Kendell, D.W. v Deputy Commissioner of Taxation

[1986] FCA 505

LIMITED DISTRIBUTION

CATCHWORDS

ADMINISTRATIVE LAW - Application for judicial review of

Commissioner's decision regarding collection f assessed tax -

Proceedings pending in Taxation Board of Review - Proceedings

settled favourably to applicant - Whether Commissioner should

pay taxpayer' S costs in :Federal Court.

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Federal Court of Australia Act 1976 s.43

Income Tax Assessment Act 1936 s.177	-
NSW G.223 of 1986

DAVID WARD KENDELL v DEPUTY FEDERAL COMMISSIONER OF TAXATION

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Wilcox J

Sydney

21 October 1986

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LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA

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NEW SOUTH WALES DISTRICT REGISTRY ) NO. G.223 Of 1986

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DIVISION	GENERAL	1	t :	,
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BETWEEN: DAVID WARD KENDELL

Applicant

! AND: DEPUTY FEDERAL

COMMISSIONER OF

TAXATION !

Respondent

!

CORAM :	WILCOX J
PLACE :	SYDNEY
DATE :	21 OCTOBER 1986

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. By consent Application dismissed.

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

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LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA

1

NEW SOUTH WALES DISTRICT REGISTRY ) NO. G.223 Of 1986

1

DIVISION GENERAL 1

BETWEEN: DAVID WARD KENDELL

Applicant i ;

I : AND: DEPUTY FEDERAL

COMMISSIONER OF

TAXATION

Respondent

CORAM : WILCOX J

PLACE : SYDNEY

DATE : 21 OCTOBER 1986

EXTEMPORE REASONS FOR JUDGMENT

There are before the Court proceedings under the

Administrative Decisions (Judicial Review) Act 1977 by which

the applicant taxpayer seeks review of various decisions of

the Deputy Commissioner of Taxation in relation to the

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extension of time for payment of income tax and additional tax

totalling $99,240.25 and in relation to his decision not o

defer, delay or stay the commencement or prosecution of

Supreme Court proceedings for the recovery of that tax.

'2.

The relevant assessments cover the taxation years

1976 to 1984. There was considerable dispute between the

taxpayer and the Commissioner regarding his liability in

relation to most, if not all, of those years. In about 1983

the taxpayer paid to the Commissioner an amount which he

thought was properly due. The' Commissioner disagreed and disallowed various objections submitted by the taxpayer.

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In about May 1984 these objections were referred to

the Taxation Board of Review. Because of the state of the

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list of that	Board, the matters did not come	n for hearing	r.;
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prior to the	transfer of the Board'sijurisdiction, at the	I .
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beginning of	July 1986,	to the Administrative Appeals	I_
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Tribunal. However, the appeals were apparently amongst a

number of matters called over early in 1986 and, I infer, as a

result of that activity -- perhaps in conjunction with other

activity on behalf of the Commissioner -- further

consideration was given to Mr Kendell's claims that the

assessments were erroneous. In the result, the parties have

agreed as to the fate of the assessments. Mr Kendell has been

substantially successful. The Commissioner has agreed that,

save in relation to one item totalling $2,733.00, each of the

objections made by Mr Kendell should be upheld and that

amended assessments should be issued accordingly.

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In the meantime, the proceedings in this Court, which

were commenced on 3 June 1986, have been mentioned on several

occasions. A lengthy affidavit was filed on behalf of the

applicant to support the Application and a further affidavit

has recently been filed, bringing the situation up to date and

revealing the settlement. Plainly a deal of work has been

done on behalf of the applicant, and no doubt also on behalf

'I	of the respondent Commissioner, in preparation for the hearing
in this Court. However, it is not clear that the whole f the
material which would be sought to be used by the parties if
the proceedings had continued, is yet on 'file. The agreement
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between the parties as to the amendment of the assessments has
meant that only a small amount of tax is payable by Mr

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Kendell. This amount has been tendered him, along with tax

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for 1985. So far as I can make out from the correspondence

there appears to be no continuing dispute between the parties: and I think that must be said that Mr Kendell's position in

relation to the major dispute has been vindicated by the

ultimate concessions made by the Commissioner.

Under the circumstances the parties have agreed that

the proceedings in this Court should be dismissed. However,

the applicant seeks an order for payment by the Commissioner

of his costs in this Court. The Commissioner opposes this

application. He does not reciprocate by seeking an order for

payment of his own costs but submits that there ought	to be no
order for costs.

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4.

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On behalf of the applicant, Mr Inglis submits that

notwithstanding the dismissal by consent, the Court has power

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to award costs to his client. This proposition has not been

contested. The real question is whether it would be a proper

exercise of the Court's discretion to make such an order.

In essence, Mr Inglis says that his client came to

this Court because, at the time, there were proceedings in the

Supreme Court which were based upon the issue'of assessments

which have now been conceded to be erroneous.: In the Supreme

Court, of course, the Commissioner would have;been entitled-to

rely upon the assessments themselves, notwithitanding the fact

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that the applications for review were still outstanding (see

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s.177 of the Income Tax Assessment Act, 1936)': I.,

The submission of the applicant is that, under those

circumstances, he faced a real danger of suffering judgment in

the Supreme Court and that this was the basis of the

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Application in this Court. On behalf of the Commissioner it

is submitted that, in order to justify an order for costs in

favour of the applicant in these proceedings,,the Court would

have to come to an affirmative conclusion that the applicant

would have been likely to succeed in the proceedings in this

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Court. It is pointed out on behalf of the Commissioner --

correctly I think -- that the prospects of success in these I :.

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proceedings are logically distinct from the merit of the ..

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contest between the parties before either the Taxation Board

of Review or the Supreme Court of New South Wales. It is said

that s.177 evinces a policy that the Commissioner is entitled

to proceed to collect tax notwithstanding the fact that an

objection, or an appeal, has yet to be finalized.

Mr Bayliss says that, in order to investigate the

merits of his client's decision not to grant an extension of

time and to proceed to recover the amount payable under the

assessment, it would be necessary for him to adduce additional

evidence and that the hearing would be likely to occupy the

Court for at least one day.

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I confess to considerable sympathy for tHe position

in which the applicant finds himself. I think it'is

unfortunate that a taxpayer who is ultimately conceded not to

owe the full amount claimed under assessments issued by the

Commissioner, and indeed who paid the amount actually due --

apart from a relatively small amount -- some years ago, should

incur costs in the Supreme Court in attempting to defend

himself against claims based upon the assessments subsequently

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conceded to be wrong and that, in an attempt to shore up the

inadequacies of his available defence in the Supreme Court, he

should then find it necessary to approach this Court for a

review of the Commissioner's decisions in relation to the

collection of tax. It is doubly unfortunate if, at the end of all that, he is left to pay his own costs when the original assessments disappear.

6.

However, notwithstanding my sympathy for the

applicant's position, I think it is correct to adopt the

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approach advocated by Mr Bayliss. The question whether or not

the applicant-should have his costs f these proceedings must

depend upon the question whether would have been likely to

succeed in these proceedings. In other words, the question

I is, given the structure of the Income Tax Assessment Act

including s.177, and, given the unfortunate delays which beset

people who object to assessments or who seek to have those

assessments reviewed, any legal invalidity attended the

Commissioner's decisions concerning the collection of :the tax.

This is not a case where the delays have been caused the

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Commissioner: in that respect it contrasts with some 'other

cases with which I have had to deal. So far as appears, the

problem has arisen because of the time lag in hearings before ' ,

the Taxation Board of Review.

As a matter of principle it must, I think, be

conceded that the policy of the Act is that, notwithstanding

an outstanding appeal, the Commissioner is entitled to'take

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recovery proceedings. It is necessary for him to consider in

each case whether this is an appropriate course: but the fact

that eventually the taxpayer may succeed in the merits does not mean that the decision to exercise the powers given by the Act was legally erroneous.

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There is nothing before me to enable me to : valuate

the grounds of attack upon the Commissioner's decision. It is

not sought that the Court should go into these matters.

Essentially, the argument put by the applicant depends upon

the fact that he has been ultimately successful on the merits

of his taxation liability. I do not think that this is

enough.

Notwithstanding my regret about the position n which

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this places the applicant, I think that the proper orders for

me to make is that the proceedings in this Court be dismissed

and that there be no order for costs.

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I certify this and the six ( 6 )

preceding pages to be a true copy of

the Reasons for Judgment of

his Honour Mr Justice Wilcox.

Associate: d&Q,y?h

Date: 6 November 1986

Counsel for the Applicant:	Mr M W Ingliss
Solicitors for the Applicant:	Sly & Russell
Appearance-for the Respondent:	Mr R Bayliss, Solicitor
Solicitors for the Respondent:	Australian Government .
Solicitor

hearing: of Date 21 October 1986

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