C A T C H W O R D
TAXATION - Income Tax - Application for release of unpaid tax - Finding by Board that payment of tax would cause taxpayers serious hardship - Whether Board had a discretion not to grant application for release - Whether Board's decision was unreasonable.
Income Tax Assessment Act 1936, ss 265 and 269
Administrative Decisions (Judicial Review) Act 1977, s 5
Associated Provincial Picture Houses Limited v Wednesbury Corporation (1948) 1 KB 223
King v Trebilco ex parte F.S. Faulkner and Sons Limited (1936) 56 CLR 20
PHILIP JOHN CHRISTIAN CORLETTE and SUSAN JANE CORLETTE v RUSSELL MACKENZIE, ROSS ADDISON and PETER JOHNSON
NO. NG727 of 1995
CORAM: WILCOX, EINFELD & FOSTER JJ
PLACE: SYDNEY
DATE: 17 MAY 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 727 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: PHILIP JOHN CHRISTIAN CORLETTE
First Applicant
SUSAN JANE CORLETTE
Second Applicant
AND: RUSSELL MACKENZIE
First Respondent
ROSS ADDISON
Second Respondent
PETER JOHNSON
Third Respondent
CORAM: WILCOX, EINFELD and FOSTER JJ
DATE: 17 MAY 1996
PLACE: SYDNEY
MINUTE OF ORDERS
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellants pay the respondents costs of the 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 727 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: PHILIP JOHN CHRISTIAN CORLETTE
First Applicant
SUSAN JANE CORLETTE
Second Applicant
AND: RUSSELL MACKENZIE
First Respondent
ROSS ADDISON
Second Respondent
PETER JOHNSON
Third Respondent
CORAM: WILCOX, EINFELD and FOSTER JJ
DATE: 17 MAY 1996
PLACE: SYDNEY
EXTEMPORE REASONS FOR JUDGMENT
WILCOX J: This
is an appeal from a decision of Beazley J in a matter brought to the Court
under the Administrative Decisions (Judicial Review) Act 1977. Her Honour was concerned with two
matters. Firstly, there was an
application to her for an extension of time under the Act to allow the
appellants to challenge a decision given by the respondents, the members of a
Taxation Relief Board, refusing to release
them from their liability for unpaid tax under s.265 of the Income
Tax Assessment Act 1936. That
decision was made on 27 March 1992. Her
Honour held that no case had been made out for the exercise of the Court's
discretion to extend time and dismissed the application for that
extension. The appellants do not
challenge that aspect of her Honour's decision.
The second matter with which her Honour was concerned related to a decision given by the Board on 20 October 1994 refusing an application for reconsideration of the 1992 decision. That aspect of her Honour's decision is challenged and two grounds have been advanced. First, it is said, her Honour erred in holding that s 265 of the Act conferred on the Board a discretion as to whether or not to release the tax. Secondly, it is said that the decision of the Board to refuse the release was unreasonable in the sense discussed in Associated Provincial Picture Houses Limited v Wednesbury Corporation (1948) 1 KB 223.
In my opinion, neither of the points advanced on behalf of the appellants has any merit. In relation to the first point, her Honour discussed at some length the question whether the power conferred by s 269 was mandatory. She reviewed the relevant authorities and I would respectfully agree with, and adopt, what she said. In particular, I am of the opinion that her Honour was correct in treating the decision in King v Trebilco; ex parte F.S. Faulkner and Sons Limited (1936) 56 CLR 20 as an authority relevant to s.265. That case turned on s 66 of the Land Tax Assessment Act 1910. The section was couched in language very similar to s.265, although the circumstances in which release was available were more tightly circumscribed. Nonetheless, the High Court held that, even if the circumstances were established, the Board established under that Act for consideration of release applications had a discretion as to whether or not it should exercise the power.
It seems to me that if Trebilco's case is to be distinguished at all from the present case, it can only be by saying that the argument in favour of a mandatory obligation was a little stronger in that case than it is in the present case. I say that because, as I have said, the circumstances were more tightly circumscribed under the Land Tax Assessment Act than they are under the Income Tax Assessment Act.
The circumstances stipulated by s 265 of the Income
Tax Assessment Act are extremely broad.
It is sufficient, for example, for a taxpayer to establish that he or
she has suffered a loss or is in such circumstances that the exaction of the
full amount of the tax will entail serious hardship. On some occasions, of course, the loss or the
circumstances may be for reasons that were outside the control of the taxpayer,
but that will not necessarily be so. It
would be extremely odd if a taxpayer who was the author of his or her
misfortunes, through imprudent or extravagant expenditure, was
entitled, as a matter of right, to a release of unpaid income tax.
I think it is unnecessary for me to say anything more about the first point. As I say, it is discussed in some detail by her Honour and I agree with what she has said.
The second argument is always a difficult argument to maintain. In order to establish unreasonableness in the relevant sense, it is necessary to demonstrate to a Court that the decision made by the statutory decision-maker was one that no rational person, properly understanding his or her duty, could make. It is not enough that it be a decision that the members of the Court reviewing the case might not themselves have made.
In the present case, Mr Corlette's application for release stated a ground of hardship: that as he was a chartered accountant, bankruptcy might jeopardise his ability to work. Apparently, when he made the application, he was not in fact working as a chartered accountant. He gave his occupation as being a sales manager for a company which, however, does not seem to have been carrying on active business at that time. Mrs Corlette was employed as an office assistant. She gave no reason for her claim of serious hardship. Despite this, the Board concluded in May 1992 that serious hardship would be sustained if Mr and Mrs Corlette were obliged to pay their tax liability. Apparently, this was done on the basis that the extent of the tax liability was so great that it could not be discharged without diminishing their ability to provide the necessities of life for themselves and their young child.
The Board however refused the application, saying it was not satisfied that the granting of relief would alleviate that hardship, given the appellants' other debtors. The evidence is that they owed a very considerable sum, apparently approaching $1 million, to Equiticorp Financial Services Limited (In Liquidation) in respect of the acquisition of some shares.
As I said, there was a request for re-consideration. This took place over a lengthy period in 1993 and 1994. The request for reconsideration was conveyed in an application dated 22 September 1993, signed by Mr Corlette. He requested reconsideration of the May 1992 decision "on the basis that I believe that that company, Equiticorp, has abandoned any claim against me". He gave some reasons for this belief.
The Board apparently made inquiries about this matter and reached a view adverse to the application. But the appellants complained about this course being taken without them having been heard. They were then given an opportunity of putting further material before the Board and they availed themselves of that opportunity. They even put before the Board an opinion of Mr David Bennett QC relating to the Equiticorp situation. The Board was apparently minded to seek the comments of Equiticorp on the matters advanced by Mr Bennett and, in particular, to ascertain whether Equiticorp proposed to take any action. But it appears that Mr and Mrs Corlette, through their solicitor, vigorously opposed any contact with Equiticorp and the Board accordingly decided not to make any direct inquiry.
It was in this situation that the request for reconsideration was finally dealt with. The letter of 20 October 1994 conveyed to the appellants the Board's decision. It acknowledged Mr Bennett's advice but commented that the Board was not prepared to reverse its earlier decision because the opinion only reflected one side of the argument. It did not reflect the views of Equiticorp. The letter went on:
"The board was not satisfied that Equiticorp Financial Services Ltd (In Liquidation)(Receiver and Manager Appointed) does not intend to pursue its debt or indeed that it is precluded from pursuing that debt. The Board would have contacted the receiver/manager to either confirm there was no intention to pursue the debt or that the receiver/manager was precluded from doing so, but both you and your representative, Mr Teen, indicated strong opposition to that action.
You would be aware that a Board is not prepared to grant a release in situations where it was perceived the granting of the release would benefit other creditors in an insolvency. You should now contact the Debt Collection area of the Chatswood Taxation Office to discuss payment of your liabilities."
It will be seen that this letter directly responds to the
ground advanced by Mr Corlette in his request for reconsideration. He had asserted that Equiticorp did not
intend to pursue its debt. The Board
attempted to satisfy itself about that matter but, because of the attitude of
the appellants, it was frustrated in doing so.
It thereupon determined the matter on the basis that it was not
satisfied that what Mr Corlette had alleged was correct. It seems to me that there was nothing
unreasonable or irrational about that course.
Indeed, any other course might have caused some surprise.
Mr Libling on behalf of the appellants focused on the last paragraph of the letter set out above. He referred to the reference to the granting of release benefiting other creditors in an insolvency and said this was an irrational approach because there was no certainty of a bankruptcy.
I do not think this is the gist of the Board's reasoning. It was simply a comment and related to a general attitude. It is difficult to criticise the logic of that attitude. If the basis of a request for release is to avoid a bankruptcy, there is really not much point in granting the application if the person is likely to be made bankrupt at the instance of another creditor. The only effect of the release would be to preclude the Australian Taxation Office from proving in the bankruptcy and taking whatever dividend might be available. I think that was all that the Board was saying in the last paragraph of the letter.
I think that there is no irrationality in the decision made in this case. I agree with what the learned primary judge said about that. In my view the appeal should be dismissed with costs.
I certify that this and the preceding seven (7) pages are a true copy of the reasons for judgment herein of the Honourable Justice Wilcox
Associate:
Date: 17 May 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 727 of 1995
)
GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: PHILIP JOHN CHRISTIAN CORLETTE
First Applicant
SUSAN JANE CORLETTE
Second Applicant
AND: RUSSELL MACKENZIE
First Respondent
ROSS ADDISON
Second Respondent
PETER JOHNSON
Third Respondent
CORAM: WILCOX, EINFELD and FOSTER JJ
DATE: 17 MAY 1996
PLACE: SYDNEY
EXTEMPORE REASONS FOR JUDGMENT
EINFELD J: I agree that the appeal should be dismissed for the reasons given by the learned presiding judge. I would add only this: the hardship on which the whole of this matter proceeded has been said in the various application forms to be a desire to avoid bankruptcy, or the certainty of bankruptcy, if the relief is not granted. This is said to be a hardship because it would, so it is suggested, prevent the male appellant from pursuing his occupation as a chartered accountant. As I read the papers, and I think it is not challenged, he is not working as a chartered accountant right now, and, in any case, there is no evidence that bankruptcy would necessarily prevent him from carrying on at least aspects of that practice, even if it prevented him from owning his own practice. As he does not seem to own his own practice at the moment, this can hardly be described as a hardship.
Hardship, the Board has informed us, is treated by them as being an inability to provide for the necessities of life if relief is not granted. The material available does not suggest that that position has been reached. Hence, it seems a beneficial finding of the Board for the appellants that they would suffer hardship at all.
On the other hand, the Board says that it only grants relief when the relief would actually relieve the hardship. That does not seem to be the position in this case because the appellants seem to have relatively limited assets and income and it does not seem likely that their situation would be benefited by any release from the taxation debt.
The other question that arises here is that the legislation appears to permit any number of applications to the Board for relief. As the Equiticorp debt now appears to be statute barred, there seems to be nothing to stop the appellants from going to the Board for a further ruling in relation to the matter, there now having been removed from the scene any concern it may have had in respect of Equiticorp's getting a benefit from the taxation debt being removed altogether.
In these circumstances, it seems to me impossible to say that the Board acted so unreasonably that no unreasonable person could now support such a decision. That is not the stuff of Wednesbury unreasonableness at all and I can see no way in which it could be proved, let alone has it been proved, that the Board was unreasonable in the finding that it made. For those reasons, I support the orders proposed by the learned presiding judge.
I certify that this and the preceding two (2) pages are a true copy of the reasons for judgment herein of the Honourable Justice Einfeld.
Associate:
Date: 17 MAY 1996
IN THE FEDERAL COURT OF AUSTRALIA)
)
NEW SOUTH WALES DISTRICT REGISTRY) No. NG 727 of 1995
)
GENERAL DIVISION )
BETWEEN: PHILIP JOHN CHRISTIAN CORLETTE
First Applicant
SUSAN JANE CORLETTE
Second Applicant
AND: RUSSELL MACKENZIE
First Respondent
ROSS ADDISON
Second Respondent
PETER JOHNSON
Third Respondent
CORAM: WILCOX, EINFELD, FOSTER JJ
DATE: 17 MAY 1996
PLACE: SYDNEY
EXTEMPORE REASONS FOR JUDGMENT
FOSTER J: In my view, the judgment appealed from is correct in every respect. I am of the view that the orders proposed by the learned presiding judge should be made and for the reasons that he has given.
I certify that this one (1) page is a true copy of the reasons for judgment herein of the Honourable Justice M. L. Foster.
Associate:
Date: 17 MAY 1996
A P P E A R A N C E S
COUNSEL FOR THE APPLICANTS: MR D.F. LIBLING
INSTRUCTED BY: S.A. TEEN Solicitor
COUNSEL FOR THE RESPONDENTS:MISS R.M. HENDERSON
INSTRUCTED BY: AUSTRALIAN GOVERNMENT SOLICITOR
DATE OF HEARING: 17 MAY 1996
DATE OF JUDGMENT: 17 MAY 1996
