McGrouther & Anor v Commissioner of Taxation

[2015] HCATrans 221

[2015] HCATrans 221

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Sydney  No S68 of 2015

B e t w e e n -

TOD STEPHEN MCGROUTHER

First Applicant

VICKIE ISABELLE MCGROUTHER

Second Applicant

and

COMMISSIONER OF TAXATION

Respondent

Application for special leave to appeal

BELL J
GAGELER J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 11 SEPTEMBER 2015, AT 9.47 AM

Copyright in the High Court of Australia

MR G.K.J. RICH, SC:   May it please the Court, I appear with my learned friend, MR T.H.J.H. PAGE, for the applicants.  (instructed by Mark J Ord, Lawyer & Consultant)

MR J.O. HMELNITSKY, SC:   If the Court pleases, your Honours, I appear with my learned friend, MR D.F.C. THOMAS, for the respondent.  (instructed by Australian Government Solicitor)

BELL J:   Yes, Mr Rich.

MR RICH:   Your Honours, at page 41 of the application book at the very top of the page in paragraph 25 of the joint judgment, your Honours will see there identified two rights referred to as statutory rights conferred on taxpayers, the first being the right to give a notice under what I will refer to as subsection (2), and the second being the right to what is described as a deemed objection decision by operation of subsection (3). 

Your Honours will find those two subsections at page 71 of the application book between lines 20 and 30.  We would ask your Honours to notice that, while subsection (2) begins with the words, “The person may give”, subsection (3) uses the formulation, “If . . . then”.  Coming back, if we may, to page 41 and paragraph 25 of the joint judgment, your Honours will see at about point 12 on the page their Honours referring to:

The statutory context of s 14ZYA makes it clear that these rights are personal to the taxpayer exercising them and do not have some wider public purpose.

If I might ask your Honours to then drop down to about line 24, your Honours will see the sentence beginning:

In these circumstances, it is undoubted that the rights conferred by s 14ZYA, and the statutory consequences that flow, exist solely for the personal benefit of the taxpayer exercising them –

Therein, in our submission, lies the error on which the judgment founders.  First, it is incorrect to treat subsection (3) as conferring a personal right on a particular party, when it actually prescribes a result or a consequence that affects both parties.  Secondly, even if it were right to say that subsection (3) confers a right on the taxpayer, the deemed decision that flows by operation of the statute after 60 days is one that does not exist solely for the benefit of the taxpayer.  It benefits the Commissioner.

GAGELER J:   So your construction – leave aside the detail of what is said in that paragraph – your construction is to the effect of a notice, once given under subsection (2), triggers the obligation in subsection (3) which cannot be withdrawn?

MR RICH:   That is correct; triggers the consequence ‑ ‑ ‑

GAGELER J:   The consequence.

MR RICH:   ‑ ‑ ‑ rather than obligation in subsection (3).

GAGELER J:   You took us to the language “if then”, but the “if”, at least on one view on quite a natural reading of the provision, contemplates the notice being given and continuing to be in existence.  It is not a difficult construction to read subsection (3) as contingent on the notice having been given and continuing to be given.

MR RICH:   Save that the “if” has been satisfied by the giving of the notice.  What the subsection says in terms, as your Honour knows, is if the Commissioner has not made an objection decision by the end of the period of 60 days after being given the notice.  So it does not in terms fix upon the continued existence of the notice.  What it fixes upon is the expiry of a particular period of time after the notice has been given.  We know the notice was given and it follows inexorably after 60 days the statute kicks in, in our submission.  The question then is, can one read or should one read that formulation as permitting a taxpayer, having given the notice under subsection (2), to withdraw it and therefore avoid ‑ ‑ ‑

GAGELER J:   Why not?

MR RICH:   Well, the – why not ‑ ‑ ‑

GAGELER J:   Leave the “can” aside; go to the “should”.

MR RICH:   Well, because the first reason is that the legislative intention which is contemplated by or intended from this regime is one of certainty.  That is, if a notice is given then after 60 days both parties know the objection process is over.  There will be no further correspondence entered into, so to speak.  If you want to take it any further, then there are rights of review to the AAT or the Federal Court.  That is a certain outcome which is prescribed by the legislation.

BELL J:   It is a certain outcome prescribed by the legislation that can only be triggered by action taken by the taxpayer.  What conceivable object is served by introducing the degree of inflexibility that your construction favours?

MR RICH:   Well, the avoidance of administrative inconvenience that the trial judge referred to in paragraph 48 of his judgment which your Honours will find on page 14 of the application book at about point 12 on that page:

if taxpayers are permitted to serve and then withdraw s 14ZYA notices at will the effect is to create administrative inconvenience –

In other words, it will often be the case that the service of such a notice causes within the Commissioner’s office a reallocation of resources with a view to deciding that particular objection earlier than might otherwise have been the case and, indeed, in priority to other objections.  Then, after a considerable amount of work may have been done, let us say on day 50, the taxpayer sends in a letter or contacts the Commissioner and says, “I withdraw my notice”, and then, potentially, a week later sends another six boxes’ worth of evidentiary material to the Commissioner after – in the interim, the Commissioner having redeployed his staff to another matter.  That sort of administrative inconvenience is one reason why this Court would not construe these sections as permitting this sort of giving and taking process.  The object of the legislature was to produce once given a certain outcome.

What now happens as a result of this decision of the Full Court if it stands is that in wanders waiver to this whole scheme.  Your Honours know the indefinite connotations involved in that word and that concept, so that there will inevitably then be disputes as between the ‑ ‑ ‑

BELL J:   The Full Court applied a conventional approach with respect to the entitlement of a person to waive a rule made for the person’s benefit, being a rule that can be dispensed with without infringing any public right or policy.  What is the error in that approach?

MR RICH:   Well, the error is that that principle which was applied only applies in circumstances where the provision said to be waived was for the sole benefit of, in this case, the taxpayer.  In this case, the outcome of the deemed decision is actually adverse, as your Honours know, to the taxpayer.  It is, in our respectful submission, wrong to say that a deemed decision which rejects the objection is solely for the benefit of the taxpayer.

GAGELER J:   Well, the benefit to the taxpayer obviously is the invocation of the appeal rights.  That is the whole purpose of it.

MR RICH:   Well, the appeal rights and bringing them forward could work to the benefit of both parties.  It would ‑ ‑ ‑

GAGELER J:   Sometimes.

MR RICH:   Indeed, but it is not something, in our submission, that can be said to be solely for the benefit of the taxpayer.

BELL J:   Mr Rich, the Commissioner can proceed and determine the objection with an objection determination speedily, if that is what the Commissioner chooses to do.  What is the infringement of, as it were, the public right or benefit that you identify?  The Commissioner’s hands are not tied.

MR RICH:   Your Honour is, with respect, right, the Commissioner’s hands are not tied, but the Commissioner is then placed in a position – as your Honour knows, there is behind all of this or preceding the service of a notice, a statutory duty to determine objections.

BELL J:   Yes.

MR RICH:   That involves consideration of evidence and the like to come to a decision.  This provision, once a notice is served, relieves the Commissioner of that legal obligation.  Once the 60 days passes, the Commissioner no longer has a legal obligation to determine the objection.  That is to his benefit.  He does not have to expend time or resources looking into, investigating, the particular matter.  He can after 60 days rest upon the deemed decision.  We then go to an appeal process where the taxpayer has the onus, as your Honours know, of satisfying the court that the original assessment was incorrect and ought to be set aside.  So that is another benefit to the Commissioner which emerges from subsection (3).  If your Honours please.

BELL J:   We do not need to hear from you, Mr Hmelnitsky.

In our opinion there is no reason to doubt the correctness of the decision of the Full Court.  Special leave is refused with costs.

AT 9.58 AM THE MATTER WAS CONCLUDED