DINNING v FC of T

Members:
Ryan J

Tribunal:
Federal Court

MEDIA NEUTRAL CITATION: [1999] FCA 785

Decision date: 11 June 1999

Ryan J

There is before the Court an application for an order of review pursuant to the Administrative Decisions (Judicial Review) Act 1977 (``the AD(JR) Act'') and pursuant to s 39B of the Judiciary Act 1903 in respect of a decision of the first respondent (``the Commissioner'') to issue a notice under s 218 of the Income Tax Assessment Act 1936 (``the Act'') in relation to the applicant's tax liability. The applicant is a pilot employed by Ansett Australia Holdings Ltd (``Ansett''). The operative part of the notice in question requires Ansett:

``... TO PAY TO THE COMMISSIONER out of each of the payments where ANSETT AUSTRALIA HOLDINGS LIMITED become(s) liable from time to time to make to the taxpayer, forthwith upon the payment becoming due or coming to be held by ANSETT AUSTRALIA HOLDINGS LIMITED, an amount of twenty cents in every dollar of the base salary until the amount of $66,543.81 due by the taxpayer is satisfied.''

2. The applicant, during the tax year ended 30 June 1995, invested in a stage play named ``Cabaret/Amadeus'' and, in the light of that investment, the Commissioner made amended assessments of the applicant's liability to tax and later issued notices under s 218 of the Act dated 5 February and 12 February 1999 respectively, the first of which required Ansett to remit to the Commissioner thirty cents in every dollar of payments which might become due to the applicant from Ansett until the amount of $25,930.72 due by the applicant was satisfied. The second notice, which replaced the first, required Ansett to remit thirty-eight cents in every dollar of the applicant's base salary until the amount of $25,995.67 was satisfied.

3. On behalf of the Commissioner, the substitution of the notice dated 12 February 1999 for that of 5 February 1999 has been explained as attributable to advice from Ansett that:

``... because airline pilots such as the Applicant worked regular but varying amounts of overtime and were in receipt of certain other income entitlements which varied from time to time that it would be an administrative burden for Ansett to determine at the end of each pay period the precise amounts payable to the Deputy Commissioner of Taxation under the s 218 notice dated 5 February 1999.

...

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It was for this reason that the 5 February 1999 notice was replaced by the 12 February 1999 notice which adjusted the rate so that it applied to THIRTY-EIGHT cents in every dollar of the base salary of the Applicant as distinct from the gross salary of the Applicant.''

4. Proceedings Nos VG 79, VG 98 and VG 99 were then issued on behalf of the applicant and two other airline pilots, George Aslanis and Edward Godek, challenging the issue of the s 218 notices to which I have already referred in respect of the applicant and similar notices in respect of Mr Aslanis and Mr Godek. On 1 April 1999 a ``round table conference'' was held between representatives of the Commissioner and taxation advisers of the applicant in the course of which it was agreed that the extant s 218 notices would be withdrawn and the proceedings in this Court be discontinued. According to the solicitor for the applicant, it was further agreed that:

``... Further, the objections lodged by Aslanis would be used as the basis for a test case in the Administrative Appeals Tribunal (`AAT') to determine whether or not the deductions claimed in respect of an investment project known as `Cabaret/ Amadeus' are allowable as claimed by the participants. The AAT has accepted that Aslanis be run as a test case and that all other matters involving investors in the same project have been stayed pending the outcome of the test case.''

5. After that round table conference, further s 218 notices were issued in respect of the applicant and seven other airline pilots. I have already quoted from the later notice in respect of the applicant which was dated 18 May 1999. In the meantime, the Commissioner had written the following letter, dated 28 April 1999, to the applicant:

``I refer to your letter dated 19th April 1999. You are advised that the other amounts figure totalling $90,056.91 is made up of the following. 

+------------------------------------------------------------------------+
|           Description                  | Due Date/Issue |    Amount    |
|                                        |      Date      |              |
|------------------------------------------------------------------------|
| 1995 Amendment (Cabaret)               |      2/11/98   | 21,004.77 dr |
|                                        |                |              |
| 1997 Credit amendment                  |     15/10/98   |    189.97 dr |
|                                        |                |              |
| 1996 Amendment (Cabaret)               |      1/12/98   |  2,253.03 dr |
|                                        |                |              |
| 1997 Amendment (Cabaret)               |      1/12/98   |  2,027.16 dr |
|                                        |                |              |
| Additional tax for late payment posted |      4/12/98   |    252.67 dr |
|                                        |                |              |
| Payment                                |     16/ 2/99   |  2,798.80 cr |
|                                        |                |              |
| 1996 Amendment (Books)                 |     14/ 4/99   | 62,820.30 dr |
|                                        |                |              |
| 1997 Amendment (Books)                 |     14/ 4/99   |  6,160.80 dr |
|                                        |                |              |
| Payment                                |     18/ 3/99   |  1,473.05 cr |
|                                        |                |              |
| Rounding Benefit                       |      Various   |      0.11 cr |
|                                        |                |              |
| Total                                  |                | 90,056.80 dr |
+------------------------------------------------------------------------+

This represents the amount outstanding at that time viz 7th April 1999 with the exception of additional tax for late payment which accrues on a daily basis. Since that date the amount outstanding has been reduced by $7,252.85 being a credit amendment for the 1998 year, $3,263.69 being a credit amendment for the 1996 year and $1,473.05 being a payment to the account.

This last payment will be applied to the debt which issued in respect to the `Cabaret' amendments and as such will constitute the completion of the 50% arrangement in respect to that debt. A letter withdrawing the notice pursuant to section 218 of the Income Tax Assessment Act was issued on 23 April 1999.

However this 50% arrangement does not apply the recent amendments issued in

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respect to the `Books'. These amendments were due on the 14th April 1999 and, after taking into account the recent credit amendments, total $65,717.41. Payment of this amount is required within 7 days in order to avoid the commencement of recovery proceeding including the issue of another notice pursuant to section 218 of the Income Tax Assessment Act requiring them to deduct and forward an amount not exceeding 30 cents in the dollar of your gross income to apply to this debt.

If you have any queries regarding this matter please contact the officer mentioned above.''

6. The reference to ``Books'' in that letter was to what was known as the ``ASEAN Books'' investment in which the applicant and other airline pilots had participated on the advice, or at the instigation, of the Institute of Taxation Research Pty Ltd (``ITR''). The Commissioner's agreement to withdraw the earlier s 218 notices which were said to be referable only to amended assessments based on the Commissioner's view of the ``Cabaret'' investment has been explained as follows in an affidavit sworn 31 May 1999 by Mr Zafiriou, a debt collection officer in the Australian Taxation Office:

``By the time of the round table conference held on 1 April 1999... the First-named Respondent had recovered under the said s 218 notice issued to the Applicant's employer in respect of the Cabaret scheme, an amount nearly equal to 50% of that tax liability and, in accordance with his policy (see Ch 28 ATO Policy exhibited and referred to below), agreed to withdraw the Cabaret scheme s 218 notice the next month after collection of the whole of the 50% and to defer further collection of that tax liability pending the outcome of the AAT `test case'. In accordance with the said agreement, upon collection of the whole of the 50% the First- named Respondent withdrew the s 218 notice on 23 April 1999. The agreement in relation to the AAT `test case' in respect of the Cabaret scheme was in respect of three taxpayers only, namely, the Applicant, one Mr Aslanis and a Mr Godek. The substance of that agreement was that Mr Aslanis would be the `lead' case before the AAT. Since that time, the First-named Respondent has decided that Mr Aslanis may be the `lead' case for all of the participants in the Cabaret scheme (which number approximately 43 taxpayers, many of whom are not represented by either the Applicant's solicitors nor the Institute of Taxation Research Pty Ltd). Other than the three named taxpayers, no specific agreement has been reached in respect of the other participants in the Cabaret scheme.''

7. In the discontinued proceedings No VG 79 of 1999, the applicant had sworn an affidavit on 17 March 1999 detailing his financial circumstances which disclosed net realisable assets of $44,000, liabilities of $7,050, a monthly net income after tax of $5,500 and monthly expenses of $6,818. In paragraph 9 of his affidavit of 31 May 1999, Mr Zafiriou has deposed:

``In the course of deciding to issue the 18 May notice the Respondents did have regard to the financial circumstances of the Applicant, as detailed in the affidavit sworn by the Applicant in proceeding No VG 79 of 1999, a copy of which is exhibit `RD-3' to the Applicant's affidavit sworn 22 May 1999. That was the reason for deciding that an amount of TWENTY cents in every dollar cents should be remitted.''

8. However, the Commissioner apparently does not accept, in its entirety, the state of the applicant's financial circumstances deposed to in proceedings VG 79 of 1999. Mr Zafiriou went on to depose in paragraph 16 of his affidavit in the present proceedings:

``According to records held in the office of the First-named Respondent, in the year of income ended 30 June 1998 the Applicant returned gross income of $136,736.00 on account of salary and wages received from Ansett He disclosed that tax instalment deductions totalling $20,303.96 had been deducted from his salary and wages. The net result being that salary and wages paid to the Applicant by Ansett totalled $116,433.00. When averaged over a 12 month period there is an average of $9,000.0 per month received by the Applicant. After deducting from that amount all of the expenses referred to by the Applicant and after allowing for the further expense on account of the amount to be remitted to the Deputy Commissioner of Taxation by Ansett, the Applicant still has available a net amount of $500.00 approximately per month.''

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9. Mr Zafiriou also exhibited to his affidavit chapters 12 and 28 of the Australian Taxation Office's Debt Collection Policy which included these passages:

``12.4.6 The requirements are that:-

  • (i) `garnishee' notices must be in writing;
  • (ii) a copy of the notice must be forwarded to the debtor at the last place of address known to the Commissioner;
  • (iii) the notice must be directed to a person who meets one or more of the specifications within the sections of the relevant acts (a notice must be explicit and strictly within the terms of the relevant section, otherwise the persons subject to the notice may be in doubt as to the duty under which the notice places them and this could render the notice invalid - if in doubt, the Commissioner could choose to issue a separate notice in relation to each subsection of the relevant sections);
  • (iv) a notice must require payment of such monies as is sufficient to pay the debt due to the Commissioner (`due' does not mean due and payable; the Commissioner can issue a `garnishee' notice even though the payable date has not been reached - once issued and served, the notice operates to prevent a subsequent dealing with the amount that may prevent compliance with the notice);
  • (v) `garnishee' notices can seek payment of either a lump sum or payment by instalments (if the notice requires payment by instalments, the amounts required to be deducted must be reasonable having regard to the particular circumstances as they exist at the time - the maximum amount required to be deducted from the gross salary or wages of an employee whose only source of income is those salary or wages should not exceed 30 cents in the dollar).

12.4.7 The following are some restrictions on the use of `garnishee' notices:-

  • (i) `garnishee' notices can only be effective in regard to `money' (they will not apply to cheques held by a solicitor made out to a vendor, traveller's cheques or gold) (
    Smith v DC of T, unreported 9 May 1997);
  • ...

12.5.1 Collection through third parties by serving a `garnishee' notice is often an efficient and cost effective way of obtaining payment of an outstanding debt, particularly in cases where the cost of initiating legal collection activity may seem prohibitive when compared to the size of the debt.

12.5.2 The Commissioner will use `garnishee' notices in circumstances where that action is considered to be the most effective method of obtaining payment of a debt. `Garnishee' notices may issue prior to the due date for payment of a debt, but not before notice of the debt has been served on the debtor, where feasible (
Clyne v DFC of T 81 ATC 4429).

12.5.3 Any decision to issue a `garnishee' notice needs to be based on the best information available. Some matters that may be taken into account when considering whether to issue a `garnishee' notice are:-

  • (i) whether a debt has been established and the value of that debt (including additional charges for late payment);
  • (ii) the financial position of the debtor and the steps taken to make payment in the shortest possible timeframe having regard to the particular circumstances of the debtor;
  • (iii) the extent of any other debts owed by the debtor;
  • (iv) whether the revenue is placed at risk because of the actions of the debtor, such as:-
    • • evidence or suggestion of the debtor dissipating assets;
    • • deliberate and continued efforts by the debtor to frustrate legal recovery action;
    • • the debtor making payment to other creditors in preference to paying the Commissioner;
    • • where the issue of a writ has proven to be unsuccessful, but information obtained indicates that `garnishee' action may be appropriate in relation to the debtor's employment, bank and/or building society deposits and the like; or
    • • the existence of a bar to legal action, but information to hand indicates that `garnishee' action is

      ATC 4626

      available against payments from an employer or in relation to bank deposits;
  • (v) the past compliance history of the debtor, including whether there has been previous non payment;
  • (vi) whether there are better alternatives to obtain payment;
  • (vii) whether the use of a `garnishee' notice could be perceived as an abuse of power;
  • (viii) the steps taken by the debtor to acknowledge indebtedness and accept the responsibility to pay;
  • (ix) the likely implications of issuing a notice on a debtor's ability to provide for a family or on the debtor's employment or business;
  • (x) the quantum of the amount required to be forwarded if the notice is looking to a regular contribution (the maximum amount to be deducted from gross salary or wages should not exceed 30 cents in the dollar where the debtor's only income is that salary or wage); and
  • (xi) whether the debtor has requested the Commissioner to issue a `garnishee' notice.

...

12.5.5 The `garnishee' provisions are an important power given by Parliament to assist the Commissioner in recovering unpaid tax. Care needs to be taken to ensure that this recovery power is not abused, nor perceived as being abused. For example:

  • • the power should not be used to prejudice to a significant degree the business of a debtor who is pursuing avenues of appeal against assessments that raised the debt (
    Edelsten v Wilcox 88 ATC 4484 at 4495);
  • ...

12.5.6 The Commissioner will consider any reasonable request from a debtor to either withdraw, or vary the requirements of, a `garnishee' notice, provided the debtor makes alternative arrangements for payment that are suitable to the Commissioner. A notice will be withdrawn or varied as required by legislation.''

10. It has been asserted on behalf of the Commissioner that there is no extant objection by the applicant to the amended assessment raised in the light of the ``ASEAN Books'' investment. As well, Mr Zafiriou has sworn:

``14.... Further, according to the ATO records and with the exception of a second Notice of Objection lodged by the Applicant in relation to the Cabaret scheme assessments on 9 March 1999 (which objection awaits the outcome of the Cabaret scheme `test case') all Notices of Objection filed by the Applicant or on his behalf have been disallowed and the Applicant has been informed accordingly.''

11. Concern has been expressed by the applicant's solicitor, Mr Waters, that s 218 notices have only been issued in respect of those airline pilots who have participated in the relevant investment schemes by whom his firm and ITR have been retained. Mr Waters has also deposed to a fear that s 218 notices will be issued in respect of a further 54 pilot investors for whom he and ITR act ``regardless of their capacity to pay or the effect on their employment or livelihood''. Any actual or potential discrimination of that kind has been disavowed by Mr Zafiriou on behalf of the Commissioner. Mr Zafiriou has sworn:

``19.... It is incorrect to say as Mr Waters does that `notices have only been issued against the pilots for whom ITR and I act'. Section 218 notices have been issued to at least two other taxpayers who are pilots and for whom ITR and Mr Waters do not act.

...

20.... The position with respect to the persons listed in Exhibit `NW-1' to the Mr Waters' affidavit, excluding the Applicant and the 7 persons named in paragraph 8, is that the Australian Taxation Office has issued a letter to eleven (11) informing them that where tax which has been assessed in relation to the years of income wherein the First-named Respondent has disallowed deductions claimed in respect of the Asean Book Publishing scheme is still outstanding, then failing payment appropriate action may be taken.... In respect of every other taxpayer who was a participant in the Asean Book Publishing scheme, including the remaining 42 taxpayers listed at `NW1' to Mr Waters' affidavit, if the tax has not been

ATC 4627

paid or a satisfactory arrangement entered into, a letter in similar terms will be issued before any action is taken. In relation to two (2) of the persons listed in Exhibit `NW-1' to Mr Waters' affidavit, no action will be taken including any section 218 notice, as satisfactory arrangements have been made between those persons and the Australian Taxation Office with regard to payment of the tax in dispute.''

12. Requests have been made of the Commissioner pursuant to s 13 of the AD(JR) Act for a statement of reasons for the decision to issue s 218 notices in respect of the applicant and the seven other persons referred to in paragraph 5 above. It has been indicated on behalf of the Commissioner that those statements of reasons are being formulated and will be supplied within 28 days of the receipt of each request as required by s 13(3) of the AD(JR) Act.

13. Against this factual background, it was sought at the first directions hearing in this matter on 26 May 1999 that directions be given to enable the application to proceed as a representative action pursuant to s 33C of the Federal Court of Australia Act 1976. As well, the applicant sought an interim order requiring the Commissioner to withdraw the s 218 notices which had been issued in respect of the participants in the ``ASEAN Books'' scheme. Subsequently, by motion on notice dated 28 May 1999, the Commissioner sought orders that:

``1. The proceeding be dismissed pursuant to Order 20 Rule 2(1) as it:

  • (i) discloses no reasonable cause of action;
  • (ii) alternatively, it is frivolous or vexatious.

2. Further or in the alternative, the proceeding be dismissed within the inherent jurisdiction of this Court, as adequate provision is made under the Income Tax Assessment Act 1936 enabling the Applicant to seek substantive relief sought.''

14. It is convenient to consider, first, the applicant's request to convert the present proceedings into a representative action, and then, because they raise a number of common or similar issues, to examine together the applicant's motion for an interim order and the Commissioner's motion for summary dismissal of the proceedings.

Should the application proceed as a representative action?

15. It was recited in the initiating application filed on 24 May 1999 that the applicant was one of a representative class of pilots whose employer was Ansett or Qantas Airways Ltd (``Qantas'') the operator of the other major Australian airline, and application was made to bring these proceedings ``as a representative action pursuant to the provisions of Section 33H of the Federal Court of Australia Act 1976 on behalf of those pilots who are listed in the affidavit of Noel Stewart Waters filed herein and who are greater than 7 in number and whose circumstances regarding the issue of a s 218 notice or proposed issue of s 218 notice and whose facts in relation to their dealings with the Respondents and/or officers are similar in terms to those of the Applicant''. The application further recited under the heading ``REPRESENTATIVE ACTION'':

``3. The questions of law raised by each member of the representative class are similar in nature to those raised in this application and concern the decisions and conduct of the Respondents and officers in issuing or proposing to issue a s 218 notice to their employers in similar fact circumstances to the Applicant herein.''

16. It will be recalled that exhibited to Mr Waters' affidavit was a list with tax file numbers of some 62 clients of ITR, including the applicant, all of whom were said to be domestic air pilots employed by either Ansett or Qantas. However, to date, s 218 notices are extant in respect of only the applicant and seven other persons on that list. It was apparently contemplated when the application was framed that it would be converted into a proceeding under Part IVA of the Federal Court of Australia Act in which the applicant sued as representing both himself and all the other 61 ITR clients. However, when the application came on for a second directions hearing and for determination of the claim for interim relief, Mr Bigmore QC who then appeared with Mr F Farrow for the applicant, sought that the application proceed as a representative action in relation only to the following group members:

``Russell Craig Dinning (the Applicant)

Thomas Joseph Raniere

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Ronnie Joe Coleman

Peter Tanfani Cecil

Roger Lee Duncan

Eric Lee Rooth

Daryl Marcellus Petersen

Maxwell Charles Knight''

17. A direction for even that limited form of representative action was opposed by Ms Richards QC who appeared with Mr Sharpley for the Commissioner. She pointed out that the application did not comply with O 73 r 3 of the Rules of this Court which requires the filing of an application in accordance with Form 129 obliging an applicant to identify the questions of law or fact common to the claims of the group members which s 33H(1)(c) of the Federal Court of Australia Act mandates are to be specified in an application commencing a representative proceeding.

18. However, even if that defect could be cured, I am not persuaded that there is a sufficiently substantial question of law or fact common to the small number of persons now comprising the proposed group to warrant attracting the relatively complex procedural regime embodied in Part IVA. It is true that all eight group members are airline pilots who have been clients of ITR and have participated in the ``ASEAN Books'' investment. However, that degree of community does not entail the existence of a substantial question of fact common to all members of the group. As explained, for example in
Silkfield Pty Ltd v Wong (1998) 159 ALR 329 applying, at 344,
Zhang v Minister for Immigration, Local Government and Ethnic Affairs (1993) 45 FCR 384, to be ``substantial'' a common issue is one the determination of which is capable of resolving all or a significant part of the issues of liability raised by the individual claims advanced by each member of the group. In the present case, as I perceive it, the question of fact to be raised in respect of each taxpayer is whether his individual financial circumstances warranted the Commissioner issuing a s 218 notice requiring the employer to remit 38% (or in the case of the applicant, 20%) of the taxpayer's ``base salary'' accruing due from time to time. The question has only to be stated in that way for it to be seen that the answer may well be different for each member of the group according to his individual financial circumstances and the information which the Commissioner had about those circumstances when the relevant s 218 notice was issued.

19. When requested by the solicitors for the Commissioner to identify the question of law and fact said to be common to all members of the proposed group, the applicant's solicitors replied:

``The questions of law are the issue of s 218 Notices directed to salary and wage earners. The questions of fact are the seizure upon the amounts of 20 cents/38 cents.''

20. However, as they became refined in the course of argument on the second directions hearing, the questions of law resolved into whether a notice under s 218 can attach to instalments of wages or salary as they accrue from time to time and whether the form of the notices issued in respect of the applicant was permitted by the section. Those were fully debated in the course of the hearing on 2 and 3 June 1999 and can, I consider, be as effectively determined in the proceedings as presently constituted as they could in a representative action.

21. Moreover, the seven other pilots in respect of whom s 218 notices have so far issued can be added to the present proceedings as applicants in their own right. That is not to say that the result to be arrived at may not be different in respect of each of the eight presently available applicants, but such joinder would permit each pilot to be bound by a finding of fact or ruling on a question of law which is applicable to him in common with any of the other applicants. I have already noted that Counsel for the applicant has resiled from the contention that the proposed group should comprise all 62 airline pilots for whom ITR has acted. When that consideration is added to the circumstances which I have already outlined, it becomes manifest, in my view, that it would not be an appropriate exercise of the Court's discretion to reconstitute the present action as a representative proceeding.

Claims for summary dismissal and interlocutory relief

22. The two points of law which, as I have said, have been fully debated in the course of the interlocutory hearing, each involved the interpretation of s 218(1). That sub-section provides:

ATC 4629

``The Commissioner may at any time, or from time to time, by notice in writing (a copy of which shall be forwarded to the taxpayer at his last place of address known to the Commissioner), require:

  • (a) any person by whom any money is due or accruing or may become due to a taxpayer;
  • (b) any person who holds or may subsequently hold money for or on account of a taxpayer;
  • (c) any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or
  • (d) any person having authority from some other person to pay money to a taxpayer;

to pay to the Commissioner, either forthwith upon the money becoming due or being held, or at or within a time specified in the notice (not being a time before the money becomes due or is held):

  • (e) so much of the money as is sufficient to pay the amount due by the taxpayer in respect of tax or, if the amount of the money is equal to or less than the amount due by the taxpayer in respect of tax, the amount of the money; or
  • (f) such amount as is specified in the notice out of each payment that the person so notified becomes liable from time to time to make to the taxpayer until the amount due by the taxpayer in respect of tax is satisfied;

and may at any time, or from time to time, amend or revoke any such notice, or extend the time for making any payment in pursuance of the notice.''

23. Among the definitions in s 218(6B) is the following:

```person' includes a company, a partnership, the Commonwealth, a State, a Territory and any public authority (whether incorporated or unincorporated) of the Commonwealth or a State or Territory;''

24. It was first submitted on behalf of the applicant that, because the sub-section is predicated on ``money'' being or becoming due to the recipient of the notice and being paid to the Commissioner it requires a ``finite'' or liquidated sum to be identifiable at the time when the notice is issued. Accordingly, so it was argued, a notice could not require payment to the Commissioner from salary or wages payable under a contract of employment in respect of a period of employment which had not commenced when the notice was issued. Reference was made to
DFC of T v Conley 98 ATC 5090; (1998) 158 ALR 229 where a Full Court held that s 218 was not available to require payments to the Commissioner from accounts denominated in United States currency in the Sydney and New York branches of a bank. Emmett J, with whom Wilcox and Tamberlin JJ agreed, traced the history of s 218 and concluded, at ATC 5099-5100; ALR 240:

``The difficulties as to the time at which a conversion calculation is to be made in order to determine how much of foreign currency is attached by a notice under section 218 indicates, in my opinion, that foreign currency is not intended to be the subject of such a notice. The absence of any indication in section 218 itself that it was intended to apply to foreign currency and the absence of any mechanism for conversion such as is contained in section 20 reinforces the conclusion that foreign currency is not intended to be the subject of a notice under section 218.''

25. However, there is no suggestion that any moneys which may become due to the applicant from Ansett are denominated otherwise than in Australian currency. Moreover, Emmett J expressly acknowledged that a notice under s 218 may attach to moneys becoming payable to the taxpayer in the future. His Honour said, at ATC 5097; ALR 237:

``One consequence of the service of a notice under section 218, where money is not yet due by the recipient, is that, as from the time of service, the recipient is bound, as and when money becomes due and payable to the taxpayer, to pay some part of that money to the Commissioner - see
DFC of T v Donnelly & Ors 89 ATC 5071 at 5093; (1989) 25 FCR 432 at 459-460. A taxpayer is prevented thereafter from assigning money which is the subject of such a notice -
Clyne & Anor v DFC of T 81 ATC 4429 at 4438; (1981) 150 CLR 1 at 19. Section 218 requires the recipient to pay to the Commissioner, when it becomes payable, some part of the money owing to the taxpayer at the date of service of the notice.

ATC 4630

The obligation attaches to the recipient on service of the notice, though it cannot be performed until a future date. The effect of imposing the obligation is to make it unlawful for the recipient, after service of the notice, to pay the money to anyone but the Commissioner - see per Mason J in Clyne at ATC 4440; CLR 23. Further, the service of a notice under section 218 has been held to create a charge over the debt due by the recipient to secure the amount due in respect of tax - see DFC of T v Donnelly & Ors at ATC 5075 and 5091-5092; FCR 436 and 457.''

26. In my view, the construction of s 218(1) for which the applicant contends ignores the presence in paragraph (a) of the words ``may become due'' which qualify the word ``money''. Those words indicate that the Commissioner may make the requirement in respect of money which the recipient of the notice is not presently liable to pay to the taxpayer but which he or she ``may become liable'', because of some contractual or other legal connection with the taxpayer, to pay in the future. This interpretation is borne out by the legislative history of s 218 which, as Emmett J noted in DFC of T v Conley, is traceable to s 50A inserted in 1918 and from it to s 66 inserted in 1922 which, as his Honour said at ATC 5095; ALR 235, is closer in its structure to the current s 218. The debate on the second reading of the Bill which led to the insertion of s 50A included this explanation by the relevant Minister:

``(4) Under clause 32, by an amendment suggested by the Conference of Taxation Commissioners, the Commissioner will be empowered to call upon any employer of a taxpayer, who is in arrears in payment of his tax, to deduct the amount due from any salary, wages, or other payments due to the taxpayer by the employer.

...

As it is, the clause simply requires that the employer, upon receipt of a demand from the Commissioner, shall take this action in regard to future payments.''

27. The interpretation which I favour is also supported by the following passage from the judgment of Mason J in
Clyne & Anor v DFC of T 81 ATC 4429 at 4440; (1981) 150 CLR 1 at 23 although the facts of that case, which concerned moneys on deposit with a bank at the date of the s 218 notice which were repayable in the future, led his Honour to confine his remarks to moneys owed to the taxpayer at the date of the notice:

``... The section relates to moneys owing to the taxpayer when the notice is given, it imposes an obligation to pay forthwith moneys which are then payable; it imposes an obligation to pay moneys which become payable at a future time when that time arrives . It does not explicitly prescribe as a condition preliminary to the creation of the obligation to pay that the moneys owing to the taxpayer at the date of the notice shall continue to be owing to him when they become payable. It merely requires the recipient to pay to the Commissioner when they become payable moneys owing to the taxpayer at the date of the notice. The obligation attaches to the recipient on service of the notice, though it cannot be performed until a future date .''

(emphasis added)

28. The second issue of law raised by the applicant was whether s 218 permits the issue of a notice requiring payment to the Commissioner of a specified percentage of a sum of money which may become due to the taxpayer in the future. Mr Bigmore for the applicant contended that to impose the requirement contemplated by s 218(1)(f) to pay ``such amount as is specified in the notice'' the Commissioner must stipulate an amount in dollars and cents which the recipient of the notice is required to pay to the Commissioner out of moneys from time to time becoming payable to the taxpayer. To stipulate, as the present notice does, ``an amount of 20 cents in every dollar of the base salary'', it was argued, did not discharge the Commissioner's obligation to specify an amount in the notice.

29. I do not agree. I consider that a notice may ``specify an amount'' if a precise sum of money is ascertainable by the recipient of the notice by applying its terms to factual circumstances of which that recipient has knowledge. The ``base salary'' of the applicant was presumably known to Ansett from the terms of the contract of employment. The amount to be remitted to the Commissioner is therefore 20% of the base salary component of each instalment of remuneration which Ansett may become liable to pay to the applicant. In

ATC 4631

my view, that amount was ``specified'' in the sense required by s 218; see eg
Re Arthur Average Association (1875) 10 Ch 542 where it was suggested by Sir George Jessel MR at 550 that a policy of marine insurance required to ``specify'' the subscribers or underwriters did so if, by itself, it afforded the means of ascertaining who the insurers were to be. Similarly, in
A v B [1969] NZLR 534 Roper J said at 536:

``In my view persons can be specified without being named, provided they are unambiguously identified...''

30. More recently a Full Court of this Court in
TCN Channel Nine Pty Ltd v Australian Mutual Provident Society (1982) 42 ALR 496 said, at 504, of a similar requirement in the Broadcasting and Television Act 1942:

``Whatever the commercial arrangement, the requirement of the section, in our view, is that the certificate must specify the interest in question with sufficient particularity to enable it to be identified as the relevant authorized shareholding interest. This can be done where the interest is already held or where the applicant is a party to a proposed transaction for the acquisition of an interest. It cannot be done where no specific proposal is envisaged.

There is an additional requirement of sub-s (2) namely, that the specification of the interest in the licensee company must be shown as `amounting to a specified amount'. In the case of shareholding interests this can be expressed as a percentage of the paid up capital of the licensee company. Under s 91D(9) a person shall not be taken, by reason only of the application of s 91(2)(c), (d) or (e), to have a prescribed interest in a licence so long as he holds interests in the licensee company as authorized by a s 91D certificate and does not otherwise hold any interest in the company. Section 91(2)(e) (paras (c) and (d) not being relevant for this purpose) provides that for the purposes of Div 3 of Pt IV a person has a prescribed interest in a licence if he is:-

`(e) the holder of shareholding interests in the company holding the licence exceeding in amount 5% of the total of the amounts paid on all shares in that company.'

Thus s 91(2)(e) itself speaks of an amount in terms of a percentage of the total of the paid up capital of the licensee company whose shareholding interests are concerned. This provides strong support for our view that shareholding interests can be expressed as a percentage of paid up capital. However, even if s 91(2)(e) were not so expressed we would have come to the same conclusion because `amount' is a word of wide import. We see no reason why it cannot be expressed or measured as a percentage.''

31. It is also significant in this context that in
Edelsten v Wilcox & Anor 88 ATC 4484; (1988) 19 ATR 1370 Burchett J had to consider the efficacy of a notice under s 218 requiring the Health Insurance Commission to pay to the Commissioner the whole of any money due by it to the applicant until an amount of $1,183,583.10 tax due should be satisfied. No point was taken that the notice did not comply with s 218 because it failed to ``specify'' in dollars and cents the amount of any instalment to be paid to the Commissioner.

32. For these reasons the two issues of law in relation to the scope and form of the Commissioner's notice must each be resolved adversely to the applicant.

33. The other attack made on the Commissioner's decision to issue the current s 218 notice in respect of the applicant I take to be based on s 5(1)(e) of the AD(JR) Act which affords as a ground for review of an administrative decision:

``that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made;''

34. Section 5(2) of the AD(JR) Act provides, so far as is relevant:

``The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to:

  • (a) taking an irrelevant consideration into account in the exercise of a power;
  • (b) failing to take a relevant consideration into account in the exercise of a power;
  • (c) an exercise of a power for a purpose other than a purpose for which the power is conferred;
  • (d) an exercise of a discretionary power in bad faith;

    ATC 4632

  • ...
  • (f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case;
  • (g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power;
  • ...
  • (j) any other exercise of a power in a way that constitutes abuse of the power.''

35. I do not consider that the evidence, as it stands, supports a case that the Commissioner has issued the present notice for an ulterior purpose, in bad faith or otherwise in abuse of his statutory power. However, not having the benefit of a statement of the Commissioner's reasons in accordance with s 13 of the AD(JR) Act, I consider that it remains arguable on the present state of the evidence that the framer of the notice fixing on an amount of 20% of the applicant's base salary to be paid to the Commissioner in addition to amounts which Ansett was already required to deduct as instalments of PAYE tax, failed to take into account all of the applicant's relevant circumstances. I accept Ms Richards' submission that the Commissioner is only required to take account of the best information available to him at the time of issuing the s 218 notice and is under no obligation to make enquiries before issuing the notice. However, the best information available includes, as the Commissioner seems to acknowledge, facts deducible from recent taxation returns filed by the taxpayer. I am not able to find, on the present state of the evidence, what matters led the Commissioner to reduce the amount specified in respect of the applicant from 38% to 20%, rather than any other percentage, of his base salary. The possibility remains that the Commissioner applied particular parts of the Debt Collection Policy without paying any, or any sufficient, regard to financial or other circumstances peculiar to the applicant. I do not consider that possibility to be excluded by the elliptical statement in paragraph 9 of Mr Zafiriou's affidavit that ``the Respondents did have regard to the financial circumstances of the Applicant as detailed in the affidavit sworn by the Applicant in proceeding No VG 79 of 1999... That was the reason for deciding that an amount of twenty cents in every dollar cents should be remitted''. As I have already pointed out, the Commissioner apparently had regard also to information gleaned from a taxation return of the applicant which was earlier in time than his affidavit in proceeding No VG 79 of 1999. Moreover, the possibility of the ground afforded by s 5(1)(e) of the AD(JR) Act as amplified by s 5(2) of that Act being made out is increased if, as I consider they should be, the remaining seven pilots in respect of whom s 218 notices have been issued are added as applicants. For each of those taxpayers, it will be recalled, the amount specified to be paid by the employer was 38% of base salary which was apparently equated by the Commissioner with the maximum of 30% of gross salary or wages allowable under cl 12.5.3(x) of the Debt Collection Policy.

36. For these reasons, I have been unable to accede to the Commissioner's motion for summary dismissal of the application. However, the recognition of an arguable question to be tried which that conclusion implies does not entail that the applicant should obtain the interlocutory relief which he seeks. In the first place, there is at present no more than a possibility that the applicant will obtain final relief. Secondly, by contrast with Edelsten v Wilcox (supra), the present applicant does not appear to have pending an appeal against the amended assessment in respect of the ``ASEAN Books'' investment. That difficulty, it is true, may be overcome if any relevant time limits which have not been observed can be extended. However, the Court is at present in no position to assess the prospects of success for any appeal of that kind.

37. Another consideration which has influenced me to exercise my discretion against the grant of interlocutory relief has been the fact that, if the Commissioner's issue of the current s 218 notices stemmed from his lacking the best available information about the applicant's circumstances, that deficiency was due in large measure to the applicant's failure before the commencement of this litigation to communicate with the Commissioner or make any proposal for payment of the debt. If there is further information not contained in the applicant's affidavit in proceedings No VG 79 of 1999, it can still be provided and the Commissioner, as he has acknowledged, is under a continuing duty to evaluate it in considering whether to withdraw or amend the current s 218 notice. As well, other avenues are

ATC 4633

available under the Act, eg through s 206 or s 265, by which the applicant can seek to be relieved of the burden of paying immediately and in full the tax debt to which the present certificate is related.

38. The evidence which the applicant has adduced in these proceedings indicates that he is insolvent in the sense that his present average monthly earnings are not sufficient to discharge his financial commitments. That suggests that the moneys attached by the s 218 notice would cease to be available to the Commissioner if the present application should ultimately be dismissed. For the same reason, the applicant is unable to proffer any enforceable undertaking as to damages. On the other hand, the applicant has not convincingly demonstrated that he will suffer any irreparable loss or damage if Ansett complies with the present s 218 notice for one or two months before his substantive application can be heard and determined. Instalments paid to the Commissioner during that period will, at worst for the applicant, be applied in reduction of a debt which, until the amended assessment is set aside or varied, by ss 204 and 207 of the Act is conclusively due to the Commonwealth.

39. For these reasons, I have not been able to accede to the applicant's motion for interlocutory relief. However, subject to any submissions which the Commissioner may be advised to make in respect of paragraphs 2 and 3 I shall make the following orders to expedite the final hearing of the application:

1.  BY CONSENT that the applicant have leave to discontinue the application against the second respondent, Frank Linsdell and that the application be amended accordingly.

That each of the following persons be added as applicants herein:

That within 21 days of the supply to him by the respondent of a statement pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 of reasons for the decision to issue a notice under s 218 of the Income Tax Assessment Act 1936 each applicant file and serve a statement of contentions of fact and law and any further affidavit or affidavits on which he intends to rely in support of the application herein.

That within 14 days of the filing and service of the last of the statements of contentions of fact and law and affidavits referred to in paragraph 3 of this order, the respondent file and serve an answering statement of contentions of fact and law and any further affidavit or affidavits on which he intends to rely in opposition to the application herein.

That the applicants file and serve within 7 days of the filing and service of the respondent's contentions of fact and law and further affidavits referred to in paragraph 4 of this order any contentions of fact and law and affidavits in reply.

That the application be fixed for final hearing by Ryan J on 2 August and, if necessary, 3 August 1999.

That the costs of all parties of the respondent's motion on notice dated 28 May 1999 and the hearing on 2 and 3 June 1999 be reserved.

That liberty be reserved to any party to apply to Ryan J on not less than 48 hours notice in writing to the other parties.

 

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