Thurecht, Ronald David v Deputy Commissioner of Taxation

CATCHWORDS

Administrative

law

- judicial

review

- decisions of

Commissioner of Taxation to refuse extens-ions

time for

payment of income tax - guidelines issued to guide officers dealing with such applications - applicants had applied to

the High Court for writs of

mandamus to compel Commissioner

to deal with notices

of objection - evidence that applicants

had been treated unfairly because

of this clrcumstance -

review of that evidence and consideration

f its slgnificance

- whether the guldelines were unlawfully restrictive of the

exercise of the Commissioner's dlscretlon

Income Tax Assessment Act 1936, ss. 166, 169, 174, 177, 186,

187, 188, 189, 201, 204, 206, 207, 208

and 209

Administrative Decisions

(Judicial Review) Act 1977, paras.

5(l)te) and 2(a),(b),(d) and ( f ) , S. 13

RONALD DAVID THURECHT AND ORS. v. DEPUTY COMMISSIONER OF

TAXATION

Nos. G76 to

G85 and G87

to G92 of 1983

Coram: Sheppard J.

Date :. 19 June 1984

Sydney

9EENSLAND DISTRICT REGISTRY

)

Nos. G76 to G85 and

~ a 7

to GX 00 1983

CZNERAL DIVISION

)

E E l T E E N

RONALD DAVID THVRECHT !AD ORS.

Applicants

I S E P U T Z COWISSIONER OF

TP-XATION

Resmndent

JUDGE MAKING ORDER	: Sheppard J.
DATE OF ORDER	: 19 June 1984

~	L
-

WHERE MADE

: Sydney

L T h e application be dismissed.

2 . The applicant Qay to the respondent

hls costs of the

application but to the intent

that the respondent have

only one

set of coscs in respect of the proceedinus No.

G76 to No. G8S and No.

G87 CO No. G92 of 1983 In respect

cozts incurred by

nlm durlnu the perlod

3 Novernber

1983 to 19 June 19d4.

?.	There be 1ibert-r to apply.

No. G76 of 1983

RONALD DAVID

!IliURKHT

Applicant

AND:

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G77 of 1983

BETWEEN:

RONALD VINCENT W R E N

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G78 of 1983

PETER CHARLES MARENDY

Applicant

DEeUTY COMMISSIONER OF TAXATION

Respondent

No. G79 of 1983

HERBERT PETER JOHN SACHS

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G80 of 1983

&crwEm:

BRIAN CARVOLTH ELLIOTT

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G81 of 1983

BFIWEEN:

CECILY MARCARET AHERN

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G82 of 1983

BETNEN:

GAIL ELIZABETH BmAR

Applicant

3 .

DEPUTY COHHISSIONEZ OF TAXATION

Respondent

No. G83 of 1983

BETWEEN:

-D	JOHN AHERN

Applicant

M&N

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G04 of 1903

BETHE€N:

ROY S m T

JOHN SIMPSON

Applicant

AND:

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G85 of 1983

BFIWEEN:

KENNETH JOHN FRANCIS JOHNSON

Applicant

AND:

..	DEPUTY COMMISSIONER OF TAXATION Respondent

No. G87 of 1983

CARLO DE LUCA

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G88 of 1983

BE3MCF.N :

PAOLO DE LUCA

Applicant

AND:

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G89 of 1983

BEXWEEN:

W I A DE LUCA

Applicant

AND::'

DEPUTY COMMISSIONER OF TAXATION

Respondent

MO. G90 of 1983

MARCO DE LUCA

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G91 of 1983

BETKEEN:

ROBERT NOEL CRANSTOUN

Applicant

DEPUTY COMMISSIONER OF TAXATION

Respondent

No. G92 of 1983

BE!lXEEN:

P m	NEIL SLIPPER

Applicant

DEPUTY COMMISSIONER

OF TAXATION

Respondent

CORM: SHEPPARD J.

DATE:

19 June 1984

REASONS FOR JUDGMENT

These sixteen applications have sought the review

of the

decisions of the respondent to refuse extensions of time for the payment of income tax. The applications were by consent heard'at 'the same time. The evidence in each case was agreed

to be evidence

in each of the others.

During the course of

the hearing it was agreed that

the application numbered G79

of 1983 made

Herbert John Peter Sachs should be dismissed

and that no order should be made as to the costs of either

party.

On 7 December 1983 I made that order accordingly.

The requests for extension terms by solicitors acting on behalf

of time were made

in similar

of each applicant. That

made in the matter

Brian Carvolth Elliott

(No. G80 of

1983) was made in a letter to the respondent dated

6 July

1983. It was as follows:-

“We have to hand your letter addressed to our

client dated the 19th May, 1983.

We now enclose an application under Section

206 for an extension of tlme for payment of

the outstandinq tax in respect of each of

the Income year(s) ending 30th June. 1976,

30th June, 1978, 30th June, 1979 and 30th

June, 1980.

Each application

is made upon the followins

grounds

1. Our client has lodged a request under

Section 187. Our client

is confident of

success

and has, to date,

shown

his

willingness to have the matter determined

by the Courts.

The time lapse between

your reference and hearlng in the Supreme only a matter of months.

2. In view of this

it is submitted that the

revenue

would

not

prejudiced

granting such

an extenslon as interest on

the

outstanding

tax

will

continue

accrue

ints

favour

ntil

fmal

..	determination of the matter.

3. If

our client borrowed funds to pay the

outstanding

tax

the

rate

interest

payable

would

excess

that

payable by you in the event of success. The interest paid would form part of our

clients

assessable

income

whereas

the

interest on moneys borrowed and paid to

you would

not be deductible.

Therefore

it is submitted that the

only

prejudice as a result of the refusal of the application for an extension of time to pay would be to our client.

view of the

basis of our clients’

request(s) under Section

206, we submit that

full details of assets and liabilities would

not be relevant to your consideration.

We also request that you undertake not to

commence proceedings for

recovery

until 30

days after notice of your decision has been

given to our client. ”

There is not a letter dated 19 May 1983 to Mr. Elliott in evidence. But

there are in evidence four

letters to him

each dated

5 May 1983 and four letters each dated

20 May

1983. These were of a formal kind. Those of 5 May 1983 advlsed him of the outcome of objections made in respect of notices of assessment of income tax made in respect of the income tax years ended 30 June 1978. 1979, 1980 and 1981.

These are respondent’s letters.

not

all

the

same

years

dealt

with

in the

Some of the objectlons were allowed in

part. The letters of 20 Hay 1983 said that. notwithstanding the objections. the tax assessed was due and payable. Demand

was made for

payment wlthin thirty days

of the date of the

letters.

But the letters also said:-

. .

“Should you be unable to pay

the amount due

within 30 days

consideration may be given to

withholding legal action for a short period

allow

payment

made.

application by you for such a concession

will need

t o be supported by full details

current assets and liabilities together with

a firm proposal for payment in full and must

be made before the expiration

of the 30

day

Where further time is allowed it

should be clearly understood, however, that

any such arrangement will be of short

duration and will be subject to additional

tax for late payment accruing at the rate of

20 per cent per annum.."

The discrepencies in the letters concerning the income

years which were In question are not of importance. Clearly,

however, the

respondent, namely, the years endinq 30 June 1978, 1979, 1980

and 1981.

years

question

are

stated

the

With their letter formal requests for extensions of time siqned on behalf of	of 6 July 1983 the solicitors sent
Mr. Elliott.

The respondent replied to

Mr. Elliott's solicitors'

letter on

15 July 1983. After acknowledging the

letter the

respondent said:-

"I am not prepared to grant an extension as

requested.

letters

May

1983

indicated that I was prepared to defer legal

action for recovery

of the additional tax

payable under Section

2 2 6 ( 2 ) of

the Income

Tax Assessment Act,

provided the balance

your account was

paid

within 30 days of the

. date of that letter. I also indicated that

I would

prepared to

consider

application to

pay

the

amount

instalments, provided that

request

was

lodged within the 30 day period accompanied by full details of assets and liabilities.

As payment was not made as directed, and as your request for an extension to pay did not comply with the terns advised, I am left with no alternative but to commence legal

action for recovery of the balance of your assessments for the years ended 30 June 1978, 30 June 1979, 30 June 1980 and 30 June 1981.

You are

reminded that

additional tax for

late payment continues

accrue

at the

statutory rate

of 20% per

annum while the

balance of your debt remains unpaid.

The

amount outstanding for the years

ended

30 June 1978. 30 June 1979, 30 June 1980 and

30 June 1981 is as follows:-

Balance 1978 Assessment

.$ 29024.84

Additional tax for late	payment	12476.00
Balance 1979 Assessment	79575.83
Additional tax for late	payment	27055 . 00
Balance 1980 Assessment	14164.05

Additional tax for late

payment

3399.00

Balance 1981 Assessment

959.96

Additional tax for late

There are similar letters written in each of the other

cases. They vary in some of the detail in that the same tax

years are not involved in each case. Otherwise there is an

payment

109.00

$166763.68

essentlal similarity in all the cases. For convenience, submissions on the evidence in the Elliott application. They agreed that the circumstances of the other cases were so similar that it was unnecessary to refer to the detail of the

counsel

centred

their

analysis

of the facts and legal

evidence in those cases.

I shall take the same course.

The respondent's letters of 15 July 1983 evidence the

10.

decisions review of which is sought by

the applicants. The

decisions to refuse the applications for extensions of time

were not made by the respondent himself but by various other

officers in the Brisbane Taxation Office. Strictly it may

have been necessary for the applicants to join

as respondents

each of the officers who made those decisions. It was

agreed, however, that there was no purpose in such a course.

No point officers who in fact made the decisions.

was

taken based upon the failure to join the

The applicants were sixteen

of twenty-seven persons who

made appllcation to the High Court of Australia for orders that the Commissioner of Taxatlon show cause before a Full

Court of the High Court

of Australia why a writ of mandamus

should not issue commandinq the Commissloner to exercise,

accordinq to

law, the functions Conferred and imposed upon

him by

S. 186

of the Income Tax Assessment Act

1936 ("the

Act") in

relation

the

determmation of notices

objection lodged by the applicants against assessments issued

to them in respect of various Income tax years. On

15 April

1983

Mason

J., in chambers, made an Order nisi to thls

effect.

May

1983 the Orders nlsi were discharged by

consent.

The respondent was, by consent, ordered to pay the

costs of each

of the applications.

11.

"he orders nisi were discharged by consent because they had had their effect.

They caused the Commissioner to deal

with each of the objections in question so that there was

longer any purpose in the proceedings.

The evidence in the

applications for writs of mandaaus disclosed that periods ranging from just short of a year to periods in excess of

five years had elapsed since notices

objections to the

various assessments had been

lodoed.

Mr. K.E. Scells is an accountant practising in Brisbane.

. -

Four of his clients were amonqst the twenty-seven applicants for wrlts of mandamus. "hey are not applicants for judicial review in the present cases. Mr. Scells' clients received

demands for payment of outstanding tax similar to those sent

to Mr. Elliott. In an affidavit he said that he

was

instructed to seek an extension of time

to pay the

outstanding tax pending the

outcome of appeals against the

disallowance of the objections.

On 7 June 1983 he

had

discussions with two officers, Messrs. Miller and Barclay, who, he said, were employed respectively in the Recovery Section and the Appeals Section in the Brisbane Taxation

Office. He was told that the Australian Taxation Office guidelines in respect of extensions of time to pay Outstanding tax were such that the extensions would only be

qranted in cases

of extreme financial hardship where full

details of assets and liabilities were

provided.

12.

Hr. scells said that on 9 June 1983 he telephoned a Mr. Talty who was employed in the Brisbane Taxation office as

Assistant Deputy Commissioner.

He said that he referred

his discussions with the two officers from the Recovery and

Appeals Sections.

He also mentioned that his clients

were

part of the group of twenty-seven who had brought proceedings other officers. Mr. Scells' affidavit continued:-

in the High Court against the Commissioner. According to Mr.

"8.

I do

not recall the precise words used

by Mr. Talty or myself

during

the

ensuing conversation apart from

the fact

that Mr. Talty prefaced the ensuing

conversation by stating that it was "off

the record".

9. Mr. Talty then said that the chances as far as the Quinces (Mr. Scells' clients) were concerned for extensions of time

were

particularly

limited

the

Tax

Office was taking a particularly hard

line

regard

requests

for

extensions of time

to pay by those

persons who had

been

Applicants

for

Mandamus.

10. He further told me that

it was important

that the Tax Office made an example of mandamus applicants because if the word

around

people

got

that

could

successfullv mandamus the Commissioner

without havins to pav the ~~outstandinq

tax then the flood sates would open and

a flurrv of Mandamus Orders which would

follow would make the Tax Office unable

to cope with the

volume."

The emphasis is mine.

13.

Mr. $cells said

that

hat

was

the

of the

conversation.

He relayed the substance of the conversation

to the solicitors acting

for his clients who later paid all

income tax outstanding in	respect of the assessments which
they disputed.

Hr. Talty has no recollection of ever speaking to Mr.

Scells. But he has given evidence, to the detail of which

shall later come. which would,

if accepted, tend to persuade

me that it was unlikely that he said the things attributed to

him by Mr. Scells

in the paragraphs of Mr. Scells' affidavit

which I have quoted. Addltionally, evidence was given by the

respondent himself and various of his officers in Brisbane to

the ffect hat he

decisions

refuse

the

various

extensions of time for payment were not made

by Mr. Talty but

by other officers. The evidence was led to establish

that it

was no part US Mr. Talty's duties to determine the outcome of

such applications

with the result that

if he dld say what Mr.

Scells attributed

to him. it had no bearing on their outcome.

Mr. Scells' evidence of what

Mr.

Talty is alleged to have

sald to him is the basis of

the applicants' submisslon that

the respondent exercised

h i s power to grant or refuse the

extensions of time which were sought

in bad faith; see

paras.

5(l)(e) and (2)(d)

of the Admlnistrative Decisions (Judicial

Review) Act L977 ("the Judicial Review Act").

Before coming to

an analysis of the evidence

on that

14.

matter, it is necessary to mention the evidence

in support of

other grounds upon which reliance was placed, the provisions

of a number of sections of

the Act and the provisions

of the

Judicial Review Act which are relied on.

In Ahern v. Deputv Commissioner of Taxation

(1983) 50

A.L.R. 177

I referred (p.

184) to certaln guidelines which

the Commissioner of Taxation had formulated

for the guidance

of officers dealing with applications for extensions

of time

to pay income tax.

The guidelines to which I there referred

were dated 3 November 1981,

5 January 1983 and 8 March 1983.

Of those only the guidellnes of 8 March 1983 are relevant to the present cases. Also relevant are guidelines of 28 April

1983 which were apparently not thought to be relevant to the

circumstances of the

case

because

was

origlnally

believed that the declsions in question had been made on

April 1983, not

28 July 1983. as I found to be the case (p.

185) .

The guidelines

of 8 March

1983

said

that

further

consideration was being given to the policy to be applied in

respect of

the collection and recovery

of tax in cases of

disputed assessments. It

that matter with which the

guidelines of 28 April 1983 deal. The March guidelines deal

comprehensively

with

extensions

time

pay

circumstances where there is no dispute about

an assessment.

Applications for extensions

time in

this category are

15.

divided

into

short-term

applications

and

long-term

applications. In

required to demonstrate that he does not have the means

necessary to discharge his liability when it falls due. In

relation to the latter the taxpayer is

such a case taxpayer shows that he will, within the period for which he

extension vi11 only be granted where the

seeks an extension of time, have the ability,

or at least the

potential, to pay the tax. Short-term applications are dealt

wlth on a less specific basis. They are described as those

which offer payment within three months of the due date and,

1 1 1 any event, before

30 June

of the income tax year in

which

the applicatlon is made.

The guidelines are lengthy and deal

wlth a varlety of circumstances, lncludlng cases of severe

hardship coming about

reason of factors outside the

taxpayer's

control.

So far

general

requests

for

extensions of time are concerned, whether short-term

long-term, the clrcumstances of the taxpayer making the application.

prime

consideration

the

financial

The qudelines

of 28 April 1983 say at the outset that

"the new arrangements for granting extensions

of time for

payment of tax and for remissions

of tax that were set out in

Head Office memorandum of

8 March 1983 are

to apply with

equal force in both disputed and non-disputed cases."

The

guidei'ines go on policy that is to apply in respect of disputed assessments

to say that the collection and recovery

will depend on whether the dispute

is in respect of

16.

so-called artificial	or paper scheme of tax avoidance," or is
a genuine dispute.	There is a reference to a memorandum of

31 b r c h 1983 in which a number of

schemes are identified.

All these are to be treated as artificial schemes. The memorandum is not in evidence so that one does not know to which schemes reference is being made. The schemes identified in the memorandum are not, however, the only

schemes which fall within the

Commissioner's description,

"artificial or paper scheme. The memorandum is

not

exhaustive of the schemes which the Commissioner considers to

be "artificial.

Paragraph 4 of the guidelines of 28 April 1983 is as

follows :

"4.

In respect of artificial scheme cases in

dispute,

there

will

special

arrangements for extension

of time to

pay beyond those general rules contained

in Head Office memorandum

of 8 March

1983. This will mean

that

once

objection is determined

against

taxpayer, the taxpayer will be advised of the tax outstanding and the accruing late payment penalty and that if the tax

is not

paid within the stipulated time

(30 days),

legal

action

for

recovery

will commence without further

notice.

On no

account is any

50150 arrangement

to be entered into

in such

a case as a

result of the tax

in dispute.

Legal

recovery action is not to be taken until

_ .

an objectlon has been determined."

The guidelines go on to

provide that

the taxpayer

17.

does not pay

the tax within the stipulated time and the

guidelines of 8 Uarch 1983 do not apply, legal recovery

which it is not relevant to mention in relation to the

present cases.

action should

commence.

There is a qualification to this

The guidelines then deal with what are called “genuine dispute cases.”

The guidelines go on to say:-

”7. ... it has been decided that there will extension of time in addition to the arrangements set out in Head Office memorandum of 8 Harch 1983. In these cases an offer by the taxoayer to pay 50 per cent of the tax in dispute (plus the full amount of tax not in dispute) subject to the balance beinu subject to additional tax for late payment from the original due date, is to be accepted as sufficient to defer legal recovery action for the period of the stage of the dispute in which the payment is made.

be a special basis for granting an

........ ........ ........ ........ ........

8. Where a taxpayer makes such an offer at the objection stage and the objection cannot be quickly determined, the offer is to accepted be pending the determination of the objection but it is to be made clear that the arrangement lapses det rmination onof the

objection. However, if the objection is determined against the taxpayer,

similar offer by the taxpayer at the reference or appeal stage is to be accepted pending the resolution of the

.. .

dispute in the taxpayer‘s case or in a case that is regarded by the

Commissioner as

on all fours with the

taxpayer’s case.

9. Where a taxpayer is not prepared to pay

50 per

cent of the tax in dispute plus

18.

m y amount of tax not in dispute and the

other bases for granting an extension of

time

not apply, action should be

taken to determine the objection

as soon

as possible.

Once

that

is done the

taxpayer should be advised that legal recovery action will commence without further notice.

........ ........ ........ ........ .......

Again there	are qualifications which it is unnecessary to
mention.

I began the recital of the facts in these matters by

reference to solicitors for each applicant on

the

letter

written

each

case

by the

or about 6 July

1983.

seeking an extension of time. Each

of these letters which

now part of a file kept in the office of the respondent is endorsed by the officer who dealt with the matter

with the

words, "Not in accordance with

HIQ memorandum 28 April 1983.

Refuse EIT." The letters "E/T" stand

for

"extension

time." The wording used by each officer

is Identical in each

case, notwithstanding that there does not appear to have been

consultation amongst the officers who dealt with the various

applications.

That 1 s a

matter upon whlch counsel for

Ltu:

applicants place reliance.

It application for extension of time to pay

appears that each application was regarded as

an assessment in "an

artificial or	paper scheme" case. The relevant part of the
guidelines of	28 April 1983 therefore required the cases to

19.

be treated-in

accordance with the guidelines

of 8 March 1983,

that is as if they were cases where there was no dispute

about the amount

of income tax assessed.

adjustment sheets, the notices of objection and the letters

notifying the disallowance of the objections. The latter are

evidence

are

the

notices

assessment,

the

the letters

of 20 May 1983 earlier referred to. Havlng

looked particularly at

the

adjustment

sheets

is not

apparent to me

that

each case lnvolves only an artificial or

paper scheme.

It may be

that it

does but the evidence is

such

that

one cannot be sure. For the purposes of his

argument,

however,

counsel classifiction of the cases Into the category of artlficial

accepted

the

r spondent's

paper scheme cases. What he did do was to rely on this

distinction In the guidelmes as one whlch

confined the

exerclse of the discretion Conferred by

S .

2 0 6 of the Act

that an officer making a decislon as to whether to grant

refuse an extension of time was denied the discretion whlch

the legislature Intended him to

have.

There was

the schemes which were involved were not schemes which were

similar to that considered by the High Court in Commissioner

discussion during the argument as to whether

of Taxation v.

Westraders Ptv. Limited (1980) 144 C.L.R. 55.

The scheme

there

question

raised

for

consideration

questions as to the construction of

ss.

36 and 36A of the

20.

Act.	If the schemes in which the present applicants had been

involved were of this kind, there would be

a s rious question

as to whether the respondent could be correct

in taking the

view that the schemes were not effective to achieve the

various applicants' objects in reducing the incidence of tax

payable by them. If that were the case, it would seem to me

that that

may

have been

weighty matter upon which the

applicants might have relied

in making their applications to

the respondent for the extensions of time which they sought.

Whether it would have been a matter

which the respondent was

bound, as

a matter of law,

to take into account, I do not

decide.

There are two reasons why I

do not.

The first is

that the applicants themselves did not rely on this matter in

their applications for extensions

time. If a matter

riot drawn to a decision maker's attention, it seems to me to

be difficult for

an applicant for judicial review to persuade

the Court that the matter upon which

he relles In such an

appllcation was a matter which the decislon maker was bound

take

into

account.

Ido

not

make

that

statement

absolutely, but I think it is one whlch will have application in the great majority of cases. Secondly, the material which

is before me does not enable me to conclude that the schemes

in the present cases were sufficiently similar to that in the

Westrader's case to make

that case applicable. The income

tax returns are not in. nor is there any evidence which would

show into what transactions the applicants entered

or on what

basis

they

claimed

deductions

or contended

that

moneys

21.

received by them were not inCOme.

Counsel for the applicants

conceded this to be so and argued this part of the case only

faint ly

The respondent, as I have

mentioned,

refused

the

applications for extension of

time on or about 15 July 1983.

On 21 July 1983 the solicitors for

the

applicants wrote to

the

respondent

informing

him

that

heir

clients

were

dissatisfied with his decisions. Pursuant to

sub-sec. 13(1)

of the

Judicial

Review

Act a

request was made to the

respondent for findings on material questions

statement

in writing

setting out his

fact and the reasons

for

his decisions.

The respondent was notified that applications

for judicial review pursuant to S. 5

of the Judicial Review

Act were to be made. The respondent replied

to these letters

on 29 August 1983.	He referred to the request which had been
made and continued:-

"Your attention is drawn to sections

201,

202, 204 and 207 to

209 of the Income

Tax

Assessment Act

which encapsulate the policy

that

income tax assessed

taxpayer

should

be paid notwithstanding

that

the

taxpayer's liability has been put in issue through the objection or appeal procedures.

The Commissioner's current practice relating to requests for extensions of time where an assessment I s disputed has regard to the legislative policy as indicated by the

. provisions mentioned.

In deciding whether

the

circumstances

of a

particular

case

warrant the granting

of an extension of time

for payment, each application is considered

in the context that as far as reasonable and

practicable income tax should be collected

22.

the financial year in which

it becomes

due and payable.

Moreover, every effort is

be -de to collect tax

soon

possible

after it becomes payable.

extension of time will only be granted where

reasonable grounds are given by a taxpayer

in support of his application, together with

sufficient details of his financial position

to enable an assessment of the taxpayer's

ability to pay to be made. Where any

deferment

arrangements

are

approved,

the

amount outstanding will generally be subject

to additional tax

in terms of

section 207

which will accrue from the date the tax

became due and payable.

I note that your letter

of 6 July 1983 which

accompanied the applications for extension

of time contained no indication of any

hardship, extraordinary or otherwise, which

might result to the taxpayer from having to

pay the tax and declined to submit details

of assets

and

liabilities.

The

grounds

stated in your

letter

were

considered.

While they disadvantages to

included

suggestion

that

the taxpayer might accrue

from having to borrow money to

pay

tax,

there was no indication

at all that such

borrowing

would

involve

the

taxpayer

serious financial hardship.

would be prejudicial

to the

revenue to

grant

extensions of time

for payment of

additional

tax

where

other

tax

remains

outstanding, no proposal for payment has

been made ablllty to pay has been forthcoming."

and

information

concerning

Subsequently, statement pursuant to

the

respondent

provided

formal

S . 13 of the Judicial Review

Act.

referred to

the

earlier

correspondence

including

the

applicants' requests for extensions of time and his refusal

of those applications on 15 July 1983. To take Mr. Elliott's

case as an example, he then referred to the balance of income

tax and additional tax outstanding in

respect of the income

23.

tm years ending 30 June 1978, 1979, 1980 and 1981. The

amount, as previously mentioned, was $166,763.68. The

respondent said that there was no express ground specified by

Mr. Elliott justifying an extension of time for payment other

than those set out in

his solicitors' letter of 6 July 1983.

There followed reference to certain documents to which he had had regard in making his findings. He again emphasised that he had considered,

"the absence of

evidence put forward to show

either that you were unable to pay your outstanding tax or that if I were to assume that you were unable to pay your outstanding tax immediately, you would be able to make

arrangements to pay either in the short or the long term, if an extension of time were granted. "

The respondent went on	to state hls reasons for hls decision
as follows:-

"The reasons for my decision were that:-

(1) the amount of outstanding tax as at 15

July 1983 was $166763.68;

( 2 ) there was

no evidence put forward by you to show that at the time of application you were unable to pay your debt: and

( 3 ) you were a participant in an artificial tax avoidance scheme in respect of the Income year which is the subject of objection.

Consequently it was

not an application to

which I should grant favourable consideration pursuant to the

guidelines

laid down by the Commissioner of Taxation as

24.

set out

in his memoranda to me dated

B March

1983 and 28 April 1983. Copies of these

memoranda are attached

hereto

marked

"Attachment A" and "Attachment B".

Further,

no reason was apparent why I should, in the

exercise

discretion

through

authorised

officers.

depart

from

the

guidelines in order to grant the extension

sought.

The attachments are the guidelines of

8 March 1983

and 28

April 1983 to which reference has already been made.

The applications for judicial review were filed on

September

1983.

Included

amongst

the

orders

sought

were

applications

pursuant

sub-sec.

13(7)

the

Judicial

Review Act for additional statements containing further and better particulars with respect to the respondent's reasons.

The applications came into the

list

f o r

directions on

October 1983.

They were in the list again for directions on

7 October 1983 and stood over

for further directions to

November 1983. The matters were then stood over for further

list on that date it was decided to proceed with the hearing

of the applicatlons for further reasons pursuant to sub-sec.

13(7) of the Judicial Review Act. It was also declded that

cross-examination should take place in respect of the issue

to whxh Mr. Scells' evidence gave rise. Cross-examination

directions to

4 November 1983. When the matter was in the

did take place accordingly.

There was discussion at the end of the day as to

how the

25.

matters should proceed. Counsel for the applicants said that

had

instructions

withdraw

the

applications

made

pursuant to sub-sec.

13(7)

of the Judicial Review Act and to

proceed with the substantive applications for judicial review

pursuant to S. 5 of the Judicial Review Act. That course was

agreed on.

Counsel

for the respondent said that it appeared

to him "to be necessary now to take this matter further in

relation to the action, if any. taken

in Canberra in relation

to the matter."

By thls I took him to mean that he was

contemplating

calling

one

offlcers

from

the

Commissioner's Canberra Office.

The matters could not proceed

untll 7 December 1983.

They

were

adjourned

that

day

when

the

hearing

was

concluded.

come now to the detail of the evidence.

have

earller referred to the substance

M r .

Scells' affidavit.

He was

cross-exammed.

The thrust of the cross-examination

was to suggest

to him that it was unlikely that

he would have

spoken to Mr. Talty because the position had been made clear

to him by Messrs. Miller and Barclay in the discussion he had

had with them. He agreed

that he knew, after his discussion,

what

the

guidelines

provided.

also

agreed

that

provided no details of his clients' financial circumstances.

In re-examination Mr. Scells was asked whether, during

26.

his discussion

with Hr.

Talty, the name

of any person was

mentioned to him by Hr.

Talty as the person handling, "the

mandamus matter."

Mr. Scells saidr-

"Yes. I omitted in my affidavit - and I have been thinking about it since - to state that

he said

that all these mandamus cases were

being handled at much higher levels than his

level, and that

it was Second Commissioner

Boucher in Canberra who was handling

them."

Counsel for the respondent sought leave to ask further questions because Mr. Scells' answer did

not arise out of the

cross-examination.

I allowed him to do so.

In the course of

that cross-examination Mr. Scells

aid

that

Mr. Talty

mentioned that, "the whole matter

mandamus was being

handled by Second Commlssioner Boucher in Canberra."	Later,
Mr. Scells said:-

"I do not

know that I could repeat the precise words, but in the latter part of the

conversation

Mr. Talty indicated the fact

that the mandamus cases were being handled by Commissioner Boucher in Canberra. and in the light of what I mentioned earlier on

there about the questions of extensions, I naturally took it that Commissioner Boucher had control over the total situation of

these mandamus cases

- the actual applying

for the wrlts as well as the collection

tax later on. "

R r .

Talty

swore

an affidavit.

He was also

cross-examined. Before

that occurred, he gave oral evidence

supplementing some of what he had said in his affidavit.

27.

the course of this evidence he explained his own position in the Brisbane office of the Commissioner of Taxation. Mr. Talty holds the position, Assistant Deputy Commissioner of

Taxation

(Compliance),

Brisbane

Taxation Office.

The

respondent, Hr. Scanlan, is the

Deputy

Commissioner

Taxation in Queensland. There are three

Assistant Deputy

Commissioners in his office. In addition to Mr. Talty, there are the Assistant Deputy Commissioner (Appeals), Mr. Taylor, and the Assistant Deputy Commissioner (Management), Hr.

Venning.

Each of the assistant deputy commissioners is in

charge of a

section of the

operations of the

Brisbane

Taxation Office. Mr. Talty's area includes assessment

and

dealing with objections to assessments.

Mr. Taylor's area,

as his designation indicates, is that assessments. Mr. Venning's area

of appeals against

includes

recovery

outstandlng income tax and dealing with applications for

extenslons of time to pay outstanding income tax.

Despite these different areas is a certain overlapping. For instance,

responsibillty. there

Mr. Talty's section

may seek

assistance

from the

Appeals

Section

if the

consideration of

whether an oblection should be allowed

disallowed involves

an especially difficult question.

Mr.

Talty's section may sometimes deal

with applications for

extensions of time, particularly if they are made pending the

determination of an objection. Even after an objection has

been disallowed, one or other of the officers in his area may

28.

deal with

an application because of his close knowledge of

the problem which

is involved in the case. Broadly speaking,

however, there is the division of functions to which I have

referred.

Mr. Talty was asked whether he received telephone calls

accountants and solicitors, about aspects of income tax. His

answer was, "I get them by the dozen." He was asked whether

he made notes of telephone conversations and said:-

from

time

to time

from

various

people,

particularly

"My

policy

or my modus operandi

with

recording telephone conversations

is that if

it	is an innocuous telephone conversation

that seems to

me to have no call for any

follow-up action,

that

I should not have to

discuss

with anyone else, that It is

complete In itself, I do not record it.

it I s one that I think is important enough

that I may have to recall it in the future,

even

if it

I s on a slip of paper three

inches square, I will simply say, Friday.

4/11, so and so re so and so.

Maybe no more

than that.... It goes on to its relevant

file.

Mr. Talty's evidence about the alleged conversation with

Mr. Scells needs to be considered against this background. In his affidavit

he said that-Mr. Scells was not known to him

either personally or by reputation nor could

he recall having

had any direct dealings with

Mr. Scells' firm of chartered

accountants. He said that he had no recollection of any

conversation

with

Mr.

Scells

9 June 1983 or, as I

29.

understand his evidence, at any other time.	Hr. Talty said
he orders nisi for mandamus but said that

aware that

dealings with any individual taxpayer in that group nor had

he dealt himself with any Of the objections in respect of

which the orders nisi were obtained. However, it was his

responsibility to ensure that subordinate officers in hls

twenty-seven

taxpayers

had

obtained

he had had no direct

section determined all the

responsibly determined before the return date stipulated in

the orders nisi.

objections

which could

Mr. conversation deposed to in paras.

Talty said that he had no recollectlon of the

8 , 9

and 10

of Mr.

Scells' affidavit. He also sald

that to the best

of his

knowledge he did not think that

Mr. Scells' clients

or any

other taxpayers involved in the applications for writs of

mandamus had been treated differently to any other taxpayer

applying for an extenslon of time to pay tax. By that I take

him to mean that hls undgrstandinq was that the applications

had been dealt wlth by officers in accordance wlth the March

and Aprll guidelines earller referred to and not otherwise.

Those applications.

as evidence to which

shall in due

course come indlcates, were determined by officers in the

Management branch or section and not the Compliance branch

section which was controlled by

Mr. Talty.

Mr. Talty said

that he applications for extensions of time for payment brought by

had taken no part In the determination of the

3 0 .

some of

the taxpayers who had obtained the orders nisi for

mandams. He added

that he had

not

discussed

those

applications for extensions

of time with any of the officers

I	involved	their	d termination.	in
I

In his oral evidence Mr. recall ever having made off the record comments about a

Talty said that he could not

taxpayer's affairs.

specifically about a taxpayer, provided he had knowledge of

the taxpayer's affairs, then he had an obligation to discuss

them to the best of his knowledge. There was no question of

He said

that

were

telephoned

anything being on or

off the record. He said that he did not

make off the record comments. Mr. Talty was asked whether he

had said to anyone that if the word got around that people

could successfully mandamus the Commissioner

without having

to pay outstanding

tax, certain results would follow. His

answer was, "To the best of my knowledge, no."

There was then

put' to him

Mr. Scells' oral evidence

concerning

Mr. Boucher. His answer

was, "Whether to Mr.

Scells or anybody else at

that

stage, yes, I would have

mentioned Hr. Boucher's name." His evidence continued:-

"In what context? --- In the initial stages of

this set of mandamus actions, in my position I was advised by Hr. Bath, the director,

that

hree

mandamus

letters

from

the

relevant solicitors had turned up in the

section. I phoned Mr. Ahern to

find out how

many

there

were.

sorted that

out. I

referred the matter

to Miss

Haley,

the

31.

principal appeals officer, and at

the same

time I phoned my opposite

number

Melbourne to see if there were any inatances

there, and also

I was in touch with head

office to forewarn them there.

This is other mandamus proceedings? ---That particular group.

But this particular group were past history

at this point of time. were they not?

---

No.

I	am talking about my connection with Mr.

Boucher.

The conversation I am asking you about is after the mandamus proceedings. This is Mr.

Scells talking about

a conversation which he

says

had

with

you on 9 June,

the

conversation referred to in this affidavit.

He says in

that conversation you said - and

I will paraphrase this

- "Look, the question

of extensions

of time

in respect of those

people who took mandamus proceedings against

us is being dealt with in Canberra

by Mr.

Boucher." First of

all, did

you say that?

---I have no recollection of saying it, but

the context could be this: once the mandamus

actions were complete, once the objections

were determined, for which I

am personally

responsible - once that was done, the matter

primarily a matter for the

appeals

section. In any action taken thereafter,

certainly in the appeals section, Miss Haley

supplied

with

copies

all correspondence

relevant

this

exercise

which she considers it was necessary for me

to know. In that context I know that a

letter summarizing the situation after the

issue of objections decisions had gone out,

was in fact prepared, I presume - and I am

head office, and it would have been dealt

only presuming - by Mlss Haley and sent to

with by Mr. Boucher.

Has that got anything to do with extensions

of time in relatlon to people?

--- No, it has

not, except to say that that memorandum says

that the March/April guidelines had been

'"applied at that

point.

Finally,

his

oral

evidence

in chief Mr. Talty

32.

reasserted that he had na

It himself been concerned at all in

any of the applications for

extension of time which were

made.

He also

said

that

had

searched

his

notes

telephone conversations and did not have a note

any

conversation with Hr. Scells. His evidence continued:-

"But you

have not mentioned

that

before

because not every conversation

does go on to

the

note? --- That

is true, not every one

does. I'

Mr. Talty was cross-examined of the cross-examination it emerged that he had kept a file

at length.

In the course

in relation to

the mandamus

applications.

The

file

was

headed with the

name of the applicants' solicitors.

He had

had this file because he was charged with the task	of
ensuring that the objections in question were dealt with,	so

far as they could be. before the return date of the orders nisi for mandamus. During this period, that is, prior to the objections being dealt with, he had discussions more than

once with the applicants' solicitor.

It followed, and Mr.

Talty conceded this, that on or about 9 June

1983 when Mr.

Scells alleges he spoke to

him on the telephone,

he had well

in his mind the general clrcumstances of the cases including the fact that each of the applicants amongst others had

made

application ... for writs of mandamus. His answers led me to ask some questions. Two of the questions and his answers were as follows:-

33.

"was this mandamus application something

that

caused a good deal of concern in the office? ---Yes, it did because there is a large

group of them, 27.

UP until that time, any

mandamus

actions

that

had

forewarnings

that

unless

determined

objections or handled in other ways compliance files, they would go for a mandamus action, they are always matters which were under directive must be immediately brought to the attention of the Deputy Commissioner. He must know first up, and that being so, then he sets his deadlines to when reports will be completed and when action will be completed or the extent of almost all letters.

this generate a certain amount of resentment In the office? ---It does not generate resentment in Compliance because I guess we are fairly inured after the last

Does

four or

five years.

There

1 s nothmg much

else that can come up in the way of priorities which we have not already struck, but if you get a group of 27 mandamus at the one time, that is certainly g o m g to get top attention and that is what thls lot got."

In the course of the cross-exammation counsel for the

applicants put

to Mr.

Talty a hypothetical question asklng

him whether, if someone had rung him to ask about the position with respect to an extension of tlme. he would have

expressed any view.

He said:-

"I doubt it. I would have stopped them at

the point of

saying "Have you recelved a

recovery letter yet?" If they sald yes, I

.. .would say,

"Do you intend to pay? Are you going to apply for an extension of time?" I would probably also have said, "Have you got

a deferment arrangement? Have

you paid 50

per cent of the tax in dispute or not?"

34.

Mr. Talty’s cross-examination continued:-

“Apart from asking some questions, would you

express an opinion about their prospects of

getting a deferment? ---I do not think so,

no.

You would just ask questions and not express

any view at

all? ---My normal response would

be, “Look, as far as the decision

the

extension of time

is concerned, it will be

under the policy as

I understand it.

will not be decided in my office.“

khat is the point of asking questions unless

you are prepared to express

opinlon?

---Because

you

can

guide

them.

May I

elaborate on that? Some of the calls

I have

had are pre-mandamus, so I would say before

you entered into It

- - -

No,	I am asking you about the events after

the mandamus orders were made.

do not

want you to digress Into a situation that

may have been the case before that.

I am

simply asklng you the question.

I would

llke you to answer

It, whether if people had

asked you about thls time - this is about

June 1983, for

example

what

thelr

prospects

were,

havlng

been

involved

mandamus

proceedings,

of gettlng an

extension of time, I suqgest you would have

answered them?

- - - K

suggest I

would answer

them that it wlll ’ rest wlth someone a lot hlqher than me because of the Importance of thls whole group of 2 7 , and knowlng at that stage that the matter was being dealt with at the highest level.

HIS

HONOlTR:

they were in a speclal

category? ---They are in the sense that they

are a group of 27 which has been given total

priorlty

meet

return

dates.

That is

still happening. There

1s still a total

.. interest at the highest echelons, because

a drop

copy

the

letter

I got

the

Commissioner hlmself sent a report to the

office of

Mr.

Grant, who 1s the chief of

appeals

and

advising

area

Canberra

reporting progress

on 11 May.

35.

Now at that stage

I have completed

involvement and responsibility and having

the objections determined by my staff down

the line.

The rest of it as

far

extenaion, recovery action, any other facet

of it, the legal aspect

of it, they are not

in my corner at all at that stage."

Mr. Talty

gave

following

evidence

re-examination:-

"In relation to the special categorisation

you referred to their being in

a special

category because they sought mandamus, does

that

special

categorisation

apply

applications for extension of time after the

determination of the

objection?

---It

applies equally to any compliance case and

they are the ones

I wlll speak of and

I will

confine my comments to them because	I know
about them.

But

talking

about

after

the

Commissioner has complied

or obeyed the

mandamus order to determine the objection.

Do they then stay in a speclal category for

the purpose of determining whether

a person

gets an extension of time

In which ta pay

tax? ---That I could not tell you beyond saying when they left compliance branch to go to appeals branch. I think they went to,

or	recovery branch or both, and I do not

know in what order, they would have left

as a group of files on a priority basis

rather than any other nexus."

In addition to

Mr.

Talty there were called in the

respondent's case the respondent himself, a Mr. Milliner,

who,

the

relevant

time,

was

the

Assistant

Director

(Enforcement

and

Management

Services)

In the

Management

branch or section, Miss Cumpsty.

Mr. Daly and Mr. Murr. Hiss

36.

Cumpsty, Mr. Daly and Mr.

Murr were

all, at the relevant

time. employed in the Recovery section of the Management

branch. They were responsible to

Hr. Venning. not Ur. Talty.

Two affidavits were sworn by

the respondent.

He said

that a perusal by him of the files and records relating

the applications for extension of time made by the applicants

did not disclose any memorandum or other notation relating to

the applications

which

in any way suggested that in the

determination of the applications for extensions of time any

different considerations should be applied or were applied

from those which applied to applications for extension of

time by taxpayers who

ad not taken proceedings for mandamus.

The respondent also said that there was no policy

the

Brisbane Taxation Office

that in the determination of

any

application for an extension of time for payment of

tax where

the applicant had applied for a writ of mandamus against the

Commissioner of Taxation requiring him to determine his

objection, Considerations were to be applied which differed

from the considerations applicable to the determination of

such applications from other taxpayers. He said that to his

knowledge there had never been such a policy. I do not find

it relevant to refer to the short cross-examination of the

respondent by

counsel for the applicants. It is enough

say that there was no cross-examination designed to suggest

to the respondent that his evidence was incorrect in any

respect.

37.

In his affidavit Hr. Milliner said that he

was the

person who made the decision not to grant

an application for

an extension of time in which

to pay outstanding tax made by

Mr. Elliott.

Mr.

Milliner said that he reached his decision

by applying the guidelines set out

in the Commissioner's

memorandum

8 March 1983 relating to the granting of

applications

for

extensions

of time in which

pay

outstanding tax. He said that he had had

no discussions with

Mr. Talty nor did relation to his decision. He sald that he did not take any

he receive any directions from him in

account of the fact that the applicant had sought a writ of mandamus against the Commissioner of Taxation. He did not

mention the cross-examination Mr. Milliner explained thls upon the basis

guidelines

April

1983.

his

that in the circumstances the guidelines of 28

April

1983

referred him back to those of

8 March 1983.

Mr. Milliner agreed that it was his understanding that

of proceedings were belng handled at the highest level in

those

who

had

been

involved

mandamus

the

flles

Canberra.

He said, however, that this was not relevant.

this I take him to mean that it was not relevant to

he task

which he had which was to conslder whether the extension

time applied for should be granted

not. Upon further

questioning Mr. Milliner maintained very strongly that

e had

relied upon the guidelines alone to guide him

in making hls

38.

decision.

m e fact that the matter may

have been the subject

of high level consideration in Canberra

w s not of moment to

him. Amongst other things he said,

"I was only obeying

following the guidelines enumerated by those memoranda. Once

we received that, that is our gospel. We attempt to follow

it as far as the guidelines are enumerated." He was referred

to the fact that the letter seeking the extension of time

referred to the mandamus proceedings, but sald that that

would have made no difference to his decision. Mr. Milliner

also said, "Once the objection was determined	I had no
further interest in mandamus. It was just a collectable

item, to collect, and

I had my guidellnes for

that."

Miss Cumpsty's affidavit is in slmllar terms to that of

Mr. Milliner except that she dealt with the application made

Paolo De Luca (No. G88 of 1983). Miss

Cumpsty was

cross-examined. Like Mr.

Milliner she was firm that she had

pald attention only to the guidelines. She knew that

Mr. De

Luca was one

of the taxpayers who had obtalned an order nisl

for mandamus against the Commissloner but she said

that this

had

relevance to

her.

She

denled

that she

had any

direction to disallow the application. She discussed the matter with the supervisor of her sectlon,

Mr. Murr. There

developed, in the course of Miss Cumpsty's evldence, some

uncertainty as to

whether it was really she who had made the

decision.

I read her evidence it would seem that the

decision was in fact made by Mr. Murr. But nothing turns

.-.

39.

this. Miss Cumpsty agreed that

Hr. Hurr had mentioned to her

the	mandamus proceedings at the time he or she made the

decision.

Mr. Daly was previously the Chief Recovery Officer. He made the decision in respect of the application for extenslon

of time made

by the applicant, Ronald Vincent Warren

(No. G77

of 1983).

His affidavlt 1 s

in similar terms to those of

Mr.

Milliner and Hiss Cumpsty. Like those witnesses he remained

adamant

durlng

his

cross-examination

that

made

his

declsion upon guidelines. The fact

the

basls

what

was

contained

the

that

there

had

been

mandanus

proceedings was of no relevance to him.

Mr. Murr was, at

relevant

tune, the

Acting

Supervisor, Deferred Tax Unlt. He made the declsion to

refuse the extension of time sought

by Edward

John Ahern,

(No. G83 of 1983).

Aqaln, his affldavlt 1s In similar terms

to the other affidavits s’ciorn by those who made decislons to

refuse extensions of time.

ln the case of the other

witnesses he remained firm that he had regard

only

to the

guidelines in determlning the appllcatlon. He denled that

there was any outside pressure or that the fact

that

the

applicant had decision in any way. He said that

taken

mandamus

proceedings

affected

his

he had

no instructions

from any superior to treat the matter specially because of

that circumstance.

40.

m e proceedings Hurr's evidence.

on 4 November 1983 concluded

with Mr.

When the natter resumed on 7 December 1983,

no evidence was given

by any of the remaining decision

makers. As earlier mentioned the

notation

made

by each on

the various applications for extensions of time is in evidence. Each of the notations is expressed in identical terms.

Notwithstanding what he had foreshadowed on 4 November 1983 when the matter was adjourned, counsel for the respondent did not seek to lead evidence from any officer in the Commissioner's office in Canberra. In particular, Mr. Boucher, mentioned by Mr. Talty in his evidence, was not called.

The remaining evidence led by counsel for the respondent

was that of Mr. Barclay whose affidavit sworn on 7 December

1983 he sought leave to file In Court. Mr. Barclay said that

he had prepared

a number of letters requestlng

further

Information from each of the appllcants. The requests were apparently made pursuant to S . 189 of the Act to enable the respondent to refer the decisions to disallow the objections

to a board of review or a court.

"he affidavit showed that

although some information had been received, there was

a good

deal of information still outstanding. Mr. Barclay was not cross-examined. When his affidavit had been read counsel for

41.

the respondent closed his case.

Counsel €or the applicants read in reply four affidavits sworn by the applicants' solicitor. Amongst other things these showed the detailed nature of the requests for information referred to in Mr. Barclay's affidavit.

That concludes the account

of the evidence called in the

case. I next refer shortly to the relevant sections of the Act. Sections 166 and 169 provide for the making by the Commissioner of assessments of the amount of income tax which persons are liable to pay. Section 174 provides f o r notices of assessment. Sub-section 177(1) provides that the production of a notice of assessment is to be conclusive evidence of the due making of the assessment and (except in proceedlngs on appeal against the assessment) that the amount and all the particulars of the assessment are correct. Section 185 provides for objections to assessments. Objectlons must be made within slxty days after service of a notice of assessment. By S. 186 the Commissioner is to

consider the objection

and may either disallow it or allow It

in whole or in part.

He is to serve the taxpayer

with

written notice of his decision. Section 187 provides for an appeal against or review of the Commissioner's decision to disalidw an objection. A request in that behalf is to be

lodged within sixty days after service

notice by

the

Commissioner

that the objection has been disallowed either

42.

wholly or in part. Section 188 provides for reference to a

board or a court. Section 189 provides that if within sixty

days after receiving the request the Commissioner does not refer the decision or forward the objection, the taxpayer may at any time thereafter give him notice in writing to do so

and the Commissioner

shall within sixty days after receiving

the notice refer the decision or forward the objection to a board o r a court. There is a proviso to S. 189. It is that

if within

sixty

days

after

receiving

the

request the

Commissioner requires

the taxpayer in writing to furnish

information relating to the decision or objection, the Commissioner shall not be bound to refer the decision or

forward the expiration of sixty days after the

objection

board or court until

the

receipt by him of that

Information.

I pause to note the

leisureliness of the procedure which

is provided for. The taxpayer has, first of all, sixty days within which to object to an assessment. No time limit is

placed upon the Commissioner within which he

1s to consider

the objection.

If delay in dealing with the objection is

unreasonable, the taxpayer may, as did the applicants in the

present cases,

seek to compel the Commissioner to deal with

the ob~ection

by proceedings for mandamus.

Once the decision

to disallow an

objection has been made a taxpayer

has a

further sixty days within which to

request the Commissioner

to refer

the decision to a board of review or

to treat the

43.

objection as

an appeal and to forward it to a court.

The

periods involved in S. 189

involve a further period of one

hundred and twenty days before the matter must come before a

board or

a court.

It is true that the period may be less

than that, but it is possible that It will be up to one hundred and twenty days and still be within the section. Furthermore, if, as in the present cases, the Commlssioner

requires further information, there is

a another open-ended

period

during

which

the

information

sought

and

the

taxpayer provides it. Thus total periods of two hundred and forty days are limited by the sections. Additionally, there are two open-ended periods, namely, the period durlng which

the Commissioner may consider the objection and the perlod,

if any, during information before referrlng

whlch

the

Commissioner

seeks

further

a matter to a board or court.

Notwithstanding those provlslons,

S. 201

provides that

the fact that an appeal or reference 1 s pending shall not in

the meantime interfere with

or affect

the assessment the

subject of the appeal

or reference; and Income tax may be

recovered on the assessment as

If no appeal or reference were

pending.

Sectlon

204 provides that, subject

tohe

provisions of

Part VI, any income tax assessed shall be due

and payable by the person liable to pay

on the date

.._

specified in the notice as the date upon whlch the tax is due

and payable not being less than thirty days after the service

of the notice. Secton

208 makes income tax, when

it becomes

44.

due and

payable, a debt due to the Commonwealth and payable

the

commissioner

in the

manner

and

the

place

prescribed.

By S. 209 any tax unpaid may be sued for and

. -

recovered in any court of competent jurisdiction by the

Commissioner or a Deputy Commissioner suing in his official

name. Section extensions of time for payment

206 enables

the

Commissioner

grant

or	to permit payment to be

made by instalments. If

he does, the tax shall

be due and

payable in accordance with the extensions which

has

granted. There are no criteria provided for the exercise

his discretion. Section 206 is the section pursuant to which

the applicants made their applications for extensions of time

in the present cases. Finally,

S. 207

makes provision for

the payment of penalties in the case

tax not paid in

accordance wlth the requirements of an assessment. It 1s

unnecessary further to refer to that sectlon.

In provisions and thelr applitation (pp.

Ahern’s

case

(supra)

I dlscussed

these

various

188 - 190).

I do not

repeat what I there said except to say

that the provisions of

the Act which require payment, notwithstandlng the lodgement

of objections and

the

invocation of the appellate process,

particularly when one bears in mlnd the period which will

usually elapse whilst all that takes place,	are,	indeed,
Draconian.

I now come to the grounds upon which these applications

45.

are made. m e principal ground relied upon was that provided for in para. 5(l)(e) of the Act, namely, that the making of the decisions was an improper exercise of the power conferred by the Act in pursuance of which it was purported to be made.

In other words, there was an improper exercise of the power

conferred upon the respondent by S. 206 of the Act. The particular provisions of sub-sec. 5(2) which were relied upon were paras. (a). (b). (d) and (f). Those paragraphs provide respectively that a reference In para. 5(l)(e) to an improper

exercise of a power is to

construed

including

reference to the taking of an

irrelevant consideration into

account, failing to take a relevant consideration into account, the exercise of a dlscretionary power in bad faith and an exercise of a discretionary power in accordance with a rule or policy wlthout regard to the merits of the particular

case. Particulars furnished by the

solicltors

for

the

applicants of the grounds relled upon were as

follows:-

"(a) Relevant consYderations not taken into

account.

1. The fact that the applicant had objected to the assessmentts)

2. The fact that the applicant's

objection(s) waslwere genuinely

based

upon substantial grounds.

3. The fact that despite a request to do

so, the Respondent has not forwarded

the applicant's objection(s)

Court for determination.

(b)	Exercise of power in accordance with a rule or policy without regard to the merits of the case.

. L _

46.

1. Application

the

Commissioner‘s

guidelines

8 March 1983 on

inflexible basis.

considerations

taken

into

account.

1. That the applicant had applied for

Writ

Mandamus

compel

the

Respondent

determine

hisiher

objection(

S) .

2. That the applicant had entered into tax minimisation arrangements.

(d)EKercise of

Power in bad faith.

1. Determination

the

applicants

application upon assumption that it

was

Important

that

the

Respondent

made

example

the

Mandamus

applicants because if word got around

that

people

could

successfully

Mandamus

the

Commissioner

without

havlng

pay

the

tax

then

the

floodgates would open and a flurry of

Mandamus Orders would make the

Tax

Off ice

unworkable.

”

The questions. They are:-

3 e grounds raise, in my opinion, three

sub: itant ial

What	is the signlficance for the case of Mr. Scells’

evldcnce?

Whether the guidelines, insofar as they provlde for a

different approach in relation to paper	or artificial
schemes, are lawful?

Whether the guidelines were not	so restrictive of the
-._

discretion conferred by

S. 206 of the Act that they

prevented the Commissioner himself and

his officers,

including

the respondent and officers employed in the

47.

Brisbane Taxation office, exercising any real discretion

determining

applications

made

pursuant

the

section?

This statement

of the issues leaves out

of account the

matters relied upon in

para. (a) of the particulars earlier

quoted.

I have touched on this

already in saying what

I have

about ss.

36 and 36A and the Westraders' case (supra).

For

the reasons mentioned

I am clearly

opinion that the

respondent was not bound, as a matter

law, to

take the

matters relied upon by counsel into account.

It seems to me

that that

must dispose of

the matters relied upon

in para.

(a12 of

the particulars.

The fact that the applicants in

their solicitors' letters

of 6 July 1983 sald that their

cllents

were

confident

of success

and

had

shown

their

willingness to have the matter "determined

by the Courts" was

not of

itself something which the respondent was obliged to

take into account.

Likewise, the mere fact that the applicants had objected to the assessments (para.

(all) is not

a matter

which the

respondent was obliged to take into account.	The legislative
policy to be dlscerned from a consideration	of the various

sections of the Act to which

I have referred militates

against such a contention. In any event, I do not think that the evidence establishes that the respondent did not take

this matter into account. He,

through various officers in

48.

his office, knew Of the objections. It is drawing a long bow

to say that they put the fact

of them completely on one side.

Furthermore, the guidelines themselves specifically deal with

cases which are the subject of notices

of objection.

Finally, in relation to para. (a), there relied upon in sub-para. 3.

is the matter

There can be no basis for this

ground. The respondent is acting in accordance with the Act.

Pursuant to S. 189 he has sought further information. Again,

the policy of the Act does not oblige

him, as a matter

law, to take into account the fact that

he 1 s

obtaining

further information before forwarding the objectlons to

court for determination when determining the outcome

of an

application under

S .

206.

So the matters relied upon In paras. particulars of the grounds ralse the essential matters

(b) and (c) of the

for

decision.

The

issues to which they glve rlse are those

earlier stated. The first concerns the slqnlficance of Mr. Scells’ evldence. At the outset 1s the question of whether I accept it. The thrust of the cross-examinatlon of Mr. Scells

by counsel for the respondent was to suggest to him that

would have been unlikely that he would have spoken to

Mr.

Talty because the position was foreclosed by reason of

what

he i

been told by

Mr. Miller and Mr. Barclap at the

interview which occurred

prior to his telephone conversation

with Mr. Talty. They had informed him of what the

qudelines

49.

provided. He had not given particulars

of his clients'

assets and liabilities.

followed

that

was most

unlikely that any extension

of time would have been granted.

But Mr. Scells expressed reason for ringing Mr. Talty was

that one	of his clients had suggested that course. That is
not	something

which cross-examination. All in

was

the

subject

of further

all

I do

not

think

the

cross-examination sheds light on whether it was llkely

unlikely that Mr. Scells had the conversation with Mr. Talty

to whlch

he has deposed.

There are, of

course, a number of posslbllities. There

IS the posslblllty of deliberate fabrlcation by

Mr. Scells.

Thls was

relied

upon

counsel

for

the

respondent,

notwithstanding that no suggestlon of

was put to Mr.

Scells In cross-examination.

There 1s

the possibility that

Mr.	Scells did not speak to Mr. Talty, but to some other

offlcer. Again. thls was not

a matter suggested

Mr.

Scells in cross-examlnatlon. Then there

1s the possibillty

that Mr. Scells may have mlsunderstood what

Mr. Talty said to

him. Perhaps he took too much from

it or gave

Mr. Talty's

words an

emphasls or a

slant that Mr. Talty did not Intend

them to have.	No	doubt there are other posslbilities as
well.

Although I think counsel for the respondent sufficiently

Indicated

Mr. Scells

that

his

evidence

was

bang

50.

challenged, the possibilities which

I ave mentioned were not

the subject of cross-examination. This may have been because

Mr. Talty had no recollection of any conversation but could

not say positively that he had never spoken

to Mr. Scells. I

would not myself have thought that those circumstances would

have prevented a cross-examination based on the possibility

of mlstake or mlsunderstanding.

Again,

the

absence

cross-examination did not deter counsel

for

the respondent

from putting submissions

that that was an explanation for the

evidence which I might well regard as satlsfactory.

Before

I pass to consider the evidence of the other

witnesses, I should say that I found nothing in Mr. Scells'

demeanour which gave me the least anxlety about his veracity

and reliability as a witness. He remained firm in his

recollection of the conversation. It

1 s true that he had not

recollected for the purposes of his affidavit the mention by

Mr. Talty of Mr. Boucher's name, but hls explanatlon for this

omlssion dld not suggest to

that he was fabrlcatlng

reconstructlng

his

evidence.

In short,

hls

evldence

was

consistent with that

of a truthful and rellable wltness.

Whether it is to be accepted, of course, depends on the vlew

have of

all the evidence in the case.

I turn to the

evidence called on behalf of the respondent.

_ .

The principal witness whose evidence is to be considered

1 s Mr. Talty.

There

are

some

background

matters

to be

51.

mentioned before

I come directly to the evidence concerning

the conversation. Firstly,

Mr. Talty was

well aware of the

. .

mandamus proceedings. He had felt the impact Of them in the

course of his duties because it had been

his branch’s task to

deal with each of the notices

objection as a

matter of

urgency.

He denied feeling resentment, but, particularly in

answers which

I have earlier quoted, he made it clear that

the applications had had an upsetting effect on his branch. evrdence.

Then

recelved a call from Mr. Scells. It was customary for him to

receive numerous calls from accountants and solicitors. Nor

is the fact that he made no note of the conversation of

there

1 s

nothing

extraordinary

his

having

slgnlf icance. Accordlnq to Mr. Scells

was

“off

the

record”.

If that be true, one would not expect a note of it

be made. Of course, to

be weighed in the balance in

relatlon to that matter ‘is Mr. Talty’s evidence that it was

not his

hablt to have “off the record” conversations about

tax matters.

Next there 1s the reference to

Mr. Boucher. Mr. Talty‘s

evldence makes it clear that

if he did have a conversation

wlth Mr..

Scells about his clients,

it would not have been

unlikely that he would have mentioned Mr. Boucher’s name or sald that the outcome of the applications for extensions of

52.

time	a mtter for senior officers in the Commissioner's

office in Canberra.

On the other side of the coin is the plain fact that it

was not the primary task of

Mr. Talty nor those in his branch

to deal with applications for extenslons

of time for payment

of tax. Once the Compliance branch had dealt with the

notices of objection, it became

matter for the Recovery

Section which was part of the Management branch of the

different hierarchy was involved, notwithstanding

the overlapping of function that sometimes occurred and to

which I have earlier referred.

office.

And finally there were the guidelines. In the words of one of the witnesses they were "gospel".

The decisions to

refer the applications for extensions

of time, so far as one

can tell from the evidence, were, objectively speaking, all

in accordance with the

guidelines: In other

words, whatever

attitude Mr. Talty or others may have had towards those who

lnstltuted mandamus proceedings, the appllcatlons appear to

have suffered the same fate as one might expect any simllar

application unaffected

by overtones of mandamus to have

suffered. Indeed, that very fact

1 s the basis for one of the

applicants' submissions later to be dealt wlth.

The thrust of Mr. Talty's more direct evidence about the conversation was to point to circumstances that would make it

53.

unlikely that he would have said what Mr. Scells' attributed to him. He had to do this because he had no recollection of the conversation. I do not Sap that critically of him and, I

would add, that the fact that

said that he

had no

recollection of the conversation

is not a matter which

think points one way or the other to the probability of the

conversation having taken place.

Mr. Talty said that

he did not

have "off the record"

conversations.

The guidelines covered the matter entirely.

The applications were not the concern of his branch. They

were a matter for the Recovery Section in the Management branch of the Brisbane Office.

Yet, if all

that be so. why

did he so readily say that if he had had a conversation about extensions of time wlth Mr. Scells, he would have mentioned

Mr.

Boucher's name and also said that the prospect of

Mr.

Scells' clients being granted extensions of tlme would "rest with someone a lot higher than me because of the importance

of this whole group of 2 7 " . I refer to hls evldence earller

quoted. One needs to read the whole of it to appreciate the

context in which those statements were made. When he said

that the matter would not be "decided in my off

ice",

thought at first he was referring to the fact that that was

because the applications would not be dealt with in the

Compliance branch. But his later evidence made it clear that

he meant that the matter would be decided in the Canberra

Office; the decisions would not be made in the Brisbane

_._

54.

Office at all.

In weighing Hr. Talty's evidence

I have had regard

generally

his

demeanour.

He did

not

make the

same

impression upon me as did

Mr.

Scells. But that

is not a

matter upon which

I would place great weight. The witness

box is a difficult place and affects people in varying ways.

I do say. however, that I gained the distinct lmpression from

Mr. Talty

that he was, If not resentful of the applicatlons

for writs of mandamus, at least concerned and upset by them.

A matter I should

bear

mind,

when

making

the

comparison between the two wltnesses

- and I say this with no

dlsrespect to counsel

for the respondent

I s that

the

cross-examinatlon of Mr.	Scells could not be described as	t
all riqorous.

In the end It is a question of welqhing

up the

probabilltles and coming tb a conclusion.

In assessing the

probabllltles I have

taken

Into

account

the background

matters I have earlier mentioned and the particular matters concerning Mr. Boucher and the applicatlons belng decided In

Canberra to

whlch

reference was made by

Mr. Talty in hls

evidence.

I have taken into account the question of whether

Mr.. Scells would deliberately fabricate the conversation such

as he has deposed to.

It seems to me unlikely that

he would.

It also seems to me to be unlikely that it is a conversation

55.

about which e could be mistaken.

1 have had regard to the evidence

the respondent

himself and of the other officers called

in his

case. But

that evidence cannot shed much light on the question

whether Mr.

Talty said the words in question to

Hr. Scells.

It seems to me that the importance of this evidence it sheds .light on the significance of Mr.

is that

Talty’s words if I

flnd them to have been spoken, not on the question of whether

they were in fact said

or not.

A final matter to which

I have had regard In reachlnq my

concluslon

1s the seriousness of the allegation which

Mr.

Scells makes. L express no concluded view, but as mentioned durlng the argument, the makmq of the statements attrlbuted

to Mr. Talty could have involved him In the commlsslon of

contempt of the High Court.

A flnding that the words were

spoken is, therefore, not one which ought to be llghtly made.

Havlng reflected on the matter over the various consideratlons to which

a period and welghed

I ave referred as best

can, I have reached the concluslon that

I ought to accept Mr.

Scells’ evidence. Accordingly,

I find that on

9 June 1983,

he did speak to Mr. Talty and that

Mr.

Talty dld say

to him

words, the substance of which are set out in paras. 7.

8, 9

and 10 of Mr. Scells’ affidavit earlier referred

to.

56.

me next question is what flows from this.

If it were

not for one factor, I would have unhesitatingly answered that

question, "Very little". That

is because of the evidence

given

by the respondent, and the witnesses other than

Hr.

Talty, called in the respondent's case.

The respondent, I am

satisfied, knew nothing of any policy of special treatment of

those who applied for

writs of mandamus. His evidence to

this effect should be accepted at its face value. There was

no cross-examination	of him which suggested that it should
not.

I formed a favourable Impression of the other wltnesses.

Mr. Milliner, Miss Cumpsty,

Mr. Daly, and Mr. Murr. They

applied the quldelines. Once the view was taken that the

applicants had been involved In an artificial scheme, these

dictated thelr course. From the quidelmes of 2 8 April 1983,

they were referred back to those of 8 March 1983.

Financial

clrcurnstances became the only criterion.

The applicants had

decllned to put any matteY based on them In support of their

appllcatlons. It followed

that

the

appllcations

must

refused.

No lnstructlons

from

the

Canberra

Office

were

needed to achieve thls result.

Of course, not all the decision makers were called and

it is' true that each decision maker, whether called or used exactly the same language when he or she recorded the

not,

declslon to

refuse each application. But, bearing in mind

57.

according to them, no need to refer the applications to

the existence of the guidelines and the fact that there was. evidence of the respondent and the other witnesses. It is

true

that

all

knew of

irrelevant; it was to the guidelines that reference had to be

made.

the

mandamus

applications.

But,

according

to the evidence

each

witness,

these

were

these considerations tend to lead one to conclude that Mr. Talty's statements have no significance

at all for

All

the outcome of these applicatlons.

One could explain

his

statements as simply a series of unwise remarks in

an off the

record conversation. It could be that what he said was his

way of maklng known to Mr. Scells his dislike of applications

for wrlts of mandamus and the consequences they had had for

his branch of the Brisbane Office. Evidence given by

Mr.

Barclay, to which

I have not yet referred, would tend to

explain hls exasperation. This shows the enormous burden

which is belng shouldered by offlcers In the Commissloner's

various offices. Mr. Barclay referred to the slxty-first

annual report of the Commissioner of Taxation to Parliament

for the year ending 30 June 1982. The report showed that at

30 June 1982 there were 2 5 , 569

cases awaiting reference to

boards 'of review in Australia. During the previous year only

456 cases were heard or part-heard. But for the year In

question

4,473

cases were withdrawn by the taxpayer and a

58.

further 10,763 involved objections which were either allowed

by the Commissioner

or resolved as the result of settlements.

No doubt the making of the

27 applications for mandamus threw

out the balance of the Brisbane Office.

This may well have

accounted for

Mr.

Talty's attitude towards the mandamus

proceedings and go a long way to explain why he would speak

to Mr. Scells as I have found that he did.

But there are matters which have caused me to pause

before dlsposing of these applications, insofar as they are

based upon Mr. Scells' evidence. in this way. My hesitation

arlses because of Mr. Talty's evidence

that, if he had had

conversation about extensions of tlme with

Mr.

Scells, he

would have mentlont-d Mr. Boucher's name and that applications

In these matters would have been a matter for somebody more

senior than

he In the Canberra Office. This evidence was

glven on

4 November 1983. The matters had to be adjourned

7 December 1983 to be completed. Counsel for the respondent saw the desirabllity of callmg evidence from the Canberra

Offlce, whether from

Mr. Boucher or some other offlcer. That

was a

matter expressly referred to by hlm towards the close

the

proceedings

on 4 November

1983.

I have

earlier

referred to what he sald. Yet when the hearing resumed over

a month later on

December 1983, no such evidence was

called. He read Mr. Barclay's affidavit and closed his case.

No	explanation for not calling Mr. Boucher or any other

officer from Canberra was given. Certainly it could not have

59.

been due to

any surprise on COUnSel’S part nor on the part of

the respondent or the Comissioner.

The evidence given was

explicit. There was plainly

an issue about it and remarks

had been made during the course of it

wh ch indicated that I

took a serious view of

it.

In those circumstances there is no reason why one ought not to apply the principles laid down

in Jones v. Dunkel

(1959) 101 C.L.R. 2 9 8 .

By reason

of what Mr. Talty had said

about Mr. Boucher and the Canberra Office, the inference is

open that the Commissioner, through one of his more senior

officers. had declded that the applicants for mandamus would

be denied out of hand extensions of

time to pay the income

tax for which they had been assessed and that the principal,

only be more serious. Yet, in the absence of any evidence from

reason

for

this, was

because

the

If not the applications they had made to the Hlgh Court. Nothing could

Canberra, why should

I not draw the inference that that

indeed was the position. In other words, should

I not take

the view that no evldence whlch might have been glven by Mr.

Boucher or any other Canberra officer would have been to any

different effect from that which 1 s to	be Inferred from Mr.
Talty’s evldence.

I	confess that this circumstance has caused me grave

anxiety.

The inference 1s open that what Mr. Talty said to

Mr. Scells was not lust a letting off of steam. Coupled with

60 .

what he said about Mr. Boucher and the decisions

on the

applications being for more senior officers in Canberra, it

is capable of suggesting that there had in fact been decided

upon at

a high level in Canberra,

a policy designed to

disadvantage - really to punish

- those who had had the

temerity to applications for writs of mandamus. That policy was designed

force

the

Commissioner's

hand

making

ensure

that

anybody

else

minded

make

such

application would be discouraged from doing

so. That is the

applicants' case. The questlon	is whether I should accept
It.

After much reflectlon I have decided that I should not.

My reason for not doing so

1 s based entlrely on

my n e w of

the evldence, other than that of

Mr. Talty, called in

the

respondent's case. witness box of any officer from Canberra,

Notwlthstanding

the

absence

from

the

I feel persuaded by

that evldence that no improper conslderatlons were taken into

account by those who made the decislons,

nor was any Improper

influence brought to bear on them before

thelr declslons were

made.

If there were the policy upon whlch the appllcants

rely, It would seem to

unllkely

that the respondent

himself would have been unaware of It.

I accept his evidence

that he dld not know

of any such policy o r decision; there

was no cross-examination of him to suggest that he did. accept a l so the evldence

of those who made the decisions

that

they had regard only to the circumstances

of each case and to

One witnesses is this. Mr. Scells’ affidavit was filed on

matter I should

mention

relation

these

November 1983. Until it was served none of the witnesses who made the decisions could have had foreknowledge of what was

alleged by him.

The witnesses who gave evidence

of how their

decisions had been made swore affidavits

on 3 November 1983.

They were cross-examlned on them on

November 1983. They

came to the Court on that day,

so far as I could tell, as

matter of urgency and without much notice. It appeared to me

that they gave their evidence without any great opportunity

to prepare themselves for the witness box. Furthermore, the proceedings had developed into a hearing on 4 November 1983

unexpectedly.

The

hearlng

had

started

a directions

hearing. But the

matter was regarded as urgent because the

applicants were being pressed for payment for the outstanding

tax.	The very circumstances in whlch the witnesses who made

the decisions came to the witness box militate against them

bemg involved in some sort of consplracy which would have to

be found to exlst

If the appllcants’ case were well founded.

For the foregolng reasons I answer question (a) earlier posed, namely, what is the significance for the case of

Mr.

. ..

Scells’

evidence,

by saying

that

has

relevant

significance.

It follows that the grounds relied upon in

paras. (cl1 and (d) fail. That leaves the grounds relied

6 2 .

upon in

paras. (b)l and t c ) 2 .

The

matters to be considered

are encompassed by the two questions	(b) and ( c ) earlier
posed.

In relation to the guidelines I

would firstly say that

there does not seem to me to be anything inherently unlawful

in the Commissioner laying down guidelines to guide those

exercising the discretion conferred by

S. 206

of the Act in

the task which they have. Indeed, so it desirable fOK the Commissioner to have a policy about

seems to me, it is

how

that discretion will usually be exercised.

This will lead to

consistency of decision making

In his various offices in

Australia and it will enable those seeking extensions of time

to know what matters will be taken Into account and how an

officer making a declslon is likely to approach hls task.

Nevertheless, there remalns the question

of whether the

quidellnes that have been laid down are too inflexible.

they operate

as to take away the dlscretlon which an

officer making a decision under

S . 206 was intended to have?

The first matter that should be noticed when this problem is being considered IS the Draconian policy of the Act earlier referred to. which, subject to the grant of an extension of time, obliges a taxpayer to pay tax which has been assessed notwlthstanding that he may have objected to the assessment

and invoked the appellate process whxh

may take months, if

not years, to work itself out.

The basic consideration found

63.

in the guidelines of 0 March 1903 is the taxpayer's ability

to pay. w t would encompass, in question of whether he was financially capable of paying but

my opinion, not only the

what impact upon the totality

of his financial affairs the

need to pay

an assessment which

was disputed, might have. Of

course, if the assessment were not disputed, then one would think that in most cases, financial circumstances would be the most fundamental matter, if not the only matter, to be

considered. For the foregoing reasons

I do not find anything

unlawful In the guidelines of

8 March 1983.

The remaining question is whether the drawn in the guidelines of

distmction

April 1983

between disputed

cases which involve artificial or paper schemes and disputed

cases of other

klnds, is a distlnctlon which

1s unlawful.

This has caused me some concern. Taxpayers are entitled to

arrange their affairs

so as to reduce the incidence of income

tax. Provided they act within the

law,

the law does not

regard them any differently from any

law-abidma group In the

community. It

1s true that in recent years there has been a

swing away from what might have appeared to be the support

the law for tax avoidance schemes. Thls	has	come about
prlncipally because of changes to the Act, and	also, to a

degree, because of a changed attitude on the part of the

court;'.'

Many

schemes

previously

lawful

have

been

specifically

outlawed

legislation.

The general

tax

avoidance provisions of Part

IVA

have been enacted. There

.. .

64.

have been the decisions of this Court in Ure

Federal

Commissioner of Taxation (1981) 34 A.L.R.

237 and Federal

Commissioner of Taxation v. Ilbery (1981)

38 A.L.R. 172; and

there is the trend, at least in the United Kingdom, to take the firm view that where there is a pre-ordained series of

transactions or a

single

composite

transaction,

steps

inserted that have no commercial

or business purpose other

than avoiding liability to

tax, are

to be disregarded for

fiscal purposes; see Furnlss v. Dawson C19843

2 W.L.R. 226.

Having given the matter due consideration,

I see nothing

unlawful in the Commlssloner adoptlng a general pollcy in

relatlon to the grant of extension of

time for payment of tax

which distingulshes between disputes concerning artificial

schemes and disputes concernlng other matters. The only

point

of the dlstinctlon is that, in the latter case, a

taxpayer will usually be able to obtaln a more favourable

response to his application for

an extension of time than he

will If he has been

involved

In what

the

Commlssloner

considers to be

an aritificial scheme case.

I wish to repeat somethlng to whlch

I referred earlier

in this ~udgment. If the

scheme

one

which

current

authorlty has decided has lawfully achieved the avoidance of

the tax which the

taxpayer

hoped

would,

different

considerations might apply. Subject to such operatlon as

might need to be accorded Part IVA

of the Act (which does not

3 S

65.

apply to

any scheme entered Into prior to

27 May

1981), a

scheme of

that kind would be

scheme similar to that

considered by the High Court in the Westraders’ case (supra).

As earlier said, there is insufficient material to enable me

to make any judgment as to whether the schemes here in question were of that kind or not. If they were, the further question remains as to whether that would be a matter which the Commissioner or his officers would be bound, as a matter

of law, to take into account.

I	think the real answer to the complalnts which the

applicants make is

that the guidelines enable an officer

considering an application for an extension of time to take

well into account the financial clrcumstances of an applicant

for an extension of tlme. Bearing In mind the policy of the

Act to whlch I have earlier referred,

If that is

done, the

Commissioner will have acted fairly in the great rna~ority of cases. Furthermore, and perhaps more importantly, because of

the reliance by the appllcants

para.

5(2)(f) of

the

Judicial Review Act, the offlcer will

not, because he takes

individual financial exercising the power in accordance wlth a rule

circumstances

Into

account,

or pollcy

without regard to the merits of the partlcular case.

Accordingly, I am of opinion that posed should be answered in the affirmative and question

question (b) earlier

(c)

in the negative. In consequence the appllcants have not made

66.

out the remaining grounds upon

which they rely, that is,

paras. (b) and (c12 of the particulars of the grounds earlier

set cut.

The applications, apart from that made by Herbert Peter of, are dismissed. The applicants are to pay the respondent's costs of the applications but to the intent that he have only one Set of costs in respect of costs incurred by him during the period 3 November 1983 until today. There

John Sachs (No. G79

of 1 9 8 3 ) which has already been disposed

!	W 1 1 1 be liberty to apply.

[1984] FCA 160

19 Jun 1984