Bryant, J.R. v Deputy Commissioner of Taxation

[1993] FCA 377

JOSEPH RICHARD BRYANT v. DEPUTY COMMISSIONER OF TAXATION
No. NG802 of 1992
FED No. 377
Number of pages - 4
Administrative Law
(1993) 25 ATR 419

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Whitlam J(1)

CATCHWORDS

Administrative Law - Application for review - Taxation Offence - Decision to prosecute and seek reparations - Prosecution policy guidelines - Power of Local Court to stay proceedings as an abuse of process - Intervention by Court only in exceptional circumstances.

Taxation Administration Act 1953 s 8Y

Gerah Imports Pty Ltd v. Minister for Industry, Technology and Commerce (1987) 17 FCR 1

Smiles v. Federal Commissioner of Taxation (1992) 109 ALR 449

Jago v. District Court of New South Wales (1989) 168 CLR 23

HEARING

SYDNEY, 16 April 1993

#DATE 23:4:1993

Counsel for the applicant: D.J. Thorley instructed by

Townsend Partners

Counsel for the respondent: Alan Robertson instructed by

Australian Government Solicitor

JUDGE1

WHITLAM J This is an application for an order of review under the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act"). The background to the application may be shortly stated.

1. The applicant is or was a director of six companies. On 14 November 1990 Mr Boulger from the Australian Taxation Office visited the applicant to discuss the companies' failure to remit group tax for the months of June to October 1990. Subsequently on 21 November 1990 the respondent wrote to the applicant drawing his attention to an employer's obligations under s 221F(5)(a) of the Income Taxation Assessment Act 1936 (the "Assessment Act") and the liability to prosecution, but concluding: "It is not proposed to proceed to prosecution on this occasion, however, any future breach may result in the institution of legal proceedings without further notice." On 3 May 1991 Mr Boulger again called upon the applicant to discuss the failure to remit tax instalment deductions for November and December 1990 and February and March 1991. On this occasion the applicant gave Mr Boulger a written statement "outlining the reasons for non-remittance of Group Tax" in respect of the six companies. On 17 September 1991 the applicant's wife, who was also a director of the six companies, attended the respondent's offices pursuant to a notice under s 264 of the Assessment Act and gave sworn evidence about the failure of the companies to remit group tax. The applicant attended these offices on 16 October 1991 and was interviewed by the respondent's officers about the same subject.

2. On 7 February 1992 the applicant was served with sixty-six summonses in respect of the alleged failure by the six companies to remit tax instalment deductions contrary to s 221F(5)(a) of the Assessment Act. The applicant was prosecuted by virtue of s 8Y of the Taxation Administration Act 1953 which renders directors liable for tax offences committed by a company as if they had committed the offences themselves.

3. The summonses were adjourned by consent on 19 March 1992 and 21 May 1992. On 8 July 1992 the applicant's solicitor was told that the respondent intended to seek reparations from the applicant under s 21B of the Crimes Act 1914 for the deductions which had not been remitted by the six companies. On 9 July 1990 the summonses were again adjourned, on the applicant's application and without opposition by the respondent, to 1 October 1992 in order to permit the applicant to make representations to the respondent. On 28 September 1992 the applicant, accompanied by his solicitor and counsel, met officers of the respondent. On 1 October 1992 the summonses were once more adjourned to 29 October 1992 in order to permit the applicant to commence proceedings under the ADJR Act. These proceedings were commenced on 28 October 1992, on which day the applicant's solicitor was also informed that the prosecution had been taken over by the Director of Public Prosecutions. On 29 October 1992 the summonses were fixed for hearing at Parramatta Local Court on 5 May 1993.

4. In these proceedings the applicant challenges what are described as the decisions of the respondent to institute and continue the prosecution of the applicant pursuant to s 8Y of the Taxation Administration Act and the decisions to seek and continue to seek reparations from him pursuant to s 21B of the Crimes Act. The applicant's case is that such decisions contravene "the published policy guidelines being Income Tax Ruling IT 2246 dated 6 February, 1986 relating to the use of Section 8Y of the Taxation Administration Act, 1953." This one fundamental point has been re-fashioned with various degrees of ingenuity by the applicant in order to rely upon the grounds in s 5(1)(b), (e), (f), and (h) of the ADJR Act.

5. IT 2246 is a Taxation Ruling entitled Australian Taxation Office Prosecution Policy. The particular provisions upon which the applicant relies are set out in Chapter 8 dealing with the "Failure to remit PAYE deductions by group employers," which provides
   

"8.1 Having regard to the regime of administrative penalties available, as a matter of policy those penalties should be applied with maximum effect with the objective of achieving voluntary compliance. Prosecution action also has a place in achievement of the stated objective.

8.2 An effective use of the penalty option should normally reduce the number of defaulting group employers to cases falling into the following categories:

i. those whose default is due to genuine insolvency; and,

ii. companies whose assets are being misappropriate by associated natural persons and/or whose insolvency has been or is being engineered for the purpose of defeating creditors.

8.3 Cases falling into the first category would generally not be cases suitable for prosecution. The appropriate course of action is to promptly commence bankruptcy, liquidation or other appropriate recovery proceedings. Cases falling into the second category would normally be suitable for prosecution action (by utilising section 8Y) against the natural persons who have profited from the offences. In most cases where sec. 8Y is utilised it would be appropriate to seek a reparation order under sec. 21B of the Commonwealth Crimes Act. Because of the need to demonstrate to the court that the company is incapable of making the remittances it would be important to have appropriate evidence of this fact available at the time when the prosecution is commenced. Normally this would entail the commencement of liquidation proceedings and the appointment of a liquidator. 8.4 Apart from the cases referred to above it is anticipated that some cases will be detected where the degree of culpability will indicate that prosecution action should be taken. By way of example a case where a defaulting group employer was repeatedly delinquent or obstructed or hindered an officer who was seeking to establish the employer's liability would be suitable for prosecution under both sec. 8X of the Taxation Administration Act and para. 221F(5)(a) of the Income Tax Assessment Act. A further example of a suitable prosecution case would be a situation where it was discovered that the defaulting group employer had committed offences against sec. 8L, 8Q, 8T or 8U of the Taxation Administration Act in relation to the group tax records. In this type of case the group employer should be prosecuted under the appropriate provision of the Taxation Administration Act and para. 221F(5)(a)."

1. The applicant submits that s 8Y of the Taxation Administration Act is to be used only in the limited circumstances suggested in the second category identified in paragraph 8.2 of the ruling. The authorities on the status of such guidelines are usefully collected by Davies J in Gerah Imports Pty Ltd v. Minister for Industry, Technology and Commerce (1987) 17 FCR 1. It is clear that such guidelines do not have the status of law and are non-binding in character. (No doubt, they may be the source of expectation in a way that brings into play the rules of natural justice, but that is not the applicant's case here.)

2. The applicant submitted however, that s 10 of the Freedom of Information Act 1982 (which provides that unpublished guidelines are not to prejudice the public) meant that, as a corollary, published guidelines could be regarded as laying down "procedures required by law to be observed" within the meaning of s 5(1)(b) of the ADJR Act. I fail to see how s 10 of the Freedom of Information Act can elevate such guidelines to the status of law.

3. Counsel for the respondent draws attention to the provisions of Chapter 10 of IT 2246 dealing specifically with s 8Y of the Taxation Administration Act, paragraph 10.5 of which provides:
   

"10.5 Whenever it becomes apparent that a corporation has failed to remit instalments of Prescribed Payments and/or PAYE deductions and/or sales tax and there are indications that the corporation will be unable to make payment of amounts due, then careful consideration should be given to prosecuting the appropriate officers and seeking a reparation order under sec. 21B of the Commonwealth Crimes Act.

Properly understood, it is submitted, the guidelines themselves in no way confine the use of s 8Y in the way contended for by the applicant. I think that this is correct.

1. I have read the transcript of the meeting that took place on 28 September 1992 when the respondent's officers were taxed, if I may be forgiven a pun, by the applicant's counsel and solicitor with their views of IT 2246. It seems to me that the respondent's officers acted with great courtesy and that they had regard to everything that the applicant had put to Mr Boulger, including his companies' past record of remittances. If it were up to me, I should not regard any concern that the respondent's officers had for the protection of the revenue as irrelevant. On the contrary, the number of offences and the amount of money involved seem to be most relevant considerations.

2. However, none of these considerations is a matter for me. The decision of the Full Court in Smiles v. Federal Commissioner of Taxation (1992) 109 ALR 449 stands as an insurmountable obstacle to the relief that the applicant seeks. The applicant suggests no "exceptional circumstances" why this Court should intervene in the criminal proceedings pending in the Local Court. The applicant submitted that the "abuse of process" for which a Local Court could grant a permanent stay of proceedings was confined to cases of delay and the like and did not extend to the non-observance of prosecution guidelines. Nothing in Jago v. District Court of New South Wales (1989) 168 CLR 23 suggests that the power of the Local Court is so confined.

3. Since the application must fail, it is unnecessary to deal with the respondent's objection to competency. The application is dismissed. The applicant must pay the respondent's costs.