Huston, Robin David v Deputy Commissioner of Taxation

Aaministracive Law - Nocices to garnishee funds on account of income cax as assessed - Review of aecisrons eo issue notices and later not to revoke them - iWnetner assessment can be reviewed. - Appllcation of nocrces eo securicy given for coscs and in solicltors' trust account;.

Adminiscracive Decisions (Judicral Revrew) Ace

1977 - secns. 3il)

and 5; Scneaule 1.

Income Tax Assessment Act 1936 - secns. 177 and 218.

Soliclcors Act 1891 (pld) - s.16.

Trust Accounts Act 1973

tQld) - secns. 6 and 8.

J I L L LARRAINE HUSTON v. TFii DEPUTY COIYiISSIONEli OF TAXATION OF

THE COMMONKEi4LTH OF BUSTiiALI.4

NO. G131 it? 1982

NO. G132 OF is82

N i t .

G23 OF 1983

BETHEEFi :

JiLL LI2.FAINE kUSTON

Applicant

Aim :

Respondent

O R D E R

JrnGE:	FQX J.
D A E OF ORDQ.:	23 Auqusr; 1983
WHEflE MIJE:	Brisbane

No. G23 of 1983

Respondent

O R D E R

JUDGE :	For J.
DATE O F ORDER:	25 March 1983
rN’HERE MADE:	Brisbane

L,	Tne appllcacion be alsmxssea.

GENERAL

D I V I S I O N

)

Applicant

-	desgnnaens

O R D E R

Fox J.

23 Bugus+, i983

Sri

sbane

L.	"he appllcazion be dismlssec.

No. G131 of 1982

J i L L L.WPdiNE

FiUSTON

Applicanc

ANi3 :

Respondent

Appiicant

Respondent

Respondent

CORAii:	FOX J .
FOX J.

M TEMPORE

25 March 1383

L will deliver judgment in these matters unmediacely.

There are three cases before me, LWO For hearing, and

one for directions.

The

two cases first-mentloned are being

heard together,

as chey ra1sP- r,he same issues and the same

evxdence 1s rellea upon.

%ne chlrd case is closely relacea, hut

Lwill Tor the momenr; postpone ieallng

wlcn

1 z .

The applicants are Mr. and Hrs. Iiuscon, %no are nusband

and wife.

They

proceed

agalnsz

the

Deputy Cornmissloner

o f

Taxatmn

in reliance

s . 5

the Admln;itrac;ve

g e c i s i o ~ s

(Judicial Review) $cc

1977 "che Judlcial Zevxew

lucz ' 1 .

P - e

particuiar paragrayhs reiiei u?on were nuc szacs~

?rec lse lTr , h

appear to be s.5(l)(e), as eiaboraced in s . 5 ( 2 ) ; and s.5(11(h).

The respondent,

on 30 November 1982, issued notices

under s.21E

of the income Tax Assessment Act 1936 (“the Act”),

which is sometimes referred to as

the garnishee provision of the

A c t , to varlous orqanisacions and to che applicants’ solicitors.

Lt 1s not disputed that the aeclsions were decisions to which the Judicial Review Act relate, and which are reviewable under that

Act.

The notices were based on a number of default asessments

issued

Immediately

beforehand

Mr. and Hrs.

Huston

respectively.

The amounts involved- totalled some

$3,948,793.59.

After counsel for the applicants had opened h l s case, L C

was

subrnitced

bp counsel for the respondent

that, on

the case

put, the apnlicant would not succeed, and chat the consleerabie body of affidavic evidence which had. beer. filed would f o r the

m o s t part

be objecced to as irrelevant.

if adnictea subject to

oblection, pendinq the hearing of final arqumer.c, the respnndenc

would.

wanr;

to cross-examme, an& possibly adduce

furtzer

evidence.

m e result,, it was aqreed, would

be rhac

che case,

wnlch was

of some urgency, would not concluie

In t3e

two days

allotted. I indicacea thac 1t coulc ROE be continued for at least s i x weeks thereafter. ir; earrefore seemed a cgnvenlenc

course to enterram-the leual ?.cquner.-, as soor! a3 soSSIble, 02

_ .

- .

agreed, or assumed faces, vith ::?e

xztenzlon of rlnalslnq c55

matter under Order 29 of the Rules of Court. B document called "Statement of Facts" was later kanae i in by counsel for cne

applicants, and I understand it to include

all the materral

thought necessary to

support an

arqumenc that the applicants'

case couldbe- sustained.

The respondenr: did not acimrt the facts

stated to be assumed, or thelr relevance. At

the request of the

respondent, a furcher paragraph (para.	l581 was inssrtea, and was
agreed.

The Statement of Facts confirmed

the

following agreed

facts:

. . .

On the 30th day

of November, 1582 the

Deputy Commissioner

Taxation Issued the

followfnu assessments and amenciea assessments against Hr. Huston, his wife J.L. Huston ar.d

associated

companies.

Particulars

of those

assessments and amended. assessments are set

out at paragraph 5 of Hr. Robin Davrd iiuston's

Affidavit sworn the 27th January, 1993, anfi

filed: herem, and copies

of them are the

copies referred z o in that Taraurapn. Tne aforesaid Income Tax assessaents and aner?izi assessments cotai $3,548,793.59.

...

On the 30th November, +,he 1st December

ani

2nd Ijecember respectively, Notlces were issued

by the Deputy Commissioner of Bxatron, Xr. Scanlan, pursuanr to Section 218 of che income Tau Assessment Act i536 as amended. gecaiis

of those

Notices

are

sec out lr, fuil

- - -

paragraph 20 of aohm Davrd Euscon's srrlaavlt paragraoh.

of the 27tn January, 1983, and copies gf che

. . .

5 .

The bulk of the monies

from the National

Bank were delivered by bank cheque to che

Deputy Commissioner of Taxation on che 6th December, 1982. In all, pursuant: to the said Seccion 218 Notices. an amount of $421,859.54

w a s paid

by the

National Bank to che Deauty

Commissioner of Taxation.

...

8. On

the 24th January, 1983 ohjections were

lodged to the

assessments

and

amended

assessments issued by the Australian TaxaLion ended 30th June, 1381 and 1982 have been lodged on 24th March 1983 In respect of all taxpayers the subject sf che aforementioned assessments and amended assessnents.

...

11,	in respect of the said Notlces directed

to Gilshenan FL

Luton, Solicitors an amount of

$29,416.48 in therr trust account remams subject to the said Notice, and. in respect of

the Notice relatlnp

to Mrs. Ruston directed to

Chase N.B.A. Finance

Limited,

Herchant

Bankers, an amount of $9,210.09 remains with that company and subject to the sald Netice.

. L .

14. On the 18th November, 1982 crimlnal

charges were

laid.

agalnst

M r .

Huston being

charges under the Criminal Code of Queensland, as set out in paragraph ‘L9 of tna sald alZidavlt of Mr. Huston.

...

158.

Mr. Huscon has been charged

wlzi?. and

convicted of the offences speciflee in

- -

parapraphs 70 to i b Inclusive of L.	Lne
affidavit of Mr. Taltp, sworn on ~ i e	9r;h

March, 1983 and filed	herex.
...

The foilowxncr were assume-i:

. A .

5 .

On the 3rd December,

1982 Mr.

Cooney of

Gilshenan & Luton rang Mr.

Talty, the Actina

Commissioner of Taxation and requested that the Australian Taxation Office hold action on

the abovementioned

Seccion 218 Notices. it is

alleged that Mr. Talty agreed tc hold action

on the said Sectzon 218 Notices for a period

of seven to fourteen days. It is alleged chat

in reliance upon that undertaking grven by

M r .

Taltpthe Applicants took no steps to seek a Court Order agalnst compliance with tke aforesaid Notices.

...

9. Ic is aileqed that aT; all times in zlls

appearances before

the Royal Commissioner into

the activities of the Federated Shlp Palnters and Dockers IJnion Mr. HuEton by his Couniel

made it clear that althouqh

he wished to leave

the country at the end

of 1982 he had no

intention of doing

so p r i o r to completing his

evidence before the Royal

Commission and prior

having

received

back

from

che

Royal

Commissioner all documentatron requirei for

the completion

of outstandlng T a r Returns.

10. Ir: is further alleqed tnac Mr. Leo We135

of the Australian Taxation Office was fully

aware that all the documentation had been

subpoenaed bp the	Royal	Commissxoner	in
IOctober of 1962.

I .

instructed the firm

of Gilshenan

Luton,

3olicxtOrs of arlsbane to act on his behalf in

defence of

tne sald charaes, and the

sum of

$25,416.48 was paid into trust

on account of

fees .

On the. same

day Mr. Huston signed an

Authority to Act

and a Trust Account Authorlty

in favour of Messrs, Gilshenan

L Luton.

copy of t:haur

letter is marked with the letter

“CC“ annexed to Mr. Huston’	S ILffidavit of the
17th January, 1983.
..L

Paraqraph 16 (the lase paragra:.c) was larcreiy arqumentative, but

f o r the sake of completlon i

set it nut:

“It is

alleged that the decision

to issue the

aforesaid Section 213 Notices was an improper exercise- of the power conferred by the Income T a x Assessment Act. It is alleged that the

decisions

involved

taknu into

account

irrelevant

considerations,

involved

exercise of

the power qranted

in Seccion 218

of the Income Tax Assessment Pct for a

pc?rpose

other than a purpose for whlch the power is

conferred, and involved an exercise of a power

in a way chat constituted an abuse of the

_ .

power. Particulars in support

the above

are-

as follows:-

(a) it is alleqed that Hr.

Talty @f the

Australian

Taxatlon

uz11ce

made

the

following comments to Mr. Chriscopher John

Cooney of Gilshenan G Luton:-

“ h e

Hustcns have been blaneetei wzth

Section

213

i toz lcss .

’There 1s a nobi i i r - r Eartcr in c k ~

ZUSCCR

Tax Asssssmenia and the Taxable income.’

(5) it 1s allecxi thac ar c&e neecl-nq helc

- l -

the i c h Deceajer,

G 2 2 Mr.

~ a ~ t y -

saili-

that instructions x ~ r ?

?:vet?

3y h1-m. t k t no

~ c c i c n

was

to be caxsr? ‘‘1 e r 2 z r c ~

?a:7mznc

- -

Imder the Secrz~! 1 ~ 2

3ioc1z25 fc;r 2 ?er292

of ~ o f

less c > = ~

izvsr. d a v s

zqcr % ~ r e

char.

t,en 5ays.

Australian Taxation 0fFlce ac the meetinq

of the 7th December, l9E2 atated that wnat

the Tax Departmenc 'had done was to add up all of the deposits recelved into -,he bank in respect of H.D. Euston & Co. which was

approximately $600,000.00.

and that that

amount was then applied to the three taxpayers namelp Hr. Huscon, Mrs. Hustcn

and Mrs, Huston as trustee of the fail?

trust.

(d) It is

further

alleged

rlhat the

assessrnents were issued

f o r the purpose of

issuing Section Z1Y Nctices.

(e) It is further alieqed t;%r

the Depucg

Commissmner had ro bona fide belief

t h a c

liabili-ty to tax eursted. i

the caac of

Mrs. Huston personally or in

her capaclty

a5 crustee

of the Huston Family Trusz No.

3. I'

The first submission of counsei for

the appiicacts was

expressed as follows:

"The assessments were not Issued. bona f i d e jut were arrived at for the pur?osa largely o r soiely of ~ssulng the s.218 notices wlthout

any or any proper atcempt c c computz the

taxacmn liability nut wirh tne intention of

immedlatelg f r e e z x q the caxpsyer's

assets."

7 L

and that

rt was duly made.

LL cannot be saxi

chat r t was made

for an

inadmissible purpose.

Tae same case incldenrally

shows

that the Commissioner can

proceei unier S .218

immediately upan

the issue

of t-he notice af assessment.

The other difficulky is

tinat bp reason of s . 3 ( 1 )

and Schedule I of

the Judicial Zieview

A A , t h a t Act does not apply to

( e ) :

“(e) decisions maklnq, or forming part of the process of making, or leading up to the making of, assessments nr calcularions of

tax or duty, or decisions disallowing

ob	j ecc ions to asses5neEcs or calculations

of tax o r duty, or declsionr amecding, or

refusinq CO amend, assessments or calculacions af tax o r duty, under acy of the following Aces:

. ..

Income Tax Assessment ACC

1976

L..

this submissran must fall.

The second submission relaced separately to the notices flowlnp f r o m the assessments issued to Krs. Huston

and the

trustee of the family trust, but

was to the effect

that the

exercise of the Commissioner's drscretlon

was bad for the reasons

given under

the first submisaion and no others.

hihen asked w h y

he created these assessments separately f r o n the others, counsel

sald char: there could be no bona fide belief on tks part of the

respondent that Mrs. Huston and the rrustee, respecrrvely, were

liable for the

tax for which they naa been assessed.

%nis

submission seems co me	to fail for	the reasons I have already
indicated.

An additional submissxan reiatea to an amount of 329.000

held rn the trusc account of the- solicltors for

E k e applicants.

It was submrtted that

t 'nis

was not an anounr: ko whzch s.2iE(l)

refers.

The

statenent of assumed facts says rhar: che

sum of

$29,416.48 was paid

on account of fees. An authority dared 18

NovemSer 1982 given to the solicirnrs vas m the followln? ter!ns:

il.

Conzrary to

the Statement of Facts, an afflCavlz wnich kas ~ e e n

referred. to. says

thac while the authority was qlven

in November.

the- amount	In Euestion was paid to t h e solicitors several weeks
lacer.

It was submitted z.hat zhe amount m questmn gas not ,ius

or accrulnu r.0 the applicants O K either of them or held f o r them. It was said that the amounr: was committed f o r Mr. Huston's c o s t s in defending himself against crimlhal charges. For zhe respondent it was submitteL that the mount at any time remaunna

ln the solicitors' czust xcount (and. earmarked m zccordance

with the Trust Accounts Bcr. 1373 (Qid) , (s.6,

and see s.3)) was

payable on request to the applicants. The statutory qarnlskmrn:,

it was sal&, could operate thereon.

i cioubt whether t h i s latter

submission is sound. as

a general

proposltian, bu t at

rhe same

- .

time I

C O not Laow znouuk about the faczs

ro cm!e zo any zlzai

determxation.	I thinK it is unsatisfacrory to dezermrne ri-e
Lssue in favour	of one paxy or the o t h s r w-Lzkout havlnq xorz

detail concerning the accounr- and

iljbilities refprabln r c e r e z o

as at zhe dace of issue of she nozice to the zolicltors. ne solicltors can take thelr ohm course in relation zo r-he notlce served on him, but it may be zhouql~z bercer to -MVP i rullnq zn this case. I w i l l uivz r h e Sart-Lei an opportunzty of lzrLqailzc

the mattsr f*xther before me if they w i s n .

Li.

Commissioner's power to attempr

CO impound. an

amount apFroprzaced

for legal costs in respect QC a defence against criminal charges.

This is I think the only arqument whiLi really siieals witr- che

purposes of s.218. It is probably best to deal wlzh It %hen

considering

the

earlier

submission.

cercainiy s e e m

unreasondole that

the Commissioner shoulc have any power

deprive

people of money

necessary

for

tne

defence

aqainst

crlminal charges, but

is anotner yuestion whezhrr

such

requirement is bepona power or m n p r o p e r exercise of power. in

the present case too, one is entitle2 CO have reqard 50 the fact

that assessments for very larqe sums were issued at C ~ E one tine,

that

they

were

default assessinenti, thac they may

weii

Inaccurate and

that tne

5.218 nor;ic=s were issued imnediately,

even before notices

of objection could

3e lodged.

The Commissioner does, nowever, have very wlaz powers

which can undoubzedly

in man7 cases create undue hardship.

z z

free to take proceedings for winalnu-up or CaEKru?tCY or or-her proceedings in erecutlon, as well as proceedin?= under

s.112,

notwithstanding C M C the asssssmezzz uson

wiiinch

c e l l r r n q are

the sub jert of appeal.

zven ~f r h e appeals

are succesaz~~~,

may in the meancime have ruicea che taxpayer.

13.

committed

'ro such a

ourpose by

b e r n g

i n

s o l l c i c o r ' s

t r u s c

account .

The posrtion. as

I h v e

a l r e a d y

i n d r c a t e d

may

trat

the

sec t ion

aoes

no t

a-;rpLy, bu t i f

r c aaes

apply i n t h e Greser?k

case, L would hold that the appl icant

cannot

ob ta in

re l i e f

clnder

the J u d i c i a l Review

Act;.

R e l a t e d

t o

the

amount of

$ 2 9 , 0 0 0 ,

t o

which 1

have

r e f e r r e d ,

i s an amount

$9,210.119

he ld by

Chase

N.EI.B.

Cinance

Limited.

Before

the

i s s u e

t h e

n o t i c e

to that

banx, Mrs.

Huston

had

given

i c a

d i r e c t i o n

t o

pay the amount I

have

mentioned

t o

the

s o l i c i t o r s '

t r u s t

a c c o u n t ,

w i t h

t he

i ncen t ion

apparent iy that	Lt be	adaerl	to	the o the r amount	a v a i l a b l e for
costs and fees.

14.

sum.

It 1 s said to be for moneys 'hac and. received

by t5e

defendant to che use of the pialntiff". '%e

purpasr of the r l a ~ x

is to endeavour to recover monies obtained. a s a resul:

of the

s.218 notices and wnac

i 'have aireaay said wili operate

to debar

such a

claim. It is

only nscessary to add thar

,-n ny v l e w the

claim is beyond che jurisdiction of this Court. TELS

appllsatxon

should be dismissed with

c u s t s .

The case has Rot so far followe5 orec;sel-:r the ccurse

set out

m Order 29. ,The ef fsct of my vi=w cf the iaw IS,

however, that	s u 3 j e c t to cl??	question concerninq cke	?.mou;l+,	in
- -

the solicitors' trust

account, the appiicanzs

m u s ~

ra l r ,

and

sublect CO that matter I will m due course dismiss

~ h e

firs~

~:m

applications.

therefore stand down tl?e

r ' l r s z two applications

for furcher hearinu.

23 Buqust 1983

The major part of

tins sum, namely $ZY,300, was paxZ t o

t h e

s o l i c i t o r s

on 1 December

1982 and the r e c e i J t

hrn

favour of

Mrs.	Huston is as f o l l o w s :

"Hustcn -

You ats F o i i c s

Secur i ty for

costs I

16.

In respecc of this amou?.t,

anc eke holdinq of it s n the trust

account, I

have been referrsa

to the Solicitors Act

1831 ( g i i )

and particularly s.16 chereof.

The respective cases of

nusnaE&- and wife proceeded on

the basis tiit any

moneys pay=zble by the soilcltors were payable

to one or other o r both

of cnem, and ic has not been a necessary

part of the argumenc to draw any dxszinction between

them.

Two

m a t c e r s are ralsed on behalf

of the applicanrs. Ths

first is concerxed with the ieclsion

Issue the s A L 1 8 ~lot~ce,

and the second wzth what has been submitte6 was a decision not CO

revoke the notices at a lacer time.

In relatior. eo che first Icatter, wkzch COIIC~C~S

c5e

decision to Issue the nocice,

i was referred zo the conscructlon

of 5.319 and

the decision of che Hiun Court thereon In Clvne v.

I -

Tne Dewutv Commis=icner of ikxaclon t 1 3 P i l 25

B .L.Z.

5 6 7 .

wis

held in chat case that

in 5.218( 1) the word "due" when appezrxxcr

in tne

v a r i o u s Garagraphs

meaiit:

"due anc

pa:r?Ale l .

L t

WE5

therefore said. that t h e amount souqnr fo be obcained iy reasor! 01

17 L

belng the pawer to issue the 5.218 notice, ln baO faith, on the basis that he was proceeding on a course of conduct w h c h nac the risk of aeprivtnq the applicant, Zobin Davic H u s t o n , of lecral

representacion at 'penainq

leual proceedings.

It was

also sujmitted that the Deputy CoEmissioner nad

exercised the

power ir.

a way whlch no reasonable

?ersor. would

have

exarcised it, and the power was

exercried in a way

constltuting an abuse of power.

It was said tht there was no

eviaence to justify the aepucy Commissroner I n lssurng the notice, and that r;he decision was based on a conclusinn That on= or other of the facts referred to in 5.21&(1) garas. (a), ( h ) ,

([I)

o r

(d) existed, ana chat

this was not cne case.

L? was in

relation to

this latter suhrnisslon in particular t'hac reference

was made to Clvne's Case, and

I shouia note the reference :

the

earlier

case,

Sicree

and

Another v. Dewllrv Commlzsioner cf

Taxation ( l S 8 l I ) 32 B.L.R.

307.

18.

prospective appllcatlon.

i do not mean, In ?jutclnu tce maccer

that way, to suggest

that: the

Commissioner, if challenge=, must

establish char; at some time one of the- paragraphs will apply, but

rather that he

is by the section enabled to

Issue a notxce even

lf it may apply only to clrcuiistancee arlsinq in the Lucure, as

betweerr garnlshee and taxpayer.

Assuming therefore

that

che solicx+,ors were under no

obligation to pay to the Depucy Commissioner any part of the sum

of	$29,000-odd to which I have referred, the notice would s c ~ l l

be good,

m e

notice was adciressed

Eo tne solicitors, who nay

have come inco possession

of moneys ?ayable

50 olther

o r boch

taxpayers wnich tney wouid hald

on their accounz, such as,

f o r

example, moneys received. on discharse of

9 mortaage Ln relation

to a

r e a l esrate dealing.

LE ma:T

be tne facr,

zf che charues

aqalnst their clienc were dropped, chat

surslus moneys w c i i l c be

immedlateIy	avaiiable ar.d due CO be pal< to one	or 50th
taxpayers.

,There 1 s

no direct evidence *out

t:?e mor:lve o r inceE=

of the Deputy

Commissioner which would lnvallcate

his decision z o

issue the r.otice,

and in my view :lt 1 s

no t possi3le to sap chat

l?.

once he became aware of

the situaclon respectmu cne amount of

$29, ODO.

It is sald that whatever his state af knowledqe

earlier, he was aware at a

later point of time

t'nat che moneys

' were being held, or at least thac ~t was clalmeu they were bein?

held as

security

f o r

costs

relation

the

cruninal

proceeding.

It 1s not at a l l clear CO me that

there

was

"decision", within

the meaning of the Jucicial Review Act, but

what is relied upon

is a letter of 14 December 1982 addresiea ro

Mr.

Talty, the Assistant Deputy Commlssioner

of Tauatlon, one

paragraph of which reads,

and I quote:

"ME

specifically

ask

chat the Sectlon

ZlS

notice dlrecced to

and

C - m s e - N . B . : l .

Finance Linited be withdrawn and

Y i c

Notices be issued and no

other steps czxen m

respect of any ocher money -.in~~ch miunr: 3ecome available From the Hustons' property which we

will l i s t hereunder.

20.

at 2 December 1982 were

EOZ cauqnt bp the notice.

L do pot

decide whether this

would be so if they were nernq

held. by way of

security for co-

sti

As I have said. the notice applies

to 3ng

surplus 3f

those moneys which

at any tune could

said to

be due and

Gayable by the solicitors to the taTpayers and also to anp other

moneys that might fall withzn the t-.rms

of s.?^lZ.

It does noc seem CO ne chat if there were a declsion !?or

to revoke, based upon knowledge

concernincr che $29,900, chat the

Deputy Commissioner would be in breach of

any of che provxslmr

of 5.5 of

the Judicial Review ACE by reason of his not revoklnq

that notice

or wichdrawing it.

It xs not for me in t'nese proceedinqs EO derermlze wkat

part, if any, of the amounc of $29.000-odd 1s ?ox, or was at t h e

time of the lssue of the norlce, or has ar: ar.:r intermedzare else

been due and payable cc che taxpayers.

if t%s

marter has to 3e

litigated F-, will have C O be

~n another forux~.

I would only

2 1 .

of c h s amounc of $29,000.

They therefore they fail completely.

No steps were caken cc) icLlow the proceciure ucder

Order

29. Ic was noc dispuced that In che circumscances I should make

final orders disposing of the matcers.

[1983] FCA 220

25 Mar 1983