the plaintiff did ultimately allow, by way of the second notice of so-called amended assessment, one such loss that he had at first refused. Counsel argued that the plaintiff had no right to treat as final what was advised in the first return to be, in effect, a ``best-guess'' estimate; and that the plaintiff, moreover, was obliged to wait and consider the amended return before completing his process of assessment by reference to it. It was also submitted that the plaintiff effectively gave the defendant the option expressed in the adjustment sheet accompanying the first notice of assessment of confirming or attempting to confirm the partnership losses before a final and

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ATC 4723

definitive assessment was made, and that the plaintiff cannot now resile by arguing that what was really only a preliminary assessment was final.

Another submission was that the adjustment sheets which accompanied the notices of amended assessment for 1978 acknowledged a distinction between taxable income ``notified'' and taxable income ``assessed''. This was said to be an indication confirming or conceding that the original assessment was not an assessment in the strict sense, but merely a notification of taxable income, albeit a provisional one.

The submission on behalf of the defendant did not go so far as to say that the plaintiff loses irrecoverably a right to assess the defendant for the 1978 year. Rather, it was said, the plaintiff must go through the proper process of making an assessment, and issuing a notice of it, as necessary prerequisites to the recovery of tax. To the extent that the plaintiff was held up by virtue of the failure of the defendant to supply all the necessary information which would have allowed a full and final assessment to be made, it was submitted that the plaintiff was adequately protected by the right to impose additional tax under sec. 226.

The case of
Batagol v. F.C. of T. (1963) 109 C.L.R. 243 stands for the proposition that an assessment is something that imposes a liability on the taxpayer, and that it involves a process definitive of the amount of the liability by way of fixing the amount of taxable income and the amount of tax payable thereon. Batagol's case and the case of Bloemen between them decide that, in terms of Pt IV of the Act, the completion of such a process is both necessary and sufficient. Moreover, it was said by Mason and Wilson JJ. in Bloemen's case, at ATC p. 4289; C.L.R. p. 378 of the report, that a notice in proper form of an assessment necessarily compels the conclusion that there was an assessment made in fact. It is therefore idle to argue that a document which purports to be a notice of assessment, and which fulfils the necessary and sufficient criteria, cannot be a notice of assessment because the Commissioner might have used, or even that he did use, information that was inaccurate.

The notice for the 1978 year primarily relied on by the plaintiff bears, in my opinion, every necessary hallmark of a notice of assessment unless the note on the accompanying adjustment sheet is sufficient to deprive it of that character. It was conceded for the plaintiff, and I think rightly, that the adjustment sheet may be considered in an appraisal of the more formal notice that went with it. The two were clearly issued together as complementary documents and were intended to be read together. Even so, the adjustment sheet does not, in my opinion, detract from the definitive nature of the notice. I regard the adjustment sheet as conveying no more than that, when and if further information were provided, an amended assessment would issue to the extent necessary to give effect to any demonstrated partnership losses. The adjustment sheet cannot fairly be read as indicating that, as matters stood, any initiative lay with the plaintiff to change them. Unless and until the defendant made a move, the assessment was final and not subject to amendment.

If it be thought helpful to contrast the note on the adjustment sheet here with that considered in Simons' case, I should regard the Commissioner's position as stronger here than there. At least in Simons' case it could be predicated that the objection referred to in the note would be dealt with, and that it might result in some amendment of the assessment in the current year. In the present case it could not be predicted with certainty, so far as the Commissioner was concerned, that anything would happen that might result in an amended assessment. The plaintiff was intimating in effect that, so far as he was concerned, he had done his task and that the defendant was liable in accordance with the notice. The challenge to the 1978 assessment therefore fails.

It was not suggested that if the primary assessment was valid the two amended assessments were not also valid.

The 1979 assessment relied on by the plaintiff was challenged by reference to a comparatively short point. The relevant facts are these. The defendant's 1979 return was not in evidence but, according to an adjustment sheet, the return showed a loss for the year of $215,764. The adjustment sheet to which I refer was issued together with a printed and typed document dated 22 May 1980 on a form of the kind used by the plaintiff for a notice of assessment but headed ``Notice of Credit Applied''. The adjustment sheet showed that the loss of $219,854 carried forward from the previous year had been disallowed and added

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back by the plaintiff and that certain other losses claimed had been adjusted. The result was that the loss of $215,764 as returned was converted, according to the adjustment sheet, into a ``taxable income'' of $3,185. This, it is common ground, was below the threshold amount that attracted income tax and, although there is a minor clerical error in the notice, it is clear enough that it purports to say that for the 1979 year the defendant's taxable income was nil and that no tax was assessed or payable for the 1979 year. The notice also served to advise the defendant that provisional tax for the 1979 year, assessed in the 1978 year, was credited against the current outstanding debit brought forward from the 1978 assessment, which was wholly unpaid. In the result, the notice of credit applied, as it is described, informed the defendant that the amount assessed for the 1978 year, less provisional tax credited, remained to be paid.

On 19 August 1983 there issued to the defendant what purported to be a notice of assessment in conventional form for the 1979 year. The notice was accompanied by an adjustment sheet showing ``taxable income as previously notified'' of $3,185 and following with the expression ``amended to include additional income, add $13,000''. The taxable income of the defendant for the 1979 year therefore became $16,185. The notice of assessment so stated, and tax thereon was assessed and stated in the notice, and the previous debit balance of the defendant in the books of the plaintiff was increased accordingly.

The point taken for the defendant was that the so-called notice of assessment for the 1979 year, being ex facie an original assessment, is invalid because it could properly only have been an amended assessment, the document headed ``Notice of Credit Applied'' having been, in truth, itself an original assessment. The so-called Notice of Credit Applied was said on behalf of the defendant to have been a notice of assessment because, when read with the adjustment sheet sent with it, it purported to assess a taxable income; and that even though it did not purport to assess a liability for tax for the 1979 year, it nevertheless satisfied the definition of ``assessment'' in sec. 6 of the Act, viz. ``the ascertainment of the amount of taxable income and the tax payable thereon''. It was argued that tax was assessed, albeit at nil. Alternatively, perhaps, the argument was that the definition, when it refers to ``the tax payable thereon'', means ``the tax payable thereon, if any''.

I think I must hold the argument to be without foundation. It is sufficient to say that, in my opinion, it is foreclosed by the decision of Batagol v. F.C. of T., some of the salient features of which I have already mentioned. The imposition of a liability is a necessary feature of an assessment under Pt IV of the Act, and a nil assessment is an impossibility: see the judgment of Kitto J. at p. 251 of the report.

It was submitted that the question whether a notice is properly to be classed as a notice of assessment cannot depend on whether any tax is payable following the issue of the notice. The example was given of a taxpayer, being employed, from whose periodical earnings taxation instalment deductions were made. At the end of the year the taxpayer might well have paid all the tax incurred by him in that year and might, indeed, have made an overpayment by virtue of the deductions. The Commissioner is nevertheless bound to assess him, to make an assessment of taxable income and to send a notice of assessment. In a case where there has been an overpayment, in effect, by virtue of taxation instalment deductions, no net debit would be raised against the taxpayer, but that is not to say that the requisite notice, in order to be an assessment, need not assess tax upon the taxable income assessed. The assessed tax might have been prepaid, but it would none the less be tax assessed. A notice of assessment is not to be confused with a mere statement of account. In my opinion the document which was called Notice of Credit Applied did not meet the criteria of an assessment and was more in the nature of a statement of account (or a bill) sent by the plaintiff to the defendant for information.

For these reasons the challenge to the 1979 assessment must also fail.

It follows from my decision so far that the plaintiff is entitled to rely upon the copy notices of assessment he has put in evidence relating to all four years with which I am concerned. Section 177 of the Act therefore takes the plaintiff a long way towards success. There is no defence remaining, I think, to his claims for primary income tax and provisional tax, and he

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is entitled to judgment for the outstanding amounts claimed for them. He would, indeed, succeed entirely at this point, were it not for a series of arguments directed specifically to the matter of recoverability of additional tax under sec. 207 and 226.

The first of these arguments depends on the facts, which are common ground, that each of the assessments and amended assessments on which the plaintiff relies for his claim for additional tax has been the subject of objection which has been disallowed and has been the subject of a reference to a Taxation Board of Review, each of which references is pending.

The defendant then refers to sec. 201 of the Act which, until amended on 14 December 1984, by Act 123 of 1984, read as follows:

``The fact that an appeal or reference is pending shall not in the meantime interfere with or affect the assessment the subject of the appeal or reference; and income tax may be recovered on the assessment as if no appeal or reference were pending.''

By Act 123 of 1984 the then existing part of the section, that I have just read, became subsec. (1), and subsec. (2) was added in this form:

``In sub-section (1), `income tax' includes additional tax under section 207 or Part VII.''

I may say, for the sake of completeness and accuracy, that there has been since 1984 a further somewhat formal amendment to sec. 201. That was made by Act 48 of 1986 to take account of the fact that the jurisdiction of the Taxation Boards of Review was transferred, I think from 1 July this year, to the Administrative Appeals Tribunal. For present purposes, however, it is sufficient to look at sec. 201 as it stood immediately before that most recent amendment to it was made.

Although it was not quite put in this way, the argument for the defendant which relies upon sec. 201 of the Act seems really to involve two stages. First, it is said in effect that sec. 201, before it was amended by Act 123 of 1984, applied only to allow recovery, during the pendency of an appeal or reference, of income tax strictly so-called, and that it prohibited the recovery of additional tax imposed under either sec. 207 or 226 during such pendency. Secondly, it is said in effect that subsec. (2), added in 1984, does not apply to allow recovery during the pendency of any appeal or reference of additional tax that depends on an assessment made before the subsection came into operation.

I am disposed to think that the argument fails at the first stage but, whether it does or not, I am satisfied that it fails at the second. The first stage of the argument really relies on the application of the principle expressio unius est exclusio alterius for a conclusion that the reference to a right to recover income tax involves a deliberate exclusion of a reference to a right to recover additional tax, and further implies that a right to recover additional tax is denied during the pendency of an appeal or reference.

Even if the reference to income tax in the section is to be interpreted as not including additional tax, I should think it difficult to construe the section before amendment as imposing a fetter by implication on a right to recover additional tax if an appeal or reference were pending. The section is in its nature, as it seems to me, a facultative provision and does not appear to be designed to impose a fetter of any kind, even by implication.

This is a view I recently expressed obiter in the case of
D.F.C. of T. v. Trower (5 September 1986) and, having heard further argument about it, I am not persuaded that it is unsound.

I was referred on behalf of the defendant to a dictum of Mason A.C.J. in
Clyne v. D.F.C. of T. 82 ATC 4510; (1982) 56 A.L.J.R. 857, which was said to be inconsistent with the view I have expressed. It does not seem to me that it is. Referring to the commencement of proceedings for recovery of tax, notwithstanding the pendency of proceedings under Pt V of the Act designed to challenge the correctness of the assessment, his Honour said:

``In the ultimate analysis the Deputy Commissioner's charter to commence recovery proceedings notwithstanding a challenge in Part V to the correctness of the assessment is to be found in sec. 201 of the Assessment Act.''

That dictum, at best for the defendant, is silent as to the effect of sec. 201 upon the Commissioner's right to recover additional tax. It does not seem to me to be an indication that the learned Judge was there making a definitive assessment of the content and extent of sec.

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201. In particular, he did not purport, I think, to be saying that it imposed any kind of fetter upon the Commissioner.

Counsel for the defendant presented a detailed and admirable argument for the conclusion that the expression ``income tax'' in sec. 201 is not reasonably capable of including additional tax, and the contrary argument was put by counsel for the plaintiff. Even if counsel for the defendant was right I would remain to be persuaded that the section contains the implied prohibition for which the argument pressed for the defendant logically contends.

In the end, however, I think it best to leave this to one side for I prefer to decide the matter upon the basis, which seems to me to be very clear, that subsec. (2) applies to cover the plaintiff's entitlement to recover the additional tax he claims in these actions.

Support for a contrary view was sought on behalf of the defendant from the case of
D.F.C. of T. v. Moor 86 ATC 4359. That was an action brought to recover tax which was decided by Rogers J. in the Supreme Court of New South Wales on 26 May this year. His Honour was certainly concerned to construe the Income Tax Assessment Act as it stood before the amendments made by Act 123 of 1984 took effect on 14 December 1984. His Honour said at p. 4360 of the report:

``The amounts sued for are based on notices of amended assessment issued by the plaintiff to the defendant, all dated 18 January 1984. The defences relied upon by the defendant have to be dealt with in accordance with the law as it stood at that date. Important amendments made to the relevant provisions of the Income Tax Assessment Act 1936 (`the Act') on 14 December 1984 by Act No. 123 of 1984 do not directly arise for consideration.''

Rogers J. was concerned in the case of Moor in particular with the operation of sec. 177 upon assessments dated 18 January 1984, and he was also concerned with the effect of sec. 207, as a matter of its construction, to create a liability for tax in relation to late payment of tax imposed under sec. 226 before the amendments took effect. Plainly enough, the amendments effected by Act 123 of 1984 had nothing to do with the questions his Honour had to decide. There were two reasons for this. First, the amendments had no effect at all on sec. 177 and, secondly, while the amendments did affect sec. 207, the provisions of sec. 165(5) of the amending Act specifically precluded a reference to the amendments for the purpose of construing sec. 207 at a time before the amending Act commenced. Moor's case was not concerned with sec. 201. I cannot regard it as deciding that none of the amendments to the Income Tax Assessment Act made by Act 123 of 1984 had any effect on the recoverability of tax raised by or dependent on assessments made before its enactment. In particular, I think it did not purport to decide that sec. 201 in its amended form is not applicable to cases such as the present case. Section 201 is not concerned with any imposition of liability for tax, as is sec. 207 with which Rogers J. was concerned in the case of Moor. Section 201 assumes a taxpayer's liability for tax and is directed to the matter of its recoverability notwithstanding the pendency of a challenge to the assessment on which it depends. Even assuming that sec. 201 before its 1984 amendment was concerned to suspend the right of the Commissioner to recover additional tax (a conclusion which I have doubted), it was in the nature of a procedural provision. It seems to me that the new subsec. (2) was at least designed to remove such a suspension.

In deciding upon the effect of such a statutory provision, inserted by way of amendment, as subsec. (2) of sec. 201 was, it is useful, if not mandatory in this country, to have regard to what was said in
Maxwell v. Murphy by Sir Owen Dixon (1956-1957) 96 C.L.R. 261 at p. 267. The passage is well known but bears repetition here. His Honour said:

``The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred in such a way as to confer or impose or otherwise affect rights or liabilities which the law had defined by reference to the past events. But, given rights and liabilities fixed by reference to past facts, matters or events, the law appointing or regulating the manner in which they are to be enforced or their enjoyment is to be secured by judicial remedy is not within the application of such a presumption. Changes made in practice

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and procedure are applied to proceedings to enforce rights and liabilities, or for that matter to vindicate an immunity or a privilege, notwithstanding that before the change in the law was made the accrual or the establishment of the rights, liabilities, immunity or privilege was complete and rested on events or transactions that were otherwise past and closed.''

I refer also to the judgment in Maxwell v. Murphy of Fullagar J. Although it was a dissenting judgment, it is, if I may say so with respect, particularly instructive upon the way in which a provision such as subsec. (2) of sec. 201 is to be regarded. At p. 286 of the report, having referred to a dictum of Channell B. in Wright v. Hale, and to Lord Blackburn's speech in Gardner v. Lucas, Fullagar J. said:

``A consideration of the cases generally cited in this connexion has led me to think that the distinction is probably best stated by saying that it is between statutes which create or modify or abolish substantive rights or liabilities on the one hand and statutes which deal with the pursuit of remedies on the other hand. In the former class of case there is a presumption against retrospective operation in the sense explained above. In the latter class of case there is no such presumption: on the contrary, the presumption is that the enactment applies in all proceedings commenced after it became law and it may be right to construe it as applying even in proceedings commenced before it became law.''

I refer also, without reading from it, to the judgment of Fullagar J., as a member of this Court, on the same topic in
Re Ovens and King Traders Pty. Ltd. (1949) V.L.R. 16, particularly at p. 19.

It would seem to me that if ever there was a provision in a statute introduced by way of amendment which was designed to deal with the pursuit of remedies, subsec. (2) of sec. 201 is such a provision. It assumes that tax was owing by a taxpayer at the time of the commencement of a reference and contemplates that - and this is putting the argument most favourably to the defendant - whereas sec. 201 might have been interpreted previously as suspending a right in the Commissioner to pursue additional tax, that suspension is now to be lifted.

It follows that when the two actions before me were commenced subsec. (2) of sec. 201 applied to allow, in actual terms, their commencement and their pursuit.

There is one remaining point which is a narrow point concerning only the plaintiff's right to recover additional tax for the year 1977. It depends upon sec. 204 of the Act, which reads as follows:

``Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.''

The notice of assessment for the 1977 year issued, according to its face, on 31 May 1978 and expressed as the date upon which the tax was due to be paid, 30 June 1978. Evidence was led that the document was not received at the defendant's tax agent's office in Hay until 6 June 1978. The argument was that, upon those facts, the notice of assessment was invalid. The argument was to this effect: that sec. 204 gives two options to the plaintiff when he is concerned with a date for payment of tax notified by a notice of assessment. He may either specify a date for payment which is a date not less than 30 days after service, or he may insert no date at all; and if, as matters turn out, a date specified in the notice is less than 30 days after the date on which the notice happens to be served, then there is no due date. It was said that you cannot read this section as meaning that tax is payable on the date specified or a date 30 days after the service of the notice, whichever is the later. Had that been intended the section would have said so.

I hope I should be as ready as anyone to acknowledge that a taxing statute is to be construed and applied as it stands. It must be understood, on the one hand, to extract from a taxpayer all that its terms will properly allow, neither more or less, and on the other hand to impose no liability which is not clearly spelt out. It has also been said that if a provision in a taxing statute is capable of two alternative meanings the courts will infer that meaning more favourable to the subject:
I.R.C. v. Ross and Coulter (Bladnoch Distillery Co. Ltd.) (1948) 1 All E.R. 616 at p. 625

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ATC 4728

in the speech of Lord Thankerton. His Lordship was no doubt referring there to a case where two meanings were equally open.

In the application of these guides one is not authorised, of course, to disregard other principles of statutory construction merely because one is dealing with a taxing Act. The central aim must always be to give effect to the intention of the legislature, as the intention is gathered from the language employed and having regard to its context.

If, therefore, there are two constructions of which a taxing Act is capable, one of which would facilitate the evident object of the legislature and the other of which would plainly thwart it, one is not justified in preferring the latter merely because it would be more favourable to the subject.

An interpretation of sec. 204 is properly to be approached in that light. Its avowed object is to provide for identification of a day on which tax assessed shall be due and payable. In my opinion it enables the Commissioner to specify in the notice of assessment as the day on which the tax shall be due and payable any date; and the effect of the section is that, if the date so specified is not less than 30 days after the date of service, the tax is due and payable on the day of that date, whereas if there is no date specified that is not less than 30 days after service, the tax is due and payable on the thirtieth day after service.

The expression ``not being less than 30 days after the service of the notice'' is an adjectival phrase qualifying and descriptive of the expression ``the date specified in the notice''. Unless a date specified in the notice answers that description the notice will be one in which ``no date is so specified''.

Of course, it would never be possible to know, at the time of the preparation of the notice, that a date specified in it as the date for payment is a ``date so specified''. That could not be known until service occurred. The practice, no doubt, is to leave some leeway by inserting the date of a day which is some time ahead of 30 days from the date of the preparation of the notice, in the expectation that service will duly occur in the ordinary course of post. But, since the day of service cannot ever be forecast with certainty, it is not to be supposed that sec. 204 means that the notice is ineffective as providing for the identification of a date for payment if there are not 30 days separating the day of service and the day of the specified date. The concluding phrase of the section beginning, ``or, if no date is so specified'' then operates to fix the date for payment. That concluding phrase would operate, certainly, if no date at all were specified in the notice, but its operation is not in my opinion confined to such a case. It operates ``when no date is so specified'', that is to say, no date of the kind described in the section is specified. In the present case it appears from the face of the notice that the date specified could not have been 30 days after service, assuming that service could not have occurred at the address stated in the notice (which was a post office box at Hay, New South Wales) until after the date of issue, which was 31 May 1978.

In the calculation of the 30 days referred to in sec. 204 the day of service is to be excluded and the day of the specified date is to be included:
Resch v. F.C. of T. (1941-1942) 66 C.L.R. 198 at pp. 214 and 227. Even if service had been effected on the day next after the day of issue in the case of the notice now in question, 30 days would not, on that basis of calculation, have run by 30 June. It is, in my view, always open to a taxpayer to prove that service of a notice of assessment was not effected until a day after a day 30 days before the date specified in it for payment. That was done here and the date proved was 6 June 1978. The day on which the tax assessed became due and payable was therefore fixed in accordance with sec. 204 as 6 July 1978.

The interpretation I have given to sec. 204 is supported both by its terms and by its history. As originally enacted in 1936 the section provided, and I am paraphrasing it, that any income tax assessed should be due and payable 60 days after the service of a notice of assessment; but it also provided that where a date was specified in the notice as the date upon which the tax was to be due and payable, that date should be deemed to be the date upon which it was due and payable unless the contrary were proved. The taxpayer in those days had the option, which I think is still open to him under the present sec. 204, of proving the date of service. The original section was repealed and replaced in 1940 by a provision in the same terms as the present, save that it did

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ATC 4729

not contain the last clause ``or, if no date is so specified, on the thirtieth day after the service of the notice''. That was added in 1954. After 1940 and before the 1954 addition, there might have been much to be said for the view now urged for the defendant. As it is, however, I think the addition is in the nature of a fail-safe provision or, as counsel for the plaintiff described it, a provision that has the effect that the section covers the field. At all events, the provision since 1954 has in my opinion had the effect that I have indicated.

Gentlemen, I think that disposes of all the issues on the points of law that were argued. It follows that the plaintiff is entitled to succeed in respect of each category of tax for which he claims in each of the four years. I must confess that I have not, however, done the arithmetic, notwithstanding that I have been furnished with the blue highlighted document which was handed in yesterday. Have you, Mr de Wijn, had any opportunity to consider that?

• Mr de Wijn: Your Honour, we do not challenge the arithmetic in the document. That is as far as I can take it.
• His Honour: Mr Batt, what judgment do you say you should receive?
• Mr Batt: Your Honour, I would ask, if I can, that the gentleman behind me listen closely while I speak: that we would submit that in the Supreme Court action there should be judgment for the plaintiff for what will be the addition of two figures, your Honour, $34,212.31 and $78,015.25, which I make $112,227.56. Then in the action commenced in the County Court there should be judgment for the sum of two amounts, being $10,547.43 and $2,932.10.
• His Honour: $13,479.53?
• Mr Batt: Yes, your Honour, I had transposed two figures. Would your Honour mind repeating the figure?
• His Honour: $13,479.53, I make it.
• Mr Batt: Yes, your Honour. Those are the sums -
• His Honour: Certainly if they are right and not the subject of argument then I am prepared to accede to them, making it clear that I have not satisfied myself about any of the arithmetic at all. Mr de Wijn no doubt hears that.
• Mr Batt: Your Honour, it has been calculated by the manager, Melbourne manager of the Tax Office Recoveries Section with the aid of his calculator.
• His Honour: Yes, I have no doubt they were put in in good faith. Whether it is right or not, I do not know. Yes, very well. There is no argument about those figures. There will be judgment in each action accordingly.
• (Discussion ensued re costs.)
• His Honour: There will be an order in each case that the plaintiff's costs of the action so far as they are not covered by the order of the Master of 3 June 1986 be taxed, including reserved costs, except the costs reserved last Wednesday, the 11th, before me, and when taxed be paid by the defendant.
• (Discussion ensued re interest and stay of execution.)
• Mr de Wijn: Your Honour, I have instructions on the question of security. My client is not in a position to give any specific security. My client is prepared to make an undertaking that he will not dispose of any assets other than in the ordinary course of business or for full value. I thought that that sort of undertaking would protect the status quo and protect the position of the plaintiff pending any application for a stay.
• Mr Batt: That undertaking, if given, apparently is acceptable.
• (Discussion ensued.)
• His Honour: Upon the defendant undertaking by his counsel that he will not in the meantime dispose of any of his assets except in the ordinary course of business or for full value, there will be a stay of judgment until the hearing and determination of the application by the Master of the application referred to in para. 12 (in the Supreme Court action) and para. 11 (in the County Court action) of the order of Master Barker made on 3 June 1986, or further order, and that the continuance of such stay abide the result of that application or the result of any appeal therefrom.
• (Discussion ensued.)
• His Honour: It seems to me that sec. 79A of the Supreme Court Act does confer a discretion, not only as to what rate of

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  ATC 4730

  interest might be awarded but also whether interest might be awarded at all upon a judgment debt recovered or upon a particular portion of it. As I indicated in the course of argument, I think that appears, at least so far as sec. 78 of the Supreme Court Act is concerned, from the judgment of Gowans J. speaking for the Full Court in
  Brew v. Whitlock (No. 3) (1968) V.R. 504 at p. 505. Having, I believe, such a discretion, I think I should exercise it against awarding interest upon so much of the judgments as relates to additional tax under sec. 207. I think it is not necessary to decide whether sec. 207 additional tax is ``interest'', in terms of sec. 79A(2)(a). I would be prepared to concede for the moment that it is not.
• The policy of sec. 79A, however, seems to me to involve a reluctance to award interest upon a sum which is in the nature of a penalty, which I have no doubt additional tax under sec. 207 is. At all events, it is a penalty for the purpose of a discretion which would influence one in deciding whether it should carry interest.
• If it be accepted that sec. 207 has as its intention that of assuring, so far as it may be assured, that primary income tax will be paid, then this judgment today will secure that policy and also that sec. 207 tax is to be paid because payment of primary tax is made late. It seems to me that it would be wrong also to award interest on the sec. 207 tax. Those parts of the judgments which involve an obligation on the part of the defendant arising otherwise than under sec. 207 are in a different position. I should have thought that, prima facie, the plaintiff is entitled to interest on the primary tax, including provisional tax, by virtue of its non-payment to date, notwithstanding that he would also be recovering under the judgment sec. 207 tax referable to that late payment.
• I can see no good reason in principle, either, for not allowing, prima facie, interest on so much of the judgment as depends upon sec. 226. The point raised by Mr de Wijn this afternoon, however, I think does cause concern. If it be right to say that any interest awarded by the Court on these judgments could not be recovered in the event that the defendant were to succeed, or succeed in part, upon his references under Pt V of the Act which are pending, I would hesitate long before making an award of interest at all.
• It is said that the sums awarded for interest would not be recoverable because the judgments, even in the event of success in the Pt V proceedings, could not be set aside on that account. Accepting that that might be so, Mr Batt for the plaintiff has indicated that the position might be covered by sec. 200B(1) of the Act. Moreover, he submitted, if it turned out that the plaintiff had not been entitled to retain the fruits of his judgment, but there were no statutory provision providing for the repayment of any interest, then an appeal against so much of the judgment as awarded interest would be likely to succeed, even if well out of time.
• I think it would not be right to assume necessarily that that would be so. The various considerations that might affect an appeal cannot now be visualised in their entirety, I am sure.
• In the end I think the suggestion I threw out in the course of argument is likely to be productive of as fair a conclusion as one can provide for. I would accordingly be prepared to award interest at a rate of, say, 14 per cent from the date of commencement of the proceedings until judgment on so much of the amount of judgment as is not referable to sec. 207 tax, but to do so only upon the undertaking of the plaintiff that, to the extent that the defendant succeeds in the relevant Pt V proceedings, the interest would be repaid.
• I think that is sufficient to indicate what I am prepared to do, so it will depend upon instructions you receive.
• (Discussion ensued.)
• This could be mentioned again in the morning. It will be listed as part heard, and I will pronounce judgment then.
• (Discussion ensued.)
• His Honour: In action 271 of 1986 of the Supreme Court, order that upon the plaintiff undertaking by his counsel that (to the extent, if any, that the defendant, by a decision of the Administrative Appeals Tribunal or a Court that becomes final

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  ATC 4731

  within the meaning of sec. 200B of the Income Tax Assessment Act 1936, succeeds on proceedings under Pt V of that Act arising out of any of the references referred to in para. 9 and 10 of exhibit ``ASI'') interest awarded by the judgment pronounced this day that has meanwhile been recovered by him will be repaid by him to the defendant not later than 60 days after the decision becomes final, judgment for the plaintiff for $112,227.56, together with damages in the nature of interest under sec. 79A of the Supreme Court Act of $3,968.31.
• Further order that the plaintiff's costs of the action (save those ordered to be taxed by the order of Master Barker made herein on 3 June 1986) including reserved costs, if any, but not including costs of and incidental to the proceedings before me on 10 September 1986, be taxed and paid by the defendant.
• Further order that upon the defendant by his counsel undertaking that he will not in the meantime dispose of any of his assets except in the ordinary course of business or for full value, execution on the said judgment and costs be stayed until the hearing and determination by a Master of the application for a stay of execution referred to in para. 12 of the said order of Master Barker or further order, and that the continuance of the stay hereby ordered abide the result of that application or the result of any appeal therefrom.
• (Discussion ensued.)
• In action M316 of 1986, order that upon the plaintiff undertaking by his counsel that (to the extent, if any, that the defendant, by a decision of the Administrative Appeals Tribunal or a Court that becomes final within the meaning of sec. 200B of the Income Tax Assessment Act 1936, succeeds on proceedings under Pt V of that Act arising out of either of the references referred to in para. 4 of exhibit ``AS2'') interest awarded by the judgment pronounced this day that has meanwhile been recovered by him will be repaid by him to the defendant not later than 60 days after the decision becomes final, judgment for the plaintiff for $13,479.53, together with damages in the nature of interest under sec. 79A of the Supreme Court Act of $758.25.
• Further order that the plaintiff's costs of the action save those ordered to be taxed by the order of Master Barker made herein on 3 June 1986, including reserved costs if any but not including costs of and incidental to the proceedings before me on 10 September 1986, be taxed and paid by the defendant.
• Further order that upon the defendant by his counsel undertaking that he will not in the meantime dispose of any of his assets except in the ordinary course of business or for full value, execution on the said judgment and costs be stayed until the hearing and determination by a Master of the application for a stay of execution referred to in para. 11 of the said order of Master Barker or further order, and that continuance of the stay hereby ordered abide the result of that application or the result of any appeal therefrom.