Tomaras & Tomaras & Anor and Commissioner of Taxation
[2017] FamCAFC 216
•13 October 2017
FAMILY COURT OF AUSTRALIA
| TOMARAS & TOMARAS AND ANOR AND COMMISSIONER OF TAXATION | [2017] FamCAFC 216 |
| FAMILY LAW – CASE STATED – Whether s 90AE(1)-(2) of the Family Law Act 1975 (Cth) confers power to make an order substituting one party to a marriage for the other party in relation to a taxation debt – Whether presumption that statutory provisions expressed in general terms do not bind the Crown applies only to provisions which impose an obligation or a restraint on the Crown – If the presumption applies, the absence of an express statement binding the Crown is not determinative – Bropho v State of Western Australia (1990) 171 CLR 1 applied – The express link between s 79 and s 90AE provides a strong indication that the Commissioner of Taxation should be treated as a “creditor” for the purposes of s 90AE given that Parliament must be taken to have known of the way the Commissioner has historically taken advantage of his status as a “creditor” for the purposes of s 79 – The answer to the question posed by the case stated is “Yes”, subject to a proviso relevant only to the terms of the particular order sought in the substantive proceedings. |
| Acts Interpretation Act1901 (Cth) ss 2C(1), 15AA Bankruptcy Act 1966 (Cth) s 134(1)(j) Family Law Act 1975 (Cth) ss 79, 80, 90AA, 90AB, 90AC, 90AE, 90AJ, 90ACA, 90ADA Income Tax Assessment Act 1936 (Cth) s 175A Taxation Administration Act 1953 (Cth) Part IVC, s 14ZL, Sch 1, s 255-5 |
| ACCC v Baxter Healthcare Pty Limited (2007) 232 CLR 1 Revised Explanatory Memorandum to the Family Law Amendment Bill 2003 (Cth) |
| APPLICANT: | Ms Tomaras |
| FIRST RESPONDENT: | Mr Tomaras |
| SECOND RESPONDENT/INTERVENOR: | Official Trustee in Bankruptcy |
| INTERVENOR: | Commissioner of Taxation for the Commonwealth of Australia |
| FILE NUMBER: | BRC | 11352 | of | 2013 |
| APPEAL NUMBER: | NA | 70 | of | 2016 |
| DATE DELIVERED: | 13 October 2017 |
| PLACE DELIVERED: | Perth |
| PLACE HEARD: | Brisbane |
| JUDGMENT OF: | Thackray, Strickland & Aldridge JJ |
| HEARING DATE: | 9 March 2017 |
| LOWER COURT JURISDICTION: | Federal Circuit Court of Australia |
REPRESENTATION
| COUNSEL FOR THE APPLICANT: | Mr Robertson QC with Mr Carius |
| SOLICITOR FOR THE APPLICANT: | Hartnett Lawyers Group |
| THE FIRST RESPONDENT: | In person |
| THE SECOND RESPONDENT/ INTERVENOR: | No appearance |
| COUNSEL FOR THE INTERVENOR: | Mr Williams SC with Ms Winnett |
| SOLICITOR FOR THE INTERVENOR: | Australian Government Solicitor |
Order
The question stated for the consideration of the Full Court be answered as follows:
Question: Does s 90AE(1)-(2) of the Family Law Act 1975 (Cth) grant the court power to make Order 8 of the final orders sought in the amended initiating application of the Wife?
Answer: Yes, but with the proviso that s 90AE(1) confers power only to make an order that the Commissioner be directed to substitute the first respondent for the applicant in relation to the debt owed by the applicant to the Commissioner of Taxation for the Commonwealth of Australia.
Note: The form of the order is subject to the entry of the order in the Court’s records.
IT IS NOTED that publication of this judgment by this Court under the pseudonym Tomaras & Tomaras and Anor and Commissioner of Taxation has been approved by the Chief Justice pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth).
Note: This copy of the Court’s Reasons for Judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.02A(b) of the Family Law Rules 2004 (Cth)), or to record a variation to the order pursuant to r 17.02 Family Law Rules 2004 (Cth).
| THE FULL COURT OF THE FAMILY COURT OF AUSTRALIA AT BRISBANE |
Appeal Number: NA 70 of 2016
File Number: BRC 11352 of 2013
| Ms Tomaras |
Applicant
And
| Mr Tomaras |
First Respondent
And
| Official Trustee in Bankruptcy |
Second Respondent/Intervenor
And
| Commissioner of Taxation for the Commonwealth of Australia |
Intervenor
REASONS FOR JUDGMENT
Thackray & Strickland JJ
The question in this case stated is whether s 90AE of the Family Law Act 1975 (Cth) (“the Act”) confers power on a court to make an order substituting one party to a marriage for the other party in relation to a taxation debt.
The Commissioner of Taxation for the Commonwealth of Australia (“the Commissioner”) contends that such power is not conferred because s 90AE does not bind the Crown, at least insofar as taxation debts are concerned. Ms Tomaras (“the applicant”) asserts otherwise.
The agreed facts
The applicant and first respondent were married in 1992 and separated in 2009. During their marriage, the Commissioner issued assessments requiring the applicant to pay income taxation and the Medicare levy. The applicant failed to pay the amounts assessed, while also failing to lodge any objection.
In November 2009, the Commissioner obtained a default judgment against the applicant for the unpaid tax and the penalties incurred. She failed to pay the judgment debt, and the Commissioner did not take any steps to enforce it.
In November 2013, the first respondent became bankrupt. It is common ground that nothing turns on this for present purposes although, as will be seen, it is clearly a relevant matter if the Commissioner’s primary contention fails.
In December 2013, the applicant commenced proceedings in the Federal Circuit Court under s 79 of the Act, seeking orders for alteration of property interests between her and the first respondent. In February 2016, the Commissioner was given leave to intervene in those proceedings.
By her amended application in the Federal Circuit Court proceedings, the applicant sought the following order:
8.Pursuant to section 90AE(1)(b) of the Family Law Act 1975 (Cth), in respect of the applicant wife’s indebtedness to the Commissioner of Taxation for the Commonwealth of Australia taxation related liabilities in the amount of $256,078.32 as at 9 August 2016 plus General Interest Charge (GIC), the respondent husband be substituted for the applicant wife as the debtor and the respondent husband be solely liable to the Commissioner of Taxation for the said debt.
On 22 August 2016, Judge Purdon-Sully stated a case for the opinion of the Full Court pursuant to s 94A(3) of the Act in the following terms:
Does s 90AE(1)-(2) of the Family Law Act 1975 (Cth) grant the court power to make Order 8 of the final orders sought in the amended initiating application of the Wife?
The statutory provision
Section 90AE of the Act provides as follows:
90AE Court may make an order under section 79 binding a third party
(1) In proceedings under section 79, the court may make any of the following orders:
(a) an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;
(b) an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c) an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;
(d) an order directed to a director of a company or to a company to register a transfer of shares from one party to the marriage to the other party.
(2) In proceedings under section 79, the court may make any other order that:
(a)directs a third party to do a thing in relation to the property of a party to the marriage; or
(b) alters the rights, liabilities or property interests of a third party in relation to the marriage.
(3) The court may only make an order under subsection (1) or (2) if:
(a) the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b) if the order concerns a debt of a party to the marriage—it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c) the third party has been accorded procedural fairness in relation to the making of the order; and
(d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e) the court is satisfied that the order takes into account the matters mentioned in subsection (4).
(4) The matters are as follows:
(a) the taxation effect (if any) of the order on the parties to the marriage;
(b) the taxation effect (if any) of the order on the third party;
(c) the social security effect (if any) of the order on the parties to the marriage;
(d) the third party’s administrative costs in relation to the order;
(e) if the order concerns a debt of a party to the marriage—the capacity of a party to the marriage to repay the debt after the order is made;
…
(f) the economic, legal or other capacity of the third party to comply with the order;
…
(g) if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters—those matters;
…
(h) any other matter that the court considers relevant.
Section 90AE appears in Part VIIIAA of the Act which was inserted by the Family Law Amendment Act 2003 (Cth). The relevant object of that Part, as provided in s 90AA, is to permit the court “in relation to the property of a party to a marriage” to make an order under s 79 that is “directed to, or alters the rights, liabilities or property interests of a third party”. While authorising orders that are binding on third parties, the Part does not otherwise affect the operation of any other provision of the Act (s 90ADA).
The expression “third party” is defined to mean “a person who is not a party to the marriage” (s 90AB). The word “person” must be taken to include a “body politic”, and therefore prima facie includes the Commissioner (Acts Interpretation Act1901 (Cth), s 2C(1)).
Section 90AE provides no definition for “debt” or “creditor” and those words may therefore be taken as having their everyday meaning. For present purposes, it is also worth recording that the Taxation Administration Act 1953 (Cth) treats a “tax-related liability” that is due and payable as being “a debt due to the Commonwealth” and “payable to the Commissioner” (sch 1, s 255-5).
The presumption
Following the decision of the High Court in Bropho v State of Western Australia (1990) 171 CLR 1 (“Bropho”), we consider the following not to be controversial:
·Australian courts must apply a presumption that statutory provisions expressed in general terms do not bind the Crown;
·The presumption is an aid to construction, not an inflexible principle;
·If an intention to bind the Crown appears when the legislation is construed in a context which includes the presumption against the Crown being bound, then the legislative intention must prevail;
·The intention to bind the Crown must be found in the provisions of the statute, including its subject matter and disclosed purpose and policy, when construed in a context which includes permissible extrinsic aids;
·A legislative intention for the Crown to be bound may be ascertained by means other than express words or necessary implication;
·The strength of the presumption will depend on the circumstances, including the content and purpose of the provision being construed, and the identity of the entity in respect of which the question of the applicability of the provision arises;
·In some circumstances, the presumption will be no more than the starting point of the ascertainment of the legislative intention; and
·A statute may, when construed in context, disclose a legislative intent that one of its provisions will bind the Crown while others will not.
Applying what was said in Bropho at 24, we perceive that the fundamental question we have been asked to answer is:
whether the presumption against the Crown being bound has, in all the circumstances, been rebutted, and if it has, the extent to which it was the legislative intent that [s 90AE(1)] should bind the Crown and/or those covered by the prima facie immunity of the Crown?
But the question presupposes the presumption applies in the first place. For reasons that follow, we are not convinced that this premise should be accepted.
Does the presumption apply?
The presumption that the Crown is not bound by a statute applies only to provisions which impose an obligation or a restraint on the Crown (British Broadcasting Corporation v Johns (Inspector of Taxes) [1965] Ch 32 (“BBC”); Bropho at 16). Nothing said in Bropho suggests the contrary. There is accordingly no place for the presumption if the provision, properly construed, confers a benefit on the Crown (Madras Electric Supply Corporation v Boarland [1955] AC 667 (“Madras Electric”); McGraw-Hinds (Aust.) Pty Ltd v Smith (1979) 144 CLR 633 at 656 (“McGraw-Hinds”)).
In our view, it could be reasonably argued that s 90AE can only impose a benefit on the Crown since:
(a)instead of an impecunious taxpayer being responsible for a tax liability, his or her more wealthy spouse may be made solely responsible pursuant to s 90AE(1)(a), thereby increasing the prospects of recovery;
(b)instead of one spouse being responsible for a tax liability, both spouses may be made liable pursuant to s 90AE(1)(b), thereby providing a remedy for recovery that otherwise would have been unavailable;
(c)whilst an order might be made leaving the less wealthy spouse to meet a tax debt, such an order could not be made if it was foreseeable that the order would result in the debt not being paid (s 90AE(3)(b)); and
(d)the legislation permits the court to make such order as it considers just for the payment of the reasonable expenses of the creditor incurred as a necessary result of the order (s 90AJ(2)).
Section 90AE could therefore only ever operate to the detriment of the Crown if the court, in making an order:
(a)relieved a spouse of their obligation to pay tax which they would have paid if the order had not been made; and
(b)instead imposed the obligation on a spouse who, although appearing at the time able to meet the liability in full, ultimately was unable to do so for some unforeseeable reason.
In assessing the likelihood of such an outcome it must be remembered that the Commissioner would be on notice that an order under s 90AE is sought and would be entitled to be heard on the issue of the foreseeability of the tax not being paid if one party were to be substituted for the other.
It can thus be seen that the possibility of the Commissioner being adversely affected by an order under s 90AE does not arise by operation of the Act but only by the happening of an event that could not have been reasonably anticipated. In those circumstances, we see no place for the presumption.
The submissions of the Commissioner
The matter was argued on the basis that the presumption did apply. Therefore, lest we are mistaken in the view we have reached to the contrary, we will discuss the main arguments advanced by senior counsel for the Commissioner in support of the proposition that s 90AE does not evince a legislative intention to bind the Crown, at least in respect of taxation related liabilities.
No express statement binding the Crown
The Commissioner stressed the absence of an express statement in Part VIIIAA indicating an intention to bind the Crown, which was contrasted with s 116C(4) which provides that s 116C and associated regulations “bind the Crown in right of the Commonwealth, of each of the States and of the Northern Territory”.
Section 116C is designed to prevent the payment of Commonwealth legal aid funds to legal practitioners in excess of a regulated amount and provides for the imposition of an obligation on a body distributing such monies to repay the Commonwealth any amount paid in excess of that amount. The provision expressly recognises that bodies responsible for the distribution of such funds include those established under a law of a State or Territory (s 116C(5)).
Given the legal authorities concerning the extent to which legislation of one jurisdiction in a federal system can bind the Crown in the right of another jurisdiction, it was clearly prudent for the Parliament to enact s 116C(4) to remove doubt about the applicability of s 116C to the States and the Northern Territory (Bradken Consolidated Ltd v Broken Hill Proprietary Co Ltd (1979) 145 CLR 107 at 123 (“Bradken”) and other cases collected in Pearce, D.C. and Geddes, R.S., Statutory Interpretation in Australia (LexisNexis, 7th ed, 2011) at [5.14]). The fact that this statement was made in a part of the Act dealing specifically with entities that clearly otherwise might have claimed immunity does not provide support for the proposition that other provisions appearing in the Act must be taken as excluding the Crown from their scope.
Once it is accepted that it was prudent to include an express statement in s 116C indicating an intention to bind the Crown in right of the States and the Northern Territory, it becomes clear why it was then thought necessary to make plain that the provision also bound the Crown in right of the Commonwealth. The absence of such a statement would have led immediately to an argument that it was not intended that a Commonwealth instrumentality would be bound.
Taxation debts are not connected with particular assets
The Commissioner submitted that it was not evident that a substitution order relating to a debt that is unconnected with particular assets, as opposed to a debt attached to specific property, could be seen as “reasonably necessary” or “appropriate and adapted” in order “to effect a division of property” (s 90AE(3)(a)).
We are not persuaded there is any sound basis for construing the provision so narrowly. The fact a debt may not have a direct association with a specific item of property does not mean that an order under s 90AE relating to the debt could not, for example, be “reasonably appropriate and adapted” in order to bring about an overall division of the parties’ property.
In any event, this argument goes only to the exercise of the power, rather than the existence of the power. It would always be open to the Commissioner to argue in a particular case that a proposed order was not “reasonably necessary, or reasonably appropriate and adapted, to effect a division of property”.
The provisions of s 90AE(4)(a) & (b)
The Commissioner also relied on “the language of the separate limitations in s 90AE(4)(a)-(b)” which, it was submitted, strongly suggests that a taxation debt lies beyond the scope of s 90AE.
Paragraphs 90AE(4)(a) and 90AE(4)(b) make the “taxation effect” of a substitution order a mandatory consideration before such an order can be made. The Commissioner argued that “the taxation effect” of an order is “something separate from the nature of the debt itself” and that the requirement to consider such an effect was a further indication that tax debts are not themselves to be the subject of an order under s 90AE.
This submission overlooks the presence of the words “(if any)” in s 90AE(4)(a) and s 90AE(4)(b). Self-evidently, the legislation itself anticipates that there may be no taxation effects of a substitution order. In any event, we accept the applicant’s argument that there may, in fact, be “taxation effects” of one party becoming liable for the tax debt of another party – for example, the party who was initially responsible for paying the tax may be unable to claim the payment of the General Interest Charge as a business expense.
Alternative powers to deal with taxation liabilities
Senior counsel for the Commissioner accepted that there would be cases where it would be appropriate for one spouse to be responsible for a taxation liability incurred by the other spouse. He submitted, however, that other provisions in the Act provided the means by which a court could bring about that result, and referred in particular to the powers under s 80(1) of the Act, especially paragraph (f). It was submitted that the availability of such powers was part of the context in determining whether an intention was evinced that s 90AE should bind the Crown.
We accept that a court exercising jurisdiction under s 79 may make an order directing one party to the marriage to meet the tax debt of the other party. Such an order might be made, for example, in the common scenario where the party who has responsibility for the tax did not, in fact, receive the benefit of the income which led to the imposition of the tax. While a court can order the spouse who received the benefit of the income to meet the tax, this provides no defence to the original taxpayer against a claim by the Commissioner. The original taxpayer also would not have the many advantages the Commissioner enjoys in enforcing an obligation to pay tax.
Accordingly, while we accept that other provisions of the Act can provide context in construing a specific provision, we do not consider the availability of an alternative remedy to be persuasive in determining if s 90AE should be treated as binding the Crown. It must also be said, of course, that precisely the same argument could be made in relation to any other form of debt – i.e. an order might be made for one spouse to pay any debt of the other spouse. However, it is apparent Parliament did not consider this was a sufficient remedy in a regime designed to bring about a “just and equitable” adjustment of property interests between spouses.
Furthermore, the substitution provisions in s 90AE have much potential to promote the objective in s 81 for the court to make, as far as practicable, “such orders as will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them”.
The impact on taxation laws
The Commissioner sought to support his argument by consideration of the potential effect of a contrary construction of s 90AE on the taxation laws.
In a nutshell, the Commissioner submitted that a construction of s 90AE that permitted tax debts to be transferred between spouses would create absurdities in the application of the taxation scheme because s 90AE could not operate to transfer the objection, review and appeal rights associated with the tax debt. Reference in particular was made to the “conclusive evidence” provisions governing the effects of assessments made by the Commissioner, which prevent challenges to a notice of assessment outside of proceedings available to a taxpayer under Part IVC of the Taxation Administration Act 1953 (Cth)
Section 175A(1) of the Income Tax Assessment Act 1936 (Cth) provides that:
A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953.
Senior counsel for the applicant argued that a spouse who was ordered to meet the tax debt of the other spouse would have the same rights of objection to an assessment as the original taxpayer. As authority, he relied upon McCallum v Commissioner of Taxation (1997) 75 FCR 458. We accept the submission of the Commissioner that McCallum is not on point since the issue there was the capacity of a bankrupt taxpayer (and the trustee of the bankrupt) to seek to review a dismissal of his objection to an assessment. Different considerations apply in the context we are considering as there is no provision equivalent to s 134(1)(j) of the Bankruptcy Act 1966 (Cth), which permits a trustee in bankruptcy to bring legal proceedings relevant to the bankrupt estate.
We do not wish to express a firm view on this issue, given the way it was argued. However, we are not entirely persuaded that the rights of objection, review and appeal held by the original taxpayer would not pass to their spouse in the event a s 90AE order was made. The Commissioner submitted that it would “strain the statutory language to afford Part IVC rights to someone who is not a taxpayer”, but we are not convinced this is so, given that the order would direct the Commissioner to “substitute” one spouse for the other.
“Substitution” involves “putting of one person or thing in place of another” (Oxford English Dictionary) and we can see no reason why other laws of the Commonwealth would not be interpreted so as to confer on the party substituted all the rights of the person in whose place they have been obliged to stand by order of a court. Furthermore, Part IVC of the Taxation Administration Act 1953 (Cth) expressly confers the rights of objection on “a person who is dissatisfied with an assessment, determination, notice or decision” (s 14ZL). This is arguably a wider class than the person against whom the assessment was made and, in our view, might extend to a party obliged to pay the amount assessed.
We accept that a person who has been obliged to assume the tax liability of their spouse may face procedural/evidentiary difficulties in disputing the amount of an assessment. But this would not always be the case, as the party obliged to assume liability may well be the party with more intimate knowledge of the financial/taxation affairs of the marriage.
It is important to observe that procedural/evidentiary difficulties may also arise in respect of debts other than taxation debts. The fact that a debt may be in dispute, and that there may be difficulties in challenging it if an order is made under s 90AE is something a court would take into account prior to making such an order. In our view this again goes to the exercise of the power and not to its existence. Contrary to the submission of the Commissioner, this does not represent the “offloading” of problems to the court but rather involves no more than taking into account one of many potentially relevant considerations.
If we are wrong in being prepared to accept that the substituted spouse might be entitled to exercise all the same rights of objection as the original taxpayer spouse, then the Crown, through the Commissioner, would derive a benefit rather than a detriment. That fact would not provide justification for interpreting s 90AE as not applying to the Commissioner, although it might point to the need for amendment of the relevant tax legislation.
The explanatory memoranda
The Commissioner submitted that his position was supported by the Revised Explanatory Memorandum and the Supplementary Explanatory Memorandum to the legislation which introduced s 90AE. Senior counsel for the Commissioner argued that these characterised third party interests in a manner indicative of debts owed to private individuals and commercial enterprises rather than liabilities owed to the government.
While we accept that there is nothing in either the Revised or Supplementary Explanatory Memorandum referring to tax liabilities or other debts owed to government agencies, conversely there is nothing to indicate that it is intended that such liabilities would not be within the range of contemplation.
Furthermore, [149] of the Revised Explanatory Memorandum states that s 90AE is “intended to apply only to the procedural rights of the third party” and goes on to deny any intention to extinguish or modify substantive rights. This perceived limited effect of s 90AE provides no basis for concluding that it was intended not to deal with debts owed to government agencies.
Excluding the Crown would not make the provision ineffective
The Commissioner submitted that his construction of s 90AE as not binding the Crown would not render the legislation “extraordinarily ineffective” in achieving its purpose. It was argued, correctly, that if the Commissioner’s argument was accepted, s 90AE orders could still be made in relation to most debts, and that tax debts could be dealt with under s 79, as earlier discussed.
We accept that in Bropho the High Court had regard to the fact that the relevant law would have been rendered “extraordinarily ineffective” if Crown land was excluded from its scope. However, it does not follow that a provision that would still have significant useful operation without binding the Crown must therefore be interpreted as not binding the Crown. The effectiveness of the legislation, depending upon whether the Crown is bound or not, is but one factor to consider in construing the scope of the relevant provision.
The applicant’s submissions
Senior counsel for the applicant submitted that as the Commissioner is a “creditor” for the purposes of s 79 and s 79A of the Act, and takes advantage of his status as such, it follows that the Commissioner is also a “creditor” for the purposes of s 90AE. It was argued that the Crown could not have the statutory rights conferred by the Act on a creditor without also having the obligations of a creditor conferred by the same Act.
The applicant further submitted that s 90AE is “epexegetical” to s 79 in furthering Parliament’s purpose of ensuring the court can order a just and equitable division of assets and liabilities. It was argued that s 90AE is not a power to make orders independently of the power under s 79, but is a power that facilitates the making of “the single order under s 79”. On this view, if s 79 applies to the Crown, then so must s 90AE. Such a construction, it was contended, better serves the purpose of s 79 and hence is a construction to be preferred (Acts Interpretation Act 1901 (Cth), s 15AA).
In response, the Commissioner contended that there is no difficulty in principle with a construction of an Act that grants the Crown rights conferred by one provision but immunises it from liabilities imposed by another. We have no difficulty in accepting that proposition (see McGraw-Hinds; Bropho at 23 – 24).
However, the Commissioner went on to contend that while s 79 forms part of the context in deciding if s 90AE binds the Crown, the meaning of “creditor” and “debt” in s 79 does not automatically control the meaning of the same words in s 90AE.
While there is a rule of construction that the same meaning should be given to the same words wherever they occur in a statute, we accept that the rule does not carry much weight and readily yields to the context (McGraw-Hinds at 643; Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 10 and 15). Nevertheless, there is an express link between s 79 and s 90AE, and we consider it would be surprising if different meanings were given to the same word appearing in those linked sections (Murphy v Farmer (1988) 165 CLR 19 at 24). We do not accept the submission of the Commissioner that there are “textual indications that the field of persons and property to which a s 90AE order may be directed is different from those falling within [s 79]”.
We acknowledge though that the real issue is not whether the same words are to be given the same meaning in the two sections, but rather whether an intention is evinced that the Crown be caught by one but not by the other. However, Parliament must be taken to have known that the Commissioner has always been treated as a “creditor” for the purposes of s 79 and s 79A. Had Parliament intended to exclude the Commissioner as a “creditor” when expanding the existing powers of the court, it could have readily done so in precisely the same way that it excluded a species of property from the ambit of the section when enacting s 90ACA, which is in these terms:
The powers of the court under this Part do not apply to superannuation annuities (within the meaning of the Income Tax Assessment Act 1997).
The failure of Parliament to include such a provision, given the Commissioner’s history of availing himself of benefits flowing from directly associated provisions in the Act, is a strong indication that there is a legislative intention that the Commissioner be bound by s 90AE. We are fortified in coming to this conclusion by the knowledge of the benefits we identified earlier as flowing to the Commissioner from the making of orders under s 90AE.
The significance of s 90AC(1)
Senior counsel for the applicant called s 90AC(1) in aid of his argument. This subsection provides as follows:
90AC This Part overrides other laws, trust deeds etc.
(1)This Part has effect despite anything to the contrary in any of the following (whether made before or after the commencement of this Part):
(a)any other law (whether written or unwritten) of the Commonwealth, a State or Territory;
(b) anything in a trust deed or other instrument.
It was submitted by the applicant that the presumption that the Crown is not bound by a statute confers a prima facie right of immunity, which was “an unwritten law of the Commonwealth”. We reject this argument since the presumption is nothing more than an aid to statutory interpretation. It is not an unwritten law of the Commonwealth. Section 90AC(1) therefore has no application.
The answer to the Case Stated
For these reasons, with one proviso, we would answer the question posed by Judge Purdon-Sully in the affirmative.
The proviso is that s 90AE(1) would confer power to make only an order that the Commissioner be directed to substitute the first respondent for the applicant in relation to the debt owed by the applicant to the Commissioner. The additional words sought by the applicant in Order 8, namely “and the respondent husband be solely liable to the Commissioner of Taxation for the said debt” have the potential to create the impression that whatever rights the applicant may have had to challenge the debt (which senior counsel for the Commissioner acknowledged might still exist) are extinguished by the making of the order. For the reasons given earlier, we are not entirely persuaded that such rights would be extinguished by an order under s 90AE.
Aldridge J
I have had the benefit of reading the reasons of Thackray and Strickland JJ. I agree with the order proposed by their Honours and generally with their Honours’ reasons, subject to the comments that follow.
Does the presumption that the Crown is not bound by a statute apply?
The issues are whether s 90AE is legislation that is beneficial to the Crown and, if it be such, whether it follows from that alone that the Crown is bound by it.
These are not matters that were raised before us and we did not receive submissions on them. Accordingly, the views I express can only be regarded as tentative but they differ from the considerations of Thackray and Strickland JJ.
It is true that in the past the issue of whether the legislation benefited the Crown or acted to its prejudice by casting an obligation or restraint upon it was a relevant consideration. For example, as quoted in Bropho at 16, Lord Diplock said in BBC at 78 – 79:
The modern rule of the construction of statutes is that the Crown … is not bound by a statute which imposes obligations or restraints on persons or in respect of property unless the statute says so expressly or by necessary implication.
To like effect is the earlier case of Madras Electric at 685:
The appropriate rule, as I understand it, is that in an act of parliament general words shall not bind the Crown to its prejudice unless by express provision or necessary implication.
The dichotomy between benefit and obligation or prejudice, however, seems not to have played a significant role in subsequent statements of the principle by the High Court. For example, in Bradken at 116, Gibbs ACJ posed the following test (which was subsequently disapproved in Bropho) as:
It is an established rule of construction that no statute binds the Crown unless the Crown is expressly named therein or unless there is a necessary implication that it was intended to be bound; there will be such a necessary implication if it is manifest from the very terms of the statute that it was the intention of the legislature that the Crown should be bound.
Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ observed in ACCC v Baxter Healthcare Pty Limited (2007) 232 CLR 1 at [41]:
The Court in Bropho concluded that the inflexible rule as formulated, for example, in Bradken, should give way to a more flexible approach to construction that took account of the nature of the statutory provisions in question and the activities of government to which they might apply. Making the Commonwealth or a State liable to prosecution might be one thing. Subjecting the employees of a governmental corporation to general requirements enacted for the public benefit might be another.
In Bropho at 22 the Court expressly rejected:
earlier judicial statements to the effect that it must be manifest from the very terms of the statute itself that it was the legislative intent that the general words of a statute should bind the Crown, or that it must be apparent that the purposes of the statute would be wholly frustrated unless the Crown were bound…
This, at least, is an express rejection of a very significant aspect of the test posed in both BBC and Madras Electric to which I have already referred. It seems too that the dichotomy between benefit and prejudice has been replaced by a more flexible test.
The principle now to be applied is articulated in Bropho at 23 – 24:
Implicit in that is acceptance of the propositions that, notwithstanding the absence of express words, an Act may, when construed in context, disclose a legislative intent that one of its provisions will bind the Crown while others do not and that a disclosed legislative intent to bind the Crown may be qualified in that it may, for example, not apply directly to the Sovereign herself or to a Crown instrumentality itself as distinct from employees or agents. Always, the ultimate questions must be whether the presumption against the Crown being bound has, in all the circumstances, been rebutted, and, if it has, the extent to which it was the legislative intent that the particular Act should bind the Crown and/or those covered by the prima facie immunity of the Crown.
Thus, my present inclination is that whilst the issue of benefit to or burden upon the Crown may be a relevant consideration in determining whether the Crown is bound by a statute, it cannot be considered as a starting point or as a threshold issue.
Further, my current view is that an order under s 90AE operates to interfere with and vary the legal rights and entitlements of the third party as it “imposes obligations or restraints” or acts “to the prejudice” of the third party, to use the language earlier quoted, and cannot therefore be regarded as legislation beneficial to the Crown. No longer is the third party entitled to deal with a party or the parties to the marriage in accordance with its legal rights (whether they have arisen by contract or by statute) but rather it must do so subject to the imposition made under s 90AE.
It is true that the clear intent of s 90AE(3) and s 90AJ is that orders should not be made under s 90AE(1) unless the Court is satisfied that it is not foreseeable that under the order to be made the debt will not be paid in full and that the creditor’s expenses of complying with the order will be met. However, that is not the receipt of a benefit because those sections are designed to ensure that, in short, the creditor will be no worse off. Being no worse off is quite different to receiving a benefit. This remains the position even though it is possible that the orders may, in a particular case, have the effect that a creditor may be paid or paid more quickly than otherwise would have been the case if no order under s 90AE(1) be made. It is easy enough, however, to envisage orders being made, albeit for the right reasons and with the best of intentions that, for lack of compliance for example, have the opposite effect resulting in a financial detriment.
Substitution
I also wish to add some comments about the issue of whether or not one spouse can be substituted for the other in relation to rights of objection and appeal in relation to taxation liabilities.
Whilst the terms of s 14ZL of the Taxation Assessment Act 1953 (Cth) (which provides that “a person who is dissatisfied may object”) can accommodate such an order for substitution, as set out by Thackray and Strickland JJ, the same cannot be said of s 175A of the Income Tax Assessment Act1936 (Cth) where the rights of objection and appeal are given to the “taxpayer”. That word is defined in s 6 of that Act as meaning “a person deriving income or deriving profits or gains of a capital nature”. These phrases identify the person entitled to object as the earner of the income, profits or gains and do not comfortably accommodate the substitution of one spouse for the other as the “taxpayer”. This is because the spouse seeking to be substituted is unlikely also to meet that description as the relevant earner. Thus it is not entirely clear that rights of objection and appeal can be substituted for all taxation liabilities.
However, I do not see this as an issue of critical significance or one that would create any practical difficulties for the Commissioner. Whether the objector or the appellant against the assessments is the original creditor or the substituted spouse, the Commissioner would still face an objection or an appeal.
I also consider that the difficulties that have been suggested to arise if the obligation to pay and the right to object reside in different people are more apparent than real. The person with the rights to object could continue to do so in accordance with his or her rights under the particular Act in question. If there is a difficulty it would be with the newly substituted spouse, who is liable to pay, perhaps not having a right of objection. That, of course, may be a reason for not making an order under s 90AE(1).
An analogous situation is the equitable assignment of causes of action where the assignee may have to sue in the name of the assignor. No practical difficulty of significance arises in those cases.
Further, as has been pointed out, a more complete answer is that it is most unlikely that any orders would be made under s 90AE if there were genuine issues of substance that would justify an objection or an appeal which was being or was likely to be pursued.
I certify that the preceding seventy-nine (79) paragraphs are a true copy of the reasons for judgment of the Honourable Full Court (Thackray, Strickland & Aldridge JJ) delivered on 13 October 2017.
Associate:
Date: 13/10/17
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