CATCHWORDS

 

 

 

INCOME TAX - Assessment made by Commissioner - Notice of Assessment - no formal objection lodged against Assessment by taxpayer - conclusiveness of Notice in Court proceedings not brought under Pt IVC of Taxation Administration Act - ss 175 and 177(1) Income Tax Assessment Act - application of Hickman principle - whether assessment must be made bona fide - whether assessment must relate to subject matter of Income Tax Assessment Act - whether assessment must be reasonably capable of reference to powers of Commissioner.

 

 

 

INCOME TAX - Assessment made by Commissioner - Notice of Assessment - validity - whether assessment tentative or provisional - whether assessment mala fide - whether assessment issued to raise a s 218 Notice - whether proper assessment made under s 167 Income Tax Assessment Act.

 

 

 

BANKRUPTCY - property - property of the bankrupt - property divisible among the bankrupt's creditors - whether application for prerogative relief is property that vests with the trustee - whether right to pursue claim for damages for misfeasance in public office is property that vests with the trustee - whether misfeasance in public office is a wrong to the bankrupt  - whether s 116 (2)(g) includes misfeasance in public office - trustee's decision not to prosecute - whether s 99 sole mechanism to challenge trustee's decision precluding operation of s 178 - whether s 178 appropriate mechanism to challenge trustee's decision.

 

 

 

ADMINISTRATIVE LAW - matter in which certiorari sought against an officer of the Commonwealth - whether Court has power to issue certiorari where prohibition not available - grounds to refuse discretionary relief - s 39B Judiciary Act.

 

 

 

TORT - misfeasance in public office - elements - whether sufficient evidence to proceed to hearing.

 

 

The Constitution - s 75(v)

Judiciary Act 1903 (Cth) - s 39B

Income Tax Assessment Act 1936 (Cth) - s 166, s 167, s 175, s 177(1), s 204, s 205, s 218(1)

Taxation Administration Act 1953 (Cth) - s 14ZW, s 14ZZK

Bankruptcy Act 1966 (Cth) - s 5(1), s 58(1), s 58(1)(a), s 99, s 116(1), s 116(2)(g), s 116(2)(g)(ii), s 178

Freedom of Information Act 1982 (Cth)

 

Holpitt Pty Ltd v Varanu Pty Ltd (1990) 29 FCR 576

Fuller and Cummings v Beach Petroleum NL (1993) 43 FCR 60

Glass v State of New South Wales (1994) 52 FCR 336

Ainsworth v Criminal Justice Commission (1992) 175 CLR 546

United Breweries Limited v Castlemaine Tooheys Limited (1986) 161 CLR 543

Hall v Nominal Defendant (1966) 117 CLR 423

Walton v Gardiner (1993) 177 CLR 378

R v Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301

Deputy Commissioner of Taxation v Richard Walter Pty Limited (1994-95) 183 CLR 168; 69 ALJR 223

Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45

Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178

R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598

F J Bloemen Pty Limited v The Federal Commissioner of Taxation (1980-81) 147 CLR 360

Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243

Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39

Bank of NSW v Commonwealth (1948) 76 CLR 1

Simons v Federal Commissioner of Taxation (1980-81) 147 CLR 360

Metropolitan Bank v Pooley [1885] 10 App Cas 210 (HL)

R v Deputy Commissioner of Taxation; Ex parte Briggs (1987) 14 FCR 249

Pitfield & Ors v Franki & Ors (1970) 123 CLR 448

R v Cook; Ex parte Twigg (1980) 147 CLR 15

R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Limited (1949) 78 CLR 389

R v Licensing Court of Blackall; Ex parte Chiconi [1920] St R Qd 4

R v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177

R v Aston University Senate; Ex parte Roffey [1969] 2 QB 538

Tebbutt v Egg Marketing Board of New South Wales [1976] 2 NSWLR 179

Northern Territory of Australia & Ors v Mengel & Ors (1995) 129 ALR 1

Beckham v Drake [1849] 2 HLC 579

Faulkner v Bluett (1981) 52 FLR 115

Cox v Journeaux (No 2) (1935) 52 CLR 713

 

 

 

ALEXANDER WILLIAM MADDEN v JOAN LILIAN MADDEN, FEDERAL COMMISSIONER OF TAXATION and OFFICIAL RECEIVER

 

No. NG 941 of 1993

 

 

 

SHEPPARD, EINFELD & FOSTER JJ

27 MARCH 1996

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 941 of 1993

                                  )

GENERAL DIVISION                  )

 

 

         ON APPEAL FROM A SINGLE JUDGE OF THE COURT

 

 

                      BETWEEN:   ALEXANDER WILLIAM MADDEN

 

                                                   Appellant

 

 

                          AND:   JOAN LILIAN MADDEN

 

                                            First Respondent

 

                                  FEDERAL COMMISSIONER OF TAXATION

 

                                           Second Respondent

 

                                  OFFICIAL RECEIVER

 

                                            Third Respondent

 

 

 

JUDGES MAKING ORDERS:    SHEPPARD, EINFELD & FOSTER JJ

 

DATE:     27 MARCH 1996

 

PLACE:    SYDNEY

 

 

 

 

                      MINUTE OF ORDERS

 

 

 

THE COURT ORDERS THAT:

 

 

          1.   The appeal be dismissed.

 

 

          2.   The appellant pay the respondents' costs of this appeal.

 

 

 

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

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 941 of 1993

                                  )

GENERAL DIVISION                  )

 

 

 

         ON APPEAL FROM A SINGLE JUDGE OF THE COURT

 

 

 

 

                        BETWEEN:  ALEXANDER WILLIAM MADDEN

                                      Appellant

 

 

 

                        AND:      JOAN LILIAN MADDEN

                                      First Respondent

 

 

                                  FEDERAL COMMISSIONER OF TAXATION

                                      Second Respondent

 

 

                                  OFFICIAL RECEIVER

                                      Third Respondent

 

 

 

 

 

 

CORAM:    SHEPPARD, EINFELD & FOSTER JJ

 

PLACE:    SYDNEY

 

DATE:         27 MARCH 1996

 

 

                    REASONS FOR JUDGMENT

 

 

SHEPPARD J:  In this matter I have had the advantage of reading the judgment to be delivered by Foster J.  Subject to two matters, I am in agreement with his Honour's reasons and with the conclusions at which he has arrived.  I agree in the orders which he proposes.

     The first of the matters to which I have referred concerns the various steps which must be undertaken by the appellant if he is to succeed in the action which he wishes to bring.  I agree, of course, with the fact that those steps confront him.  Nevertheless, the question for us is whether there is, in any real sense, the likelihood of there being a triable issue concerning the question whether the assessment of income tax which was made was carried out otherwise than in good faith.  That is the matter upon which I have concentrated attention in my consideration of the matter.  I am in agreement with Foster J that the appellant has not made out the colour of a case in support of his contention about the critical matter in issue.

 

     The second matter concerns the availability of the writ of certiorari.  I do not wish to express a view on this question because I do not think it necessary to do so.  If the appellant were entitled to succeed otherwise, there may have been a question whether certiorari would go.  But, if the Court were of the view that the writ was not available, the position would be likely to be cured by the making of an appropriate declaration, which the appellant in any event seeks, and, if it were necessary, the grant of an injunction something which is plainly within the jurisdiction of the Court to grant under s.75(v) of the Constitution and thus under s.39B of the Judiciary Act 1903.

 

     Neither of the points to which I have referred bears on the substantive matter to be decided.  In the result I agree that the appeal should be dismissed with costs.

 

 

     I certify that this and the two (2) preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Sheppard.

 

 

     Associate

 

     Dated

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)    No. NG 941 of 1993

GENERAL DIVISION                  )

 

 

  ON APPEAL FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

 

 

                   Between:      ALEXANDER WILLIAM MADDEN

                                           Applicant

 

 

 

                       And:      JOAN LILLIAN MADDEN

                                           First respondent

 

 

 

                             FEDERAL COMMISSIONER OF TAXATION

                                           Second respondent

 

 

 

                                  OFFICIAL TRUSTEE IN BANKRUPTCY

                                           Third respondent

 

 

 

           REASONS FOR JUDGMENT OF JUSTICE EINFELD

 

 

 

SYDNEY                                         27 MARCH 1996

INTRODUCTION

 

This matter involves an appeal or an application for leave to appeal from the judgment of a single Judge of this Court given on 9 May 1995 on motions by the second and third respondents that the application and statement of claim of the appellant be dismissed, permanently stayed or struck out.  In order to appreciate the case before this Full Court, it is necessary to relate the unusual nature of the primary application as finally presented after several amendments.

In September 1986 the appellant was arrested and charged with conspiracy to supply heroin.  On 1 October 1986 the second respondent (the Commissioner) assessed the appellant for income tax for the year to June 1986 in the sum of $512,781.81 due and payable immediately.  At his bail application a few days later, a copy of the assessment was tendered as evidence of the appellant's earnings and flight risk.  As a consequence bail was refused.  On 23 February 1990 the Commissioner obtained judgment against the appellant in the Supreme Court of New South Wales in respect of this liability for income tax.  On the Commissioner's petition founded on that judgment, the appellant became a bankrupt on 10 April 1990.  At that time the appellant was incarcerated and no one appeared on his behalf.  The third respondent (the trustee) became his trustee in bankruptcy.

 

By application on 30 November 1993, last amended on 17 March 1994, the appellant sought an order against the Commissioner in this Court quashing the tax assessment as well as detailed declaratory relief and damages including exemplary damages for the tort of misfeasance in public office.  In the event that the right to take these proceedings vested in the trustee upon the appellant's bankruptcy, and that the appellant was therefore denied standing in the matter, the appellant challenged the decision of the trustee not to prosecute the allegations on his behalf and sought an order under section 178 of the Bankruptcy Act 1966 (the Bankruptcy Act) that he be given leave to bring such proceedings in his own or the trustee's name.  The appellant did not specify from where the jurisdiction of the Court for the
matter was derived but it appears to have proceeded primarily on the basis of section 39B of the Judiciary Act 1903 and the jurisdiction accrued from the tortious claims themselves.  The first respondent is the appellant's former wife, but no relief was pressed against her in either the primary or the appellate proceedings.

 

THE FIRST INSTANCE HEARING AND DECISION

 

The assessment

 

The appellant's claims against the Commissioner at first instance were that the assessment had not been raised in accordance with the Income Tax Assessment Act 1936 (the Tax Act), nor for a bona fide purpose, and that it was not a proper exercise of the powers vested in the Commissioner.  The suggestion was in essence that it had been raised for a purpose collateral to that contemplated by the Tax Act and should therefore be quashed.

 

In respect of the assertion that the assessment had not been raised in accordance with the Tax Act, the appellant submitted to his Honour that the Commissioner had not undertaken any relevant process of assessment along the lines decided in R v Commissioner of Taxation: Ex parte Briggs [1986] 12 FCR 301.  In that case a Full Court of this Court (Bowen CJ, Sheppard and Beaumont JJ) held that an assessment that was in fact not an assessment at all could not be protected by sections 175 and 177(1) of the Tax Act.  As will be seen, the tax authorities had admitted that no attempt had been made to ascertain the
taxpayer's income, that no relevant process of calculation had been undertaken, and that the assessment had been raised for a collateral purpose.

 

In the present instance the Commissioner submitted to the learned primary Judge that sections 175 and 177(1) protected his decision from review other than by the appeal process provided for by the Tax Act.  These provisions are:

 

     175.The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.

 

     177. (1)  The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.

 

The Commissioner asserted that a true assessment was made, in the sense that a process had been undertaken, and therefore that Briggs had no application.  Reference was made in this respect to a letter to the appellant's previous solicitors on behalf of D J Cortese, Deputy Commissioner of Taxation, in which the Tax Office stated that the assessment was made in terms of sections 166 and 167 of the Tax Act from information in the possession of the Commissioner.  These sections state:

 

     166.From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon.

 

     167.If -

                   (a)  any person makes default in furnishing a return; or

                   (b)  the Commissioner is not satisfied with the return furnished by any person; or

                   (c)  the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income,

 

              the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purposes of section 166.

 

Other evidence indicated that the assessment was made on information from the police as to the appellant's dealings in heroin and its estimated street value.  No deductions were allowed, nor was it suggested that income in the estimated sum was actually derived.  In particular, there was no investigation of or support for the correctness of the police's estimate, no consideration of whether the assessed income was actually recoverable in the appellant's sole hands, and no attempt to assess what period of time and what expenses would be necessary before the suggested price could be achieved.  Apparently accepting the Commissioner's submission that Briggs was inapplicable or distinguishable, the learned primary Judge held that there had nonetheless been an identifiable process of assessment by the Commissioner.  As was the case in F J Bloemen Pty Ltd v The Commissioner of Taxation (Cth) [1981] 147 CLR 360, his Honour held that the assessment was on its face an assessment and that there was some basis for it.

 

In other words, in the absence of admissions from the Commissioner of the kind made in Briggs, the learned primary Judge accepted that the Commissioner was in possession of some evidence concerning the income of the taxpayer in the form of the police report, and that there was some rational correlation between the information provided and the assessment.  Thus, his Honour found, there was evidence to suggest that the Commissioner had taken a view of the facts.  That conclusion enabled his Honour to hold that the assessment was protected by the comprehensive shield of sections 175 and 177(1) of the Tax Act.  The learned primary Judge entered one proviso -- viz. that the assessment had been made in accordance with the approach laid down in R v Hickman: Ex parte Fox and Clinton [1945] 70 CLR 598.  There Dixon J at 615 formulated an approach to the construction of privative clauses like sections 166 and 167:

 

     Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided as always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body.

 

The appellant submitted at first instance that the assessment breached the first of these provisions in that it was not a bona fide attempt to establish his income in the relevant year.  In fact he alleged that the assessment had been raised in order to oppose bail on the heroin charge and was thus not a valid assessment.  His Honour analysed the evidence in this regard and determined (AB47) that:

 

     ..... it may be readily inferred that the information in the report came from the police.  However, having gone into the facts as Dixon J did in Cox v Journeaux [No 2] (1935) 52 CLR 713, I am firmly of the view that the extraordinary allegation as to collusion about bail cannot be sustained.  It is [quite] hopeless and may be properly described as frivolous or vexatious.

 

This aspect of the appellant's claim at first instance was not pressed on this appeal.

 

The appellant further submitted to his Honour that the assessment was raised in order to collect the tax from monies held by the police.  Among documents obtained from the Tax Office under the Freedom of Information Act 1982 concerning its investigation and assessment of the appellant's liability to income tax for the year ending June 1986 were a series of handwritten notes part of which were quoted by his Honour.  For the purposes of this appeal it is necessary to set them out in full:

1.  (AB28)        Alexander William Madden

                    Supplementary Report

     Refer to folio (7) for authority to audit.

     Refer to folio (6) for the [...] of facts available.

 

     During the 1986 year of income the taxpayer has sold heroin being a total sale figure of $856,000.  As the police hold $188,720 and it appears likely the taxpayer through his solicitors will attempt to regain at least $174,500 urgent action must be taken.

     Initially it is proposed to raise an assessment on an income of $856,000 and issue a 218 notice on the police to recover the outstanding taxes.

 

     It is therefore submitted to:

 

          (1) Issue a manual assessment based on a taxable income of $856,000 for the year ended 30th June 1986; and

 

          (2) Issue a 218 notice on the police department to recover outstanding taxes held by them.

 

                                                     29/9/86

 

2. (AB30)         Alexander William Madden

 

     Attached folios 1-5 are the facts and charges against the T/P.  For our purposes the following points should be noted:

 

     (1) Cash held by the police

     (a) Cash on T/P's person at the time of arrest   $4,220

     (b) Cash located on further searching           $10,000

     (c) Cash located later in a security box      $174, 500

 

              Total cash held by police             $188,720

     (2) Details of sale of heroin:

          Total sale value                         = $856,000

 

                                                     26/9/86

 

3. (AB37)         Alexander William Madden

 

     Taxpayer has been arrested on heroin charges and it is necessary to raise a 1986 [assessment] in order to put 218 notice on police for monies held by them.

 

     Submit to raise a pro forma

 

     1/ prefer 2

     2/ lodgement control

 

                                           Supervisor Unit 2

 

Additionally the Income Tax Investigation Report showed the following (AB23-25):

 

    Part E - GENERAL INFORMATION CONCERNING INVESTIGATION

     6.   Sources of income - Sale of drugs

                  PART F NOTES AND COMMENTS

 

     1.   Degree of taxpayer's culpability.  His explanation of the understatements and the Investigation Officer's comments.

 

          The taxpayer has not been interviewed to date.

 

     2...

 

     3...

 

     4.   Capacity of taxpayer to pay.

 

          Taxpayer's known cash held by police is $188,720

                   Approved        Supervisor Unit 2 29.9.86

 

Section 218(1) of the Tax Act provides:

     The Commissioner may at any time, or from time to time, by notice in writing (a copy of which shall be forwarded to the taxpayer at his last place of address known to the Commissioner), require:

 

          (a)  any person by whom any money is due or accruing or may become due to a taxpayer;

 

          (b)  any person who holds or may subsequently hold money for or on account of a taxpayer;

 

          (c)  any person who holds or may subsequently hold money on account of some other person for payment to a taxpayer; or

 

          (d)  any person having authority from some other person to pay money to a taxpayer;

 

     to pay to the Commissioner, either forthwith upon the money becoming due or being held, or at or within a time specified in the notice (not being a time before the money becomes due or is held):

 

          (e)  so much of the money as is sufficient to pay the amount due by the taxpayer in respect of tax or, if the amount of the money is equal to or less than the amount due by the taxpayer in respect of tax, the amount of the money; or

          (f)  such amount as is specified in the notice out of each payment that the person so notified becomes liable from time to time to make to the taxpayer until the amount due by the taxpayer in respect of tax is satisfied;

 

     and may at any time, or from time to time, amend  or revoke any such notice, or extend the time for making any payment in pursuance of the notice.

 

The learned primary Judge considered that the Commissioner's desire to issue a section 218 notice did not vitiate the assessment process and emphasised the words 'recovery of outstanding taxes' in the handwritten notes to hold that the assessment was valid within the Hickman principle.  His Honour also held that the word 'initially' within the notes did not support a conclusion that the assessment was either provisional or tentative (AB47).

 

The claim in tort

 

The appellant submitted to the learned primary Judge that the action of the Commissioner in raising the assessment amounted to the tort of misfeasance in public office.  His Honour considered the elements that must be established in a case of this kind.  One of them is that the impugned act(s) must have been beyond the power of the officer concerned to the officer's knowledge.  Referring to his earlier reasoning that the assessment was not in breach of the Hickman principle and was therefore a valid exercise of power protected by section 177(1) of the Tax Act, the learned Judge thus denied to the appellant the fundamental element of the tort that the relevant action be ultra vires.  His

Honour also considered that the appellant could not make out the mental element of the tort, and held that the claim was therefore without foundation and vexatious.

 

The effect of the appellant's bankruptcy on the assessment application

 

His Honour held that the claim for prerogative relief was a chose in action and was therefore "property" of the trustee for the purposes of the Bankruptcy Act.  The trustee was thus the proper applicant: Daemar v Industrial Commission of New South Wales (No 2) [1990] 22 NSWLR 178; Fuller and Cummings v Beach Petroleum NL [1993] 43 FCR 60.

 

As for the action in tort, the question before the primary judge was whether this application was within the exceptions of section 116(2)(g) of the Bankruptcy Act and was therefore not property that vests in the trustee.  Subsections (1) and (2) of that section relevantly provide:

     Subject to this Act:

 

     (1)  (a)  all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him, or has devolved or devolves on him, after the commencement of the bankruptcy and before his discharge;

 

          (b)  the capacity to exercise, and to take proceedings for exercising, all such powers in, over or in respect of property as might have been exercised by the bankrupt for his own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his discharge;

          (c)  property that is vested in the trustee of the bankrupt's estate by or under an order under section 139D; and

 

          (d)  money that is paid to the trustee of the bankrupt's estate under an order under section 139E;

 

          is property divisible amongst the creditors of the bankrupt.

 

     (2)  Subsection (1) does not extend to the following property:

 

          ...

 

          (g)  any right of the bankrupt to recover damages or compensation:

 

              (i)    for personal injury or wrong done to the bankrupt, the spouse of the bankrupt or a member of the family of the bankrupt; or

 

              (ii)in respect of the death of the spouse of the bankrupt or a member of the family of the bankrupt;

 

         and any damages or compensation recovered by the bankrupt (whether before or after he became a bankrupt) in respect of such an injury or wrong or the death of such a person;

 

His Honour considered that in contrast to Faulkner v Bluett [1981] 52 FLR 115 at 122, the cause of action pleaded was not a wrong to the appellant's 'mind, body or character', and therefore did not fall within the subsection (2)(g) exception so as to constitute the bankrupt as the proper appellant.  His Honour conceded that the possible recovery of exemplary damages may fall within the ambit of subsection (2)(g), but that this was irrelevant because the entire proceedings were without merit and groundless.

 

The trustee's decision

 

They were not specifically stated, but his Honour's views on the trustee's decision not to prosecute the matter on behalf of the appellant can readily be inferred, viz. there was nothing on which to base the challenge.

 

The respondents submitted that the application for an order under section 178 of the Bankruptcy Act was misconstrued and that in fact the appellant was challenging the trustee's decision to accept the Commissioner's proof of debt.  Because that circumstance was specifically provided for under section 99 of the Bankruptcy Act, that section provided the appropriate and sole avenue for the appellant, which he had chosen not to follow.  Rejecting this submission, his Honour held that an application under section 178 was appropriate, but as the appellant's underlying claims were hopeless and unmeritorious, the challenge to the trustee's decision through section 178 of the Bankruptcy Act was beside the point.

 

Decision at first instance

 

The learned primary Judge thus ordered the proceedings against the Commissioner and the Official Trustee to be stayed generally and dismissed the appellant's application with costs.

 

THE APPEAL

 

Time

 

As the reasons for judgment at first instance were delivered on 9 May 1995, the last day for filing an application for leave to appeal, if the judgment was interlocutory, was 16 May 1995.  If it was a final judgment, the last day for filing a notice of appeal was 30 May 1995.  Nothing was filed by either of those dates.  A motion for an extension of time to apply for leave to appeal, and the proposed notice of appeal, supported by an affidavit of Waldemar Abramowicz, the appellant's present solicitor, were lodged with the registry on 5 June, but for some administrative reason they were not accepted.  The motion and affidavit were therefore not filed until 22 June 1995.  The affidavit indicated that there was confusion as to whether the primary judgment was in terms interlocutory or final.  It also stated that the solicitor did not know what time was allowed in this Court for filing a notice of appeal and an application for leave to appeal.

 

Neither the Commissioner nor the trustee professed any prejudice if the Court exercised its discretion to grant the extension of time.  However, the Commissioner sought to make an issue of the fact that the reasons supplied by the appellant for the late filing were not material considerations.  He submitted that tardiness or ignorance do not justify the Court exercising its discretion to grant an extension of time.  The Commissioner also submitted that the public interest in certainty and in the need
for finality of disputes should justify a reluctance in the Court, despite the absence of prejudice, to exercise a discretion in favour of an appellant who had offered no good reason for the delay.

 

The Commissioner submitted that the orders carefully crafted by the learned primary Judge had the effect of bringing the action to an end.  In other words, the judgment of the primary Judge was in fact final in that it had the legal effect of disposing of the rights of the parties: Hall v Nominal Defendant [1966] 117 CLR 423 at 439.  As a final judgment, the Commissioner said that the hurdle for the appellant was higher than if it was interlocutory.

 

On the other hand, the appellant submitted that the judgment was interlocutory, basing his submission on the logical argument that if the decision to stay the proceedings finally disposed of the rights of the parties, the appellant would be denied traditional avenues of redress generally available in these circumstances.  These would generally encompass the rights provided by such provisions as section 14ZW of the Taxation Administration Act 1953, section 99 of the Bankruptcy Act, and the right to seek prerogative relief against the Commissioner in the original jurisdiction of the High Court under section 75(v) of the Commonwealth Constitution.

 

It is truly extraordinary that at the end of the twentieth century lawyers are still arguing about whether a judgment is interlocutory or final.  In my opinion it is unnecessary to
decide the point in this case since even if the stricter approach is adopted, the exercise of the relevant discretion is nonetheless founded upon what is just and fair in the circumstances.  The Court must perceive "special reasons" to give leave to appeal out of time: Order 52 rule 15(2); Holpitt Pty Ltd v Varanu Pty Ltd [1990] 29 FCR 576.  Both the appellant and his solicitor have been open and frank with their reasons for the delay and have not shown any reason to dissuade the Court from exercising its discretion if the merits of the case justify it.  Moreover, the conceded lack of prejudice to the respondents favours the exercise of the discretion if the circumstances of the case otherwise warrant it.

 

Jurisdiction

 

Also at the threshold, the Commissioner next challenged the jurisdiction of the Court to entertain the appellant's claims against him.  He submitted that section 39B of the Judiciary Act does not form a basis of relief against the Commissioner as the case is not a

 

     ..... matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth.

 

The Commissioner further submitted that as a consequence of their being no federal jurisdiction invoked, there could also be no accrued jurisdiction to entertain any part of the application:
United Breweries Ltd v Castlemaine Tooheys Ltd [1986] 161 CLR 543 at 553; Glass v State of New South Wales [1994] 52 FCR 336.

 

The appellant maintained that although section 39B had not been specifically pleaded, the orders sought were clearly modelled on the prerogative writs.  He pointed to the fact that two orders sought were that the record of the Commissioner's decision be brought into this Court and that the decision be then quashed.  This submission has some difficulties because section 39B does not specifically include the writ of certiorari to which this language is apposite.  The learned primary Judge noted (AB43) that the appellant had not specifically applied for a writ of mandamus or prohibition or an injunction against the Commissioner.  However, his Honour commented that the causes of action were modelled on those relied upon in Briggs -- although in that case mandamus and prohibition were specifically sought.

 

Section 39B is considered to vest jurisdiction in the Federal Court of Australia in the same way that section 75(v) of the Constitution vests jurisdiction in the High Court of Australia: Duff v McCulloch [1985] 65 ALR 677.  In Pitfield v Franki [1970] 123 CLR 448, both certiorari and prohibition were sought and certiorari was granted.  Neither Barwick CJ nor Owen J found it necessary to decide whether or not prohibition would have been available before deciding that certiorari was.  McTiernan J concluded that certiorari was available despite holding that prohibition would not be and Menzies J did not consider the issue.  The question of jurisdiction of the High Court to grant certiorari was also considered in R v Cook; Ex parte Twigg [1980] 147 CLR 15 where again alternative remedies of prohibition and certiorari were sought.  Gibbs J considered (at 25-26) that the Court had jurisdiction in that case because a writ of prohibition was also sought and that, whilst it was not the primary application, it was nonetheless arguable.  Aitken J also considered the point, stating at 34:

 

     For the reasons which I have indicated I find it necessary in the present case to go at least as far as saying that the Court has jurisdiction to grant certiorari in a case in which prohibition would be available and in which certiorari is necessary in order to make more effective or complete the remedy which prohibition would provide.

 

It remains unclear whether or not the Federal Court has jurisdiction to grant certiorari under section 39B of the Judiciary Act without at least an accompanying colourable plea for prohibition.  In addition to certiorari, what is rather quaintly entitled the "Amended Further Amended Application" included a request for the following relief against the Commissioner:

 

     4.   A declaration that the assessment by the second respondent in or about late 1986 was not made for the purposes or within the meaning of the Income Tax Assessment Act 1936;

 

     5.   A declaration that the assessment by the second respondent in or about late 1986 was not made by the second respondent as a proper exercise of the powers vested in the second respondent pursuant to the Income Tax Assessment Act 1936;

 

     5A.  A declaration that the assessment by the second respondent in or about late 1986 was made male [sic] fides in that it was made for the purposes
of providing evidence to the New South Wales Police to be used by the Police to oppose the applicant being released from prison on bail.

 

None of these declarations in form invokes the jurisdiction of this Court, unless it is accepted that certiorari lies under section 39B.

 

It is difficult to imagine a viable writ of prohibition -- the notice of assessment has already issued, the creditor's petition has been heard, and the appellant's estate has been sequestrated.  However, the Commissioner is under a duty to make an assessment: Tax Act s.166.  For reasons given earlier, it must be duly made.  To provide a basis for the contrary assertion made by the appellant, a writ of mandamus could be appropriate:  Ainsworth v Criminal Justice Commission [1992] 175 CLR 546 at 580.  In my opinion, the appellant should be given leave to amend the pleadings yet again to include this possible cause of action.  If made, mandamus is in my view sufficiently arguable to make unnecessary a decision on the specific separate availability of certiorari under section 39B, for the Court would then have a clear jurisdictional base to entertain the matter.

 

The assessment

As at first instance, the appellant argued on appeal that the assessment had no factual basis, that its truth had never been investigated or considered, and that the omission of other income and any deductions meant that it was arbitrary and speculative.  The appellant submitted that the assessment was thus not the result of a bona fide exercise of power by the Commissioner and that it should be quashed.  The Commissioner sought to argue that regardless of the answers to the questions raised by the appellant concerning how the assessment was derived, the result would be the same: the assessment was protected by sections 175 and 177(1) of the Tax Act.

 

In Bloemen, Mason and Wilson JJ said at 375:

 

     It is true that Pt VI contains large powers to enable the recovery of tax; powers the exercise of which may make life uncomfortable both for the taxpayer and perhaps others who owe money to the taxpayer.  So much may be conceded, but the Act does not proceed upon the hypothesis that the Commissioner will be motivated in the exercise of his powers by improper or collateral purposes.  As Isaacs ACJ observed in Federal Commissioner of Taxation v Clarke after stating that s 39 of the Income Tax Assessment Act 1922-1925 (a provision analogous to s 177 of the Tax Act) made the assessment unchallengeable:

 

         The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury.

 

At 377 their Honours continued:

 

     As Barwick CJ explained in Bailey v Federal Commissioner of Taxation [1977] 136 CLR 214 at 217:

 

         But the process of assessment requires the application of the Act to the facts as known to and accepted by the Commissioner.  He must of necessity, as part of that process, adopt a view of the relevant facts.

 

     The Commissioner may be right or wrong in his view of the facts, but it would appear to be incontrovertible
that the figure on the notice of assessment which records the Commissioner's view of the taxable income evidences that a process of assessment was actually undertaken however cursory or inadequate that process may have been.

 

Their Honours later said at 378:

 

     The Bloemen notice of assessment is in form an assessment.  It sets out the ascertainment of the taxpayer's taxable income and the tax payable thereon.  It is therefore appropriate to bring s 177(1) into operation.  Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose.

 

This last passage was considered by Mason CJ in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 69 ALJR 223 to be consistent with the Hickman principle.  In Walter the taxpayer submitted that because the Commissioner had assessed two taxpayers (Richard Walter Pty Ltd and Morlea Professional Services Pty Ltd) on the same income, it was not protected from judicial review by operation of sections 175 and 177(1).  However, in view of the fact that the Commissioner has the power to assess more than one taxpayer on the same income: Richardson v Federal Commissioner of Taxation [1932] 48 CLR 192, it was held that this was not an appropriate ground to challenge the bona fides and hence the validity of the assessment.  Mason CJ held that the validity of the assessment does not depend on procedural compliance or considerations of purpose, but that such a statement does not conflict with the Hickman principlethat the assessment must be a bona fide exercise of power.  At 232:

     ..... the paramount purpose of the Act is to ascertain liability of taxpayers to tax and that the Act, with that object in view, sets up a legislative regime whereby the Commissioner assesses a taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunal or an appeal under Pt IVC to the Federal Court.  In such an appeal, it is for the taxpayer to show that the assessment is excessive.  In that context, the existence of an admissible purpose on the part of the Commissioner plays no part.  The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax.  In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner.  Thus on appeal the Court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor.

 

     In the light of the relevant provisions of the Act as I have explained them, s 177 is not inconsistent with s 75 of the Constitution; nor does s 177 trench upon the provisions of s 75.  Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose.  On this view, s 177(1) is consistent with the Hickman principle.

 

It may be inferred from his Honour's comments that in other circumstances an improper purpose might vitiate the assessment.  For example, also at 232:

 

     I did not understand the taxpayer to contend that the assessments were tentative or were vitiated by bad faith or improper purpose otherwise than by reference to the fact that two taxpayers were assessed to tax in respect of the same income deriving from the one source.

 

Although Bloemen appears to have been supported in Walter by Justice Brennan at 240:

 

     The function of the Commissioner in making an assessment is to take  a view of the facts so far as a view can reasonably be taken from the information in his possession, and to apply the general provisions of the Act so as to arrive at the taxpayer's taxable income and to define the tax liability accordingly...

 

     [But] It must be remembered that the Commissioner's function is administrative, not judicial.  The power to assess is, as s 167 shows, not limited to cases where the Commissioner has enough information on which to make a positive finding of fact.

 

his Honour had earlier said at 236:

 

     The privative clause is given effect despite non-compliance with the provisions governing the exercise of the power, but only if the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation and it is reasonably capable of reference to the power given to the body purporting to exercise it.  The validating provision cannot be so construed if the impugned act by the repository of the power is not referable to the power given to the repository or exceeds the power which can constitutionally be given to the repository.

 

At 246 Deane and Gaudron JJ applied the Hickman principle to tax assessments in precisely the same terms used in that case, particularising that they must:

 

     1.   be a bona fide attempt by the Commissioner to exercise powers conferred by the Tax Act,

 

     2.   relate to the subject matter of the Tax Act, and

 

     3.   be reasonably capable of reference to those powers.

In Briggs the agreed facts included the following (at 303):

 

     4.   None of the Respondents, prior to the issue and service of the Notices of Amended Assessment and Assessment, made any attempt to ascertain the Prosecutor's taxable income, nor intended to undertake any relevant process of calculation but the First Respondent issued the said Notices for the purposes of forcing the Prosecutor to consult with him or his officers.

 

     5.   None of the Respondents carried out any proper investigation of the affairs of the Prosecutor prior to the making of the Amended Assessments and Assessments the subject of the Notices.

 

     6.   There was no material having any rational or logical probative force to justify the issue of the Notices of Amended Assessment and Assessment.

 

     7.   None of the Respondents took any steps to consider facts provided by the Prosecutor to the Respondents prior to the issue of the Assessments and Amended Assessments.

 

     8.   The Respondents failed to consult with the Prosecutor prior to the issue of the Notices of Assessment and Amended Assessment.

 

     9.   The First Respondent in the person of the Second Respondent decided to issue the Notices of Amended Assessment and Assessment knowing that they did not reflect any rational assessment of a liability of the Prosecutor or with reckless indifference to whether they did or did not reflect any such assessment.

 

The Full Court said at 308:

 

     A genuine attempt to ascertain the taxable income of a taxpayer, even if carried out cursorily or imperfectly, is one thing.  But when regard is had to the whole of the facts and surrounding circumstances of the present case and it appears that the respondents never intended to embark and did not in fact embark, upon the process of ascertaining the taxpayer's income, no "assessment" is involved.  So much is really conceded by the respondents in the agreed facts and that consideration takes the case
beyond what was decided in Bloemen.  It must follow that section 177(1) can have no operation.

 

The Full Court went on:

 

     But here, the Respondents have admitted that the documents issued by them were not, in truth, assessments of taxable income: according to par 4 of the admitted facts, none of the respondents, prior to the issue and service of the notices of assessment, made any attempt to ascertain the prosecutor's taxable income, nor intended to undertake any relevant process of calculation; rather, the first respondent issued the said notices for the purpose of forcing the prosecutor to consult with him or his officers; and, by par 9, the first respondent, in the person of the second respondent, decided to issue the notices of assessment, knowing they did not reflect any rational assessment of a liability of the prosecutor or with reckless indifference to whether they did or did not reflect any such assessment.  The respondents have thus elected to proceed upon a footing different to that contemplated by the Act, for the statute proceeds upon the hypothesis that the Commissioner will not be motivated in the exercise of his powers by improper or collateral purposes: see Bloemen, per Mason and Wilson JJ at 375.....

 

By notice of contention the Commissioner challenged his Honour's decision that the Hickman principle must be satisfied before the internal workings of the Tax Act can protect the assessment.  Relying on Bloemen, the Commissioner's submission was that the production of a certified copy of the notice of assessment is sufficient to bring the protection into play.

 

In the light of Walter and Briggs, it must now be accepted that the protection of the Tax Act's section 175 and consequently section 177(1) will only attach to an assessment that satisfies the Hickman principle.  In other words, in order to be valid, an
assessment must not be arbitrary but must be a product of a bona fide attempt to exercise the powers conferred on the Commissioner to assess tax.  This necessarily includes the bona fides of the motivation behind the assessment, and Bloemen can no longer be interpreted, if it ever was, as authority for a principle that motivation to raise an assessment is irrelevant. In my opinion the learned primary Judge was correct in his decision in this respect.  I would reject the notice of contention.

 

In my opinion, the Commissioner's:

(a)  acceptance of the untested and uncorroborated valuation of the heroin by police officers,

(b)  acceptance of the expertise in heroin valuation of the particular police officers when their expertise was apparently unknown to taxation officials,

(c)  failure to enquire or ascertain anything about the entitlement of others to share in the proceeds if and when obtained,

(d)  failure to ascertain or investigate and include other income of the appellant,

(e)  failure to investigate or contemplate and allow appropriate deductions,

all of which were established by documents obtained under the Freedom of Information Act, virtually ensured that the assessment was wrong in fact, and would seem to have enabled the appellant to mount a successful appeal.  But the assessment did not become a quashable attempt by the Commissioner to exercise his powers to assess the appellant's tax liability on those accounts.  The Tax Act proceeds upon the hypothesis that every assessment is a
bona fide attempt to exercise powers, and the listed factors are in my view insufficient to rebut the hypothesis.  However insubstantial, the Commissioner's actions were, in my opinion, entitled to be classified by the learned primary Judge to be a genuine attempt in unusual and challenging circumstances to protect the revenue of the Commonwealth from untaxed but apparently taxable income.  I do not believe that the learned primary Judge erred in this respect.

 

 

The motive

 

The appellant's submission, on appeal as at first instance, was that the Commissioner raised the assessment for the purpose of issuing a section 218 notice on the police to recover monies seized from the appellant.  In these circumstances, the appellant said, sections 175 and 177(1) could not protect the assessment.  In my view, the issues relevant for consideration of this submission are:

 

     1.   whether there was evidence that the Commissioner was in fact motivated to make the assessment in order to raise a section 218 notice; and

 

     2.   if so, whether such a motivation is appropriate to challenge the bona fides of the Commissioner.

 

Tax collection/recovery and the assessment process

 

Prior to making the assessment in Walter, the Commissioner made certain determinations under section 177F which were considered part of the assessment.  Of the scope of the assessment process, Brennan J said at 239:

 

     As the scheme of the Act is to protect the validity of notices of assessment while allowing a taxpayer a full opportunity to have the general provisions of the Act affecting tax liability applied, I would construe the term "due making of the assessment" in s 177(1) as extending to every purported exercise of the power to ascertain the taxable income and tax liability of a taxpayer which satisfies the criteria expressed by the Hickman principle.

 

Collection and recovery of tax are provided for in Part VI of the Tax Act.  The Commissioner's powers in this regard are certainly extensive as the Tax Act countenances that the Commissioner not only has power to determine tax liability, but also real power to extract payment of the tax owing.  However, recovery of tax and the exercise of powers to do so are predicated on a valid notice of assessment, meaning that a necessary precondition of any attempt to collect tax owing is a valid notice of assessment in the sense that it is not arbitrary and satisfies the Hickman principle.  It does not follow that recovery of tax is a valid motivation for raising an assessment. Indeed, as the assessment is not in any way conditioned upon the collection of or the ability to collect the debt, it is my opinion that the assessment process does not include the collection of the tax thereby declared to be owing.

One of the arguments in Bloemen was that the assessments had been raised for the improper purpose of founding a section 218 notice.  It is not entirely clear from the judgments in that case if their Honours simply found that a motive for the assessment of issuing a section 218 notice was not an improper purpose, or whether on the facts of the case, it had not been shown that it was.  However, Bloemen did not lay down a general proposition that raising an assessment for garnishee purposes is either a proper purpose or immune from judicial review due to the operation of sections 175 and 177(1).  Whilst the hypothesis upon which the Tax Act proceeds is that the Commissioner will act in accordance with his powers and not be motivated by an improper purpose, it is not an irrebuttable presumption.  In the normal course of events, there will be no need of any 'curial diving' (to use the words of Isaacs ACJ in FCT v Clarke cited in Bloemen) because the facts will bear out the correct approach.  Indeed, the hypothesis was rebutted in Briggs and it can be so again.

 

As tax collection is not part of tax assessment, the Hickman principle that the assessment must have been made in a bona fide attempt to exercise the powers conferred by the Tax Act, i.e. the powers of assessment, seems to me to lead to the conclusion that a motive of collection from a known fund rather than by a genuine assessment of tax due is a breach of the principle.  It is one thing to raise an assessment having regard to tax collection, even to enhance the ability to collect the tax -- the Tax Act provides as much: see for example sections 167 and 205.  However, it is entirely another matter to raise the assessment with speed, imprecision and inadequacy of examination, investigation and enquiry in order to take advantage of a window of opportunity for its simple collection.  In other words, raising an assessment in order to collect tax, rather than to determine the tax due, is not a bona fide attempt to exercise the powers of assessment conferred by the Tax Act.

 

The consequence of an improper exercise of power is to take advantage of the taxpayer in a way which cannot be redressed within the internal appeal and review procedures of the Tax Act itself.  Once the notice of assessment has been served, the taxpayer is liable to tax and section 218 may be activated.  In this case the result has been bankruptcy.  If the Commissioner was motivated to raise this assessment in order to serve a section 218 notice on the police, the assessment would in my opinion not have been made for a proper purpose and would accordingly be invalid.

 

The evidence of motive

 

This analysis supports the notion that the privative clauses of the Tax Act are to be construed with regard to the Hickman principle.  There is therefore scope for a successful challenge to this assessment if the appellant can point to evidence that by raising the assessment to found a section 218 notice, the Commissioner acted other than in a bona fide attempt to exercise his power to assess the taxpayer for tax.

 

This appeal, arising as it does from a strike out application, does not provide the forum for determining the merits of the case, and the appellant argued, in my view correctly, that evidence that could show such a motive -- what he called "the collateral purpose" -- is limited by the fact that he has not had the opportunity of interrogatories or discovery.  Nevertheless, he relied on the handwritten notes and the investigation report to demonstrate that the section 218 notice was prominently in the mind of the Commissioner prior to the raising of the assessment.

 

In my view, it would not be an abuse of power if the Commissioner merely had regard to his statutory tax collection powers when exercising his assessment powers.  The appellant nevertheless submitted that an inference may be drawn, from the way the reference to the section 218 notice is made in the handwritten notes and the investigation report, that recovery from the police by this method of collection was the abiding reason and the motivating factor for the raising of the assessment.

 

The appellant also submitted as a relevant factor that, prior to this assessment, he had always lodged income tax returns in accordance with the Tax Act.  Consequently, he contended that an inference of an improper purpose may be drawn from the fact that the Commissioner in this instance made a default assessment under section 167, rather than used the routine section 166.  The appellant also pointed out that the assessment was made without consultation with him and maintained that it did not reflect his assessable income.  Apart from other anomalies alleged, it included only the assumed sale of drugs as his source of income, despite the fact that he operated a business and owned property.

 

The appellant argued for a similar inference to be drawn from the fact that the notice of assessment was drawn in accordance with section 205, rather than the more normal section 204.  Section 204(1) of the Act provides:

 

     Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after service of the notice.

 

By section 205(1) the Commissioner is empowered to vary that date, including to the date of the assessment itself, in the case of a taxpayer who may leave Australia before the due date. Because the appellant was in custody at the time so that he could not have left the country even if he had wanted to do so, the use of this facility in this case, the appellant said, indicated an urgency supportive of the assessment having been raised for the sole or principal purpose of securing the monies held by the police.

 

On their face, these actions and decisions of the Commissioner do not suggest an improper purpose.  The Commissioner is well within his rights to take a view of the facts and in his judgment draw the assessment as he sees fit.  His view need not be concluded on the balance of probabilities, nor any other
particular standard: see Brennan J in Walter at 240.  The only proviso is that the Commissioner's view must be a result of a due exercise of his powers.  And, as mentioned earlier, the Tax Act proceeds upon the hypothesis that the Commissioner acts in good faith.

 

On one view of the Commissioner's decisions, his assessment in terms of section 167 may indicate that he was of the view that the taxpayer was, in the words of the section, a 'person who has not furnished a return and has derived taxable income'.  Similarly, a notice of assessment in terms of section 205 might indicate that the Commissioner was of the view that the taxpayer was, again in the words of the section, 'a person liable to pay tax [who] may leave Australia before the date on which the tax is due and payable...'.

 

However, I agree with the appellant's submission that when viewed in concert with the handwritten notes and investigation report, these actions do paint a picture that could rebut the hypothesis and establish an improper exercise of the relevant powers.  In my view, there is sufficient evidence to warrant granting the appellant an opportunity to investigate and prosecute this assertion further, and his Honour erred in finding that the exercise was hopeless and bound to fail.

 

The claim in tort: misfeasance in public office

 

The learned trial judge held that this part of the bankrupt's claim should also be struck out for two reasons:  firstly, because the bankrupt could not make out the elements of the offence, and secondly, because the claim was not one which fitted within the exceptions declared in section 116(2)(g) of the Bankruptcy Act and therefore had to be brought, if at all, by the trustee.

 

The elements of the tort of misfeasance in public office are detailed in Northern Territory v Mengel [1995] 129 ALR 1, namely the doing of an act which is beyond power, which the relevant public officer knows is beyond power, and which involves a foreseeable risk of harm and results in damage.  As Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ explained at 17:

 

     ... the weight of authority here and in the United Kingdom is clearly to the effect that it is a deliberate tort in the sense that there is no liability unless either there is an intention to cause harm or the officer concerned knowingly acts in excess of his or her power.

 

At 18:

 

     One aspect of misfeasance in public office that lacks precise definition is whether assuming damage, it is sufficient to establish that the public officer knows that he or she is acting without authority or whether there is some additional requirement...

 

     The cases do not establish that misfeasance in public office is constituted simply by an act of a public officer which he or she knows is beyond power and which results in damage.

 

And at 19:

 

     ...it is sufficient for present purposes to proceed on the basis ..... that liability requires an act which the public officer knows is beyond power and which involves a foreseeable risk of harm.

 

Brennan J said at 25-26:

 

     A number of elements must combine to make a purported exercise of administrative power wrongful.  The first is that the purported exercise of power must be invalid, either because there is no power to be exercised or because a purported exercise of power has miscarried by reason of some matter which warrants judicial review and a setting aside of the administrative action...  Something further is required to render wrongful an act done in purported exercise of power when the act is ultra vires.

 

     The further requirement relates to the state of mind of the public officer when the relevant act is done or the omission is made...

 

     That is to say, the mental element is satisfied when the public officer engages in the impugned conduct with the intention of inflicting injury or with knowledge that there is no power to engage in that conduct and that the conduct is calculated to produce injury.  These are states of mind which are inconsistent with an honest attempt by a public officer to perform the functions of the office.  Another state of mind which is inconsistent with an honest attempt to perform the functions of the public office is reckless indifference as to the availability of power to support the impugned conduct and as to the injury which the impugned conduct is calculated to produce...

 

And at 27:

     It is the absence of an honest attempt to perform the functions of his or her office that constitutes the abuse of the office.  Misfeasance in public office consists of a purported exercise of some power or authority by a public officer otherwise than in an honest attempt to perform the functions of his or her office whereby loss is caused to the plaintiff.  Malice, knowledge and reckless indifference are states of mind that stamp on a purported but invalid exercise of power the character of abuse of or misfeasance in public office.  If the impugned conduct then causes injury, the cause of action is complete.

 

The appellant submitted that if the assessment was not made in a bona fide attempt to exercise the powers, then it was prima facie beyond power.  However, as the extracts from Mengel indicate, there is a great deal more to this tort than mere action in excess of power.  In particular the action must be a conscious abuse of power, in the sense that the officer must be aware that the action is beyond power, and it must be calculated to cause damage.  Moreover, the question of what damage is actually caused is part of the proof of liability.

 

In this case the first element to be satisfied is that there has been a lack of good faith in the exercise of the powers of the Commissioner to assess the taxpayer.  On the basis found earlier, viz. that there is at least an arguable case that the assessment was motivated by a factor unrelated to the determination of the tax due, this issue should in my opinion be given an opportunity to go to trial.

 

The second aspect of this part of the tort that the appellant must establish is the mental element that the lack of good faith was a conscious demonstration or wilful misuse of the power to
assess for tax.  The evidence before his Honour on this score was not informative.  It is true that the appellant has not had the opportunity of interrogatories or discovery, but it is not the purpose of such forensic tools that they be used as a 'fishing expedition' from the results of which a case is manufactured.  Nevertheless, I believe that the appellant has pointed to sufficient evidence of conscious if not wilful misuse of power as to raise a real question to be litigated regarding knowledge.  In my view, this issue also should be given an opportunity to go to trial.

 

Thirdly, the appellant must point to the injury suffered.  In this regard the appellant said that as a direct result of the tainted assessment, he has been made a bankrupt as a consequence of which he has presumably lost or lost control of all his assets.  The Commissioner, on the other hand, submitted that the appellant cannot prove damage from his bankruptcy because as a direct result of the sequestration order, the Tax Office can no longer pursue, and the appellant will never have to pay, the debt.  I disagree with the Commissioner's scenario.  Firstly, the assets now vesting in the trustee may enable the realisation of all or most of the debt.  But whether that be so or not, it seems to me that as the petitioner for the appellant's bankruptcy, the Commissioner can hardly call a directly resulting detriment to himself in aid of an argument that it is he not the bankrupt who has suffered.  However, it is not necessary to decide this point now because it is sufficient that the potential for the appellant to prove that loss or damage has occurred.

Standing of the appellant as a bankrupt

 

1.   on the challenge to validity of the assessment

 

Fundamental to the Bankruptcy Act is the provision in section 58(1)(a) that, subject to express exceptions,

 

     ..... where a debtor becomes a bankrupt the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee.

 

Consequently, if the bankrupt's right to pursue this action is relevantly "property" and does not fall within the exemptions provided, the trustee alone will be the proper appellant.  In order to assess whether the appellant's claim in this case is relevantly "property", it is necessary to look at the regime by which it is classified in the Bankruptcy Act.

 

The "property of the bankrupt" is defined in section 5(1) of the Bankruptcy Act:

 

     the property of the bankrupt, in relation to a bankrupt, means:

 

     (a)  except in subsections 58(3) and (4):

 

         (i)       the property divisible among the bankrupt's creditors; and

 

         (ii)any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt.

 

"Property divisible amongst the creditors" is defined by section 116(1) and relevantly includes:

 

     (a)  all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy...

 

"Property" is in turn defined in section 5(1) broadly:

 

     "property" means real or personal property of every description, whether situate in Australia or elsewhere, and includes any estate, interest or profit, whether present or future, vested or contingent, arising out of or incident to any such real or personal property;

 

In Fuller and Cummings a majority of a Full Court of this Court (Gummow and Whitlam JJ) held at 67 that the right of appeal from a judgment of damages against the bankrupt was "property" that vests in the trustee.  Their Honours concluded that the right to appeal fell in particular within the term 'personal property of every description'.

 

Justice Hill dissented.  His Honour was of the view that "the property of the bankrupt" which vests in the trustee is relevantly limited to "property divisible among the creditors", and that the interpretation of that expression in section 116(1) is not expanded by the broad definition of the word "property" in section 5(1).  His Honour stated at 70:

 

     There is no doubt that the definition of "property" is very wide.  Like the definition concerned in Jones v Skinner [1835] 5 LJ Ch (NS) 87 at 90, it is indicative
and descriptive of every possible interest which a party can have in property.  The word clearly includes not only tangible things but debts, choses in action and any other rights or interest of a proprietary kind.

 

     It is clear that the meaning of the word "property"  may vary in accordance with the context in which it appears...

 

Justice Hill later stated at 72-73 that section 116(2) gives legislative recognition to the law inherited from England:

 

     .....  There is, however, no reason to believe that  s 116(1)(a) is to be interpreted any more widely than its English counterpart by virtue of the exclusion provisions of s 116(2)(g).  Particularly it may be noted that the heading to Div 3 "Property available for Payment of Debts" suggests that s 116(1) and (2) together define that property out of which creditors may be paid.  It would be a strange concept to regard a right to appeal against a judgment imposing a liability as being property which could be available for the payment of creditors.

 

Consequently his Honour held at 77:

 

     In my view a right to appeal against a judgment where damages have been awarded against the appellant and where there is no cross-claim, is not property divisible among creditors vesting in the trustee under s 58(1).

 

The appellant submitted that the dissenting judgment of Justice Hill is to be preferred to the majority and adopted his Honour's reasoning.

 

Fuller & Cummings has been appealed to the High Court which has reserved its decision.  The breadth and scope of "property" that
vests in the trustee and the appropriateness of the decision in Fuller & Cummings has also been recently considered by another Full Court of this Court (Spender, Einfeld, Cooper JJ) in Griffiths v Civil Aviation Authority (No. QG 197 of 1994).  Again the decision has been reserved.

 

In the present case the assessment which underpins the bankruptcy is being challenged.  If successful, the result would be that the bankrupt's primary debt evaporates.  In my view, the right to pursue the application is not "property" in the sense that it is divisible among the creditors.  Consequently, I would hold that the appellant has standing in the challenge to the assessment.

 

2.   on the claim in tort

 

The Commissioner also submitted that unless the appellant is successful in setting aside the judgment debt or has the bankruptcy annulled, there is no scope to argue misfeasance once Metropolitan Bank Limited v Pooley [1884-85] 10 AC 210 is considered.  In that case an undischarged bankrupt sought to maintain an action for maliciously procuring the bankruptcy.  The Earl of Selbourne LC, with whom Lords Blackburn, Watson and Fitzgerald substantially agreed, was of the view (at 216) that public policy demanded that:

 

     An action for malicious prosecution cannot be maintained until the result of the prosecution has shewn that there was no ground for it.  If a man has been tried and convicted on that prosecution, and there is no writ of error brought and no reversal of the decision such an action will not lie.

The House of Lords dismissed the application as manifestly frivolous and vexatious, the Lord Chancellor saying at 217 that as long as the adjudication of bankruptcy stands, "there can be no pretence for the action".  The Lord Chancellor was also of the view that the bankrupt who had been unsuccessful in his application for annulment of the bankruptcy had no standing to bring the action.

 

In Daemar President Kirby, with whom Samuels and Clarke JJA agreed, said of the words "wrong done to the bankrupt" in section 116(2)(g) of the Bankruptcy Act at 55:

     However, the words cannot be taken in isolation.  They must, in accordance with the ordinary canons of construction, be read in the context in which they appear.  The meaning of the expression, taken from that context, has been explained in numerous cases.  In Australia, the classic expression is that contained in the judgment of Dixon J in Cox v Journeaux [No 2] [1935] 52 CLR 713 at 721.  Speaking of the appellant in that case Dixon J said:

 

         ...He is a bankrupt and there is no prospect of his satisfying any order for costs made against him in this, or as I infer, in previous litigation.  Notice was given under s 63(3) of the Bankruptcy Act 1924-1933 to the official receiver requiring him to elect to prosecute or discontinue the action and he has elected not to prosecute it.  The plaintiff says that he himself is entitled to prosecute it under the proviso as an action for personal injury or wrong done to himself.  The test appears to be whether the damages or part of them to be estimated by immediate reference to pain felt by the bankrupt in respect of his mind body or character and without reference to his rights of property (Wilson v United Counties Bank Ltd [1920] AC 102 at 111 and 128-133).

 

     See also Faulkner v Bluett.

 

     Applying that test to the present case, the action brought by the claimant cannot be categorised as he submits.  Although it is true that the claimant contends that a "wrong"  has been done to him and that he has suffered hurt and even "defamation" in the course of the judgments of the Commission, these contentions are irrelevant to the task of identifying, for the purpose of s 60(4)(a) of the Act, the nature of the action exempted from the stay.  The exemption is limited to those cases where it has been considered appropriate to sever the personal interests of the person subsequently made bankrupt from his property, and to reserve to him the prosecution of and benefits derived from such litigation as not being legitimately entitlements of the creditors.  In the present case the so called "wrong" of which the claimant complains is the very source of the financial problems which have led to his bankruptcy.  It is therefore to be classified not as a "wrong" which is exempted from the operation of s 60(2) and the statutory stay provided for but as of the very essence of the subject matter to which s 60(2) is addressed.

 

These theses may well present a procedural hurdle for the present appellant though I am not thereby to be taken to approve the principle laid down in Pooley.  For reasons which follow, it is simply not necessary to decide the point in the present case.  Daemar, a most unusual case in itself, is at least distinguishable.  The present case is not one where the "wrong" alleged is irrelevant to the task of identifying the nature of the action for the purpose of fitting it within the exception.  The hurt is not collateral or a side effect.  If proved, the present appellant will have shown a conscious or wilful abuse of power aimed directly at him which has led to injury.  The "wrong" in that sense cannot be shunted home to the appellant as in Daemar.  I consider that the right of action for the tort of misfeasance in public office is one contemplated by section 116(2)(g) of the Bankruptcy Act as an exception to the general rule that all property of a bankrupt vests in the trustee.  The appellant has standing to prosecute the claim in tort.

The trustee's refusal to prosecute the case

 

These conclusions mean that the appellant's challenge to the trustee's decision not to prosecute this case on his behalf is redundant and not requiring of a decision.  However, as the matter was fully argued, it is prudent to make some brief comments on this aspect of the case.

 

As had been done at first instance, the trustee asserted on this appeal that in essence the appellant was seeking to challenge the proof of debt accepted by the trustee and that consequently section 99(1) of the Bankruptcy Act is the sole appropriate avenue for the appellant.  The trustee further submitted that as section 99(1) is a specialist provision, the general section 178  should be read subject to it.  These provisions are:

 

     99.  (1)  Where a creditor or the bankrupt considers that, by virtue of a decision of the trustee under subsection 102(1),(3) or (4), a proof of debt has been wrongly admitted, he may apply to the Court for an order that the proof be expunged or that the amount of the admitted debt be reduced, and the Court may make an order accordingly.

 

     178.If the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.

 

The question of whether the existence and availability of section 99 precluded access to section 178 was left open by the majority in Fuller and Cummings.  The learned primary Judge here pointed out that some support for the trustee's position may have been
derived from the dissenting judgment of Justice Hill in that case who said at 76:

 

     To the extent that it may be argued that the trustee may wish to contest the liability constituted by the judgment, that matter remains open to the trustee at all times who can reject the proof of debt and in an appropriate case go behind the judgment.

 

This comment should not be taken out of context.  Justice Hill had come to the conclusion that the bankrupt was competent to bring the appeal to set aside the judgment and his observation was directed to showing that the trustee was also not without recourse if he should be so inclined.  It should not be read as a definitive statement on the extent of the powers of the trustee and on the only avenues available to challenge the debt, but merely that there is clearly an option.

 

It is difficult to see how the trustee could reject the proof of debt in the face of what appears to be a valid notice of assessment.  The first step must be that the assessment be withdrawn, replaced or quashed.  In the absence of action by the Commissioner himself which destroyed or aborted the assessment, the trustee would first need to bring an action for prerogative relief as the appellant now seeks to do.  This is not a simple case of merely rejecting a proof of debt; it is about how to treat the assessment and notice of assessment.

 

No reason other than the section 99 argument appears to have been proffered as to why the trustee has failed to prosecute the case.
No evidence was before his Honour as to the merits or otherwise of the decision of the trustee.  If anything, the evidence suggested that the trustee has never given the question any attention at all, relying upon the technical argument that the appeal was not in proper form.  As the affidavit of senior assistant Official Receiver, James Thomas Garrett, of 1 March 1994 stated:

 

     A proof of debt dated 12 December, 1990 was lodged by the Deputy Commissioner of Taxation and was admitted to rank for dividend in the sum of $847,550.00 on 23 January, 1992...

 

     No application has been received from the bankrupt pursuant to the provisions of s 99 of the Bankruptcy Act 1966.

 

Furthermore, on this appeal, the trustee did not embrace the view taken by the learned trial Judge at (AB 53) that:

 

     The claims that the applicant wishes to pursue are hopeless.  They are bound to fail.

 

The trustee's counsel actually said on the appeal (T81):

 

     This may or may not have been the view of the Official Trustee.

 

His Honour held, in my view correctly, that section 99 did not preclude a section 178 challenge, but he did not decide the section 178 point, holding that the substantive claims behind it were groundless and bound to fail.

I acknowledge that the trustee has apparently not yet made a decision on the merits of the case.  But if the appellant had not had independent standing, I would in the circumstances at least have found that the trustee should prosecute the case, if not ordered the trustee to do so.

 

CONCLUSIONS ON APPEAL

 

The subject matters of this appeal are complex and involved.  This factor alone could be a reason to allow the case to go to trial.  But my specific conclusions in summary are:

 

     1.   The appellant has made out a sufficient case for an extension of time to file and prosecute this appeal.

 

     2.   The Federal Court has jurisdiction to entertain this application.  Leave should be given to amend the pleadings to reinforce the jurisdiction.

 

     3.   Sections 175 and 177(1) of the Tax Act only operate to protect an assessment that has been made as a bona fide exercise of Commissioner's powers to make it.

 

     4.   The Tax Act proceeds upon the hypothesis that the Commissioner will act in good faith, but this may be rebutted by the particular facts of the case.

     5.   Raising an assessment in order to issue a section 218 notice will not be a bona fide exercise of the Commissioner's power to assess a taxpayer to tax.

 

     6.   The appellant has pointed to sufficient evidence to require the question of whether or not the Commissioner acted bona fide to be heard.

 

     7.   The appellant's application for damages for misfeasance in public office raises real questions to be tried and should be given an opportunity to go to trial.

 

     8.   The right of action for prerogative relief is not property that vests in the trustee.  The appellant has standing to pursue this claim.

 

     9.   The claim of misfeasance in public office fits within the exceptions of section 116(2)(g) of the Bankruptcy Act and is therefore not property that vests in the trustee.  The appellant has standing to pursue this claim.

 

     10.  The application under section 178 of the Bankruptcy Act is an appropriate form to challenge the trustee's decision not to prosecute this matter in the name or on behalf of the bankrupt.  Section 99 of the Bankruptcy Act does not preclude the operation of section 178 in these circumstances.

 

I would grant an extension of time to file the notice of appeal or an application for leave to appeal.  If leave is required, I would grant the leave sought.  I would allow the appeal and set aside the decision below.  The second respondent's notice of contention and the second and third respondents' motions to dismiss, stay or strike out the application and statement of claim should be dismissed.  The respondents should be ordered to pay the appellant's costs of the appeal and the proceedings at first instance.  Leave should be given to the appellant to have these costs assessed or taxed forthwith.

IN THE FEDERAL COURT OF AUSTRALIA     )

                                 )

NEW SOUTH WALES DISTRICT REGISTRY     )    No. NG 941 of 1993

                                 )

GENERAL DIVISION                 )

 

 

         ON APPEAL FROM A SINGLE JUDGE OF THE COURT

 

 

                 BETWEEN:   ALEXANDER WILLIAM MADDEN

 

                                                   Appellant

 

 

                     AND:   JOAN LILIAN MADDEN

 

                                            First Respondent

 

                   FEDERAL COMMISSIONER OF TAXATION

 

                                           Second Respondent

 

                   OFFICIAL RECEIVER

 

                                            Third Respondent

 

 

 

CORAM:   SHEPPARD, EINFELD & FOSTER JJ

 

DATE:         27 MARCH 1996

 

PLACE:   SYDNEY

 

 

 

                    REASONS FOR JUDGMENT

FOSTER J:   This appeal from a single judge of the Court (Whitlam J) raises questions under taxation, bankruptcy and administrative law.  The proceedings before the primary judge were treated by him as applications on behalf of the second and third respondents that the proceedings brought against each of them by the appellant in his application and amended statement of claim be permanently stayed or dismissed.  His Honour, having concluded that the proceedings were hopeless and doomed to failure, expressed the view that they should be permanently stayed.  He gave effect to this conclusion by dismissing the appellant's applications with costs.

     Before the primary judge and also before this Court the appellant argued that the case that he sought to bring against each of the second and third respondents was an arguable one and, consequently, not amenable to summary dismissal.  The appellant did not seek to proceed against the first respondent who was, accordingly, not involved in the proceedings before his Honour or in this appeal.  The appellant is a bankrupt whose estate is administered by the third respondent, the Official Trustee in Bankruptcy.

     The second respondent ("the Commissioner") has submitted that the Court should not entertain the appeal as it has been brought out of time.  He does not allege any prejudice.  For the reasons given by Einfeld J in his judgment, which I respectfully adopt, I am satisfied that leave should be granted to the appellant to bring this appeal.

     Before coming to the issues in the appeal, it is convenient that certain relevant matters should be stated by way of background.

BACKGROUND

     The appellant was arrested in September 1986 and charged with the crime of conspiring to supply heroin.  In the
course of the arrest the police took possession of the sum of $188,720.00 in cash, being money belonging to the appellant.  At the time of his arrest the appellant had not yet furnished an income tax return for the year ending 30 June 1986.  This was not, in itself, unusual as he normally furnished income tax returns for the preceding financial year later than the month of September in the succeeding year.  He had business and property interests which generated income which was ordinarily declared in his returns.  There is no suggestion that he had declared income in previous years arising from dealing in heroin. 

     The Commissioner, on 1 October 1986,  issued a Notice of Assessment ("The Notice") in respect of the appellant.  The Notice was issued pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) ("the Tax Act") and was based upon an income of $856,000.00, this being the alleged sale value of heroin dealt in by the appellant, that information having been supplied by the police.  Tax of $512,781.81 was assessed.  This tax was, by the Notice, made due and payable on 1 October 1986, the date of the assessment.  The shortened period for payment resulted from the application of s 205 of the Tax Act in circumstances where it was apprehended that the appellant might leave the country. 

     There is no challenge to the form of the assessment or to its issue and service.  The following facts, however, may be noted as they were relied upon by the appellant in
argument: the only amount of income upon which the assessment was based was the figure of $856,000.00 allegedly obtained from heroin dealing; no income from the appellant's business or property activities was included, although it might have been expected that there would have been income from these sources; no deductions for business expenditure or any other allowable deductions were included; and the appellant was in custody when the assessment was issued and, consequently, in no position to leave the country. 

     In October 1986, shortly after the issue of the assessment, the appellant applied for bail to a magistrate.  This application was opposed.  The existence of the Notice and its contents were relied upon by the prosecution in support of its opposition, it being asserted that the appellant had been in receipt of significant money and that it was feared that if he were released on bail he would be able to use his funds here and overseas for the purpose of fleeing the jurisdiction.  Bail was refused.  It is part of the appellant's allegations in the case that the Notice was issued for the improper collateral purpose of providing evidence to be placed before the magistrate in opposition to the bail application.  The learned primary judge rejected this suggestion.  It has not been raised in the hearing before this Court, it being conceded that the currently available material provides no adequate foundation for it.

     The appellant remained in custody until he was admitted to bail in August 1987.  He had solicitors acting for him.  He was aware of the existence of the assessment.  It was clearly the subject of discussion and advice.  As appears from correspondence in evidence, the solicitors were advised, as a result of a written inquiry made on 12 November 1986, that the assessment had been made in terms of s 167 of the Tax Act and that "the amount of taxable income was determined from information in the possession of the Commissioner".  This information was conveyed in a letter of the Commissioner of 19 November 1986 received by the solicitors on 24 November 1986.  The solicitors responded to that letter in the following terms:-

     "We thank you for your letter of 19 November 1986 which was received on 24 November 1986.

     You have not advised the basis of the Notice of Assessment and accordingly, it has not been possible to prepare an objection against the assessment which states `fully and in detail the grounds on which [Mr. Madden] relies' (Section 185(1) Income Tax Assessment Act).  There is little point in lodging an objection simply on the grounds that the assessment is `excessive' as that may be a proper Notice of Objection.

     In the circumstances it will be necessary to await access to Mr. Madden's file pursuant to the request made under the Freedom of Information Act, 1982 on 12 November 1986.  Further, it will be necessary to await the finalisation of certain Company income tax returns before it will be possible to determine the taxable income of Mr. Madden for the year ended 30 June 1986.

     In the circumstances it will be necessary to make an application for an extension of time within which to lodge the objections pursuant to Section 188(2) of the Income Tax Assessment Act.  The act does not permit the making of that application prior to the filing of the objections and we simply at this stage foreshadow that such an application will be made.  If you will oppose that course or which [sic] to nominate a further period within which the objections must be lodged without opposition please so advise us within seven (7) days.

     We confirm our advice to Mr. Bohm on 10 November 1986 that in our view the assessment is not valid and does not create a liability.

     Our view remains the same and we do not admit the validity of the assessment and this letter and the foreshadowing of objections shall not be construed as such an admission.

          We await your advice."

          This letter was forwarded on 3 December 1986 and a reply was received from the Australian Taxation Office on 5 January 1987 which reiterated that the Notice had been issued on the basis of s 167 and that the taxable income was determined from information in the Commissioner's possession.

          As indicated in the letter of 3 December, the solicitors had made an application under the Freedom of Information Act 1982 (Cth) on 12 November 1986.  This request was responded to by the Commissioner in a communication received by the solicitors on 10 November 1987.  From these documents it appears that an investigation of the appellant's affairs was commenced on 26 September 1986 on the basis of information received that he had sold drugs to the value of $856,000.00 in the relevant year, it being noted that the "taxpayer has not been interviewed to date" and that "the taxpayer's known cash held by the police is $188,720.00".  This information was contained in a document, being obviously a standard form, headed "Income Tax Investigation Report". 

          Additionally there was a handwritten document headed "Supplementary Report" which contains the following statement:-

     "During the 1986 year of income the taxpayer has sold heroin being a total sale figure of $856,000.

     As the police hold $188,720 and it appears likely the taxpayer, through his solicitors, will attempt to regain at least $174,500 urgent action must be taken.

     Initially it is proposed to raise an assessment on an income of $856,000 and issue a 218 notice on the police to recover the outstanding tax.

     It is therefore submitted to:-

     1)   Issue a manual assessment based on a taxable income of $856,000 for the year ended 30th June 1986, and,

          2)   Issue a notice on the police department to recover outstanding taxes held by them."

          This supplementary report is dated 29 September 1986 and has a note on it "approved" and the same date.

          An earlier note, seemingly in the same handwriting, details the amount of cash held by the police and also, under the heading "Details of Sale of Heroin", states "total sale value equals $856,000".

          A further note, seemingly dated 29 September 1986, in the same handwriting, refers to the arrest of the appellant on heroin charges and states that it was "necessary to raise a 1986 assessment in order to put 218 notice on police for monies held by them".  The note ends "submit to raise a pro
forma".  An endorsement indicates approval by a supervisor on the same date.

          These documents were, apparently, in the hands of the appellant's solicitors from 12 November 1987.  The appellant had been admitted to bail in August 1987.  There was no evidence before the learned primary judge indicating what steps, if any, were taken in relation to the Notice of Assessment by the appellant or his solicitors in 1986, 1987, 1988 or 1989.  The appellant's present solicitors are not the solicitors who were then acting for him.  The documents to which I have just made reference were supplied to the present solicitors by the previous solicitors.  In late 1989 the appellant pleaded guilty to the offence charged and was sentenced to imprisonment.  He was released, according to his evidence, in February 1990.

          There is no evidence provided as to why no steps had, apparently, been taken in relation to the foreshadowed objection to the 1986 assessment.  Indeed, there was nothing placed before the learned primary judge indicating what the appellant claimed to be his true 1986 income.  The plea of guilty would indicate that he was in fact dealing in heroin in that year.  There is no evidence as to the income that he received from this trade pointing to error in the figure upon which the assessment was based.

          On 23 February 1990 the Commissioner obtained a default judgment for the amount of tax owing under the assessment.  This judgment could not have been obtained unless appropriate process had been served upon the appellant.  There is no evidence in explanation of the appellant's failure to defend the proceedings.  Nor does it appear that he took any steps to set the judgment aside on the basis that the money was not owing or that the assessment creating the debt was invalid.

          The appellant was made bankrupt upon the Commissioner's petition on 10 April 1990.  The relevant act of bankruptcy was noted on the sequestration order as having occurred on 22 March 1990.  Clearly this was failure to comply with a bankruptcy notice based upon the default judgment.  The appellant seems to claim that he took no steps in relation to the petition because he was in gaol.  This statement appears to be in conflict with his assertion that he was released in February 1990.  There cannot be said to be any satisfactory explanation offered as to why he allowed both the judgment and the sequestration order to be entered against him.

          It is against this general background that the appellant brought the proceedings which were terminated by the orders appealed from.  It is appropriate, now, to consider those proceedings.

PROCEEDINGS BROUGHT BY APPELLANT

          On 30 November 1993 the appellant filed an application in the Court, proceedings No. NG 941 of 1993, in which was claimed the following relief against the respondents:-

     "As against the Second Respondent:

     3.   An order removing the record of the decision of the second respondent to make the assessment in or about late 1986 into this Court.

     4.   A declaration that the assessment made by the second respondent in or about late 1986 was not made for the purposes or within the meaning of the Income Tax Assessment Act 1936.

     5.   A declaration that the assessment by the second respondent in or about late 1986 was not made by the second respondent as a proper exercise of the powers vested in the second respondent pursuant to the Income Tax Assessment Act 1936.

     5A.  A declaration that the assessment by the second respondent in or about late 1986 was made male [sic] fides in that it was made for the purposes of providing evidence to the New South Wales Police to be used by the Police to oppose the applicant being released from prison on bail.

     6.   An order quashing the decision of the second respondent in or about late 1986 to make the assessment against the applicant.

     7.   Damages and exemplary damages for misfeasance in public office.

     As against the Third Respondent:

     8.   Pursuant to s.178 of the Bankruptcy Act an order that the applicant be given leave to bring proceedings against the second respondent in the terms of paragraph 1-6 of the Statement of Claim in proceedings No G941 of 1993 either;

          (i)  in the name of the third respondent; or

          (ii)in the name of the applicant.

     9.   The third respondent pay the costs of the said proceedings.

     10.  For the purposes of Order 8 an order that the applicant be given leave to file and serve an application under s.178 in the terms of the terms referred to in paragraph 8 hereof and on the filing and service of such application the application be consolidated pursuant to Order 29 rule 5 with proceedings No G941 of 1993.

          11.  Alternatively to the order sought in 10 hereof the applicant be given leave to dispense with filing and serving of the application under s.178 and that the Statement of Claim and the Amended Further Amended Application be pleadings and application in the proceedings against all respondents."

          In the accompanying statement of claim the appellant made a number of allegations of fact in support of the orders claimed.  It is convenient to deal with those later in these reasons.  At this point it may be noted that there is no reference in the appellant's pleading to s 39B of the Judiciary Act 1903 (Cth).  Nonetheless, it is on the basis of this section that orders 3 and 6 were sought against the Commissioner. 

          No pleadings were filed by the respondents.  Their response was to take out the notices of motion heard by his Honour.  At the hearing the Commissioner tendered the relevant Notice of Assessment which enabled him to make submissions based upon ss 175 and 177(1) of the Tax Act.

THE CASE BEFORE THE PRIMARY JUDGE

          As already indicated his Honour treated the motion brought by each of the respondents as one claiming a permanent stay or dismissal of the appellant's proceedings.  This necessarily involved him in considering whether the material before him indicated that the appellant's case was clearly untenable, could not possibly succeed, or was "foredoomed to fail" (Walton v Gardiner (1993) 177 CLR 378 at 393).  His Honour held that the appellant's case against each respondent could be so described.

          He referred to the fact that the appellant's claims were apparently based upon s 39B of the Judiciary Act, in that it was under that section that prerogative relief was sought against the Commissioner.  He noted, as, indeed, appears to be the case, that the "causes of action appear to be modelled on those relied on in R v Commissioner of Taxation (WA); Ex parte Briggs (1986) 12 FCR 301" ("Briggs (1)").  In that case, as a result of concessions made by the Commissioner, it was held that no assessment had in fact been made, despite the fact that the Commissioner tendered and relied upon the Notice that had issued.  In the present case, however, no such admissions were made.  As already indicated, the Commissioner tendered the Notice of Assessment submitting that the result of his so doing was that ss 175 and 177(1) of the Tax Act necessarily produced a complete answer to the appellant's claim.

          His Honour did not accept this argument because of the decision of the High Court in Deputy Commissioner of Taxation v Richard Walter Pty Limited (1994-95) 183 CLR 168 ("Walter"), to which I shall make reference later.  However, he held that the evidence before him necessarily excluded any case that the assessment had not been made bona fide "within the Hickman principle".  Specifically he held that the fact that "if the Commissioner had in mind to issue a s 218 Notice when the assessment was made, that could hardly vitiate the process".

          He also held that there was nothing provisional or tentative about the assessment despite the use of the word "initially" in the handwritten document headed "Supplementary Report" set out above.  He further held that there was no material which could support a suggestion that the assessment had been raised for the improper purpose of opposing bail.

          His Honour also held that the applicant's bankruptcy provided another reason why his claim to quash the assessment was bound to fail.  For this he relied upon two decisions in the New South Wales Court of Appeal, Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 and Daemar v Industrial Commission of New South Wales (No 2) (1990) 22 NSWLR 178.  In each case claims made by a bankrupt for prerogative relief to set aside a money judgment were held to be claims that vested in the Trustee of the bankrupt and could not be brought in his personal capacity.  They were "property" of the bankrupt which vested in the Trustee at the time of sequestration (s 58(1) Bankruptcy Act 1966 (Cth) ("the Bankruptcy Act")).  He found that although it was open to the appellant to claim under s 178 of the Bankruptcy Act that the Trustee should bring or permit the bringing of the action for prerogative relief against the Commissioner, that action, if brought, was, in any event, bound to fail.  Accordingly, he did not consider whether the evidence before him did or did not indicate the existence of an arguable case for relief under s 178.

          His Honour also held that the claim for misfeasance in public office could not succeed.  He said "the evidence reveals this claim to be without foundation so as to be vexatious".  In these circumstances he made the orders appealed against.

THE CASE ON APPEAL

          In his appeal the appellant sought the reversal of all the findings of the primary judge.  Before considering the arguments advanced in the appeal, it is convenient to deal in the first place with the matters raised by the Commissioner in his notice of contention. 

(i)  The Notice of Contention

          By this notice the Commissioner contended that the following matter was wrongly decided against him:-

     "Despite the production of a certified copy of a notice of assessment of income tax the assessment must still satisfy the principle formulated by Dixon J in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 at 615 and the purported assessment must-

     (i)   be a bona fide attempt by the Commissioner to exercise powers conferred by the Income Tax Assessment Act 1936,

     (ii)  relate to the subject matter of the Income Tax Assessment Act 1936, and

          (iii)     be reasonably capable of reference to those powers."

          I read the notice as raising more than a mere contention as to onus.  The learned primary judge stated in his judgment "an assessment will be excluded from any general judicial review, but it must still satisfy the principle formulated by Dixon J in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 at 615".  I am satisfied that his Honour was not suggesting by this form of words that the Commissioner bore any onus to establish the three elements set out in the notice of contention in any litigious setting.  Quite clearly the Commissioner is entitled to tender a Notice of Assessment or copy as prescribed by s 177(1) and then rely upon the combined effect of s 175 and that section.  The considerations emerging from the decision in Hickman must be raised by the taxpayer, he bearing the onus of attacking the assessment on any of the Hickman grounds. 

          However, I apprehend that the question sought to be raised by the notice of contention is whether an assessment can be attacked as not having been made bona fide in circumstances where the Commissioner tenders the Notice of Assessment and relies upon s 177(1).  In considering this question it is convenient, in the first instance, to set out ss 175, 177(1) of the Tax Act and s 14ZZK of the Taxation
Administration Act 1953 (Cth) (previously s 190 of the Tax Act).  They provide as follows:-

     "175.   The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.

     177(1). The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.

     14ZZK   On an application for review of a reviewable objection decision:

     (a)  the applicant is, unless the AAT orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and

     (b)  the applicant has the burden of proving that:

          (i)   if the taxation decision concerned is an assessment (other than a franking assessment) - the assessment is excessive; or

          (ii)  if the taxation decision concerned is a franking assessment - the assessment is incorrect; or

              (iii)              in any other case - the taxation decision concerned should not have been made or should have been made differently."

          Undoubtedly the Commissioner's contention received strong support from the decision of the High Court in F J Bloemen Pty Limited v The Federal Commissioner of Taxation (1980-81) 147 CLR 360 ("Bloemen").  In that case the taxpayer had sought a declaration that the relevant income tax assessments were void and of no effect in law in that (inter
alia) they did not "issue as a result of a bona fide exercise of the powers vested in the [Commissioner] [to issue assessments]" and also in that the assessments were issued "in an attempt inter alia to place the defendant in a position: (i) to support the issue of notices purportedly issued pursuant to s 218; (ii) to harass the plaintiff".  It may be noted that the allegations are similar to those made in the present proceedings.

          The Commissioner tendered the Notice of Assessment and relied upon s 177(1) as foreclosing the issues sought to be raised by the taxpayer.  The leading judgment in the case was given by Mason and Wilson JJ.  At 371 their Honours noted that "the argument turned very largely on s 175 and especially on s 177(1) and their relationship to the Commissioner's basic duty under s 166 to make an assessment of the amount of the taxable income of the taxpayer and of the tax payable thereon".

          After setting out the text of s 175 their Honours continued as follows (at 371):-

          "This section does not relieve the Commissioner from the necessity of performing his duty to make an assessment.  The section protects the validity of an assessment, once made, from the consequences which might otherwise flow from the Commissioner's failure to comply with any provisions of the Act.  But it does not, and cannot, create a valid assessment where no assessment has been made at all.  The section requires an actual assessment as a condition of its operation."

          Their Honours then considered the operation of s 177(1).  They noted that an assessment protected by that section must accord with the requirements for a valid assessment as set out in the judgment of Kitto J in Batagol v Federal Commissioner of Taxation (1963) 109 CLR 243 at 251.  They then indicated (at p 372) that:-

          "There is nothing in Batagol to suggest that the court will go behind the assessment of a taxpayer's taxable income and tax payable as expressed in the notice of assessment served on him, unless it appears from the notice or an accompanying document that the notice is not in truth a notice of assessment."

          Their Honours noted that Federal Commissioner of Taxation v S Hoffnung & Co Ltd (1928) 42 CLR 39 provided an example of an assessment which was not in truth an assessment as it "had been made `tentatively' or `subject to revision' or `to be finalized'".  Their Honours further said (at 372-3):-

          "There is no ground for saying that `assessment' in s. 177(1) is used otherwise than in its defined sense or that the comments in Hoffnung (1928) 42 C.L.R. 39 and Batagol (1963) 109 C.L.R. 243 do not apply to it.  The sub-section looks to a definitive ascertainment of the taxpayer's taxable income and of the tax payable thereon, not one which is merely tentative."

          Subject to those comments their Honours then turned to the effect of s 177(1).  They posed the question in the following way (at 373):-

          "What then is the effect of s. 177(1)?  Does production of an appropriate notice of assessment or document provide conclusive evidence that an assessment was actually made, or does it merely provide conclusive evidence that an assessment, if made, was duly made?  Although it was said that the second alternative reflected a more natural reading of the provision, our view is that the language of the section is equally susceptible of either reading and that the answer is to be found, not so much in the language, as in the context and in the scope and purpose of the Act."

          After further consideration of earlier authorities their Honours expressed their view of the operation of the section as follows (at 375-376):-

     "An explicit and, in our view, correct statement of the effect of s. 177(1) was made by Taylor J. in McAndrew (1956) 98 C.L.R., at pp. 281-282.  For the reasons there expressed his Honour concluded that `s. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground'.  He conceded that the word `excessive' in s. 190(b) was inappropriate.  However, he considered that an assessment `made in purported but not justifiable exercise of a statutory power' could properly be described as `excessive' (1956) 98 C.L.R., at p. 282.

     This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions.  The effect of this policy is that, once the Commissioner takes advantage of s. 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities.  The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V.

     ...

     Of course, the appellants argue that this view of the operation of the Act does not offer sufficient protection to the taxpayer in the event of an abuse by the Commissioner of his powers.  They point to the fact that notwithstanding that the assessment may be under review or appeal pursuant to Pt V the tax assessed is payable and the Commissioner has access to the extensive powers prescribed in Pt VI, including the garnishee power in s. 218.  It is true that Pt VI contains large powers to enable the recovery of tax; powers the exercise of which may make life uncomfortable both for the taxpayer and perhaps others who owe money to the taxpayer.  So much may be conceded, but the Act does not proceed upon the hypothesis that the Commissioner will be motivated in the exercise of his powers by improper or collateral purposes.  As Isaacs A.C.J. observed in Federal Commissioner of Taxation v. Clarke (1927) 40 C.L.R. 246, at p. 276, after stating that s. 39 of the Income Tax Assessment Act 1922-1925 (a provision analogous to s. 177 of the Act) made the assessment unchallengeable:-

              `The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury.'"

          After noting that the rights of review provided by Pt V (since repealed and replaced by Pt IVC of the Taxation Administration Act) were comprehensive, their Honours continued (at 376):-

          "Quite evidently it was contemplated that the Commissioner would in every case take advantage of s. 177(1) and foreclose the exercise of jurisdiction to decide whether an assessment has been duly made.  The general tenor of the statutory provisions suggests that a taxpayer wishing to challenge a notice of assessment served upon him will be effectively confined to the Pt V procedures."

          Their Honours further stated (at 378):-

     "In our opinion, it must follow that a notice in proper form of an assessment necessarily compels the conclusion that there was an assessment made in fact.

     ...

          The Bloemen notice of assessment is in form an assessment.  It sets out the ascertainment of the taxpayer's taxable income and the tax payable thereon.  It is therefore appropriate to bring s. 177(1) into operation.  Its production will put beyond contention the due making of the assessment so that the Court cannot find that no assessment was made or that, if made, it was made for an inadmissible purpose."

          Quite clearly the reasoning in Bloemen is strongly supportive of the Commissioner's contention in the present case that the production of the Notice of Assessment made the assessment, as it were, invulnerable to collateral attack on the grounds that there was lack of bona fides in the making of it or that it was raised for an impermissible purpose. 

          However, the decision in Bloemen must now be read subject to the decision of the High Court in Walter.  In Bloemen no reliance had been placed upon s 39B of the Judiciary Act as there had been no claim for prerogative relief against the Commissioner.  Nor would it appear that any argument was addressed based upon the principle formulated by Dixon J in Hickman.  In Walter these two fresh considerations were introduced and were decisive.

          In Walter the taxpayer wished to challenge assessments which had included in his taxable income amounts claimed by the Commissioner to be "tax benefits" connected with a scheme to reduce income tax to which Part IVA of the Tax Act applied.  He brought proceedings (inter alia) in the Federal Court of Australia seeking determinations that the assessments were void and of no effect.  The Commissioner, by notice of motion, sought orders that the Federal Court proceedings be dismissed on the ground that the Court had no
jurisdiction to grant the relief sought, the Commissioner having produced Notices of Assessment and claimed the protection of s 177(1).  This notice of motion led to the removal of the proceedings into the High Court where a question was reserved for consideration of the Court.  The question was in the following terms:-

          "Does the production of the Notices of Assessment preclude wholly or in part challenge or review of the Richard Walter assessments in the proceeding under s 39B of the Judiciary Act 1903 (Cth), by reason of the operation of s 177 of the Income Tax Assessment Act 1936 (Cth)?"

          This question was answered in the negative by four members of the bench of seven.  Different reasons for returning this answer are to be found in the judgments to which I will now make brief reference.

          Mason CJ (at 179-180) referred to the effect of the Hickman principle in the following passage:-

     "The extent to which Parliament can, by means of privative clauses providing that awards and orders shall not be subject to prohibition or mandamus, limit the cases in which this Court can grant a remedy in the form of mandamus or prohibition has been discussed in a series of cases.  For present purposes that discussion may be taken as beginning with the decision in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598.  In that case, Dixon J expressed the principle, in a form which subsequently gained acceptance, in these terms (ibid, at 615):

          `Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts
within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body.'"

          After referring to other cases in which the court had applied this formulation to privative clauses his Honour referred to s 39B(1) of the Judiciary Act which vests in the Federal Court:-

          "Jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth."

          His Honour indicated that s 39B vested in the Federal Court the entirety of the jurisdiction which s 75(v) of the Constitution refers to the High Court, that section having been included in the Constitution, "to make it constitutionally certain that there would be a jurisdiction capable of restraining officers of the Commonwealth from exceeding Federal power" (Bank of NSW v Commonwealth (1948) 76 CLR 1 at 363).

          After consideration of earlier cases including Bloemen his Honour said (at 188):-

     "In the light of the relevant provisions of the Act, as I have explained them, s 177 is not inconsistent with s 75 of the Constitution; nor does s 177 trench upon the provisions of s 75.  Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose.  On this view, s 177(1) is consistent with the Hickman principle."

          The reference to "considerations of purpose" in this passage reflects the formulation in Bloemen set out above which appeared to confer total invulnerability on an assessment from collateral attack, once the protection of s 177 had been suitably invoked.  However, the further reference to consistency with the Hickman principle dispels this suggestion, a fact which is underlined by his Honour's later reference to his not understanding "the taxpayer to contend that the assessments were tentative or were vitiated by bad faith or improper purpose ..." (p 188).

          Brennan J (at 193-194) referred to the "Hickman principle" as follows:-

     "The `Hickman principle', as it has been called, reconciles

          `the prima facie inconsistency between one statutory provision which seems to limit the powers of the [repository of the power] and another provision, the privative clause, which seems to contemplate that the [repository's] order shall operate free from any restriction' R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418.

          The reconciliation is effected by `reading the two provisions together and giving effect to each'.  The privative clause is given effect despite non-compliance with the provisions governing the exercise of the power, but only if the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation and it is reasonably capable of reference to the power given to the body purporting to exercise it."

          His Honour related the application of the Hickman principle to the operation of ss 175 and 177(1) in terms which qualify the breadth given to that operation by Bloemen.  His Honour said (at 197):-

     "The scope and operation of each of s 175 and s 177(1) must be congruent, for the Parliament is not to be taken to have intended by s 175 to validate a purported assessment that does not comply with the general provisions of the Act to an extent that falls short of the evidentiary protection afforded by s 177(1).  Equally there is no reason to suppose that Parliament intended the evidentiary protection afforded by s 177(1) to fall short of the validity of an assessment determined by reference to the provisions of s 175.  In my respectful opinion, the operation of s 177(1) corresponds with the operation of s 175 and the disconformity in operation between ss 175 and 177(1) which was accepted in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 371, 375 in reliance on the judgment of Taylor J in McAndrew (1956) 98 CLR, at 281-282 is erroneous.  Unless the operation of s 177(1) corresponds with the operation of s 175, the conclusive evidence provision in s 177(1) would attempt to shut out judicial review of a purported exercise of the power of assessment that does not satisfy the Hickman principle.  And that would be inconsistent with s 75 of the Constitution.

          It is conceivable that a purported assessment could be made in bad faith so as to forfeit the protection which s 175 would otherwise confer on the assessment.  If such a case were to occur, neither s 175 nor s 177(1) would transform the purported but invalid assessment into a source of liability.  See Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614 at 624, 633-634 and Bloemen (1981) 147 CLR, at 375-376, 378.  The purported assessment would be a nullity.  But an assessment which has been made in a bona fide attempt to exercise the power to make it is not invalid merely on account of a disconformity between the amounts assessed and the amounts properly assessable under the general provisions of the Act."

          His Honour further said in relation to the operation of ss 175 and 177(1) (at 198):-

          "Section 177(1) does not itself confer validity on an instrument that is not otherwise a valid notice of assessment.  If it stood alone as an evidentiary provision, it could not preclude an effective exercise by this Court of its constitutional jurisdiction to review an exercise by the Commissioner of his power of assessment.  But if s 175 be construed according to the Hickman principle and each of ss 175 and 177(1) be construed as having an operation corresponding with the operation of the other, the evidentiary edifice of s 177(1) is seen to be constructed on the foundation of s 175.  So construed, the immunity from review produced by the `conclusive evidence' provision of s 177(1) is co-extensive with the validity of assessments produced by operation of s 175 or, when s 175 has no work to do, by the general provisions of the Act.  The `notice of assessment' to which s 177(1) attaches a conclusive evidentiary effect is a notice of an assessment which is either valid under the general provisions of the Act or is validated by s 175."

          His Honour, once again, indicated the overarching importance of the Hickman principle in the following passage (at 199):-

          "As the scheme of the Act is to protect the validity of notices of assessment while allowing a taxpayer a full opportunity to have the general provisions of the Act affecting tax liability applied, I would construe the term `due making of the assessment' in s 177(1) as extending to every purported exercise of the power to ascertain the taxable income and tax liability of a taxpayer which satisfies the criteria expressed by the Hickman principle."

          Deane and Gaudron JJ also affirmed the applicability of the Hickman principle to the construction of ss 175 and 177(1) (at p 211).  Section 175 afforded protection from invalidity only if the purported "assessment" (i) was "a bona fide attempt" by the Commissioner to exercise powers conferred by the Act, (ii) "relate[d] to the subject matter" of the Act, and (iii) was reasonably capable of reference to those powers.  If the purported "assessment" did not satisfy those three requirements, the protection of s 175 would be unavailable and the purported "assessment" would be invalid.  In such circumstances the protection of s 177 of the Act was inconsistent with s 75(v) of the Constitution to the extent that s 177 purported to make a certificate of the Commissioner conclusive evidence of the due making of an assessment in proceedings in the original jurisdiction of the High Court under s 75(v) of the Constitution.

          It is, accordingly, clear that where prerogative relief against an assessment is sought pursuant to s 75(v) of the Constitution and s 39B of the Judiciary Act, the Hickman principle is called into operation.  I find myself in respectful agreement with the statement of the learned editors of 1995 CCH Australia Limited Australian Federal Tax Reporter at p 47,901 where they say in relation to the Walter decision:-

     "The decision in Richard Walter is ... authority for the proposition that in a case of bad faith or a tentative assessment, a taxpayer is entitled to use sec 39B to challenge the validity of the assessment.  The strict approach of Bloemen, in which the court held that the only circumstances in which sec 175 and 177 permit a court to investigate the validity of an assessment is where no assessment or copy is produced or where the circumstances are the same as those in Hoffnung, has also been effectively broadened.

          The practical effect of this decision is that unless a taxpayer can show evidence of bad faith on the part of the Commissioner or that the purported assessment is not an `assessment' for the purposes of the Act, then the taxpayer will not be able to challenge the validity of the assessment.  The taxpayer's only option will be to dispute the substantive liability under the assessment pursuant to the procedures under Pt IVC of the Taxation Administration Act."

          In the result, in my opinion, the Commissioner's notice of contention in these proceedings cannot be supported.  I would propose, therefore, that it be dismissed.

(ii) The Appeal

          I come then to the appeal itself.  Stripped to its essentials, the appellant's submission is that he has demonstrated the existence of an arguable case that the Commissioner's 1986 assessment was invalid either because it was not made in bona fide exercise of the power to assess or it was tentative or provisional and thus not a true assessment.  It is convenient to deal, in the first place, with this second assertion.

     (a)  Was the assessment tentative or provisional?

          It will be remembered that in the documents obtained under the Freedom of Information application, which have been set out above, reference was made to a recommendation that "initially" an assessment should be raised under s 167 of the Tax Act.  The learned primary judge held that it was impossible, on the basis of this piece of evidence, to envisage any viable case that the assessment was merely tentative or provisional.  I agree.  In the first place I am not satisfied that this evidence can provide a lawful basis for mounting such an attack.  This statement appears in a document which in no way formed any part of the assessment and was certainly not served with it.  In Hoffnung the tentative or provisional nature of the assessment in question was shown on the face of the Notice of Assessment.  The Notice described the assessment as "tentative" or "subject to revision" with the result that it lacked the definitive quality necessary to constitute a true assessment.  It may also be noted that in Simons v Federal Commissioner of Taxation (1980-81) 147 CLR 360 (a case heard with Bloemen) the Notice of Assessment served on the taxpayer was accompanied by an adjustment sheet which carried the notation "your assessment will be reviewed upon determination of the objection against your assessment for 30 June 1977".  It was held (per Aickin J at 381-382) that this notification "conveyed no more than that there was an outstanding objection in respect of the preceding year of income, the determination of which might require an amendment of the assessment notified by the Notice of Assessment, including the alteration sheet".  It did not convey the meaning that the Notice of Assessment was tentative.  It was a "definitive" assessment notwithstanding that it might later be subject to amendment.

          I am satisfied that, even if the statement in the document in this case can properly be taken into account, it is incapable of indicating that the assessment was tentative or provisional.  At very best it might indicate that an amended assessment might later be appropriate.  I consider that the learned primary judge was correct in the view that he took on this aspect of the case.

     (b)  Was the assessment mala fide?

          What is the position in relation to the claim that there is an arguable case that the assessment was not bona fide?  Before I come to the submissions that have been made in this regard, I consider it a worthwhile exercise to set out, by way of background, the steps to be undertaken by the appellant if he is to achieve his ultimate purpose in this litigation.

          In the first place he must establish that the assessment perfected by the service of Notice upon him on 1 October 1986 was an action by the Commissioner which was amenable to the writ of certiorari, this being the prerogative relief claimed in the application.  In doing so, he must overcome the problem that s 39B of the Judiciary Act does not provide for prerogative relief other than "a writ of mandamus or prohibition or an injunction". 

          Secondly, he must achieve the quashing of the assessment upon the basis that the making of it was in excess of the Commissioner's powers or an abuse of them.  As the remedy is discretionary he must establish that it is a proper case for the exercise of discretion in his favour.

          Thirdly, if he is successful in obtaining a quashing of the assessment, he must apply to the Supreme Court of New South Wales to have the judgment entered against him in February 1990 set aside.  As his Honour noted, for some reason, the appellant does not at this stage wish to undertake such a step.  However, as his ultimate aim appears to be the annulment of the bankruptcy this would appear to be necessary.

          Fourthly, he must take steps to dispose of the sequestration order made against him on 10 April 1990.  This would be a necessary precursor to his making a claim for damages for misfeasance in public office (Metropolitan Bank v Pooley [1885] 10 App Cas 210 (HL)). 

          Fifthly, if all these matters were accomplished then, subject to any problems arising under a relevant statute of limitations, he would seek to prosecute his action against the Commissioner for the tort of misfeasance of public office.  It would appear that in establishing damage he would have to overcome problems that might well arise from his failure to object to the assessment or raise at an early stage the question whether the assessment was, in any event, a true "assessment".  Moreover, there being no evidence as to what the correct figure of his taxable income was in 1986, there is no current indication that the assessment was "excessive".  Furthermore, his failure to take reasonable steps to prevent judgment and the subsequent sequestration order might well raise difficulties in relation to failure to mitigate damage.

          It should be added, of course, that he is currently a bankrupt and seeks, in these very proceedings, to assert a claim under s 178 of the Bankruptcy Act that the Trustee should be required to bring these proceedings on his behalf, in circumstances where no evidence is given as to how such proceedings could be funded.

          It is apparent that the whole edifice of these contemplated proceedings is based upon the claim that the 1986 assessment process was not bona fide and that, consequently, the assessment itself should be quashed.  Has an arguable claim to this effect been established?

          As indicated in the documents set out above, the Commissioner advised in 1986 that the assessment had been made under s 167 of the Tax Act.  That section provides as follows:-

     "If-

     (a)  any person makes default in furnishing a return; or

     (b)  the Commissioner is not satisfied with the return furnished by any person; or

     (c)  the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income,

          the Commissioner may make an assessment of the amount upon which in his judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166."

          Section 166 with which this section needs to be read provides as follows:-

          "From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon."

          In his statement of claim the appellant makes the following general complaints in relation to the making of the default assessment under s 167:-

     (a)  the second respondent did not make any attempt to ascertain the applicant's taxable income and did not undertake any relevant process of calculation;

     (b)  the second respondent did not carry out any, any proper, or any genuine investigation of the affairs of the applicant prior to the making of the said default assessment;

     (c)  there was no material in the possession of the second respondent having any rational or logical probative force to justify the issue of the said default assessment;

     (d)  the second respondent failed to interview or consult with the applicant prior to the issue of the said default assessment;

     (e)  the second respondent decided to issue the said default assessment knowing that it did not reflect any rational assessment of a liability of the applicant or with reckless indifference as to whether it did or did not reflect any such assessment;

     (f)  the second respondent acted for the improper purpose of making the said default assessment for the use of officers of the New South Wales Police to use as evidence to oppose the applicant's application for release on bail;

     (g)  the second respondent knew that the applicant at the date of the making of the said default assessment was not in default in furnishing a
return in respect to the year ended 30 June 1986;

          (h)  the second respondent denied to the applicant any opportunity to be heard before making the said default assessment thereby not according natural justice to the applicant."

          In relation to the allegation in (f), as already indicated, it is not asserted on behalf of the appellant that there is sufficient evidence to ground a submission of "arguable case" in relation to it.  In relation to (g) it must be noted, of course, that s 167(c) does not require that the Commissioner believe that a taxpayer be "in default" in relation to the furnishing of his return.  It is sufficient that, at the relevant time, he has not furnished one.

          As pointed out by the primary judge these allegations seem to derive at least in part from the facts that were admitted for the purpose of the litigation in Briggs (1).  On those admitted facts the Full Court of this Court held that, notwithstanding the tendering of the Notice of Assessment and reliance upon s 177(1), there had in fact been no assessment of the taxpayer's taxable income under s 167. 

          The fundamental question for determination here is whether the facts adduced provide any significant indication that no proper assessment under s 167 was made in 1986.  Before embarking upon a consideration of the factual material which was before his Honour and this Court, it is appropriate to give consideration to what is required for the making of an assessment under s 167.

          This question was considered at length by Sheppard J in R v Deputy Commissioner of Taxation; Ex parte Briggs (1987) 14 FCR 249 ("Briggs (2)").  It had been submitted to his Honour that it was incumbent upon the Commissioner to follow the same procedure for assessment under s 167 as would be followed under s 166.  His Honour did not accept this submission and, in my respectful opinion, he was correct in rejecting it.  Although s 166 contemplated a process of ascertainment of assessable income, and allowable deductions leading to the calculation of the taxable income, s 167 involved no such requirement.  His Honour said (at 265):-

          "What I think needs to be done is to look at the language s 167 has used and, to the extent that it is necessary, the language of s 166.  The relevant words of s 167 are `... the Commissioner may make an assessment of the amount upon which, in his judgment, income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of s 166'.  Those words do not suggest that the Commissioner, in exercising the powers he has under s 167, is required to endeavour to ascertain the assessable income and the allowable deductions which the taxpayer has.  It envisages that he may come directly to the task of determining a figure which, once determined, becomes the taxable income.  That is not to say that the Commissioner may not proceed in the way contended for by counsel.  But the words do not suggest to me that he is bound to do so."

          I am quite satisfied that in making the s 167 default assessment in 1986 the Commissioner was under no obligation to make any precise calculation or to take into account any actual or potential deductions.  He was entitled in the circumstances when no return had at that time been furnished to "make an assessment" of the amount upon which in his judgment income tax ought to have been levied.  It is clear, in my opinion, that the word "assessment" in this part of the section does not oblige the Commissioner to undertake a process of calculation involving the subtraction of deductible items from the amount accepted as the taxpayer's income.  The Commissioner could go straight to a final figure providing that in doing so he made a genuine attempt at assessment.  As Sheppard J said in Briggs (2) (at 270):-

          "The essential question in this case is whether there was any assessment at all.  The fact that it may have been able to be better done than it was will not make it a nullity if in truth the process of assessment, however unsatisfactorily, or even erroneously, it may have been done, was carried out.  What is involved is a judgmental exercise to determine whether what Mr Gill did constituted an assessment or was an exercise unrelated to the prosecutor's circumstances."

          In the present case, in view of the matters just discussed, I am firmly of the opinion that the Commissioner's failure to ascertain whether there were any other items of income or any allowable deductions that should have been brought into account is of no consequence having regard to the fact that he was making a default assessment.  The only significant question, in my view, is whether it could be argued that he made no assessment at all, in that he acted in bad faith and for the ulterior purpose of using his powers
under s 218 of the Tax Act to require payment to him of the amount of money held by the police.

          The material adduced shows that the Commissioner was minded to take possession of this money in circumstances of urgency in that, if swift action were not taken, the money would pass from the possession of the police and would, in all probability, become irrecoverable.  It may be said, then, that evidence has been adduced showing that the Commissioner was motivated, in raising the assessment, by a desire to take possession of the money.

          It is also established that the Notice of Assessment provided for payment on the date of the Notice.  This was quite unusual and could only have been done in reliance upon s 205 of the Tax Act.  That section enabled a reduction of the ordinary 30 days period for payment in circumstances where it was apprehended that a taxpayer was about to leave for overseas in order to avoid his tax liabilities.  Although there is no direct evidence on this point, it quite clearly appears that the appellant's bail was being opposed for this reason and that there was concern that he should not have access to the money in possession of the police as it might be used for purposes of flight.  I am satisfied that nothing is shown in the material adduced by the appellant that could reasonably point to the shortening of time in the Notice of Assessment as being other than a bona fide reliance upon s 205 in circumstances calling for its application.

          As I see it, the appellant's contention amounts really to this.  He alleges that the assessment was invalid because it was issued by the Commissioner in abuse of his power to assess under s 167, in that it was not a bona fide attempt to assess the amount upon which tax should be levied but was a mere device to enable the issue of the s 218 Notice.  He asserts that he has an arguable case for invalidity as the assessment was in no better case than that considered by the Full Court of this Court in Briggs (1), where it was conceded that the assessment was, in effect, a product of unsubstantiated invention.

          In the first place, I am unable to attribute any significance to the fact that the assessment was issued in conjunction with and motivated by a desire to take advantage of s 218.  There is sufficient indication of urgency in the situation to warrant the steps that were taken.  In my opinion, the s 218 connection is a purely neutral fact in the determination of whether the assessment itself was invalid.

          Moreover, in my view, the facts relied upon as emerging from the documents set out earlier in these reasons demonstrate that the assessment in this case was not issued in circumstances similar to those in Briggs (1) but rather to those in Briggs (2).  They demonstrate clearly that the Commissioner had available to him positive information as to the value of heroin dealing undertaken by the appellant in the relevant income year.  A precise figure was provided by senior investigating police.  It was a substantial sum.  It was, in my view, demonstrably adequate to provide a foundation for a default assessment in the circumstances in which the assessment needed to be issued.  Conformably with the principles enunciated by Sheppard J in Briggs (2), the Commissioner was entitled to use it as a basis; the assessment could well be erroneous, but was nevertheless bona fide.

          I am quite satisfied that no case has been demonstrated for permitting these proceedings to go forward on the basis that they might be rendered more substantial by the use of auxiliary procedures such as discovery and interrogatories.  Such procedures would, in the circumstances, amount to no more than "fishing".

          I should add that, in my opinion, the prerogative relief of certiorari would not, in any event, be available to the appellant.  Section 39B of the Judiciary Act, like s 75(v) of the Constitution does not in terms provide for certiorari.  This omission has been the subject of consideration in decisions of the High Court.  In Pitfield & Ors v Franki & Ors (1970) 123 CLR 448 certiorari and prohibition were sought in the alternative, the Court granting certiorari.  However, it does not appear that the question of the availability of the remedy was raised or addressed.  In R v Cook; Ex parte Twigg (1980) 147 CLR 15 the High Court was asked to grant an order for prohibition or certiorari directed to a judge of the Family Court of Australia.  Gibbs J said (at 25-26):-

          "It is clear that the Court has original jurisdiction in the present matter.  The case is one in which a writ of prohibition is sought against an officer of the Commonwealth within s. 75(v.) of the Constitution.  A judge of the Family Court is an officer of the Commonwealth within that provision and is amenable to prohibition: see Reg. v. Watson; Ex parte Armstrong (1976) 136 C.L.R. 248, at p. 263.  Section 75 (v.) does not confer original jurisdiction on this Court in a matter in which certiorari is sought and it is `at least questionable whether certiorari to quash proceedings of an inferior tribunal can issue from this Court as a substantive remedy not ancillary to some proceeding otherwise within the original jurisdiction of the Court': Reg. v. District Court; Ex parte White (1966) 116 C.L.R. 644, at p. 655, per Windeyer J., and see per Barwick C.J. (1966) 116 C.L.R., at p. 648.  However in Pitfield v. Franki (1970) 123 C.L.R. 448 a case brought in the original jurisdiction, this Court did grant certiorari.  ...  In that case, as in the present, prohibition and certiorari were claimed as alternative remedies, and one possible explanation of the decision is that once the Court was seized of jurisdiction because prohibition was sought against an officer of the Commonwealth, not merely colourably, but in good faith, the Court, in the exercise of that jurisdiction, had power, under s. 31 of the Judiciary Act, to grant the more appropriate remedy of certiorari.  ...  Moreover, it is clear that the conviction and sentence ought not to be allowed to stand, and that no injustice can be done by granting certiorari.  In all these circumstances it seems appropriate to adopt the view of Pitfield v. Franki suggested above, and to hold that the Court has power to grant certiorari in the present case if we consider that the grounds for the issue of that writ have been established.  This will, of course, not preclude the Court from examining the correctness of Pitfield v. Franki in a future case."

          In the same case Mason J (at 29) said "I entertain some doubt as to whether relief by way of certiorari is appropriate in a case such as this".

          Aickin J dealt with the matter more fully.  He said (at 32):-

     The question of whether this Court has jurisdiction to issue a writ of certiorari has been the subject of some discussion in a number of cases.  It is a remedy which is not expressly conferred or authorized under s. 75(v.) of the Constitution.

     No submission was made to the Court that there was any lack of jurisdiction to issue a writ of certiorari by counsel for the applicant nor by the Solicitor-General who appeared as amicus curiae, but it is trite law that consent or absence of opposition does not give jurisdiction.  I am however troubled by the suggestion that the Court should make an order for certiorari on the same basis as was done in Pitfield v. Franki (1970) 123 C.L.R. 448 but reserving the possibility of re-examining the correctness of that decision.  The Court is at all times free to reverse any of its earlier decisions, but it seems to me that it would not be proper to make an order for certiorari except upon a basis which involved the Court in treating its jurisdiction to make such an order as established, if not by the decision in Pitfield v. Franki, then by the circumstances of the present case.

     The precise basis of the decision in Pitfield v. Franki is perhaps not easy to discern.  Two possible explanations were mentioned in passing by Mason J. in Reg. v. Marshall; Ex parte Federated Clerks Union of Australia (1975) 132 C.L.R., at p. 609.  But like the present case, it was one where both prohibition and certiorari were claimed as alternative remedies.

          It seems to me that the narrowest basis for the granting of a writ of certiorari in the present case is that it is one in which a writ of prohibition could properly issue, and not one where all that can be said is that it was sought `not merely colourably, but in good faith'.  As I have indicated above I regard this case as one in which an order for prohibition could be made, but to make such an order would be inadequate.  In such a case it appears to me that the writ of certiorari may be used as an adjunct to an order for prohibition so as to make such order fully effective."

          His Honour later said (at 34):-

     "For the reasons which I have indicated I find it necessary in the present case to go at least as far as saying that the Court has jurisdiction to grant certiorari in a case in which prohibition would be available and in which certiorari is necessary in order to make more effect or complete the remedy which prohibition would provide."

          This is plainly not a case where prohibition could be granted.  I have already set out in summary fashion the course that events have taken since the making of the assessment.  There is simply nothing left to prohibit.  In my view, there has been no definitive ruling on this topic by the High Court.  Consequently this Court must form a view.  In my opinion, the reasoning of Aickin J should be followed.  There is not even a colourable basis for the grant of prohibition.  Consequently certiorari is not available and the assessment cannot now be quashed.

          I also note that certiorari is a discretionary remedy (Cook p 29 per Gibbs J).  Refusal of prerogative relief may occur where there has been unreasonable delay in the commencing of proceedings (R v Commonwealth Court of Conciliation and Arbitration; Ex parte Ozone Theatres (Aust) Limited (1949) 78 CLR 389 at 400).  Also where the grant would be futile or serve no useful purpose (R v Licensing Court of Blackall; Ex parte Chiconi [1920] St R Qd 4; R v Anderson; Ex parte Ipec-Air Pty Ltd (1965) 113 CLR 177 at 201; R v Aston University Senate; Ex parte Roffey [1969] 2 QB 538; Tebbutt v Egg Marketing Board of New South Wales [1976] 2 NSWLR 179 at 188).  Here, nothing was put before the primary judge to indicate that the assessment was in fact excessive or that an assessment which might have been substituted by way of the objection and appeal proceedings would have resulted in a debt
capable of being paid by the appellant.  There is nothing to indicate that judgment and bankruptcy would not have followed in any event.

          These reasons impel me to the conclusion that the appellant has demonstrated no arguable case for the granting of the prerogative relief he seeks.  I am in respectful agreement with the decision of the learned primary judge.

          I also agree with him that this finding must dispose of the other claims made by the appellant.

          I find no need to resolve the question whether the availability of proceedings under s 99 of the Bankruptcy Act necessarily precludes the application sought to be made by the appellant under s 178.  There can be no basis for requiring any action on the part of the Trustee or bringing action despite his opposition, where the action itself must necessarily fail.

          As to the claim for damages for misfeasance of public office, the primary finding that there is no arguable case of abuse of power cuts the ground from underneath this action.  In these circumstances there is no need for me to consider the strict requirements for establishment of this tort now laid down by the High Court in Northern Territory of Australia & Ors v Mengel & Ors (1995) 129 ALR 1.  Moreover, I am quite satisfied that the claim as formulated was one relating to the property of the bankrupt and not to "pain felt by the bankrupt in respect of his body, mind, or character" (Beckham v Drake [1849] 2 HLC 579; Faulkner v Bluett (1981) 52 FLR 115 at 119; Cox v Journeaux (No 2) (1935) 52 CLR 713).  Consequently the right to bring the action was vested in the Trustee and could not be exercised independently by the appellant bankrupt pursuant to s 116(2)(g)(ii) of the Bankruptcy Act. 

          I am, accordingly, of the view that this appeal must fail. 

          I propose that it be dismissed with costs.

            I certify that this and the preceding forty-three (43) pages are a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.

            Associate:

            Date:   27 MARCH 1996

 

                           A P P E A R A N C E S

 

 

COUNSEL FOR THE APPELLANT:          G. McVAY

 

INSTRUCTED BY:                      FOX & STANILAND

 

 

COUNSEL FOR THE SECOND RESPONDENT:  D. McGOVERN

 

INSTRUCTED BY:                      AUSTRALIAN GOVERNMENT SOLICITOR

 

 

COUNSEL FOR THE THIRD RESPONDENT:   B.J. SKINNER

 

INSTRUCTED BY:                      LOBBAN McNALLY & HARNEY

 

 

DATE OF HEARING:                    12 SEPTEMBER 1995

 

DATE OF JUDGMENT:                   27 MARCH 1996