Robinswood Pty Ltd v The Commissioner of Taxation of the Commonwealth of Australia
[1998] FCA 404
•24 APRIL 1998
FEDERAL COURT OF AUSTRALIA
ADMINISTRATIVE LAW - application to strike out amended application - notices of assessment of penalty taxes - objections lodged - delay in deciding objections - purported revocation of notices of penalty taxes - issuance of new notices of such taxes - advice objections “invalid” as notices revoked - application to review alleged decisions not to decide objections and other decisions and conduct in course of audit leading to first notices - whether applicant has standing in relation to entities other than itself - whether review relates to “decisions” - whether decisions made “under an enactment” - whether “Guidelines for the Conduct of Auditors and Taxpayers in Complex and Large Case Audits” are Public Ruling - whether decisions under Guidelines are made “under an enactment” - whether no reasonable cause of action or claims vexatious, frivolous or an abuse of process - whether adequate provision for remedies elsewhere.
Income Tax Assessment Act 1936 (Cth), s 8
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Guidelines for the Conduct of Auditors and Taxpayers in Complex and Large Case Audits
Judiciary Act 1903 (Cth), ss 39B, 39B(1A)
Hutchins v Deputy Commissioner of Taxation (1996) 65 FCR 269, applied
Industrial Equity Limited v Deputy Commissioner of Taxation (1990) 170 CLR 649, followed
ROBINSWOOD PTY LTD (ACN 008 844 488) v THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA and CLIVE ROSS
R D NICHOLSON J
PERTH
24 APRIL 1998
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 56 of 1997
BETWEEN:
ROBINSWOOD PTY LTD (ACN 008 844 488)
ApplicantAND:
THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
First RespondentCLIVE ROSS
Second RespondentJUDGE:
R D NICHOLSON J
DATE OF ORDER:
24 APRIL 1998
WHERE MADE:
PERTH
THE COURT ORDERS THAT:
The respondents’ motions for dismissal be allowed in respect of the following paragraphs in the Amended Application which are struck out:
(a) A1 (a) (b) (c) (d) (e) and (f).
(b) A2 , A3, A4, A5, A6, A7 and A11.
(c)A8 so far as it relates to objections lodged by the applicant in relation to entities other than itself.
The respondents’ motions be dismissed so far as they otherwise relate to paragraphs A8, A9 and A10 of the Amended Application.
Costs reserved for submission.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
WAG 56 of 1997
BETWEEN:
ROBINSWOOD PTY LTD (ACN 008 844 488)
ApplicantAND:
THE COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
First RespondentCLIVE ROSS
Second Respondent
JUDGE:
R D NICHOLSON J
DATE:
24 APRIL 1998
PLACE:
PERTH
REASONS FOR JUDGMENT
HIS HONOUR: The respondents bring motions to strike out an Amended Application for judicial review. The motions are supported, firstly, by reference to four jurisdictional arguments and, secondly, by reference to discretionary factors.
Background circumstances
The applicant, together with other companies shortly to be referred to, is a member of what may be described as “the Caratti group” established by the late Mr S Caratti around 1967. Following the unexpected death of Mr Caratti in 1992, an audit was conducted in respect of the group. As the result of the audit, the first respondent (“the Commissioner”) issued to the applicant and other members of the group notices of assessment (“the notices”) dated on 20 April 1995, 28 September 1995 and 18 October 1996 for penalty tax under par 221EAA(1)(a) of the Income Tax Assessment Act 1936 (Cth) (“the Assessment Act”). The notices were issued on the basis the applicant was an employer which had refused or failed during the period 1 July 1988 to 30 June 1994 to deduct from the salary or wages of employees at the time they were paid the amount required to be deducted under the Assessment Act. Objections (“the objections”) dated 5 October 1995 were lodged by the applicant in respect of these notices.
No response having been made by the Commissioner to the objections, on 14 May 1997 the applicant filed with this court an application (“the Application”) for an order to review pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the ADJR Act”) and to s 39B of the Judiciary Act 1903 (Cth). It sought review of alleged decisions and conduct of the respondents.
A motion for strike out of the Application was filed on 25 June 1997.
On 4 November 1997, pursuant to directions, the applicant filed an amended application (“the Amended Application”).
On 5 November 1997 the Commissioner, being then of the view the applicant was an employer other than a group employer, advised the applicant the notices were revoked. On the same date the Commissioner notified the applicant of a new remission decision in respect of penalties imposed by par 221EAA(1)(a) on the basis the applicant was not a group employer. In further letters of the same date the Commissioner also notified the applicant of the revocation of remission decisions in respect of penalties imposed under par 221G(4A)(d)(i) of the Assessment Act and the making of new remission decisions under that paragraph on the same changed basis.
On 18 November 1997 the Commissioner advised the applicant in respect of each of the objections they were:
“... no longer valid and therefore no Objection decision will be made. This is because the PAYE Penalty notices against which your Objection was lodged have been withdrawn ....”.
On 21 November 1997 the respondents filed a notice of objection to the Amended Application.
On 8 December 1997 the respondents filed a further motion seeking dismissal of the Amended Application on alternative discretionary grounds.
On 17 December 1997 the respondent lodged a notice of objection to competency for which leave was granted during the hearing.
Also during the course of the hearing it was agreed leave should be granted to the Amended Application. The Court is to therefore determine the respondents’ motions of 25 June 1997 and 8 December 1997 on the basis they each relate to the Amended Application.
The applicant wishes to pursue its Amended Application because it considers it is entitled to determinations of the objections in its favour. For it, the contention is made the Commissioner has made a decision not to determine the objections and that should be a reviewable decision.
Issue of standing
The Amended Application commences by seeking review of the decisions and conduct of the respondents in respect of the audit and assessing functions required by the Assessment Act and in particular their failure pursuant to s 8 of the Assessment Act to make decisions in the completion of the audit of the affairs of the applicant and its related entities. Those entities are described in the Amended Application as:
“Venetian Nominees Pty. Ltd. as trustee for the J.M. Carratti Family Trust; Mine Exc Pty. Ltd.; Grangefield Holdings Pty. Ltd; Excelco Mining Pty. Ltd.; the Partnership of S & M Caratti; and Zel Nominees Pty. Ltd. as trustee for the Maddeliene Caratti Trust; PMR Quarries Pty Ltd as trustee for the WA Limestone Unit Trust and Kelena Nominees Pty Ltd”.
The first jurisdictional objection made for the respondents is the applicant has no standing to bring an application under the ADJR Act in respect to the related entities. It is submitted in support that the fact some of those entities may have some common directors and/or shareholders with the applicant would not be sufficient to demonstrate “the existence of a special interest in a decision” and that the decision “will in some way expose that interest to peril” on the part of the applicant in respect of the potential tax liabilities of those entities: Queensland Newsagents Federation Ltd v Trade Practices Commission; Ex parte Newsagency Council of Victoria Ltd & Anor (1993) 118 ALR 527 at 531-532.
I accept the submission for the applicant there is not presently before the Court any evidence upon which the Court can determine the degree of interest of the applicant, if any, in the related entities. Where there are allegations of the same audit applying to all the entities over the same period of time with the same alleged consequences to all entities, it may be there could be found some proper evidentiary basis upon which it could be held the applicant “can show a grievance which will be suffered as a result of the decision complained of beyond that which [it] has as an ordinary member of the public” (Tooheys Ltd v Minister for Business and Consumer Affairs (1981) 4 ALD 277 at 290 referring to Robinson v Western Australia Museum (1977) 138 CLR 283) in respect of a course of conduct as it affects all entities. The Court is simply not in a position to judge that on a motion unsupported by relevant evidence.
For the respondents in reply it is contended the absence of evidence brought by the applicants on this issue entitles them to have the issue determined on the basis of the material presently before the Court. I do not accede to that submission because at the hearing it was the respondent’s position the hearing should proceed on the basis the matters would be argued strictly on the documents without reference to evidence.
It is open to the related entities to seek to be joined as parties pursuant to s 12 of the ADJR Act. Joinder applications by them would require support by evidence of the same sort, namely, showing how the interests of each of them may be adversely affected by the decision or conduct of the respondents in connection with the applicant. Failing that, the related entities could file separate applications, but the applicant’s submissions suggest cost considerations are a deterrent to that course.
I proceed on the basis that if the other issues raised for the respondents fail or only partly succeed, this issue should be set down for final determination after an opportunity is provided to the applicant to file relevant evidence.
Whether matters raised are “decisions”
Among the alleged decisions and/or alleged conduct and/or alleged failures to make decisions for which the applicant seeks review are the following (identified by the respondents by reference to the paragraph of the Amended Application):
“ * (i) A1(c) - alleging a failure to comply with the Guidelines for Complex Audits;
* (ii) A1(d) - alleging a failure to inform the Applicant of the progress of the “audit” or its likely completion date;
* (iii) A1(e) - alleging a failure to accord procedural fairness to the Applicant by not giving an Audit Plan or timetable during the “audit”;
(iv) A2 - alleging a decision and failure to provide reasons pursuant to section 13 of the ADJR Act;
* (v) A3 - alleging a failure to make any proper decision during the conduct of the “audit” as to whether the Applicant has any real “liability” to either deduct or remit PAYE deductions;
* (vi) A4 - alleging a failure to accord procedural fairness to the Applicant by not informing the Applicant as to the way or manner in which the Applicant’s business methods were in breach of the provisions of the Income Tax Assessment Act;
(vii) A5 - alleging a decision not to comply with the Applicant’s request for a statement of reasons pursuant to section 13 of the ADJR Act;
(viii) A6 - alleging a decision prior to and on 30 April 1997 to call each person to whom the Applicant paid money an “employee”;
* (ix) A7 - alleging a decision prior to and on 30 April 1997 to treat unidentified cash payments in the books of accounts of the Applicant as a payment of wages to an employee; and
* (x) A11 - alleging proposed conduct in relation to a decision to issue notices under section 218 of the ADJR Act; ”
For the respondents it is contended these are not reviewable decisions or reviewable conduct within the terms of ss 5-7 of the ADJR Act. Specifically it is submitted the alleged decisions are not final, operative, or determinative: Ricegrowers Co-Operative Mills Ltd v Bannerman (1981) 38 ALR 535 at 543-544. As to the alleged failures to make decisions, it is submitted they are not operative or determinative in a practical sense of the issue of fact falling for consideration and there was no duty on the respondents to make them. In the case of the paragraphs marked with an asterisk in the above list, it is submitted these matters are entirely informal, having no perceivable statutory base.
The contentions of both parties on these submissions substantially overlap with the submissions in respect of the third jurisdictional issue. In my view it is preferable for them to be dealt with under that ground. This is particularly so because they cannot be resolved other than as a matter of law on this application. That is, it should be assumed the matters listed above are “decisions” and the question then asked (which is the third issue) whether they are properly reviewable as being “under an enactment”. That leaves open for future argument the factual position concerning each of the alleged decisions if, so taken, they are found to be made under an enactment.
Whether decisions are made “under an enactment”
Here the case for the respondents identifies the following additional decisions:
“(xi) A1(a) - alleging failure to make decisions in connection with the “audit” of the Applicant and its related entities;
(xii) A1(b) - alleging failure to make decisions necessary for the finalisation and completion of the “audit”;
(xiii) A1(f) - alleging a failure to finalise and complete the “audit” within almost three years.”
The contention is made for the respondents that the decisions previously identified together with these additional decisions are not reviewable decisions or conduct because they are part of the general administrative process of the Assessment Act, and, in addition to not being operative or determinative in any practical sense, are not required or authorised by statute.
Requirements of reviewability
The ADJR Act does not contain a definition of the word “decision”. The phrase “decision to which this Act applies” is defined in s 3(1) of the ADJR Act as “a decision of an administrative character made... under an enactment.” A decision will be made “under an enactment” where it is expressly required or authorised by the statute. It may also be implied. Implication will occur where the existence of a determination is required for the operation of a statutory provision and there is no other statutory source obliging the determination to be made with the consequence the statutory provision will be without effective content: Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 at 302-303.
There are circumstances where a decision will not qualify to be “under an enactment”. Three were identified in argument in this proceeding. The first is where it is but part of the process of consideration. In Ricegrowers at 544 Northrop J said:
“The mere thought processes taking place in the mind of the person when considering whether or how to exercise a power or to perform a duty of an administrative character under an enactment do not, in my opinion, constitute a decision. In addition to thought processes, there must be some overt act by which the conclusions reached as a result of those thought processes are manifested. The manifestation may take many different forms. It may take the form of a verbal or written communication of the conclusion to the person affected. It may take the form of action taken to give effect to the conclusion. It may take the form of no action being taken when otherwise a definite action would have been taken.”
The second is where it is not final, operative and determinative of the issue of fact falling for consideration: Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 337, 365 and 369. A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision: Bond at 337. As expressed by Toohey and Gaudron JJ in Bond at 377:
“... findings which are not themselves required by an enactment but merely bear upon some issue for determination or some issue relevant to the exercise of a discretion...are not themselves ‘decisions under an enactment.’ ”
The third is that a decision which is neither expressly nor impliedly required by an enactment and is authorised in only a general way or through general powers of administration conferred by the enactment is unlikely to have the character of a decision for which provision is made by or under a statute or which is given force or effect by an enactment: Hutchins v Deputy Commissioner of Taxation (1996) 65 FCR 269. In Hutchins Black CJ (at 271) accepted there may be a decision under an enactment notwithstanding the enactment concerned does not expressly require or authorise the decision in question but does so impliedly. He continued (at 272):
“Where, however, the authorisation is very general it is difficult to see how an enactment may be said ‘to make provision’ for a decision in the sense in which that expression was used by Mason CJ in Bond ...It seems to me that Mason CJ contemplated that there might be acts, capable of being called decisions, that were authorised in the sense of being within the general scope of powers conferred by an enactment but as to which the enactment could not be said to make provision, and which would therefore not be decisions under the enactment. Thus, a decision for which ‘provision is made’ by or under an enactment ‘will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for determination’.”
At 276 Lockhart J accepted decisions may be expressly or impliedly required or authorised by an enactment. At 278 Spender J said:
“The fact that a decision is made within power, ie is not ultra vires a particular statute, does not in my opinion necessarily mean that the decision is a decision made under that enactment. There is no identity between decisions made within power and decisions made under an enactment.”
Black CJ concluded (at 273) “a decision that is neither expressly authorised or required, nor impliedly required, by an enactment but which has as its sole source of authority general powers of administration conferred by an enactment is unlikely to be one that is given force or effect by an enactment or by a principle of law applicable to the enactment.”
In Hutchins the applicant sought judicial review of a decision by the Commissioner of Taxation to vote against a motion for composition put to a creditors’ meeting pursuant to Pt X of the Bankruptcy Act 1966 (Cth). The applicant in that proceeding contended the decision was made by the Commissioner “under” one or more of ss 8, 208 and 209 of the Assessment Act.
Section 8 of that Act provides:
“8. The Commissioner shall have the general administration of this Act.”
Section 208 provides for income tax, when due and payable, to be a debt due to the Commonwealth. Section 209 provides a power to recover unpaid tax.
Black CJ held (at 273) s 8, standing on its own, did not give any force or effect to the decision to vote at the meeting of creditors and was far too general in its terms for it to be concluded it makes provision for that decision. He also held the combination of that section and s 208, although authorising the decision in question, did not “make provision” for it in the sense in which that expression was used by Mason CJ in Bond. The addition of s 209 to the combination was even more remote and non-specific. Spender J was also of the view the decision was not made under an enactment. Lockhart J reached his decision on the ground the decision, having no nexus in law between it and the practical outcome of the meeting of creditors as its import was uncertain when made, was not final, operative or determinative.
In Chittick v Ackland (1984) 53 ALR 143 at 153 Lockhart and Morling JJ approved a passage from the judgment of Ellicott J in Burns v Australian National University (1982) 40 ALR 707 at 716‑717, which had earlier been approved by Bowen CJ and Lockhart J on appeal, in which Ellicott J said:
“the Act [ADJR Act] should not be confined to cases where a particular power is precisely stated. In each case the question to be asked is one of substance, whether, in effect, the decision is made ‘under an enactment’ or otherwise.”
Forster J in Taranto (1980) Pty Ltd v Madigan (1988) 15 ALD 1 at 5 held that even if the decision in issue could be justified as an exercise of general administrative power by the Commonwealth to make arrangements for the proper carrying out of its functions, that would not qualify it as a decision “under an enactment.” That was applied by Lee J in Merman Pty Ltd v Comptroller‑General of Customs (1988) 16 ALD 88 at 92 where a decision to conduct an inquiry into the elements of dumping allegations raised in complaints was held to be a decision of this type.
These principles were again considered and applied in Salerno v National Crime Authority (1997) 144 ALR 709. There the appellant sought to review a decision of the National Crime Authority (“the NCA”) to raid his premises utilising a general warrant under s 67 of the Summary Offences Act 1953 (SA) as a step in a wider investigation authorised pursuant to s 11 of the ADJR Act. The Full Court (von Doussa, Drummond and Mansfield JJ) held the determination by the NCA to raid the premises by utilising the general warrant had the necessary qualities, including its effect on the appellant’s legal rights and the character of finality, to enable it to be regarded as a reviewable decision. On the question whether the determination qualified as “made under an enactment”, the Court applied the majority decision in Hutchins, referring extensively to the reasons for judgment of Black CJ at 156‑157, and the Full Court in Australian National University v Lewins (1996) 138 ALR 1 in which support for Hutchins was expressed. The Court also stated the distinction drawn by Black CJ in Hutchins between decisions authorised only in a general way by an enactment and those which are expressly or impliedly required by an enactment or which are given force or effect to by the enactment, gives proper effect to balancing the two competing policy considerations referred to by Mason CJ in Bond at 336‑337, namely the need for a convenient and effective means of redress for persons aggrieved by administrative decision‑making and the risk to the efficient administration of government. Applying Hutchins, the Full Court in Salerno held the determination of the NCA not to be reviewable.
In Lewins the issue was whether a lecturer, whose application for promotion made in accordance with the statement on policy and procedures on academic promotions published by the university was rejected, was entitled, pursuant to s 13 of the ADJR Act, to a statement of reasons for the decision. At 14 Lehane J, with whom Kiefel J agreed, rejected a submission the decision refusing promotion was one made under a section of the Australian National University Act 1991 (Cth), which conferred a range of powers on the university, including power “to employ staff”. Lehane J characterised this as a general power requiring the application of Hutchins.
Hutchins and Salerno have recently been applied by Sundberg J in Knuckey v FC of T 97 ATC 4911 at 4918‑4919 in holding a decision by the Commissioner to establish a “Work Related Expenses Audit Program” and to include the applicant in it was authorised but only generally by s 8 of the Assessment Act and accordingly was not reviewable.
For the applicant it is submitted the decision in Knuckey, which is presently on appeal, takes a narrower view of s 8 than the Full Court in Hutchins and should not be followed. That submission does not require resolution because here it is Hutchins which is the relevant authority.
The word “conduct”, the review of which is provided for in s 6 of the ADJR Act, points to action taken, rather than a decision made, for the purpose of making a reviewable decision. It looks to the way the proceedings have been conducted rather than decisions made along the way with a view to the making of a final determination, so that it is essentially procedural and not substantive in character: Bond at 342 per Mason CJ.
So far as a failure to make a decision is concerned, s 7 of the ADJR Act requires where that is the ground of application, there be a duty for the person to have made the decision in issue. The consequence is that in the absence of any such duty, the application is incompetent: cfBrownsville Nominees Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 409 at 413‑414.
The statutory scheme
Division 2 of Pt VI of the Assessment Act establishes the statutory framework for the collection of income tax by instalments. The scheme is that with respect to payments within the definition in s 221A(1) of “salary or wages”, an employer is required to make deductions on account of income tax liability from those payments.
Features of the scheme as it stood at the relevant date (being prior to amendments on 16 December 1995) were:
deductions were to be made at the rates prescribed by the Income Tax Regulations: s 221C(1A).
a penalty tax was imposed in the case of a refusal or failure to make the deductions: s 221EAA(1).
penalties were imposed on an employer failing or refusing to comply with the duty to purchase and affix tax stamps: s 221G(4A).
penalties were also to be imposed where a group employer failed to comply with the duty imposed by s 221F(5), as it relevantly provided, whereby a duty was imposed to remit to the Commissioner deductions made by the employer from salary or wages paid to an employee: s 221F(12).
these mandatory penalties under ss 221EAA(1), 221F(12) and 221G(4A) could be remitted by the Commissioner after consideration of criteria relating to the reasonableness of action taken by the employer to mitigate the circumstances or their effects or the existence of special circumstances: s 221N(4). Provision is made for objections against such a decision in relation to the last two penalty taxes: s 221N(4).
any amount payable to the Commissioner under the Division is a debt to the Commonwealth and may be sued for and recovered in any court of competent jurisdiction: s 221R.
any person dissatisfied with the Commissioner’s decision on such an objection may apply to the Administrative Appeals Tribunal for review or appeal to the Federal Court: s 14ZZ(a) of the Taxation Administration Act 1953 (Cth) (“the Administration Act”).
The Audit function
It is common ground the Assessment Act does not expressly require or authorise the Commissioner to audit the affairs of taxpayers generally or with a view to ascertaining income tax payable, the status of the taxpayer as an employer and whether deductions have been made from salary and wages and remitted to the Commissioner. For the respondents it is submitted the general administrative powers in s 8 of the Assessment Act are the source of such authority. For the applicant it is contended many final and determinative decisions may be made during an audit and these are reviewable under the ADJR Act.
In Industrial Equity Limited v Deputy Commissioner of Taxation (1990) 170 CLR 649 the High Court held that a notice to produce documents purporting to have been issued pursuant to s 263 of the Assessment Act and notices to produce documents purporting to have been issued pursuant to s 264 of that Act, had been made and issued for the purposes of the Assessment Act when they were utilised for the purposes of a random audit. The members of the majority (Mason CJ, Brennan , Deane, Dawson, Toohey and McHugh JJ) said (at 660):
“The expression “tax audit” does not appear in the Act. The Shorter Oxford English Dictionary defines “audit” as “make an official systematic examination of (accounts).” Such an examination, where a taxpayer’s affairs are involved, will be for the purposes of the Act where it is directed to ascertaining the taxable income of a taxpayer. The examination is relevant to the process of assessment and to the further consideration of an assessment, once raised... it is entirely consistent with the Act that the Commissioner should, at one time, decide to look more closely into the affairs of particular categories of taxpayers as well as of particular taxpayers, with a view to ascertaining their taxable income, and this whether an assessment or an amended assessment has issued.”
For the applicant it is submitted it follows that in this present action it is a relevant purpose under the Assessment Act for the respondents to carry out an audit of the applicant and the related entities in relation to the Commissioner’s recovery provisions pursuant to Pt V1 and Div 2 and related provisions of the Assessment Act. That I do not see as being in dispute.
Then it is further submitted for the applicant that just as it has been held by the High Court that the issue of ss 263 and 264 notices in aid of audit are reviewable decisions under the Assessment Act, so it follows decisions made in the audit which in themselves are final and determinative, or the failure to make decisions which if made would be final and determinative in nature, and the conduct of the persons leading to the making or the failure to make these final and determinative decisions, are all reviewable under that Act. The premise of this submission requires examination. In Industrial Equity there were two applications for review under the ADJR Act. In the first the application was to set aside decisions by the Deputy Commissioner and his officer to issue to another officer an “Authorisation for Access” and to set aside decisions by all respondents to seek access to the premises in question. The authorization was the document which purported to have been made pursuant to s 263. By the other application Industrial Equity sought to have set aside decisions of the Deputy Commissioner and another to require it to produce records. While judgment on the first application was reserved, the Deputy Commissioner issued notices pursuant to s 264 of the Assessment Act requiring production of the records. Consequently the decisions under review were decisions expressly authorised by the Assessment Act.
It does not follow that final and determinative decisions are in the same category when they do not relate to the exercise of particular statutory power. The decision in Industrial Equity clearly establishes the carrying out of an audit by the Commissioner will be authorised under the general administration powers conferred by s 8 of the Assessment Act. Whether particular decisions made in the course of an audit qualify for review in that context can only be determined by deciding whether, despite that character of the audit as a whole, they can be characterised as final and determinative in nature and as made under an enactment (as distinguished from the general power of administration).
Guidelines on audits
For the applicant it is contended the conduct of an audit involves more than the exercise of the general power of administration in s 8 of the Assessment Act because there is a binding Public Ruling applicable to such conduct. Provision for a system of Public Rulings is made in Pt 1VAAA of the Administration Act. A Public Ruling may be a ruling on the way in which, in the Commissioner’s opinion, a tax law would apply to any person in relation to a class of arrangements, to a class of persons in relation to an arrangement or to a class of persons in relation to a class of arrangements: ss 14ZAAE, 14ZAAF and 14ZAAG. It may be a ruling on the way in which a discretion of the Commissioner under the law would be exercised: s 14ZAAD. For this purpose it is provided the Commissioner exercises a discretion if the Commissioner forms an opinion, attains a state of mind, makes a determination or exercises a power or refuses or fails to do any of those things: s 14ZAAC.
For the applicant it is submitted s 14ZAAD evinces a legislative intent that once a Public Ruling is made the Commissioner will always be bound to exercise the discretion in that manner. However, in making this submission it is acknowledged there are difficulties in reconciling statements of intention with the alleged binding character.
In s 170BB of the Assessment Act provision is made concerning the effect of a Public Ruling on tax. Where the amount of final tax under an assessment exceeds the amount which would have been payable if the law had applied in the ruled way, the assessment and the amount of final tax must be what they would be if that law applied in the ruled way.
On 15 December 1989 the Commissioner issued “Guidelines for the Conduct of Auditors and Taxpayers in Complex and Large Case Audits” (“the Guidelines”). These took effect from 1 January 1990. On 18 November 1992 an Addendum was issued.
The Addendum revised the Guidelines and incorporated in them a review procedure for taxpayers who satisfy various criteria. For the applicant it is submitted the decision made by officers of the Commissioner when interpreting the audit guidelines and applying them to the applicant, have been acknowledged by the Commissioner in the Guidelines as decisions capable of review.
The submission is therefore made for the applicant that the conduct of an audit under a binding Public Ruling is more than the application of the power of general administration under s 8 of the Assessment Act. It is contended the provisions of Div 2 Pt V1 constitute the statutory basis for the audit in the same way ss 169A, 263 and 264 did in Industrial Equity. It is said therefore s 8 cannot be seen as the sole statutory basis upon which the Commissioner acted in conducting the audit.
There are a number of answers to the applicant’s submissions. Firstly, the Guidelines are not issued as a Public Ruling within Pt 1VAAA of the Administration Act. Secondly, the Guidelines state they “are not intended to prejudice or compromise the [Australian Taxation Office’s] statutory powers” in the conduct of the audit. Thirdly, the Guidelines are also expressed only to “set out mutual expectations for the behaviour of Australian taxpayers.” Fourthly, the Guidelines are only applicable “where the taxpayer co-operates in facilitating the timely conduct of an audit” and do not preclude the Office taking whatever steps are necessary in particular circumstances such as suspected fraud or evasion.
Additionally, the Guidelines are expressed to apply only to “complex audits”. However, their terms do not make it apparent they are to be applied only to large corporate groups. Complexity appears to derive from the number of phases and issues requiring audit.
Nevertheless it is patent the Guidelines have no legal status. They cannot have the consequence of taking the exercise of the power of audit out of the category of a power deriving its authority from the general power of administration in s 8 of the Assessment Act.
Furthermore it is not the case that the High Court in Industrial Equity found to the effect contended. The Court was there considering whether an audit investigation was within the purposes of the Assessment Act as required for the exercise of the powers in ss 263 and 264. It was not in issue that a decision to exercise a power in those sections was a decision under an enactment for the purposes of the ADJR Act.
In my view it is beyond argument the Guidelines can have no relevance to the resolution of this matter and provide no basis for characterising decisions or conduct in the course of an audit differently to the audit itself.
Particular decisions, conduct and failures
Turning to the particulars matters referred to in the Amended Application, and applying the principles previously referred to, I consider the position to be the following in relation to each of them to be as follows.
The grounds advanced on the basis of the alleged failure of the respondents to comply with a binding Public Ruling have not been shown to have any basis in law: see grounds A1(c),(d),(e) and (f) and A11 so far as it is based on that contention. The truth of the particulars pleaded is not the subject of this application. Nevertheless the particulars fall if there is no ground in law to support them.
Likewise the alleged decisions, conduct or failures referred to in the following paragraphs in the Amended Application have not been shown to have any statutory basis other than the general power of administration: A1(a), (b), A2, A3, A4, A5, A6, A7, A11.
In relation to A1(a) and (b) I add that nothing in Barina Corporation Ltd v DCT (1985) 16 ATR 336 at 340-341; Nestle Australia v FCT (1986) 17 ATR 322 at 324; or FCT v Nestle Australia Ltd (1986) 17 ATR 1130 at 1138-1139 causes me to reach a different view of the issue before me.
In relation to A2 and A5, the alleged decision and failure to supply s 13 reasons, there is the provision in s 13(4A) of the Assessment Act providing a remedy in the case of non-supply of reasons but I regard that as relevant only to the discretionary considerations on the alternative application.
In the case of A3, the references to ss 221C(1A) and 221F(5), do not provide any statutory authority for the alleged decision which the respondents are alleged to have failed to make in the course of the audit. Furthermore, it could not have been the auditors authority to make decisions concerning duty and obligation. Similarly A6 and A7 are unassisted by reference to s 221A and ss 221EAA and 221F respectively. The submissions overlook that penalties are automatically imposed by statute and require no decision: subs 221EAA(1) and 221F(12).
In the case of A8, A9 and A10 it is accepted the decisions there pleaded are reviewable decisions. However, those paragraphs are challenged on other grounds appearing below.
Whether ADJR Act excluded
The fourth ground on which the respondents’ first motion is brought is that the reference to the audit of the affairs of the applicant and its related entities, so far as it refers to any audit carried out by the Commissioner other than a withholding tax audit enquiry, is a reference to decisions and/or conduct to which the ADJR Act does not apply by reason of s 3(1) and sch 1(e). This ground is brought in respect of pars A1(a), (b), (c), (d), (e), (f) and A3 of the Amended Application. This is therefore an alternative argument to that which I have already found renders those paragraphs non-reviewable.
I accept the effect of subs 3(1) and item (e) of sch 1 is that decisions leading up to the making of assessments or calculations of tax under the Assessment Act, the Superannuation Guarantee (Administration) Act 1992 (Cth) and the Fringe Benefits Tax Assessment Act 1986(Cth) are not decisions to which the ADJRAct applies. This would exclude from review any decisions in the above‑mentioned paragraphs which can be characterised as falling within those provisions. As those paragraphs fail for reasons previously given, it is unnecessary to consider the application of this alternative argument.
General alternative relief
The respondents’ motion also seeks to strike out the paragraphs of the Amended Application on grounds arising under the Federal Court Rules (“FCR”) O 20 r 2, namely that they disclose no reasonable cause of action, are frivolous and vexatious or an abuse of process. Materially, in view of the decisions already arrived at, it is only necessary to consider these submissions in relation to pars A8, A9 and A10.
Paragraph A8 seeks review of the decision of the respondent prior to and on 30 April 1997 not to determine the objections lodged by the applicant pursuant to subs 221N(4) of the Assessment Act on 4 May 1995. Subsection 221N(4) provides that a person who is dissatisfied with a decision of the Commissioner in relation the person under subs 221N(2) may object other than in relation to an amount payable under subs 221EAA(2). Subsection 221N(2) authorises the Commissioner to remit the whole or part of any amount payable by an employer under par 221EAA(1)(a), subs 221EAA(2) or par 221F(12)(b)(ii)(A).
The respondents object to par A8 on the ground that it is uncertain whether one or more decisions is referred to and, in either case, fails to properly identify the date or dates. In my view the pleading is not so uncertain as to be embarrassing. Dates are pleaded and the objections said not to have been determined are identifiable. In my opinion there is no sufficient basis upon which this could be struck our pursuant to FCR O 20 r 2.
Paragraph A9 seeks to review the decisions of the respondents (a) to de-register Keystyle Holdings Pty Ltd and (b) to commence recovery proceedings against the applicant in respect of the liability said to have been shifted from Keystyle to the applicant. The case for the respondents objects to this on the ground it fails to specify the dates of the alleged decisions or what the liability allegedly shifted relates to. In my opinion the paragraph is not incapable of being open to argument. It identifies facts apparently capable of being made out. It does not qualify for strike out even if it could have been more elegantly or appropriately drafted.
Paragraph A10 seeks review of the decision on 30 April 1997 to commence recovery proceedings when the objection lodged by the applicant on 4 May 1995 had not been determined. The objections for the respondents to this are that it fails to specify which recovery proceedings are involved or identify the particular objection and may be duplicatory of par A8. In my view these considerations, in the context of the apparent specificity of par A10, do not raise a case for strike out. It is arguable a decision to commence recovery proceedings is a reviewable decision made under an enactment: The Hell’s Angels Limited v Deputy Federal Commissioner of Taxation (No 3) 84 ATC 4683; see also Barina.
Paragraphs A8, A9 and A10 are supported by pleadings in pars B8, B9 and B10. These plead the basis of the aggrievance of the applicant is because of the oppression resulting from the decisions complained of and the unreasonable and improper use of the powers in issue. The complaint for the respondents is no relevant facts are pleaded to support the allegations so they do not know the nature of the case they have to meet or the facts relied upon by the applicant in support. So far as that may be a factor, it is not incapable of remedy. Nothing in B8, B9 and B10 makes A8, A9 and A10 beyond argument. B is in any event explanatory of the alleged effects of A: the case the respondents are primarily required to answer is in relation to A.
It is also contended for the respondents that par A10 should be struck out in that the applicant does not bring any evidence to support that a decision of the alleged character was in fact made. On a strike out application the pleadings are to be taken at their highest. The Court must decide if, so taken, the pleadings give rise to an arguable case and one which is not within FCR O 20 r 2: Australian Building Industries Pty Ltd v Stramit Corporation Ltd & Anor (Full Court, Federal Court of Australia, 1 December 1997, unreported); Webster v Lampard (1993) 177 CLR 598. The respondents have the opportunity in their defence to put in issue the question of fact whether the decision was made and whether it qualifies as a decision or merely as the expression of a thought or opinion of an officer.
For these reasons I do not consider the respondents have succeeded in establishing a case for pars A8, A9 and A10 to be struck out.
Form of relief
Apart from objections to the form of relief based on grounds which I have found made out in relation to all but pars A8, A9 and A10, the Amended Application proposes to add a claim for declarations pursuant to ss 39B - and 39B(1A) - of the Judiciary Act 1903 (Cth). For the respondents it is contended this relief is not properly invoked in that the relief sought is not relief available under that section. Why such relief is or is not properly invoked is not the subject of submissions. If there is a case to be made it can be made in opposition to the relief if and when a claim is found to have been made out. No injustice is therefore done in the case of the claim for relief by granting leave in the knowledge that any such contentions are not foreclosed.
New remission notices
For the applicant it is submitted the remission decisions which are the subject of the applicant’s objections have been withdrawn and replaced by new remission decisions, such that the objections in respect of which the applicants seek relief are no longer on foot. I do not consider it is the case the Amended Application in pars A8, A9 and A10 is directed to the prior remission decisions. A reading of grounds A8, A9 and A10 supports this. While the prior notices and the new notices may be part of the relevant factual substratum, I do not consider the Amended Application is precluded from argument so far as it survives in pars A8, A9 and A10 on the ground it is directed to a state of fact which no longer pertains.
Discretionary consideration
Section 10(2)(b)(ii) of the ADJR Act provides the Court may, in its discretion, refuse to grant an application under ss 5, 6 or 7 that is made to the Court in respect of a decision, conduct or alleged failure for the reason “that adequate provision is made by any law other than this Act under which the applicant is entitled to seek a review by the Court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure.”
It is submitted for the respondents the real issues raised in the Amended Application are complaints concerning factual findings by the respondents relating to whether certain persons should be held to be employees for the purposes of the Assessment Act. It is further submitted adequate provision has been made for review and determination of those factual issues in the courts and tribunals and that they would not fall for determination if the Amended Application proceeded because that would not be a process which would lead to the merits being determined.
In my opinion these contentions do not support a case for the exercise by the Court of the discretion in s 10(2)(b)(ii). The issues are not so confined as the submission makes them and there is no authority that on an application for review this Court is unable to properly deal with relevant factual issues. If it is the case the applicant in truth seeks a form of merits review not open to this Court, that is a consideration for it to weigh before pursuing the application with its inherent risk of an adverse costs award.
Had ground A2 survived, I consider it would be open to argument that the provision in s 13(4A) of the Assessment Act was an adequate provision justifying the exercise of the Court’s discretion under s 10(2)(b)(ii) of the ADJR Act.
Standing in relation to pars A8, A9 and A10
Returning to the issue of standing, I consider the applicant would only have standing to argue par A8 in relation to itself. It would have standing to argue par A9(b) which is confined to liability arising in the applicant itself (which in turn would allow it to argue the question of shifted liability referred to in par A9(a)). Paragraph A10 relates only to the objection lodged by the applicant, in relation to which it has standing.
Conclusion
For these reasons I consider the motions should be dealt with as follows:
the respondents’ motions for dismissal should be allowed in respect of the following paragraphs in the Amended Application:
A1 (a) (b) (c) (d) (e) and (f),
A2, A3, A4, A5, A6, A7 and A11.
The respondents’ motions for dismissal should be allowed in respect of par A8 of the Amended Application so far as it relates to objections lodged by the applicant in respect of entities other than itself.
The respondents’ motions should be refused so far as they relate to the application of pars A8, A9 and A10 in relation to the applicant and the objection lodged by it pertaining to itself.
I certify that this and the preceding twenty‑two (22) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice R D NICHOLSON
Associate:
Dated: 24 April 1998
Counsel for the Applicant: F G A Beaumont QC with E J Power Solicitor for the Applicant: Amidzic & Co Counsel for the Respondent: S Owen-Conway QC with T Burrows Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 12 December 1997 Date of Judgment: 24 April 1998
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