Ruddy v Commissioner of Taxation

[1998] FCA 317

FEDERAL COURT OF AUSTRALIA

ADMINISTRATIVE LAW - Judicial Review - whether decision of Commissioner to institute proceedings is a “decision of administrative character made under an enactment”

Income Tax Assessment Act 1936 (Cth) ss 222ALA, 222AQA, 221R, 208, 209 and 8
Administrative Decisions (Judicial Review) Act1977 (Cth) ss 3(1), 5, 16
Judiciary Act 1903 (Cth) s 39B

Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 Refd
Attorney-General (Hong Kong) v Ng Yuen Shiu (1983) 2 AC 629 Refd
Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648 Refd
Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273 Refd
Kioa v West (1985) 159 CLR 550 Refd
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 Appl
Hutchins v Commissioner of Taxation (1996) 65 FCR 269 Disc
The Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 Refd
General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 Cited
Australian National University v Lewins (1996) 68 FCR 87 Cited
Salerno v National Crime Authority & Ors (1997) 144 ALR 709 Cited
Century Yuasa Batteries Pty Ltd v Federal Commissioner of Taxation (1997) 143 ALR 477 Cited
Terrule Pty Limited v Deputy Federal Commissioner of Taxation (1985) 85 ATC 4166 Refd
Strictly Stainless Pty Ltd v Deputy Commissioner of Taxation (unreported decision 5 November 1993 Davies J) Cited
Lamb v Moss (1983) 76 FLR 296 Doubted
Newby v Moodie (1988) 83 ALR 523 Doubted
Ross v Costigan (1982) 59 FLR 184 Refd

Mark Harry Ruddy v Deputy Commissioner of Taxation
QG 93 of 1997

Kiefel J
Brisbane
2 April 1998

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 93 of 1997

BETWEEN:	MARK HARRY RUDDY APPLICANT
AND:	DEPUTY COMMISSIONER OF TAXATION RESPONDENT
JUDGE(S):		KIEFEL J
DATE OF ORDER:		2 APRIL 1998
WHERE MADE:		BRISBANE

THE COURT ORDERS THAT:

1. The application for an extension of time for the bringing of the application filed on 17 July 1997 is dismissed.

2. The application for review be dismissed with costs, including the costs of the application for an extension of time.

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

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 93 of 1997

BETWEEN:	MARK HARRY RUDDY APPLICANT
AND:	DEPUTY COMMISSIONER OF TAXATION RESPONDENT

JUDGE(S):	KIEFEL J
DATE:	2 APRIL 1998
PLACE:	BRISBANE

REASONS FOR JUDGMENT

The applicant seeks an extension of time within which to seek review of the decision made by the respondent to bring proceedings against the applicant for the recovery of sums due under an agreement made pursuant to s 222ALA Income Tax Assessment Act 1936 (“ITAA”) in respect of which he may be liable. The respondent opposes the grant of any extension on the basis that the substantive application has no reasonable prospect of success: Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344; and submits that there was no decision to which the Administrative Decisions (Judicial Review) Act 1977 could apply and no jurisdiction to review. The respondent’s notice of contention is to the same effect.

The Decision sought to be reviewed
On 5 February 1997 Grand Orbit Pty Ltd, of which the applicant was a director, entered into a written agreement with the respondent Commissioner pursuant to s 222ALA ITAA, by which the company agreed to pay outstanding group tax in the sum of $106,910.82 on 10 May 1997. The company did not do so, and the monies became due and payable on that day: s 222ALA(5). Section 222AQA, ITAA requires the directors of the company to cause the company to comply with such an agreement and provides that, in the event of contravention by the company, each director is liable to pay to the Commissioner, by way of penalty, an amount equal to the balance payable under the agreement. Section 221R of the Act (“Recovery of Amounts by Commissioner”) provides, by subsection (1):

“(1)[Debt due to Commonwealth] An amount payable to the Commissioner under the provisions of this Division shall be a debt due to the Commonwealth and payable to the Commissioner, and may be sued for and recovered in any court of competent jurisdiction by the Commissioner or the Deputy Commissioner suing in his official name.”

A reference in s 221R to “an amount payable under this Division” includes that due by way of penalty under s 222AQA: see s 221R (IAA). It is relevant, to references in cases relied upon in submissions, to observe that ss 208 and 209 ITAA make similar provision with respect to the Commissioner suing for and recovering income tax payable.

The respondent sued in the District Court for recovery of the amount due on 30 May 1997, having formed an opinion concerning the applicant’s liability.  The respondent did not bring action against the other directors. Although originally sought in the application, review is not now sought of any decision to issue proceedings against the applicant alone.

The Grounds for Review
The applicant contends that there has been a breach of the rules of natural justice in connexion with the making of the decision, and points to representations made by officers of the respondent to the applicant and another director, prior to the company entering into the agreement, to the effect that the directors would not be personally liable if the company entered into an agreement under s 222ALA. The applicant did not submit, on the hearing of this application, that such an assertion was correct and did not cast doubt upon the provisions of s 222AQA. The point taken is that the representation or opinion was given apparently without reference to the section and it was such as could, and did, engender a belief in the applicant.

It is alleged in the application that the applicant relied upon it and caused the company to enter into the agreement under s 222ALA. What other courses were open to it were not touched upon. The conclusion stated in the application is as follows:

“(d) The applicant has a legitimate expectation that the applicant would not be personally liable for the unpaid group tax and penalties of the company if the company entered into an agreement with the respondent under s 222ALA of the Act;

(e) in the premises the respondent is not entitled to resile from its representation that the applicant would not be personally liable.”

Despite the terms of the application, submissions on the hearing made clear that the applicant was not seeking to hold the respondent estopped to any promise that the applicant would not be held liable.  The remedy sought lay in a “legitimate expectation”, said to have been brought about by the representation that the applicant was not legally liable, and which now required that the applicant be given an opportunity to make submissions before the respondent determined to sue for recovery of the sum in question.  Among the cases upon which the applicant placed reliance were Attorney-General (Hong Kong) v Ng Yuen Shiu (1983) 2 AC 629; Haoucher v Minister for Immigration and Ethnic Affairs (1990) 169 CLR 648 and Minister for Immigration and Ethnic Affairs v Teoh (1995) 183 CLR 273. Were the application for extension to depend upon the grounds for review, further analysis and argument would seem to me to be necessary. Attorney-General v Ng Yuen Shui was relied upon because it extended the application of legitimate expectations to cases where a decision-maker might be held to a promise to follow procedures (see Teoh, McHugh J, 311) so long as to do so did not cut across the decision-making itself.  Haoucher involved a departure from policy in relation to recommendations.  In each case the change proposed required that an opportunity be given to make representations.  The extension in Teoh was to create a legitimate expectation by reference to the ratification of an international convention whereby the Minister could reasonably be expected to act in conformity with it.

The present case appears to combine elements of a cause of action in estoppel and claims to procedural fairness, despite the concessions referred to above.  Here there was no promise or expectation created as to the procedures to be undertaken in any decision to bring proceedings.  There was no situation which prevailed which was to be subjected to change.  The applicants real complaint lies in the incorrectness of the legal view expressed, that directors were not personally liable. It is difficult however to see that that could create any expectation that a decision would be made regardless of the correct legal position.  It may also be observed that the applicant’s claim would require an opportunity to be given to make representations to the effect that the Commissioner’s view as to the applicant’s legal liability should take account of the erroneous advices given, although the applicant is unable to make out a substantive case based upon that advice.  Even if one put the doctrine of legitimate expectations to one side and simply enquired what the duty to act fairly required in the circumstances (McHugh J, Teoh, 211 referring to Kioa v West (1985) 159 CLR 550), an obligation to afford the applicant the opportunity to make representations as to whether recovery proceedings should be brought would neither seem to be called for, nor practical. It must be added however that the submissions on this application focussed upon the nature of the decision and its connexion with s 221R, and these matters were not addressed in detail. The two alternative grounds - failure to take into account a relevant consideration and the implementation of a policy of recovery without regard to the merits of the case, were not gone into.

Whether a reviewable decision
Two aspects as to the nature of the decision were dealt with in submissions: whether it was one made, or required to be made, under an enactment (s 3(1) ADJR Act), namely the ITAA and in particular s 221R of that Act, and whether it had the final, operative or substantive character as Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, 336-7, requires. In my view it is the last mentioned enquiry which is most relevant to this case but I shall now deal with the first.

In Hutchins v Commissioner of Taxation (1996) 65 FCR 269 Black CJ (Spender J agreeing on this issue) held that there may be a decision within the meaning of that expression in the ADJR Act, notwithstanding that the enactment concerned does not expressly require or authorise the decision, but does so impliedly (271): see The Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 there referred to. In such cases, in the view of the Chief Justice (272), the enactment can be said “to make provision” for the making of the decision, in the sense in which Mason CJ spoke in Bond (337).  As his Honour’s reasoning in Hutchins discloses, it is the extent of the connexion with the statute which may determine the question. Where there is, as there was in that case, a very general authorisation, the connexion is too remote to enable the conclusion that the decision was made under the enactment or that it provided for it. There the Court was concerned with a decision by the Commissioner to vote against a motion at a meeting of creditors. The provisions of the ITAA in question were s 8, by which the Commissioner was charged with the administration of the Act, and sections 208 and 209 which are, as noted above, in similar terms to s 221R save for the character of the debt due. In the view of the Chief Justice, whilst a combination of sections 8 and 208 would be said to authorise the decision, they did not make provision for it in the sense referred to in Bond.  That appears to me to be the essential question here.

In Hutchins the Chief Justice also considered the other mode of assessing the relationship between enactment and decision, namely whether the former can be seen to give the decision its force and effect, and concluded that neither of the sections above referred to did so.  (See General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164, 172 and Australian National University v Lewins (1996) 68 FCR 87,101).

The lack of necessary connexion  with the statute, applying Hutchins, meant that in each of Salerno v National Crime Authority & Ors (1997) 144 ALR 709 and Century Yuasa Batteries Pty Ltd v Federal Commissioner of Taxation (1997) 143 ALR 477 the decision was not reviewable, in the first mentioned case because the legislation only marked out, in general terms, the area of activity and in Century Yuasa because the provisions relied upon as giving the Commissioner power to sue for monies as a debt were considered by Cooper J not to give force and effect to a decision to make demand for them as outstanding monies (488).

Section 221R(1) does not expressly refer to a decision, on the part of the Commissioner, that proceedings be brought, which decision would incorporate a conclusion to be reached as to the prospective respondent’s or defendant’s liability, although clearly the section authorises it. I add here that a further submission by the respondent, to the effect that the decision might be seen as an exercise of the Executive power was recently withdrawn. The point was raised in Terrule Pty Limited v Deputy Federal Commissioner of Taxation (1985) 85 ATC 4166, but not in Hutchins (noted by Lockhart J, 275). In this case the provisions of the ITAA provide for more than a mere general authorisation to do what is necessary. What is provided for in s 221R necessarily involves the determinations referred to. The decision to sue, and the actions which follow, derive their force and effect from the specific authority provided to the Commissioner by the section. That is not however an end to the matter.

Lockhart J in Hutchins determined that the decision to vote in a particular way was one impliedly authorised by ss 8 and 208 of the ITAA, but went on to hold that it was not susceptible to review since there was nothing final, operative or determinative about the decision (277). Black CJ reached the same conclusion, agreeing with the primary Judge that the decision was not of a substantive nature and did not determine anything, and was no more than a step towards the creditors’ resolution of the issue (274). Spender J, however, held to the contrary on this point.

In Spender J’s opinion, because a decision does not itself determine anything, or is not crucial, did not prevent it from being a “substantive determination” or lacking the qualities of which Mason CJ spoke in Bond. In the course of reasoning his Honour referred to a decision made under s 209, to sue for unpaid tax, as furnishing an example of a decision which likewise was neither final nor determinative, in the sense that the ultimate decision of the Court sued in would be. Nevertheless his Honour considered that such a decision was one of substance and therefore susceptible to review. In Strictly Stainless Pty Ltd v Deputy Commissioner of Taxation (unreported decision 5 November 1993) Davies J had held that that a summons seeking an order for winding up was not determinative and amounted only to the first procedural step in the course of proceedings and the decision to commence those proceedings was not reviewable.  Spender J noted the decision, but appears to have considered that there was no “decision” in that case because neither the decision just mentioned nor another, to reject settlement proposals, were “made under an enactment”.

The applicant here placed reliance upon earlier cases, notably those concerning decisions to commit or to prosecute such as Lamb v Moss (1983) 76 FLR 296; Newby v Moodie (1988) 83 ALR 523 and Smiles v Commissioner of Taxation (1992) 37 FCR 538. In the lastmentioned case, however, the Court accepted that it had jurisdiction to deal with the claims relating to the informations under s 39B(1) Judiciary Act 1903 (Cth) and observed that it was unnecessary to consider whether there was also jurisdiction to review by virtue of the provisions of the ADJR Act (544).  Cases such as Newby v Moodie, which were decided before Bond, have been doubted (see eg Davies J in Strictly Stainless and Smiles v Commissioner of Taxation at first instance (1992) 35 FCR 405) and in my view correctly so. Lamb v Moss is in a somewhat different category, for it was the subject of express reference by Mason CJ in Bond.  The decision in Lamb v Moss, and the fact that it was not overruled by Bond, were considered by Spender J to support the view that, so long as the decision concerned a matter of substance, it did not matter that the decision to commit in Lamb v Moss was one “along the way” in the criminal hearing process.  In the same way, in his Honour’s view, the finding in Bond, that the licensees were no longer fit and proper persons, was an intermediate determination and that in Minister for Immigration and Ethnic Affairs v Mayer was not itself determinative of the question whether an entry permit should be granted, it was only a finding with respect to one condition.  So stated, the test is met by a decision being of sufficient importance in what it determines or of practical effect to warrant review, otherwise the requirement that it be of substance would apply to any decision which is not inconsequential.  If that be the case I could not, with respect, agree with Spender J that a decision as to how to vote at a creditor’s meeting could be said to be one of substance.  Lockhart J in Hutchins  did consider whether the decision was determinative in a practical sense, but concluded that it was not, since it neither conferred nor denied any benefit or imposed any disadvantage.  Any consequences would follow the cumulative effect of all votes at the creditor’s meeting.  In Century Yuasa  Cooper J also concluded that a decision to seek recovery of an amount equal to withholding tax and penalty for late payment lacked the necessary characteristic that it be a substantive determination and that the demand which was made had no practical effect on the applicant.  Any disadvantage which the applicant might suffer by way of liability for late payment would arise from its view of the law, and not from the decision of the Commissioner.

In Bond Mason CJ rejected the broader interpretation of “decision” which had been favoured by the Full Court in Lamb v Moss,  his Honour expressing a preference for that stated by Ellicott J in Ross v Costigan (1982) 59 FLR 184 namely that “decision” ought to be taken to refer to “an ultimate or operative determination not a mere expression of opinion or a statement which of itself has no effect on a person”, although his Honour went on to say that he did not intend to exclude all antecedent conclusions or findings (338).  In Bond the Court was concerned with the question whether intermediate findings could amount to a decision within the meaning of the ADJR Act. It was held that they might, if the decision in question was “final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration”  (337) and if the decision was a “substantive determination” (Mason CJ (337), and see also Toohey and Gaudron JJ, 377 where their Honours distinguished findings which might merely bear upon some issue).  The Tribunal’s finding that the licensees were no longer fit and proper persons to hold their broadcasting licences, although intermediate and one made on the way to deciding what to do in connexion with the licences, the ultimate decision, was “a decision on a matter of substance for which the statute provided as an essential preliminary to the making of the ultimate decision” (339).  Mason CJ did accept that the decision of the Magistrate in Lamb v Moss, that a prima facie case had been established and that he would proceed with committal proceedings, was likewise reviewable, for it “resolved an important substantive issue to be determined before the ultimate decision could be made … whether to commit the defendant for trial or discharge him from custody” (338). His Honour observed, however, that it would usually be inappropriate for a Court to exercise its discretion in favour of the grant of relief, under s 16 ADJR, for policy reasons. Considerations based in policy might also weigh against interference with decisions to seek recovery of monies owing, save in exceptional circumstances.

The present case does not involve a tiered process of decision-making.  The decision to sue for recovery was not a decision on an important substantive issue, the essence of an ultimate decision which would have far-reaching consequences.  True it is that it necessarily involved a view  being formed concerning the applicant’s liability to pay the sum in question, but it seems to me that this cannot equate with a decision made, on evidence presented in committal proceedings, that there is sufficient evidence to require a person to stand trial on serious criminal charges.  Indeed it does not determine anything.

The practical consequences to which the applicant pointed take the matter no further. It was submitted that the proceedings would have an effect upon the applicant’s credit standing and that he was exposed to a judgment. Neither consequence flows from the decision itself. If by the first-mentioned the applicant refers to perceived impacts upon his reputation, it is difficult to accept it as real and in any event would result from views held by others in relation to the bringing of claims. If it be intended to refer to effects upon his ability to borrow, this would merely recognise his potential for liability which arose by the operation of other provisions of the ITAA, which is the question to be determined in the proceedings themselves. Exposure to judgment may be viewed in the same way. It was also submitted that the decision effectively deprived him of his “legitimate expectation” that he would not be held personally liable, and is thereby to be seen as one of substance. The submission however seems to me to confuse an application for review based upon an alleged denial of procedural fairness, with a claim founded upon estoppel, as I have earlier discussed.

An alternative jurisdictional basis, in s 39B Judiciary Act, was stated in the application.  I put to one side the question whether the remedies under that section are appropriate or whether the applicant could claim certiorari.  No basis for any such relief was provided in the application and submissions on the hearing did not disclose any, save that the Court ought grant relief where it was thought appropriate to do so.  It is not necessary to deal further with this matter.

Conclusion and Orders
There is in my view no jurisdiction to review the decision of the respondent to commence proceedings.  The application for an extension of time for the bringing of the application filed on 17 July 1997 is dismissed.

I certify that this and the preceding eight (8) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Kiefel

Associate:

Dated:             2 April 1998

Counsel for the Applicant:	Mr H Alexander
Solicitor for the Applicant:	O’Shea Corser & Wadley
Counsel for the Respondent:	Mr P Bickford
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	17 September 1997
Date of Judgment:	2 April 1998