Daniels v Deputy Commissioner of Taxation - [2007] SASC 431

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
DANIELS v DEPUTY COMMISSIONER OF TAXATION
[2007] SASC 431
Judgment of The Full Court
(The Honourable Justice Debelle, The Honourable Justice Sulan and The Honourable Justice Vanstone)
7 December 2007
CONSTITUTIONAL LAW - OPERATION AND EFFECT OF THE COMMONWEALTH CONSTITUTION - RESTRICTIONS ON COMMONWEALTH AND STATE LEGISLATION - LAWS RELATING TO RELIGION (CONSTITUTION, S 116)
Income tax - appellant contended that percentage of income tax collected by Australian Taxation Office in the form of Medicare levy is disbursed by Medicare for costs associated by women who undertake abortions – whether that percentage is contrary to s 116 of the Constitution and therefore invalid – whether it is appropriate for Court to require notices to be issued pursuant to s 78B of Judiciary Act. – appeal dismissed.
Australian Constitution s 116; Judiciary Act 1903 (Cth) s 40, s 78B, referred to.
ACCC v CG Berbatis Holdings Pty Ltd (1999) 95 FCR 292; Krygger v Williams (1912) 15 CLR 366; Re Finlayson (1997) 72 ALJR 73, applied.
Adelaide Company of Jehovah’s Witnesses Inc v The Commonwealth (1943) 67 CLR 116; Capelvenere v Omega Developments Corporation Pty Ltd (1983) 5 ATPR 40-386; Green v Jones [1979] 2 NSWLR 812; State Bank of New South Wales v Commonwealth Savings Bank of Australia (1986) 4 NSWLR 549, considered.

DANIELS v DEPUTY COMMISSIONER OF TAXATION
[2007] SASC 431
Full Court: Debelle, Sulan and Vanstone JJ

DEBELLE J: This is an appeal by Mr Daniels from a decision of David J, a judge of this court, dismissing an appeal from a decision of a judge of the District Court. David J made the decision on an application by the respondent, Deputy Commissioner of Taxation (“the Commissioner”) to dismiss the appeal summarily on the ground that the appeal could not succeed. His Honour granted the application and dismissed the appeal.
It is a nice question whether the appeal is from a decision on an interlocutory application so that Mr Daniels requires permission to appeal. Given that the decision concerned the merits of the appeal, the court directed that the parties each present their arguments as if the court were hearing an appeal. In short, the court treated the argument as a hearing of the appeal.
These proceedings have been complicated by interlocutory applications in the District Court and by proceedings in the High Court of Australia. The history of the proceedings is set out in detail in the reasons of David J. It is unnecessary to note every step in the proceedings. It is sufficient to note the following.
In late 2000 Mr Daniels ascertained that a small percentage of the income tax collected by the Australian Taxation Office in the form of the Medicare levy is disbursed by Medicare for costs incurred by women who undertake abortions. Mr Daniels believes that the percentage is about 0.05117 per cent of income tax recovered. It is not clear whether that belief is correct but it is not necessary to stay with that question. It is sufficient that a percentage, whatever it may be, is applied in that way. Mr Daniels says that the application of revenue collected in this way offends his Christian beliefs. He objects to the fact that part of the income tax he pays is used to fund “the slaughter of innocent unborn babies”, to use his words.
Initially, in 2000 Mr Daniels deducted $10.33 from his liability for income tax. The Australian Taxation Office informed him that he was liable to pay the whole of his liability for income tax so that he was liable for unpaid tax and general interest charges in an amount of $414.26. Mr Daniels then decided not to pay any of his income tax. On 2 June 2005, the Commissioner instituted proceedings in the District Court of South Australia to recover income tax and other amounts payable by Mr Daniels.
Mr Daniels filed a defence and counterclaim. The defence is prolix. Much of it is irrelevant. The essence of his defence is
1that the allocation of that part of the revenue which represents payments of income tax is contrary to the laws of God and to Christian belief and is, therefore, contrary to s 116 of the Constitution of the Commonwealth; and
2that the Commissioner had agreed to accept payment of his income tax less 0.05117 per cent.
In his defence, Mr Daniels pleads the first ground in these terms:
The plaintiff seeks protection under section 116 of the Commonwealth Constitution and claims an exemption from the portion of taxation monies deemed to be collectable from the defendant and used for the purpose of slaughtering innocent unborn babies (abortion) through tax funded Medicare payments.
Mr Daniels seeks to advance other constitutional arguments which have no foundation in law. I will refer to them in a moment. Some of the grounds of defence are in effect argument in support of other grounds. The counterclaim is grounded on an alleged breach of the privacy policies of the Australian Taxation Office and of the Privacy Act1988 (Cth).
On 18 October 2005 Mr Daniels applied to remove the action from the District Court to the High Court of Australia pursuant to s 40 of the Judiciary Act 1903 (Cth). The application was not heard until 1 March 2007 when it was dismissed with costs by Kirby and Callinan JJ. The disposition of the court handed down when dismissing the application stated:
The applicant’s application must be dismissed. It is prolix, unhelpfully argumentative, and fails to identify any substantive meritorious or reasonably arguable points of law, constitutional or otherwise, upon which the applicant might rely. It is not, in any event, the sort of matter which this Court would, at this stage, entertain, there having not even been a hearing of the strike-out application.
That disposition is signed by both Kirby and Callinan JJ.
In the meantime, the Commissioner had applied for an order striking out the defence and counterclaim. The hearing of the application had been adjourned pending the hearing of the application to remove the action in the District Court to the High Court of Australia. On 6 October 2006 a master in the District Court of South Australia decided the application should be heard. She granted the Commissioner’s application. The master struck out the statement of claim and entered summary judgment for the Commissioner. Mr Daniels appealed to a judge of the District Court against that decision. The District Court judge dismissed the appeal.
On 20 December 2006 Mr Daniels appealed to a judge of this court against the decision of the District Court judge. The Commissioner applied for an order that the appeal be summarily dismissed on the ground that it could not possibly succeed. David J heard the application. On 3 April 2007 he granted the Commissioner’s application and struck out Mr Daniels’ appeal. It is from that decision that Mr Daniels now appeals.
It should be noted that Mr Daniels admits that he is liable to pay income tax save and except a small percentage which he contests for the reasons noted above. He has made arrangements to pay what is due. In this respect, it is appropriate to quote the following remarks of David J:
I note these proceedings, and those below, have arisen due to the respondent’s unfaltering stance that contributing monies to purposes associated with abortion, even if indirectly through taxation, is contrary to his beliefs and faith. I have no reason to doubt the respondent’s submissions that he has generally been a good taxpayer and that he withheld taxation payments purely in a bid to have issues he perceives as fundamental resolved by the courts.
This court agrees with that assessment.
Mr Daniels has repeated arguments which have for sound reasons already been overruled in the District Court and by David J. The arguments are founded on a misunderstanding of legal principle and, in particular, constitutional legal principle. Mr Daniels also misunderstands the principles of statutory interpretation, the operation and effect of the Income Tax Assessment Act 1936, and the operation and effect of other legislation. He is unable to identify any breach of privacy legislation. Neither the defence of Mr Daniels nor his counterclaim contain any grounds which enable him to resist the Commissioner’s claim for payment of the income tax due by Mr Daniels.
On the hearing of this appeal, Mr Daniels especially relied on three grounds stemming, he said, from the terms of the Commonwealth Constitution. The first was that the fact that part of the revenue from income taxation was applied to fund Medicare payments for abortion offended s 116 of the Constitution and that ground was sufficient to invalidate at least that part of the income tax payable by him which was applied to that purpose. As his argument proceeded, it became apparent that he recognised that the whole of his liability for income tax could not be invalidated on this ground. Section 116 of the Constitution is in these terms:
The Commonwealth shall not make any law for establishing any religion, or for imposing any religious observance, or for prohibiting the free exercise of any religion, and no religious test shall be required as a qualification for any office or public trust under the Commonwealth.
Mr Daniels relies on that part of s 116 which provides that “The Commonwealth shall not make any law…for prohibiting the free exercise of any religion”. The obligation imposed by the Income Tax Assessment Act and associated legislation (“the income tax legislation”) does not, in any respect, prohibit the free exercise of religion. The words quoted from s 116 are a constitutional barrier to laws prohibiting the practice of religion, that is to say, laws that prohibit the doing of acts in the practice of a religion. As Griffiths CJ said in Krygger v Williams (1912) 15 CLR 366 at 369:
To require a man to do a thing which has nothing at all to do with religion is not prohibiting him from a free exercise of religion. It may be that a law requiring a man to do an act which his religion forbids would be objectionable on moral grounds, but it does not come within the prohibition of s 116.
See also Barton J at 372-373. Section 116 is not a dispensation from general obedience to the law: Adelaide Company of Jehovah’s Witnesses Inc v The Commonwealth (1943) 67 CLR 116 at 129 per Latham CJ. In short, the obligation to pay income tax imposed by the income tax legislation has nothing to do with the performance of religious beliefs. It is an obligation imposed on all citizens who earn assessable income irrespective of whether they have a religious belief or the nature of that belief. If Mr Daniels seeks to challenge the validity of the appropriation of part of the revenue from income tax to Medicare payments for abortion, he must seek to do so by some means other than challenging the validity of the income tax legislation.
The other two arguments on which Mr Daniels relied were advanced in support of the contentions under s 116. The first was a reference to that part of the preamble to the Commonwealth Constitution which reads:
WHEREAS the people of New South Wales, Victoria, South Australia, Queensland, and Tasmania, humbly relying on the blessing of Almighty God, have agreed to unite in one indissoluble Federal Commonwealth…
Mr Daniels contended that those words in the preamble constitute an invocation of the laws of God which should not be offended by, as he says, “the shedding of innocent blood”. Mr Daniels also relies on the terms of the Oath of Allegiance which he contends reinforces his argument under s 116. There is no validity in either submission. The reference in the preamble to “the blessing of Almighty God” does not in any way enlarge the meaning and operation of s 116 of the Constitution. The argument based on the requirement to take the Oath of Allegiance and the terms of that Oath entirely overlook the fact that the Schedule to the Constitution includes an Affirmation of Allegiance that may be used by those who prefer to make an affirmation instead of swearing on oath.
In short, with due respect to Mr Daniels, all of the arguments on which he relies are untenable. I have given close consideration to each. None of them avail his cause. They must all fail. Mr Daniels’ defence and counterclaim are patently not arguable and were correctly struck out.
Mr Daniels orally applied for the stay of proceedings so that the constitutional issues which he raises might be argued. There is no lawful ground on which the court could order a stay. For the reasons already expressed, the constitutional arguments on which Mr Daniels relies will not succeed. There is, therefore, no basis for which to order a stay. The application for a stay must be dismissed.
Section 78B of Judiciary Act
When an action involves a matter arising under the Constitution or involving its interpretation, s 78B of the Judiciary Act 1903 requires this court not to proceed to hear it unless notice has first been given to State and Federal Attorneys-General in the manner prescribed in the section. Section 78B is in these terms:
78B   Notice to Attorneys-General
(1)Where a cause pending in a federal court including the High Court or in a court of a State or Territory involves a matter arising under the Constitutional or involving its interpretation, it is the duty of the court not to proceed in the cause unless and until the court is satisfied that notice of the cause, specifying the nature of the matter has been given to the Attorneys-General of the Commonwealth and of the States, and a reasonable time has elapsed since the giving of the notice for consideration by the Attorneys-General, of the question of intervention in the proceedings or removal of the cause to the High Court.
(2)For the purposes of subsection (1), a court in which a cause referred to in that subsection is pending:
(a)     may adjourn the proceedings in the cause for such time as it thinks necessary and may make such order as to costs in relation to such an adjournment as it thinks fit;
(b)     may direct a party to give notice in accordance with that subsection; and
(c) may continue to hear evidence and argument concerning matters severable from any matter arising under the Constitution or involving its interpretation.
(3)     For the purposes of subsection (1), a notice in respect of a cause:
(a)     shall be taken to have been given to an Attorney-General if steps have been taken that, in the opinion of the court, could reasonably be expected to cause the matters to be notified to be brought to the attention of that Attorney-General; and
(b)     is not required to be given to the Attorney-General of the Commonwealth if he is she or the Commonwealth is a party to the cause and is not required to be given to the Attorney-General of a State if he or she or the State is a party to the cause.
(4)The Attorney-General may authorize the payment by the Commonwealth to a party of an amount in respect of costs arising out of the adjournment of a cause by reason of this section.
(5)Nothing in subsection (1) prevents a court from proceeding without delay to hear and determine proceedings, so far as they relate to the grant of urgent relief of an interlocutory nature, where the court thinks it necessary in the interests of justice to do so.
The terms of s 78B(1) are mandatory. They impose a duty on the court not to proceed until the notices have been given. The nature of that duty has been examined in Green v Jones [1979] 2 NSWLR 812 at 817-818; State Bank of New South Wales v Commonwealth Savings Bank of Australia (1986) 4 NSWLR 549; Capelvenere v Omega Developments Corporation Pty Ltd (1983) 5 ATPR 40-386.
One question concerning the operation of s 78B is whether it is necessary for notice to be given in those cases where it is patently clear that the constitutional questions have no merit. In Capelvenere at 44,546 Fitzgerald J was critical of the mandatory terms in which the duty imposed by s 78B is expressed. He referred to the fact that matters are sometimes raised which are patently without substance so that the court might have to require notices to be given pursuant to s 78B even if the High Court has recently decided the precise point in indistinguishable circumstances. In contrast, Hunt J said in Green v Jones at 818 that s 78B was not intended “to permit never ending challenges to matters which have already been determined by the High Court particularly recently by that court”. In ACCC v CG Berbatis Holdings Pty Ltd (1999) 95 FCR 292 at 297, French J referred to that divergence of view. In his opinion, s 78B does not operate where the constitutional question is unarguable. He expressed his reasons in these terms:
By extrapolation from judicial construction of like language in s 40 of the Judiciary Act, relating to removal of causes, a matter should “really and substantially arise under the Constitution” before it attracts the operation of s 78B – Public Service Association of New South Wales, Re application by; Re Industrial Union of Employees (Commissioned Police Officers) Award (1947) 75 CLR 430 at 433 per Williams J. These cases and the general principles surrounding the application of s 78B were discussed by Burchett J in Amrit Lal Narain v Parnell (1986) 9 FCR 479 at 486-489. His Honour said, at 489, and I respectfully agree:
“Section 78B only operates when the circumstances it postulates are made to appear to the Court: it does not operate simply because a party asserts those circumstances. It is clear, from the reference to the possibility of intervention or removal of the cause to the High Court upon the initiative of an Attorney-General, that what the section contemplates is a constitutional question which is a live issue in the proceedings.”
His Honour was there dealing with an application for judicial review from a Magistrate’s decision to refuse bail to a person the subject of an extradition warrant pending the hearing of the extradition proceedings. A purported constitutional point having been raised, Burchett J said:
“On the basis that the constitutional point depends entirely upon an erroneous construction of the Extradition (Commonwealth Countries) Act 1966 (Cth), the cause pending in this Court does not “really and substantially” (to use the language of Williams J in the passage cited above) involve a matter arising under the Constitution or involving its interpretation.”
Section 78B does not impose on the Court a duty not to proceed pending the issue of a notice no matter how trivial, unarguable or concluded the constitutional point may be. If the asserted constitutional point is frivolous or vexatious or raised as an abuse of process, it will not attach to the matter in which it is raised the character of a matter arising under the Constitution or involving its interpretation – Nikolic v MGIC Ltd [1999] FCA 849: cf Australian Securities and Investments Commission v White (unreported, Federal Court, Drummond J, No QG 40 of 1998, 16 July 1998).
I respectfully agree with this reasoning which is consistent with the views expressed by Toohey J in Re Finlayson (1997) 72 ALJR 73 at 74:
In terms of s 78B, a cause does not “involve” a matter arising under the Constitution or involving its interpretation merely because someone asserts that it does. That is not to say that the strength or weakness of the proposition is critical: See Green v Jones [1979] 2 NSWLR 812 at 817-818. But it must be established that the challenge does involve a matter arising under the Constitution.
It is to be noticed that in making those observations, Toohey J referred to Green v Jones.

Neither party has issued notices pursuant to s 78B at any stage in these proceedings. Nevertheless, by reason of the terms of s 78B, this court has a duty to consider whether notice should be given. The court was not of that view. These are my reasons for that conclusion.
Like French J, I do not believe that a court must proceed pursuant to s 78B no matter how unarguable or concluded the constitutional point might be. This is one of those instances where the constitutional question is not a live issue in the proceedings in the sense that it is patently not arguable. The defence and counterclaim filed by Mr Daniels shows that he has an inadequate understanding of legal principle including constitutional legal principle. The defence and counterclaim are replete with grounds which are either irrelevant or have no legal foundation. For the reasons expressed above, the issue said to arise under s 116 does not give rise to an arguable issue. It is a question which has been already determined by the High Court and is plainly unarguable. If Mr Daniels seeks to challenge expenditure of Commonwealth moneys to assist those who have undertaken an abortion, he has chosen an inappropriate vehicle to do so. Any challenge cannot be by way of a challenge to the recovery of income tax. The argument based on the preamble to the Constitution and the Oath of Allegiance do not in any respect involve a matter arising under the Constitution or involve its interpretation. Mr Daniels’ position is quite untenable. In addition to all of those considerations, the fact that the High Court has already dismissed Mr Daniels’ application to remove this action pursuant to s 40 of the Judiciary Act provides another reason to conclude that this is not an appropriate case in which to require notices to be issued pursuant to s 78B.
For those reasons, I would dismiss the appeal.
SULAN J: I agree with Debelle J.
VANSTONE J: I agree.