David Jones Finance & Investments Pty Ltd v Commissioner of Taxation of the Commonwealth

No judgment structure available for this case.

Re: DAVID JONES FINANCE and INVESTMENTS PTY LTD
And: ADSTEAM FINANCE and INVESTMENTS PTY LTD and COMMISSIONER OF TAXATION OF
THE COMMONWEALTH OF AUSTRALIA
No. S G52 of 1990
FED No. 139
Taxation - Constitutional Law - Courts
91 ATC 4315/21 ATR 1506 99 ALR 447
28 FCR 484

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Morling(1), Pincus(2) and French(1) JJ.

CATCHWORDS

Taxation - judicial review - challenge to making of assessment - alleged abuse of power and ultra vires conduct - whether defeated by production of notices of assessment in Court - jurisdiction of Court - Judiciary Act 1903, s.39B - nature of jurisdiction - relationship to original jurisdiction of High Court under Constitution para.75(v) - origins and nature of jurisdiction under para.75(v) - effect of privative provisions - construction of privative provisions - effect of s.177 Income Tax Assessment Act 1936.

Constitutional Law - High Court - original jurisdiction - Constitution para.75(v) - origins - nature - operation of privative provisions.

Courts - High Court - jurisdiction - original jurisdiction - Constitution para.75(v) - origins and nature - Federal Court - Judiciary Act s.39B - relationship to para.75(v) and construction - construction and effect of privative provisions.

Reynolds - A.I. Clark's American Sympathies and His Influence on Australian Federation (1958) 32 ALJ 62

Conv. Deb Adel 1897 989

Conv. Deb. Melb 1898 320, 349

La Nauze - The Making of the Australian Constitution (1972)

Thomson - Constitutional Authority for Judicial Review: A Contribution from the Framers of the Australian Constitution in The Convention

Debates 1891-1898 Commentaries Indices and Guide (Legal Books Pty Ltd 1986) 173

Quick and Garran - Annotated Constitution of the Australian Commonwealth p 779

Ratcliffe and McGrath - The Law of Income Tax (1938)

Aronson and Franklin - Review of Administrative Action (1987) Wade, Administrative Law (1988) Sixth Edition

de Smith's Judicial Review of Administrative Law Fourth Edition, p 106

Income Tax Assessment Act 1936, sub-s.46(2), s.8, s.175, s.177

Federal Court of Australia Act 1976 s.24(1A)

Federal Court Rules O.52 r.10(1)

Judiciary Act 1903, s.39B

Conciliation and Arbitration Act 1904 s.31, s.60

Statute Law (Miscellaneous Provisions) Act (No. 2) 1983

Income Tax Acts (Qld) 1924-1930

Commissioner of Taxation v. Patcorp Investments Ltd (1977) 140 CLR 247

Inland Revenue Commissioners v. National Federal of Self Employed and Small Businesses Ltd (1982) AC 617

R. v. Inland Revenue Commissioners, Ex parte Preston (1985) 1 AC 835

Haoucher v. Minister of State for Immigration and Ethnic Affairs (1990) 93 ALR 51

F.J. Bloemen Pty Ltd v. Commissioner of Taxation (1980-81) 147 CLR 360

McAndrew v. Federal Commissioner of Taxation (1957-58) 98 CLR 263

R. v. Commissioner of Taxation (WA) Ex parte Briggs (1986) 12 FCR 301

Commissioner of Taxation v. S. Hoffnung and Co. Pty Ltd (1928) 42 CLR 39

Re Pezzano; Ex parte Deputy Commissioner of Taxation (NSW) (1988-89) 20 ATR 423

Marbury v. Madison 5 US (1 Cranch) 137 (1803)

Ah Yick v. Lehmert (1905) 2 CLR 593

R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte The Brisbane Tramways Co. Ltd (1914) 18 CLR 54

The Waterside Workers' Federation of Australia v. Gilchrist, Watt and Sanderson Ltd (1924) 34 CLR 482

Ince Bros. and Cambridge Manufacturing Co. Pty Ltd v. Federated Clothing and Allied Trades Union (1924) 34 CLR 457

Australian Coal and Shale Employees' Federation v. Aberfield Coal Mining Co. Ltd (1942) 66 CLR 161

R. v. Drake Brockman; Ex parte National Oil Pty Ltd (1943) 68 CLR 51

R. v. Connell; Ex parte The Hetton Bellbird Collieries Ltd (1944) 69 CLR 407

R. v. Hickman; Ex parte Fox (1945) 70 CLR 598

R. v. Commonwealth Rent Controller Ex parte National Mutual Life Association of Australasia Limited (1947) 75 CLR 361

R. v. Central Reference Board; Ex parte Thiess (Repairs) Pty Ltd (1948) 77 CLR 123

R. v. Coldham; Ex parte The Australian Workers' Union (1983) 153 CLR 415

O'Toole v. Charles David Pty Ltd (1990) 96 ALR 1

Mooney v. Commissioners of Taxation (NSW) (1906) 3 CLR 221

Federal Commissioner of Taxation v. Clarke (1927) 40 CLR 246

Parks v. Commissioner of Taxes (Qld) (1933) SR (Qld) 306

George v. Commissioner of Taxation (1952( ALR 961

HEARING

SYDNEY

#DATE 12:4:1991

Counsel for the Appellants: Mr C.S.C. Sheller QC with Mr Durack and

Mr Slater

Solicitors for the Appellants: Thomson Simmons and Co.

Counsel for the Respondent: Mr B.J. Shaw QC with Mr Pagone and Mr

Robertson

Solicitor for the Respondent: Australia Government Solicitor

ORDER

The appeal be allowed.

The orders made on 17 August 1990 dismissing the application and ordering the applicants to pay the respondent's costs be set aside.

The respondent's amended motion dated 12 July 1990 be dismissed.

The respondent pay the appellants' costs of the appeal and of the motion.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The applicants are companies incorporated in New South Wales and Victoria respectively. On 9 July 1990 they filed an application in the Adelaide Registry of this Court seeking injunctive and declaratory relief and damages against the Commissioner of Taxation. Their complaint related to the issue by the Commissioner on 23 May 1990 of notices of assessments and amended assessments of income tax for the years ended 30 June 1985 to 30 June 1988 inclusive. The assessments and amended assessments brought to account as part of their taxable income the full amount of dividends received by the applicants in respect of shares in certain defunct companies.

Shareholders are entitled to rebates on dividend income under sub-s.46(2) of the Income Tax Assessment Act 1936 and, according to the appellants, it has been the practice of the Commissioner for more than 30 years to extend the benefit of that provision to corporate taxpayers which are the beneficial owners of shares registered in the names of corporate nominees. They say that it was on that basis that they acquired the beneficial ownership of the shares and allowed them to remain registered in the names of nominees. The decision of the Commissioner to depart from that practice in this case is said to have been an abuse of power and ultra vires s.8 of the Income Tax Assessment Act 1936 which confers upon him the general administration of the Act. On 17 August 1990, O'Loughlin J. made an order on the Commissioner's motion that the application be dismissed, but gave leave to appeal against that decision. The central question on the appeal is whether or not, as the Commissioner contends, the appellants are confined by the privative provisions of s.177 of the Income Tax Assessment Act to remedies by way of appeal under Pt. V of that Act. The question is, in essence, one of jurisdiction.
Statement of Claim
By their statement of claim, the appellants refer to s.8 of the Income Tax Assessment Act 1936 conferring upon the Commissioner the general administration of the Act which, they allege, he is obliged to administer fairly (paras. 3 and 4). It is alleged that in the exercise of those powers over a period of more than 30 years the Commissioner has adopted a practice in relation to the administration of the Act so far as it concerns s.46 (para.5). The practice is defined as one whereby the Commissioner and his officers have not insisted that to be entitled to the rebate, corporate taxpayers must become registered as the holders of shares beneficially owned by them (para.6). It is said that to the knowledge, and with the acquiescence of the Commissioner, it has been accepted and understood by the public and corporate taxpayers generally as:

1. the basis upon which corporate taxpayers might properly order their affairs so as to be entitled to the benefit of the rebate of tax afforded by s.46;

2. the basis upon which the Commissioner would assess corporate taxpayers; and

3. the basis upon which corporate taxpayers should prepare their returns of income to the Commissioner.

The appellants allege that they relied upon the practice in acquiring the beneficial ownership of shares in a number of companies and allowing the shares to remain registered in the names of corporate nominees at times when dividends were declared and paid. The Commissioner has claimed to be entitled to payment of tax on the surplus made by each of the companies (now defunct) in which the shares were beneficially owned (para.9). Three of the companies were dissolved following the issue by the Commissioner of a s.215 notice to the liquidator of each, indicating the absence of any relevant taxation liability. The fourth company is in liquidation, but has not been dissolved.

Notices of assessment have been issued to the appellants purporting to assess them to income tax on the basis that they are not entitled to the rebate on dividends received from the defunct companies. The assessments cover the years ended 30 June 1985 to 1988 inclusive for the first appellant and 1985 to 1987 inclusive for the second appellant (para.11). They have been issued, it is said, pursuant to the Commissioner's decision to depart from previous practice with respect to years of income prior to that decision. Paragraph 13 of the statement of claim alleges:
"13. The decision of the Respondent to depart from the

practice in relation to the Applicants in relation to the issue of the alleged notices is an abuse of power in that:

(i) the said decision involved a departure from the practice upon which the Applicants had relied in respect of years of income prior to the said decision;

(ii) the said decision was made, and the alleged notices were issued in an attempt to assess to and collect from the Applicants tax which is calculated on a basis that denies to the Applicants a rebate of tax allowed to other taxpayers in like circumstances; and

(iii) the said decision was made, and the alleged notices were issued, for the purpose of seeking to procure from the Applicants tax claimed by the Respondent to be due not by them but by the defunct companies."

It is also pleaded that the decision of the Commissioner not to apply the practice is ultra vires s.8 of the Income Tax Assessment Act (para.14).

The application seeks an order that the Commissioner be restrained from taking proceedings of any kind whatsoever to collect or recover from the appellants any amount in respect of or on account of the income tax "purportedly notified and claimed" in the assessments to which reference has already been made. An order is also sought that the Commissioner "act consistently with the duty imposed on him by s.8 of the Income Tax Assessment Act, as described in the accompanying Statement of Claim, in the assessment of the Applicants". Declarations are claimed that the notices are not notices of assessment of income tax and do not notify assessments of income tax made for the purpose of, or within the meaning of the Act and are invalid and a declaration that neither of the applicants has any liability to the Commissioner in respect of any, or any fresh or further, liability purportedly imposed on them by the notices.
The Strike Out Motion and Judgment
By a notice of motion filed on 12 July 1990, the Commissioner moved for orders in the following terms:
"1. This Honourable Court lacks jurisdiction to make the orders or

any of them sought by the applicants by reason of:

(a) the production of the notices or documents produced as exhibits to the affidavit of Stephen Catt affirmed on 5 July 1990 herein; and

(b) ss.175 and 177 of the Income Tax Assessment Act 1936 ("the Act").

2. The applicants' application herein dated 20 June 1990 be set aside.

3. The applicants' statement of claim herein be struck out and the proceedings be otherwise dismissed.

4. In the alternative to 1, 2 or 3 above, the application herein be stayed until the final determination of such proceedings at first instance as each of the applicants may be advised to bring pursuant to the provisions of Pt. V. of the Act."

In support of the motion an affidavit was filed, affirmed by a solicitor employed in the office of the Australian Government Solicitor, exhibiting copies of the relevant notices of assessment certified by the Deputy Commissioner of Taxation in Sydney. The motion was argued on 20 July 1990 before O'Loughlin J. On 17 August 1990, his Honour acceded to the motion and ordered that the application be dismissed. On the same day he gave the applicants leave to appeal against his decision, apparently pursuant to s.24(1A) of the Federal Court of Australia Act 1976 and O.52 r.10(1) of the Federal Court Rules. In this case, however, the decision was final rather than interlocutory and an appeal from it lay as of right.

In the reasons for judgment his Honour outlined the statement of claim and referred to the decision of the High Court in Commissioner of Taxation v. Patcorp Investments Ltd (1977) 140 CLR 247. In that case it was held, inter alia, that the rebate of dividend income for which s.46(2) provides does not extend to the beneficial owner of shares who has not been entered in the company register as their holder - at pp 273 (Mason J. at first instance), 283 (McTiernan J.), 295 (Gibbs J. with whom Stephen J. agreed) and 305 (Jacobs J.). His Honour observed that the practice alleged in the statement of claim was at variance with the decision in that case. Although the Commissioner had not filed any defence to para.6 of the statement of claim, his Honour was prepared to assume for the purposes of the motion the practice did exist as alleged. It was not necessary for him to decide whether such conduct would, if proven, be consistent with the lawful administration of the Income Tax Assessment Act in terms of s.8 of that Act. But he was not prepared to dispose summarily of the case on the basis, propounded for the Commissioner, that the applicant's case was nothing more than a complaint that the Commissioner was applying the law. His Honour referred to English decisions supporting a legal duty in revenue collecting authorities to treat taxpayers fairly - Inland Revenue Commissioners v. National Federal of Self Employed and Small Businesses Ltd (1982) AC 617; R. v. Inland Revenue Commissioners, Ex parte Preston (1985) 1 AC 835. He also cited the recent decision of the High Court in Haoucher v. Minister of State for Immigration and Ethnic Affairs (1990) 93 ALR 51, on the legitimate expectation of treatment consistent with announced policies. And having referred to those cases, he went on to say:

"Arguably therefore, the mandate given to the Commissioner in s.8 to attend to the general administration of the Act, requires him to exercise his statutory powers with "procedural fairness" - and, so it was said, it would be unfair on the part of the Commissioner to change an entrenched practice without warning and with retrospective effect and in circumstances (as alleged in para.13(ii) of the statement of claim) where "a rebate of tax (is) allowed to other taxpayers in like circumstances"."

His Honour accepted that it was sufficient for present purposes that he acknowledge that in matters of the exercise of discretionary powers, the combined effect of s.39B of the Judiciary Act 1903 and the United Kingdom cases referred to would enable a taxpayer to argue that the Commissioner is amenable to judicial review and, subject to the provisions of Pt.V of the Income Tax Assessment Act, that the pleading disclosed grounds that might, if established, justify the court in intervening. Having found thus far in favour of the taxpayer on the motion, his Honour turned to the provisions of ss.175 and 177 of the Income Tax Assessment Act. He first referred to the adoption by Mason and Wilson JJ. in F.J. Bloemen Pty Ltd v. Commissioner of Taxation (1980-81) 147 CLR 360, of the remarks of Taylor J. in McAndrew v. Federal Commissioner of Taxation (1957-58) 98 CLR 263 at 281 that:

"...s.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground...".

R. v. Commissioner of Taxation (WA) Ex parte Briggs (1986) 12 FCR 301 was also mentioned as illustrative of the rare and exceptional circumstances in which the court will intervene in the assessment process outside the framework of Pt.V of the Income Tax Assessment Act. That decision proceeded on the basis that the purported notice of assessment did not reflect a true assessment process. See also Commissioner of Taxation v. S. Hoffnung and Co. Pty Ltd (1928) 42 CLR 39, where a document styled as a "tentative" notice of assessment could not be regarded as a notice for the purposes of s.177. The cases of Lucas v. O'Reilly 79 ATC 4081 and Re Pezzano; Ex parte Deputy Commissioner of Taxation (NSW) (1988-89) 20 ATR 423, had been advanced before his Honour in support of the proposition that an assessment made for an improper purpose or in bad faith would be regarded as an abuse of power and subject to judicial review. Distinguishing the two cases his Honour went on to say:

"In any event I have come to the conclusion that the proposition that has been advanced... is in conflict with the decision in Bloemen's case."

And after citing a passage from the judgment of Mason and Wilson JJ. in that case, his Honour concluded:

"It seems to me therefore that Pt. V of the Act is in the nature of a Code that controls the rights of a taxpayer who seeks to challenge an assessment. In Briggs' case, facts that were admitted by the Commissioner, enabled the Court, to find, as a matter of law, that no assessment had issued - and that was its distinguishing feature: (cf. the similar result in Hoffnung's case)." Grounds of Appeal

The grounds of appeal as set out in the appellants' notice filed on 5 September 1990 were as follows:
1. His Honour erred in holding that the provisions of the said Part

V prevent a Court from entertaining proceedings for judicial review on the facts pleaded in the Appellants' Statement of Claim.

2. His Honour erred in holding that the decision of the High Court

in F.J. Bloemen Pty Ltd v. The Commissioner of Taxation of the Commonwealth of Australia (1980-81) 147 CLR 360 was fatal to the Appellants' claim to be entitled to judicial review.

3. F.J. Bloemen Pty Ltd v. The Commissioner of Taxation of

the Commonwealth of Australia was incorrectly decided and should now be overruled.

A notice of contention was also filed on behalf of the respondent that O'Loughlin J. erroneously decided that the pleadings disclosed grounds that might, if established, justify the court in intervening.

Statutory Framework

Section 8 of the Income Tax Assessment Act provides that:
"The Commissioner shall have the general administration of the Act."
His power and the duty to make assessments of the amount of taxable income of any taxpayer and the tax payable thereon are conferred by ss.166 and 169 of the Act. The assessments so made have the benefit of the protective provisions of s.175. Section 175 provides:
"175. The validity of any assessment shall not be affected by reason

that any of the provisions of this Act have not been complied with."

And s.177 provides in the relevant parts:

"177(1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner purporting to be a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Pt. V on a review or appeal relating to the assessment, that amount and all the particulars of the assessment are correct.

.

.

.

(3) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued.

(4) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced."

The provision of the Judiciary Act which is invoked as the source of the Court's jurisdiction in this case, is s.39B which provides:

"39B(1) The original jurisdiction of the Federal Court of Australia

includes jurisdiction with respect to any matter in which a writ of

mandamus or prohibition or an injunction is sought against an officer

or officers of the Commonwealth.

(2) The reference in sub-s.(1) to a officer or officers of the

Commonwealth does not include a reference to -

(a) a person holding office under the Industrial Relations Act 1988 or the Coal Industry Act 1946; or

(b) a Judge or Judges of the Family Court of Australia."

The language of the section reflects that of para.75(v) of the Constitution. That paragraph finds its place in Chapter 3 of the Constitution dealing with the judicature and comprising ss.71 to 80 inclusive. Section 71 vests "the judicial power of the Commonwealth" in the High Court of Australia and in "such other Federal Courts as the Parliament creates, and in such other Courts as it invests with federal jurisdiction". Section 73 defines the appellate jurisdiction of the High Court and ss.75 and 76 its original and "additional original" jurisdiction, while s.77 confers on the Parliament power to make laws defining the jurisdiction of Federal Courts. The three sections mentioned need to be read together and are in the following terms:

"75. In all matters -

(i) Arising under any treaty;

(ii) Affecting consuls of other representatives of other countries;

(iii) In which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party;

(iv) Between States, or between residents of different States, or between a State and a resident of another State;

(v) In which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth:

the High Court shall have original jurisdiction.

76. The Parliament may make laws conferring original jurisdiction on the High Court in any matter -

(i) Arising under this Constitution, or involving its interpretation;

(ii) Arising under any laws made by the Parliament;

(iii) Of Admiralty and Maritime jurisdiction;

(iv) Relating to the same subject matter claimed under the laws of different States.

77. With respect to any of the matters mentioned in the last two sections, the Parliament may make laws -

(i) Defining the jurisdiction of any federal court other than the High Court;

(ii) Defining the extent to which the jurisdiction of any federal court shall be exclusive of that which belongs to or is invested in the courts of the States;

(iii) Investing any court of a State with federal jurisdiction."

In order to determine the proper operation of s.39B of the Judiciary Act 1903 it is necessary first to consider the nature of the constitutional jurisdiction under para.75(v) from which it is derived.

Origins and Nature of the Jurisdiction Created by Paragraph 75(v) of the Constitution

Paragraph 75(v) of the Constitution was inspired by the decision of Marshall C.J. of the United States Supreme Court in Marbury v. Madison 5 US (1 Cranch) 137 (1803). That decision asserted the jurisdiction of the Court to determine that "a legislative act contrary to the Constitution is not law". The jurisdiction was there invoked to invalidate s.33 of the US Judiciary Act 1789 insofar as it purported to authorise the Supreme Court to issue writs of mandamus to non-judicial officers of the United States. The power so conferred involved the exercise of an original jurisdiction for which the Constitution had made no provision. In this regard it was distinct from the power to issue such writs to judicial officers which was seen as an element of the exercise of appellate jurisdiction. Andrew Inglis Clark, who was the Tasmanian Attorney-General in 1891 and had read the case, produced a draft Constitution Bill which included a cl.63 to overcome the effect of Marbury v. Madison so far as it might apply to the Australian Constitution:

"In all cases affecting Public Ministers, or other accredited Representatives of other Countries, and Consuls, and in all cases in which a Province shall be a party, or in which a Writ of Mandamus or Prohibition shall be sought against a Minister of the Crown for the Federal Dominion of Australasia, the Supreme Court shall have original jurisdiction".

- For the terms of Clark's draft bill see Reynolds - A.I. Clark's American Sympathies and His Influence on Australian Federation (1958) 32 ALJ 62 at 67-75. The draft Constitution Bill adopted by the National Australasian Convention in Sydney on 9 April, 1891 defined the original jurisdiction of the High Court, then referred to as the Supreme Court of Australia, in cl.8 of Chapter 3 "The Federal Judicature", in rolled up terms which incorporated Clark's proposal. Debate on the clause was negligible apart from an amendment in respect of the additional original jurisdiction which is not relevant for present purposes. When the draft came before the Adelaide Convention in 1897, cl.8 had become cl.77 and was broken up into five sub-paragraphs each defining a head of jurisdiction along substantially the same, although not identical lines, as s.75 in its final form. Paragraph (v) of cl.77 referred to all matters "in which a writ of mandamus or prohibition is sought against an officer of the Commonwealth". There was no debate on the clause and it was agreed to - Conv. Deb Adel. 1897 at 989.

The constitutional security of the original jurisdiction conferred on the High Court by cl.77 was emphasised in debate by Mr Isaacs, as he then was, in Melbourne in January 1898:
"The jurisdiction of the High Court is not to be touched except by

this Constitution, and except as in s.74, where express power is given to the Parliament to except from the appellate jurisdiction of the High Court."

It was during these debates that Edmund Barton moved for the deletion of sub-cl.77(v). He had earlier expressed concern that the words "a writ of mandamus or prohibition" might be given a limiting effect excluding other remedies such as injunctions or habeas corpus - Conv. Deb. Melb 1898 at 320. Isaacs noted the absence of any like provision in the American Constitution and made the observation, apparently in ignorance of Marbury v. Madison:

"I think I am safe in saying that the power is not expressly given in the United States Constitution, but undoubtedly the Court exercises it." - Conv. Deb. Melb 1898 at 321

The deletion proposed by Barton was carried - Conv. Deb. Melb. 1898 at p 349. Clark became aware of it and sent him a telegram, apparently referring to Marbury v. Madison. Barton replied in the following terms:

"I have to thank you further for your telegram as to the striking out of the power given to the High Court to deal with cases of mandamus and prohibition against officers of the Commonwealth. None of us here had read the case mentioned by you of Marbury v. Madison or if seen it had been forgotten - It seems however to be a leading case. I have given notice to restore the words on the reconsideration of the clause".

- See La Nauze - The Making of the Australian Constitution (1972) at pp 233-234 and Thomson - Constitutional Authority for Judicial Review: A Contribution from the Framers of the Australian Constitution in The Convention Debates 1891-1898 Commentaries Indices and Guide (Legal Books Pty Ltd 1986) p 173 at 178-180. Paragraph (v) in its present form was inserted in the draft Constitution in March 1898 on Barton's motion. In so moving he referred to Marbury v. Madison and the risk that absent a specific provision in the Constitution it might be held "that the Courts should not exercise this power, and that even the statute giving them the power would not be of any effect...". The words of the provision, he observed, could not do harm and might "protect us from a great evil".

In their Annotated Constitution of the Australian Commonwealth at p 779, Quick and Garran, after referring to Marbury v. Madison, expressed the view, consistently with that held by Clark, that in the absence of sub-para.75(v) the American decisions would be completely applicable to the Australian Constitution and, that mandamus could not issue from the High Court against a non-judicial officer of the Commonwealth except in cases which came within the scope of the original jurisdiction of the court:

"The difference made by this sub-section is that whenever any person seeks any one of these three remedies against an officer of the Commonwealth, the High Court will have original jurisdiction in the matter - whether or not it is a matter "arising under a treaty" or "affecting consuls," or "between States" etc."

And further:

"The High Court, apart from this sub-section, would have had power to grant the remedies of mandamus, etc whenever it was incident or necessary to the exercise of their original jurisdiction. This sub-section expressly extends that jurisdiction in the case of three remedies "which are specially in their nature addressed to persons who may be carrying out the provisions of the statute law" (Conv. Deb. Melb., 1885); but as regards all other remedies it leaves the jurisdiction of the Court unaltered."

The character of para.75(v) foreshadowed in these commentaries and Isaacs' observations in the Convention debates as a provision conferring jurisdiction impervious to statutory erosion, was reflected in the course of subsequent judicial decision-making. In Ah Yick v. Lehmert (1905) 2 CLR 593 at 609, Barton J. said it was clear that para.75(v) was inserted to prevent doubt from arising by reason of the decision in Marbury v. Madison "and that it has no other effect than to add a new and distinct power to the powers which the High Court inherently possesses". And later in R. v. Commonwealth Court of Conciliation and Arbitration; Ex parte The Brisbane Tramways Co. Ltd (1914) 18 CLR 54 (The Tramways' Case (No. 1)) at 68 he said he was "clearly of opinion that the Constitution in sec.75(v) gives the familiar remedy of prohibition as a matter of jurisdiction". Powers J. agreed at 86.

The constitutional security of the jurisdiction has been affirmed on many occasions by the High Court, principally in relation to privative legislation aimed at protecting industrial award decision making from challenge by resort to injunctive or prerogative relief. In Tramways' Case (No. 1) (supra) consideration was given to the effect of s.31 of the Conciliation and Arbitration Act 1904 which provided that no award of the Commonwealth Court of Conciliation and Arbitration should be challenged, appealed against, reviewed, quashed or called in question in any other Court on any ground whatsoever or be subject to prohibition or mandamus. The references to prohibition or mandamus had been inserted by amendment in 1911. Barton J. regarded the amendment as "clearly ineffective so far as it purports to affect the power expressed by the Constitution in that section". Similar sentiments were expressed by Gavan Duffy and Rich JJ. at 83:

"The Commonwealth Parliament cannot take away a right granted by the Constitution."

In The Waterside Workers' Federation of Australia v. Gilchrist, Watt and Sanderson Ltd (1924) 34 CLR 482 at 526, Isaacs and Rich JJ. referred to the "inalienable jurisdiction" conferred on the High Court by para.75(v). Starke J. at 551 observed that:

"So far as sec.31 is concerned, no one can deny that the Parliament cannot transcend the Constitution by any form of words or by any device."

In Ince Bros. and Cambridge Manufacturing Co. Pty Ltd v. Federated Clothing and Allied Trades Union (1924) 34 CLR 457 at 464, Isaacs, Powers and Rich JJ. affirmed the proposition that "Parliament cannot repeal sec.75(v) of the Constitution" but noted that it could "by appropriate legislation limit the cases to which that remedy is applicable". See also Australian Coal and Shale Employees' Federation v. Aberfield Coal Mining Co. Ltd (1942) 66 CLR 161 at 176, 186 and 192; R. v. Drake Brockman; Ex parte National Oil Pty Ltd (1943) 68 CLR 51 at 55; R. v. Connell; Ex parte The Hetton Bellbird Collieries Ltd (1944) 69 CLR 407 at 428 and 438, and R. v. Hickman; Ex parte Fox (1945) 70 CLR 598. The latter case concerned, inter alia, the effect of Regulation 17 of the National Security (Coal Mining Industry Employment) Regulations which provided similar protection for the decisions of local reference boards as was provided by s.31 of the Conciliation and Arbitration Act 1904 for decisions of the Commonwealth Court of Conciliation and Arbitration. Latham C.J. made the point at 606 that para.75(v) is not limited to the grant of prohibition on constitutional grounds but extends to that grant on grounds independent of the Constitution and relating only to the statutory powers of Commonwealth officers. In the same case the proposition was first advanced that a privative provision could, subject to certain provisoes, be construed as an element of the statutory power whose exercise it protected. In a passage at 615, Dixon J. said:

"Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation and that it is reasonably capable of reference to the power given to the body."

Where the legislature confers authority subject to limitations and at the same time enacts such a clause as contained in Reg.17:

"...it becomes a question of interpretation of the whole legislative instrument whether transgression of the limits, so long as done bona fide and bearing on its face every appearance of an attempt to pursue the power, necessarily spells invalidity".

And further:

"In considering the interpretation of a legislative instrument containing provisions which would contradict one another if to each were attached the full meaning and implication which considered alone it would have, an attempt should be made to reconcile them. Further, if there is an opposition between the Constitution and any such provision, it should be resolved by adopting any interpretation of the provisions that is fairly open."

This approach to the operation of privative statutory provisions was restated in the joint judgment of Latham C.J. and Dixon J., with whom Rich J. agreed, in R. v. Commonwealth Rent Controller Ex parte National Mutual Life Association of Australasia Limited (1947) 75 CLR 361 at 369. See also R. v. Central Reference Board; Ex parte Thiess (Repairs) Pty Ltd (1948) 77 CLR 123 at 130, 137 and 140. There, speaking of Reg.17 of the National Security (Coal Mining Industry Employment) Regulations, Dixon J. said:

"Such a provision is taken to mean that it is enough if the award order or determination deals with a subject matter placed within the province of the tribunal and represents a bona fide attempt to exercise its powers and authorities or some of them."

The principles were more recently explored in R. v. Coldham; Ex parte The Australian Workers' Union (1983) 153 CLR 415. The Court considered the operation of s.60 of the Conciliation and Arbitration Act 1904 which, like its predecessor provision s.31, protected awards from appeal or review and from being "subject to prohibition, mandamus or injunction in any Court on any account". Mason A.C.J. and Brennan J. at 418 reaffirmed the fundamental proposition that the jurisdiction conferred by para.75(v) cannot be ousted by a privative clause. They also accepted that a clause in the form of s.60 would validate an award or order of the Commission so far as it could do so constitutionally and subject to the provisoes enumerated by Dixon J. in Hickman's case. But they added the rider that such a section cannot affect the operation of a law which imposes inviolable limitations or restraints upon the jurisdiction or powers of the Tribunal in question. See also Deane and Dawson JJ. at 428.

Section 60 again fell for consideration in O'Toole v. Charles David Pty Ltd (1990) 96 ALR 1 in which a case stated for the Full Court of the Federal Court was removed into the High Court after the Federal Court had published its reasons, but before any orders had been made. The Federal Court was not exercising jurisdiction under s.39B in that case, but rather under s.119 of the Conciliation and Arbitration Act 1904. There was again strong support in the High Court for the view that s.60 was a provision empowering the Commission to go beyond its prescribed statutory limits provided it did not contravene the three conditions set out in the Hickman case. Deane, Gaudron and McHugh JJ. pointed out at 35 that s.60 is not confined in its application to valid awards. Were it otherwise the provisions of the section would be nugatory since it would not preclude challenge to the validity of an award. And reiterating at 36 the principles enunciated in Hickman, they said:

"It follows that a purported award will, as a matter of statutory construction, attract the protection of s.60(1) of the Act if it satisfies three conditions, namely that it represents a bona fide attempt by the Commission to exercise its powers, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the Commission."

Their Honours rejected the proposition that the good faith requirement could refer to the subjective intentions or motivations of those purporting to exercise the relevant power. Rather it should be understood as referring to what is apparent on the face of the record. Investigations into the subjective motivation of members of the Commission would be the very type of inquiry which the legislature was most concerned to prevent:

"So understood, the condition will, as a practical matter, be satisfied unless the purported exercise of power can be seen, on the face of the record, to be not bona fide. That being so, the cases in which that first condition is not satisfied in respect of an award purportedly made by the Commission will be rare and extreme. The second and third conditions are related. Both involve objective tests."

Similar views were expressed by Dawson J. at 50, with whom Toohey J. agreed. Dawson J. also reiterated at 51 that no privative clause such as s.60 could affect the jurisdiction conferred on the High Court by para.75(v) of the Constitution. Although their rationale was not made explicit in the judgments, the Hickman provisoes can no doubt be regarded as reflecting presumptions to be applied to the construction of privative provisions on the basis that the legislature would not have intended to authorise bad faith decisions or decisions incapable of reference to the subject matter of the legislation or the powers conferred by it.

In summary therefore, para.75(v) of the Constitution confers a jurisdiction upon the High Court which cannot be limited or qualified by any statute. That jurisdiction authorises the Court to control excesses of power or failure of duty by officers of the Commonwealth. It is ambulatory to the extent that its exercise will depend upon the constitutional and statutory boundaries of the powers or duties in question. To determine those boundaries in a given case may involve questions of the construction of the relevant legislation. And that process may require that account be taken of any privative provisions able to be construed as extending the powers or contracting the duties. It is against this background that s.39B of the Judiciary Act and its interaction with s.177 of the Income Tax Assessment Act 1936 may be considered.
The Nature of the Jurisdiction Conferred on the Federal Court By Section 39B of the Judiciary Act 1903
Section 39B was introduced into the Judiciary Act 1903 by the Statute Law (Miscellaneous Provisions) Act (No. 2) 1983. Its purpose was explained by the then Attorney-General, Mr Lionel Bowen, in the course of his Second Reading Speech on the Bill in the House of Representatives on 21 September 1983:

"Judiciary Act 1903

There are a number of amendments to this Act. The first amendment inserts a new section 39B into the Act. Paragraph 75(v) of the Constitution confers original jurisdiction on the High Court of Australia in matters in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth. The High Court has a heavy work load and one way of reducing that work load would be to confer jurisdiction in paragraph 75(v) matters on the Federal Court of Australia. The High Court cannot be divested of its jurisdiction in this area. Section 44 of this Act empowers the High Court to remit matters pending before it to any Federal court, or court of a State or Territory where that Court has jurisdiction in respect of the subject matter and the parties. The proposed amendment will not only confer jurisdiction so that proceedings under paragraph 75(v) may be commenced in the Federal Court but will also allow the High Court to remit to the Federal Court matters commenced before it. The proposed amendment will also close in part a gap which has been left by section 9 of the Administrative Decisions (Judicial Review) Act 1977. Section 9 has had the effect of depriving State courts of some jurisdiction which those courts formerly possessed to review decisions and actions of officers of the Commonwealth. But the whole of the jurisdiction so taken away was not conferred on the Federal Court under that Act. As a consequence some parties who might formerly have obtained relief in a State court were confined to seeking relief only in the High Court. Following the amendment they will be able to seek relief also in the Federal Court. The Federal Court will not initially have jurisdiction under the proposed new legislation in relation to matters arising before the Australian Conciliation and Arbitration Commission, the Public Service Arbitrator, the Coal Industry Tribunal or the Family Court of Australia. However, further consideration is being given to extending the capacity of the High Court to remit matters under section 44 in relation to these areas."

Subject to the exceptions relating to persons holding office under the Industrial Relations Act and the Coal Industry Act, and Judges of the Family Court of Australia, it is apparent from the language of the s.39B, its identity with that of para.75(v) and the Second Reading Speech, that the intention of the legislature was to confer on the Federal Court the full amplitude of the original jurisdiction of the High court under para.75(v). Consistently with that intention, and the case law, the jurisdiction so conferred will not be displaced, qualified or limited by privative provisions in statutes predating the amendment. And for statutes which post-date it, there will be a powerful presumption, in the absence of clear words to the contrary, that no such displacement, qualification or limitation is intended. Statutory erosion of the jurisdiction will effectively return it, contrary to the legislative intention, to the exclusive province of the High Court. The interaction of s.39B with s.177 of the Income Tax Assessment Act must therefore be considered on the same footing as the interaction of para.75(v) of the Constitution with that provision.

The Interaction of Section 177 of the Income Tax Assessment Act and Section 39B of the Judiciary Act 1903

Sections 175 and 177 of the Income Tax Assessment Act 1936 are lineally descended from ss.34 and 35 of Australia's first Commonwealth Income Tax legislation, The Income Tax Assessment Act 1915. The language of s.34 was identical to that of s.175, while the operative parts of s.35 were close to those of s.177 and became closer after amendment in 1918. The two sections were reproduced as ss.38 and 39 of the Income Tax Assessment Act 1922 later supplanted by the Act of 1936. Similar preclusive sections were to be found in early State taxation statutes as, for example, sub-s.56(2) of the Income Tax Act 1895 (Vic) which made production of any assessment register, or book or copy or extract under the hand of the Commissioner conclusive evidence "of the making of the assessment" and (except in objection proceedings) "that the amount and all the particulars of any assessment appearing in such register, book or document are absolutely correct". That provision was said by the Full Court of the Supreme Court of Victoria in Webb v. England (1896) 23 VLR 260 at 267 to amount to this:

"...the assessment register is to be conclusive evidence of the making of the assessment - that is, where an assessment can lawfully be made - and except in proceedings as to objections is to be conclusive evidence of the amounts and all particulars of the assessment appearing therein, but of the assessment only."

Section 67 of the Land and Income Tax Assessment Act 1895 (NSW) gave to the production of an assessment book or a document under the hand of the Commissioner purporting to be an extract from it the same effect as its Victorian counterpart. In Mooney v. Commissioners of Taxation (NSW) (1906) 3 CLR 221, a taxpayer challenged the validity of a default assessment in the course of recovery proceedings. He was successful at first instance but lost on appeal to the Full Court of the Supreme Court of New South Wales. The High Court, by a majority comprising Griffiths CJ and Barton J., with O'Connor J. dissenting, allowed the appeal from the Full Court. In the course of the judgment at p 242 Griffiths CJ, with whom Barton J. agreed, said of s.67:

"In my opinion it is impossible to read this section as applying to a case where an assessment is made without jurisdiction, without either rejecting the express provisions of ss.30 and 39, or holding that it applies to assessments to land tax of persons who are not owners of land as well as to assessments to income tax of persons who are not liable to pay it because their incomes do not fall within that area of taxation."

An appeal to the Privy Council left open the question of the operation of s.67 - (1907) AC 342 at 350. A more restrictive approach to the equivalent provisions of the 1922 Commonwealth Act was indicated in Federal Commissioner of Taxation v. Clarke (1927) 40 CLR 246. Dealing with a contention that an amended assessment was not valid because the Commissioner did not have reason to believe that there had been attempted evasion or fraud on the part of the taxpayer, Isaacs J. said at 276:

"While the Commissioner is directed not to assess unless he has reason to believe attempted evasion or fraud, s.39 of the 1922-1925 Act (sec.35 of the 1915-1918 Act) plainly makes the assessment unchallengeable. The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury."

A like provision in s.77(5) of the Income Tax Acts 1924-1930 (Qld) was considered by the Full Court of the Supreme Court of Queensland in Parks v. Commissioner of Taxes (Qld) (1933) SR (Qld) 306. The taxpayer, a master mariner, resident in New South Wales, challenged the validity of assessments in recovery proceedings in the Magistrates Court on the ground that the provisions under which he was assessed discriminated against residents of States other than Queensland in a way that infringed s.117 of the Constitution. Section 77(5) of the Income Tax Acts (1924-1930) provided that a signed copy of an assessment was conclusive evidence of its "due making" and that the amount and all particulars of the assessment were correct except in proceedings on appeal which lay to a Court of Review. The Full Court held at 320 that the Act reserved for the consideration of the Court of Review alone all questions as to the validity of the assessment itself, all questions as to the amount and particulars shown therein and all questions depending on these, including questions as to the application of the Act to facts disclosed by the assessment. Such matters, it said, "must be litigated in that Court alone". But as to whether the alleged liability rested on a discrimination prohibited by s.117 of the Constitution, the Court said at 322:

"The Constitution, the supreme law, is binding on the Courts, Judges, and peoples of every State...notwithstanding anything in the laws of any State. See the Constitution Act, covering s.5. It was therefore the duty of the Magistrates Court, and is the duty of this Court, to give full effect to s.117, notwithstanding anything in our Income Taxation Acts."

As soon as it appeared that a tax was based upon a discrimination forbidden by s.117, it became the duty of any court in which it was sought to recover it, to refuse its assistance. That proposition obviously cannot be limited to State Courts, State laws and constitutional prohibitions. It extends with equal validity to Federal Courts and to constitutional limits on legislative power.

In 1938 the authors of Ratcliffe and McGrath - The Law of Income Tax cited both the Mooney and Parks decisions and concluded that it was by then settled that the correctness of the amount and particulars of an assessment "and in general its validity" could not be impeached in any proceedings except proceedings on appeal. But it was in their view an open question "whether in a case where an assessment is made without jurisdiction, or under a statutory provision which is ultra vires, its validity can be impeached in proceedings other than proceedings on appeal, or whether a prohibition will not lie".
The use of the language of "jurisdiction" in Mooney's case and in Ratcliffe and McGrath carries with it conceptual encrustations which are now outdated. But it does suggest that Mooney's case is support for the proposition that the statutory precursors of s.177 would not preclude inquiry into the question whether an assessment was within power. The equation of jurisdictional error with ultra vires action was probably always possible. But it is only in more recent times that it has been able to be said as confidently as is observed in Aronson and Franklin - Review of Administrative Action (1987) at p 6 that, "Most judgments nowadays either use "ultra vires" and "jurisdictional error" interchangeably or else differentiate between the two only on grounds of common usage. The distinction has become purely semantic". For now, as Professor Wade observes in the Sixth Edition of his Administrative Law (1988) at p 41 the simple proposition that a public authority may not act beyond its powers can be called the central principle of administrative law:

"An act which is for any reason in excess of power (ultra vires) is often described as being "outside jurisdiction". "Jurisdiction", in this context, means simply "power", though sometimes it bears the slightly narrower sense of "power to decide", e.g. as applied to statutory tribunals. It is a word to which the courts have given different meanings in different contexts, and with which they have created a certain amount of confusion. But this cannot be explained intelligibly except in the particular contexts where difficulties have been made. Nor should the difficulties be exaggerated. For general purposes "jurisdiction" may be translated as "power" with very little risk of inaccuracy."

And in the Fourth Edition of de Smith's Judicial Review of Administrative Law at 106, Professor Evans says:

"Acting ultra vires and acting without jurisdiction have essentially the same meaning, but it is usual to speak of vires when considering administrative and subordinate legislative orders, and of jurisdiction when considering judicial decisions, or orders having a judicial flavour."

For the High Court, invested by para.75(v) of the Constitution with a jurisdiction not able to be impeached by legislative action, the question whether administrative conduct is within or beyond power or whether a statutory duty has been discharged is always open to inquiry. The inquiry is complicated when it involves a privative provision only to the extent that the privative provision may have to be taken into account in defining the boundaries of the power or duty the exercise of which is under review. The Court in Mooney's case, decided long before the advent of the Hickman approach to the construction of privative provisions, did not consider the extent to which s.67 of the New South Wales Act might itself extend the "jurisdiction" of the Commissioner. Nor to date has the possible character of s.177 as an empowering provision been considered.
The earliest reported decision of the High Court on the operation of s.177 was George v. Commissioner of Taxation (1952) ALR 961. There the Commissioner issued an amended assessment to a taxpayer in respect of one year and an assessment under s.167 in respect of another on the basis that the return filed for the latter year was not satisfactory. On appeal to the High Court following disallowance of objections, the taxpayer sought particulars from the Commissioner. These were refused by Kitto J. at first instance, and an appeal from his decision was dismissed by the Full High Court. One of the issues raised was whether the determination that the taxpayer's returns were not satisfactory for the purposes of the section, had been made by an appropriately authorised officer. The Court held (at 968) that this question was not left open by s.177:

"The clear policy of s.177 is to distinguish between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment."

The Court held that if there were conditions precedent to the exercise of the power given by s.167, this would mean ex hypothesi that the power to assess the tax was not well exercised. The assessment would be bad and there would be nothing to be treated as good:

"Obviously the "due making of the assessment" was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal." - at 968

The decision appears to have been consistent with that in Mooney's case insofar as it held that the privative provisions would not protect ultra vires action except to the extent that it might be said to have arisen from failure to comply with procedural requirements.

The limitation of "due making of the assessment" referred to in s.177 to procedural steps, was supported in McAndrew v. Federal Commissioner of Taxation (1956) 98 CLR 263. It was a case stated to the Full High Court in which the primary question was whether or not the Commissioner, having issued an amended assessment under s.170(2), had the burden in a Pt. V appeal of proving failure to make full disclosure or avoidance of tax by the taxpayer as conditions precedent to the exercise of the power conferred by the section. In their joint judgment, Dixon C.J., McTiernan and Webb JJ at 269 said they were constrained by the conclusion that where there is a question in a Pt. V appeal whether the conditions governing the exercise of the power under sub-s.170(2) have been fulfilled the burden rests upon the taxpayer of proving to the reasonable satisfaction of the Court the particular fact or facts which take the case outside s.170(2). The reasons for this conclusion, as expressed in the judgment, may be summarised as follows:
1. the meaning and effect of sub-s.177(1) is to give evidentiary

effect to an assessment over the whole ground which by law it is the function of an assessment to cover;

2. it is the policy of the legislation to give the taxpayer

full opportunity of objecting to his assessment and contesting liability "in every respect" before a Board of Review but on the other hand to require that in recovery proceedings the assessment will be conclusive and the taxpayer not entitled to go behind it for any purpose;

3. the question whether the conditions for the issue of an

amended assessment are fulfilled is within the policy;

4. although it would not be difficult to regard the

conditions on which the power to amend depends, as part of the due making of the assessment, that would deprive the taxpayer of the protection which s.170(2) is designed to give him. In this context the joint judgment cited with evident approval George's case limiting the scope of the "due making of the assessment" in s.177(1) to "the procedure or mechanism by which the taxable income and tax is ascertained or assessed" as distinct from the substantive liability of the taxpayer.

Kitto J. at 274, following George's case, took a similar view saying that "due making" in this context is an expression which covers all procedural steps, other than those (if any) which go to substantive liability and so contribute to the excessiveness of the assessment. The width attributed by his Honour to "procedural steps" appeared however inconsistent with the policy underlying the restricted view of "due making" adopted in the joint judgment and to go to questions properly described as matters affecting substantive liability such as the existence of an opinion on the part of the Commissioner that avoidance of tax was due to fraud or evasion. The reasoning of Taylor J., on the other hand, was more closely aligned with that of the joint judgment. At 281 he said:

"(I)t readily appears that if the existence of the facts upon which the power of amendment under s.170(2) may be exercised ought to be regarded as comprehended by the expression "the due making of the assessment" a taxpayer would be precluded entirely, on appeal, from disputing the existence of those facts. In my view, however, the "due making of the assessment" does not involve the ascertainment of the existence of a state of facts prescribed as a condition precedent to the making of an amended assessment. The process of ascertaining the existence of such a state of facts is not in any real sense part of the process of making the assessment and this is the function to which the first limb of the sub-section is precisely addressed."

McAndrew's case is therefore authority for the proposition that the first limb of s.177(1) is limited to precluding inquiry into matters of a procedural character which might otherwise have been taken to condition the validity of the assessment. Facts outside that category, whose existence or non-existence conditions the statutory power underlying the assessment are, on that analysis, not protected from inquiry by the first limb of s.177(1) although they would be caught by the second.

In F.J. Bloemen Pty Ltd v. Federal Commissioner of Taxation (1981) 147 CLR 360 the taxpayer had instituted Pt. V appeals in the New South Wales Supreme Court and on a summons for directions in the appeals sought declarations that the relevant assessments were void and that they had not issued as a result of a bona fide exercise of powers vested in the Commissioner. A question arose as to the jurisdiction of the Supreme Court to make those orders. The matter went to the Court of Appeal from Rath J. and then on appeal from that Court to the High Court. Mason and Wilson JJ. delivered the principal judgment, with which Stephen and Aickin JJ. agreed. They followed George and McAndrew which they characterised, at 373, as showing that the language of sub-s.177(1) is to be read in its context so as to give effect to the scope and purpose of the Act:

"The distinction drawn by s.177(1) is between the procedure by which the taxable income is ascertained (the "due making" of the assessment of which the production of the notice of assessment is conclusive evidence) and the taxpayer's substantive liability to tax ("the amount and all the particulars of the assessment" which may be challenged in Pt. V proceedings)."

The actual making of an assessment is comprehended by the expression "due making" and is put beyond challenge by s.177 (p 376). However, a question may arise as to whether the notice produced by the Commissioner is a notice of assessment as distinct from a notice expressed to relate to a provisional or tentative assessment (p 378):

"Unless it can be characterised as a "notice of assessment", s.177(1) will have no operation."

The operation of the first limb of s.177(1) was further elaborated at p 378 where, referring to the notice of assessment which was in issue in that case, their Honours said:

"It sets out the ascertainment of the taxpayer's taxable income and the tax payable thereon. It is therefore appropriate to bring s.177(1) into operation. Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose."

The reference to "inadmissible purpose" seems to have been intended to convey that the first limb of s.177(1) excludes any inquiry into the question whether the making of the assessment was beyond power as directed to purposes other than those authorised by the Act. This proposition must no doubt be read in the light of the restrictions placed on the operation of the first limb by the judgments in George and McAndrew. It may involve some implicit departure from what was said in Mooney's case, which does not appear to have been referred to in Bloemen. It must also be read subject to constitutional limits and prohibitions. The question arises whether the section can be read, within its proper field of operation, as an empowering provision in the way that the court construed privative provisions of the Conciliation and Arbitration Act discussed earlier in these reasons. The conditional operation of the section lies against such a construction. Both first and second limbs come into effect only upon the production of a notice of assessment and operate in the context of proceedings in which the "due making" of the assessment or the amount and particulars thereof might otherwise be debated. If a notice is not produced, they can be debated. The statutory powers under which the Commissioner or his delegates operate in making assessments are therefore logically anterior to the operation of the section in proceedings in which the "due making" and substantive liability might be in issue. There is nothing to indicate that the legislature would have intended that these powers should be contingently and retroactively affected by the production of a notice in later litigation. To so construe the section would be to allow the absurd possibility that the powers exercised in making an assessment are to be treated as greater in one proceeding where a notice is produced (say recovery proceedings) than in another where it is not produced (say judicial review proceedings). The conditional nature of the operation of s.177 distinguishes it from the privative provisions considered in Hickman and the cases that followed it and leads to the conclusion that it is intended to operate and does operate to deny to the Courts authority to enquire into the due making of the assessments and, except in Pt. V proceedings, whether the amount and all the particulars of the assessment are correct. On that characterisation its effect is purely jurisdictional and cannot displace the jurisdiction conferred on this Court by s.39B. In this Court and in the proper exercise of that jurisdiction the "due making" of the assessment and the amount and all particulars thereof is open to inquiry.

If that conclusion be incorrect so far as it relates to the first limb and it is properly construed as an empowering provision, then the scope of its application would fall for consideration in the light of Hickman and the related decisions cited earlier. On this approach the first limb would be seen as widening the powers otherwise conferred on the Commissioner to the extent that it excludes review of an alleged failure to comply with "procedural steps" or the pursuit of "inadmissible purposes". On the latter application raised in Bloemen's case, the first limb would empower by widening the range of purposes for which an assessment may be made beyond those otherwise contemplated by the Act. The route to that characterisation is the indirect one of depriving the taxpayer of any remedy in relation to an otherwise improper purpose. But even on that assumption the scope of the first limb must be limited by the presumption, applied generally to privative clauses in Hickman, that the legislature did not intend to allow it to be used to protect the Commissioner against inquiry into the bona fides of any exercise of his powers under the Act. That class of inquiry is, of course, closely related to the question of improper purposes. For as the learned author of de Smith (supra) observes in a discussion of the concept of "bad faith" in judicial review:

"A power is exercised fraudulently if its repository intends to achieve an object other than that for which he believes the power to have been conferred." - at 335

And see also Aronson and Franklin - Review of Administrative Action at pp 44 - 45.

For the preceding reasons, the first limb of s.177(1), if it is to be regarded as an empowering provision, does not authorise conduct of the assessment process in bad faith. And to some extent that must mean that it will not authorise the conduct of the process for improper purposes. On the pleadings in the present case, it is alleged that the assessments in question were made in the exercise of an abuse of power and for improper purposes which are tantamount to an allegation of bad faith on the part of the Commissioner. And to that extent the inquiry raised by those allegations would not be affected by the operation of the first limb of s.177(1).
Given that the first and second limbs of the section between them cover "the whole ground which by law it is the function of an assessment to cover" - McAndrew (supra) at 269 - then if not covered by the first limb, the matters raised in the pleading fall within the second. But it is beyond argument that the second limb which operates only to channel disputed assessments into the Pt. V process, has no effect on power. It rather defines the jurisdiction in which the inquiry may be undertaken into whether "the amount and all the particulars of the assessment are correct". For reasons earlier outlined, that cannot displace the jurisdiction conferred upon this Court by s.39B of the Judiciary Act 1903.
The point was made by senior counsel for the Commissioner that in Bloemen's case the jurisdiction of the Supreme Court to grant declaratory relief must have derived from s.39 of the Judiciary Act conferring upon the State Court jurisdiction in matters in which the High Court has original jurisdiction. In that case the particular jurisdiction invoked related to a proceeding in which the Commonwealth was a party and therefore derived ultimately from para.75(iii) of the Constitution. It is apparent, however, from the judgment in Bloemen's case, that no question of the kind now before the Court was considered. The relationship of the jurisdiction conferred by s.39 to the constitutional jurisdiction of the High Court and the implications of any such relationship for the construction of s.39 and the operation of s.177 of the Income Tax Assessment Act 1936 were not debated. A fortiori the case has nothing to say about the relationship between the privative operation of s.177 and the jurisdiction conferred on the Court by s.39B.
The learned judge at first instance disposed of the motion before him relying upon Bloemen's case and on the basis that, by virtue of s.177, Pt. V of the Act "is in the nature of a code that controls the right of a taxpayer who wishes to challenge an assessment". But with respect to his Honour, that approach gives to s.177 an operation that would displace the jurisdiction conferred on the Court by s.39B. But for the effect he gave to s.177 in the present case, his Honour at first instance would not have been prepared to strike out the appellants' pleadings. It is not necessary for present purposes to determine finally whether the nature of the abuse and excess of power alleged by the appellants would, if established, fall within the scope of the first proviso in the Hickman case. It is sufficient to say, notwithstanding the notice of contention, that the point is arguable. The appeal should be allowed with costs. The orders made by the Judge at first instance should be set aside and in lieu thereof orders made that the respondent's motion be dismissed with costs.

JUDGE2

On 17 August 1990, a single Judge of this Court ordered that a certain application and statement of claim "stand dismissed" and made an order for costs. Each of the two applicants named in those proceedings, namely David Jones Finance and Investments Pty. Ltd. ("David Jones") and Adsteam Finance and Investments Pty. Ltd. ("Adsteam"), having obtained leave, has filed a notice of appeal. The notices appear to be somewhat irregular, in that each purports to institute an appeal from part of the reasons, whereas one would have expected the notice of appeal to be against the orders made. However, no point was taken about that and it seems right to treat the proceedings before this Court as if they were instituted by notices of appeal against the primary Judge's orders.

On 23 May 1990, the respondent Commissioner issued four notices of assessments to David Jones and three to Adsteam under the Income Tax Assessment Act 1936 ("the ITA Act"). Those issued to David Jones related to the years ended 30 June 1985, 1986, 1987 and 1988 respectively and, if valid, made payable a sum exceeding $52 million. Those issued to Adsteam related to the years ended 30 June 1985, 1986 and 1987 and, if valid, made payable a sum exceeding $37 million. On 20 June 1990, David Jones and Adsteam caused an application to be filed in this Court claiming an order restraining the Commissioner from taking proceedings to collect or recover money or property in reliance on the notices of assessment which I have mentioned, a declaration that those notices are invalid and other relief. David Jones and Adsteam delivered a statement of claim.
In that pleading, the applicants alleged that over more than 30 years the respondent had adopted a practice of not insisting that, to be entitled to a certain rebate of tax, corporate taxpayers must be registered as the holders of shares beneficially owned by them. The rebate of tax referred to is that under s.46(2) of the ITA Act, which reads as follows:

"Subject to this section, a shareholder, being a company that is a resident, is entitled to a rebate in its assessment in respect of income of the year of income of the amount obtained by applying the average rate of tax payable by the shareholder -

(a) if the shareholder is a private company in relation to the year of income, to the sum of -

(i) one-half of the part of any private company dividends that is included in its taxable income; and

(ii) the part of any other dividends that is included in its taxable income; and

(b) if the shareholder is not a private company in relation to the year of income, to the part of any dividends that is included in its taxable income".

The pleading then went on to allege that, in relation to transactions in which the applicants were involved, the respondent had departed from that practice by issuing the notices of assessment referred to above. It was said that the respondent's decision to depart from the practice was an abuse of power and ultra vires. Certified copies of the notices of assessment were exhibited to an affidavit read before the primary Judge.
Accepting the contention of the respondent that there was no cause of action, the primary Judge ordered, as I have said, that the application and statement of claim stand dismissed. His Honour took the view that the "conclusive evidence" provision, s.177(1) of the ITA Act, made it impossible, the notices of assessment having been produced, to hold that they had not been duly made. That provision is as follows:-

"The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part V on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct".

The appellants attack this decision on the basis that s.39B of the Judiciary Act 1903, under which the proceedings have been brought, on its proper construction, overrides the conclusive evidence provision.
The reason is, so the appellants say, that s.39B of the Judiciary Act was intended, subject to the exceptions mentioned in it, to give the Federal Court the same powers in relation to actions of officers of the Commonwealth as the High Court has under s.75(v) of the Constitution; the appellants claim that the High Court would not be prevented from enquiring into the validity of any act of an officer of the Commonwealth, in exercising jurisdiction under s.75(v) of the Constitution, by a conclusive evidence provision such as s.177(1) of the ITA Act. Section 39B of the Judiciary Act, which in its original form was inserted in 1983, reads as follows:

"(1) The original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.

(2) The reference in sub-section (1) to an officer or officers of the Commonwealth does not include a reference to -

(a) a person holding office under the Industrial Relations Act 1988 or the Coal Industry Act 1946; or

(b) a Judge or Judges of the Family Court of Australia".

Section 75 of the Constitution provides in part as follows:

"In all matters -

...

(v) In which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth:

the High Court shall have original jurisdiction".

Because of the argument as to the effect of s.75(v) of the Constitution, notices, albeit during rather than prior to the hearing, were given under s.78B of the Judiciary Act. The Court was subsequently informed that there was to be no appearance on behalf of any Attorney-General to argue the constitutional question.
The separate question whether s.39B has the effect contended for may be described as a procedural point, for if the appellants are right about the interpretation of s.75(v), then the only point of practical significance is whether such a claim as that of the appellants has to be launched in the High Court rather than in the Federal Court.
Because of the form in which the dispute came before this Court, namely as an attack on a pleading, the matter falls to be considered on the assumption that such a practice as is alleged does in truth exist - that is, on the assumption that the impugned notices of assessment were issued to collect from the appellants "tax which is calculated on a basis that denies to the (appellants) a rebate of tax allowed to other taxpayers in like circumstances", as the statement of claim says. Before coming to the questions which were debated before us, some comment should be made on one which was not, namely whether the adoption of such a practice as is alleged would have been illegal.
One activity of the respondent Commissioner which may escape scrutiny is the selective relaxation of taxation laws. Those in whose favour the application of the laws is waived can hardly be expected to complain; those against whom the law is applied in its full rigour will have no cause of action, if what is done against them accords with the Act. Here, it suited neither side to argue that it would have been unlawful for the respondent to have followed the alleged practice. I can find nothing in the Act suggesting that the respondent has a discretion to issue assessments on the basis that companies which are not shareholders are entitled to a rebate in respect of dividend income under s.46(2) of the ITA Act. To hold that the issue of such assessments is lawful would be to accord to the respondent a discretion to exact income tax on the basis of criteria not laid down in the Act, to decide that for reasons which seem good to him the tax laws shall be applied against one citizen and not against another. I refer to Bates v. Inland Revenue Commissioners (1968) AC 483 at 516E, R. v. Attorney-General; Ex Parte Imperial Chemical Industries Plc (1986) 60 TC 1 at 64G.
The primary Judge held that the alleged practice "would be at variance with" the decision of the High Court in Commissioner of Taxation v. Patcorp Investments Ltd. (1977) 140 CLR 247. I respectfully agree; it seems clear that the rebate under s.46(2) cannot be allowed to a company to which dividends flow unless it is a shareholder; it is not enough that it is a beneficial owner of the shares.
It is convenient to defer further discussion of this subject until my views on the points argued are set out.
Section 75(v) of the Constitution
It is evident that a statute which purported to deprive the High Court of its powers under s.75(v) would be inconsistent with the Constitution. What is not so clear is the extent to which Parliament may make laws rendering supervision of Commonwealth officers under s.75(v) less effective: for example, by vesting in officers of the Commonwealth very wide discretions, by making them immune from attack on certain grounds, or by conclusive evidence provisions like s.177 of the ITA Act.
Most of the decisions appear to have concerned the effect of statutes designed to protect decisions given under the Conciliation and Arbitration Act 1904 and other industrial legislation. One such case is Ince Brothers v. The Federated Clothing and Allied Trades Union (1924) 34 CLR 457; in the reasons of three of the Judges it is said that while Parliament cannot take away the jurisdiction of the High Court in prohibition entirely, it can "... by appropriate legislation limit the cases to which that remedy is applicable ..." (464). In Australian Coal and Shale Employees Federation v. Aberfield Coal Mining Co. Ltd. (1942) 66 CLR 161 at 176, Latham C.J. said:

"No statute or regulation can prevent this Court from exercising the powers conferred by the Constitution, sec. 75(v) ...".

See also per Williams J. at p 192 and to similar effect The King v. Commonwealth Rent Controller; Ex Parte National Mutual Life Association of Australasia Ltd. (1947) 75 CLR 361.

One of the difficulties in analysing this line of authority is that provisions affecting the s.75(v) jurisdiction may prove ineffective for reasons other than collision with that constitutional provision. Privative clauses cannot save purported exercises of power which are inconsistent with other provisions of the Constitution: for example, exercises of judicial power by bodies other than Courts. More importantly for present purposes, privative clauses can be ineffective because of their inconsistency with the apparent intention of other provisions of the statute in which they are contained. The line of industrial law decisions reached a conclusion, which became authoritative, in The King v. Hickman; Ex Parte Fox (1945) 70 CLR 598. The reasons of Dixon J. laid down what has subsequently been sometimes called the "Hickman test" and did so as a matter of interpretation of the statutory provisions in issue. His Honour held to be effective a privative clause designed to protect decisions of a Board exercising a power to settle industrial disputes, provided that the Board's decision:

"... is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body". (615)

The Hickman test has undergone some subsequent development, culminating in R. v. Coldham; Ex Parte Australian Workers' Union (1983) 153 CLR 415. Mason ACJ. (as his Honour then was) and Brennan J. explained that:

"... it is a matter of reconciling the prima facie inconsistency between one statutory provision which seems to limit the powers of the Tribunal and another provision, the privative clause, which seems to contemplate that the Tribunal's order shall operate free from any restriction". (418)

It is unnecessary for present purposes to trace the history of the Hickman test or state its precise content. The important point is that the Hickman test arises, at least substantially, out of a process of reconciling apparently inconsistent provisions of the statute containing the privative clause. Although the test was arrived at having regard to the inability of Parliament to take away the s.75(v) jurisdiction, it does not purport to define the extent to which Parliament may, directly or otherwise, abrogate the High Court's power under s.75(v). It appears never to have been necessary for the High Court to determine, as a separate issue, that precise point.
Section 39B of the Judiciary Act
The appellants say that in enacting s.39B (in its original form), in 1983, Parliament must have intended this Court to acquire whatever power the High Court had under s.75(v). The argument is supported by considerations of the inconvenience and inappropriateness of forcing litigants into the High Court, in first instance matters of no general importance: see per Deane, Gaudron and McHugh JJ. in O'Toole v. Charles David Pty. Ltd. (1990) 64 ALJR 618 at 642R, a case concerning the effectiveness of a privative clause in proceedings based on an industrial award.
The reason why it is necessary for the appellants to argue that this Court, in exercising jurisdiction under s.39B of the Judiciary Act, is as free as is the High Court under s.75(v) of the Constitution, is that other possible grounds of attack on the privative clause in question here are not open. In particular, it cannot be argued that s.177(1) must be read down on the ground of the necessity of reconciling it with other provisions of the ITA Act which limit the Commissioner's power (the "reconciliation" question). That approach to interpretation of s.177(1) is not open since the High Court decided F.J. Bloemen Pty. Ltd. v. Commissioner of Taxation (1981) 147 CLR 360.
Bloemen's case turned on no constitutional consideration, but merely upon a reading of the ITA Act. It was held that "s.177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground" (375). It was also held in effect that the Supreme Court could not, where a notice of assessment was produced, decide that an assessment had not been duly made (376). Although the High Court's decision dealt with the jurisdiction of the Supreme Court, it is equally applicable to this Court unless the appellants' contention based on the relationship between s.75(v) of the Constitution and s.39B of the Judiciary Act is correct.
The principal authority on which the appellants rely is O'Toole's case (above). They referred in the first place to what was decided in the Full Court of this Court: (1989) 90 ALR 112. The case concerned an attack on the validity of an award of the then Australian Conciliation and Arbitration Commission, on which Mr. O'Toole sued in the Federal Court.
It was held in this Court that a privative clause, s.60 of the Conciliation and Arbitration Act 1904, had to be reconciled with those provisions of the Act which seemed to limit the powers of the Commission protected by the clause and that this should be done by treating s.60 as not saving awards which failed to pass the Hickman tests. Secondly, it was held that Parliament cannot vest in this Court jurisdiction to adjudicate upon "rights and liabilities created by a law which attempted to rise higher than its source". That is so, as I understand it, because (for example) an application to enforce an award made other than in respect of an interstate dispute would not be a matter arising under a law made by Parliament and would have no other foundation in Chapter III of the Constitution. The subject of such a law, the principal judgment says, "is something less than a matter in the sense of Ch III of the Constitution" (159). This reasoning would seem to apply to any provisions purporting to vest jurisdiction in a Court (State or Federal) to hear cases based on a regulation or award or the like, protected from attack in that forum by a privative clause. The appellants did not base an argument on this second ground of decision.
When O'Toole's case went to the High Court, the decision just mentioned was upheld, but the reasons given were not quite the same. All the members of the High Court were of the opinion that s.60 of the Conciliation and Arbitration Act 1904 did not prevent the Federal Court from investigating the question whether an award satisfied the three Hickman conditions; their Honours were not at one as to what those conditions entailed. All the members of the Court were of the view that, for constitutional reasons, s.60(1) had to be read down so as to enable the Federal Court to investigate the question whether a purported award was within constitutional power.
The decision in the O'Toole case gives support of a general kind to the appellants' argument, insofar as they would have us read s.39B of the Judiciary Act as giving this Court (subject to the express limits in the section) power of the same kind as has the High Court under s.75(v) of the Constitution. Were there some settled construction of s.75(v), establishing its effect on privative clauses quite separately from the "reconciliation" question, the appellants' argument might be hard to resist; that settled construction might safely be applied to s.39B of the Judiciary Act, just as the Hickman construction, evolved in s.75(v) proceedings in the High Court, was applied in O'Toole's case to statutory provisions giving this Court jurisdiction under the Conciliation and Arbitration Act 1904.
But one must keep in mind that the search is for legislative intention. Subject, perhaps, to the second ground of the decision in this Court in O'Toole's case, there is no doubt as to Parliament's power to make a conferment of jurisdiction on this Court subject to a privative clause such as s.177(1) of the ITA Act. Whether the High Court's jurisdiction to hold administrative action to be invalid in s.75(v) proceedings is affected by a provision such as s.177(1), saying that production of a document is conclusive evidence of the "due making" of a certain administrative act, appears never to have been decided.
But s.39B of the Judiciary Act became law less than three years after Bloemen's case and at a time when this Court had appellate jurisdiction in income tax cases. In the leading judgment, it was said:

"Section 177(1) specifically operates by compelling a court, for example the Supreme Court, in the exercise of its jurisdiction to treat a notice of assessment on its production as conclusive evidence that the assessment has been duly made and thereby foreclosing that issue". (147 CLR at 376)

I understand that Morling and French JJ. would interpret s.39B as if it not only gave this Court jurisdiction, but gave it free from any limitation or qualification imposed by other statutes. Whatever may have been the effect of s.39B on other privative provisions, it seems to me difficult to accept that s.39B of the Judiciary Act was intended to exclude or limit the application of s.177(1) of the ITA Act in proceedings in this Court; the substantial weakening of such a critical part of the tax collection system in this country could hardly have been intended to be effected by a mere implication.

General

The views expressed above are, in substance, that the extent to which the High Court must in s.75(v) proceedings respect privative clauses in general, or conclusive evidence clauses in particular, has never been determined; secondly, as a matter of interpretation, it appears unlikely that Parliament intended s.39B of the Judiciary Act to alter the law laid down in Bloemen's case, with respect to proceedings challenging tax assessments under that section.
The question remains whether, in these circumstances, it is right to interfere with the trial Judge's order. It appears that the argument raised in this Court was not put squarely, if it was put at all, to the primary Judge. In those circumstances, it is necessary for this Court to exercise its own discretion.
The drastic remedy of dismissing proceedings summarily on the basis of the content of the statement of claim is reserved for plain cases. The question is whether the present case falls into that special category. Further, dismissal of the proceedings would prevent an airing of the issue relating to the alleged practice whose legality I have commented on above. It appears to me that the desirability of determining the existence and legal status of that practice should be weighed in the balance with the strength of the appellants' legal contentions.
It appears to me, on the whole, that the proper course is to give effect to the view which I hold, on the purely legal point, that the appellants' argument as to the relationship between s.39B of the Judiciary Act and s.177(1) of the ITA Act cannot be accepted. Although the effect of privative clauses on the jurisdiction under s.75(v) of the Constitution and the question whether that effect "flows on" to proceedings under s.39B of the Judiciary Act are both uncertain points, the specific question of construction raised may, in my view, be answered with some confidence. I think proceedings under s.39B of the Judiciary Act alleging an abuse of power in the issue of an assessment may be effectively answered by tendering the notice of assessment. In my opinion, the appeal should be dismissed with costs.

Actions

Download as PDF Download as Word Document

Citations

David Jones Finance & Investments Pty Ltd & Anor v Commissioner of Taxation of the Commonwealth [1991] FCA 139 (91 ATC 4315; 21 ATR 1506; 99 ALR 447; 28 FCR 484)

Cases Citing This Decision

0

Cases Cited

20

Statutory Material Cited

0

Federal Commissioner of Taxation v Patcorp Investments Ltd [1976] HCA 67

Blanchard & Blanchard [2009] FamCA 321

SZMJT v Minister for Immigration & Citizenship [2009] FCA 163

[1991] FCA 139

12 APRIL 1991