Chubb Electronic Security Australia Pty Ltd v Commissioner of State Taxation
[2012] SASC 164
•20 September 2012
SUPREME COURT OF SOUTH AUSTRALIA
(Appeals to a Single Judge: Civil)
CHUBB ELECTRONIC SECURITY AUSTRALIA PTY LTD v COMMISSIONER OF STATE TAXATION
[2012] SASC 164
Judgment of The Honourable Justice White
20 September 2012
TAXES AND DUTIES - STAMP DUTIES - APPEAL, CASE STATED, ETC - SOUTH AUSTRALIA
TAXES AND DUTIES - STAMP DUTIES - ASSESSMENT AND AMOUNT PAYABLE INCLUDING FINES - GENERAL MATTERS - SOUTH AUSTRALIA
Appeal against assessment of stamp duty by Commissioner - whether the withdrawal of an offer by the Treasurer of ex gratia relief can be reviewed on an appeal against the Commissioner's assessment - whether Commissioner has general power to grant relief from stamp duty liability on discretionary grounds - whether Commissioner permitted or obliged to take account of any grant of relief by Treasurer on an assessment of stamp duty - whether decision as to ex gratia relief forms part of the 'assessment' - whether Treasurer acting as agent or delegate of Commissioner - whether Commissioner has an incidental power to grant such relief.
Held: appeal dismissed - the withdrawal of an offer by the Treasurer of ex gratia relief cannot be reviewed on an appeal against the Commissioner's assessment - other than in circumstances which are not presently material, the Commissioner does not have power to grant relief from a stamp duty liability on discretionary grounds - Commissioner not permitted to take account of any grant of relief by Treasurer on an assessment of stamp duty - a decision as to ex gratia relief does not form part of the 'assessment' - Treasurer not acting as agent or delegate of Commissioner - Commissioner does not have an incidental power to grant such relief.
Stamp Duties Act 1923 (SA) ss 2-4, s 16, s 20, s 23, s 107; Taxation Administration Act 1996 (SA) s 3, ss 8-9, s 12, s 61, s 66, s 82, s 88, s 92, s 100, s 102G, s 104; Public Finance and Audit Act 1987 (SA) s 7, referred to.
Bates v Inland Revenue Commissioners [1968] AC 483; Inland Revenue Commissioners v Frere [1965] AC 402; R v Inland Revenue Commissioners, ex parte MFK Underwriting Agents Ltd [1990] 1 WLR 1545; R v Inspector of Taxes, Reading, ex parte Fulford-Dobson [1987] QB 978; Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32; Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 85 ALJR 1183; Vestey v Inland Revenue Commissioners [1980] AC 1148; Vestey v Inland Revenue Commissioners (No 2) [1979] Ch 198, considered.
CHUBB ELECTRONIC SECURITY AUSTRALIA PTY LTD v COMMISSIONER OF STATE TAXATION
[2012] SASC 164
Civil
WHITE J. The Chubb Group of Companies is engaged in the security industry. In 2006, it carried out an organisational restructure under which Chubb Security Australia Pty Ltd (Chubb Security) transferred part of its business to the appellant (Chubb Electronic)[1] and the remaining part to Chubb Security Personnel Pty Ltd (Chubb Personnel). The transfers attracted a liability for stamp duty under the Stamp Duties Act 1923 (SA) (the SD Act). The Chubb Group sought relief from those liabilities under guidelines approved by the State Treasurer.
[1] At the time of the transfer the appellant was known as Chubb Electronic Security Pty Ltd.
On 29 June 2006, the Acting Treasurer offered the Chubb Group stamp duty relief. The offer was, however, subject to conditions, one of which could not be satisfied. Subsequently, the Acting Treasurer withdrew the offer and, in turn, on 16 May 2011 the Commissioner of State Taxation (the Commissioner) made an assessment of the stamp duty payable by the three companies to the full extent of their liability.
Acting under s 82 of the Taxation Administration Act 1996 (SA) (the TA Act), on 2 August 2011 Chubb Electronic lodged with the Treasurer a notice of objection to that part of the assessment which concerned it. By letter dated 5 September 2011 the Treasurer informed Chubb Electronic that he did not regard the letter of 2 August as raising an objection of the kind contemplated by s 82. That was because the objection related to the Acting Treasurer’s withdrawal of the offer of stamp duty relief, and not to the Commissioner’s assessment.
Chubb Electronic now appeals, under s 92 of the TA Act, against the Commissioner’s assessment of 16 May 2011. Its notice of appeal also indicated that it appealed against the decision of the Treasurer not to determine the objection, but at the hearing of the appeal counsel indicated that Chubb Electronic did not pursue that aspect of the notice.
In effect, Chubb Electronic seeks on an appeal against the assessment of stamp duty by the Commissioner to have the Court review the withdrawal of the offer of ex gratia relief. I consider that the Commissioner’s assessment is not open to review on that basis, and that the appeal should fail. My reasons follow.
The Scheme for Stamp Duty Relief
Before outlining the circumstances giving rise to the appeal, it is appropriate to note some of the matters concerning the liability for stamp duty and to refer to the scheme by which the Treasurer may offer relief from that liability in respect of corporate restructures.
By s 4(1) of the SD Act, certain instruments are charged with stamp duty. The duty chargeable upon any instrument is to be calculated by reference to the rates in force at the time when the instrument is produced to the Commissioner for the purpose of being stamped (s 16). In respect of instruments executed outside South Australia (as apparently occurred in this case), the duty must be paid and the instrument stamped within two months after their receipt in this State, or within six months of their execution, whichever period expires first (s 20(1)). Instruments are to be stamped in accordance with the assessments made by the Commissioner (s 23). The parties executing the instrument are jointly and severally liable to pay the duty charged in respect of the instrument (s 4(2)).
The TA Act contains provisions relating to the administration and enforcement of the taxation laws in this State and the SD Act is to be read in conjunction with it.[2] By virtue of s 61 of the TA Act, the Commissioner has the general administration of the taxation laws. Part 3 of the TA Act authorises the Commissioner to make an assessment (and, if necessary, re‑assessments) of the tax liability of a taxpayer (ss 8-9). The Commissioner may make an assessment on the information available at the time of the assessment (s 12(1)).
[2] Stamp Duties Act 1923 (SA), s 3.
Each of the SD Act and the TA Act define an “assessment” for the purposes of those Acts as “an assessment by the Commissioner under Part 3 [of the TA Act] of the tax liability of a person”.[3] The TA Act also indicates that such assessments include an assessment made by the Treasurer on an objection under s 82 of the TA Act, and by this Court on appeal under s 92 of the TA Act.
[3] Stamp Duties Act 1923 (SA), s 2(1); Taxation Administration Act 1996 (SA), s 3(1).
The Treasurer has recognised that a stamp duty liability may be an impediment to corporate restructures and, in particular, to those restructures intended to achieve simplification or rationalisation of an existing corporate structure. Accordingly, the Treasurer has approved guidelines for the provision of “ex gratia relief from stamp duty for corporate reconstructions”. The guidelines are contained in Circular No 227 published by the Commissioner on 24 June 2002 entitled “Stamp Duty Relief Guidelines for Corporate Reconstructions”. I will refer to this document as “the Guidelines”.
The Guidelines state the purpose and policy of the scheme for relief as follows:
1.To provide stamp duty relief for bona fide corporate reconstructions where the duty represents an impediment to a restructure which would result in the simplification and rationalisation of an existing corporate structure, making it more efficient, effective and/or competitive.
Bona fide corporate reconstructions are those where there is no change of beneficial ownership but a significant change to the legal ownership of the property the subject of relief.
It is not the purpose of these guidelines to provide relief from stamp duty where the transfer(s) represents a normal commercial transaction, such as the transfer of individual assets from one corporation to another corporation within the corporate structure, rather than the restructuring of corporations within an existing corporate group.
Clause 3 of the Guidelines contains the principal criteria for a grant of relief:
3.Subject to paragraph 12, the Treasurer may approve an ex gratia payment in respect of the stamp duty applicable on an eligible transaction if the Treasurer is satisfied that the eligible transaction is for the purposes of giving effect to a bona fide corporate reconstruction.
The ex gratia payment may be for an amount which is up to 95 per cent of the stamp duty otherwise payable on the “eligible transaction” (cl 17).
An “eligible transaction” for the purposes of cl 3 is defined to be an instrument or transaction which conveys, transfers or assigns a beneficial interest in property between “associated eligible entities” (cl 2(h)).[4] Companies will, for material purposes, be “associated eligible entities” if they have been members of the same corporate group for at least three years prior to the date of the eligible transaction (cl 2(g)).
[4] See also cl 4.
An additional criterion for the grant of relief is that the transferor and transferee corporations must remain members of the corporate group for a period of at least three years immediately after the eligible transaction (cl 6).
Applications for relief are to be made to the Treasurer (cl 16) and it is the Treasurer who may make or withdraw the grant of relief. The Treasurer may also impose further criteria, conditions or restrictions on applicants seeking relief from a liability to pay stamp duty (cll 7, 20). On their face, the Guidelines do not contemplate the Commissioner having any function at all in relation to applications for relief.
A distinctive feature of the scheme contained in the Guidelines is that the Treasurer does not approve a waiver, exemption or reduction in the liability for stamp duty under the SD Act. Instead, the Treasurer may approve “an ex gratia payment” in respect of the applicable duty. It was an agreed fact that when the Treasurer does approve an ex gratia payment, the amount so approved is transferred from an account holding funds for ex gratia relief purposes (presumably held by the Treasury) to RevenueSA to be applied in payment of the outstanding stamp duty liability. In this way the stamp duty liability of the taxpayer as assessed by the Commissioner is discharged, without being withdrawn or varied. If the taxpayer has already paid the stamp duty at the time the ex gratia payment is approved, the payment is made to the taxpayer.
The Guidelines provide for the circumstances in which an amount paid by way of relief may be recovered (claw‑back) (cll 8-11). If the Treasurer issues the approval on the basis of false or inadequate material or if the entities involved cease to be members of the corporate group (other than in some cases of liquidation) within three years of the eligible transaction, the Treasurer’s approval will be deemed to have been withdrawn, and any ex gratia payment is repayable together with interest. Clause 8 provides:
8.Where an application for an ex gratia payment of stamp duty has been approved and:
…
(iii) the relevant entities have ceased to be members of the corporate group (other than in circumstances outlined in paragraph 9) within 3 years of the date of the eligible transaction(s);
the approval will be deemed to have been withdrawn and any ex gratia payment made will be repayable by the applicant, with interest, from the date on which the eligible transaction(s) occurred [refer paragraph 21 (c)].
Clause 10 provides for the circumstance in which the eligible entities remain part of one corporate group but the property which was the subject of the transaction is transferred outside the group.
Background Circumstances
At the time of the transactions giving rise to this appeal both Chubb Electronic and Chubb Personnel were wholly owned subsidiaries of Chubb Security. They formed part of the Chubb Group of Companies.
The Chubb Group originally sought stamp duty relief in August 2005 in respect of the proposed transfer of assets from Chubb Security to Chubb Electronic. The Treasurer refused that application on the basis that, contrary to the Guidelines, the reconstruction did not involve a transfer of “substantially all” of Chubb Security’s assets.
Subsequently, on 29 June 2006,[5] Chubb Security executed deeds with each of Chubb Electronic and Chubb Personnel under which certain of its assets and business (about 70 per cent) were transferred to Chubb Electronic and other assets and parts of its business (about 30 per cent) were transferred to Chubb Personnel. This involved a transfer of the entirety of the assets in the business away from Chubb Security. Each deed was made conditional upon stamp duty relief being granted to the transferees (cl 2).
[5] This was the same day on which the Acting Treasurer made the offer of stamp duty relief to which I refer later. The evidence did not explain the coincidence in dates.
Before 29 June 2006, the solicitors for the Chubb Group had applied to the Treasurer for stamp duty relief. Their letter of 4 May 2006 referred to the Guidelines and included statements that Chubb Security, Chubb Electronic and Chubb Personnel intended, for at least three years after the restructure, to remain associated companies and to keep within the Chubb Group the assets being transferred.
The Treasurer granted the application. By letter dated 29 June 2006 to the Group’s accountants, the Acting Treasurer offered relief in the form of an ex gratia payment equal to 95 per cent of the stamp duty which would otherwise be payable. The Acting Treasurer went on to include a provision concerning claw‑back:
My approval of relief is subject to the relevant entities entering into an agreement with the Treasurer, which, amongst other things, specifies that they are obligated to advise [the Commissioner] in writing if, within three years from the date of the relevant transfers, more than ten per cent of the property (including shares) the subject of the reconstruction are held outside the Chubb Group, or a relevant member of the corporate group is transferred outside the Chubb Group.
In the event that there is a significant departure from this undertaking, the Commissioner may recover some or all of the remaining 95 per cent of stamp duty otherwise payable.
The two deeds executed on 29 June 2006 were stamped on 31 July 2007. As a result of an error, the assessment of duty on the deed between Chubb Security and Chubb Electronic was less than the amount properly payable. This mistake was not identified at the time. Apart from explaining some of the delays which occurred subsequently, the mistake did not give rise to any issue on the present appeal.
By letter dated 26 November 2007, RevenueSA sent to the Chubb Group’s then solicitors a draft of the deed to be entered into between the Treasurer, Chubb Electronic and Chubb Personnel relating to the grant of ex gratia relief and providing for the claw‑back. The solicitors for the Chubb Group did not receive this draft and a further copy was sent on 12 March 2008. It was not suggested that anything turned on the lengthy lapse of time which occurred between the Acting Treasurer’s letter of 29 June 2006 and the provision of the draft deed.
By an email of 28 March 2008 and a letter of 22 April 2008, Malleson Stephen Jacques (Mallesons), solicitors for the Chubb Group, requested that Chubb Personnel be removed completely from the draft deed. They said that “[d]ue to an imminent sale of that company, it may be that no undertaking can now be provided by our client in respect of that company”.
The foreshadowed sale of Chubb Personnel did proceed and, on 31 July 2008, its issued capital was transferred to an entity outside the Chubb Group.
Thereafter, RevenueSA and the solicitors for the Chubb Group corresponded concerning the claw‑back of the stamp duty relief offered by the Acting Treasurer. At that time, the actual payment of the ex gratia relief had not been made because, as I understand it, the deed formalising the arrangements between the Treasurer, Chubb Electronic and Chubb Personnel required by the Acting Treasurer’s letter of 29 June 2006 had not been executed. In the correspondence, the Chubb Group asserted that the claw‑back should apply only to the ex gratia relief relating to the transaction between Chubb Security and Chubb Personnel. RevenueSA considered that the claw‑back should relate to the whole amount of the stamp duty relief offered by the Acting Treasurer.
Eventually, on 20 January 2009, the Acting Treasurer withdrew the entire offer for stamp duty relief. The pertinent passages in the Acting Treasurer’s letter to the Chubb Group’s solicitors were:
I am advised that in this case the transfer of [Chubb Personnel] out of the Chubb Group to an unrelated third party results in the removal of approximately 29.5 per cent of the aggregate value of assets the subject of my approval, from the ownership of relevant members of the Chubb Group.
As Chubb Group has failed to maintain 90% of the assets, the subject of the corporate reconstruction within the Chubb Group, for three years following the date of the asset transfers, the offer of stamp duty relief in relation to the transfer of the electronic security business and the protective services business of [Chubb Security] is withdrawn.
The Treasurer confirmed that decision in a letter of 31 May 2009.
In September 2008, when the error in the original assessment of stamp duty was identified, the Commissioner had requested the Chubb Group to return the original and a copy of the deed of 29 June 2006, to which Chubb Electronic was party, for restamping. It seems that the Chubb Group did not return the documents at that time and its omission to do so was overlooked.
Eventually, on 16 May 2011 the Commissioner issued a fresh notice of assessment. The Commissioner assessed the stamp duty payable on the Chubb Personnel transaction as $676,276.70 and the duty payable on the Chubb Electronic transaction as $1,294,665.80 before any imposition of interest. After giving credit for the stamp duty previously paid by the Chubb Group, this meant that a further $1,028,143.97 was payable.
The Objection and Appeal
On 2 August 2011, and acting on behalf of Chubb Electronic, Mallesons lodged with the Treasurer a notice of objection under s 82 of the TA Act[6] against the assessment. The grounds of objection were as follows:
4.The Treasurer erred in deciding that the Claw‑Back provisions in the Guidelines applied, and was not entitled to form the view that Claw‑Back provisions in the Guidelines applied.
5.The Business Sale Deed was a separate and independent transaction from the Business Sale Deed between [Chubb Security] and [Chubb Personnel] dated 29 June 2006, and as a consequence, any circumstances in relation to the Business Sale Deed between [Chubb Security] and [Chubb Personnel] has no bearing in relation to ex gratia relief regarding the Business Sale Deed between [Chubb Security] and the Objector.
6.In the circumstances where the amount assessed is the entire amount of the duty otherwise payable under the Stamp Duties Act 1923 (SA), the assessment of stamp duty is invalid.
7.The amount of stamp duty as assessed is therefore not payable by the Objector.
As will be seen, these grounds did not provide a proper basis for an objection to the Commissioner’s assessment.
[6] Section 82 provides:
A person who is dissatisfied with—
(a) an assessment (other than a compromise assessment); or
(b)a decision under Part 4 concerning a refund or an application for a refund of tax; or
(c)any other decision of the Commissioner under a taxation law that is not declared to be a non-reviewable decision,
may lodge a written notice of objection with the Minister.
On 5 September 2011 the Treasurer responded to the notice, pointing out that the objection was not to the basis of the assessment made by the Commissioner but instead to the withdrawal of the offer of stamp duty relief:
The objection does not question the basis of the Assessment made by RevenueSA in the administration of the [SD Act and the TA Act]. The objection only shows concern about the implications for the Assessment of the then Acting Treasurer’s decision to withdraw the offer of stamp duty relief made in the administration of the Guidelines. This decision is not reviewable under the [TA Act].
You have not provided any pertinent grounds for objection to the Assessment made by RevenueSA under [the SD Act or the TA Act] and, as a result, I cannot treat your letter as an Objection.
Acting under s 92 of the TA Act,[7] Chubb Electronic then commenced the present appeal. Although Chubb Security is, under s 4(2) of the SD Act, jointly and severally liable with Chubb Electronic for the stamp duty, it has not invoked the objection or appeal process. It was not suggested that this made the present appeal futile for the Chubb Group.
[7] Section 92 provides:
A person who has made an objection may appeal to the Supreme Court if—
(a) the person is dissatisfied with the Minister's determination of the objection; or
(b)90 days (not including any period of suspension under section 88) have passed since the objection was lodged with the Minister and the Minister has not determined the objection and served notice of the determination on the person.
Chubb Electronic’s appeal is against the portion of the stamp duty assessed on the deed between Chubb Security and it. It did not challenge the stamp duty assessed on the deed between Chubb Security and Chubb Personnel. Chubb Electronic’s notice of appeal contains three grounds:
1.The Assessment includes an amount for $1,294,665.80 being in respect of a transaction involving the transfer of assets from [Chubb Security] to the appellant, for which the Treasurer previously granted ex gratia relief for 95% of the stamp duty otherwise payable, pursuant to the guidelines and the subject criteria in Circular 227 dated 24 June 2002 issued by the Commissioner of State Taxation (“Guidelines”). There has been no breach of the Guidelines and the Treasurer’s decision regarding the grant of ex gratia relief should not have been withdrawn.
2.The Treasurer erred in deciding that the stamp duty claw‑back provisions in the Guidelines applied, and was not entitled to form the view that stamp duty claw‑back provisions in the Guidelines applied.
3.In the circumstances where the amount assessed relates to the appellant’s subject transaction, the Assessment is invalid.
The Efficacy of the Grounds of Appeal
The grounds of appeal do not raise any issue concerning the liability to pay duty on the deed of 29 June 2006, nor concerning the computation of the amount of duty payable. They relate solely to the Treasurer’s withdrawal of the offer of ex gratia relief. An appeal on this basis faces a number of problems.
The subject matter of the appeal is the Commissioner’s assessment of 16 May 2011. It is that assessment which was the subject of Chubb Electronic’s notice of objection under s 82, and it is the Treasurer’s treatment of that notice which gave rise to the entitlement to appeal under s 92. Furthermore, the definition of the word “assessment” in the TA Act to which I referred earlier indicates, prima facie, that it is the Commissioner’s “determination” of the stamp duty liability of a taxpayer which can give rise to the objection and appeal process.
The appeal is an appeal de novo but it is nevertheless the Commissioner’s functions, powers and discretions (if any) in relation to the assessment of stamp duty which are to be considered. This understanding of the appeal underpins an appreciation of the matters which may properly be considered in the determination of the appeal.
As previously noted, it is the Commissioner who is vested with the function and power to make the assessments of the tax liability of a taxpayer. A number of provisions in ss 8-17 of the TA Act regulate the exercise of the Commissioner’s powers in that respect. In addition, as already seen, the SD Act charges instruments with the rates specified in the Schedule to that Act (s 4) and the duty charged on an instrument is to be calculated according to the rates applicable in force at the time when the instrument is presented for stamping (s 16).
Neither the SD Act nor the TA Act vest the Commissioner with any general discretion with respect to the charging of stamp duty or (subject to the matters to be mentioned shortly) with any discretion with respect to the waiver or enforcement of the stamp duty charged. On the contrary, the provisions just mentioned indicate that the Commissioner is obliged to charge instruments with stamp duty, and to collect the duty so charged, in accordance with those Acts.
It is significant that the powers of the Commissioner to ameliorate the burden of a liability to pay stamp duty are limited.
The Commissioner does have the power to make some refunds of tax[8] and to correct errors.[9] However, the power to make refunds may be exercised only in relation to tax which has been overpaid by the taxpayer and the power to grant relief so as to correct errors is narrowly confined.
[8] Taxation Administration Act 1996 (SA), Part 4.
[9] Stamp Duties Act 1923 (SA), s 107.
Similarly, the power vested in the Commissioner by s 104 of the TA Act to write off unpaid tax is enlivened only if the Commissioner is satisfied that recovery action is impractical or unwarranted. Perhaps more significantly for present purposes, s 102G of the TA Act permits the Commissioner to grant a form of relief in respect of some later transfers of a “prescribed interest” in a land holding entity. In such cases, the Commissioner may, if satisfied that it is just and equitable to do so, exempt the later transfer, wholly or in part, from duty.
The fact that the Commissioner has been granted only these specific and limited ameliorative powers speaks against the Commissioner having some more general power to grant relief on discretionary grounds from stamp duty liability.
Taken in combination, these matters indicate that the Commissioner is to assess stamp duty in accordance with the SD Act and, that other than in the limited circumstances mentioned, the Commissioner is to do so without exercising a discretion based on matters such as hardship or the merits of a particular case.
Further still, the assessment of stamp duty by the Commissioner is not made conditional upon, or subject to, the grant of stamp duty relief by the Treasurer, whether under the Guidelines or otherwise. There is no indication at all in either the SD Act or the TA Act that the Commissioner may, let alone should, take account of the grant of stamp duty relief by the Treasurer when making the assessments required under the SD Act and the TA Act.
It is also to be noted that, apart from one circumstance, the Treasurer is not vested with any power at all in relation to the assessment of stamp duty. The exception is the power of the Treasurer, on the determination of an objection under s 82, to make an assessment in substitution for the assessment to which the objection relates (s 88(4)(b)). The existence of this power is immaterial for present purposes. Nor was it suggested that the Treasurer has any power to direct the Commissioner as to the assessments of stamp duty under Part 3 of the TA Act.
These matters indicate that Chubb Electronic’s grounds of appeal go to matters which do not bear on the correctness of the Commissioner’s assessment. Fundamentally, that is because the Commissioner is not authorised or permitted, let alone obliged, to take account in the assessment of stamp duty any grant or withdrawal of ex gratia relief by the Treasurer.
The inappropriateness of a challenge to the Commissioner’s assessment by reference to the Treasurer’s withdrawal of ex gratia relief is also demonstrated by a consideration of the scheme of relief established by the Guidelines. Two features of the scheme are material for present purposes.
The first is that the scheme does not contemplate a waiver or reduction of the liability for stamp duty, but instead an ex gratia payment. The second is that the payment is made in respect of the “stamp duty applicable” to the transaction (cl 3). In the same vein, cl 17 refers to payment of 95 per cent of “the stamp duty otherwise payable”. These provisions in the Guidelines should be read and understood in the context of the SD Act and the provisions for assessment contained in the TA Act. They suggest that the ex gratia relief is a payment in respect of the stamp duty for which the taxpayer is liable and which, in accordance with the regime established by those two Acts has been, or will be, assessed by the Commissioner at the time of stamping of the instrument in question.
These circumstances suggest in turn that the grant or withdrawal of ex gratia relief occurs independently of the assessment of stamp duty. This is confirmed by the second fact agreed by the parties for the purposes of this appeal:
2.An application for ex gratia relief from stamp duty pursuant to Circular No 227 is independent of and processed separately to the assessment of stamp duty payable under the Stamp Duties Act 1923.
In effect therefore, the grant or withdrawal of relief is separate and distinct from the assessment. Furthermore, the matters material to the grant or withdrawal of relief (founded in the underlying nature, purpose and effect of the transaction) are not matters which are material to the Commissioner’s assessment.
In my opinion, these distinctions between an assessment, on the one hand, and a grant of relief, on the other, indicate the inefficacy of Chubb Electronic’s grounds as a basis for challenge to the Commissioner’s assessment. Those grounds relate to matters which are immaterial to the assessment and cannot warrant this Court’s interference with the assessment. This suggests that the appeal should fail.
Decision as to Ex Gratia Relief Part of the “Assessment”?
Faced with these difficulties, Chubb Electronic mounted some inventive arguments.
First, it submitted that the “assessment” against which an appeal is available should be interpreted in a broad way so as to encompass the amount of stamp duty which a taxpayer is ultimately liable to pay. In this case, that would be the net amount which Chubb Electronic must pay after a grant of relief, with the effect that any decision relating to that net amount may be considered on an appeal against the assessment.
Chubb Electronic sought to support this construction by reference to s 100 of the TA Act. Section 100 provides:
(1)The validity or correctness of an assessment or any other decision in respect of which rights of objection and appeal are conferred under this Part is not open to challenge in any proceedings other than proceedings by way of objection or appeal under this Part.
(2) If an amount has been paid to the Commissioner as tax—
(a) no proceedings may be brought for the recovery of the amount, or a part of the amount, unless the amount or part has been found to have been overpaid as a result of an assessment, or a decision on an application for a refund, made by the Commissioner, or by the Minister or the Supreme Court on an objection or appeal under this Part; and
(b) no question may be raised as to liability to pay the amount, or a part of the amount, as tax except through an application to the Commissioner for an assessment or a refund, or in proceedings by way of objection or appeal under this Part.
The effect of s 100(1) is to make the process of objection and subsequent appeal under ss 82 and 92 the sole means by which the assessments and decisions to which those provisions refer may be challenged. The effect of s 100(2)(b) is to limit the means by which challenges may be made to tax already paid to an application to the Commissioner for an assessment or refund or to the process of objection and review under ss 82 and 92.
Chubb Electronic focussed on the phrase “liability to pay the amount” in s 100(2)(b). It submitted that the limitation of the means of challenge to the “liability to pay the amount” to the means contemplated (relevantly) by ss 82 and 92 had the effect that a challenge relating to the liability to pay in a general sense must be contemplated by s 82 and, in turn, s 92. Thus, so the argument ran, the word “assessment” in s 82(a) should be understood as a reference to a taxpayer’s net liability, and not just to the Commissioner’s determination.
Chubb Electronic then submitted that a decision to grant, withdraw or refuse ex gratia relief which affected the net amount of stamp duty to be paid by a taxpayer was a decision forming part of, or relating to, the “assessment”. The fact that it is the Treasurer who makes this decision affecting the ultimate liability is immaterial.
In my opinion this is not an appropriate construction of the word “assessment” in s 82(a). It is inconsistent with the meaning given to the word “assessment” in s 3(1) of the TA Act and s 100 does not provide any indication that some different meaning is appropriate in the case of s 82. The effect of s 100 is to limit the means of challenge to the matters to which it refers to the means for which the TA Act itself provides, and to those means only. There would be an incongruity in regarding a limiting provision of this kind as expanding the range of matters which may be disputed under the means provided in the TA Act. Further still, the subject matter of s 100 is the procedure by which challenges to assessments may be made, and not the nature of the underlying assessments.
It is clear that Parliament did intend to place significant restrictions on the scope of disputes by taxpayers about their taxation liabilities. In that circumstance, it is not appropriate for this Court to adopt a strained construction of the word “assessment” so as to have it encompass all decisions which may affect the net amount of tax which a taxpayer must pay.
In short, in my respectful opinion, the construction proposed by Chubb Electronic involves some artificiality, is contrary to the statutory definition of the word “assessment” and is contrary to the apparent legislative intention. Accordingly, I reject the construction of the word “assessment” for which Chubb Electronic contended.
The Treasurer as Agent or Delegate of the Commissioner?
In a further attempt to align the decision concerning the withdrawal of relief with the Commissioner’s assessment, Chubb Electronic contended that the Treasurer, in withdrawing the grant of relief, was acting as the Commissioner’s agent or delegate.
The notion that the Treasurer may act as the delegate of the Commissioner in the present context involves some incongruity. Ministers responsible for government departments do not usually exercise powers delegated to them by officials within that department. If anything, the converse will ordinarily be the case.
Quite apart from this consideration, the submission faces other difficulties. The Commissioner’s powers of delegation are found in s 66 of the TA Act. Section 66(1) provides that the Commissioner may delegate any of his or her “powers or functions” under a taxation law to another person.
Obviously enough, the Commissioner cannot delegate a power or function which he does not possess. As already seen, neither the SD Act nor the TA Act vest the Commissioner with any statutory authority to make ex gratia payments in respect of stamp duty liabilities.
For such a power to exist, one would expect to see express statutory authority. Not only is there no such express authority, the monies received by the Commissioner under the SD Act and the TA Act are, subject to some qualifications which are not presently material, to be paid into the Consolidated Account.[10] This obligation of the Commissioner is inconsistent with the Commissioner having the power to use some of the monies collected to make payments of ex gratia relief.
[10] Public Finance and Audit Act 1987 (SA), s 7.
Further still, a delegation under s 66 of the TA Act is required to be made by instrument in writing (s 66(3)(a)). Chubb Electronic did not provide evidence of any delegation answering this description. Instead, it submitted that it could be inferred from the Commissioner’s publication of the Guidelines as Circular No 227 that the Treasurer was, in promulgating the Guidelines, acting on behalf of the Commissioner and, in consequence, acting on the Commissioner’s behalf when exercising a discretion regarding ex gratia relief.
The content of the Guidelines is inconsistent with this submission. Apart from one immaterial reference, the Guidelines do not refer to the Commissioner at all and do not contain any indication that, in the exercise of the discretions to which it refers, the Treasurer is acting on behalf of the Commissioner. For the reasons already given, the notion that the Treasurer is acting on the Commissioner’s behalf in granting or withdrawing relief or in establishing a scheme of relief involves incongruity, especially as the Commissioner does not have any relevant powers in relation to such matters.
In my opinion, the Commissioner’s publication of the Guidelines as Circular No 227 should be understood simply as the means adopted by the Commissioner of informing taxpayers and potential taxpayers of the Treasurer’s Guidelines.
Chubb Electronic also referred to the following agreed fact:
When the Treasurer considers a request to grant ex gratia relief, the usual practice is that staff within RevenueSA’s Legislative Services Section prepare a minute of advice with draft correspondence to the applicant for the Treasurer to sign. The Treasurer may accept or reject the advice and may modify the correspondence. In general however, the Treasurer adopts the advice made by RevenueSA’s Legislative Services Section.
In addition, Chubb Electronic tendered the memorandum dated 9 January 2009 to the Acting Treasurer in which it was recommended that he withdraw the offer of stamp duty relief in this case. It is evident that the Treasurer acted on that recommendation.
In my opinion, neither the agreed fact nor the memorandum support the view that the Treasurer was acting at the time as a delegate or agent of the Commissioner. Instead they evidence the circumstance, as one would expect, that the Treasurer acted on the advice and recommendation of departmental officers. Further still, the fact that the memorandum of 9 January 2009 containing the recommendation to the Treasurer was signed by the Commissioner is inconsistent with the Treasurer acting, at the relevant time, as the Commissioner’s delegate or agent. It would be incongruous to suppose that the Commissioner was making a recommendation to a delegate or agent in whom he had reposed his own powers.
Accordingly, I reject the submission that the Treasurer was, at material times, acting as the agent or delegate of the Commissioner so that the exercise of the Treasurer’s discretion under the Guidelines can be regarded as part of the assessment process.
An Incidental Power?
Chubb Electronic sought to overcome the difficulty arising from the Commissioner’s lack of power to grant relief by pointing to the UK concept of “extra statutory concessions”. As I understand it, these are concessions or indulgences by revenue authorities to which taxpayers are not entitled under the strict letter of the law and which reduce or eliminate the liability for tax which would otherwise apply.[11]
[11] See R v Inspector of Taxes, Reading, ex parte Fulford-Dobson [1987] QB 978; R v Inland Revenue Commissioners, ex parte MFK Underwriting Agents Ltd [1990] 1 WLR 1545.
The submission in the present case, as I understood it, was that the Commissioner had a like power which operated alongside the SD Act. In the exercise of that ancillary power the Commissioner could reduce the amount of stamp duty liability which was otherwise payable by a taxpayer.
I note that the power to grant extra statutory concessions has not been without controversy in the United Kingdom. Walton J in Vestey v Inland Revenue Commissioners (No 2)[12] said:
… I, in company with many other judges before me, am totally unable to understand upon what basis the Inland Revenue Commissioners are entitled to make extra‑statutory concessions. To take a very simple example (since example is clearly called for), upon what basis have the Commissioners taken it upon themselves to provide that income tax is not to be charged upon a miner’s free coal and allowances in lieu thereof? That this should be the law is doubtless quite correct: I am not arguing the merits, or even suggesting that some other result, as a matter of equity, should be reached. But this, surely, ought to be a matter for Parliament, and not the commissioners. If this kind of concession can be made, where does it stop; and why are some groups favoured as against others?[13]
Lord Wilberforce endorsed these sentiments on appeal and, in particular, another observation of Walton J: “One should be taxed by law, and not be untaxed by concession”.[14]
[12] [1979] Ch 198.
[13] Ibid at 203. See also Inland Revenue Commissioners v Frere [1965] AC 402 at 429; Bates v Inland Revenue Commissioners [1968] AC 483 at 516.
[14] Vestey v Inland Revenue Commissioners (1980) AC 1148 at 1173.
Counsel did not refer to any Australian authority indicating that revenue authorities in this country should be regarded as having some like ancillary power, and none can be found. I consider that the position is that stated in De Smith’s Judicial Review:
Just as the Crown is without authority to alter the general law of the land by prerogative, so are its servants and other public authorities without inherent authority to impose legal duties or liabilities or to confer legally enforceable rights, privileges or immunities on the subject.[15]
[15] Woolf, Jowell and Le Sueur, De Smith’s Judicial Review (6th ed, 2007) at 981.
That does not mean that documents such as the Guidelines may not give rise to legitimate expectations so as to found a basis for judicial review. They may well have that effect, but that does not extend to enlarging the power of the relevant decision‑maker beyond that which is authorised by statute.
As previously noted, s 61 of the TA Act vests in the Commissioner the general administration of that Act and of other taxation laws, including the SD Act. That function no doubt carries with it a power in the Commissioner to make decisions incidental to the administration of the taxation laws. However, it cannot reasonably be concluded, in the context of the specific but limited ameliorative powers to which I referred earlier, that such incidental powers would include a power to grant ex gratia relief from the liability for stamp duty. In particular, such incidental powers as may arise under s 61 would not extend to the Commissioner paying, on a taxpayer’s behalf, some portion of the stamp duty for which the taxpayer is liable.
The Nature of the Appeal
Chubb Electronic emphasised that the present appeal requires a hearing de novo with this Court standing in the position of the Commissioner as original decision‑maker. In that circumstance the Court has to exercise all the powers and discretions of the Commissioner.[16]
[16] Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41 at [5]; (2011) 85 ALJR 1183 at 1184; Secretary, Department of Social Security v Hodgson (1992) 37 FCR 32 at 39-40.
I am willing to accept this characterisation of the Court’s functions under s 92 without further analysis, but a river cannot rise above its source. If, as I consider to be the case, the Commissioner did not have the powers and discretions permitting him to take account of the Treasurer’s withdrawal of ex gratia relief, then neither does this Court on appeal when standing in the Commissioner’s shoes.
Administrative Law Remedies
Chubb Electronic then argued that the exercise of the Treasurer’s powers under the Guidelines is capable of giving rise to “administrative law remedies” on an application for judicial review. Section 100 of the TA Act precludes the pursuit of remedies of that kind and has the effect that such relief may be sought only on an objection under s 82 and on an appeal under s 92. In some way, which I confess I did not fully understand, it was submitted that this had the effect that “ordinary judicial review has been converted or upgraded to a merits based review”. That had the consequence, it was said, that Chubb Electronic was entitled to agitate on the present appeal complaints which it could otherwise have pursued in judicial review proceedings.
There are two matters which indicate that this submission cannot succeed. First, on my findings, the Commissioner’s assessment of stamp duty is a separate and distinct decision from the Treasurer’s decision concerning the grant or withdrawal of ex gratia relief. Sections 82 and 92 provide a means of appeal ultimately to this Court against an assessment by the Commissioner, but no right of review or appeal against the separate decision of the Treasurer, whether on judicial review grounds or otherwise.
Secondly, for the reasons previously given, s 100 does not expand the range of matters which can be reviewed on an objection under s 82, or on an appeal under s 92.
Conclusion
For these reasons, I dismiss the appeal.
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