McDonald v Commissioner of Business Franchises

[1992] HCATrans 328

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IN THE HIGH COURT OF AUSTRALIA

Office of the Registry

Melbourne No Ml6 of 1992

B e t w e e n -

NOEL WALTER ALEXANDER McDONALD

Appellant

and

COMMISSIONER OF BUSINESS

FRANCHISES

Respondent

MASON CJ
BRENNAN J
DEANE J

DAWSON J

TOOHEY J

GAUDRON J

McHUGH J

McDonald(2) 1 11/11/92

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON WEDNESDAY, 11 NOVEMBER 1992, AT 10.21 AM

Copyright in the High Court of Australia

MR R. RICHTER, OC: If the Court pleases, I appear with my

learned friend, MR P.K. SEARLE, for the appellant.

(instructed by Alex Lewenberg)

MS A. MOSHINSKY, OC: If the Court pleases, I appear with my

learned friend, MR H. REICHER, for the respondent.

(instructed by Solicitor to the Commissioner of

Business Franchises)

MR RICHTER:  If the Court pleases, may I hand up a summary

of the appellant's submissions. May we make one

observation about it, and that is that in

paragraph 1 there is a rather grievous omission of

a case which is to be relied upon very heavily.

That is O'Toole's case. It is relied upon

elsewhere in the summary of submissions, but it was

somehow omitted from the list of cases referred to

in paragraph 1. This is O'Toole v Charles David

Pty Ltd, (1990-91) 171 CLR 232.

MASON CJ: Yes, Mr Richter?

MR RICHTER:  If the Court pleases, the point to be argued,

in our respectful submission, comes down to how one

construes a provision such as section 19E(2) of the Business Franchise (Tobacco) Act. We will refer to

it as a conclusivity provision because, on the face

of it, that is what it purports to be. It purports

to conclude and shut out argument. It is akin to

privative clauses in other pieces of legislation

such as section 60 of the Conciliation and

Arbitration Act.

The way the case arises, if we could try and

crystallize the problem, is this, that the

Commissioner of Business Franchises sued the appellant for recovery of a number of sums listed

in a series of what were said to be notices of

assessment dated 11 September 1989. It is common

ground that the assessment was made on

11 September 1989. That in fact emerges from a

reading of the pleadings, and in particular

paragraphs 4 and 5 of the particulars of demand

which appear at page 3 of the appeal book.

So that the action below in the magistrates'

court for recovery was as follows: the

Commissioner asserted in the particulars of demand that there were notices of assessment totalling some $368,499.60, that they were duly served in

accordance with the requirements of the Act, and

that the Commissioner was therefore entitled to

recover those amounts from the appellant, and in

the event the magistrate below so held. The

Commissioner's case was conducted on the basis of a tender of notices of assessment.

McDonald(2)	11/11/92
DAWSON J:	When was amendment effected?
MR RICHTER:	The amendment came into effect on

1 December 1988. This was Act No 66 of 1988 in

Victoria, and it came into operation on

1 December 1988; so that the assessment itself, as

is common ground was - - -

MASON CJ: September or December?

MR RICHTER:  December of 88. The notices of assessment were

11 September 1989 and it was common ground that that was the date upon which the assessment was

made. So the assessment was, in fact, made some

one year and nine months after the power to assess

had been removed.

The Commissioner, on behalf of the Commission,

sought to tender the notices of assessment.

Objection was taken to the tender on the basis that

the documents that were sought to be tendered were

not on their face and could not on their face be

notices of assessment albeit that they had the

words "Notices of Assessment" on them. Now, the

purported notices of assessment, if we could take

Your Honours to page 8 of the appeal book, there is a whole series of them, all of which are identical

except for the amount and they are documents which

take the form of a letter addressed to

"Mr N. w. A. McDonald" at his address.	The heading
is:

Business Franchise (Tobacco) Act 1974
Notice of Assessment

You are hereby notified that an assessment has been made in accordance with section 19A(l) -

what is omitted there is paragraph (d), because it

is only under paragraph (d) of that section that

this particular assessment, or what we might call a

default assessment could have been made, but be

that as it may, it does not matter because in 19(1)
there is no other possibility for making such an

assessment other than through paragraph (d).	And
it continues:

19A(l) of the Business Franchise (Tobacco) Act

1974 of the amount which should have been paid

by you had you made an application for a

wholesale tobacco merchant's licence for the

month of September 1986.

So, what the objection that was taken below was

that when one looked at this document it was not

sufficient to look at the document because without

the existence of the Act simply a document which

McDonald(2) 3 11/11/92

says "Business Franchise (Tobacco) Act 1974 Notice

of Assessment" means nothing because it of itself

has no force apart from the Act.

In other words, the production of that

document, in order to ascertain what force it may

or may not have, compelled recourse to the Act

itself to see whether or not in fact it was a

notice of assessment in compliance with the Act.

Now, when one looked at the Act which was in force

at the time of the assessment and at the time of
the issuing of the notices of assessment, one found

that the Act made no provision at all for assessing

whether by licence fees properly so called, or by

default assessment in relation to tobacco

wholesaling, with one exception - I overstated it - the Act does deal with fees for tobacco wholesaling

licences, but the effect of the 1988 Act was to

make it completely optional.

MR RICHTER:  In other words, there was no requirement to

obtain a tobacco wholesaler's licence as at the

time these notices of assessment were issued.

Whereas prior to the amendment there was a

requirement and a compulsion to apply for a licence

and in the absence of an applicatio"n for a

wholesaler's license there could be a default

assessment issued.

So, to that extent, when one then looks from

the notice of assessment and goes to the Act from

whence it seeks to derive its authority and force,

one finds that there is simply no head of power

there to issue a default assessment under 19A(l)(d)
with respect to the activities of tobacco

wholesaling.

The argument therefore was and still is, this

document, on its face - and on its face must

encompass the examination not only of the document

but of the Act that is said to give it force - on

its face it is simply not a notice of assessment

and is therefore not tenderable because it can be

probative of nothing. That was the argument.

That argument was overruled, and it was overruled

on the basis that the conclusivity provisions,

because it is a document which is said to be a
notice of assessment, the so-called conclusivity
provisions in 19E(2) precluded any challenge other
than through the appeal provisions that are
provided for in the Act in earlier sections, in
sections 17 and 18, the parts that deal with
objections and the determination of appeal. Those
are akin to the structure in the Income Tax

Assessment Act providing for appeals against assessment.

McDonald(2) 4 11/11/92

The point that was taken below at each

instance, both in the magistrate's court and at the

Court of Appeal was that a taxpayer did not have to

wait to follow through the appeal processes because

a condition precedent to success by the

Commissioner had not been fulfilled.

In other words there was simply no notice of

assessment, no document which purported to be a

notice of assessment, because what was referred to
in Bloemen's case as the visual inspection test, as

it were, was simply not passed. And we shall have submissions to make on Bloemen's case because what we say is this, the tests posed in Bloemen's case

in relation to these conclusivity provisions appear
to cover the objection that was taken by the

appellant in this case in any event, and so we

ought to succeed under Bloemen's case, but if we do

not succeed under Bloemen's case we would be

submitting that the test in Bloemen's case is too
narrow for a challenge to such comclusivity

provisions, and that in fact the propositions

adumbrated in O'Toole's case make it appear that

Bloemen's case, if it sought to limit the

objections to conclusivity provisions to the sort

of visual inspection test, Bloemen's case would now

be considered wrongly decided.

TOOHEY J:	Mr Richter, you appear to be saying two things: one is that the document described as a notice of
assessment cannot be such because of a lack of
power to issue it; and a further argument, as I
understand it, that in any event the document, on its face, does not purport to be a notice of
assessment.
MR RICHTER:	Your Honour, they run in together, in this

sense: the document, if one just takes the piece of

paper, on its face purports to be a notice of

assessment, but the notion of notice of assessment

has no meaning in law apart from particular pieces

of legislation that give it force. And so before -

if I were to write a document saying, "Notice of

Assessment" on its heading, on a serviette in court and hand it to someone, that would not be a notice

of assessment in law under any circumstances,
although on the face of it it says it is a notice

of assessment. It would have to refer to the

source of power, to the legislation that says it is

a notice of assessment.

TOOHEY J: Well, that is what I meant -

MR RICHTER: Yes, Your Honour, but they run in together -

TOOHEY J: - - - when I referred to your second argument,

which seemed to be an argument independent of

McDonald(2) 11/11/92

power, namely that the document on its face,

although it is called a notice of assessment, is
not in fact a notice of assessment because it does
not assert the power from which the assessment

derives. Is that what you are saying?

MR RICHTER:	Well I cannot be saying that because it does seem to assert the source of power on its face,
because it refers to section 19A(l) of the Act.
But that very reference means that one then has to
look at 19A(l), and in the end Your Honour is
right; it comes down to a proposition of the
complete absence of power, not just an excess of
power, but a complete absence of power. There is simply no head of power and therefore when one
looks at the document and what one has to look at
with the document, because for enforceability one
has to look at the Act, one is driven to the
conclusion that the document is not and does not purport to be a notice of assessment, because it
cannot be because of its reference to tobacco
wholesaling and - - -

DAWSON J: That is a very short point. If you say if it is

demonstrable by reference to what appears in the

document that it is not a notice of assessment,

then it is not. You do not need to say anymore

about that, do you?

MR RICHTER: That is the point; it is a very, very short

point, Your Honour. The fact is this, we in our

submission say it does not meet the visual

inspection test which is referred to in the passage

in Bloemen's case and on that basis alone the

action should have failed, because it is the

Commissioner for Business Franchise who brings the

action and must show that the document on its face

is what it purports to be and it can only do so by

reference to the Act. Now it is interesting the

way the trial of the action ran, because the

Commissioner for Business Franchises was simply not

able to do that; it was not able to say, here is a

document that is a notice of assessment, here is

the Act, this is what the Act says, give us

judgment. It could not say that. It itself had to

go behind the Act that was in force at the time

this document came into existence and to say, "Ah,

but we do not rely on the law as it stood or on the

Act as it stood, at the time of these notices. We

in fact rely on an older Act.", and then we have to

go to the Interpretation of Legislation Act and

then we have to argue that rights have accrued,

that liabilities have been incurred and so on.

That in itself demonstrates that the

mechanical process, if we can call it that, of

enforcement through notices of assessment and

McDonald(2) 6 11/11/92

conclusivity proceedings could not have applied in

this case. Because what it required a court to do,

a recovery court was to interpret the legislation

and interpret whether rights have accrued or not,

whether liabilities have been incurred or not.

That, of course, in itself, goes completely

contrary to what it is that conclusivity provisions
are about.

In our submission conclusivity provisions are about form and compliance with form on the face of

it, so that if there is compliance with form on the
face of it there is prima facie enforceability,

unless there be considerations of the kind referred

to in O'Toole's case, which are real and live

considerations. On the face of this document there

is no enforceability, because when one considers

enforceability one has to look to the source of the

power for enforceability.

BRENNAN J:	You said that Mr Richter(?).
MR RICHTER:	Yes, Your Honour.

MASON J: But is that the same argument as you were putting

before, or are you now founding on the words "due

making"? In other words, limiting the scope of

enforceability?

MR RICHTER:  I am not founding it on the due making, I am

founding it on the actual status of the document.

The due making - - -

MASON J: Yes, I follow that, that is the answer to my

question.

MR RICHTER:  The Act says the due making cannot be attacked

in any way. In our respectful submission the

judgment of His Honour Mr Justice Fullagar with

whom Justices Murphy and O'Bryan agreed,

misconstrued the notion of due making and gave it greater meaning than is given to it in cases such	as Hoffnung's case, in fact, and the meaning that
he gave it in the judgment, in fact, tends to demonstrate that if he is right you cannot attack the due making either in enforcement or in appeal
proceedings at all. So we are not attacking the
due making aspects of it, which, if one construes them - - -

MASON J:  I follow that. But you are limiting the concept

of due making.

MR RICHTER:  Yes I am. I am limiting the concept of due

making to the sort of considerations that were

discussed in Kellow Falkiner's case to the sort of

formalities, the formal requirements as -

McDonald(2) 7 11/11/92

MASON J:  And that is an independent argument from the

argument you were advancing a moment ago?

MR RICHTER:  Yes, it is an independent argument, yes indeed,

Your Honour. The argument has already been made,

except that we need to explore it slightly further

by reference to O'Toole's case, because O'Toole's

case, in a sense, if it is seen to be in conflict

with Bloemen's case is, in our respectful

submission, correct, in fact. We would like to

take the Court to some passages in O'Toole's case.

O'Toole's case, of course, deals with a

conclusivity provision, what might be described as

either a conclusivity provision or a privative

provision in the Conciliation and Arbitration Act

that deals with the effect of section 60 of that

Act which provides as follows:

"(l) Subject to this Act, an award ... (a) is

final and conclusive; (b) shall not be

challenged, appealed against, reviewed,

quashed or called in question in any court;

and (c) is not subject to prohibition,

mandamus or injunction in any court on any

account. (2) A determination or finding of

the Commission upon a question as to the
existence of an industrial dispute is, in all

courts and for all purposes, conclusive and

binding on all persons affected by that

question."

The scope of the possibility of attack on an award was discussed by this Court in O'Toole and

its discussion traversed two very significant

decisions which are referred to in the list of

authorities but, in fact, are not to be read from

because their substance is reproduced and their

gist is reproduced in O'Toole's case, and we are

referring to Hickman; Ex parte Fox and Clinton,

(1945) 70 CLR 598, and Coldham; Ex parte Workers
Union, (1983) 153 CLR 415.	Out of these judgments,

certain propositions were distilled in relation to

the governance of the impact of such privative

conclusivity clauses.

We would, with respect, submit that they are,

in fact, correct and we would, in fact, add one

other principle - and we will enunciate that in a

moment, in our submission. But the effect of the

judgment in O'Toole's case is to concentrate on

what is described by His Honour Justice Brennan as

the Hickman-Coldham conditions and is also passed

upon by the learned Chief Justice, of course.

At page 274 of O'Toole's case, His Honour

Justice Brennan discusses the principles relating

McDonald(2) 11/11/92

to privative provisions and cites from Hickman's

case, as follows:

[Private provisions] are not interpreted as

meaning to set at large the courts or other

judicial bodies to whose decision they relate.

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 -

and these are the three conditions, first of all,

we say -

that its decision is a bona fide attempt to

exercise its power -

secondly -

that it relates to the subject matter of the

legislation and -

thirdly -

that it is reasonably capable of reference to
the power given to the body.

We substitute for the Commission, the Commissioner for Business Franchises and we substitute for the

award the word "assessment" and the effect of it is

this, that for the assessment to have the same sort

of privative and conclusive impact as the award,

for example, has, there are certain conditions that

need to be met: the first one being that the

exercise of the award-making or, indeed,

assessment-making power was done bona fides.

That is not something into which argument was

addressed below because the notion of bona fides

was accepted, really. It was not argued mala fides
was there unless by inference the Corporate Affairs

Commissioner must be known that she had no power at all and did it knowing she had no power at all.

But the fact is there was an argument that was

raised about the effect of the Interpretation of

Legislation Act, an argument with which His Honour

Mr Justice Fullagar found not absurd and,

therefore, maintainable to some extent, although
the tenor of the judgment says that if it was run

in the Appeal Court we would have probably

succeeded there. So it was a tenuous argument but

not one that could be called absurd.

McDonald(2) 9 11/11/92

DEANE J:  Mr Richter, what is the section of the Act that

confers the ordinary power of assessment on the

Commissioner?

MR RICHTER: Section 19A.

DEANE J:  No, that is a default assessment. What is the

ordinary power to assess?

MR RICHTER:  The ordinary power of assessment comes with a

calculation relating to licence fees and is raised

by the whole structure of the Act. In other words,

the Act provides for an application for licences

and a certain payment of money is to be made when a

licence is applied for - $50 it is. There is then a provision for monthly returns to be made and the

licence fee is calculated by referring back, in

fact, two months. If one looks at section 9(2) and

then section 10, one gets the structure of the Act.

It is a self-assessing process in this sense, that

the returns are made and the calculation is made on the basis of 25 per cent of the turnover in the two

months preceding.

DEANE J:  So the reference to assessments in all these

sections, 19AA and so on, are all references to

default assessments, are they?

MR RICHTER:  Yes, Your Honour, because 19A - seeing that it

is, as we have said, a sort of self-assessing

process, 19A deals with the following situations,

in paragraph (a):

where a person has made a false or misleading

statement -

for example, so it can be corrected. 19(b):

a person has omitted any item from an

application for a licence - - -

DEANE J: You have answered my question. If assessment in

the subsequent provisions can only refer to an

assessment under 19A, that answers my query.

MR RICHTER:  We do not go that far. Our learned friends

agree with that. We simply go back to the

provisions of section 10(7) basically, which says:

Where a person has applied for a licence pursuant to section 7 of this Act and that

person has not paid or tendered the fee which

is, in the opinion of the Commissioner payable

under section 10(1) for the licence, the

commissioner may make an assessment of the

amount which in his opinion should be paid -

McDonald(2) 10 11/11/92

So we were wrong in that sense, that section 10(7)

provides for assessments only in the event of

licence applications, only in the event that a

licence application is made. So assessment covers

the situation where a licence application is made, but it is used in 19A to cover situations where an

application is not made but also where an

application is made and there is false information

or understatement and the like.

MASON CJ: What has O'Toole got to do with this case?

O'Toole was concerned with the constitutional

jurisdiction, was it not?

MR RICHTER:  Directly yes, and that was really condition 4

for the force that privative or conclusive

provisions such as section 60 have, because it was

added as another consideration that it is

constitutionally valid and that constitutional

validity, as was discussed in David Jones for

example and in O'Toole cannot be shut out in that

sense, but O'Toole is very important on this issue

because it discusses the basis upon which these

sorts of conclusive provisions operate and the fact
that there are preconditions to them.

Bloemen's case does not exclude preconditions for the operation of these clauses. It discusses

one and that is that providing the document can be

characterized as an assessment, but it does not go

on to discuss what that, in fact, means. What we

say is, O'Toole's case gives the key to a

discussion of what it means to say whether or not a

document can be characterized properly as a notice

of assessment and that is the significance of

O'Toole, because it deals with a provision which

shuts out challenge in the same way that 19E(2)

shuts out challenge, but it says it is not as

simple as that. There are certain conditions that

have to be met.

Now, what we say is that of the three

conditions discussed by His Honour

Mr Justice Brennan at page 274 and of the

constitutional validity provision which is
discussed elsewhere in the judgment, there is then
another condition and, in fact, it is the very
first precondition and that is the Bloemen
condition of the passage of what might be described

as the visual inspection, which, in fact, in some

ways, then diverts to the other tests. But, if one

is faced with a document which, on its face, for

example, says this is a provisional assessment, or

a tentative assessment, then the authorities tell

us that on its face it cannot be an assessment.	So
it does not - - -

McDonald(2) 11 11/11/92

McHUGH J:  Mr Richter, would you have any argument if the

assessment did not contain the words "In accordance

with section 19A(l)"?

MR RICHTER:  Yes, we would, because it seeks to refer to an

activity for which there is no head of power, and

that is tobacco wholesaling.

McHUGH J: But you could have been, so far as the assessment

is concerned, if you did not have those words "19A"

in, the assessment could have been under 10(7),

could it not?

MR RICHTER:  No, Your Honour, because the assessment is for

failing to get a licence. So it is not for getting

a licence, it is for failing to get a licence and, in fact, it sort of imposes a penalty, as it were, for the failure to get a licence. It calculates

fees that would have been paid had a licence been

applied for, or that should have been paid. So the

omission of the reference to section 19A(l) does

not cure it, in our respectful submission; because

10(7) applies to situations where a licence has

been applied for.

McHUGH J: Yes, I appreciate that, but supposing the

Commissioner had just simply sued on a certi.f icate which eliminated the words "1981" - - -

MR RICHTER:	Yes, Your Honour.
McHUGH J:	What would your answer have been then, to 19E(2)?
MR RICHTER:	The answer to 19E(2) would then be to say, this is a document that purports to levy fees for
failing to apply for a tobacco wholesalers licence;
fees that should have been paid had you made an
application.  One then looks at the Act which is
sought to be invoked to collect the money for a
source of power, in the way that a O'Toole's case
requires, for a head of power and one cannot find it.

DEANE J: What if the Commissioner argues that 19A(l) in the

form applicable to your failure to obtain a licence

is 19A(l) before the amendment.?

MR RICHTER: It cannot, in our respectful submission,

because the rights were not reserved, the

legislation is quite clear on that. And the reason

we say that the legislation is quite clear on that

DEANE J: What, the transitional provisions are clear?

MR RICHTER:  There are not any that apply; one has to go to

the Interpretation of Legislation Act, but we say

McDonald(2) 12 11/11/92

that it is quite clear that the amending Act did

not intend it, because when one looks at the

original Act, prior to the amendment, one finds
that it provides that - and this is in reprint No 2

in paragraph (d) of 19A -

If the Commissioner has reason to believe that

a person is carrying on or has carried on a

business of tobacco retailing, tobacco

wholesaling -

then certain consequences flow. When one then

looks at the amended provision, it reads:

If the Commissioner has reason to believe that

a person is carrying on or has carried on a

business of tobacco retailing -

In other words, if the intention was to preserve

the situation it would have said, "or has prior to

1 December 1988 carried on the business of tobacco

wholesaling" and the vice with that reading is the

very vice which, in our respectful submission, Mr Justice Fullagar fell into in his judgment,

because he read section 19A(l)(d) as though it had

had that amendment, which it does not, and it is

really on that basis that he made the decision, and

I will take the Court to the passage in

His Honour's judgment - - -

DEANE J: Well do not let me take you out of your course;

you deal with it as you like.

MR RICHTER:  Well, it forms part of the narrative. The

argument that I have made already will not, as

His Honour Justice Brennan observed, bear too much

repetition, it is a very simple proposition, so it

flows there. Because what we say is this: there

are a number of patent errors in the judgment of

the Victorian Supreme Court and it is a reason why

it ought to be overturned and must be overturned.

One of them is this: His Honour deals with

section 19A(l), he redraws it. At page 49 of the
appeal book His Honour says this at line 3:

Section 19A(l)(d) must be read in the present case at the date of assessment as if it contained inter alia the following words -

"If -

( d)	the Commissioner before or after
1st December 1988 has reason to believe that a person has prior to 1st December
1988 carried on a business of tobacco
wholesaling without having made an

McDonald(2) 13 11/11/92

application for the appropriate licence

under the Business Franchise Acts or

That, in our respectful submission, is a

fairly breathtaking act of judicial legislation.

The Parliament could have done it and did not do it

at all. What His Honour does is to read into the

Act a whole new section that simply does not exist and that the Parliament must be taken to have

intended not to exist, because both previous and

current sections dealt with situations of persons

who are carrying on a business or have carried on a

business. In other words, it allows for the

levying of fees for past business and yet, by the

exclusion of wholesaling altogether, it excluded

the levying of fees for both past business and

future business, and it did that explicitly. This

is, after all, a taxing piece of legislation which

ought to be construed strictly.

MASON CJ:  I do not want to interrupt you and take you off

the course of your argument or even, as it were, to

shorten what you are going to say to us, but have

you looked at Dalco's case?

MR RICHTER:  No, Your Honour.

MASON CJ: It is reported in 168 CLR 614 and the relevant

passage is in the judgment of Justice Brennan at

621, 622. My quick glance at those two pages

suggests to me that it strongly supports your case.

MR RICHTER:  Your Honour, in our respectful submission, a

reading of these materials supports our case, and I
am very grateful for that assistance. Both our

learned friends and we have obviously missed it.

MASON CJ:  I suggest you ought to look at it.

MR RICHTER:  I will certainly look at it for reply purposes, because I have run my argument essentially, and the

only thing that I want to do now, pending looking

at the case for reply if necessary, is simply to

draw attention to certain errors which we say are

manifest in the judgment of the supreme court,

whatever the situation.

Before we do that, we would say the following,

that the argument below on the part of the
Commissioner really took the form of saying the

Interpretation of Legislation Act gives the

Commissioner the right. That, in our respectful

submission, is a proposition which is completely

beside the point. It is not apposite this sort of

case because, as soon as a plaintiff or complainant has to depart from the four corners, as it were, of

the Act upon which they are relying for

McDonald(2) 14 11/11/92

enforcement, it is no longer a case of proper form

and clear form of the kind required to bring

conclusivity provisions into immediate operation.

As soon as one enters the area of argumentation and

ambiguity, then it can no longer be said that 19E

is conclusive in the way that it is sought to be

said.

MASON CJ: Could I ask you this question: what does

section 177 of the Income Tax Assessment Act

provide?

MR RICHTER: It provides the same thing.

MASON CJ: If that is so, Dalco's case is an authority on

this language.

MR RICHTER:  I accept with gratitude Your Honour's

observation that it assists me, and I will embrace

it as soon as I have read it.

MASON CJ: Perhaps I ought to read it out to you:

The matters which are excluded by

s 177(1) from challenge in proceedings on

appeal against an assessment (including an

amended assessment (s 173)) have been narrowly

confined in accordance with legislative policy
"to give to the taxpayer full opportunity on

objecting to his assessment of contesting his

liability in every respect before a court or

before a board of review". It is therefore

open to a taxpayer to attack not only the

calculation of the amount of an assessment but

the authority of the Commissioner to make the

assessment.

Then it goes on in support of that and refers to a

judgment of Justice Taylor in McAndrew's case to

the same effect.

MR RICHTER:  Yes, Your Honour. We are grateful for that and

we certainly accept that. The only thing I want to

do before sitting down is saying this: that

His Honour, Mr Justice Fullagar, who delivered the

judgment of the court with whom the other two

concurred, concentrated on one issue, and one issue

alone really, when one analyses the Act, and that

was the issue of good faith.

Throughout the judgment are peppered

references to the fact that the Commissioner

appears to have acted in good faith.	And that is
all.	He never went to the issue of the head of

power in the Act itself, or the source of power,

and to that extent the sort of reasoning in

O'Toole's case was simply not there because

McDonald(2) 15 11/11/92

O'Toole's case was decided not long after, so this

is not surprising. But those references to good

faith can be found at pages 42 of the appeal book

at line 7 and in that paragraph, at page 45 of the

appeal book, line 25, at page 46 of the appeal

book, line 4, and at page 48 of the appeal book,

line 18. Also at page 49 of the appeal book, line

28.     Also page 50 at line 14.

His Honour placed the greatest weight on the

fact that there was nothing to suggest that the

Commissioner acted in bad faith. And that, in our

respectful submission, is but one of the
considerations that go to the finality of these

conclusivity provisions. And the final reference

to the bona fides aspect is at page 16 at line 4

on.

The gravest error, in our respectful

submission, that the learned judge made in his

judgment is at page 50 of the appeal book, line 6

where His Honour says this:

In my opinion mere absence of power

appearing after the recovery court's perusal

of the statute relied upon is not enough to
show that the assessments are bad upon their

face. To do that, the view of the law which

must be attributed to the Commissioner to

bring the assessments within power, or the
view of the facts which must be taken in order

to bring the assessments within power, must be

so untenable or absurd that it simply could

not have been taken by an honest Commissioner.

Now, in that passage, His Honour wraps up what we

say are both errors. First of all, the over-

reliance on good faith but, secondly, we would

submit that the mere absence of power appearing

after the recovery court's perusal of the statute

relied upon is enough, and must be enough, to do

away with conclusivity provisions and to do away

with the purported notice of assessment. And the

reason for that is, as is discussed in

O'Toole's case, if there is a patent prima facie

absence of power, one says from whence does this

piece of paper derive its authority, and secondly,
it simply cannot be what it purports to be, that

is, a notice of assessment, it is just not that.

Your Honours, that is the argument that we

have in support of the appeal.

MASON CJ:  Mr Richter, you said that section 177 is the same

as the provision in this case.

MR RICHTER:  Yes, Your Honour, we

McDonald(2) 16 11/11/92

MASON CJ: It is not quite the same, is it, and the

difference may be material?

MR RICHTER:  I am just comparing the two, They appear to me

to be very close.	I am just trying to find the
point of difference.

BRENNAN J:  It may be that Daleo was dealing with

conclusivity in appeal proceedings, whereas you are

dealing here with conclusivity in -

MR RICHTER:  In recovery proceedings. That is something

that occurred to me as His Honour the Chief Justice

was reading it. It struck me as an appeal

proceeding type of conclusivity, where it cannot be

conclusive, or is said not to be conclusive. The

piece of legislation itself says that as to the due

making aspect the notice of assessment is

conclusive for both. So it has to be read somewhat

differently and has been read differently in the authorities. The due making has been limited to

formality, the formal aspects of the assessment,

and in the appeal proceedings it has been held that

it is open to challenge.

BRENNAN J: Before your enthusiasm for Daleo runs away with

you, it may be desirable to consider whether if

conclusivity in appeal proceedings extends or does

not extend to the authority of a Commissioner to
make the assessment then is there an argument that

that subject-matter is conclusive in enforcing

proceedings?

MR RICHTER:  In our respectful submission, no, because if

one looks at 19E, the prohibition, or rather the

limitation on the challenge to be made is the same

when it comes to the due making aspect of it,

because the section reads as follows:

(2) The production of a notice of assessment,

or a document under the hand of the

Commissioner purporting to be a copy of a

notice of assessment is conclusive evidence of

the due making of the assessment -

that phrase means conclusive of the due making of

the assessment in appeal proceedings and in

recovery proceedings because the section
continues -

and (except in proceedings on appeal against or review of the assessment) that the amount

and all particulars of the assessment are

correct.

A reading of that section, therefore, means that

the due making of the assessment is not

McDonald(2) 17 11/11/92

challengeable in either the recovery court or the

Appeal Court, and, except in proceedings on appeal,

in the recovery court all the particulars of the

assessment must be taken to be correct.

McHUGH J: But that is where Daleo would help you, on the

appeal you would be able to challenge that the

amount was correct because the Commissioner did not

have authority to make it.

MR RICHTER:  Yes. If Daleo is right about what can be

challenged on appeal and that that in fact goes to

the notion of due making and power, then it must

equally a fortiori apply to recovery proceedings

because of the wording of 19E(2).

MASON CJ: But why, because when you look at the judgments

in Daleo, they seem to me to be founded on that
part of the provisions of the Act that enable the

taxpayer objector to show in appeal proceedings

that the assessment in excessive?

MR RICHTER:  Yes, but if what the appellant does there is to

show that the assessment is without power, then, in

fact, he is going beyond that and saying, "There is

no assessment here.", and if Mr Justice Fullagar is

right and he is saying that the contention, "There

is no assessment here.", goes to the due making

aspect, then the due making aspect can never be

challenged either in appeal or in the recovery

proceedings. So that what we say is this, that if

the question of, "Is there an assessment?", can be

raised in appeal proceedings, it can certainly be
raised also in recovery proceedings if the notion

is whether or not there are preconditions met for

the force behind the conclusivity certificate.

BRENNAN J: But the proceedings under the Income Tax

Assessment Act always proceed on the footing that

there is power to make an assessment because there

simply has been a continuance of the Act -

MR RICHTER: That is right, and not only that

BRENNAN J:  - - - which confers the power. So that if there

is a question of no power to make an assessment

under the Income Tax Assessment Act it must be

because some condition precedent to the power has

not been satisfied, whereas the argument that you

are putting here, as I understand it, is that there

is no power in the Commissioner to make an

assessment?

MR RICHTER:	At all - yes, Your Honour.
BRENNAN J:	So that section 19E, on its true construction,

must be limited in respect of those instruments

McDonald(2) 18 11/11/92

which, on their face, purport to be within the

power conferred.

MR RICHTER:  Yes.

BRENNAN J: Well, that really is your first argument and

everything else seems to be, perhaps - - -

MR RICHTER: Closed from it, unless one describes it as

otiose.

BRENNAN J: Well, not so much otiose, perhaps, as a little

confusing.

MR RICHTER:  We accept that, Your Honour. The income tax

cases have to be seen in that context because of

the provisions of section 17 of the Income Tax

Assessment Act which, in effect, imposes a

liability for tax and rather than go into the cases

that make the distinctions between an excise and a

fee for the running of business, there are those

distinctions into which the income tax assessment

cases have to be put on the one side, because the question of a power to assess as such is never in issue in income tax cases except for its width and

what it covers. The question of ultra vires, there

is a question of possibly excess of authority,

rather than a complete absence of authority and in

the Tobacco case the issue is one of a complete

absence of authority. If the Court pleases.

MASON CJ: Yes, thank you, Mr Richter. Ms Moshinsky.

MS MOSHINSKY:  Your Honours, before I commence, I have been

instructed to invite the Court to consider

rescinding special leave to appeal. The basis for

that is twofold: one is that special leave to

appeal was granted because the application was made

on the grounds that this case raised the same threshold question as the case of David Jones.

MASON CJ: It does not raise the same question. David Jones

was, in a sense, a more complex issue.

MS MOSHINSKY:  I accept that and that is what I say, that

the special leave appeal - and if Your Honours went
to the material that is abundantly clear that the

lynchpin for the special leave application was that

this case was a suitable vehicle for the decision

in David Jones to be considered.

DEANE J:	What material are we to go to?
MS MOSHINSKY:	Do Your Honours have the affidavit in support of the application for special leave? It is in the
application book, I do not know if Your Honours
still have the application book.

McDonald(2)	19 MS MOSHINSKY, QC	11/11/92
MASON CJ:	No, we do not have the application book. have a copy of the transcript of the special leave	I do
application.

MS MOSHINSKY:	Could I perhaps read from the affidavit?
MASON CJ:	Yes.

MS MOSHINSKY: This is an affidavit sworn by

Mr Andrew Abercrombie and after setting out the

grounds of appeal and the questions to be raised,

in paragraph 4, the dependent says:

The reasons why the abovementioned questions

of law are sufficiently important to justify
the grant of special leave to appeal are as

follows:

(1) There is no material distinction between

the operation of section 177(1) of the Income

Tax Assessment Act (Commonwealth) and the

operation of section 19E(2) of the Business

Franchise (Tobacco) Act .....

(2) In FC of T v David Jones Finance &

Investments Pty Limited and another,

(1991) 90 ATC 4315, the Commissioner of

Taxation sought special leave to appeal

against the decision of the Full Federal Court

reported at 91 ATC 4315 in which the majority

of the Court held that section 177(1) of the

Income Tax Assessment Act was ineffective to

prevent a review by the Court under

section 39B of the Judiciary Act.

(3) The David Jones Finance application for

special leave was refused because an agreement

between the Commissioner and the Respondent
provided that the Respondent discontinue the

proceedings in the Federal Court. In refusing

special leave Mason CJ stated that the point

which the Commissioner sought to raise in the

Court was one which, in an appropriate case,

would warrant the grant of special leave and

further, that the question which the

Commissioner sought to agitate in the Court

was likely to arise in other proceedings in

which the Court could grant special leave.

The critical paragraph is the next one:

(4) The present application is an appropriate

vehicle to agitate similar issues to those

which the Commissioner sought to raise in FC

of T v David Jones Finance & Investments Pty

Ltd. In essence, the present application for special leave raises the same threshold

McDonald(2) 20 MS MOSHINSKY, QC 11/11/92

question which has been raised and referred to

in numerous High Court and other authorities.

McHUGH J: Could I just stop you to say that in reply

Mr Richter said, at page 14 of the transcript:

With respect, we are not relying on David

Jones as the reason why we should get special

leave.

MS MOSHINSKY:  Your Honour, we did note that he said that

and we could not find an explanation for that,

because the basis of the application as we

understood it - and perhaps I am wrong - was that

it was the same issue as in David Jones. That is not to say that they were relying on the decision

that the court reached in David Jones. The

question was the question of jurisdiction of the

courts, a question of whether in recovery

proceedings the challenge presently being made by

the appellant could be raised.

It was the question of jurisdiction which we

understood was the point for which special leave

was granted, the jurisdiction of a court in

recovery proceedings to canvass or to hear a

challenge of the kind presently made. As David

Jones went to jurisdiction, this was the

understanding. I will not press the point. I have

raised it; I invite Your Honours to consider it.

I said it was a twofold request, and that was

on the question of O'Toole's case and the

submissions now being put on a privative clause.

That submission has never been raised in this case

below. I accept that the decision may have been

subsequent to the argument before the Full Court,

but it was not subsequent to the special leave

application. This Court has said on a number of

occasions that it is desirable that it has the

benefit of having the issue considered by an
intermediate court of appeal.	So they are the two
grounds.	I am quite happy for Your Honours to

consider them and to go on with my outline of

arguments.

DEANE J:  Do we not need to approach this case on the

assumption that items 1, 2, 3, 4 and 5 of your

outline are all wrong?

MS MOSHINSKY:  No, Your Honours.

DEANE J: Because the Victorian Supreme Court has

effectively held, has it not, that it does not have

to worry about any of those things?

McDonald(2) 21 11/11/92

MS MOSHINSKY: Paragraphs 1, 2, 3, 4 and 5 first of all give

the background for the application of the Business

Franchise Act and go to the question that there was

in fact power to raise the assessment.	No court
has decided, to the best of my knowledge,

Your Honour, that there was no power to raise these

assessments.

DEANE J:	Has any court decided that there was power?
MS MOSHINSKY:	No, the issue has not been determined.
DEANE J:	Then if the courts below are saying, "We don't

have to worry about power", and all Mr Richter is

asking is for an order that we send it back and

tell them to worry about power, why should we not

assume that you are wrong on what you say in 1, 2,

3, 4 and 5?

MS MOSHINSKY:  I accept that it is not relevant, but I would

not go as far as saying that one assumes that it is

wrong. I accept that it is not relevant because on

our argument, we say that issue is precluded in

recovery proceedings.

DEANE J: I accept your correction; "not relevant" is

probably - - -

McHUGH J: Could I ask you this: your submissions do not

seem to come to grips with the appellant's

submissions. It is as though you have passed them

by in some way.

MS MOSHINSKY:  Your Honour, for the sake of completeness we

had gone to the trouble to outline the scheme of

the Act, the application 177. The only relevant

submission, and again I accept it would be

paragraph 11, and that is, we go straight to the

heart of the issue and that on the authorities it

is clear that what were issued in the present case

were in fact assessments. Now what paragraphs 1 to	5 show that at best what the appellant could say is
the absence of power was arguable; we have never disputed that the absence of power could be
arguable. We have said, and still submit, that
McAndrew's case, Bloemen's case and that the law is
quite clear, that the challenge to the assessment
is a challenge that the assessment is erroneous; that the challenge to the assessment is a challenge
that can be brought. It is not excluded, it is a
challenge that can be brought in Part V proceedings.

McHUGH J: But the moment you begin to rely on 19E(2) and

you tender the document, the question then is, the

production of a notice of assessment; notice of

assessment of what? And the section says -

McDonald(2) 22 11/11/92

the production of a notice of assessment - The notice of assessment of what? It must be a

notice of assessment of some liability in respect

of the Act.

MS MOSHINSKY:  Your Honour, it is a notice of an assessment

of a prior liability; it is a notice of assessment

of an amount that should have been paid. Now, it

is the quantification of that amount that is being

assessed and that is only that part of the

assessment, and I would endorse what Your Honour

said, or what I take Your Honour to have meant in

questions to my learned friend, is that the only

part of the assessment is that amount, and in

Bloemen's case, I think, Your Honour

the Chief Justice in a joint judgment clearly

points that out; what is the assessment? It is the ascertainment of the amount. And the other matters

referred to in the notice of assessment - - -

McHUGH J:	But could I just stop you to say, you have got to identify what the assessment is. If you are handed
up a piece of paper assessing for a road tax, even though it was under the hand of the Commissioner,
19E(2) would have nothing to say, would it?
MS MOSHINSKY:	It is the assessment, what the notice gives

you, is that there is an amount payable - if I just

take one, for example - of the sum shown on that

notice, under the Business Franchise (Tobacco) Act.

Now, if you are not the taxpayer, then you have a

defence and recovery proceedings. If it is the

wrong Act, you may have a defence and recovery

proceedings, but what you are precluded from in the recovery proceedings is to go to the examination of

that Act and to look at whether it has been validly

applied.

TOOHEY J:  But are you not entitled to raise by way of

defence the argument that there was no power to	raise the assessment, on the basis that the Act	afforded no authority in the circumstances for
raising the assessment?

MS MOSHINSKY: 

It really depends how wide we draw the

statement "no power". If one is to say that the
Business Franchise (Tobacco) Act was the wrong Act,

it would have to be blatantly obvious, I would say
it would have to be an abuse of power.

DAWSON J: 

Ms Moshinsky, if you look at the assessment and

see on the face of it that there was no power to

make the assessment, you would not suggest it was

conclusive, would you?

MS MOSHINSKY:  No, that would be going too far.

McDonald(2) 23 11/11/92

DAWSON J: What about if I may ask you this; next

proposition. Mr Richter says that this assessment

on the face of it shows that there was no power

because of the date on which it was made, and by

reference to the amendment, and therefore there is

no conclusivity as he puts it.	You dispute that.
You say there was power.	Now is not the argument
power or no power.

MS MOSHINSKY:  No. With respect, Your Honour, several

arguments, and if I can put it in the context, one

must look at what is the assessment and what had been under a different section, what if there

was no reference to that section, what if it -

DAWSON J: Let us not deal with hypothetical cases. If in

fact, by reason of the amendment which cut out

wholesale tobacco merchants' licences, there was no

power to make this assessment, that is the end of

the matter, is it not?

MS MOSHINSKY:  Not in recovery proceedings. My submission

is not that you cannot challenge this, this is

where the confusion is about the due making and the

balance of section 177. It is not ·submitted on

behalf of the Commissioner that they cannot

challenge this assessment. What is submitted on

behalf of the Commissioner is that you cannot say

that it is not an assessment. It may be an

erroneous assessment, it may be an assessment

without power, but that issue, without power, has

to be determined and the scheme of the Act channels

that challenge to a Part V objection procedure.

Now, the business franchise scheme of the Act

is identical in that respect to the Income Tax

Assessment Act. The taxpayer has the right to

object and to challenge and say that this

assessment is void.

DEANE J: What if the assessment had been for a million

Russian rubles, would not the taxpayer be entitled

to say you have no power to assessment in Russian

roubles, if he were sued?

MS MOSHINSKY:  I think one would have to accept that on its

face, as Your Honour Justice Dawson said, that it

did not appear to be an assessment - certainly not

an assessment in Australian dollars. Now, whether,
and why I am hesitating, whether one is entitled to

look at the Act to see if an assessment can be

raised in other currencies is another issue.

DAWSON J: Could I put another example to you. What if the

Act said by amendment, the Commissioner had no power, prospectively or retrospectively, to make

McDonald(2) 24 11/11/92

any claim for taxation or any assessment of

taxation in relation to a wholesale tobacco

merchant's licence or the failure to hold one. And

it states it explicitly as that, do you still say

if he made an assessment, you could not challenge

it.

MS MOSHINSKY:  No. If it was blatantly without power I do

not have to go that far. All I have to submit,

Your Honour - - -

DAWSON J: But it cannot be a question of being blatantly

without power or not blatantly without power, so it

must be a question of with power or without power.

Blatancy cannot affect it, can it?

MS MOSHINSKY:  What I was putting to the Court before was

that that would be an abuse of power; we are then

going into a different area. Now, the courts have

got power to stay recovery proceedings; the court

has power to grant an injunction. It would be an

abuse of power if a Commissioner issued an

assessment blatantly without power.

McHUGH J: Yes, but on your argument then you could still go

along and sue on the assessment unless you were

injuncted or restrained from relying on the

assessment. Supposing in this case the notice of

assessment had said that the money was an amount

which should have been paid by you had you made an

application for a consumer's licence for the month

of June 1987. Now, there is no such licence in the

Act. Could you have recovered the amount on that

basis?

MS MOSHINSKY:  It comes back, Your Honour, as to what is

shown on the face of the assessment.

McHUGH J: Well, on the face of this assessment, or at least

one of them - the one in front of me at the moment

talks about for a wholesale tobacco merchant's

licence.

MS MOSHINSKY:  Yes, and it is submitted that on the face of

that assessment there is nothing to indicate an

absence of power, that what my learned friend has

gone - has gone to the Act itself, to the

construction of the Act and to raise the issue - he

has reversed the onus. He has said that the

presumption is that there is no power, rather than

that the presumption is that there is power.

DAWSON J: Except ah the date of the assessment, there was

no such thing as a wholesale tobacco merchant's

licence.

McDonald(2) 25 11/11/92

MS MOSHINSKY:  Your Honour, then that again is an

interpretation of the law, because there is no

reference in the section to the word "wholeseller"

in that section, but that does not mean, with the

benefit of section 14(2) of the Interpretation of

Legislation - - -

DAWSON J: That is a different point. We are now starting

to debate the question, but I am just suggesting to

you there is something on the fact of the

assessment which suggests it is beyond power, if

the argument is correct. If it is not correct,

well that is it.

MS MOSHINSKY:  But it is if the argument is correct and it

would deny the whole scheme of the Act to make the

presumption that it is correct from the outset.

One does not assume lack of power. In fact, the

court went to pains in Bloemen's case to have a
presumption that the Commissioner would act bone

fide.

DAWSON J: But that argument goes something like this: if

there is no power to make the assessment, the

assessment is not an assessment, but we say it is

an assessment and therefore there is no

jurisdiction to hear an argument that there is no

power.

MS MOSHINSKY:	Your Honours, there is something, in a matter of logic, persuasive about what Your Honour is
putting to me, but I do not accept that in the line
of Bloemen's case. If Bloemen's case is wrong, and of course this is not an appeal to show that
Bloemen is wrong, but Bloemen's case is, I would
suggest, a total answer to the challenge being put here. Bloemen's case says first that the
assessment is only the ascertainment of the amount
liable. Second, that the due making means that you
cannot question that the ascertainment was made,
everything else can be challenged, but only under and that the due making only goes to formalities, that it is not an incontestable tax, and that Part V.

BRENNAN J: But really, Ms Moshinsky, you have to rely on

19E(2), do you not, for your argument?

MS MOSHINSKY:	Yes, Your Honour.
BRENNAN J:	And the first step in your argument is to

demonstrate that the document purports to be a

notice of assessment.

MS MOSHINSKY:  Yes, Your Honour.

McDonald(2) 26 11/11/92

BRENNAN J:  And in order to demonstrate that it purports to

be a notice of assessment, you must look at the

document and see what it purports to do. And if it

purports to do that which the statute says there is

no power to do, how can it be a purported notice of

assessment? That is my first question to you. The

second question is: is there no distinction

between a case where the statute confers a power

subject to conditions precedent, and a case where

the statute confers no power at all?

MS MOSHINSKY: If I could go back to the first question, it

is a question of what is meant by "on its face is

an assessment".

BRENNAN J:  What is meant by "purporting to be a copy of a

notice of assessment".

MS MOSHINSKY:  It is our submission that on the face of this

document, it purports to be a final assessment. It

does not purport to be anything other than a final

assessment.

BRENNAN J: But that assumes that it is a final assessment

within and for the purposes of the Act.

MS MOSHINSKY:  Yes, Your Honour, it does. That is why I am

saying the question of bona fides. It assumes that

it is purported an assessment for the purposes of

the Act. There is nothing on the face of the

document that suggests - and again, I rely on

visual inspection, the same way as my learned

friend does - there is nothing on the face of this

document that suggests that it is anything other

than a proper exercise of power under the Business

Franchise (Tobacco) Act.

BRENNAN J: But it purports to be a notice of assessment in

respect of the fees payable for a wholesale tobacco

merchant's licence.

MS MOSHINSKY:  Fees are still payable in certain

circumstances for a wholesale tobacco merchant's

licence.

BRENNAN J: That is not the question. The question is, does

it purport to be an assessment for the purposes of
the Act. If one looks at the Act as at the date of

the issue, one sees that there can be no such thing

as a notice of assessment for the fees for a

wholesale tobacco merchant's licence.

MS MOSHINSKY: With respect, Your Honour, there can still be

an assessment for a wholesale tobacco merchant's

licence, but not, it would appear, unless the issue

is determined in respect of past activities of a

merchant who is no longer a wholesale merchant.

McDonald(2) 27 11/11/92

One can still apply for a licence under the Act.

It is the default assessment in these circumstances.

DAWSON J: Well now, if you are right about that, on its

face this is an assessment; if you are wrong about

it, on its face it is not.

MS MOSHINSKY:  That goes to the second question of whether

there is any difference between a precondition or

the absence of power.

McHUGH J: But the notice of assessment on its face purports

to be made under section 19A(l) in respect of a

wholesale tobacco merchant's licence and at the

time, 19A did not contain any power to make such an

assessment.

MS MOSHINSKY: Well, if I could just leave your question for

a moment, Your Honour - - -

McHUGH J:  On its face, 19A did not. You have - - -

MS MOSHINSKY:	Yes, but again, that is going into a question of legal construction; the words are missing. If
that is all Your Honour is saying, that is correct;
the words are missing. But as long as it is possible that there is power, the court cannot say that this is not an assessment. Really, I suppose,
it depends upon who the onus is and, what I was
putting, as to whether it is arguable or blatant.

McHUGH J: But that is why I keep saying to you that you

have to identify what the notice of assessment is,

and you can only identify the notice of assessment

by reference to the Act, and if the Act in terms

does not contain such a subject-matter as is in the

subject of the notice of assessment, why can you

not say, this is not a notice of assessment for the

purpose of the Act?

MS MOSHINSKY:  It seems, with respect, still a back-door way

of challenging the validity of the assessment and

it denies the Commissioner the presumption that an

assessment is valid until set aside. Now,

Bloemen's case and McAndrew's case clearly define

an assessment in far narrower terms than what is

being put to me in this Court, and clearly do not

canvas the going to the Act to question its

validity. Now, it is really a, if I can say,

threshold question; does this challenge really

support an argument that there is not assessment

and that 19E does not apply? It is our submission

that it does not; that it is no different to -

well, it is similar, but not identical to a

precondition situation, the similarity being that

McDonald(2) 28 11/11/92

it is one characterization as to whether it is

going to validity.

Now if, as Your Honours says, it cannot be an

assessment, well the question of validity does not

come up. But if it can be an assessment or if

there is a presumption that there is an assessment,

because on its face it appears to be an assessment

and it is a question what is meant by "on its

face", then it goes to the question of validity,

and it is the demarcation line. I accept that

there is an issue in this case of what is the

challenge?	Now the challenge has been put that it
is not an assessment.	What has been put by the

Commissioner on behalf of the respondent is that it

cannot say that it is not an assessment. You

cannot go down that line of inquiry to say whether

it is or it is not an assessment, because the

authority is clear that it is a final determination

of an amount the Commissioner says is payable under

the Business Franchise Act.

BRENNAN J: Well, it comes back to Mrs Beaton's first recipe

for rabbit pie: first catch your rabbit, and your

first rabbit, it seems to me, is 19E, and if you

cannot rely on 19E, Bloemen's case and many_of the

others just have no application.

MS MOSHINSKY:	I accept that.
BRENNAN J:	And so, to construe 19E you have to construe

what is meant by "purports to be a notice for the

purposes of the Act", without reference to the

document.

MS MOSHINSKY:  Yes.

BRENNAN J: If, as a matter of construction of the Act, one

finds that the notices which can purport to be

notices of assessment for the purposes of 19E are

those which can be made within power, then you have

apply to documents which cannot be within power,	got your definition. If you find that it cannot
then it does not seem to me that you have.

MS MOSHINSKY:  Your Honour, every assessment is challenged

as being without authority. Every assessment is

sent to challenge power. Every assessment is
challenged on the basis that the assessment was

raised under the wrong provision in the Act, that

it is without power, that there was no authority to

assess in certain circumstances.

BRENNAN J:  My question to you is: is it not on the basis

that it cannot be within power, not that it is not,

but cannot be as a matter of construction within

power?

McDonald(2) 29 11/11/92

MS MOSHINSKY:  The question of whether it cannot be within

power is, as I have said, if it was in recovery
proceedings - and again, I do stress that, because

otherwise we deny the whole scheme and operation of

the Act and the whole scheme that the Commissioner

is entitled to recover and that if he is wrong or

the assessment is void, that it be set aside.	But
if it cannot be within power, then it is not an
assessment.

But it is not the argument here that it cannot

be within power.	You cannot just look at the
omission of the words in section 19A.	It is a

question of can you say, on the face of this

document, that it cannot be within power. I

accept, Your Honour, it is the argument it cannot

be within power. This is what I was trying to say

and could not convey, that my learned friend was

shifting the onus.

It is not for the Commissioner to justify his

assessment, it is not for the Commissioner to prove

that it is a valid assessment. It is for the

appellant to say, "This assessment cannot be an
assessment." Unless that can be said by a court

purely on a visual inspection of the document, the

assessment and accompanying documents - and I can

read to Your Honours all the relevant passages -

that presumption is made in favour of the

Commissioner because of section 19E and the scheme

of the Act. It is for the appellant to show it

cannot be within power.

TOOHEY J: But on your argument, Ms Moshinsky, the appellant

could not show it by going to the Act. You must

for present purposes, on your argument, forget that
the Act exists, put it to one side, look at the
piece of paper and unless in some way that escapes
me the appellant can say, on looking at that piece

of paper, there can be no power to raise the

assessment, the appellant must fail.

MS MOSHINSKY:  There are examples of cases where that was

actually said, and I think from recollection Parks'

case was a case in point, where the appellant said,

"I am not a taxpayer. I cannot be a taxpayer and

therefore I cannot be liable to tax and therefore

this is not an assessment on me."

TOOHEY J:  But he could only say that by adducing some

evidence. I thought your argument was that the

absence of power had to appear from the document

itself on its face. That I have a lot of trouble

with.

MS MOSHINSKY: Well, Your Honour, again, he could say that

by saying that he was not a resident of the State

McDonald(2) 30 11/11/92

and therefore it was again blatantly clear that he

could not be a taxpayer. In this case - - -

TOOHEY J: Well, that is a curious argument. I mean, you

let in evidence of factual matters -

MS MOSHINSKY:	Yes.
TOOHEY J:	- - -in order to decide whether on its face the

document is an assessment, but you will not let in

the various provisions of the Act in order to
decide whether it is an assessment or not. I would

have thought the argument was strongly in favour of

letting in the Act, in letting in factual evidence.

MS MOSHINSKY: Sorry, I think I might have misled Your

Honour, in that it is a question of - the issue was

not necessarily of whether it was an assessment,

and I would have to refresh my memory, but whether

you could recover against that person. Now, in

recovery proceedings you show the assessment and

you show the debt.	I think I was right the first
time.

But, going back to what Your Honour said, if

the appellant came along and said "I am not a

tobacco merchant and I have never been a tobacco

merchant" then it would be clear that he was not a

taxpayer, although this Act is slightly different.

My learned junior has shown me the passage in the

case I was referring to which is Commissioner of

Taxes v Parks and that is referred to in (1933) QdR

and I believe it was on my learned friend's list of

authorities. At page 320 His Honour

Justice Henchman, clearly says:

When he is sued in the competent Court he

may not question the due making of the

assessment, or that its amount and particulars

are correct, provided that the notice of

other defences are open to him e.g., that he	assessment or a signed copy is produced -these are then conclusively proved - but all	is not the person named in the assessment,that the notice of assessment was not served on
him, that the time for payment therein stated
has not yet arrived, or that he has already paid the tax.

So one must separate the defences in recovery and

the question here. Apart from defences such as

these, it would seem fairly clear that the Act

reserves for the sole consideration of the court of

review all questions as to the validity of the

assessment.

McDonald(2) 31 11/11/92

Now, reading that, of course, I still see the issue is whether it is a question of validity of

assessment or an issue of an assessment. Now, why

I say it is an issue of validity of assessment

again comes back to the question of if - I cannot

recall the way it was put by His Honour

Justice Brennan as to which way the question is put

- is it clearly without power or is it clearly an

abuse of power, or is it an assessment which is

invalid.

It is my submission, and I still put it, that

the judgment of Justice Taylor in McAndrew's case

which is then referred to by His Honour the

Chief Justice in a joint judgment with

Justice Wilson, puts a total answer to the appellant's case. If I could just refer you to

that, perhaps that will help me in my response to

Your Honours' questions.

On page 375, Their Honours joint judgment, an

explicit - - -

TOOHEY J: Sorry, which case are we going to now?

MS MOSHINSKY:  Bloeman's. The passage referring to the

judgment of Justice Taylor in McAndrew, and it is a

passage which we state is the correct statement of

the law.

BRENNAN J: At what page is it, Ms Moshinsky?

MS MOSHINSKY:  At page 375, Your Honour:

An explicit and, in our view, correct

statement of the effect of s 177(1) was made

by Taylor J. in McAndrew. For the reasons

there expressed his Honour concluded 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". He conceded that the word

"excessive" -

and if I could just interrupt, this is the part

that I rely on, what is meant by excessive -

ins 190(b) was inappropriate. However, he

considered than an assessment "made in

purported but not justifiable exercise of a

statutory power" could properly be described

as "excessive".

This interpretation gives expression to

the policy which underlies, and is manifest

in, the statutory provisions. The effect of

this policy is that, once the Commissioner

McDonald(2) 32 MS MOSHINSKY, QC 11/11/92

takes advantage of s 177(1) by producing an
appropriate document, the taxpayer is
precluded from contesting that the

Commissioner has made an assessment or that in making the assessment he has complied with the

statutory formalities. The taxpayer is

entitled to dispute his substantive liability

to tax in proceedings under Pt v.

Now, Your Honours, it were put to me, that is once he has produced an assessment and we have the same

circuitous situation, but what I am putting to

Your Honours is that implicit in that is that the

type of challenge here is the type of challenge

that Their Honours were considering. It is made in

purported but not justifiable exercise of a

statutory power. It is not a document without

reference to a purported and justifiable exercise

of statutory power. It is not for the Commissioner

to come to court and prove power and that is what

the appellant is putting: that the appellant can

question the power and that the Commissioner then

must prove that he has power to establish that it

is an assessment.

Now, the only exception that the court

considered was, where on its face it was clear that
the Commissioner had not made an ascertainment of

the amount due and when it was on its face clearly

not a final assessment, and until - and it is save

for that, the presumption is that it is an

assessment.

I could just take Your Honours through and

build up, as Their Honours did in that case. At page 373 they look at what is the effect of 177, but I will not take Your Honours to that because

Your Honours will put to me: what if it does not

apply? At page 375 is the passage that I read to

Your Honours, but if I could take Your Honours to

pages 377 and 378 which go to the question of

whether there is or is not an assessment.

In Bloemen's case the challenge was - two

grounds of challenge and the basis of challenge is

outlined at page 365 - that there were not in truth

final assessments and that there were mala fides

because they had an ulterior purpose, or different

purpose, not the Act. And the challenge that it

was not an assessment is directly looked at at

pages 377 and 378. Their Honours say:

There is a further difficulty confronting

the appellants. It is one thing to say that a

notice of a tentative assessment is not

touched by ss 175 and 177. That is clearly

correct. But it is difficult to understand

McDonald(2) 33 11/11/92

how it can be said, consistently with those

sections, that a notice which appears to be a

final notice of assessment is nevertheless not

what it appears to be because there was no

assessment at all. As we have observed, the

process of assessment requires the

ascertainment of the taxpayer's taxable

income, and of the tax payable thereon.	As
Barwick CJ explained in Bailey v Federal
Commissioner of Taxation:

"But the process of assessment requires the application of the Act to the facts as

known to and accepted by the Commissioner.	He
must of necessity, as part of that process,
adopt a view of the relevant facts."

And I would say, adopt a view of the relevant law.

The Commissioner may be right or wrong in his

view of the facts -

and again, I would say he equally may be right or

wrong as to his view of the law -

but it would appear to be incontrovertible

that the figure on the notice of assessment

which records the Commissioner's view of the

taxable income evidences that a process of

assessment was actually undertaken however
cursory or inadequate that process may have

been.

Could we go to page 378:

In our opinion, it must follow that a notice

in proper form of an assessment necessarily

compels the conclusion that there was an

assessment made in fact.

It is submitted that this is a notice in proper

form. Accordingly, in our opinion the Supreme

Court is bound, on production of a notice of
assessment, to rule that the assessment was

duly made both in statutory proceedings and in

the exercise of its general jurisdiction. In

a given case a question may arise as to

whether the notice produced by the

Commissioner is a notice of assessment, eg a

notice expressed to relate to a definitive

assessment as distinct from a provisional or

tentative assessment. Unless it can be

characterized as a notice of an "assessment",

s 177(1) will have no operation.

McDonald(2) 34 11/11/92

That is what Your Honours are putting to me and I

am submitting that unless it is provisional,

tentative, and as long as it relates to a

definitive assessment, it is an assessment.

The Bloemen notice of assessment is in

form an assessment. It sets out the

ascertainment of the taxpayer's taxable income
and the tax payable thereon. It is therefore

appropriate to brings 177(1) into operation.

Again, it is submitted that this notice in its

form, that is the ascertainment of the past

liability, is in proper form and that the section

does apply and that 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.

That goes much further than perhaps I was

going and the judgment of Justice Murphy goes even

further. It is strongly reliant on the

conclusivity and it is limiting the judgment -

Bloemen's case limits how you can say something is not an assessment. It closes the door on the

challenge to what is or is not an assessment.

His Honour Mr Justice Murphy, at 379 about a third

of the way down, says:

Ultimately the appellants retreated to the extreme contention that production of the notice or copy was no evidence of due making. Acceptance of the appellants' contention is precluded by the decision -

that is, the challenge was that it was not an

assessment, that challenge was precluded unless, on

its face, it was clearly no assessment -

in In re Noonan; Ex parte Deputy Commissioner

of Taxation in which this Court (Barwick CJ,

Taylor, Windeyer and Owen JJ) dismissed an

appeal from a decision by the Federal

Bankruptcy Court that an assessment could be

challenged only in the manner provided by the

income tax legislation.

In re Noonan is a very strong case in point. There

the taxpayer had failed to make an objection to the

assessment. It went to the validity or power to

raise that assessment and the Court held that the
only avenue for such a challenge was - I will just

continue to read what His Honour said. Having

referred to In re Noonan and saying that that

contention was precluded by the decision of the

High Court:

McDonald(2) 35 MS MOSHINSKY, QC 11/11/92

Section 177(1) operates so that production of a notice or document ..... Such production prevents any challenge to the fact, validity or correctness of an assessment, except in proceedings on appeal, when the correctness only of the assessment can be challenged.

What the Court is saying is that the question of

whether this is or is not an assessment cannot be

challenged. What can be challenged is whether it

is valid or erroneous. And what it is saying is

that it is only in the case where it is abundantly

clear, such as in the case where the Commissioner

virtually conceded that he did not make an

assessment, that it is not an assessment.

Your Honour, I submit that the decision in

Noonan's case was in point and I submit that what

Justice Murphy has put there is the correct

statement of the law, that the acceptance of the

appellant's contention in this case, as in that

case, would go contrary to Noonan, and it really

goes back to the presumption that an assessment has

been made and that an assessment has the force of

law until set aside.

So the issue for this Court to decide is

whether it can be said on the face of this
assessment that it was not an assessment. It is

submitted that the court cannot on its face, as it

was easily done in Hoffnung and Kellow-Falkiner,

say that this is not an assessment. What the court

has to do is question the power to raise it or the

validity of the assessment and that it is no

different than - and if this was permissible, if

one did not start with the conclusivity rule, that

in every recovery proceedings what would be asked

is for the Commissioner to establish that he had

power. And I submit that the mere absence of the

words in that section does not bring my learned

friend home.

If I could go to his submissions and ensure

that I have addressed them all. He construed

section 19E(2) as a conclusivity provision, which

shuts out argument. It is submitted that that is

not so; it is clearly, in the first limb, a

conclusive provision, but not in the second limb.

He submits that the power was removed, and it is

again submitted that that is not so and that that

is not an issue for recovery proceedings, and it is

submitted that there was power and that it cannot

be said that it was not open to the Commissioner to

say that there was power. It is sort of like a

no-case submission. It could not be said, in this

case, that there was no case for power. He said

that he was entitled to enquire into the operation

McDonald(2) 36 11/11/92

of the Act and what is submitted is that he is not

so entitled, because if that were so, then every

taxpayer would be entitled to ask the court to
consider the operation of the Act and it would open

the very thing that the scheme of this Act tries to

prevent; this Act allows assessments to be

disputed, but only under part (5). An inquiry into the operation of the Act would defeat the operation of the provisions.

He says, as I said, that this is a

conclusivity provision. We say no, because the

relevant part is the second limb and we say that it

would be quite different if my learned friend was

saying that the respondent's submission is that he

can never challenge the lack of power. We do not

say that; he can challenge the lack of power.

What has been said is that where there is an arguable lack of power, that is an issue which is

directed to whether the assessment - and we say it
is an assessment until proved not to be an

assessment - is erroneous or not.

We say that an assessment does not have to

refer to the source of power, that all the

information on the present notice of assessment is

irrelevant. The only relevant part of the

assessment is the ascertainment of the amount of

debt that was due and payable. It would be the

same as if a wrong section was referred to - no

different. The taxpayer is a tobacco wholesaler;

this is an Act in respect of tobacco wholesale

merchants; and that is all the inquiry can

undertake.

The submission that is put by the appellant

would deny the operation of section 177 totally

because, as was put more strongly in McAndrew and

then accepted in Bloemen, 177 covers the field. It

is the question of what is outside of 177. What

Your Honours are putting to me is: is this outside

of 177? Our submission is that this is not outside
of 177; 177 covers the field. It goes to the
question of what is an assessment, it goes to the
question of whether the procedure has been properly

carried out, and goes to the question of its

validity, whether it is erroneous, whether it is

beyond power.

MASON CJ:  I do think you have made those points fairly

clear.

MS MOSHINSKY:  Thank you, Your Honour. A few other points

that were raised:  Your Honour Justice Deane asked

my learned friend whether this was a default

assessment. In the Business Franchise (Tobacco)

Act they are all default assessments. It is an Act

McDonald(2) 37 11/11/92

where the tobacco wholesaler has to undertake

self-assessment.

I do not know if Your Honours want me to

address you on power if I say it is not relevant to

recovery proceedings, but we do submit that there

was power and that there was no intention to change

the legal consequences of the prior events. There

was no intention by legislature to remove a

liability that had already come into existence.

That is very important to the question of power

that this is a default assessment as to an amount

of money that should have been paid.

Liability existed. If retrospectively the

legislature had wanted to remove that liability, it

would have said so.	So our starting point on the
question of power is completely the other way.	We
say that there was no intention to remove a
pre-existing liability to discharge. All those
tobacco wholesalers that had avoided paying a
licence fee could now be released from the debt.

BRENNAN J:  I am not sure what you are saying there,

Ms Moshinsky. Are you saying that after the 1988

Act 11ne into force that the Commissioner retained

a power to issue a default assessment under

19A(l)(d)?

MS MOSHINSKY:  Yes, Your Honour, I am. I am saying that all

the amendment did is that in respect of tobacco

wholesalers that now carried on tobacco wholesale

from the date of the amendment, that is

prospectively, in respect of them he could not

issue an assessment contemporaneously with them

commencing business nor subsequently after they had

carried on business. That was the prospective

effect of the amendment.

BRENNAN J:  I understand your argument as to what it is.

What is your argument based on?

MS MOSHINSKY:  The argument is based on both common law

principles and section 14(2) of the Interpretation

of Legislation Act, the principles that are

enunciated in Maxwell v Murphy and all the

authorities which say that an Act has to be

construed as not intending to change the legal

consequences of past Acts and events. This is a

case where a person had, prior to the amendment,

carried on a tobacco wholesale business. He was

under an obligation to pay a licence fee.	It is
critical to the argument on power that that

obligation arose on the carrying on of that

business. That has been clearly considered in

Phillip Morris v Commissioner of Business

Franchises.

McDonald(2) 38 11/11/92

So what I am saying is that from the moment a

tobacco wholesaler started business he had a

liability to self assess and pay a licence fee

under the Tobacco Franchise Act. From that moment

there was a liability and that liability continued.

The Commissioner of Business Franchises had a right

to raise an assessment in respect of that

liability, which was a default assessment and which

was the basis for the first step in recovery

proceedings.

BRENNAN J:  Was there a power to raise an assessment

otherwise than under 19A(l)(d)?

MS MOSHINSKY: 

It is a question of construction of 19A(l)(d)

whether the repeal of the words "tobacco wholesale
merchant" had the effect of changing

retrospectively the legal consequences, or

discharging the tobacco wholesaler from that past

liability.

BRENNAN J:  That was not my question to you. 19A was

inserted, it seems, by the amending Act.

MS MOSHINSKY:  Yes.

BRENNAN J: Before that amending Act came into force, was

the wholesaler under a liability?

MS MOSHINSKY:  Yes, Your Honour.

BRENNAN J: Well then, the power to make a default

assessment was added in order to make the

enforcement of that liability more secure, one

takes it.

MS MOSHINSKY:  No, no, Your Honour, 19A was there from the

start, and perhaps I could go back to it this way.

In the original Act, that is, in the 1974 Act, the provision was there that a tobacco wholesale

merchant had to apply for a licence and pay for a

licence fee every month he carried on business.

Equally, the provision was there that the

Commissioner could, under 19A, raise an assessment.

Now, 19A was in existence at that time. The

amendment was purely to delete from 19A(d). It was

a technical amendment to delete the reference to

wholesale tobacco merchants. How it came about was

that in Bath v Alston Holdings, the question of the

constitutional validity of the provisions of this

Act were put in issue, and it was held that the imposition of a licence fee on retail tobacco
merchants was unconstitutional because it was

discriminatory against interstate trade.

McDonald(2) 39 11/11/92

BRENNAN J:  Ms Moshinsky, I notice on my copy of the Act

that 19A is said to have been inserted by Act

number 8838.

MS MOSHINSKY:  Yes, Your Honour.

BRENNAN J: And my notes at the back of the copy I have say

that that Act was assented to and came into force

on 18 May 1976. What then was the position between

1974 and 1976?

MS MOSHINSKY:  But the period, Your Honour, that we are

speaking about is within that period and if Your

Honour says that that provision came in in 1976 I

will go to the facts to see when the trade was

carried on. It has not been put on behalf of the

appellant that there was never any power, and that

is - - -

BRENNAN J:  I appreciate that. I thought your argument was

that the power to raise the default assessment was

incidental to the existence of the liability to

pay.

MS MOSHINSKY:	Yes.
BRENNAN J:	My question was directed to discover whether the

power rested entirely upon section 19A, because 19A, if my copy is correct, has been in the Act

only since 1976.

MS MOSHINSKY:  I am sorry, Your Honour. I did not realize

exactly the direction - well, one could rely on

section 4 also, which is the general power to

administer the Act and what would have been the

provisions - and I have not turned to the Act prior

to the inclusion of 19A - where a tobacco wholesale

merchant did not apply for a licence and did not

pay the fee. I cannot believe that under the

previous Act there was no provision for collection

of, and recovery of, the fee, even if 19A was not
there in the present form.	But again, as I said,

section 4 is a general administration and the

Commissioner would have always had power to

administer the Act and to collect the fees.

Because again, as I am putting it, this is only the

first step to recovery.

The right here that we are discussing, or the

power, is the power to collect fees that should

have been paid, and why I submit that there is

power here is because there was no intention in the

legislature to discharge the taxpayers who owed

money from that debt.

BRENNAN J: Well, that is a different question from the

existence of the power, is it?

McDonald(2) 40 MS MOSHINSKY, QC 11/11/92

MS MOSHINSKY: Well, it goes to the question of whether

there is power, because the question then is: did
the amendment have the effect of removing the power

in respect of taxpayers or wholesale merchants who

had already carried on. Now, it clearly had the

effect of prospectively doing so; that in future

tobacco wholesalers could apply for licence and

could pay a fee but there would be no default

assessment against them, and the reason for the

amendment was to overcome the difficulties raised

by the constitutional challenge. But it never was

intended, and there is no intention shown here, to

remove the pre-existing debt or liability, or the

ancillary power to raise an assessment in the

relevant period, even if one had a different

argument preceding the introduction of that

section.

But in the relevant period here, when the

merchant carried on business he had to take out a

licence, he had to pay a fee and the Commissioner

could raise an assessment against him to recover

that fee, and what I am putting to Your Honour is

that there is no intention in the amendment, by the

deletion of those words, to say that the Act as it

was ought not to continue in operation, or that

there would be retrospective effect, or that the

consequences of a person who had traded would now

be totally free of paying that past liability. I

do not know if that covers what Your Honour is

directing to me.

As I said, it is much stronger than saying

"the words have just been removed". We say that the decision of Justice Fullagar was correct and

there is no reason to overturn it; that goes

without saying. I do not think there is anything

else I can put to Your Honours, without again

taking the risk of repeating myself, but I do

strongly urge on Your Honours that it is our

submission that if the appellant is right then it

clearly limits Bloemen considerably, quite contrary
to the policy of this legislation.	We so submit.

MASON CJ: Thank you, Ms Moshinsky.

MR RICHTER:  Does the Court desire me to reply on the

application to withdraw special leave?

MASON CJ:  No. We do not need to hear you on that. No

ground has been made out for recision of the grant

of special leave and the application for recision

is therefore refused.

MR RICHTER:  Thank you, Your Honours. There are very short

matters that we would seek to raise. Our learned

friend says that what we are seeking to do is to

McDonald(2) 41 11/11/92

reverse a burden of proof in relation to the

existence of a power. That is certainly not what

is raised by this appeal. The Commissioner for

Business Franchise goes to the Magistrates Court

and says, "I want $368,000.".	The Commissioner has
to make out a claim.	The way the Commissioner

makes out a claim is by saying, "Here is a piece of

paper. If it is a notice of assessment within the

Act, then it is irrebuttable and I am entitled to

my money".

It is for him to prove that it is a notice of

assessment within the meaning of the Act and the

rider "within the meaning of the Act" always has to

be there because the sole force that the piece of

the paper can get is from the Act and not from

something else. So a defendant is entitled to sit

back and say, "Well, you prove that there is a

notice of assessment within the meaning of the Act

which makes it unchallengeable for me".

For the purpose of that argument, the existence of rights of appeal analogous to the

Part V rights under the Income Tax Assessment Act

is simply not relevant and does not bear on the

issue. A person does not have to go through the

process of losing a case and being a judgment

debtor before taking on something which is

apparent.

Our learned friend referred to a liability and

the absence of a legislative intention to do away with the liability that had been incurred. That, of course, goes to the question of the merits,
rather than the question of the power. But we
would, in our respectful submission, say that it is

quite clear that there is no liability incurred and

never was a liability incurred prior to the

abolition of the power because the sole liability

that arises - if one looks at the Act - upon the

making of an assessment. Prior to the making of an

assessment, there is not any liability.

With the Income Tax Assessment Act, there is a

fair bit of learning on the subject and the law may

be a little bit settled about what happens during a

financial year with the derivation of income up

until midnight on 30 June of a particular year,
because section 17 of the Income Tax

Assessment Act, unlike any equivalent provision in the Business Franchise Act, says as follows:

Subject to this Act, income tax at the rates

declared by the Parliament, is levied and

shall be paid.

McDonald(2) 42 11/11/92

And that, of course, gave rise to the whole string

of cases like Mendonca's case and then Clyne's

case, as to what liabilities accrue, if any, prior

to the issue and service of a notice of assessment,

and that Clyne's case did not finally determine

that proposition, except for this, that in the

Income Tax Assessment Act - so that there are sort

of nascent rights, as it were; emerging rights

which do not become crystallized at all, but there

is the kernel of an emerging right, because the liability attaches to the generation of income,

less the deductions as they arise.

In the Business Franchise Act, the reason why

in Phillip Morris it was held not to be an excise

and valid is precisely because of the obverse. In

other words, the liability does not attach to the
sale of tobacco at all; the sale of tobacco simply

gives a means of quantifying the licence fee by

reference to some back period. And so, there is no

provision in the Act creating a liability, never

was, other than the provision of section 19A, which

says that the Commissioner may make an assessment

of the amount that in his judgment should have been

paid had the application been made or had the information contained in the application been

correct, and that person shall be liable to pay

that amount.

The Commissioner does not even have to make

the assessment, and unlike section 17 which talks

about an obligation with the derivation of income,

as it were, there is no such thing in this Act.	If
the Commissioner does not make an assessment. there
is never a liability.	And that is why

Mr Justice Fullagar held, and the other judges agreed really, that if this was to be argued in an

appeal court we in fact stood a pretty good chance

of winning on that, because it looked right, but

what he said was that we could not raise it in

recovery proceedings.	So our learned friend is
wrong when she talks in terms of an existing

liability.

The only other matter really that we wanted to

raise just to highlight the fact that this is not a

notice of assessment was this: His Honour

Mr Justice Fullagar - and this is by way of a

personal complaint - himself raised the question

of, "What if the piece of paper said, 'This is an

assessment for smoking tobacco.'?" I embraced that

proposition and pursued it only to meet with the

stricture that I was putting an extreme example of

the kind that judges in tax cases say ought not to

be put.

McDonald(2) 43 11/11/92

But if one takes the Income Tax Assessment Act

and one looks to the argument of our learned friend
in the context of the Income Tax Assessment Act,

what if there was an assessment under the Income Tax Assessment Act headed "Income Tax Assessment Act Et Cetera for Smoking Tobacco"? Would that not

attract the argument in an enforcement court,

"Well, looking at this piece of paper, where is the

theoretical head of power?"; not the question of,

"Is there sufficient power or isn't there

sufficient power?", but "Where does this draw its

force from in the Act?"

This Act does not deal with smoking tobacco.

It may deal with selling it and income generated

from it, but it simply does not deal with the head

of power. Bloemen's case, and indeed the other tax

cases where there are challenges, they are really

section 170 cases where the power is acknowledged.

There is never any question about the power not

being there. It is a question of its extent and

scope, and maybe in some instances the

constitutional validity of some of its extensions,

but that is not the case here. So, with respect,

our learned friend has to fail.

We would take up another issue as to the

consequences of the failure. Your Honour the

Chief Justice mentioned the fact that we asked for

the matter to be remitted to the court below. The
fact is the orders that are sought include the
first one, the setting aside of the decision of the

appeal division of the supreme court - this is at

page 60 of the appeal book.

Secondly, we seek an order that the order nisi

made by Master Williams on 14 June 1991 be made

absolute. In fact, we would submit that in this

case it is appropriate for that to happen because

of the way the Commissioner conducted the case

below.

If our learned friend is right, and there was

a pre-existing liability, then the case launched by

the Commissioner should have been an action for a
debt. It was not. It was an action relying upon a
notice of assessment and in the instance where the

objection - - -

McHUGH J: But it was, was it not? The nature of the

complain was a debt due to Her Majesty.

MR RICHTER:  But the way in which it was said to be proved,

and they led no other evidence, was the notice. In

other words, they closed their case on the notice.

Now, that being so, if that document on its face is

McDonald(2) 44 11/11/92

not a notice and should not have been admitted into

evidence, that case had to have been dismissed.

DEANE J:  But we are not going to decide that. I mean, if

you be wrong on the effect of the Amending Act and its effect be as Ms Moshinsky submitted, this is a

notice, and it is conclusive.

MR RICHTER: If that be so, we concede that.

DEANE J: But we are not asked to consider whether that is

so or not.

MR RICHTER: Well, I was merely raising the argument that

the submission is obviously correct that there is

no pre-existing liability, but unless it is patent

on its face then His Honour is correct and the only

thing that we seek is a remittal.

DEANE J: But the existE ~ of a pre-existing liability is

not the only qt.:  :ion involved in that argument.

MR RICHTER: Well, our learned friend's argument must be

based on a pre-existing - first of all, is the

document on its face a notice? It.can only be a

notice if there is a pre-existing liability which

is preserved somehow. Otherwise it deals with no

subject matter of power dealt with by the Act.

McHUGH J:  But you can put your case no higher, can you,

than to say that ground (b) in paragraph 28 of the

affidavit in support of the order nisi was made out

and appears at page 32 and is to the effect that

His Worship erred in law in finding that section

19E(2) prevente' His Worship from determining the

validity of th 3Sessment.

MR RICHTER: Indeed, Your Honour. And that really is a

remittal to the magistrates court. It is quashing

the Full Court's judgment, it is quashing the

magistrate's judgment, it is upholding the order

nisi and remitting it to the magistrates court for

the magistrate to consider.

DEANE J: But there obviously was a contingent liability

here?

MR RICHTER: With respect, no, Your Honour. There never

was

DEANE J: But there was contingent liability that the

Commissioner might exercise her power to issue a

default assessment.

MR RICHTER: That was not a contingent liability because it

was discretionary, she might or might not, and she

did not in fact.

McDonald(2) 45 11/11/92

DEANE J: Well, that is what contingent means, is is not, it

might or might not?

MR RICHTER: Well, it is a different sort - well, that

raises questions about our Clyne's case and

Mendonca and the like, and Clyne's case leaves the

issue as unresolved in the context of a statute

where the argument for contingent liability is far

greater because section 17 provides that tax shall

be paid, whereas there is no such equivalent in

this Act.

DEANE J:  I am not suggesting that you may not be right. I

am simply suggesting there is an argument which you

had better deal with.

MR RICHTER:  Your Honour, I shall not make my grasp exceed

my reach. Thank you, Your Honour.	If the Court
pleases.

MASON CJ: Yes, thank you Mr Richter, the Court will

consider its decision in this matter.

AT 12.35 PM THE MATTER WAS ADJOURNED SINE DIE

McDonald(2) 46 11/11/92