The Hells Angels Ltd v Deputy Commissioner of Taxation

[1984] FCA 251

Re: THE HELLS ANGELS LIMITED
And: THE DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
V. No. G113 of 1984
Administrative Law - Income Tax
3 FCR 83 / 84 ATC 4683 / 6 ALD 420

COURT

IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Northrop J.(1)

CATCHWORDS

Administrative Law - whether decisions of the Deputy Commissioner of Taxation are judicially reviewable. Jurisdiction - objection to competency to hear and determine application. Practice and procedure - interim orders restraining Commissioner from entering judgment in a Supreme Court action pending determination of substantive issues - test to be applied - whether such orders are contrary to the structure and policy of the Income Tax Assessment Act.

Administrative Decisions (Judicial Review) Act 1977 ss.3(1), 5(1) and (2), 13(11), 15.

Income Tax Assessment Act 1936 ss.167, 185, 186, 187, 189, 201, 204, 206, 207, 209, 226

Income Tax - Assessment - Action for recovery of tax assessed - Taxpayer appealed to a Board of Review - Refusal of Commissioner to grant extension of time for payment - Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 3(1), 5(1) and (2), 13(11), 15 - Income Tax Assessment Act 1936 (Cth), ss 167, 185, 186, 187, 189, 201, 204, 206, 206, 209, 226.

HEADNOTE

Held, that the decision of the Deputy Commissioner of Taxation to refuse to grant an extension of time under s. 206 of the Income Tax Assessment Act 1936 (Cth) (the Act) is a decision under an enactment in respect of which judicial review is available under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the Judicial Review Act). There is no restriction on the power of the court in respect of such a decision to make ancillary orders preventing the Deputy Commissioner from taking any further step in Supreme Court recovery proceedings. The structure and policy of the Act provide no basis for the court in appropriate circumstances declining to exercise the discretion to make orders restraining the Deputy Commissioner from giving effect to such a decision or from prosecuting recovery proceedings in relation to it.

HEARING

Melbourne, 1984, July 26, 27. #DATE 27:7:1984

F. G. A. Beaumont and J. Judd, for the applicant.

C. N. Jessup, for the respondent.

Solicitors for the applicant: Mercer Lewenberg & Pryles.

Solicitor for the respondent: Australian Government Solicitor.

G.F.V.

JUDGE1

By application dated 30 April 1984 The Hells Angels Limited, a company limited by guarantee, is seeking orders of review under the Administrative Decisions (Judicial Review) Act 1977 (hereinafter called "the Judicial Review Act"), in respect of a number of decisions made by the Deputy Commissioner of Taxation of the Commonwealth of Australia under the Income Tax Assessment Act 1936, (hereinafter called "the Act"). The decisions include decisions relating to proceedings in the Supreme Court of Victoria in which the Commissioner of Taxation is seeking to recover tax unpaid by The Hells Angels Limited. The application to this Court has not yet come on for hearing but The Hells Angels Limited is moving the Court for interlocutory orders that the Deputy Commissioner be restrained from proceeding further with the prosecution of the Supreme Court proceedings until the hearing and determination of the application. The Deputy Commissioner is moving the Court for orders that the Court has no jurisdiction to hear and determine the application insofar as some of the decisions sought to be reviewed are concerned.

1. The matters before the Court are for interlocutory orders, and it is undesirable that the Court should express its views in any great detail on these matters since, of necessity, the facts have not been investigated fully nor has it been possible to give full and detailed consideration to the number of authorities referred to in the course of argument. Nevertheless, in order to consider the somewhat complex facts which are involved, it is necessary to set out in summary form various matters.

2. In its application The Hells Angels Limited identifies the decisions sought to be reviewed as follows:
   
   

"THE DECISIONS REFERRED TO ARE:

(a) The Respondent's decision that income tax in the sum of $87,897.72 forming part of the subject matter of the said action was due and payable by the Applicant and unpaid on 24th February, 1984;

(b) The Respondent's decision that additional tax in the sum of $43,948.00 pursuant to Section 226 of the Act forming part of the subject matter of the said action was due and payable by the Applicant and unpaid on 24th February, 1984;

(c) The Respondent's decision that additional tax pursuant to Section 207 of the Act in the sum of $23,407.10 forming part of the subject matter of the said action was due and payable by the Applicant and unpaid on 24th February, 1984;

(d) The Respondent's decision to commence the said action and prosecute the same for the recovery of income tax, additional tax pursuant to Section 226 of the Act and additional tax pursuant to Section 207 of the Act;

(e) The Respondent's decision not to defer, delay or stay the commencement of the said action or prosecution of the same pending determination by a Board of Review of the Applicant's Notice of Objection dated 29th August, 1983;

(f) The Respondent's decision not to grant an extension of time for payment of the income tax and additional tax demanded in the said action pursuant to Section 206 of the Act."

1. By its notice of objection to competency, the Deputy Commissioner objects to the jurisdiction of the Court to review the decisions lettered (a) to (e) inclusive. The Deputy Commissioner says that the decisions referred to in paragraphs (a) and (b) were decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty under the Act, and that these are not decisions to which the Judicial Review Act apply; see sub-section 3(1) of that Act and paragraph (e) of the First Schedule of that Act. Counsel for The Hells Angels Limited accepts that contention, and accordingly The Hells Angels Limited cannot rely upon those decisions for the seeking of orders to review.

2. As to paragraph (c), the Deputy Commissioner contends, and I quote:
   
   

" (i) no such decision was ever made, the additional tax referred to becoming due and payable by operation of law in the circumstances set out in s.207 of the Income Tax Assessment Act 1936; or, in the alternative;

(ii) such decision was a decision making or forming part of the process of making or leading up to the making, of, an assessment or calculation of tax or duty under the Income Tax Assessment Act 1936."

Counsel for The Hells Angels Limited disputes that contention, but for the purposes of the motion for interlocutory relief I am prepared to act on the assumption that the contention is correct. Accordingly, that decision is not to be considered as a decision to which the Judicial Review Act applies.

1. As to paragraphs (d) and (e), the Deputy Commissioner says:
   
   "(3) As to paragraph (d):
   

(i) such decision was not a decision of an adminstrative character; and

(ii) such decision was not made under an enactment.

(4) As to paragraph (e):

(i) no such decision was made at any time prior to the making of the Application or, in the alternative;

(ii) any such decision, if made, would not have been:-

(a) of an adminstrative character; or

(b) made under the enactment."

As this stage it is neccessary to state in summary form the relevent facts set out in chronological order. In December 1979, The Hells Angels Limited was incorporated. On 1 March 1983, the Deputy Commissioner Taxation issued notices of assessment under s.167 of the Act for the years ended 30 June 1980, 1981 and 1982 inclusive. Included in the assessments were additional amounts calculated and imposed under s.207 and s.226 of the Act. The tax was due and payable under s.204 of the Act on 5 April 1983. On 29 April 1983, The Hells Angels Limited filed tax returns for the three years, showing nil income. On 19 August 1983, the Deputy Commissioner disallowed the objections under s.186 of the Act. On 25 August 1983, The Hells Angels Limited lodges a request for a reference to a Broad of Review under s.187 of the Act. The matter had not been referred to the Board of Review within sixty days, and no notice under s.189 of the Act had been given.

At this stage, reference should be made to s.201 of the Act:

"201. The fact that an appeal or reference is pending shall now in the meantime or affect the assessment the subject of the appeal or reference; and income tax may be recovered on the assessments as if no appeal or reference were pending."

It should also be noted that at this stage there had been no application made by The Hells Angels Limited under s.206 of the Act. That section is also set out:

"206. The Commissioner may in any case grant such extension of time for payment, or permit payment to be made by such instalements and within such time as he considers the circumstances warrant; and in such case the tax shall be due and payable accordingly."

On 24 February 1984, the Commisser of Taxation issued the writ in the Supreme Court of Victoria seeking recivery of the tax for the three years in question. That action was taken under s.209 of the Act. On 8 March 1984, The Hells Angels Limited entered an appearance to that writ and on 28 March 1984, a summons for final judgement was served with supporting affidavit and a Regulation 53 certificate. On 2 April 1984, the summons for final judgement came on before Master Evans in the Supreme Court of Victoria. On 3 April 1984, four letters on behalf of The Hells Angels Limited was sent to the Deputy Commissioner of Taxation, namely, (a) request for details of how tax was assessed, (b) a s.207 request that no interest be charged, (c) a s.189 notice requiring reference to the Board of Review, and (d) a s.206 request for time to pay. There is some dispute as to when these letters were received by the appropriate officers within the Department of Taxation, and I shall refer to that at a later stage.

On 6 April 1984, the summons for final judgement came on for hearing before Beach J. in the Supreme Court. Counsel for The Hell Angels Limited sought an adjournment of the hearing of the summons for final judgement. That application was refused. On 6 April 1984, copies of the four letters sent on 3 April 1984 were handed to legal representatives of the Deputy Commissioner at the hearing on the summons for final judgement before Beach J.

On 11 April 1984, the summons for final judgement came on for further hearing before Beach J. On the same day, his Honour gave leave for enter final judgement for the primary tax, excluding the additional amounts payable under s.207 and s.226 of the Act. He also granted a stay of twenty-one days. On the same occasion, his Honour refused to stay operation of the order pending the hearing of an application to be made under the Judicial Review Act. In refusing the application for the stay, his Honour relied upon opinions expressed by members of the Court of Appeal of New South Wales in Deputy Commissioner of Taxation (NSW) v. Mackey (1982) 45 A.L.R. 284, and in particular to passages from the judgement of the President, Mr. Justice Moffitt at p.287 as follows:

"It would be too narrow a view to grant a stay of proceedings or execution merely because an appeal is pending or merely because an examination of the pending appeal there appears to be an arguable case or perhaps there are complex questions involved which the Board of Review or Federal Court can best determine. The policy of s 201 is that when an assessment has been made, the Deputy Commissioner has a right to have the tax paid, despite the pendency of an appeal. While hardship to the taxpayer and the merits of the appeal are relevant matters, other considerations are involved, including the Commissioner's right to have the tax assessed paid. The exercise of discretion may involve, and in my opinion in the present case it requires, some examination of the nature and basis of the liability on which the disputed tax has been assessed and the nature of the dispute."

At p.289 Hutley J.A. said:

"The Commissioner starts off with rights under s 201 and taxpayer is seeking on special bases to have a special discretion exercised in his favour. It is not possible to work out in advance all possible bases for the exercise of such a discretion and it would not be proper even to attempt to do so. It is an open-ended discretion. But there are only two cases where it is clear the court should exercise that discretion. First, the comparatively rare case where the Commissioner abuses his position, for example by assessing and endeavouring to collect tax in defiance of a decision of the High Court or other superior court precisely in point. Second, in cases of extreme personal hardship to a taxpayer called upon to pay. The obligation to pay which has been cast upon him by law is not a hardship of itself and the mitigation of the effect of inflation and the burden of interest is a matter for the legislature, not for the court."

The additional facts that are relevant are that The Hells Angels Limited claims that it does not carry on business, that it is the owner of one property only, at Fairfield, which it holds as the bare trustee for a club, or rather the members of a club known as The Hells Angels, and that apart from that property it owns no other assests or property. It claims that it has no income and that it received no income during the three years the subject of the assessments.

On 11 April 1984, the s.206 request for an extension of time for payment was received in the recovery branch of the Australian Tax Office. On 30 April 1984, the application for the order to review in this court was filed. On 18 May 1984, interlocutory orders and directions were made and undertakings given. On 30 May 1984, the references to the Board of Review under s.187 of the Act were made, but the date of the hearing of those reviews is unknown.

The assessments made by the Deputy Commissioner cannot be reviewed under the Judicial Review Act, but I am satisfied on the material before the Court that The Hells Angels Limited has genuine objections to the assessments and desires that the objections be heard and determined by a Board of Review, and the matters have been referred to a Board of Review.

I am further satisfied that The Hells Angels Limited has made an application under s.206 of the Act for an extension of time for payment of the tax assessed, and that the Deputy Commissioner has made a decision to refuse to grant that extension. No formal notice of that decision has been given to The Hells Angels Limited. The fact that the application for an extension was not given until, at the earliest, 3 April 1984, and at the latest was received by the Deputy Commissioner, in relation to the appropriate officers, on 11 April 1984, is immaterial. As I said earlier, there is a dispute of fact as to this matter, and I find it unnecessary to determine that disputed question of fact. What is important is that subsequently to 11 April 1984 the Deputy Commissioner, by his actions, is making it clear that he desires to enter final judgment for part of the tax assessed and that indicates that he has not granted the application; see the views I expressed in Ricegrowers Co-operative Mills Ltd. v. Bannerman (1981) 38 A.L.R. 535, at p.544:

"In the present case, I do not find it necessary to give any definitive meaning to the word 'decision' appearing in s 13(1) of the Judicial Review Act. 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 same can be said with respect to a decision when an application is made to review a decision under s.5 of the Judicial Review Act. In passing, it is noted that The Hells Angels Limited has not sought reasons for that decision pursuant to s.13 of the Act. Difficult questions might arise as to whether the Deputy Commissioner can be compelled to give those reasons, but this is not a matter for me to decide at the present time.

Counsel for The Hells Angels Limited emphasized reliance upon decisions referred to in paragraphs (d) and (e). It is arguable that those are decisions to which the Judicial Review Act applies, but the reasons for those decisions cannot be compelled to be given; see sub-section 13(11) and paragraph (f) of the Second Schedule of the Judicial Review Act.

In my opinion the crucial matter for the present purpose is the decision by the Deputy Commissioner to refuse to grant an extension of time under s.206 of the Act. That is a decision which can be made the subject of an order or review under the Judicial Review Act. The real issue for determination is whether the Deputy Commissioner should be restrained from acting upon that decision, or whether the decision should be stayed pending the hearing and determination of the application to review that decision. If such an interim order is made, whether under s.15 of the Judicial Review Act or under the provisions of the Federal Court of Australia Act 1976, I can see no restriction on the power of the Court to make ancillary orders preventing the Deputy Commissioner from taking any further step in the Supreme Court proceedings, including the entering of judgment and the enforcement of that judgement pending the hearing and determination of the application.

Accordingly, I turn to consider the application for interim orders based on the decision not to grant an extension of time under s.206. In considering this aspect, I proceed on the basis of whether there is a serious question to be tried, and if so, to consider the balance of convenience; see Australian Coarse Grain Pool Pty. Limited v. Barley Marketing Board of Queensland (1983) 57 A.L.J.R. 425.

In considering the balance of convenience, I apply the principles expressed by Lush J. in Slater Walker Superannuation Pty. Limited v. Great Boulder Gold Mines Limited (1979) V.R.107, at 110, and approved by the Full Court of the Supreme Court of Victoria in Magna Alloys and Research Pty. Limited v. Coffey (1981) V.R. 23 at p.28, and I quote:

"The weight to be given to the various considerations shown by the authorities to be relevant will vary from case to case. All the authorities say in one way or another that the plaintiff must show he has a chance of success before he will be granted an interlocutory injunction. The authorities refer to the use of the injunction for the purpose of maintaining the status quo or maintaining a state of affairs which is on the balance of convenience appropriate to be maintained until the trial. They refer to avoiding irreparable harm to the plaintiff. There will be situations in which the plaintiff cannot expect to be granted an injunction unless he can show that he can prove positively the existence of his rights and the infringement of them. There will be other situations in which though the plaintiff's proof of his rights or the infringement of them is not strong, an injunction may be granted because to withhold it would do the plaintiff irreparable harm, while to grant it would not greatly injure the defendant. The possible variety of situations is unlimited"

The Hells Angels Limited relies upon the ground, amongst others, specified in paragraph 5(1)(e) of the Judicial Review Act. In this regard reference is made to paragraphs (b) and (g) of sub-section (2) of that section, and I read the relevant paragraphs. Paragraph 5(1)(e):

"5.(1) A person who is aggrieved by a decision to which this Act applies... may apply to the Court for an order of review in respect of the decision on any one or more of the following grounds: ...

(e) that the making of the decision was an improper exercise of the power conferred by the enactment in persuance of which it was purported to be made; ..."

Paragraphs 5(2)(b) and (g) are set out:

"5.(2) The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to- ...

(b) failing to take a relevant consideration into account in the exercise of a power; ...

(g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power; ..."

Counsel relied also on paragraph 5(2)(d), but I am not satisfied on the material before me that there is an arguable case, or even a serious matter for trial, based on that ground. Paragraph 5(2)(d) reads:

"(d) an exercise of a discretionary power in bad faith;"

In the absence of material identifying the reasons for the decision by the Deputy Commissioner under s.206 of the Act, I am satisfied, in the requisite sense, that The Hells Angels Limited has an arguable case based upon paragraphs (b) and (g) of sub-section 5(2) of the Judicial Review Act, and that there is a serious question to be tried. There is a genuine objection to the assessments. The Deputy Commissioner has accepted the contention of The Hells Angels Limited that it had no income and thus the Deputy Commissioner does not require The Hells Angels Limited to pay instalments of tax for the financial year ending 30 June 1983. In the absence of further material, there is much to be said for the view, and it is strongly arguable, that paragraph (g) of sub-section 5(2) could be established.

On the issue of discretion, counsel for the Deputy Commissioner stressed the structure and policy of the Act. He referred to the relevant provisions of the Act, and particular reliance was placed upon sections 201, 204, 206, 208 and 209. In this regard, and having regard to the particular reliance placed upon s.201, which I have already read, it is desirable to see what was said about that section by Mason A.C.J. in Deputy Commissioner of Taxation (NSW) v. Clyne (No. 4), (1982) 13 A.T.R. 481, at p.483, and I quote:

"I was informed that it is a somewhat unusual course for the Deputy Commissioner to commence proceedings for recovery in a court relying on a notice of assessment which is under challenge in proceedings under Pt V of the Assessment Act. It is to be hoped that this is so. The institution of proceedings for recovery on a notice of assessment which is challenged in proceedings under Pt V may operate oppressively and unfairly to a taxpayer. Fortunately, and this is conceded by Mr Priestly QC, for the Deputy Commissioner, the courts in which recovery is sought have a jurisdiction to stay or adjourn recovery proceedings when the notice of assessment is under challenge in Pt V proceedings, insisting, if it be approppriate, on the taxpayer giving suitable security of a suitable undertaking to meet the exigencies of the situation. In the ultimate analysis the Deputy Commissioner's charter to commence recovery proceedings, notwithstanding a challenge in Pt V to the correctness of the assessment, is to be found in s.201 of the Assessment Act."

His Honour then set out that section and continued:

"It is a provision which has been stringently criticized. However, it appears to be impervious to criticism for Parliament has not seen fit to amend it."

In this regard also, reference has been made to Mackey's case where the Court of Appeal was influenced largely by the fact that there was a paper scheme involved in that case as a method to ease the burden of tax. Nevertheless, due regard must be had to the provisions of s.201 of the Act and in this regard also reference is made to the extracts from Mackey's case which I have read earlier. To some extent those observations may have limited application to the facts of this case since there is no suggestion that in the present case there is any scheme entered into by The Hells Angels Limited to avoid liability for tax. I have regard also to the reasons for decision by Beach J. and his reliance upon those passages in refusing to grant a stay on execution of judgment in the matter before him. His Honour was not considering a review of a decision under s.206 of the Act and a stay of proceedings pending the hearing of an application under the Judicial Review Act.

In all the circumstances of the case I propose to exercise my discretion, on the balance of convenience, in favour of The Hells Angels Limited. In this context I have regard to the nature of the claim made by the company that it is a bare trustee of the property at Fairfield and has no other assets and no income and the action of the Deputy Commissioner in accepting that contention by the company in relation to the financial year ending 30 June 1983. There is no suggestion that the company is likely to dissipate any assets it may have so as to prevent the Deputy Commissioner from recovering the amount of tax, if any, which in due course the company is required to pay. If need be, the Deputy Commissioner can make application to vary the order proposed to be made pursuant to liberty to apply which shall be granted. Likewise, if in due course the tax must be paid, the further delay in payment could be made subject to monetary recompense and additional liability if thought appropriate.

I will hear the parties as to the form of orders to be made.