Wilhelm v McKay

Case [2007] FCA 367

FEDERAL COURT OF AUSTRALIA

Wilhelm v McKay [2007] FCA 367

PRACTICE AND PROCEDURE – application for leave to amend an application for an Order of Review pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 39B of the Judiciary Act 1903 (Cth) – consideration of leave to join a party to the Application for an Order of Review.

ADMINISTRATIVE LAW – consideration of whether a challenged decision is a decision of an administrative character made or required to be made under an enactment for the purposes of s 3(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) – consideration of whether a decision by an officer of the Australian Taxation Office to swear and apply for a search warrant pursuant to s 3E of the Crimes Act 1914 (Cth) is such a decision.

TAXATION – consideration of whether the Commissioner has the power to conduct an investigation of conduct on the part of a taxpayer having its expression in the commission of criminal offences under the Criminal Code Act 1995 (Cth) (‘Criminal Code’) in connection with a taxation matter. 

Judgment

Leave to amend and leave to join a party refused with costs. 

Legislation

Corporations Act 1989 (Cth)
Income Tax Assessment Act 1936 (Cth)
Crimes Act 1914 (Cth)
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Judiciary Act 1903 (Cth)
Criminal Code Act 1995 (Cth)
Taxation Administration Act 1953 (Cth)
Australian Federal Police Act 1976 (Cth)
Federal Court Rules, Order 13, rule 2; Order 6, rule 8
Griffith University Act 1998 (Qld)
Judicial Review Act 1991 (Qld)
National Crime Authority Act 1984 (Cth)
Summary Offences Act 1953 (SA)
Income Tax Assessment Act 1997 (Cth)
Crimes (Taxation Offences) Act 1980 (Cth)

Authorities

Wilhelm v McKay [2005] FCA 792 - cited
Jilani v Wilhelm [2005] FCAFC 269; (2005 – 2006) 148 FCR 255 - quoted
Williams v Keelty (2000) 111 FCR 175 - quoted
R v Rogerson (1992) 174 CLR 268 - cited
Re Preston [1985] AC 835 - cited
Leggo Australia Pty Ltd v Paraggio (1994) 52 FCR 542 - quoted
Banque Commerciale SA en Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 - cited
Queensland v JL Holdings Pty Ltd (1996 – 1997) 189 CLR 146 - quoted
Anisminic Ltd v Foreign Compensation Commission (1969) 2 AC - cited
Craig v South Australia (1995) 184 CLR 163 - cited
Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 - quoted
Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 - cited
Griffith University v Tang (2005) 221 CLR 99 - quoted
Salerno v National Crime Authority (1997) 75 FCR 133 - cited
Electricity Supply Association of Australia Ltd v Australian Competition and Consumer Commission (2001) 113 FCA 230 - cited
Guss v Commissioner of Taxation (2006) FCAFC 88; (2006) 152 FCR 88 - cited
Hutchins v Deputy Commissioner of Taxation (1996) 136 ALR 153 - cited
Carmody v Mackellar (1997) 76 FCR 115 - quoted
Rogers v Moore (1992) 39 FCR 201 - quoted
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Details
AGLC
Wilhelm v McKay [2007] FCA 367
Case
[2007] FCA 367
Decision Date

CaseChat Overview and Summary

In Wilhelm v McKay, the applicants sought leave to amend their application for judicial review of decisions made by officers of the Australian Taxation Office (ATO) in relation to a search warrant executed at the premises of the respondents' solicitors. The applicants, comprising individuals and companies, had previously settled tax proceedings with the Commissioner of Taxation and were now challenging the issuance and execution of a search warrant at their former solicitors' premises, alleging that the officers lacked the authority to do so.

The court was tasked with deciding whether the applicants were entitled to amend their application to include new grounds of review and to add an additional respondent, Mr Bell, who was alleged to have made the initial application for the search warrant. The legal issues centered on the scope of judicial review, the availability of amendments under the court's rules, and the necessity of adding Mr Bell as a respondent.

The court considered the wide discretion it has in permitting amendments to applications, noting that amendments should be allowed if they raise fairly arguable issues. The applicants sought to challenge the decisions of Mr Bell, the issuing officer Mr McKay, and the executing officer Ms Jilani on various grounds, including errors of law and jurisdictional errors. The court found that while the applicants' proposed amendments introduced arguable grounds of review, they did not sufficiently demonstrate that the amendment was necessary to determine the real questions in the proceeding. Furthermore, the court held that joining Mr Bell as a respondent was not necessary as the existing respondents could adequately address the claims against them.

Ultimately, the court refused the application for leave to amend and to join Mr Bell as a respondent, dismissed the notice of motion, and ordered the applicants to pay the respondents' costs. The court's decision underscores the importance of demonstrating the necessity and arguability of proposed amendments and the judicious exercise of the court's discretion in managing proceedings.

Orders

Orders of the court

1. The Application for Leave to Amend the Application for an Order of Review in the terms set out in Annexure ‘SWS3’ to the affidavit of Scott William Sharry filed on behalf of the applicants on 29 May 2006 as further amended in terms of the proposed amended Application for an Order of Review handed by counsel for the applicants to the court on the hearing of the Notice of Motion for Leave to Amend filed 29 May 2006 is refused.

2. The Application for Leave to Join Phillip Richard Bell as a respondent to the Application for an Order of Review is refused.

3. The Notice of Motion filed 29 May 2006 is dismissed.

4. The applicants are to pay the respondents’ costs of and incidental to the Notice of Motion filed 29 May 2006.

Background

Background to the litigation

The application for leave to amend is supported by a Statement of Facts and Contentions filed on behalf of the applicants. The Underlying Facts The relevant contended facts are these. Clayton Utz Solicitors, acted for Markit Pty Ltd (‘Markit’) and Urinda Pty Ltd (‘Urinda’) in proceedings brought against those companies in the Supreme Court of Queensland by the Commissioner of Taxation (‘the Commissioner’) in which the Commissioner sought to recover a contended tax debt due to the Commonwealth of Australia (‘Commonwealth’). The Commissioner had commenced proceedings to set aside Deeds of Company Arrangement entered into by Markit and Urinda. Each company had entered into Voluntary Administration under Part 5.5 of the Corporations Act 1989 (Cth). The Commissioner claimed that Markit and Urinda were liable for tax instalments in the form of group tax under Divisions 8 and 9 of Part VI of the Income Tax Assessment Act 1936 (Cth). In addition, separate proceedings were commenced against Mr Dempsey (‘Dempsey’) and Mr Wilhelm (‘Wilhelm’) by which monies were claimed from them as directors of Markit and Urinda on the footing that each individual is personally liable in his capacity as a director of Markit and Urinda for the unpaid tax instalments of each company. On 7 July 2004, Wilhelm, Dempsey, Markit, Urinda and the Commissioner on behalf of the Commonwealth, entered into a Deed of Settlement to resolve the Supreme Court proceedings and the claims against Wilhelm and Dempsey personally. The material terms of the deed were that Markit and Urinda would pay the sum of $600,000 to the Commissioner by paying that sum to the Commissioner’s solicitors, Blake Dawson Waldron (‘BDW’), by 5.00pm on 8 July 2004 (clause 2(a)); upon receipt of the settlement sum the Commissioner would release all applicants from their liability for the unpaid liabilities of Markit and Urinda (clause 2(b)(iv)); upon receipt of the settlement sum, the Commissioner would, within 24 hours, instruct BDW to deliver to Clayton Utz Notices of Discontinuance of the Supreme Court proceedings and the proceedings against Wilhelm and Dempsey personally (clause 2(b)); and upon service of the Notices of Discontinuance, Wilhelm, Dempsey and Clayton Utz would be entitled to collect from BDW ‘all documents (originals and copies) as are held by [BDW] which are the property of Markit, Urinda, Dempsey or Wilhelm’ in relation to the proceedings against Markit, Urinda, Wilhelm and Dempsey (clause 2(c)). The Deed nominated particular documents expressly falling within the entitlement for collection by Clayton Utz including minutes of meetings of the directors of Markit and Urinda of particular dates and a management agreement between Markit, Wilhelm and Dempsey dated 20 May 1995. In the Supreme Court proceedings, the Commissioner, amongst other things, alleged that the documents or some of them were forgeries. At 11.30am on 7 July 2004, the applicants caused $600,000 to be transferred into the trust account of BDW on behalf of the Commissioner.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

GREENWOOD J
The applicants now seek leave to amend the primary application and further reformulate the decisions sought to be challenged. The Contended Decisions The decisions, as formulated, the applicants now seek to challenge are these. First, the decision of Mr Phillip Bell to ‘swear and make an application for a search warrant’ on 7 July 2004 which must be taken to mean, as framed, a decision reached by Mr Bell comprising two components: an election to swear information for submission to the issuing officer as to the foundation facts giving rise to reasonable grounds for suspecting that there is or will be evidential material concerning the relevant matters at the premises of BDW; and, an election to apply for the issue of a search warrant. The second decision is that of the issuing officer, Mr McKay SM, to issue a search warrant. The third decision is that of Ms Jilani to execute the search warrant at the premises of BDW, take possession of seized documents and deliver up those documents to the ATO. The proposed formulation of the first decision abandons the previous contention, as originally filed, that Ms Jilani made a decision to swear information that she had reasonable grounds for suspecting that each of the applicants had committed offences as identified. There simply was no basis for such a contention. By the application for leave which was the subject of the decision of the Full Court, the applicants contended that the operative decisions to be challenged were a decision by Ms Jilani to apply for a search warrant in relation to the relevant offences and the decision of Mr McKay SM to issue the search warrant. In the alternative, the applicants sought to challenge the conduct of Ms Jilani in applying for and executing the search warrant and in the further alternative, the conduct of Ms Jilani in taking possession of seized documents and delivering up those documents to the ATO. The Grounds of Review The grounds of review now advanced are these. First, the decision of Mr Bell to swear and make the application and the decision of Mr McKay SM to issue the warrant, are said to involve ‘errors of law’ and are ‘contrary to law’. The content of this ground comprises three propositions going to a contention of ‘no power’. The first contention is that Mr Bell swore and made the application in circumstances where neither he nor any officer of the ATO had the power to investigate the alleged offences pursuant to the Criminal Code, the Taxation Administration Act 1953 (Cth) (‘the TAA’), the Australian Federal Police Act 1976 (Cth) (‘the AFP Act’) or the Crimes Act, or any other Commonwealth legislation. The second contention is that a proper consideration of the relevant provisions of the TAA, the AFP Act and the Crimes Act is consistent with AFP members being the only persons authorised to investigate the alleged offences under the Criminal Code. The third contention is that the provisions of the legislation previously mentioned are consistent with officers who are members of the AFP being authorised to execute search warrants obtained under the Crimes Act and investigate offences against the Criminal Code, and officers of the ATO not having any power to do so (Ground 1A, Particulars (a), (b) and (c)).

Ratio Decidendi

Legal Principle Established

Established by: GREENWOOD J

At paragraphs [3] and [4] of the amended application before Finkelstein J, the applicants sought to review the ‘conduct’ of Ms Jilani in applying for and executing the warrant and in delivering up the documents to officers of the ATO. The Full Court concluded that the proposed amendments addressing the conduct of Ms Jilani failed to recognise that ‘conduct’ for the purposes of s 6 of the A D J R Act focuses upon procedural questions whereas the complaint of the applicants was that the process of decision‑making itself was flawed and erroneous. Secondly, the conduct in question was not conduct for the purpose of making a decision within the meaning of the Act. Considerations The applicants seek leave to amend the primary Application (Order 13, rule 2) and leave to join Mr Bell as a third respondent (Order 6, rule 8). The court exercises a wide discretion in determining whether leave to amend the primary Application ought to be granted. Order 13, rule 2 provides that ‘all necessary amendments shall be made for the purpose of determining the real questions raised by or otherwise depending on the proceeding, or of correcting any defect or error in the proceeding, or of avoiding multiplicity of proceedings’. In exercising the discretion, the court must determine whether the applicants are seeking to litigate an issue which is ‘fairly arguable’ recognising that the ultimate aim of the court in quelling any controversy is to secure the attainment of justice between the parties to the controversy (Queensland v JL Holdings Pty Ltd (1996 – 1997) 189 CLR 146 at 154 per Dawson, Gaudron and McHugh JJ). Further, the fact that the proposed amendment may possibly be met by a substantive defence on the part of the respondents does not, of itself, suggest any reason for refusing an amendment. In circumstances where a party seeks to introduce a substantial additional ground of challenge to the decisions of the respondents, the applicants should be permitted to argue such a ground provided the ground is ‘arguable’. In the exercise of the discretion, the applicants ought not to be shut out of raising an arguable contention. Similarly, in determining whether Mr Bell ought to be joined as a third respondent in the proceeding, the question is whether the applicants have demonstrated that they have an arguable case against Mr Bell in the terms formulated in the proposed amendment. If so, Mr Bell will be joined as a necessary party to ensure that all matters in dispute in the proceeding may be effectually and completely determined and adjudicated upon (Order 6, rule 8(1)(b)). The question then is whether the applicants have demonstrated an arguable case in relation to the proposed amendments and the joinder of Mr Bell. The Decision of Mr Bell to Swear and Make Application The applicants challenge this decision on grounds of statutory administrative review and pursuant to s 39B of the Judiciary Act. As to the A D J R Act, Ground 1A relies upon error of law (s 5(1)(f)); Ground 2, an improper exercise of power (s 5(1)(e)); Ground 3, an abuse of power (s 5(2)(j)); and Ground 4, jurisdictional error (s 5(1)(c)). As to the principles at common law upon which the Court will exercise supervisory review of administrative decisions of the Executive, administrative tribunals or officers of the Commonwealth, for the purposes of exercising a jurisdiction under s 39B of the Judiciary Act: see Anisminic Ltd v Foreign Compensation Commission (1969) 2 AC at 171, per Lord Reid, approved in Craig v South Australia (1995) 184 CLR 163 at 179; Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 366 and 367 per Deane J; and Plaintiff S157/2002 v Commonwealth (2003) 211 CLR 476 at 489 [25]. The applicants contend for three ‘decisions’ susceptible of review.