Commissioner of Taxation v Ryan

[1998] FCA 320

FEDERAL COURT OF AUSTRALIA

TAXATION - income tax - document described as an assessment, under which no tax is assessed or payable, issued by Commissioner - meaning of “assessment” - whether document an “assessment” for purposes of the Income Tax Assessment Act 1936 or making amendments to assessments under s 170(3) - whether a “nil” assessment is an assessment under the Act.

WORDS AND PHRASES - “assessment”.

Ex parte Hooper (1926) 37 CLR 368 - cited
Taylor v Commissioner of Taxation (1987) 16 FCR 212 - cited
Thai v Commissioner of Taxation (1994) 53 FCR 252 - cited
Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 - considered and distinguished
Lloyds Bank Export Finance v Commissioner for Inland Revenue [1991] 2 AC 427 - considered and applied
Scott v The Minister of National Revenue [1961] Exch. C.R. 120 - considered
F. J. Bloemen Pty Ltd v The Commissioner of Taxation of the Commonwealth (1981) 147 CLR 360 - considered
The Commissioner of Taxation of the Commonwealth v Prestige Motors Pty Ltd (1994) 181 CLR 1 - considered
Webb v Commissioner of Taxation (No 2) (1993) 47 FCR 394 - considered
Federal Commissioner of Taxation v Stokes (1997) 97 ATC 4001 - considered
Prestige Motors v Commissioner of Taxation (1993) 47 FCR 138 - considered
Deputy Federal Commissioner of Taxation v Sheehan (1986) 86 ATC 4718 - considered
Stuart (No 2) v Federal Commissioner of Taxation (1996) ATC 4942 - considered

Income Tax Assessment Act 1936 (Cth) ss 17, 166, 167, 168, 169, 170, 170(3), 170AA, 171(1), 173, 174(1), 177(1), 204

THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA v GWENDA BLANCHE RYAN
VG 476 of 1997

BURCHETT, FRENCH AND MERKEL JJ
MELBOURNE (HEARD IN PERTH)
2 APRIL 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 476 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA APPELLANT
AND:	GWENDA BLANCHE RYAN RESPONDENT

JUDGES:	BURCHETT, FRENCH AND MERKEL JJ
DATE:	2 APRIL 1998
PLACE:	MELBOURNE (HEARD IN PERTH)

THE COURT ORDERS THAT the appeal is dismissed.

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 476 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Appellant
AND:	GWENDA BLANCHE RYAN Respondent

JUDGES:	BURCHETT, FRENCH AND MERKEL JJ
DATE:	2 APRIL 1998
PLACE:	MELBOURNE (HEARD IN PERTH)

REASONS FOR JUDGMENT

BURCHETT J:

I agree with the reasons for judgment of Merkel J.

I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

Associate:

Dated:             2 April 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 476 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:

THE COMMISSIONER OF TAXATION OF THE
COMMONWEALTH OF AUSTRALIA

APPELLANT

AND:

GWENDA BLANCHE RYAN

RESPONDENT

JUDGES:	BURCHETT, FRENCH AND MERKEL JJ
DATE:	2 APRIL 1998
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

FRENCH J:
I have read the reasons for judgment of Merkel J and agree with his Honour for the reasons he has expressed that the appeal should be dismissed with costs.

I certify that this page is a true copy of the Reasons for Judgment herein of the Honourable Justice French

Associate:

Dated:             2 April 1998

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VG 476 of 1997

ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:	THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA APPELLANT
AND:	GWENDA BLANCHE RYAN RESPONDENT

JUDGES:	BURCHETT, FRENCH AND MERKEL JJ
DATE:	2 APRIL 1998
PLACE:	MELBOURNE (HEARD IN PERTH)

REASONS FOR JUDGMENT

MERKEL J:

The appeal in the present matter raises the question of whether a document issued by the appellant (“the Commissioner”) which gives notice of an assessment, but under which no tax is assessed or is ascertained to be payable by the taxpayer, is an assessment for the purposes of the Income Tax Assessment Act 1936 (Cth) (“the Act”) and in particular s 170(3) of the Act.

BACKGROUND

In her tax return for the year of income ended 30 June 1987 the respondent (“the taxpayer”) returned her taxable income as $4,470.00. The taxpayer’s taxable income as returned was arrived at after a deduction of $10,000, which was claimed by the taxpayer to be an expense or outgoing incurred by her in carrying on the business of a timber merchant and therefore as an allowable deduction pursuant to s 51 of the Act. As a result of the deduction the taxpayer’s taxable income was below the taxable threshold at the time.

In reliance upon the tax return of the taxpayer the Commissioner issued a document to the taxpayer dated 11 December 1987 (“the 1987 determination”) together with a cheque for $3653.40 being the refund of tax to which the taxpayer was entitled under the determination.

The 1987 determination was a printed form but certain parts, which are set out in bold type hereunder, were typed.

$3653.40

 

 

    11 DEC  87

 

         Australian Taxation Office      Your file number

Income Tax Assessment Act 1936 Make sure that you show
  this number on all
  letters and your next
  income tax return form

REFUND NOTICE
for the year ended 30 June 1987 (or substituted accounting period)
  Issue Date

         MRS GWENDA B RYAN
         [ADDRESS]

  257075/035

  DR = Debit  CR = Credit
Details of your assessment:

  $       C
YOUR TAXABLE INCOME IS NIL
TAX ON TAXABLE INCOME    A       0.00
TOTAL CREDIT FOR TAX STAMPS
   / GROUP CERTIFICATES     E    1451.40 CR
CREDIT FOR 1987 PROVISIONAL TAX                    F    2202.00 CR
AMOUNT REFUNDABLE  L    3653.40 CR

***********************AVERAGE DETAILS (NOTE 9) ***********************
YEAR       INCOME

1983      $ 22113  BASIC TAX AVERAGING AMOUNT           $    941.10

1984      $ 24252  TAXABLE INCOME FROM PRIMARY         

1985      $ 25978         PRODUCTION                $            0

1986      $ 24799  OTHER TAXABLE INCOME TO WHICH

1987     $  4470    AVERAGING APPLIES  $            0
TOTAL $101612   COMPLEMENTARY TAX INCLUDED 
AVERAGE     $ 20322  ABOVE IN TAX ON TAXABLE INCOME       $       0.00

         R. L. CONWELL  Amount of Refund
Deputy Commissioner of Taxation
Your copy - please keep for your records
See back for notes and other information

Although the determination stated that the taxpayer’s taxable income was “NIL”, the parties were in agreement that that statement was typed in the document in error, it being common ground that the taxable income of $4,470, as returned, had been accepted by the Commissioner.

The reverse side of the document contained, inter alia, the following printed explanatory notes:

“Explanatory notes

These notes help to explain your assessment.  They do not necessarily apply to all assessments, and you need only take note of the ones that apply to you.

1.        Reasons for change.  If we have altered amounts shown on your tax return, the changes are shown either on the front of this notice or on a separate sheet.  The reason for the change is given, together with a symbol telling you whether the figure has been increased or decreased.  Deductions claimed in your return are not shown separately on this notice, but the amount by which any deductions have been adjusted is shown.  A decrease in your deductions will appear as an increase in your taxable income.

2.        Dissatisfied with your assessment.  If you are not satisfied that your assessment is correct or you do not understand how it was calculated, please phone or call in to discuss the problem.  If you are still not satisfied, you can object to your assessment.  Your objection must be in writing and must generally be received in the Tax Office within 60 days from the date of service of this notice.  There is more information about disputing your assessment in a free booklet, Income tax and resolving your dispute available from Tax Offices.  If you disagree with your assessment, do not send your refund cheque back.  If we alter your assessment and you get a further credit, we will send you another cheque for the difference.
.......

7.        Interest on overpayments.  If you object to your assessment, and your objection is successful, you will receive an amended assessment showing a reduction in the amount of tax you have to pay.  If you paid your original assessment, or it was a credit, you will be paid interest on the amount you overpaid.  Generally, interest is paid from the date you paid your tax or your refund issued to the date the amended assessment issues.  If your interest is not included in this assessment, you will be sent a separate notice.
......
9.  Averaging of income.  Because the income of primary producers tends to fluctuate, they are assessed under a system which averages their incomes over a number of years.  From 1 July 1986 an averaging system can also apply to other people such as authors, inventors, artists and professional sporting people whose income may also fluctuate from year to year.  More information on averaging is available from Tax Offices.
.....”

Although the 1987 determination is entitled “Refund Notice” it is plain that it also gives notice to the taxpayer that the amount of the refund had been arrived at on the basis of the assessment, set out in the document, by which the Commissioner ascertained the taxable income of the taxpayer (“Nil”) and the tax payable thereon (“$0.00”).

On 11 February 1994, after an audit of a third party, the Commissioner issued a document entitled “Notice of Assessment” to the taxpayer (“the 1994 assessment”).  The 1994 assessment was as follows:

MRS GWENDA B RYAN
[ADDRESS]  Branch:  NEW
  Issue date:  11/02/94
  Job/Seq No:  326719/001

NOTICE OF ASSESSMENT

Your Taxable Income is $14470        $
Tax on Taxable Income  A          2435.01DR
Medicare Levy  O           165.68DR
Additional Tax for Incorrect Return  D          1989.22DR
Balance of this Assessment  L           4589.91DR
This amount is payable by             16 MAR 94

An Income Tax Adjustment sheet which was sent with the 1994 assessment was as follows:

INCOME TAX ADJUSTMENT SHEET

TAXPAYER:       Mrs Gwenda B Ryan          File number
_______________________________________________________________________________

The following adjustments have been made to your tax return in respect of the year ended 30 June 1987.
   $
Income as returned   4,470

Add
Deduction in respect of trading stock disallowed.  10,000

  TAXABLE INCOME  14,470
  =====

The taxpayer’s objection to the 1994 assessment was disallowed by the Commissioner.  The taxpayer applied to the Administrative Appeals Tribunal (“the AAT”) to review the Commissioner’s decision to disallow the objection.  The AAT affirmed the decision of the Commissioner on the grounds that:

• the sum of $10,000 claimed as an allowable deduction was an expense or outgoing of capital and therefore not deductible under s 51 of the Act;

• the 1987 determination was not an assessment for the purposes of the Act and in particular s 170(3);

• the 1994 assessment, which was issued more than 6 years after the December 1987 determination, was an original assessment and not an amended assessment which was required to comply with the provisions of s 170(3) of the Act.

The taxpayer appealed to the Court against the AAT’s decision but only in relation to the issues arising under s 170(3).

The learned trial judge, Spender J, concluded that the AAT had proceeded on the basis that the taxpayer had made a full and true disclosure of all material facts necessary for her assessment with the consequence that the issue raised on the appeal was:

“whether the first notice was an ‘assessment’ under s 166 of the ITA Act, with the consequence that the time limits under s 170 commence to run from the prescribed period after service of this notice.”

The trial judge, after considering the relevant statutory provisions and the authorities, concluded that the 1987 determination was an assessment for the purposes of the Act with the consequence that the 1994 assessment was an amended assessment which was not authorised by s 170(3). His Honour allowed the appeal, declared that the 1987 determination was a notice of assessment within s 166 of the Act and set aside the decision of the Commissioner disallowing the taxpayer’s notice of objection and in lieu thereof ordered that the taxpayer’s claim for a deduction of $10,000 from her assessable income for the 1987 year of income be allowed.

The Commissioner has appealed to the Full Court against the decision of the trial judge.

THE ACT

Under s 17 of the Act income tax is levied and required to be paid on taxable income. Section 17, in respect of the year of income ended 30 June 1987, provided:

“Subject to this Act, income tax at the rates declared by the Parliament is levied, and shall be paid, for the financial year that commenced on 1 July 1965 and for each succeeding financial year, upon the taxable income derived during the year of income by any person, whether a resident or a non-resident.”

Taxable income was relevantly defined in s 6(1) as:

“...the amount remaining after deducting from the assessable income all allowable deductions ...”

The rate of tax under s 7(1) of the Income Tax Rates Act 1986 (Cth) applicable to the taxpayer in respect of her taxable income for the year of income ended 30 June 1987 was that set out in cl 1 of Schedule 1 which provided, inter alia, that the rate of tax is 24.42 per centum for that part of the taxable income that exceeds $4,890 but does not exceed $12,500. The taxpayer’s taxable income of $4,470, as returned, was below the tax threshold.

The ascertainment of the taxable income in respect of a year of income and of the tax payable thereon was governed by Part IV of the Act. Section 161 provided for the furnishing of annual returns. Section 162 provided for the Commissioner to require the lodging of a return or a further or fuller return even if no income had been derived by the person required to furnish the return.

Section 166 provided:

“From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon.”

Section 6(1) provided, inter alia, that in the Act, unless the contrary intention appears:

“‘assessment’ means -
(a)      the ascertainment of the amount of taxable income and of the tax payable thereon;  or
(b)      the ascertainment of the amount of additional tax payable under a provision of Part VII;”

An assessment, as defined, has been held to have two essential elements;  ascertainment of the taxable income and the tax payable thereon and notice to the taxpayer thereof.

In Ex parte Hooper (1926) 37 CLR 368, a case arising under the Income Tax Assessment Act 1922 (prior to the enactment of the Act in 1936 which first defined an assessment as meaning “the ascertainment of the amount of taxable income and of the tax payable thereon”) at 373 Isaacs J said of the first element:

“An ‘assessment’ is not a piece of paper:  it is an official act or operation;  it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer.”

In Taylor v Commissioner of Taxation (1987) 16 FCR 212 at 218-219 Woodward and Northrop JJ said of the second element:

“In some respects, an assessment means a calculation but it also means the result of the calculation which is reduced to writing, issued and served on the taxpayer.  The assessment therefore constitutes the formal statement of the amount of tax that a taxpayer is liable to pay under s 17.”

Section 167 provided for a default assessment in the following terms:

“If -
(a)      any person makes default in furnishing a return;  or

(b)the Commissioner is not satisfied with the return furnished by any person;  or

(c)the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income,

the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.”

Section 168 provided that at any time the Commissioner may make a special assessment of taxable income derived in a year or any part of it and of the amount of tax payable thereon. Section 169 provided for the Commissioner to make an assessment of the amount of tax a person is liable to pay under the Act.
Section 171(1) provided for a taxpayer to request the Commissioner to make an assessment if the taxpayer has duly furnished a return in respect of a year of income and no notice of assessment has been served within twelve months thereafter. If the Commissioner fails to comply with the request within three months, s 171(2) provides that any assessment issued thereafter in respect of the year of income is deemed to be an amended assessment issued on the last day of the three month period. As an amended assessment, the assessment must be authorised by s 170. The section enables a taxpayer who has furnished a return to take steps which would lead to time running for the purposes of s 170.

There is nothing in s 166 or the statutory scheme to which I have referred thus far in relation to the making of an assessment that would justify a conclusion that the Commissioner is only to make an assessment where he determines that there is tax payable in respect of the taxable income of a taxpayer.

Section 170, which is critical in the present case, provided for the amendment of assessments. In so far as the section relates to an amendment by the Commissioner increasing the liability of a taxpayer it provided:

“170(1)          The Commissioner may, subject to this section, at any time amend any assessment by making such alterations therein or additions thereto as he thinks necessary, notwithstanding that tax may have been paid in respect of the assessment.

170(2)            Where a taxpayer has not made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and there has been an avoidance of tax, the Commissioner may -

(a)where he is of opinion that the avoidance of tax is due to fraud or evasion - at any time; and

(b)in any other case - within 6 years from the date upon which the tax became due and payable under the assessment,

amend the assessment by making such alterations therein or additions thereto as he thinks necessary to correct the assessment.

170(3)            Where a taxpayer has made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and an assessment is made after that disclosure, no amendment of the assessment increasing the liability of the taxpayer in any particular shall be made after the expiration of 3 years from the date upon which the tax became due and payable under that assessment.”

Section 173 provided that except as otherwise provided in the Act,

“every amended assessment shall be an assessment for all the purposes of this Act.”

Section 174(1) requires the Commissioner to serve notice in writing of the assessment upon the person liable to pay the tax as “soon as conveniently may be after any assessment is made”.

Section 177(1) provided that the production of a notice of assessment shall be conclusive evidence of the due making of the assessment and (except in proceedings on appeal against the assessment) that the amount and all the particulars of the assessment are correct.

Part V of the Act at the relevant time provided for review and appeals. Under s 185 a taxpayer dissatisfied with any assessment may lodge an objection in writing against the assessment within sixty days after service of the notice of the assessment. Section 201(1) provided that the fact that a review or appeal is pending does not affect the assessment and income tax may be recovered as if no review or appeal were pending.

Part VI of the Act provided for the collection and recovery of tax. Section 204 provided:

“204(1)          Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.

204(2)            In sub-section (1), ‘income tax’ includes additional tax under Part VII.”

Section 204 creates a liability on the part of a taxpayer to pay “any income tax assessed” on the date specified in the notice in accordance with the section or if no date is specified thirty days after the service of the notice. The section also establishes the prescribed period for the amendment of assessments under ss 170(2)(b) and 170(3) by fixing the date on which any income tax assessed is due and payable. As was said by the Full Court (Lockhart, Beaumont and Whitlam JJ) in Thai v Commissioner of Taxation (1994) 53 FCR 252 at 266-267:

“Section 204 has two limbs, each independent of the other.  In each case there must be a written document, a notice telling the taxpayer the amount of tax to which he has been assessed.  The notice may specify the date when the tax is due and payable.  If there is no reference to the date for payment (obviously this would be a rare occurrence), then the section operates of its own force to determine that date.  The second limb is in the nature of a deeming provision.  Each limb of the section depends for its operation upon the terms of the written document, the notice served upon the taxpayer.  The notice is the means whereby a taxpayer knows the amount of tax to which he has been assessed and when the tax is due and payable.”

Under the statutory scheme to which I have referred the Commissioner is to make an assessment of the taxable income and of the amount of tax payable thereon in respect of a taxpayer for each year of income after the Commissioner has obtained all of the material facts necessary for the making of the assessment. The assessment fixes the liability of a taxpayer in respect of any tax payable on the taxpayer’s taxable income for a particular year of income. It is clear from the provisions to which I have referred that an assessment occupies a central role in Parts IV, V and VI of the Act in relation to the ascertainment, final determination and recovery of any tax assessed to be due and payable under the Act.

THE SUBMISSIONS

The Commissioner submitted that:

• a notice is not a notice of assessment under the Act unless it gives notice of the ascertainment of the amount of the taxable income of the taxpayer and an amount of tax which is due and payable in respect of that income: see the definition of “assessment” in s 6(1), and ss 166, 170(3) and 170AA(6) and Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 (“Batagol”), especially 251-2 per Kitto J and 256 per Owen J;

• Batagol is binding authority for the proposition that an assessment is only made under the Act when a positive amount of tax is assessed as due and payable on the taxable income of a taxpayer as it is essential to a notice of an assessment that it render the taxpayer liable to pay an amount of tax;

• although a consequence of the decision in Batagol is that the taxpayer cannot object to a notice under which no amount of tax is assessed as due and payable the taxpayer is not deprived of the right to object as that right can be exercised if the taxpayer derives taxable income, in respect of which tax is assessed to be payable, at any later point in time;

• if, contrary to the Commissioner’s primary submission, an assessment under which no amount of tax is assessed as due and payable can be issued under ss 166 and 174, on the proper construction of s 170(3) the time limit of three years for an amended assessment only commences to run under the section from a date on which an amount of tax became due and payable under an assessment;

• as no amount of tax was assessed as due and payable in respect of any taxable income of the taxpayer under the 1987 determination, it was not an assessment for the purposes of the Act or for the purposes of s 170(3);

• as there was no date by which tax was due and payable, no date was established by the 1987 determination by reference to which s 170(3) could operate with the consequence that s 170(3) did not bar the issue of the 1994 assessment.

The taxpayer submitted that:

• s 6(1) defines an assessment as the ascertainment of the amount of taxable income and of the tax payable thereon;

• the 1987 determination gave notice of the ascertainment of the amount of taxable income (whether “nil” or “$4,470”) and of the amount of tax payable thereon (“$0,00”);

• in ascertaining the figures to be set out and set out in the 1987 determination the Commissioner took all the steps required under the Act to make an assessment as defined in s 6(1) and gave formal notice to the taxpayer of the outcome at which he had arrived;

• Batagol’s case was about the time at which an assessment under the Act is made (ie after the Commissioner has calculated the taxable income and the tax payable thereon and served on the taxpayer notice of the assessment that he has made) and not whether such a notice of assessment must also result in a positive amount of tax being payable on the taxable income of the taxpayer;

• neither authority nor the scheme of the Act require the conclusion that a “nil” assessment, whether of taxable income or of the tax payable thereon, is not capable of constituting an assessment for the purposes of the Act or that the Commissioner only makes an assessment where he determines that tax is assessable or payable;

• general policy reasons but, in particular, the policy and purpose behind s 170 of certainty and finality of assessments support the taxpayer’s contentions: see Lloyds Bank Export Finance v Commissioner for Inland Revenue [1991] 2 AC 427;

• the construction contended for by the taxpayer accords with and gives effect to the legislative scheme, intention and purpose in relation to the role of assessments under Parts IV, V and VI of the Act;

• accordingly, the 1987 determination was an assessment and the primary judge correctly held that the 1994 assessment was an amended assessment which was not authorised by s 170(3) of the Act.

BATAGOL’S CASE

Batagol’s case was central to the submissions of both parties.  In Batagol the taxpayer in his returns of income made a full and true disclosure of all the material facts necessary for his assessment in respect of the three years of income ended 30 June 1952, 1953 and 1954.  The Commissioner ascertained that as a result of accrued losses which were carried forward by the taxpayer there was no taxable income of the taxpayer for the three years with the consequence that the taxpayer was not assessable to tax on the income stated in his returns.

In respect of the 1952 and 1953 years of income, after the assessor responsible for the taxpayer’s file noted that the taxpayer was not assessable to tax upon the income stated in the return, the return was marked as having been dealt with. The same procedure was followed for the 1954 year of income but as a refund of tax was payable to the taxpayer for that year the file was forwarded to the issue section whereupon “the basis on which [the assessor] had done” the refund advice and the cheque were sent to the taxpayer. The refund advice contained the statement that no tax was payable on the income shown on the return but it appears from the summary of argument of counsel for the Commissioner (109 CLR 243 at 249) that the advice did not indicate that an assessment had been made. The appropriate officer of the Commissioner completed all the processes necessary for determining whether or not there was a taxable income and any tax payable thereon for each of the three years and nothing further remained to be done in that regard under the departmental routine and processes.

Notices of assessment dated 14 June 1955 were issued to the taxpayer and, based on a disallowance of the losses which had previously been mistakenly allowed to be carried forward in the course of the processes set out above, the taxpayer was assessable to tax. The mistake was not by error of calculation or any mistake of fact but was by a mistake of law which led the assessors to conclude that there was no taxable income for the relevant years. As a consequence of the above matters s 170(3) did not authorise an amended assessment if one had already been made in respect of the three years of income.

The issue before the High Court was whether, prior to the assessment described in the notices dated 14 June 1955, the Commissioner had made an assessment for the purposes of the Act and, in particular, s 170(3) in respect of the taxpayer for the three years of income ended 30 June 1952, 1953 and 1954. If so, the assessments dated 14 June 1955 were amended assessments which were not authorised under s 170(3) of the Act.

Kitto J summarized the competing contentions of the appellant taxpayer and the Commissioner (at 251):

“The appellant takes his stand upon the undoubted fact that in respect of each of the three years of income the entire internal procedure of the Commissioner’s office for dealing with a taxpayer’s return was gone through, and, as the case stated says, ‘nothing further then remained to be done under the departmental routine and processes.’  He says that that being so it should be held that on each occasion an assessment was made;  and on that footing he invokes the provision in s. 170 (3) that where a taxpayer has made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and an assessment is made after that disclosure, no amendment of the assessment increasing the liability of the taxpayer in any particular shall be made except to correct an error in calculation or a mistake
of fact.

A difficulty in the way of the appellant’s argument appears at once upon a reading of s. 170 (3) itself, for according to the literal meaning of its terms it assumes that an assessment is something that imposes a liability upon the taxpayer. Indeed it goes on, after making the provision I have mentioned, to say that no such amendment shall be made after the expiration of three years from ‘the date upon which the tax becomes due or payable under that assessment’; and that certainly assumes that an assessment is something under which tax becomes due and payable. Relying upon these and other indications of intention in the Act the Commissioner maintains that the word “assessment” is used throughout s. 170 in a sense which makes a ‘nil’ assessment an impossibility.”

All three members of the court (Kitto, Menzies and Owen JJ) concluded that the assessments described in the notices of assessment dated 14 June 1955 were original and not amended assessments. Kitto J, who in my view did not accede to the submissions of either the taxpayer or the Commissioner, explained how he arrived at his conclusion at 251-3:

“The word ‘assessment’ is defined in s. 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon. There is nothing in s. 170 to show the contrary intention. But the definition is not sufficient by itself to answer the question before us, because ‘ascertainment’ is a word the force of which depends upon the context. It is here used in an Act under which the service of a notice of assessment is the levying of the tax. Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice or (if no date is specified) on the thirtieth day after the service of the notice: s. 204. Thus, and thus only, there is brought about an ‘ascertainment’ of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: see s. 177) to be the result flowing from the application of the Act in the particular case. The respective amounts of the taxable income and the tax have been rendered certain. The word ‘ascertainment’ being understood in this sense, the definition of ‘assessment’ means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case. The idea coincides with that which Isaacs J. expressed in Federal Commissioner of Taxation v Hoffnung & Co. Ltd. in relation to war-time profits tax when he said: ‘If an assessment definitive in character is made, it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less. In short, it ascertains a precise indebtedness of the taxpayer to the Crown. On this construction of the Act nothing done in the Commissioner’s office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by the service of a notice of assessment.

When the group of sections which includes s. 170 is examined, it becomes, I think, quite clear that this is the concept which ‘assessment’ in s. 170 is intended to express. The making of assessments by the Commissioner is the subject of provisions in ss. 166, 167, 168 and 169, and from these it is clear that assessment is a process which by force of the Act is definitive of the amount of the taxpayer’s liability, though subject of course to review and appeal. Another section, s 171, oddly enough by its very infelicity of expression shows that a notice of assessment is essential to the existence of an assessment. It speaks of ‘any assessment issued’. Then the next section, s. 172, by describing an amendment in the taxpayer’s favour as one by which his liability is reduced, emphasises the essential character of an assessment as the creation of a tax liability of specific amount. See also the proviso to s. 185.

There is, it is true, a lack of harmony between the view I have expressed and the language of s. 174, which provides that as soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof upon the person liable to pay the tax. The provision is taken from sub-s. (1) of s. 40 of the Income Tax Assessment Act 1922 (Cth). Sub-section (2) of s. 40 enacted that the omission to give any such notice should not invalidate the assessment. There was no definition of ‘assessment’. Thus the scheme of the Act of 1922 as regards assessment was much less clearly marked than is the scheme of the present Act. It would, I think, be unsound to allow the form of words carried over into s. 174 a dominating effect on the present question. Rather is it necessary on proper principles of construction to give the section a meaning which fits the context. Accordingly it should, I think, be understood to mean that the Commissioner shall serve a notice of assessment as soon as conveniently may be after his work for the making of the assessment has been done.

The next section, s. 175, though doubts have sometimes been expressed as to its application, at least shows that ‘assessment’ is regarded as a process producing a legal effect. The provision is that the ‘validity’ of an assessment shall not be affected by reason that any of the provisions of the Act have not been complied with. I shall not refer in detail to ss. 185 to 202 inclusive, which deal with reviews and appeals, but the language of those sections cannot, I think, be reconciled with any other view than that without a notice of assessment fixing a taxable income and a tax there is no assessment. Indeed it would be hard to find clearer indications of this then [sic] s. 170 itself provides. The topic of the section is the power of the Commissioner to amend assessments, a concept which pre-supposes that an assessment is something creating a legal obligation, so that any amendment of it must depend upon a positive grant of power to alter that obligation. Throughout the section an assessment is referred to as a specific, identifiable thing, which, unless amended (or of course affected on review or appeal), will stand as decisive of liability. To speak, as does sub-s. (1), of tax being paid in respect of the assessment, or to speak, as do sub-ss (2) (b), (3), (4), (5) and (6), of tax having become due and payable under the assessment, would be impossible unless ‘assessment’ meant the whole process which comes to a head in the service of a notice of assessment and thereby becomes, as a whole, an act in the law. If this be correct, it follows that until a notice of assessment has been served on the taxpayer the Commissioner and his officers neither need statutory authority to go back over any or all of the steps that have been taken in the office, and correct anything they consider to be erroneous, nor are disabled from doing so by anything in s. 170.” (footnotes omitted)

I have set out his Honour’s reasoning in full because, as I later explain, some parts of the reasoning have been treated as authoritative in certain respects in subsequent High Court decisions but other parts have been treated in decisions in this Court and the Supreme Court of Victoria as justifying the Commissioner’s contention that a nil assessment is an impossibility.  The reasoning of Kitto J and the underlying principles which, in my view, led to his Honour’s conclusion that the 1955 assessments were not amended assessments, were as follows:

1. “Assessment” is used in its defined sense, as set out in s 6(1), in Part IV and in particular s 170 of the Act.

2. “Ascertainment” as used in the definition of “assessment” in s 6(1) is a word the force of which depends upon the context. “Assessment” in the sense of mere calculation produces no legal effect.  As “assessment” was here used in an Act under which the service of a notice of assessment establishes legal liability in respect of tax it is appropriate to construe “ascertainment” as importing the notion of the act which establishes that liability.

3. It is only after the Commissioner has gone through the process of calculation and served on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts that tax becomes by the force of the Act due and payable as set out in the notice. Thus, an “ascertainment” of the taxable income and of the tax only occurs after the requisite calculation as to the taxable income and the tax payable thereon has been made and notice thereof has been served on the taxpayer.  Accordingly, without a notice which informs the taxpayer of a taxable income and any tax payable thereon there is no assessment.

4. The above interpretation of “ascertainment”, as used in the definition of “assessment” in s 6(1), is strongly supported by s 170 itself as the concept of amending an assessment presupposes that an assessment is something which creates a legal obligation so that any amendment of it must depend upon a positive grant of power to alter that obligation. Significantly, Kitto J said at 253 that an assessment referred to in s 170 is:

   “a specific, identifiable thing, which, unless amended (or of course affected on review or appeal), will stand as decisive of liability.”

1. Accordingly, the notice of an assessment under the Act is the act which, as a matter of law, brings the whole process of fixing liability in respect of taxpayer’s taxable income and the tax thereon to finality.

2. Prior to the service of the notice of an assessment the Commissioner and his officers need no statutory authority nor are they disabled under s 170 from revisiting steps taken earlier or correcting any matters they consider to be erroneous.

3. As no notice of an assessment in respect of the three years of income had been served on the taxpayer prior to service of the notices dated 14 June 1955 the Commissioner had not made an “assessment” as defined in s 6(1) and the notices of assessment dated 14 June 1955 were not amended assessments which were invalidly issued under the Act.

Although it was central to the reasoning of Kitto J that an assessment fixed the legal liability of a taxpayer for tax in respect of a year of income, his Honour did not decide that:

• a nil assessment is an impossibility;

• an assessment for the purposes of the Act must have a positive amount of taxable income or a positive amount of tax due and payable on the taxable income; or that

• a notice that the taxable income or the tax thereon is nil cannot be an assessment for the purposes of s 170.

However, Kitto J said that the “literal meaning” of the terms of s 170(3) assumed that an assessment is something that imposes a liability upon the taxpayer. If that literal approach to s 170(3) is accepted it must follow that an amendment need only comply with the sub-section if it is an amendment of an earlier assessment under which the taxable income has been ascertained and a positive amount of tax payable thereon has been assessed. Other parts of the judgment of Kitto J also support the Commissioner’s contention that a positive liability to pay tax must arise under an assessment. However, in response there is much to be said for the view that in referring to a liability to pay an amount of tax his Honour was merely instancing that situation as an example of why it is the notice of the assessment, rather than any anterior conduct of the Commissioner, that fixed liability of a taxpayer in respect of payment of tax under the Act for any relevant year of income. I am satisfied that it does not follow from the reasoning of Kitto J, to which I have referred, that notice to a taxpayer that an assessment has been made that no tax is assessable or payable does not result in the liability of the taxpayer being fixed at nil in respect of the payment of tax under the Act for the relevant year subject only to amendment under s 170 or review or appeal under the Act.

I turn now to consider the reasoning of Owen J. His Honour observed at 255 that the “mere” ascertainment of taxable income and of the tax payable thereon within the meaning of the definition of “assessment” in s 6(1) imposes no liability to pay the tax so ascertained but is merely a step towards that end which is completed after service of the written notice of assessment: see ss 174 and 204. Owen J then considered s 170 and observed at 255-256 that the section is concerned only with cases in which the calculation of the amount of taxable income and the amount of tax payable thereon has been completed and, at least, the notice required by s 174 has been given. His Honour considered the provisions of s 170 and concluded at 256-7:

“These provisions all show that the assessment of which s. 170 (1) to (6) speak is something more than the completion inside the Taxation Department of the routines and processes necessary for the purpose of deciding whether or not in a particular case there is a taxable income and tax payable thereon.  It includes the taking of all such further steps as are necessary to create a liability to pay the tax so calculated.

For these reasons, therefore, the objections made by the appellant to the assessments of tax for the years 1952 and 1953, of which notice was given on 14 June 1955, must fail.  In the case of the year ending 30^th June 1954, the ‘refund advice’ sent to the appellant contained a statement that no tax was payable in respect of that year.  But this was not a notice of assessment:  it was merely to explain why it was that the whole of the tax deductions made during the year was being refunded.  Here again I think the taxpayer’s objection fails since, for the reasons stated above, what occurred did not create any liability to pay tax.

These conclusions do not, I think, run counter to the statement of Isaacs J. in The King v Deputy Federal Commissioner of Taxation (S.A.);  Ex parte Hooper that ‘An “assessment” is not a piece of paper:  it is an official act or operation;  it is the Commissioner’s ascertainment, on consideration of all relevant circumstances ... of the amount of tax chargeable to a given taxpayer.  When he has completed his ascertainment of the amount, he sends by post a notification thereof called ‘a notice of assessment’ ... But neither the paper sent nor the notification it gives is the ‘assessment’.  That is and remains the act or operation of the Commissioner’.  The distinction which his Honour drew is, of course, a valid one but the present case is concerned with the use of the word ‘assessment’ not in its defined sense but as conveying the meaning that every necessary step has been taken to create a debt due and payable by the taxpayer to the Crown.  This was the view taken by Thurlow J. in the Exchequer Court of Canada in Scott v The Minister of National Revenue.  After referring to the passage from the judgment of Isaacs J. set out above, he went on:  ‘But it does not, in my opinion, follow from the foregoing that the giving of a notice of assessment is not itself part of the fixation operation or procedure which is compendiously referred to in the statute as an ‘assessment’, or if the giving of notice is not strictly part of the assessment itself that the assessment itself is complete until the notice has been effectively given”.  With that statement I agree and in these circumstances it is unnecessary to consider the further questions which arise only if it be held that the assessments of which notices were given on 14 June 1955 were in truth amended assessments.” (foonotes omitted)

Owen J, in contrast to Kitto J, appears to have regarded s 170 as not using “assessment” in its defined sense in s 6(1) but rather in the sense which embraces every step necessary to

“create a debt due and payable by the taxpayer to the Crown”.

As with the observations of Kitto J as to the literal meaning of s 170(3), if that conclusion is taken literally it strongly supports the Commissioner’s position that an assessment, at least for the purposes of s 170, is one under which a positive amount of tax must be assessed as being due and payable. However in my view his Honour’s statement should not be taken literally or treated as determinative of this issue. There are several reasons for that conclusion:

1. The context of his Honour’s consideration of this issue was whether “ascertainment” under s 6(1) and a notice of assessment under s 174 are necessary for an assessment to have been made for the purposes of s 170. Whether tax is due and payable under the notice of assessment was clearly relevant to, but not decisive of, whether it was a precondition of an assessment that the notice thereof fix the liability to tax of the taxpayer.

2. If it was decisive that tax be due and payable under the assessment or that an assessment must have “created a debt due and payable by the taxpayer to the Crown” there was no need for Owen J to differentiate, as he did, between the 1952, 1953 and the 1954 years of income, as prior to 14 June 1955 there was no relevant notice creating any debt by the taxpayer in respect of any of those years.  It is significant that his Honour’s rejection of the taxpayer’s argument for the 1954 year was on the basis that the “refund advice”, which contained a statement that no tax was payable, was not a notice of assessment and merely explained why it was that the whole of the tax deductions made during the year was being refunded.  It was in that context that his Honour observed that no liability to pay tax was created under the refund advice.  In essence the refund notice appears to have been a statement of account between the Commissioner and the taxpayer.  Unlike the 1987 determination, the refund notice may not have stated the taxable income but, importantly, it did not give notice that an assessment had been made of the taxable income and the tax payable.

3. Owen J said he was adopting the same approach as Thurlow J in Scott v The Minister of National Revenue [1961] Exch. C.R. 120. Thurlow J treated a notice of assessment as an integral part of the process of assessment but did not require that a debt be created.  Rather, his Honour was concerned to explain that it is the nature of an assessment that it bring to completion and finality the process by which the tax liability of the taxpayer is determined for the particular year of income.  The decision of Thurlow J in Scott related to s 46(1) of the Income Tax Act RSC 1952 which provided for the Minister to examine each return of income and assess the tax for the taxation year and the interest and penalties, if any, payable.  Section 46(2) provided for notice of the assessment to be given.  Thurlow J said at 132:

   “As used in s. 46(1) the word ‘assess’ appears to me to be roughly equivalent to ‘ascertain and fix’ and it seems to have two possible senses in one of which the mere acts of ascertaining and calculating only are included, and the other that of computing and stating the tax in the manner prescribed by the statute.  In the latter sense, the stating is as much a part of the assessing operation itself as is the computing of the tax, and in the absence of some statutory provision for stating in another way, it would, in my opinion, be necessary to state it in such a way as to make the taxpayer aware of it.”

His Honour preferred the latter sense of the word “assess”.  In my view the decision of Thurlow J is quite consistent with an assessment under which the taxable income and tax, and therefore the taxpayer’s liability, are ascertained, fixed and stated as nil.

1. It is equally consistent with the reasoning of Owen J that a notice of an assessment ascertaining the taxable income and the tax payable thereon but under which no debt is due and payable may nevertheless be an assessment for the purposes of s 170. Indeed, as I later explain, s 204 was specifically amended in 1954 to provide for a notional date on which income tax assessed is due and payable for the purposes of s 170 in circumstances, whether by reason of offsetting tax payments or credits or otherwise, where no tax is due and payable under the notice of assessment.

2. Owen J, as did Kitto J, understandably gave instances of the operation of s 170 which assumed an assessment which assesses tax to be due and payable to explain the conclusion that assessment is only complete when written notice of it and the liability it creates is given to the taxpayer. The reasoning of both of their Honours does not preclude the possibility of a written notice of an assessment under which no tax is determined to be payable on the taxpayer’s taxable income. Indeed, if their Honours were of the view that a positive amount of tax must be payable under a notice of assessment it is surprising they did not dispose of the whole of the taxpayer’s case for the three years of income on that simple ground.

Menzies J agreed with the conclusion reached by Kitto J and Owen J that there had been no relevant assessment prior to the notice of assessment issued on 14 June 1954 but otherwise his Honour gave no indication of his own reasoning on the matter.

In my view Batagol’s case can be treated as:

• deciding that for the purposes of s 170 and, I would add, the key provisions to which I have referred in Parts IV, V and VI of the Act, an assessment is made only after the ascertainment of the taxable income and the tax payable thereon and written notice thereof has been given to the taxpayer; and

• not deciding that an assessment is made only when a positive amount of tax is assessed to be due and payable in respect of the taxable income of a taxpayer.

My conclusions are not inconsistent with discussions of Batagol in subsequent cases in the High Court.  In F. J. Bloemen Pty Ltd v The Commissioner of Taxation of the Commonwealth (1981) 147 CLR 360 at 371-2 Mason and Wilson JJ (with whom Aickin J agreed) referred to Batagol in the following terms:

“The word ‘assessment’ is defined in s. 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon.  In Batagol v Federal Commissioner of Taxation, the Court considered the meaning of ‘assessment’ in the context of s. 170 and the group of sections with which it is associated. Kitto J. observed: ‘Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance’, until he serves a notice of assessment. Then and then only has an ‘ascertainment’ been made. The amounts of taxable income and tax are then rendered certain. In this context, according to his Honour ‘assessment’ means ‘the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case’. Owen J. reached a similar conclusion. Menzies J. agreed with both Kitto and Owen JJ. It was held that nothing done in the Commissioner’s office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by service of a notice of assessment.” (footnotes omitted)

More recently in The Commissioner of Taxation of the Commonwealth v Prestige Motors Pty Ltd (1994) 181 CLR 1, after referring to the definition of an assessment in s 6(1) and ss 166, 169, 174(1), 175, 177(1) and 204 of the Act, Mason CJ, Brennan, Deane, Gaudron and McHugh JJ said at 13:

“Service of the notice of assessment brings to an end the process of assessment.
As Kitto J. explained in Batagol v Federal Commissioner of Taxation, service of the notice of assessment on the taxpayer fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment.  His Honour said:

‘[I]f the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice or (if no date is specified) on the thirtieth day after the service of the notice: s. 204. Thus, and thus only, there is brought about an ‘ascertainment’ of the taxable income and of the tax ... The word ‘ascertainment’ being understood in this sense, the definition of ‘assessment’ means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case.’

Service of the notice on the taxpayer brings the process of assessment to an end in the sense that, in conformity with s. 174(1), the notice, which necessarily reflects the requisite elements of the calculation that has been made, is served after the making of that assessment.

In Batagol, Kitto J. was directing his comments to an assessment of a taxpayer to tax on his own taxable income.” (footnotes omitted)

In Prestige Motors the Court was considering the validity of a notice of assessment given under s 174 to the “Prestige Toyota Trust”. Batagol was considered by the Court in the context of determining whether the notice was an “assessment” under s 174 and if so whether it was to the trustee or to the beneficiaries of the trust. After considering the role of the notice of assessment under the Act their Honours considered the requisite contents of the notice (at 14):

“... on the view which we take of the provisions, it is necessary that the notice should bring to the attention of the person on whom it is served that the assessment to which it relates is an assessment of that person to tax.  The principal purpose of the notice of assessment is to bring to the attention of the person on whom it is served that such person is liable to pay on the due date the amount of tax assessed in the notice on the income stated in the notice.  No doubt service of the notice on a taxpayer goes some way towards achieving this purpose.  But whether the purpose is achieved in a given case must depend upon the form and contents of the particular notice of assessment.” (footnotes omitted)

The above passages appear to adopt the reasoning of Kitto J in Batagol.  If that is correct it follows that the decision in Batagol is not restricted, as it might otherwise have been thought to have been, to an “assessment” solely for the purposes of s 170. In Webb v Commissioner of Taxation (No 2) (1993) 47 FCR 394 at 399-400 Hill J observed that cases subsequent to Batagol have made it clear that the principle in Batagol applies not merely to s 170 but to other sections such as s 177. His Honour cited Bloemen at 371-2 and Smorgon v ANZ Banking Group Ltd (1976) 134 CLR 475 at 480 in that regard. Counsel for the Commissioner did not dispute that conclusion. In its context the joint judgment in Prestige Motors at 13 appears to accept that an assessment, as defined in s 6(1) and therefore for the purposes of the Act, is completed by:

“service of the notice of assessment on the taxpayer [which] fixes the ascertainment of the amount of the taxable income and the amount of the tax payable by the taxpayer and brings to an end the process of assessment.”

These comments are not inconsistent with the notion of a notice of an assessment which ascertained and then fixed the amount of taxable income at an amount below the taxable threshold and consequently the amount of tax payable thereon as nil, thereby bringing to an end the process of assessment in respect of the particular year of income.  Indeed, it was the notion of an assessment fixing, and thereby rendering certain, the amount of a taxpayer’s taxable income and the tax payable thereon that was emphasized by the Full Court of the Federal Court (Spender, Burchett and Hill JJ) recently in Federal Commissioner of Taxation v Stokes (1997) 97 ATC 4001 at 4010-4011 as having been determined in Batagol. 

As the fixing of the taxable income and the tax payable thereon are two essential ingredients of an assessment made under s 166 the amendment of these ingredients will constitute an amendment of the assessment in a “particular” for the purposes of s 170(3). Such an amendment may be contrasted with an amendment of an amount included in the notice of assessment as a credit for a group certificate or provisional tax which might be an amendment of a particular of the notice but is not an amendment of a particular of the assessment: see Webb v Commissioner of Taxation (No 2) at 400-401, Prestige Motors v Commissioner of Taxation (1993) 47 FCR 138 at 145, Deputy Commissioner of Taxation v Clyne (1982) 60 FLR 45 and Commonwealth of Australia v Opiel (1986) 86 ATC 5013. In essence these cases decide that details such as provisional tax and other amounts standing to the credit of a taxpayer, which are relevant to calculating the taxpayer’s liability to pay the tax assessed on the taxable income, are particulars of the statement of account between the taxpayer and the Commissioner but are not particulars of the assessment for the purposes of the Act and, in particular, s 170.

For these reasons I am of the view that the trial judge was correct in concluding that Batagol is not authority for the proposition that under an assessment, whether for the purposes of the Act or of s 170(3), a positive amount of tax must be assessed as due and payable on the taxable income of a taxpayer.

However, as was emphasized by counsel for the Commissioner, decisions in this Court and the Supreme Court of Victoria have taken a different view of Batagol to that set out above.  In Deputy Federal Commissioner of Taxation v Sheehan (1986) 86 ATC 4718 at 4724 Tadgell J cited Batagol, and in particular Kitto J at 251 for the proposition that:

“The imposition of a liability is a necessary feature of an assessment under Part IV of the Act, and a nil assessment is an impossibility.”

See also Stuart (No 2) v Federal Commissioner of Taxation (1996) ATC 4942 at 4945-6 per Northrop J and at 4948 per Lee and Finn JJ.

Justice Hill (with whose reasons von Doussa and Beazley JJ agreed) in the Full Court in Prestige Motors Pty Ltd v Commissioner of Taxation at 142 said that in Batagol the Court had held:

“... that the only time that there had been an assessment was when there had been a notification of a positive amount of tax payable.”

See also Webb v Commissioner of Taxation (No 2) at 399-400 per Hill J. Although, as pointed out earlier, Hill J accepted that subsequent cases have not treated Batagol as restricted to s 170, that observation did not affect his Honour’s view expressed at 400 that for the purposes of s 170 a positive amount of tax must be payable under an assessment.

The above passages may be contrasted with the more recent discussion of Batagol by the Full Court in Stokes at 4010-4011, to which I referred earlier, which emphasized the role of an assessment in the fixing of liability to tax rather than in creating a debt for a positive amount of tax. 

For the reasons set out above I respectfully differ from the views expressed in the above cases that Batagol determined that a nil assessment is an impossibility or that an assessment under the Act or for the purposes of s 170(3) must result in a positive amount of tax being assessed as due and payable on the taxable income of a taxpayer. I do not regard Batagol as authority for either proposition nor do I regard the High Court in Batagol as having accepted the Commissioner’s argument in favour of both propositions in the decision that it made.

The conclusions set out above do not dispose of the case. They only mean that whether a nil assessment can be made under the Act is an open question.

The reasoning of the trial judge for concluding that the 1987 determination was an assessment was contained in the following passage:

“The document in the present case must be contrasted with the document in Batagol and the documents in Sheehan.  The document specifies ‘Details of your assessment’.  It states ‘Your taxable income is nil’ and ‘Tax on taxable income $0.00’, and that document was served on the taxpayer.  This document, in my judgment, contains a “fixed”, “specified”, “certain”, “precise” and “definitive statement” of the applicant’s taxable income and of the tax payable thereon. The statements in the document of 11 December 1987 were not mere explanations, they were amounts ascertained by the Commissioner and notified to the applicant. They were, in truth, details of her assessment. In my opinion, both the taxable income and the tax payable thereon were ascertained by the Commissioner. That the document was, and was intended to be, the assessment by the Commissioner in discharge of his duty under s 166 of the ITA Act to make an assessment, is strongly corroborated by the explanatory notes on the obverse of the document.

In my opinion, to require ‘the ascertainment of the tax payable’ to be positive number [sic] is an impermissible gloss on the definition of assessment in s 6(1) of the ITA Act.  The ascertainment of the tax payable as zero is no less an ascertainment within the definition as is the ascertainment of the tax as a non-zero number.

The number zero is the beginning of and hence the first number of, and included in, the domain of natural numbers.”

The trial judge’s description of the 1987 determination is clearly correct as a matter of fact. That conclusion raises directly as the sole question whether the nil “assessment” contained in the 1987 determination is impossible as a matter of law. That question is to be resolved by resort to the proper construction of “assessment” for the purposes of the Act and in particular s 170(3).

CAN A NIL ASSESSMENT BE MADE UNDER THE ACT?

There is nothing in the definition of “assessment” in s 6(1), in s 166 or the statutory scheme to which I have referred in relation to assessments apart from s 170 that requires the conclusion that:

• a positive amount of tax must be assessed under an assessment; or

• an assessment of an amount of taxable income upon which no tax is payable is not capable of being an assessment under s 166.

In Lloyds Bank Export Finance Ltd v Commissioner of Inland Revenue [1991] 2 AC 427 sound policy reasons were put forward for rejecting the view that a nil assessment cannot be made under the Income Tax Act 1976 (N.Z.).  The Privy Council concluded that the contention of the Commissioner that an assessment is only made under that Act when the Commissioner ascertains a taxable income upon which tax is payable produced “anomalies and illogicalities” under the New Zealand Act.  Under that Act a taxpayer was required to make an annual return of assessable income under s 19 and the Commissioner was to make an annual assessment from the return and other information of the amount on which tax is payable and of the amount of that tax.  Section 25, which limited the time for assessments, provided that no assessment may be altered to increase the liability of a taxpayer after the expiration of four years from the end of the year in which an assessment is made other than in, inter alia, the case of fraud or a wilfully misleading return. 

The Commissioner had made determinations that no tax was payable in respect of particular years of income but, as was the case in Batagol, as a result of allowing carry forward losses. More than four years later the Commissioner sought to issue assessments which were statute barred if the earlier determinations were assessments for the purposes of s 25. 

In the judgment of the Privy Council delivered by Lord Jauncey of Tullichettle their Lordships rejected the Commissioner’s contention that an assessment required that a positive amount of tax be payable on the grounds stated by Lord Jauncey hereunder:

“Section 9 requires a taxpayer to make a return even although he may well know that he will be required to pay no tax.  The return required is of assessable income but such income is capable of producing nil taxable income by the deduction therefrom of special exemptions.  Section 19 imposes on the commissioner the duty to make assessments in respect of every taxpayer of the amount on which tax is payable.  This involves, inter alia, calculating the assessable income.  If, as Mr Jenkin contended, the process of assessment has not taken place until some taxable income has been ascertained, it means that the commissioner will not know until he has completed the whole exercise of examining the returns and relevant documents whether he has been making an assessment or not, even although he has in that process calculated the assessable income.  If he has not been making an assessment what has he been doing and what is the statutory warrant therefor?  Mr Jenkin’s contention also produced the somewhat curious result that a determination by the commissioner that $5 tax is payable is an assessment which cannot be increased after the period specified in section 25(1) has run, whereas a determination that there is no taxable income or that there is a loss can be revised at any time without limit.” (at 435)

“Their Lordships cannot do better than quote the following passage from the judgment of Tompkins J.:

‘In my opinion the expression ‘make assessments’ in the context of section 17, means the process by which the commissioner carries out his statutory obligation to ascertain the amount on which tax is payable and the amount of tax. I find nothing in the section, nor in the statutory scheme to justify a conclusion that the commissioner only makes an assessment where he determines that there is tax payable. A conclusion that there is no amount on which tax is payable and that as a consequence there is no tax payable involves making an assessment from the returns and other information in his possession just as much as if the result of the assessment were to find that there was an amount on which tax was payable and consequently there was tax payable.” (The reference is to section 17 of the Act of 1954 which was later replaced by section 19 of the Act of 1976).’” (at 437-8)

The Privy Council was fortified in its rejection of the Commissioner’s contentions by two further considerations. 

“In the first place the purpose of section 25(1) is to achieve finality and to enable the taxpayer and the commissioner to close the books and dispose of their papers after the stipulated period.  The exercise required to be carried out by the commissioner in terms of section 19 is capable of producing three different results namely (1) that the taxpayer has taxable income, (2) that he has no taxable income, and (3) that he has a loss which he may carry forward in terms of section 188.  To accept the argument of Mr Jenkin and the reasoning of the Court of Appeal would mean that only in the first instance would finality be achieved whereas in the other two the commissioner could reopen his determination at any time in the future.  A result which would appear to be ‘contrary to the spirit of section 25,’ to quote the words of Cooke J in Commissioner of Inland Revenue v. V. H. Farnsworth Ltd. [1984] 1 N.Z.L.R. 428, 430.

In the second place the provisions of Part III of the Act of 1976 headed ‘Objections to assessments’ envisage that such objections will be dealt with by the Taxation Review Authority, a body particularly experienced in taxation matters. It would be entirely logical that the legislature should have intended that all matters involving determinations by the commissioner consequent upon receipt of a taxpayer’s return as to tax payable or not payable should be dealt with by that body. Such a result would follow from the conclusions which their Lordship [sic] have reached. If on the other hand Mr Jenkin’s argument were correct it would mean that the determinations by the commissioner resulting in a nil payment of tax or in a loss could only be challenged by a taxpayer in the ordinary courts by judicial review or some other legal process. This would appear to defeat substantially the purpose of Part III.” (at 438)

Subject to the issue of whether the terms of s 170 compel a different conclusion in my view the observations set out above may be made in respect of the role of an assessment under the Act. In that context the definition in s 6(1), the requirements of the Act in respect of returns and assessments (particularly in ss 161 and 166) and the general scheme of certainty and finality including the provisions for review under Part IV of the Act are not relevantly or in substance different from the scheme discussed by the Privy Council in respect of the New Zealand Act.

Similar policy reasons were also found by the primary judge to be persuasive in favour of rejecting the Commissioner’s contentions in the present case.

Senior Counsel for the Commissioner sought to respond to the policy reasons referred to in Lloyds Bank Export Finance by proffering reasons why there is no need for an assessment if a taxpayer has no taxable income or no tax liability on the taxable income. It was submitted that under s 166 the Commissioner embarks on and continues the process of assessment until it is ascertained that an amount of tax is payable. It was further submitted that there is nothing anomalous about that result as:

“Is it not all right to wait till it matters?  What is wrong with that?”

It was then said that if a taxpayer desired to escape any ensuing uncertainty that could be achieved by making a request for the Commissioner to make an assessment under s 171.

I do not find the Commissioner’s contentions to be convincing. Further, they run counter to the statutory scheme under the Act which provides for the Commissioner to embark upon and complete his or her assessment for each year of income in respect of a taxpayer. There is no support in that scheme for the view proffered by the Commissioner that sometimes the Commissioner can complete the process of assessment (ie if tax is assessable) and sometimes the Commissioner cannot complete that process (ie if no tax is assessable) for a year of income and in some cases indefinitely until tax is assessable. In the latter case one may well ask, as did Lord Jauncey of Tullichettle in Lloyds Bank Export Finance, what has the Commissioner been doing if not assessing and what is the source of his statutory authority if it is not for assessing?

Further there is no justification for viewing the assessment process as if it were one which only, using the words of Senior Counsel, “matters” to the Commissioner and then only when tax is assessable.  The process also “matters” to taxpayers, particularly when no tax is assessable.

I also do not accept the Commissioner’s suggestion that the answer to the ensuing uncertainty is in the rarely used s 171. The policy of certainty and finality which lies behind s 170 assumes that assessments have been made for a year of income rather than that they have not been made. Section 171 merely fills a gap arising, for the purposes of s 170, where the Commissioner has not served a notice of assessment. It has no greater or wider function than that.

For the above reasons, putting to one side the precise terms of s 170, counsel for the taxpayer was correct in contending that the general scheme of Parts IV, V and VI and the policy of certainty and finality behind s 170 in respect of assessments do not require or suggest that the Commissioner only makes an assessment when he determines that there is tax payable on the taxable income of a taxpayer and gives notice of the assessment to the taxpayer. Also for the same reasons, I am satisfied that for the purposes of the definition in s 6(1) and of s 166 of the Act there is no basis for adding what the learned primary judge said was the “impermissible gloss” on these sections, that it is only when the Commissioner assesses a positive amount of tax to be payable on the taxable income that an assessment is made. Under the sections when the Commissioner has ascertained the taxable income of the taxpayer (whether nil or a positive amount) and the amount of tax payable thereon (whether nil or a positive amount) and served notice thereof on the taxpayer the Commissioner will have made an assessment in respect of the taxpayer for the relevant year of income. Accordingly, in my view a nil assessment can be made under the Act and in particular s 166.

The Commissioner placed particular reliance upon the enactment of s 170AA(6) since Batagol in support of his contention that under the Act there cannot be a nil assessment.

Section 170AA, which was inserted by s 21 of Taxation Laws Amendment Act (No 46 of 1986), provided for payment of interest by a taxpayer where there is an amendment of an assessment increasing the liability of a taxpayer to pay tax. Section 170AA(6) provided:

“         Where -

(a)the Commissioner has served notice in respect of a taxpayer to the effect that the taxable income of the taxpayer of the year of income is nil or that no tax is payable on the taxable income of the taxpayer of a year of income;  and

(b)the Commissioner subsequently makes an assessment of the taxable income of the taxpayer of the year of income and of the tax payable on that taxable income,

the following provisions have effect for the purposes of this section:

(c)the notice referred to in paragraph (a) shall be deemed to be an assessment (in this sub-section referred to as the ‘notional assessment’) on which a nil amount of tax became due and payable at the end of 30 days after the date of service of the notice; and

(d)the assessment referred to in paragraph (b) shall be deemed to be an amendment of the notional assessment.”

The Commissioner contended that:

• Parliament’s understanding of the Act, as expressed in the amendment, should be accepted particularly in a case where a contrary interpretation would mean that the amendment would have been unnecessary: see Grain Elevators Board (Victoria) v Dunmunkle Corporation (1946) 73 CLR 70 at 86; and

• s170AA(6) accepted that the effect of the Act was that there cannot be a nil assessment.

Some support for the Commissioner’s contention can be found in the Explanatory Memorandum which explained the sub-section as follows:

“Sub-section 170AA(6) is a measure necessitated by the fact that, technically, a notice advising a taxpayer that no tax is payable, e.g., because the taxable income is below the threshold at which tax is assessed, or that the taxpayer has no taxable income for a particular year, is not an assessment for the purposes of the income tax law.  It will ensure that a taxpayer will be liable to pay interest in respect of the amount of tax payable on assessment where the taxpayer had previously been notified that no tax was payable.

For the purposes of the section, sub-section (6) deems the notice advising that no tax was payable or that there was no taxable income to have been a notice of assessment (paragraph (c)) and the subsequent assessment to have been an amendment of that deemed assessment (paragraph (d)).  Interest is then calculated under sub-section (4) in respect of the period commencing 30 days after service of the notice - a notional due date - and ending on the day on which the actual assessment is made.”

There are several answers to the Commissioner’s contention.  First, the section deals with the very situation that arose in respect of the 1954 year of income in Batagol’s case.  It ensures that in that, or any analogous, circumstance notice to the effect of the notice in Batagol is a deemed assessment for the purposes of s 170AA. If the notice is of an assessment, albeit a nil assessment, then the terms of s 170AA(6) are inapplicable. In such a case the deemed due date for the purposes of s 170AA(4) is the thirtieth day after the service of the notice: see s 204(1).

Secondly, as was said by Viscount Haldane LC in Re Samuel [1913] AC 514 at 526:

“It is not a conclusive argument as to the construction of an earlier Act to say that unless it be construed in a particular way a later enactment would be surplusage.  The later Act may have been designed, ex abundante cautela, to remove possible doubts.”

Given the decision in Batagol and the doubt over whether a notice to the effect set out in s 170AA(6)(a) can be an assessment there is much to be said in favour of the view that the sub-section removed a doubt on that issue, which was relevant for the purpose of ascertaining interest payable under s 170AA.

Finally, as was pointed out by counsel for the taxpayer, other sections of the Act such as ss 221H(2) and 221YE can be relied upon in support of the contention that the Act recognizes that there can be an assessment under which no tax is payable. Likewise counsel for the Commissioner pointed to other sections, such as ss 221H(3) and (4) and 221 AZN (3), that supported the Commissioner’s contentions.

Ultimately, the question of whether a nil assessment can be made under the Act is one of principle to be determined on the proper construction of the relevant statutory provisions in the context in which they appear and in a manner which gives effect to the overall legislative scheme, policy and intention. In such circumstances, whilst sections such as s 170AA(6) can be relevant, they cannot override the meaning to be given to an “assessment” for the purposes of the Act which is to be arrived at in accordance with the principles to which I have referred.

IS A NIL ASSESSMENT AN ASSESSMENT FOR THE PURPOSES OF s170(3)?

As explained above, it is now accepted that the preferable view is that the statutory definition of an assessment in s 6(1) is used in the key sections of Part IV. Indeed it is difficult to arrive at any other conclusion. An assessment is central to the role of Parts IV, V and VI of the Act. There is no reason why “assessment” would be used in differing senses in the key sections in those Parts which provide for the ascertainment of taxable income and the tax payable thereon in order to establish a taxpayer’s liability for a year of income. In my view it is essentially for that reason that Kitto J in Batagol seized on the context in which the word “assessment” is used in Part IV to conclude that it fixes the liability of the taxpayer to tax for a relevant year of income for the purposes of Parts IV, V and VI.  An “assessment” that no tax is assessed or payable on the taxable income fixes and thereby renders certain the taxpayer’s liability to the Commissioner for the purposes of the Act as much as an “assessment” that a positive amount of tax is assessed or payable.

Accepting that assessment is used in its defined sense in s 170 the question arising is whether the literal meaning of s 170(3) which provides that no amendment of an assessment increasing the liability of the taxpayer in any particular

“shall be made after the expiration of 3 years from the date upon which the tax became due and payable under that assessment”

results in the period prescribed in the sub-section only being applicable to an assessment under which an amount of tax is assessed to be due and payable.  The defined meaning is not excluded by a contrary intention but rather, according to the Commissioner’s argument, the sub-section only deals with a particular type of assessment being one under which tax is assessed to be due and payable.

Section 170(3) certainly assumes that the assessment with which it is concerned is one under which an amount of tax “became due and payable.” However those words are derived from s 204(1) which provides for a date under which any income tax assessed becomes “due and payable” to appear in the notice of assessment. But the sub-section also provides that if no date is so specified the notional date for the tax to be due and payable is the thirtieth day after service of the notice. The notional provision was inserted by an amendment to s 204 made by the Income Tax and Social Services Contribution Assessment Act (No 43 of 1954).  The amendment and its potential significance was not considered in Batagol as the Court decided that there had not been a notice of assessment prior to the June 1955 assessment. In explaining the amendment in his Second Reading Speech the Treasurer Sir Arthur Fadden said (at 381):

“The only other provision that it is necessary to mention is a proposed amendment to section 204 of the principal act.  As now enacted, that section provides that income tax assessed shall be due and payable on a date specified in the notice of assessment but not less than 30 days after service of that notice.  By reason of credits for provisional tax paid or for tax instalments deducted from earnings, many notices of assessment show, instead of an amount payable by the taxpayer, a refund due to him.  As it is inappropriate in such instances to specify in the notice a due date for payment, the proposed amendment will authorize the omission of this particular from the notice.  However, the omission would affect the operation of those provisions of the principal act that authorize the amendment of assessments within three years - or, in some instances, six years - from the date on which the tax became due and payable under the assessment.  I refer to both amendments that have the effect of increasing the tax in the original assessment, and those that have the effect of reducing that tax.  If no date were specified in the notice of assessment, there would be no commencing point for the period within which the assessment might be amended.  It is proposed, therefore, that, where no date is specified in the notice of assessment, the thirtieth day after service of the notice shall be a notional due date for payment, from which the period for amendment of the assessment may be reckoned.”

Although the Treasurer was referring to a situation where the assessed tax is not payable by reason of offsetting credits such as tax instalments and provisional tax, nevertheless he was accepting the necessity for a notional date for payment where no tax is payable under a notice of assessment and as a consequence no payment date is specified. There is nothing in s 204(1) as amended or in the explanation of the amendment that precludes the notion of an assessment by a notice of assessment, under which no tax is assessed or payable on the taxable income, having the notional date for payment provided for in the second limb of s 204 for the purposes of s 170 and in particular s 170(3). Indeed in my view there are compelling reasons for adopting a construction of s 204 that has that effect.

Firstly, that construction is consistent with and gives effect to the policy reasons which led to my conclusion that a nil assessment can be an assessment for the purposes of s 166 and generally under Parts IV, V and VI of the Act. Notwithstanding the reference in Lloyds Bank Export Finance to Batagol (at 437) as not being of assistance in that case due to the significantly different wording of the Australian Act, for the reasons explained above, I am of the view that the differences in wording do not produce different policy reasons in relation to the issues arising in the present case. In my view it would not only be inconsistent with those reasons to adopt a different approach to an assessment for the purposes of s 170(3) but to do so would defeat or frustrate the purpose of certainty and finality behind s 170(3). It is well established that, unless precluded by the terms of the section, a construction that gives effect to, rather than one which defeats or frustrates, the legislative purpose is to be preferred. I discussed the authorities in that regard including cases under the Act in Wang v Minister for Immigration and Ethnic Affairs (1997) 72 FCR 386 at 394-396 and Richardson v Federal Commissioner of Taxation (1997) 150 ALR 167.  See also s 15AA of the Acts Interpretation Act 1901 (Cth) and Newcastle City Council v GIO General Ltd (1997) 149 ALR 623 at 639 per McHugh J.For the reasons set out above, as the construction contended for by the taxpayer is not precluded by the terms of ss 204(1) or 170(3), it is to be preferred.

Secondly, I am unable to conceive of any reason why the policy of certainty and finality should only apply to an assessment under which an amount of tax is assessed to be payable and not an assessment under which no amount of tax is assessed to be payable. Once it is accepted that, in general, an “assessment” for the purposes of the Act fixes the taxpayer’s liability to tax there is no reason why the statutory policy of certainty and finality should not apply to it irrespective of the quantum (if any) of the liability.

Thirdly, the submission that s 170 does not apply to a nil “assessment” produces anomalous results in s 170 itself. Under s 170(4) an amended assessment may be made reducing the taxpayer’s liability to nil. Section 173 provided that an amended “assessment” is an assessment. It would follow from the Commissioner’s contentions such an “assessment” cannot be made as, according to the Commissioner, any assessment amending the earlier assessment is not one that can be made under the Act as it would not result in any tax being assessed. Section 173 does not assist the Commissioner as it only operates in respect of an “assessment” which amends an assessment.

The Commissioner also contended that the Court should be hesitant about overturning practices accepted by the Commissioner and by taxpayers on the faith of Batagol based upon a nil assessment not being an assessment for the purposes of the Act. I am far from satisfied that there is any such accepted practice in relation to a document in the form of the 1987 determination as opposed to what might have been the case in respect of a refund notice in the form or to the effect of the notice given in Batagol.  Indeed the distinguishing feature between that determination and the notice in Batagol is that the Commissioner, in his printed form, made it plain to the taxpayer that the determination is a refund notice on the basis of the assessment of the Commissioner set out in the notice.

In so far as it is suggested that the decision may result in taxpayers possibly being out of time in respect of objections there is sufficient discretion under the Act to deal with any problems that might arise in that regard: see the former ss 188 and 188A of the Act and now ss 14ZW(2) and 14ZX of the Taxation Administration Act 1953 (Cth).  If the Commissioner is out of time it will only be by reason of the Commissioner having given the taxpayer a notice of his assessment under the Act. It is difficult to accept that any unjust or untoward result could flow from the circumstance arising where such a notice (as in the present case) specifically explains the taxpayer’s rights to object to the “assessment” notified in it: see cl 2 of the explanatory notes to the 1987 determination.

Finally, if the prevailing practice is erroneous as a matter of law it is the duty of the Court to correct, rather than perpetuate, it.

For these reasons I am satisfied that under ss 170(3) and 204(1) the date upon which tax “became due and payable” is a reference to the date specified in the notice of assessment for the payment of tax in accordance with s 204(1) or, if no date is specified because no tax is assessed or payable, to the notional date for payment for the purposes of s 170(3) being the thirtieth day after service of the notice. On that basis the notional date on which tax is due and payable under the 1987 determination is the thirtieth day after service of that determination.

CONCLUSION

In my view the trial judge correctly concluded that the 1987 determination constituted a notice, issued by the Commissioner to the taxpayer, of the Commissioner’s assessment of the taxable income of the taxpayer for the 1987 year of income and of the tax payable thereon. Accordingly, the 1987 determination was an assessment for the purposes of the Act and in particular ss 166 and 170(3). It was not contended on behalf of the Commissioner that if that conclusion was correct there was any error in the consequential orders made by his Honour. In these circumstances the appeal is to be dismissed with costs.

Before departing from the case I would observe that the decision in the present case relates to a notice which on its face states that it is an assessment.  In those circumstances it is unnecessary to consider the situation that may arise in respect of a notice given by the Commissioner which states the amount of the taxable income and the tax payable thereon which is ascertained by the Commissioner to be nil, but which does not on its face state that it is an assessment.  The question of whether that notice is an assessment must depend upon “the form and contents” of the particular notice:  see Prestige Motors in the High Court at 14.

I certify that this and the preceding thirty-six (36) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Merkel

Associate:

Dated:             2 April 1998

Counsel for the Appellant:	Mr B Shaw QC with Mr T Murphy
Solicitor for the Appellant:	Australian Government Solicitor
Counsel for the Respondent:	Mr D Russell QC with Mrs J Batrouney
Solicitor for the Respondent:	Hall & Wilcox
Date of Hearing:	16 October 1997
Date of Judgment:	2 April 1998