CATCHWORDS

Appeal and New Trial - New trial - Miscarriage of Justice - Whether holding debtor to undertaking not in specified circumstances further to oppose the making of a sequestration order constituted a denial to the debtor of procedural fairness on the hearing of a bankruptcy petition - Whether new trial of petition to be refused if it is shown that the debtor could not possibly succeed on a new trial, rather than that the debtor could not possibly have succeeded on the trial marred by the denial of procedural fairness.

Australian and Overseas Telecommunications Corporation v. McAuslan (1993) 47 F.C.R. 492

Government Insurance Office of New South Wales v. Bailey (1992) 27 N.S.W.R. 304

Simmonds v. Spooner (No. 3) (unreported; Supreme Court of New South Wales, Court of Appeal; judgment 28 March 1995)

Stead v. State Government Insurance Commission (1986) 161 C.L.R. 141

MARIO GIRETTI v. DEPUTY COMMISSIONER OF TAXATION

VG6 of 1996

Jenkinson, Lindgren and Merkel JJ.

Melbourne

11 September, 1996

IN THE FEDERAL COURT OF AUSTRALIA   )

VICTORIA DISTRICT REGISTRY          )  No. VG6 of 1996

GENERAL DIVISION                    ) 

On appeal from a Judge of the Federal Court of Australia

                    BETWEEN:      MARIO GIRETTI

                                      Appellant

                        AND:      DEPUTY COMMISSIONER OF TAXATION

                                      Respondent

CORAM:    Jenkinson, Lindgren and Merkel JJ.

PLACE:    Melbourne

DATE:     11 September, 1996

                      MINUTES OF ORDER

THE COURT ORDERS THAT:

1.        The appeal be dismissed.

2.        The respondent's costs of the appeal be paid by the appellant.

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

IN THE FEDERAL COURT OF AUSTRALIA   )

VICTORIA DISTRICT REGISTRY          )  No. VG6 of 1996

GENERAL DIVISION                    ) 

On appeal from a Judge of the Federal Court of Australia

                    BETWEEN:      MARIO GIRETTI

                                      Appellant

                        AND:      DEPUTY COMMISSIONER OF TAXATION

                                      Respondent

CORAM:    Jenkinson, Lindgren and Merkel JJ.

PLACE:    Melbourne

DATE:     11 September, 1996

                    REASONS FOR JUDGMENT

JENKINSON J.

          I have had the advantage of reading the reasons for judgment of Lindgren J. and the reasons for judgment of Merkel J.  I agree in the orders proposed by Lindgren J., for the reasons which his Honour states.

                            I certify that this page is a true copy of the Reasons for Judgment of the Honourable Justice Jenkinson.

                                        Associate

                            Dated:  11 September, 1996

IN THE FEDERAL COURT OF AUSTRALIA)

VICTORIA DISTRICT REGISTRY        )          No VG 06 of 1996

GENERAL DIVISION                  )

  On appeal from a Judge of the Federal Court of Australia

          BETWEEN:

MARIO GIRETTI

                           Appellant

          AND:

DEPUTY COMMISSIONER OF TAXATION

                          Respondent

CORAM:    Jenkinson, Lindgren, Merkel JJ

PLACE:    Melbourne

DATE:     11 September 1996

                    REASONS FOR JUDGMENT

LINDGREN J:

INTRODUCTION:

This is an appeal from a decision of Olney J on 13 December 1995.  On that date his Honour made a sequestration order against the estate of the appellant ("Mr Giretti") as judgment debtor and ordered that the costs of the present respondent ("the Commissioner") as judgment creditor, of and incidental to the creditor's petition, including reserved costs, be taxed and paid in accordance with the Bankruptcy Act 1966.  Mr Giretti, who appeared (and appears) in person, contends that he did not have the benefit of procedural fairness in connection with the making of the sequestration order.

BACKGROUND FACTS:

It is convenient to set out the background facts in chronological order.

1.   On 2 May 1986 notices of assessment pursuant to the Income Tax Assessment Act 1936 ("the ITAA"), were issued by the Commissioner to Mr Giretti in respect of the years ended 30 June 1983, 1984 and 1985, fixing as the due date for payment, in each case, 5 June 1986.

2.   On 15 May 1986 Mr Giretti, through solicitors, lodged objections against the assessments.

3.   On 27 June 1986 the Commissioner disallowed the objections ("the objection decisions")

4.   At Mr Giretti's request, the objection decisions were referred to the Administrative Appeals Tribunal ("the AAT").  The date fixed for the hearing was 18 October 1988.  On that date the Commissioner was represented before the AAT but Mr Giretti did not appear.  His application for review was dismissed by the AAT.  Mr Giretti was in prison at the time.  Before us, he said that he was unaware of the hearing date.  Counsel for the Commissioner said that Mr Giretti's application to the AAT had been filed by his taxation agent who had been notified of the hearing date.

5.   On 13 October 1992, the Commissioner demanded payment.

6.   On 11 January 1993, the Commissioner commenced proceeding No MC 930070 in the County Court of Victoria at Melbourne for $88,834.13 plus interest of $1,085.73, an issue fee of $180.00 and a service fee of $60.00, making a total of $90,159.86.

7.   On 2 April 1993, in default of a defence, the Commissioner obtained judgment in that sum.

8.   On 22 February 1995 a bankruptcy notice for the amount of the judgment ($90,159.86) plus interest on the judgment ($22,367.55) was issued allowing 21 days for compliance.

9.   On 11 April 1995 the bankruptcy notice was served on Mr Giretti.

10.  On 23 April 1995 Mr Giretti filed in the County Court an application to set aside the default judgment.

11.  In view of this, on 26 May 1995 an order was made extending the time for compliance with the bankruptcy notice to 14 June 1995.

12.  On 16 June 1995, Mr Giretti's application to set aside the judgment in the County Court was dismissed by Judge
Neesham after hearing from legal representatives of both parties.  Before us, the Commissioner accepted that in view of s 177 of the ITAA, the County Court had no choice but to dismiss Mr Giretti's application to set aside.  (The effect of s 177 is discussed later.)

13.  On 13 July 1995 the Commissioner presented a creditor's petition.

14.  On 30 July 1995, the creditor's petition was served.

15.  On 18 August 1995, Mr Giretti served on the Commissioner notice of his intention to appear.  In that notice, he stated his grounds of opposition to the petition as follows:

          "1.  That the amount claimed is not owed by me at all.

           2.  That the Deputy Commissioner obtained a Judgement in Default of Defence.

           3.  The Assessments were based upon wrongful information, false accounting and hearsay.

           4.  To date,I have been unable to obtain Legal Aid appropriate to enable me to properly defend and to show that the Deputy Commissioner was wrong in assessing illegal income of $38,490.13 for 1983, 1984 and 1985 - the Assessments should have been 'nil'.

           5.  The Deputy Commissioner has already wrongly taken over $21,000.00 from my daughter's money allegedly relating to the income illegally earned as alleged by the Deputy Commissioner.

           6.  The Statute of Limitations of 6 years should apply to alleged debts claimed to 30th June, 1985 where judgement was wrongly made against me in 1993 pursuant to a Writ issued on 11th January, 1993."

16.  On 22 August 1995, the return date of the petition, directions were made for the filing and service of affidavits and the petition was adjourned to 18 October 1995.

17.  On 12 September 1995, Mr Giretti's affidavit in opposition was sworn.  This comprised five paragraphs.  In the first paragraph Mr Giretti swore that he "did not earn any additional income as alleged".  The affidavit also referred to his having been unable to defend himself properly or to attend to his personal business during the time of his imprisonment for four years and two months.  Otherwise, it generally repeated, in substance, the allegations in his notice of intention to appear.  It said:

          "I repeat that they have relied upon hearsay and false statements and false and incorrect calculations which have never been substantiated, nor have I ever been given a proper opportunity of being shown any such figures."

     Mr Giretti's complaint, as revealed by his statement of grounds of opposition and his affidavit, was that the Commissioner had relied on the word of others which was false.

18.  On 13 October 1995 the Commissioner's affidavit was filed and served.  It annexed copies of the notices of assessment for the years ended 30 June 1983, 30 June 1984 and 30 June 1985 and deposed to service of the notices of assessment on Mr Giretti on or about 2 May 1986.  It deposed to the developments subsequently, and annexed copies of the Commissioner's notices of disallowance of the objections, the AAT's notice of the direction dismissing the applications to it for review, the Commissioner's further demand dated 13 March 1992 for payment for "the balance of the assessments" and for additional tax for late payment, the County Court judgment for $90,159.86, and Judge Neesham's order dated 23 June 1995 dismissing Mr Giretti's application to set aside the County Court judgment.

19.  On 18 October 1995, the further hearing of the petition was adjourned to 15 November 1995 and Mr Giretti was directed to file and serve any affidavit in reply to the affidavit filed on behalf of the Commissioner by 8 November 1995.

20.  On 8 November 1995, an affidavit by Mr Giretti in reply was sworn and filed.  It complained that the affidavit filed on behalf of the Commissioner had not dealt with Mr Giretti's claim that he had "arbitrarily assessed income against" Mr Giretti, his wife and his daughter "in
relation to the same set of facts and circumstances".  The affidavit "repeat[ed] that [the] Commissioner acted upon hearsay in relation to arbitrarily assessing income".

21.  On 15 November 1995, the petition came before Ryan J. Detailed attention must be given to what occurred on that date and on 13 December 1995 when the petition was next before the Court and the sequestration order was made.

     Before Ryan J, on 15 November, Mr J A Nolan of counsel appeared for the Commissioner.  Mr Giretti appeared in person, but during the course of the hearing, a Ms Harrison also requested "permission to talk on behalf of Mr Giretti" and Ryan J allowed her to do so.  (A similar course of events occurred on the hearing of the appeal.)

     Mr Giretti requested an adjournment and that application was opposed by the Commissioner.  Mr Nolan handed up a chronology and outline of the Commissioner's arguments.  In response to a question by Ryan J, he explained that the assessments were "betterment assessments" (cf s 167 of the ITAA) which had arisen out of events which had given rise to the criminal charges against Mr Giretti and to his being imprisoned for four years and two months.  Mr Nolan made the following submission as to why Ryan J should not go behind the judgment:

          "Having regard to the age of the judgment and the unsuccessful attempts made by the debtor to review the assessments and set aside the judgment, it is the petitioning creditor's submission that the Court should not take that first step, your Honour, in this particular case and should not exercise a discretion to even go behind the judgment.

           In any event, your Honour, of course, it is pertinent that the Deputy Commissioner of Taxation is the, in effect, the creditor - the plaintiff in any court proceeding and notices of assessment such as these have a prima facie nature and the debt is recoverable under section 201  of that Act, regardless of any pending appeal.  In fact in, basically, all of these cases, your Honour, summary for [sic] final judgment is entered, even if there is a defence.  The Court will only exercise its discretion to go behind the judgment where the circumstances warrant, if the debtor asserts that there is in truth and reality no debt at all, it will not go behind the judgment simply to determine if the amount of the true debt is the same as the amount of the judgment.

          It is a little bit uncertain as to whether the debtor is alleging that he owes no tax whatsoever on those assessments or whether in fact the tax he alleges - or the challenge to the assessments is in respect of only part of the assessments.  Of course, if it is the latter, your Honour, even if you did exercise your - decide to go behind the judgment, you would not normally set it aside on that basis.

          The debtor alleges that his daughter has already paid $20,000 to the Tax Commissioner and that should be taken off his liability.  This is an argument that is a little difficult to conceive, your Honour, but putting it at its very, very best, even if there were a $20,000 deduction to be made in respect of the debtor's liability, it would still leave a balance of more than $90,000 due and owing at this stage.  The debtor alleges that there has been delay caused - or delay by the petitioner has been to his prejudice.  Certainly the petitioning creditor denies any undue delay in recovery action and further denies any prejudice.  On the debtor's own evidence he was in prison for that substantial period of time and it would be the petitioner's submission that his inability to deal with his personal affairs over that time was as a result of that period in jail rather than any action or inaction on the part of the petitioning creditor.

          The debtor further alleges that the petitioner is statute-barred in relation to its claims.  However that argument is put, your Honour, in my submission, it cannot succeed in respect of the claim for the principal debt.  The High Court authority of Deputy Commissioner of Taxation v Morvac makes it clear that the State acts of limitation have no application to income tax debts.  If the claim is made in relation to the judgment debt, then of course a judgment debt is still enforceable at this stage.

          Your Honour, the debtor makes no assertion that he is solvent and states that he relies upon Legal Aid funding for any legal advice.  Your Honour, it is the submission of the petitioning creditor that there are no grounds - valid grounds of opposition whatsoever to this petition; that the history of the matter demonstrates that the likelihood of any advantage to the Court in attempting to go behind these assessments now would be a very futile application - exercise.

          In any event, your Honour, the debtor has put no material before the Court whatsoever upon which the Court could even attempt to review those notices of assessment.  The debtor simply alleges that the notices of assessment were incorrectly raised but in no part of his evidence puts forward any grounds upon which those assertions are made or puts forward evidence upon which the Court could form a conclusion as to whether his assertions are correct or incorrect.  They are just broad allegations which, in my submission, are most inappropriate in a case of this nature, where the debtor seeks to go behind the judgment.  In all of the circumstances, your Honour, the application for the adjournment is opposed by the petitioning creditor and the petitioning creditor seeks to proceed to sequestration."

     On behalf of Mr Giretti, Ms Harrison said that Mr Giretti did not have any income for the years '83, '84 and '85,
had been on "on sickness benefit" and had not had "illegal incomes".  She then said that on the preceding Monday, 13 November, a Mr Nicholas Sevdalis, a solicitor who had been assisting Mr Giretti, had received a letter from "Legal Aid" advising that there was a possibility that it might "cover him on this if it looks like he has got a case" and that attempts were being made "to get a barrister to brief on this" although no barrister had yet been retained.  Ms Harrison said that Mr Sevdalis had that morning retained a Mr Brian Scheid, barrister, "to brief us and advice [sic]".  She said this:

          "He has not been, as yet, briefed to proceed for us and he would like an adjournment for us to be able to meet to apply for that with him [sic]."

     Mr Nolan pointed out that the petition was before the Court for the third time and that the letter referred to an allowance of only $300 for the giving of advice.  According to the transcript, the hearing concluded as follows:

          "HIS HONOUR: Yes.  Yes, well, Mr Giretti, I am disposed, because of the communication you have had with the Legal Aid Commission and with the office of Mr Sevdalis and Associates, to allow you to explore the - or to have the benefit of the legal advice which that correspondence refers to, and I am only prepared to do so - to give you an adjournment for that purpose on your undertaking that if the Legal Aid Commission withdraw assistance or do not extend it for your continued opposition to the
petition.  You will not, on the adjourned hearing, further oppose the making of a sequestration order.  In other words, you will allow the Legal Aid Commission to be the judge of this matter.  Do you follow that?

          MR GIRETTI: ...(indistinct)...

          HIS HONOUR: Are you prepared to give that undertaking to the Court?

          MR GIRETTI: I will do that, yes.

          HIS HONOUR: Yes, very well.  In the circumstances, upon the debtor undertaking to the Court that in the event of Legal Aid withdrawn or not extended for his continued opposition to the petition herein, that he will not at the adjourned hearing oppose the making of a sequestration order, it is ordered:

          (1)  that the petition be adjourned to 13 December 1995;

          (2)  that the costs of both parties of this day be reserved.

          I will return the correspondence about Legal Aid, Mr Giretti.

          MR NOLAN: If your Honour pleases."

22.  Mr Giretti applied, presumably following a conference with Mr Scheid of counsel, to the AAT for reinstatement of his application to it for review of the Commissioner's objection decisions.  It will be recalled that his application for review had been dismissed on 18 October 1988.  Reinstatement of applications which have been dismissed by the AAT is provided for in sub-s 42A (9) of the Administrative Appeals Tribunal Act 1975 ("the AAT Act").

     The application for reinstatement was heard by the AAT constituted by Senior Member Pascoe, on 8 December 1995. Mr Giretti was represented by Mr Brian Scheid of counsel and gave oral evidence.  Stephen John McBurney, solicitor, of the Australian Government Solicitor's office represented the Commissioner.  The AAT dismissed the application for reinstatement. 

     In the absence of written reasons of the AAT for the dismissal, Mr McBurney deposed in an affidavit sworn 13 December 1995, which was filed in Court when the matter was before Olney J on that date (see below), as follows:

          "Senior Member Pascoe stated in giving his decision that the application could only be reinstated after 28 days if the original application had been dismissed in error.  He found that no error had occurred.  However, he further stated that if he was incorrect in finding that no error had occurred, the decision to reinstate remained discretionary, and that in all the circumstances of the Applicant's application, the discretion should be exercised against reinstatement."

     I will return to this decision of the AAT later in these Reasons.

23.  The creditor's petition came before Olney J on 13 December 1995.  Again, Mr Nolan of counsel appeared for the Commissioner and Mr Giretti appeared in person.  Mr Nolan indicated that the Commissioner made no formal objection to Ms Harrison's appearing and seeking to speak on behalf of Mr Giretti, although, in the event, she did not do so on this occasion.

     Mr Nolan again handed up a chronology and outline of arguments and orally elaborated on them, generally to the same effect as before Ryan J.  He was able to add to what he had told Ryan J, the information that Mr Giretti had been represented by counsel before the AAT on the preceding Friday, 8 December, when his application for reinstatement of his application to the AAT had been dismissed.  He sought to show that there was no substance in any of the grounds of opposition.  Mr Nolan also relied on the undertaking which Mr Giretti had given before Ryan J on 13 November.  He asked that a sequestration order be made "simply" on the basis of the undertaking not to oppose which Mr Giretti had given to Ryan J.

     It is convenient to set out the relevant exchanges which occurred between Olney J and Mr Giretti as recorded in the transcript.

          "HIS HONOUR: Have you obtained legal aid to continue with your opposition to this petition.

          MR GIRETTI: Yes, we tried but they refused yesterday.

          HIS HONOUR: They have refused.  You gave an undertaking to the court on 15 November that in the event that your legal aid was not extended to continue your opposition to the petition,
that you would not today on the adjourned hearing oppose the making of a sequestration order.  What do you have to say about that?

          MR GIRETTI: Well, I did not understand the last word you said, but I did not recall more or less when I read it on the papers it was - we get the transcript and, I was...(indistinct)...

          HIS HONOUR: Well, what did you think you were undertaking to do?

          MR GIRETTI: Today, just to come to court and just tell the truth.

          HIS HONOUR: Well, I hope you are.  Well, I am not prepared to ignore what is the judge's record of what was said at that time and I have - I am quite confident that the judge would not have recorded that undertaking in those terms unless he was satisfied that the undertaking was given.  Now, you say when you got the transcript you thought it was different.  You thought you did not -

          MR GIRETTI: And she say in the last paragraph.

           HIS HONOUR: Well, when did you get the transcript?

          MR GIRETTI: 29 October - November, not October, November.

          HIS HONOUR: What is your opposition to the petition?

          MR GIRETTI: The opposition is all the allegations made against me they were false.  They were not only false but had money in the Capital Building Society, about $3½ million.  During my trials in Geelong apparently people though there was a lot of publicity, a lot of hearsay evidence come to court, but - and a lot of people even today raised by Mr Nolan last week, this - I was wrongly advised and this escort agency where they said and that is Judge Hassett dismissed that application in the County Court and I do not like anymore to smear my name.  In every court I go I am a trafficker, which is -  that is not true.  This has been proven in a County Court and the appeal of the Supreme Court.  If your Honour wished to have documents to prove this I can provide it here.  It is nothing to do with me, it was somebody else.  What I mean -

          HIS HONOUR: I am not interested in looking at any documents that have not been put to the court in the proper way by affidavit.  The fact of the matter is that there is a judgment against you by the Tax Commissioner; is that right?

          MR GIRETTI: That is what I said.

          HIS HONOUR: And you applied to the County Court to have that judgment set aside and the County Court refused to set it aside.

          MR GIRETTI: Firstly they said, yes, halfway through and after somebody brought up I was a trafficker the judge got the view and he changed his mind during the proceeding.

          HIS HONOUR: On 16 June 1995 the application to set aside judgment was dismissed.

          MR. GIRETTI: That is right.

          HIS HONOUR: There is a judgment against you by the Tax Commissioner.

          MR GIRETTI: That is right.

          HIS HONOUR: You have no current proceeding pending in the Administrative Appeals Tribunal or in the Federal Court to appeal against or review the assessment of your tax?

          MR GIRETTI: No.

          HIS HONOUR: I propose to hold you to the undertaking that you gave on 15 November.  I do this for two reasons.  One is that there was an undertaking given to a judge of this court who granted you an indulgence on that time by way of a further adjournment, and for you to now renege on that in my view almost amounts to a contempt of court.  Second, there is no material that has been put before the court which in any way would justify the court in going behind the judgment of the County Court, and in those circumstances I decline to permit you to oppose this petition.  Thank you, you may sit down." (emphasis supplied)

Olney J then expressed his satisfaction as to the service of the creditor's petition, the commission of an act of bankruptcy on 14 June 1995, the subsistence of the debt on which the Commissioner relied and the fulfilment of the other statutory conditions precedent to the making of a sequestration order (see Bankruptcy Act, 1966, s 52).  He made the sequestration order and order for costs referred to earlier, and ordered that the Official Trustee in Bankruptcy be trustee of Mr Giretti's bankrupt estate.

REASONING ON THE APPEAL

When the Commissioner's petition was before Ryan J on 15 November 1995 and Olney J on 13 December 1995, Mr Giretti claimed not to have derived income in the years in question and therefore not to have incurred a liability for income tax in respect of those years.  In this way he made it clear that he would be and was asking the Court to go behind the evidence on indebtedness provided by the judgment.  In legal terms, his ground of opposition must have been that there were substantial reasons for questioning whether or not, "behind" the judgment or "as consideration for" it, there was in truth and reality a "debt" due to the Commissioner: cf sub-ss 44 (1), 47 (1), 52 (1) and (2) of the Bankruptcy Act 1966; para (2) of Bankruptcy Form No 5; Wren v Mahony (1972) 126 CLR 212 at 222-225; and Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137 (FCA/FC) at 148.

The way in which Ryan J and Olney J dealt with the matter must be understood against the background of certain provisions of the ITAA and of the Taxation Administration Act 1953 ("the TAA") and of a line of decided cases in relation to those provisions.  

From the returns, and from any other information in his possession, the Commissioner is required to make an assessment of the amount of the taxable income of any taxpayer and of the tax payable thereon (ITAA s 166).  If a person defaults in furnishing a return, or the Commissioner is not satisfied with a return furnished or has reason to believe that a person who has not furnished a return has derived taxable income, he may make an assessment of the amount upon which, in his judgment, income tax ought to be levied, and that amount is made the taxable income of that person for the purpose of s 166 (ITAA s 167).  (It is common ground that the assessments in the present case were such "betterment assessments".)  Where, under the ITAA, any person is liable to pay tax, the Commissioner may make an assessment of the amount of such tax (ITAA s 169).  As soon as conveniently may be after any assessment is made, the Commissioner is required to serve notice thereof in writing by post or otherwise upon the person liable to pay the tax (ITAA s 174).  The validity of an assessment is not affected by reason that any of the provisions of the ITAA have not been complied with (ITAA s 175). 

In the present case, the notices of assessment were issued on 2 May 1986 and served on or about that date, Mr Giretti lodged objections against them on 15 May 1986 and the Commissioner disallowed the objections on 27 June 1986.  At that time, the relevant provisions for objection, review and appeal were found in Division 2 (ss 184-202) of Part V of the ITAA, although the relevant provisions are, in substance, the same as those introduced by Act No 216 of 1991 as s 175A of the ITAA and Part IVC of the TAA relating to assessments first notified after 1 March 1992.

The former s 185, like the present s 175A, permitted a dissatisfied taxpayer to object in writing to the Commissioner.  The former s 186, like the present s 14ZY of the TAA, required the Commissioner to decide whether to allow the objection, in whole or in part, or to disallow it, and to notify the taxpayer in writing of his decision (now called "objection decision" in the legislation).  The former s 187 provided for a taxpayer dissatisfied with the Commissioner's decision to request in writing the Commissioner to refer the decision on the objection either to a Board of Review (pre 1 July 1986) or the AAT (post 30 June 1986), or to a specified Supreme Court (pre 1 July 1986) or this Court (post 30 June 1986).  (With those provisions may be compared the current provisions in Divisions 3, 4 and 5 of Part IVC of the TAA.) 

Sub-sections 177 (1), (3) and (4) of the ITAA, like s 175
noted earlier, are of particular importance:

     "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 particulars of the assessment are correct. [At earlier times in the history of the sub-section, the words "except in proceedings under Part IVC of the Taxation Administration Act 1953" did not appear and other words appeared, namely "(except in proceedings on appeal against the assessment)" and later "except in proceedings under Part V on a review or appeal relating to the assessment," but those differences are not of present relevance.]

          (2) ..........................................

          (3)The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued.

          (4)The production of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced."

Section 201 of the ITAA provided, as ss 14ZZM and 14ZZR of the TAA currently provide, that the pendency of any reference, review or appeal, as the case may be, did not in the meantime interfere with or affect the assessment, and that any income tax might be recovered as if no such reference, review or appeal was pending.

Any income tax assessed is made due and payable on the date specified in the notice as the date upon which the 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 the service of the notice (ITAA s 204).  There is provision for additional tax if any tax remains unpaid after the time when it became due and payable (ITAA sub-s 207 (1)).

The Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable (ITAA sub-s 207 (2)).  Importantly, income tax (including any additional tax), when it becomes due and payable, is made a "debt" due to the Commonwealth payable to the Commissioner (ITAA s 208).  Any unpaid tax may be sued for and recovered in any court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name (ITAA sub-s 209 (1)). 

Unless constrained by authority to conclude otherwise, I would have thought that the ineluctable result of the foregoing provisions and the fact that there has been no suggestion by or on behalf of Mr Giretti or in any document that the conditions which activated them did not exist, is that there
was, in truth and reality, a "debt" "underlying" and providing "the consideration for" the Commissioner's judgment against Mr Giretti.  Far from detracting from this view, the authorities uniformly support it; see McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 269-270 (Dixon CJ, McTiernan, Webb JJ), 273-275 (Kitto J), 280 (Taylor J); In re Noonan; Ex parte Deputy Commissioner of Taxation (1964) 13 ATD 409; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 esp at 377-378 (Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed); Clyne v Deputy Commissioner of Taxation (NSW) (1982) 56 ALJR 857 (HCA/Mason ACJ) at 858-9, 43 ALR 342 at 344; Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673, 48 ALR 545; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 esp at 183-184 (Mason CJ), 211 (Deane, Gaudron JJ); Hoare Bros Pty Ltd v Deputy Commissioner of Taxation 95 ATC 4156 (FCA/Olney J), affirmed at 96 ATC 4163 (FCA/FC); Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation 95 ATC 4519 (FCA/Olney J); Walkom v Cutcher & Neale Pty Ltd 96 ATC 4127 (NSW/Bainton J); Wobelea Pty Ltd v Deputy Commissioner of Taxation, (1996) 20 ACSR 436 (FCA/Sundberg J) at 440.  Of these cases, In re Noonan and the second Clyne case were instances of creditor's petitions by the Commissioner.

There was no suggestion before Ryan J (or later before Olney J) that the assessments were not final or were vitiated by improper purpose or bad faith on the part of the Commissioner;
cf Deputy Commissioner of Taxation v Richard Walter Pty Ltd, supra.  The only grounds of opposition raised by Mr Giretti, namely that he had not derived any income in the three years in question and that the Commissioner had relied on "hearsay" evidence that he had which was in fact false, did not afford grounds on which it was permissible to go behind the judgment, in view of the clear intention of the legislature acknowledged in the cases noted above.

Provided Ryan J was satisfied with the proof of the matters referred to in s 52 of the Bankruptcy Act 1966, his discretion to make the sequestration order against the estate of Mr Giretti would inevitably be exercised in favour of the making of the order.  It was the reference by Ms Harrison to "Legal Aid" that caused his Honour to refrain from taking that course immediately.  Perhaps his Honour thought it desirable that Mr Giretti have the benefit of professional legal advice, even if that advice would only be to the effect that on the basis of what he had said, he was in a hopeless position.  Perhaps his Honour took into account the fact that in the light of the legislation and the cases discussed above, it was only in exceptional and closely defined circumstances (not suggested in Mr Giretti's grounds of opposition or affidavit) which would be understood by professional legal advisers but probably not easily by Mr Giretti, that Mr Giretti could hope to persuade the Court to go behind the judgment.  Perhaps his Honour contemplated the possibility of an application by Mr
Giretti to the AAT for reinstatement of his earlier application.

Having heard already what was said by Ms Harrison on behalf of Mr Giretti, his Honour understandably wished to ensure that there was not a second opportunity for Mr Giretti, or Ms Harrison on his behalf, to repeat the grounds of opposition which they had put forward which, having regard to the statutory provisions, could not prevail.

It would have been possible and, in my view proper, for his Honour to have treated the petition as "part heard" before him and adjourned the further hearing of it, subject to a direction in terms appropriate to give effect to that intention (para 33 (1) (a) of the Bankruptcy Act 1966 empowers the Court "upon such terms as it thinks fit, at any time [to] adjourn any proceeding before it, either to a fixed date or generally").  However, his Honour followed a different course.  He adjourned the entire hearing of the petition to 13 December 1995 subject to Mr Giretti's undertaking to the Court, that

     "In the event of Legal Aid [being] withdrawn or not extended for his continued opposition to the petition herein, ... he will not at the adjourned hearing oppose the making of a sequestration order ..."

His Honour did not expressly decide that the matters advanced on behalf of Mr Giretti did not provide good cause for going behind the judgment.  It should be inferred, however, that that was his Honour's view.  At the same time, it should also be accepted, that he did not regard himself as having embarked upon a hearing of the petition or as having been called upon to decide anything.

In view of the conclusions which I reach below in relation to the hearing before Olney J on 13 December 1995, it is not necessary for me to reach a final view as to the appropriateness of Ryan J's acceptance of Mr Giretti's undertaking.  However, as the matter was debated on the hearing and as we were told that the practice has been adopted in other cases, I think it right, but sufficient, for me to say that I have serious doubt as to the appropriateness of the course that was followed.  In effect, without having the benefit of reasons or a decision of one judge, Mr Giretti had to undertake not to oppose, when the petition came on for hearing before a different judge, the making of a sequestration order if he did not by then have Legal Aid.  With respect, it is at least strongly arguable that this course did not accord procedural fairness to Mr Giretti.  I say this not overlooking the facts that the adjournment was granted as an indulgence to Mr Giretti on the third occasion when the creditor's petition was before the Court; that it was granted for the purpose, stated by him, of enabling him to obtain Legal Aid; and that it was granted against the background that a refusal of an adjournment would have
resulted in the immediate making of a sequestration order.

When the petition came on for hearing before Olney J on 13 December 1995, his Honour first explored with Mr Giretti the question of the undertaking which he had given to Ryan J on 15 November.  Importantly, he then asked Mr Giretti what his grounds of opposition to the petition were, and Mr Giretti stated them.  Again, they went only to the factual issues whether he had derived taxable income during the years in question and whether the Commissioner had relied on evidence which was in fact false.  His Honour next obtained Mr Giretti's assent to the proposition that he had no current proceeding before the AAT or this Court seeking review of, or appealing against, the assessments.  It is perhaps not amiss to note that his Honour had decided Hoare Bros Pty Ltd v Deputy Commissioner of Taxation, supra, on 7 March 1995 and Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation, supra, on 14 August 1995, in which the effect of the statutory provisions mentioned earlier was referred to.  The nature of Mr Giretti's opposition to the petition and the lack of any subsisting challenge to the assessments made it virtually inevitable that a sequestration order would be made, in the light of the statutory provisions and authorities referred to earlier.

In the short reasons for Judgment given by his Honour, he began by saying "I propose to hold you to the undertaking you
gave on 15 November."  This demonstrates that his Honour did not regard the undertaking as something to which Mr Giretti was being held for no reason other than that he had given it.  The question which his Honour was, in substance, addressing was whether there was any point in not holding Mr Giretti to his undertaking.  His Honour gave two reasons for holding him to it.  The first was that the price of his being granted his request for an adjournment had been his undertaking not to oppose the making of a sequestration order.  The second was that the nature of the grounds of Mr Giretti's opposition did not justify the Court's going behind the judgment.

For the reasons which I attempted to state earlier, the second ground was clearly a proper one on which his Honour might proceed, without further ado, to make a sequestration order, subject to proof by the petitioning creditor of the matters required by the Act.  Having heard the grounds on which Mr Giretti's opposition was founded, Olney J decided afresh, and on the case as it was put to him by Mr Giretti, as the authorities compelled him to do, not to go behind the judgment.  It should be accepted that his Honour's view that the Court was not justified in going behind the judgment was an independent ground for his decision not to allow Mr Giretti to elaborate on that ground, unaffected and not contributed to by anything that had happened before Ryan J; cf Twist v Randwick Municipal Council (1976) 136 CLR 106 at 116 per Mason J and cases there cited; Preston v Carmody (1993) 44 FCR 1
(Wilcox J) at 16.  In substance, if not in form, Mr Giretti was heard by Olney J on 13 December 1995 in opposition to the petition.

If, contrary to the view that I have expressed above, a failure to accord procedural fairness tainted what transpired before Olney J, nonetheless there is an alternative ground on which the appeal should be dismissed.  We have heard at some length from Mr Giretti and, with his consent, from Ms Harrison.  Nothing has emerged to put a different complexion on the nature of Mr Giretti's ground of opposition to the petition as it was explained to Olney J.  What they said can be summarised as being that Mr Giretti did not in fact have "illegal earnings" from "trafficking" (T 8.05, 8.09) and that in making the betterment assessments in question the Commissioner had acted on evidence which was false.  It is clear that if Mr Giretti's undertaking to Ryan J had not been given or, having been  given, had been ignored by Olney J, a sequestration order would nonetheless have been made by his Honour.  This is so because Mr Giretti's ground of opposition, as elaborated upon on the hearing before Olney J and on the appeal would not have provided a ground on which his Honour would have been entitled to go behind the judgment.  In sum, Mr Giretti was not deprived of the possibility of avoiding the making of a sequestration order;  cf Stead v State Government Insurance Commission (1986) 161 CLR 141; Simmonds v Spooner (No 3), unreported, Supreme Court of New South Wales, Court of
Appeal, 28 March 1995.

In Stead v State Government Insurance Commission, supra, in an action for damages for personal injury, counsel for the plaintiff was induced not to address in relation to the evidence given by a doctor called by the defendant, by the trial Judge's statement that she need not do so because he did not accept the doctor's evidence.  In the event, however, he did accept that evidence.  An appeal was dismissed by the Full Court of the Supreme Court of South Australia which held that the making of the submissions could not have affected the result.

There was a  further appeal to the High Court.  There are various expressions of the applicable principle or principles in the joint judgment of the members of the Court.  At page 145, their Honours said this:

     " ... an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial.  An order for a new trial in such a case would be a futility."

This passage suggests a forward-looking test.  Subsequently (at 145-146) their Honours said:

     "It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact."

This suggests a backward-looking test, and in applying this test to the facts of the case, their Honours continued:

     "We do not see how the Full Court, denied the important advantage of seeing and assessing the witnesses, could satisfactorily conclude that had the appellant's counsel been given a reasonable opportunity to present submissions on the issue, it could have made no possible difference to the result." (at 146)

Finally, in a paragraph which, in my respectful opinion, seems intended to encapsulate the Court's conclusion on the matter before them, their Honours said this:

     "Alternatively, if the full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion.  All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result." (at 147 emphasis supplied)

Stead's case has been referred to subsequently.  As in Stead's case itself, the distinction between the forward-looking test and the backward-looking test does not appear to have attracted attention.  However, most references to Stead's case suggest that it has been understood to have laid down a backward-looking test, that is to say, a test in conformity with the passage last quoted above.  Reference may be made to
Australian and Overseas Telecommunications Corporation Ltd v McAuslan (1993) 47 FCR 492 per Burchett J (at 496G), Miles J (at 511G-512B and 515B-516C, but cf 515C and 516C) and Foster J (at 519C-E), and Simmonds v Spooner (No 3), supra, Kirby P (at 7, 8) and Cole JA (at 4-5) (with both of whom Rolfe AJA agreed). 

No doubt in most cases, the application of the two tests will yield the same result.  Perhaps the better view is that there is scope for the operation of both tests as alternatives in the sense that it is a ground for denying relief either that there was or that there is no possibility of a different result (cf the section heading in De Smith, Woolf and Jowell, Judicial Review of Administrative Action (5th ed, 1995) at 498, "Where the defect of natural justice has made no difference to the result; where to require fairness or natural justice would be futile; where no prejudice has been caused to the applicant" and discussion following).  At least, it seems correct in principle that a backward-looking test should have scope to exclude relief.  It is difficult to accept readily that a person who has been denied the benefit of procedural fairness should be entitled to be placed in a better position than if he or she had not been.

Olney J had a discretion whether to make a sequestration order: Bankruptcy Act 1966, sub-s 52 (1).  His Honour did not refer to this.  But he had heard what Mr Giretti had to say as
to why an order should not be made.  The Commissioner had a prima facie right to a sequestration order: Re Debtor (No 452 of 1948); Ex parte The Debtor v M R Le Mee-Power [1949] 1 All ER 652 (CA).  Nothing said by Mr Giretti was of a kind that could have properly displaced that prima facie right since, again, it went only to the factual question whether he had derived income.  On the basis of Mr Giretti's grounds of opposition, his affidavit, his oral submissions and the statutory provisions to which I have earlier referred, it would have been a perverse exercise of discretion for Olney J to have done otherwise than to make a sequestration order.

Applying the backward-looking test to the facts of the present case, I am of the opinion that if, contrary to the view expressed earlier, there was a failure by Olney J to accord procedural fairness to Mr Giretti, this did not deprive him of even a possibility of avoiding the making of a sequestration order.  On this alternative ground, the appeal should be dismissed with costs.

In my respectful view, application of the forward-looking test produces the same result.  If the sequestration order were to be set aside and the matter remitted to Olney J or to another judge, Mr Giretti would propound the same grounds of opposition and it would be a perverse exercise of discretion for the judge hearing the petition not to make a sequestration order.  I do not think that the reference in Stead's case to a
"possibility" of a different result, although it imposes a test which very strongly favours the granting of relief, requires or admits of speculation or guesswork as to matters not suggested by the evidence or by the parties.  An example would be that Mr Giretti might somehow even now obtain legal representation and mount a new and different attack on the assessments based on "the Hickman test" (R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598); cf Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168.

In the context of the forward-looking test, one final matter should be noted.  It is true that by the time of the hearing before Olney J on 13 December 1995, the 28 day period for appeal to this Court on a question of law from the decision of the AAT on 8 December 1995 had not expired (if it had commenced to run - see para 44 (2A) (a) of the AAT Act).  Mr Giretti's application for reinstatement of his dismissed application for review of the Commissioner's objection decisions was required to be made within 28 days after his receipt of notification of the dismissal:  AAT Act, sub-s 42A (8).  Mr Giretti's first hurdle had been to persuade the AAT to exercise its discretion under sub-s 29 (7) of the AAT Act to extend that time.  It is against that background that the reasoning of Senior Member Pascoe of the AAT as recounted by Mr McBurney and noted earlier in these Reasons is to be understood.  Mr Giretti was represented by counsel before the AAT on 8 December 1995.  Mr Giretti has never suggested that
he proposed to appeal to this Court against the AAT's discretionary decision on that date and no error committed by the AAT in the making of that discretionary decision suggests itself.

CONCLUSION

In my view, the appeal should be dismissed with costs.

                   I certify that this and the preceding 32 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

                   Associate:

                   Dated:          11September 1996

CatchwordsOrdersReasonsIN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

GENERAL DIVISION                  NO. VG 06 OF 1996

  On appeal from a Judge of the Federal Court of Australia

BETWEEN:

              MARIO GIRETTI                Appellant

AND:

              DEPUTY COMMISSIONER OF TAXATION

                                           Respondent

CORAM:    Jenkinson, Lindgren, Merkel JJ

PLACE:    Melbourne

DATE:     11 September 1996

                    REASONS FOR JUDGMENT

Merkel J

Introduction

The facts giving rise to this appeal, which was argued by the appellant in person, are not in dispute. They have been set out in detail in the reasons for judgment of Lindgren J.

The grounds of appeal as stated in the appellant's Notice of Appeal were:

      1.    I don't owe the Australian Taxation department any money as I did not earn the income they alleged I did in 1983-85.

      2.    Legal Aid withdrew as my solicitors. I thought I could defend myself but the court acted in such a way that it closed all opportunity for me to argue my case.

      3.    I did not know that documents eg. annexures and appendages were to be in the judges possession prior to the hearing. I had intended to give them to him on the day.

      4.    The Tax Department was given the opportunity to state their chronology of the case and I was not. In the process of that chronology remarks were made and I was not given an opportunity to defend myself.

      5.    I did not understand what Justice Ryan meant when he asked me to give an undertaking that I would not oppose the making of a sequestration order (15 November 1995). I do not understand the word sequestration. I would therefore like the opportunity to have my case heard with the evidence brought forward proving that I did not earn
the income stated in 1983-85 and that I do not owe the Australian Taxation Office any money.

The transcript of the hearing before Ryan J on 15 November 1995 offers no support for the appellant's contention that he did not understand the undertaking, which he proffered to Ryan J on that day, that he would not oppose the Petition on the adjourned date if Legal Aid was not available for him to do so. I do not accept the appellant's contention to the contrary in the first part of ground 5. On that basis the appeal raises the following questions -

(a)  Did the Court decline to permit the appellant to oppose the making of a sequestration order against his estate?

(b)  If (a) is answered in the affirmative, did that have the consequence that the trial was not conducted in accordance with law or was otherwise a denial of natural justice or procedural fairness to the appellant?

(c)  Should the Court allow the appeal and remit the matter for rehearing?

The imposition and acceptance by the Court of an undertaking by a debtor not to oppose a bankruptcy petition as the price for an adjournment, does not appear to be an isolated occurrence. In these circumstances the issues raised by the appeal have significance beyond the present case.

Did the Court decline to permit the appellant to oppose the making of a sequestration order?

There is an important distinction between a Court declining to permit a person to oppose the grant of relief and a Court regulating the manner in which a person may oppose the grant of relief. Opposition is a matter of right but regulation of that right is a matter of discretion.

In considering which of the two situations occurred in the present case I approach the issue as one of substance rather than form.

After service of the bankruptcy petition, Mr. Giretti filed a Notice of Intention to Appear at the hearing of the petition. His grounds of opposition to the petition were stated as follows:

      1.    That the amount claimed is not owed by me at all.

      2.    That the Deputy Commissioner obtained a Judgment in Default of Defence.

      3.    The Assessments were based upon wrongful information, false accounting and hearsay.

      4.    To date, I have been unable to obtain Legal Aid appropriate to enable me to properly defend and to show that the Deputy Commissioner was wrong in assessing illegal income of $38,490.13 for 1983, 1984 and 1985 - the Assessments should have been "nil".

      5.    The Deputy Commissioner has already wrongly taken over $21,000.00 from my daughter's money allegedly relating to the income illegally earned as alleged by the Deputy Commissioner.

      6.    The Statute of Limitations of 6 years should apply to the alleged debts claimed to 30th June, 1985 where judgment was wrongly made against me in 1993 pursuant to a Writ issued on 11th January, 1993.

On 12 September 1995 Mr. Giretti filed an affidavit in opposition to the petition. In the affidavit he denied that he received any additional income as alleged by the Deputy
Commissioner and otherwise, albeit in general terms, deposed to the matters set out in his Notice of Intention to Appear. The Affidavit, omitting formal parts, was in the following terms:

      1.    The Deputy Commissioner based his assessments upon hearsay information largely obtained from newspaper reports of statements purportedly made by people involved in the court proceedings which commenced in March, 1986. I did not earn any additional income as alleged. I was imprisoned for four years and two months and was unable to properly defend or attend to my personal business. The Deputy Commissioner had added penalties and charged additional amounts on top of the $38,490.13 now amounting to over $112,527.41.

      2.    The Deputy Commissioner took the balance of proceeds from the sale of my daughter's property amounting to $40,000.00 from her bank account to cover the alleged tax on the purported additional earnings. After much dispute the Deputy Commissioner had to return approximately $20,000.00 wrongly taken by him concerning this matter. They have already taken money by way of tax for income I have never earned nor ever received. I repeat that they have relied upon hearsay and false statements and false and incorrect calculations which have never been sustained, nor have I ever been given a proper opportunity of being shown any such figures.

      3.    That for the Department to wait in excess of seven years before approaching me by way of Summons made it impossible due to the time I was in jail for me to protect myself.

      4.    I had lost everything financially and was dependant upon Legal Aid advice. I had wanted to defend myself and lodged Papers (an Appearance) and awaited a response. I had not been told or I had not understood that a defence had to be lodged to protect my interest. I believe that due to the inordinate delay I was prejudiced and that the Statute of Limitations should of right be applicable to the proceedings brought by the Deputy Commissioner over seven years after the events giving rise to this matter. As a citizen I believe that my constitutional rights have been denied and are still being denied as a result of the Deputy Commissioner being able to issue proceedings after the expiry of the Statutory period of 6 years.

      5.    I understand that I might be permitted to make an Application to the Supreme Court to challenge the County Court judgment that the Deputy Commissioner obtained by default however, I am attempting to obtain necessary funding from the Legal Aid Commission to pursue these proceedings.

At the hearings before Ryan J on 15 November 1995 and before Olney J on 13 December 1995, the appellant stated that he intended to oppose the making of a sequestration order on the grounds set out in his Notice of Intention to Appear.

At the conclusion of the hearing before Ryan J the following exchange occurred:

      HIS HONOUR:Yes. Yes, well, Mr Giretti, I am disposed, because of the communication you have had with the Legal Aid Commission and with the office of Mr Sevdalis and Associates, to allow you to explore the - or to have the benefit of the legal advice which that correspondence refers to, and I am only prepared to do so - to give you an adjournment for that purpose on your undertaking that if the Legal Aid Commission withdraw assistance or do not extend it for your continued opposition to the petition. You will not, on the adjourned hearing, further oppose the making of a sequestration order. In other words, you will allow the Legal Aid Commission to be the judge of this matter. Do you follow that?

      MR. GIRETTI:      (indistinct)

      HIS HONOUR:Are you prepared to give that undertaking to the Court?

      MR. GIRETTI:      I will do that, yes.

      HIS HONOUR:Yes, very well. In the circumstances, upon the debtor undertaking to the Court that in the event of Legal Aid withdrawn or not extended for his continued opposition to the petition herein, that he will not at the adjournment hearing oppose the making of a sequestration, it is ordered:

      (1)   that the petition be adjourned to 13 December 1995;

      (2)   that the costs of both parties of this day be reserved.

When the matter came on for hearing before Olney J legal aid had not been extended to the appellant for his continued opposition to the petition. At the commencement of the hearing, counsel for the Deputy Commissioner stated that he would be seeking to rely upon the undertaking given to Ryan J. Counsel then said:

      MR NOLAN:   However, your Honour, in order to give you a full background of the matter, could I hand up a chronology. It also contains an outline of submission of arguments, your Honour. I will not take you to the outline at this stage in the sense that in my submission the arguments are not necessary to be considered, having regard to the undertaking that was given. Your Honour, this is a matter that has a very long history indeed.

Counsel proceeded to explain the factual background of the matter and why the matters which the appellant wished to raise in opposition to the petition did not afford a proper basis in
law or fact for opposing the petition. After outlining those matters counsel said:

      However, your Honour, what the petitioning creditor seeks to do at this stage is to proceed to a sequestration order simply on the basis of the fact that the debtor gave an undertaking to Ryan J on the previous hearing that the terms of the undertaking make it appropriate therefore for the debtor to not oppose the petition today, and for the petitioning creditor to proceed in those circumstances.

The submission was of some importance as, if accepted, the Court was entitled to treat the petition as unopposed by the debtor and make the sequestration order sought upon being satisfied as to the formal matters set out in ss.43(1) and 52 of the Bankruptcy Act 1966 (Cth) ("the Act").

Counsel then relied upon the affidavits filed on behalf of the Deputy Commissioner which justified the making of a sequestration order. After completion of the submissions of counsel for the Deputy Commissioner the following exchange occurred:

      HIS HONOUR:Thank you. Mr. Giretti?

      MR GIRETTI:Yes.

      HIS HONOUR:Have you obtained legal aid to continue with your opposition to this petition.

      MR GIRETTI:Yes, we tried but they refused yesterday.

      HIS HONOUR:They have refused. You gave an undertaking to the court on 15 November that in the event that your legal aid was not extended to continue your opposition to the petition, that you would not today on the adjournment hearing oppose the making of a sequestration order. What do you have to say about that?

      MR GIRETTI:Well, I did not understand the last word you said but I did not recall more or less when I read it on the papers it was - we get the transcript and, I was ...(indistinct)...

      HIS HONOUR:Well, what did you think you were undertaking to do?

      MR GIRETTI:Today, just to come to court and just tell the truth.

      HIS HONOUR:Well, I hope you are. Well, I am not prepared to ignore what is the judge's record of what was said at that time and I have -
I am quite confident that the judge would not have recorded that undertaking in those terms unless he was satisfied that the undertaking was given. Now, you say when you got the transcript it was different. You thought you did not --

His Honour then asked:

      "What is your opposition to the Petition?"

The appellant said that he disputed the allegations against him. His Honour sought to clarify the situation concerning the judgment obtained by the Deputy Commissioner and any appeal against or a review of the taxation assessment in the following exchange:

      HIS HONOUR:And you applied to the County Court to have that judgment set aside and the County Court refused to set it aside.

      MR GIRETTI:Firstly they said, yes, halfway through and after somebody brought up I was a trafficker the judge got the view and he changed his mind during the proceeding.

      HIS HONOUR:On 16 June 1995 the application to set aside judgment was dismissed.

      MR GIRETTI:That is right.

      HIS HONOUR:There is a judgment against you by the Tax Commissioner.

      MR GIRETTI:That is right.

      HIS HONOUR:You have no current proceeding pending in the Administrative Appeals Tribunal or in the Federal Court to appeal against or review the assessment of your tax?

      MR GIRETTI:No.

      HIS HONOUR:I propose to hold you to the undertaking that you gave on 15 November. I do this for two reasons. One is that there was an undertaking given to a judge of this court who granted you an indulgence on that time by way of a further adjournment, and for you to now renege on that in my view almost amounts to a contempt of court. Second, there is no material that has been put before the court which in any way would justify the court in going behind the judgment of the County Court, and in those circumstances I decline to permit you to oppose this petition. Thank you, you may sit down.

The decision of the Administrative Appeals Tribunal ("the AAT") refusing to re-instate the review of the assessment under s.42A(9) of the Administrative Appeals Tribunal Act 1975 was only made on 8 December 1995. Under s.44(2A) of that Act an appeal on a question of law was available as of right within 28 days of communication of the decision. Given that the appellant was appearing in person it may have been relevant to inquire of him whether he proposed to appeal against the decision of the AAT.

Clearly, his Honour's inquiry as to the appellant's grounds for opposing the petition was in the context of determining whether he should exercise the power the Court undoubtedly has to release a party from an undertaking. A release may be appropriate when continued enforcement of the undertaking is "unjust": see Adam P. Brown Male Fashions Pty. Ltd. v. Philip Morris Inc. (1981) 148 CLR 170; 178.

His Honour's conclusion and the reasons given for it, were consistent with a finding that in his Honour's view, no circumstances had arisen which made the continued enforcement of the undertaking unjust. It appears that on that basis Olney J accepted the submission of the Deputy Commissioner that the appellant should be held to his undertaking.

After giving his reasons for holding the appellant to his undertaking Olney J said to the appellant - "you may sit down". Thereafter the matter proceeded and was dealt with as an unopposed application. At the conclusion of the hearing Olney J delivered the following judgment:

      HIS HONOUR: I am satisfied that the petitioning creditor has validly issued and served a petition under the Bankruptcy Act. I am further satisfied on the material adduced that the debtor committed an act of bankruptcy on 14 June 1995. There is evidence to establish that the
debt is still owing and that the other formalities required by the Act as conditions precedent to the granting of a sequestration order have been established. In those circumstances I propose to make a sequestration order against the estate of the judgment debtor, and I direct that the petitioning creditor's costs be taxed, including any reserved costs be taxed and paid in accordance with statute. There does not appear to be any consent from a private trustee. The official trustee will be the trustee of the estate.

The judgment only related to the formal matters required to be considered under ss.43(1) and 52 of the Act. Accordingly, in his judgment, his Honour did not deal with the issues of looking behind the judgment (see Wren v. Mahony (1972) 126 CLR 212, 222-5 and Ahern v. Deputy Commissioner of Taxation (1987) 76 ALR 137, 148) or whether the petition should otherwise be dismissed for "sufficient cause" (see s.52(2)(b) of the Act and Clyne v. Deputy Commissioner of Taxation (1985) 5 FCR 1, 5). His Honour was not required to consider those matters in the context of an unopposed bankruptcy petition.

Although it is fair to say that both Ryan J and Olney J gave consideration to the merits of the appellant's proposed case in opposition to the petition, Ryan J did so solely in relation to whether he should grant an adjournment and Olney J did so solely in relation to whether he should release the appellant from his undertaking. Neither Judge purported to make or made any final decision on the merits of the appellant's case opposing the petition, as from the time Ryan J granted the adjournment the appellant was not permitted by the Court to oppose the final sequestration orders sought by the Deputy Commissioner and the matter was determined as an unopposed application.

In my view the facts set out above cannot support the conclusion contended for on behalf of the Deputy Commissioner that Mr. Giretti was permitted to be heard and was heard by Olney J in opposition to the petition.

First, Olney J in terms said that he was holding Mr. Giretti to his undertaking not to oppose the petition and thereafter, his Honour both in form and substance, disposed of the matter as an unopposed petition.

Secondly, if Olney J was determining Mr. Giretti's grounds of opposition as such it may be expected he would have considered and disposed of the issues of looking behind the judgment and the discretion under s.52(2)(b). He did neither.

Thirdly Olney J acceded to the Deputy Commissioner's submission that the Court should disregard Mr. Giretti's grounds of opposition as the matter should proceed as an unopposed petition in accordance with the undertaking. It would be somewhat of a contradiction in terms to conclude that although the Court held Mr. Giretti to his undertaking not to oppose the petition the matter was dealt with by the Court as an opposed petition.

Fourthly, the case Mr. Giretti deposed to was that he did not receive the income the subject of the assessments which he contended were based upon "wrongful information, false accounting and hearsay". If Olney J heard and disposed of Mr. Giretti's grounds of opposition on the merits he would have had to deal with that evidence and those contentions. His Honour did not purport to do so. Indeed, although the transcript discloses that Olney J was made aware of Mr. Giretti's affidavit that was in the context of the provision to his Honour, at the commencement of the hearing, of the chronology and the written submissions on the merits of the case by counsel for the Deputy Commissioner. As Olney J acceded to the submission made on behalf of the Deputy Commissioner that those matters need not be  considered "having regard to the undertaking that was given" findings in respect of them were not necessary.

In my view as a matter of form and substance Olney J did not hear and determine the petition as an opposed petition.

In the result, the Court made an order sequestrating the estate of the appellant at a hearing in which the Court declined to permit the appellant to oppose the making of that order.

Was the trial not conducted in accordance with law or was there otherwise a denial of natural justice or procedural fairness?

In Harrington v. Lowe (1996) 70 ALJR 495 at 501 Brennan CJ, Dawson, Toohey, Gaudron, McHugh and Gummow JJ said:

      It is to be remembered that the "unique and essential function of the judicial power is the quelling of ... controversies by ascertainment of the facts, by application of the law and by exercise, where appropriate, of judicial discretion".

In "quelling" a controversy a court permits each party wishing to do so to put that party's case properly on the facts and the law. In that way the Court is able to consider the real circumstances of the case and make its decision upon them rather than upon one side's version of them.

In Stead v. State Government Insurance Commission (1986) 161 CLR 141 at 145, in a joint judgment in inter partes litigation, the High Court adopted the following passage from the English Court of Appeal in Jones v. National Coal Board (1957) 2 QB 55 at 67.

      "There is one thing to which everyone in this country is entitled, and that is a fair trial at which he can put his case properly before the judge...

      No cause is lost until the judge has found it so; and he cannot find it without a fair trial, nor can we affirm it."

The principle is fundamental in a bankruptcy case. As was said by the Full Court in Ahern at 148:

      "Bankruptcy is not a mere inter partes litigation. It involves change of status and has quasi-penal consequences".

Further, bankruptcy is not just a matter between petitioning creditor and debtor; it interferes with the rights of all other creditors of the debtor: see Wren at 222.

In Deitrich v. The Queen (1922) 177 CLR 292 at 299 per Mason CJ and McHugh J, the common law right of an accused to a fair trial was said to be -

      "more accurately expressed in negative terms as a right not to be tried unfairly or as an immunity against conviction otherwise than after a fair trial...".

The "right" in issue at the hearing of a creditor's petition may also be accurately expressed as the right not to be subjected to an unfair trial or an immunity against a sequestration order otherwise than after a fair trial.

The content of the requirement of a fair trial will vary from case to case but the right to it does not. A critical element in a fair trial is the opportunity to be heard. In Thomas A. Edison Ltd. v. Bullock (1912) 15 CLR 679 at 681 Isaacs J said:

      "There is a primary precept governing the administration of justice, that no man is to be condemned unheard".

The entitlement to an opportunity to be heard flows from and is a particular manifestation of the more general right of a party to oppose the making of any order which may be to the prejudice of that party. It is difficult to conceive of an instance in which a final order has been made in the exercise of judicial power, in circumstances in which the party against whom it is made has not been permitted to exercise the right to oppose it.

In my view, absent some extraordinary or exceptional circumstance, it is not a proper exercise of the judicial power to determine a matter in a hearing in which only the case of one side is permitted to be put by the Court. The fact that it appears to the Court that the proposed opposition is likely to fail or even that it is virtually doomed to failure, ought not to constitute such a circumstance: see Doyle v. Commonwealth of Australia (1985) 156 CLR 510 at 518. Accordingly, in my view, the trial was not conducted in accordance with law.

It was also not a fair trial as one party has not been permitted to "put his case properly before the Judge": see Jones at 67. It is true that Olney J offered the appellant the opportunity of stating the grounds of his opposition to a sequestration order but that only afforded him the opportunity of being heard on whether he should be released from his undertaking. Having decided to hold the appellant to his undertaking, His Honour disposed of the matter as an unopposed petition. For the reasons I have set out earlier, the short explanation given by the appellant to Olney J of the grounds on which he wished to oppose the petition, for the purpose of being released from his undertaking not to oppose the petition, was not equivalent to putting his case and being heard in opposition to the petition.

The underlying principle is that a proper exercise of judicial power in accordance with law requires that parties to a proceeding in which the power is exercised, be entitled to oppose the exercise of the power and concomitantly be afforded the opportunity of so doing.

It should be emphasised that the manner in which the right is exercised and the concomitant opportunity afforded may always be regulated by Rules of Court, procedural directions or judicial discretion in a particular case, provided that the right itself is not denied.

In the present case by requiring, accepting and holding the appellant to his undertaking not to oppose the petition unless legal aid was provided to him, the appellant was deprived of his right of opposition and the opportunity to be heard in the exercise of that right. The present case is one of denial, rather than regulation, of the right to oppose.

It may be that such an outcome was an inevitable consequence of the undertaking given to Ryan J. In my view the undertaking was inappropriate. Ryan J had not formed any concluded view on the merits of Mr. Giretti's opposition. On a fair reading of the transcript, his Honour only dealt with an adjournment application. Having decided to grant the adjournment Ryan J stopped Mr. Giretti from embarking on any discussion of the merits of his opposition to the Petition. The fact that his Honour had not formed any concluded view appears to be clear from -

.    the following exchange which occurred when counsel for the Deputy Commissioner ventured into the area of the assessments and the reason for Mr. Giretti's imprisonment -

            MR GIRETTI:I object to that, your Honour. There has never been any proof, therefore this - this should not mention even be in jail. The reason is this case is not finished yet. Therefore I object to ---

            HIS HONOUR:Well, I do not propose to go into that today, Mr. Giretti.

            MR GIRETTI:Thank you, sir.

.    the reason given by His Honour for the adjournment which was to allow Mr. Giretti to explore and have the benefit of legal advice in relation to grounds upon which he may oppose the petition and dispute the appellant's liability to pay tax to the Commissioner.

In these circumstances there was no appropriate basis for imposing a condition which thereafter left the issue of Mr. Giretti's right to oppose the petition in the hands of the Legal Aid Commission. In explaining the effect of the undertaking Ryan J said -

      "In other words you will allow the Legal Aid Commission to be the judge of this matter".

Mr. Giretti had to provide the undertaking required without the Court having heard or considered his case on the merits, without the benefit of the legal advice he was seeking in relation to it and as Lindgren J has pointed out, without having the benefit of reasons or a decision of one Judge in relation to it.

In my view, in those circumstances the imposition of the undertaking, as the price for the adjournment, did not accord procedural fairness to the appellant. It must follow that when the matter came on for hearing before Olney J, it was "unjust" to continue to hold the appellant to his undertaking as it ought not to have been imposed and accepted by the Court in the first place.

The Court, by holding the appellant to an undertaking that ought not to have been imposed and accepted, in effect denied him the right to oppose and be heard in opposition to the petition. That resulted in the denial of a fair trial and also amounted to not according procedural fairness to the appellant.

Should the Court allow the appeal and remit the matter for rehearing?

In Stead v. State Government Insurance Commission (1986) 161 CLR 141 at 145-6 per Mason, Wilson, Brennan Deane and Dawson JJ the High Court stated an important qualification to the right to a new trial where the original trial has been determined to be unfair.

     That qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility.

      For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. By way of illustration, if all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would be futile to order a new trial.

      Where, however, the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact, especially when the issue is whether the evidence of a particular witness should be accepted, it is more difficult for a court of appeal to conclude that compliance with the requirements of natural justice could have made no difference. True it is that an appeal to the Full Court from a judgment or order of a judge is by way of rehearing and that on hearing such an appeal the Full Court has all the powers and duties of the primary judge, including the power to draw inferences of fact (Supreme Court Rules O 58, rr 6 and 14). However, when the Full Court is invited by a respondent to exercise these powers in order to arrive at a conclusion that a new trial, sought to remedy a denial of natural justice relevant to a finding of fact, could make no difference to the result already reached, it should proceed with caution. It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact. And this difficulty is magnified when the issue concerns the acceptance or rejection of the testimony of a witness at the trial. (Emphasis added)

In my view, as the underlined passages demonstrate, the issue was framed by the High Court in terms of whether an order for a new trial will "inevitably result in the making of the same order" rather than whether procedural fairness would have made any difference to the result at the impugned hearing.

The High Court considered whether it was open to the Full Court of the Supreme Court of South Australia to conclude that the denial of natural justice made no difference to the result. In that regard at 146 their Honours said:

      We do not see how the Full Court, denied the important advantage of seeing and assessing the witnesses, could satisfactorily conclude that had the appellant's counsel been given a reasonable opportunity to present submissions on the issue, it could have made no possible difference to the result.

Then, after considering certain of the reasons given for the Full Court's conclusion their Honours expressed their conclusion at 146-7 as follows:

      ...in our view, the Full Court was disabled in the circumstances of this case from reaching a sound conclusion that a new trial in which the applicant's counsel would have an adequate opportunity of presenting submissions on the issue of causation could make no difference to the result. (Emphasis added)

I have emphasised the passages in Stead which I consider to be critical.

There has been some ambivalence in the decisions since Stead as to whether the qualification stipulated by the High Court to the right to a fair trial is whether a new trial will "inevitably result in the making of the same order" or whether according natural justice or procedural fairness would have made any difference to the result at the impugned hearing. Although in most cases the answer will be the same, determining which of the two approaches is the correct one, may involve an important issue of principle.

In my view the relevant "qualification" was formulated by their Honours at 145:

      That qualification is that the appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility. (Emphasis added)

It is true that in certain passages their Honours discussed whether the denial of natural justice made any difference to the result but in my view that was in the context of dealing with the Full Court's reasons for refusing a new trial. Further, determining that question will usually be the most logical way of ascertaining the ultimate issue, namely whether an order for a new trial would be a "futility". The High Court recognised as much in the conclusion at 147:

      All the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result.

In his reasons for judgment on the appeal Lindgren J has expressed his preference for the "backward" rather than the "forward" looking test. On that approach it must be shown that the denial of natural justice or procedural fairness deprived the appellant of the possibility of a successful outcome at the impugned hearing. In my respectful view that approach does not accord with the reasoning of the High Court in Stead's case.

The analogous area of administrative law provides additional reasoning as to why a backward looking test ought not to be accepted: see the discussion in Judicial Review of Administrative Action de Smith, Woolf and Jowell Fifth Edition at 498-502. I endeavoured to discuss those reasons in Trong v. The Minister for Immigration Local Government & Ethnic Affairs (unreported, 2 August 1996). In that case in response to the Minister's submission that his decision would have been the same had he provided the applicant with an opportunity to be heard prior to his decision, I stated that compliance with the rules of natural justice or procedural fairness has been long accepted as a "condition" for validity. In General Medical Council v. Spackman [1943] AC 627 at 644-645 Lord Wright said:

      If the principles of natural justice are violated in respect of any decision, it is, indeed, immaterial whether the same decision would have been arrived at in the absence of the departure from the essential principles of justice. The decision must be declared to be no decision.

In Kioa v. West (1985) 159 CLR 550 at 629 Brennan J said of the non-observance of the principles of natural justice:

      The result is that the condition governing the power to make the deportation orders was not satisfied and the orders must be set aside.

There are instances where Courts have denied relief on the ground that the outcome would have been no different if a fair hearing had been given: see Glynn v. Keele University [1971] 1 WLR 487; Malloch v. Aberdeen Corporation [1971] 1 WLR 1579; Cinnamond v. British Airports Authority [1980] 1 WLR 582 and R. v. The Chief Constable of Thames Valley Police Ex parte Cotton [1990] IRLR 64. However, in my view such decisions ought to be explained either as part of a consideration that the rules of fairness had not been infringed in the particular case or as arising from the Court's discretion to refuse to grant relief if it is futile to do so. An example of the latter situation arises where it is established that a properly conducted hearing could not produce a different result.

The dangers of the backward looking test were pointed out by Bingham LJ in R. v. The Chief Constable of Thames Valley Police Ex parte Cotton (1990) IRLR 344, 352 and discussed by him in "Should Public Law Remedies be Discretionary?" [1991] Public Law 64, 72-3 in the following terms:

      Inevitability of outcome

      Judges of the highest distinction have held that an applicant who has been unlawfully and unfairly denied a right to be heard may be denied relief if the outcome would have been no different if he had been heard. Sir William Wade has referred to "the dubious doctrine that a hearing would make no difference." and in a recent case I gave six reasons for expecting (by which I really meant hoping) that such cases would be of great rarity. Since the case has not been widely reported, perhaps I may repeat them here:

      (i)   Unless the subject of the decision has had an opportunity to put his case, it may not be easy to know what case he could or would have put if he had the chance.

      (ii)  As memorably pointed out by Megarry J in John v. Rees, experience shows that that which is confidently expected is by no means always that which happens.

      (iii)It is generally desirable that decision-makers should be reasonably receptive to argument, and it would therefore be unfortunate if the complainant's position became weaker as the decision-maker's mind became more closed.

      (iv)  In considering whether the complainant's representations would have made any difference to the outcome, the court may unconsciously stray from its proper province of reviewing the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of a decision.

      (v)   This is a field in which appearances are generally thought to matter.

      (vi)  Where a decision-maker is under a duty to act fairly the subject of the decision may properly be said to have a right to be heard, and rights are not to be lightly denied.

Although the nature, content and extent of the right to be heard may vary from case to case, the right, once established does not. An approach in law which requires the determination of whether the right exists, whether it has been infringed and if so whether there are discretionary grounds for refusing the relief sought, is consistent with both principle and authority. Neither principle or authority require the interposition of an additional criterion, namely that the infringement of the right made a difference to the result at the impugned hearing.

Finally, as has been said in a different context in Santa Sabina College v. Minister for Education (1985) 58 ALR 527 at 540 per Beaumont J:

      It is not for the court to speculate or suggest the ultimate fate of the applicants' application for subsidy. The Minister may well prove to be right in the long run. Yet the authorities show that a party in the position of the applicants is entitled to have his case put again to the Executive in the present circumstances: it is enough that it is possible that the Minister may change her mind (see British Oxygen Co. Ltd. v. Minister of Technology[1971] AC 610 at 624-5; R.V. Secretary of State for Environment; Ex parte Brent London Borough Council [1982] 1 QB 593 at 646). Accordingly, I propose to grant the applicants certain of the limited relief they seek.

Clearly there are significant distinctions between reviewing a judicial decision on appeal and ordering a new trial and reviewing an administrative decision and remitting a matter back to an administrative decision maker. However those distinctions ought not to affect the applicability of the reasoning set out above. The right to a fair trial in accordance with law in the exercise of the judicial power is no less than the right to be accorded procedural fairness in the exercise of administrative power. Further, as each right is concerned with a denial of fair and proper procedural processes in a particular case there is no obvious reason why denial of the right should give rise to different relief depending upon whether the denial was in the exercise of judicial rather than administrative power.

My conclusions are consistent with the discussion of the importance of the qualification to the right to a fair trial by Kirby P in Government Insurance Office of New South Wales v. Bailey (1992) 27 NSWR 304 at 315:

      The question then arises as to what should occur, if it is found that an irregularity by the use of undisclosed matter in the conduct of the trial vitiates the judgment under challenge. Upon this point, the High Court of Australia instead has adopted a stringent requirement. Subject to "an important qualification", a new trial must then be ordered. This is not only to uphold the requirements of justice to a particular party. It is to uphold the integrity of the administration of justice itself. It should cause no surprise that the High Court had adopted this stringent rule. It has done so in other areas of the administration of justice, for example, in the case of apprehended bias on the part of a judicial officer where no suggestion is made that the judicial officer was actually biased. The test is what a reasonable observer might have concluded from the circumstances as to the judicial officer's capacity to bring an independent mind to bear upon the issues for trial: see Livesey v. New South Wales Bar Association (1983) 151 CLR 288 at 300 and Vakauta v. Kelly (at 584). The stringency of this standard, which is defensive of the reputation of the courts for integrity and manifest impartiality, was called to attention in Australian National Industries Ltd. v. Spedley Securities Ltd. (In Liquidation) (1992) 26 NSWLR 411: see especially my own reasons (at 418D) and per Mahoney JA (at 439B); and

      The exception allowed by the "important qualification" which the High Court acknowledged instead (at 145) was whether the information would "possibly have made any difference". An appellate court will not order a new trial if it would "inevitably result in the making of the same order as that made by the primary Judge at the first trial". It would hold its hand in that circumstance because a new trial would then be "a futility". The test of "possibility" is the same in this area of the law's operation as in the case of imputed bias. It is so because the same interest is at stake: the protection of the reputation of the integrity of the judicial process and the entitlement of each party which comes to our courts to have a fair trial by an impartial tribunal. New trials have been called an "evil". The legal system struggles against the delay, inconvenience, expense and emotional burden which new trials occasion: cf.
Baalenzuela v. De Gail (1959) 101 CLR 226 at 233; see also the Supreme Court Rules 1970, Pt 51 r 16. but where the complaint is one, in effect, that a party has not had a fair trial, and that the rules of procedural fairness have been breached, a "new" trial may be required because only by this means can the parties have the resolution of their dispute as the law provides. Furthermore, only by this means can the integrity of the judicial process be upheld. At stake is not only the micro-concerns of the particular litigants but the macro-concern of the administration of justice. In Stead (at 145), the High Court acknowledged the powers of a Full Court to conduct an appeal by way of re-hearing. Such a power is enjoyed by this Court: see Supreme Court Act 1970, s.75A. but the High Court also cautioned (at 145-146) that, in cases where the first trial has miscarried for denial of natural justice, an appellate court should proceed "with caution".

            "...It is no easy task for a Court of Appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact. And this difficulty is magnified when the issue concerns the acceptance or rejection of the testimony of a witness at the trial".

      It was held that the refusal of a new trial was mistaken in Stead. In Camilleri this Court applied the test propounded in Stead. Although it had all of the relevant evidence before it, it could not conclude that the same result was inevitable. A re-trial was therefore ordered.

Although Kirby P was in dissent in the result in Bailey, as he later stated in Simmonds v. Spooner (unreported, Supreme Court of New South Wales, Court of Appeal, 28 March 1995) at 6, he did not understand that the statement of the principles set forth by him were controversial.

There is attraction in the argument that a backward looking test ensures that a person who has been denied procedural fairness is not placed in any better position than that person would have been in if procedural fairness had not been denied. However, in my view that is not the preferable approach as -

.    it is inherent in the administrative or common law remedies of remitting a matter for a rehearing or a new trial, where procedural fairness was denied in the original hearing, that the rehearing or new trial may proceed quite differently and more advantageously to one of the parties than the original hearing or trial;

.    the remedy in question is one which gives effect to a right to a fair hearing; when the right has been denied the proper vindication of it, subject to discretionary considerations, is the provision of the fair hearing to which the party was entitled which will be an appropriate rehearing or a new trial once a decision has been made at the impugned hearing.

.    for the reasons set out earlier, whether the alleged denial made a difference ought to be relevant to whether there was a denial of procedural fairness rather than to whether a remedy should be denied.

.    such an approach not only sanctions the unfair trial but in a case such as the present legitimises the decision to decline to permit the appellant to exercise his right to oppose the relief sought against him.

In the present case I have found that the applicant was denied his right to a fair trial conducted in accordance with law. Therefore, the issue arising is whether there are any discretionary grounds for refusing the relief sought by him namely, setting aside the sequestration order made against him and remitting the matter for a new trial. I have already indicated that relief may be refused as a matter of discretion if it is demonstrated that it is futile to grant it.

In the present case it cannot be concluded that a new trial will be futile in that it will inevitably produce the same result. There are several reasons for that conclusion.

First, the tax liability arose from "betterment" assessments based on alleged illegal earnings. No Court or Tribunal has considered the appellant's case in opposition to the tax assessed on its merits. Although Mr. Giretti has had a somewhat hapless journey in seeking to challenge his tax liability, as pointed out earlier, his application to re-instate his application to review the assessment was only refused on 8 December 1995 and at the date of the hearing before Olney J on 13 December 1995 the time for appeal to the Federal Court on a question of law had not expired. Whilst he has not stated that he proposes to take such a course it remains a "possibility". In that regard it is to be noted that it appears that he has had no legal representation since 8 December 1995 and since the making of the sequestration order on 13 December 1995, the possibility and utility of any further proceedings by him in relation to the assessments could be expected to have to await the outcome of this appeal. It may also be open to the appellant to take other proceedings challenging the assessment. The fact that no proceedings were on foot as at 13 December 1995 is not determinative of whether it is "possible" that they may be taken hereafter. If such proceedings were taken that fact alone could be relevant to, although not determinative of, any order made, including an adjournment, at a new trial.

Secondly, even if proceedings were not taken to challenge the assessments it is open to the appellant to apply to the Court to go behind the judgment and inquire into the validity of the underlying debt. The conclusiveness of the assessment under s.177 of the Assessment Act is an important but not necessarily decisive factor in that regard. A similar issue was considered recently by the Full Court in Madden v. Madden & Others (1996) 136 ALR 98. It was accepted by each member of the Court (Foster J at 127-133, Sheppard J at 100 and Einfield J at 109-112) that as a result of the recent decision in Deputy Commissioner of Taxation v. Richard Walter Pty. Ltd. (1995) 183 CLR 168 the protection of ss.175 and 177 (including conclusiveness of the assessment) under the Income Tax Assessment Act 1936 is now subject to the Hickman test i.e. that the assessment was a "bona fide attempt" by the Commissioner to exercise powers conferred by the Act, related to the subject matter of the Act and was reasonably capable of reference to those powers. I note that Foster J (with whom Sheppard J agreed) at 133 also adopted the following passage in the 1995 Australia Federal Tax Reporter CCH Australia Ltd. at p. 47901 in relation to the Richard Walter decision.

      The decision in Richard Walteris ... authority for the proposition that in a case of bad faith or a tentative assessment, a taxpayer is entitled to use s.39B to challenge the validity of the assessment. The strict approach of Bloemen, in which the court held that the only circumstances in which s.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 present case there has been no evidence as to how the assessments were arrived at or made. As these issues relating to the assessments have not been considered, let alone determined by the Court, it is not open to conclude that they must inevitably fail. It is sufficient for present purposes to say that such issues are capable of being raised at a new trial. There is no material before this Court which demonstrates that they will not or cannot be raised or if raised that they must fail.

Although the appellant did not state his grounds of opposition to the petition in terms of "bad faith" the grounds suggest that some kind of challenge to the bona fides of the assessments was intended by him. In that regard it is relevant that the grounds do not appear to have been prepared by a lawyer, relate to "betterment" assessments and state that the assessments were based upon "wrongful information, false accounting and hearsay".

Thirdly, it is not to the point that the prospects of success for the appellant on all of these issues may be very slim indeed. That is apparent on the basis of the material he has put forward to date. However he has denied, on affidavit, that he received the income the subject of the assessments. It remains to be seen whether further or other evidence can or will be adduced on these matters and more importantly, if adduced, whether that material may affect the future course of the matter if a new trial is ordered.

Importantly, even if, as may be likely, the conclusiveness of the assessments stand unimpugned the evidence adduced by the appellant denying receipt of the income as alleged is capable of being relevant to the issue of whether there is otherwise "sufficient cause" to dismiss the petition under s.52(2)(b). In that regard the Full Court in Clyne v. Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 said:

      The circumstances which may constitute "other sufficient cause" for dismissing a bankruptcy petition are extremely variable. It is not appropriate to attempt to catalogue or circumscribe them: see Cain v. Whyte (1933) 48 CLR 639 at 645.

I have already drawn attention to the fact that as Olney J treated the Petition as unopposed, it was unnecessary for him to consider s.52(2)(b). For present purposes it is sufficient that it was open to him to treat such evidence as relevant to his discretion to further adjourn the petition to allow any additional evidence to be adduced or to act upon or reject the evidence already adduced for the purposes of exercising or refusing to exercise, the discretion conferred under s.52(2)(b).

Fourthly, when the ground of denial of procedural fairness is that a party has not been afforded the opportunity of putting a case in opposition to the relief sought, it is a heavy burden indeed to persuade an appellate court that there is no case that could possibly succeed. In my view given the wide powers conferred on the Court under the Act, including the power of adjournment, the present case is not one in which it
could be concluded that it is inevitable that a sequestration order would be made at a rehearing of the matter.

Finally, the caution expressed by Megarry J in John v. Rees (1970) Ch. 345 at 402 is apposite:

      As everybody who had anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change.

See also Doyle at 518.

In my view the present case, involving as it does issues of law, fact and discretion, is not one in which an appellate Court could reach the conclusion that an order for a new trial will be futile as the same result is inevitable.

If, contrary to the views I have expressed, the test is a backward looking one the same conclusion should be reached. If Olney J had permitted the appellant to oppose the petition it is a matter of pure speculation as to whether the same result must have followed. Mr. Giretti may have stated he wished to appeal the AAT decision if he became aware of his right to do so. The issue of the trial Judge exercising his discretion under s.52(2)(b) may have arisen and time may have been requested by either party to file further evidence on the issue of the non receipt of income. I say by "either party" as it is "possible" that if the trial Judge was prepared to consider the issue of the exercise of the discretion conferred under s.52(2)(b), the Deputy Commissioner, having regard to the width of the discretion under the section, may not have been prepared to allow the appellant's evidence on that question to stand unchallenged. As His Honour determined that the petition was to proceed as an unopposed matter, none of these issues arose. I am not prepared to conclude that if a different course had been taken these and possibly other issues could not have arisen.

Conclusion

For the reasons I have given, the appeal ought to be allowed, the sequestration order made should be set aside and the matter remitted for rehearing on a nominated date with directions for the filing of all affidavits upon which the appellant and the Deputy Commissioner may wish to rely.

It may well be that any victory of the appellant on the appeal will be a short lived one. However, if a sequestration order is ultimately made it is important that it be made after a fair hearing at which the appellant has been afforded the opportunity of properly putting his case in opposition to the making of the sequestration order sought against his estate.

Finally, although I have found that error occurred in the conduct of the hearings below I should add that that error is perfectly understandable in the situation that confronted their Honours. The appellant was not legally represented and their Honours received no submissions on behalf of the appellant on the legal issues relevant to the undertakings or to the appellant's case. Importantly, on the first occasion Ryan J endeavoured to assist the appellant by granting the adjournment sought by him on terms. On the second occasion Olney J accorded to the appellant a fair hearing on the issue of whether he should be released from the undertaking and having decided to hold the appellant to his undertaking, had no choice but to make the sequestration order he made.

The problem arising in this appeal was inherent in the nature of the undertaking imposed, accepted and enforced by the Court. Hopefully as a result of the decision in this case, the practice in respect of such undertakings, to the extent that they have been given, will cease and hereafter in similar circumstances there will be a regulation of the right to oppose rather than a denial of it.

                   I certify that this and the preceding 31 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel

                   Associate:

                   Dated:  11 September, 1996

VG6 of 1996

Appellant in person

Counsel for the Respondent Mr. J. A. Nolan instructed by Australian Government Solicitor

Date of Hearing:  14 June 1996

Date of Judgment:  11 September, 1996