Commissioner of Taxation v Dalco

[1988] HCATrans 315

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Sydney Nos Slll, Sll2, Sll3 and Sll4 of 1988

B e t w e e n -

THE COMMISSIONER OF TAXATION OF

THE COMMONWEALTH OF AUSTRALIA

Applicant

and

JEFFREY THOMAS DALCO

Respondent

Applications for special leave

to appeal

MASON CJ
WILSON J

TOOHEY J

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TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 9 DECEMBER 1988, AT 3.43 PM

Copyright in the High Court of Australia

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MR K. HANDLEY, QC: In this matter, if the Court pleases,

I appear with MR D.B. McGOVERN for the applicant.

(instructed by the Australian Government Solicitor)

MASON CJ:  Mr Handley, I think all I need ask you is

is your client prepared to pay the costs of

an appeal in any event?

MR HANDLEY:  We would submit to that condition, if

necessary, Your Honour. Thc~gh, having regard

to the amounts of money involved, we would

submit it ought not to be imposed, but we do

not wish to argue the toss to excess.

MASON CJ: Yes. Well, we will hear your opponent, I think.

MR P.M. WOOD:  May it please the Court, in these matters

I appear for the respondent. (instructed by

J.C. Behm & Associates)

MASON CJ:  You can, I think, direct your submissions to the question

whether the majority judgment was not flawed
with fundamental bias.

MR WOOD:  Yes. I did not propose to address Your Honours

on the matter of general application of this
particular decision. In my submission, the
proper approach to be made to the undoubted

correctness of the decision of the majority

must be premised by looking at the function

of a court on appeal and that function is to
displace, or set aside, an assessment that

purports to have been made an exercise of a

statutory authority, and those are the terms

in which His Honour Mr Justice Taylor had

expressed the position in McANDREW, or to correct the

process of assessment that has been adopted by

the Commissioner, and those were the terms in

which Sir Garfield Barwick expressed the

position in BAILEY.

It is implicit in that that the Commissioner

has the duty to make the assessment and that

duty is made explicit by section 166 of the Act.

That was a duty, back in those times, cast

equally upon a board of review, no longer because

of the abolition of the board of review, but it

was never a duty cast upon the court.

Now, upon that approach, the meaning to be

attributed to the word "assessment" in section
190(b) of the Act is a meaning not limited to
the quantum of the assessment. It stands for

the particulars of the assessment, which means,

and it has been held on two occasions to mean,

the ingredients or constituent elements of it.
Additionally, it means the process of assessment.

Now, the Full Court decided that in BATAGOL

back in 1963. Your Honours Justice Mason and

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Justice Wilson in BLOEMAN decided that in whose

judgments Justice Stephen and Justice Aickin

agreed.

When one takes the function of the Court and the meaning

of "assessment" in that context, it can be seen

that to discharge the onus that is placed upon

a taxpayer in a sectin 190(b) situation, it is

sufficient if -and it is demonstrated throughout

the authorities that I will very briefly refer

to in each of the propositions I contend are
consistent with the judgment of the majority and

are consistent with many decisions of this Court,

is that if the Commissioner has proceeded on a

wrong basis, or a wrong principle, it will be

set aside and no more needs to be done than that.

The Full Court did that in HENDERSON's case and

Mr Justice Walsh in CREWE's case took the same

approach, similarly, where the Commissioner has

not proceeded on any intelligible basis. In

TRAUTWEIN, Sir John Latham expressed that as

a correct proposition at law, and that goes back

to 1936. Equally, the onus will be discharged if

the Commissioner has imposed a liability without

the authority of the Act, which was the form of

expression used by Sir Owen Dixon and

Mr Justice McTiernan and Mr Justice Webb in
McANDREW. O½ additionally, if what the Commissioner

has done is a purported, but not justifiable

exercise of the statutory power, which was the

formulation in McANDREW used by Mr Justice Taylor.

Similarly, and it goes back indeed right to

1936, if a taxpayer shows that the assessment is

contrary to law or fact, that will provide a

sufficient discharge of the onus of proof

without taking the second step and demonstrating

to a court whose function is limited in these
cases, in my submission, of what should be

substituted for the assessment which the Commissioner

has raised under sections 166 or 167.

The IIDre general meaning_given to "excessive" by

the majority in the Full Federal Court is a

meaning consistent with and has the support of

this Court's decision in McANDREW and this

Court's decision in BLOEMAN. The only authorities

which can be called in aid to put in doubt the

correctness of the proposition which the majority
from which these appeals are sought to be taken

are the two cases of TRAUTWEIN and GEORGE. The

first thing to be said about TRAUTWEIN's case

was that was decided under different legislation;

that was decided under the 1922 Act when

section 190(b) did not appear in any equivalent

form and the conclusive evidence '.certificate

provision, which is now section 177. It was to

be found in the old section 39 and included

the ability of the Commissioner to certify in

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appeal cases in a way that gave that prima

facie evidence of the truth of the assessment

and the particulars. Now, that, having been removed by the present legislation, one must

read the judgments in TRAUTWEIN and in the

light of that equally, His Honour Sir John Latham

left open and expressly did not decide that it

was necessary to discharge the onus of proof the joint judgment of Sir Owen Dixon and
which lay upon a taxpayer to show not only that
the Commissioner was wrong, but to show what in
its place should be inserted in the assessment.

Mr Justice Evatt for the Commissioner's view

which is propounded in this case.

The only other case which can be taken to

be said is inconsistent with the majority

decision, and inconsistent with McANDREW and

BLOEMAN, is that of GEORGE. One must approach

that case with two critical factors in mind.

The first is that it was an application of

a peculiar form for what were said to be

particulars. When one looked at it, it looked

more like a cross between particulars and

interrogatories. The Court was anxious there to

reject the application for particulars in an

assessment in section 167. Indeed, the Full Court

took a view, in my submission, different to the

view taken by Mr Justice Kitto.

What is critical in that case was that

Their Honours refused to order the granting of

particulars in the context that under section 190(b)

a taxpayer bore the onus of proof, and accordingly

the Commissioner did not have, and does not have,

even under the majority view today, any onus

at all to discharge in an appeal under Part V

and accordingly, if there is no onus to discharge

and no proposition to assert, it is not a proper

case in which particulars can be sought in the

absence of an affirmative allegation of what

the Commissioner's position was.

If I can hand Your Honours a copy of

GEORGE's case, Your Honours will have seen from the

dissenting judgment of Mr Justice Wilcox that

reliance was placed not only upon Mr Justice Kittow's

decision in the first instance, but upon the

Full Court judgment which appears relevantly at

page 201 in 86 CLR, at the very top of the page:

Section 190 provides that upon every

appeal to the Court the burden of proving

that the - - -

MASON CJ: This is the passage that is quoted in

Justice Wilcox's judgment?

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MR WOOD:	Yes, it is.	I simply direct Your Honours'

attention to that for the purpose of my

submission that it must be read in the context

of what Their Honours then went on to say on

pages 203 and 204, and these parts are not extracted in full in any of the judgments.

At about point seven on page 203, Their Honours

say:

The formation of the judgment as to what

is the amount of the income that ought to be taxed is no condition precedent to the power to assess. It is part of the

very process of assessment itself.

They then go on to deal with the way in which

sections 166 and 167 interact. Relevantly, over

the page, Their Honours say, at about the sixth

line:

Just as under s. 166 considered alone the
commissioner ascertains the amount of

the taxable income and thus assesses it so

does he under s.167, used in aid of s.166,

ascertain the amount upon which, in his

judgment, income tax ought to be levied

and thus assesses it. By definition

"assessment" means the ascertainment of the

amount of the taxable income, and of the

tax payable thereon. This is the view

of ss. 166 and 167 adopted by Williams J.

in McEVOY V FEDERAL COMMISSIONER OF TAXATION.

The fact is that unless the taxpayer discharges

the burden laid upon him by s.190(b) of

proving that this ascertainment or judgment

is excessive, he cannot succeed and it can be

no part of the duty of the commissioner to

establish affirmatively what judgment he formed,

much less the grounds of it, and even less still

the truth of the facts affording the grounds·.

So what Their Honours are there saying is that it

will be sufficient to discharge the onus under

section 190(b) if there is proof that the:

ascertainment -

which is what the Commissioner has to do under

the Act - or the formation of the -

judgment is excessive -

and "excessive" in my submission, is used there,

and the words which surround the word "excessive" to

mean in excess of the authority which is given to

the Commissioner under the Act. It is used in

contradistinction, and that passage must be

read in contradistinction to what Their Honours

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say on page 201, and what His Honour Mr Justice Kitto

more expressly said at first instance in that

case, a passage upon which Mr Justice Wilcox

relies.

That, of course, was decided in 1952.

Following that case came BLOEMAN and McANDREW. consistent with the submission of the Commissioner

in the present case. The Comnissioner' s position

must be that McANDREW is wrong and McANDREW,

in my submission, received the approval only some

eight years ago of this Court in BLOEMAN. The

majority judgment of Mr Justice Sheppard and

Mr Justice Gummow refers to the passages in

BLOEMAN in which there is express approval given

to the statement by Mr Justice Taylor in McANDREW
as to the meaning of "excessive" and the use of
the words in "purported but not justified exercise

of a statutory power".

It is my submission that McANDREW and

BLOEMAN are both rightly decided. TRAUTWEIN

does not bear upon the issue directly for the

rea,sons which I have given, and GEORGE' s - - -

MASON CJ: Yes, but if we come back to GEORGE, and

in particular the critical passage at page 204,

you have said the reference to "excessive",

some 12 lines down from the top of the page,

is not "excessive" in relation to amount.

MR WOOD:	No.
MASON CJ:	But if you look at the expression:

this ascertainment or judgment is excessive -

it seems plain that Their Honours are referring

back to the sentence in which they say:

By definition "assessment" means the

ascertainment of the amount of the

taxable income, and of the tax payable
thereon.

So that in that context one naturally reads "this

ascertainment or judgment is excessive" as referring
back to "excessive" in relation to the amount of

the taxable income.

MR WOOD:	Yes, Their Honours -
MASON CJ:	And if that be the correct, or a reading of

which the judgment is susceptible, then we have

a view expressed on this question by the Full Court

of this Court which we cannot, as a Court of three,

now say is incorrect.

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MR WOOD:	No, I appreciate that, Your Honour, that is
why I prefaced my submission by taking Your Honours
to the nature of the case involved there, being a
simple application for particulars.  The only - - -

MASON CJ: But, you see, in the way in which it is

discussed at page 204, it is discussed as a

matter of generality.

MR WOOD:	Yes, indeed, I appreciate that, Your Honour.	The
only case under Part V of the cases relevant

to this particular set of issues is McANDREW's
case. Each of the other cases, including BAILEY,
are cases in which expressions are made generally

of the legal position, but not critically for the

purposes of the decision.

There was one other matter that my learned

friend,Mr Handley, raised with me during the course

of the week relating to an additional ground of

appeal. I will not address Your Honours on that

in view of the assurance.

There has been raised in the notice of appeal

as an additional matter - perhaps not in the

notice of appeal itself, but certainly in the

affidavit upon which this application is made,

the importance of the interaction of sections 16 7

and 166 of the Act. The only significance, in

my submission, that the present assessments were

issued under section 167 is that the making of

the judgment by the Commissioner then became an

essential step in the purported exercise of

the statutory power, but what must be held in

mind is that section 167 is additional to section 166

and by its very terms, and by decisions of this

Court, the assessment is to be placed in precisely

the same position. So there is no intrinsic, in

my submission, significance to be given to any

point which seeks to agitate the interrelationship

of sections 167 and 166. Those are my submissions,
Your	Honours .

MASON CJ:  Yes, thank you, Mr Wood. The Court need not

trouble you, Mr Handley.

MR HANDLEY: If the Court pleases.

MASON CJ:  The Court will grant special leave to appeal

in this case, Mr Handley, conditioned on the

applicant paying the costs of the appeal in

any event.

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MR HANDLEY: If the Court pleases.

MR WOOD: If the Court pleases.

MASON CJ: The Court will now adjourn.

AT 4.00 PM THE MATTER WAS ADJOURNED SINE DIE

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