FEDERAL COURT OF AUSTRALIA

Engler v Commissioner of Taxation [2003] FCA 1144

PRACTICE AND PROCEDURE – leave to appeal from interlocutory order – whether decision attended by sufficient doubt to justify review – whether substantial injustice would result if leave refused

Income Tax Assessment Act 1936 (Cth) ss 170, 170(2), 175, 177

Judiciary Act 1903 (Cth) s 39B

Federal Court Rules  O 52 r 10

Constitution of the Commonwealth of Australia 1901 (Cth)  O 75(v)

Adam P Brown Male Fashions Limited v Philip Morris Incorporated and Another (1981) 148 CLR 170 at 177 applied

Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 applied

Jarrett v Seymour (1993) 46 FCR 557 applied

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

S157/2002 v Commonwealth (2003) 195 ALR 24 cited

McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 cited

Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 cited

F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 cited

CLAUDIA CHARLOTTE ENGLER and JEFFREY KENNETH GATES v COMMISSIONER OF TAXATION

W245 OF 2001

LEE J

21 OCTOBER 2003

PERTH

THE COURT ORDERS THAT:

The motions filed by the applicants on 13 May 2003 be dismissed with costs.

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

REASONS FOR JUDGMENT

LEE J:

1                     By notices of motion the applicants made application under O 52 r 10 of the Federal Court Rules for leave to appeal from an interlocutory judgment of a judge of this Court delivered on 6 May 2003 (2003 FCA 411).  The arguments of the parties in support of, or in opposition to, the motions were presented in writing.

2                     The principles to be applied in determining whether leave should be granted to appeal from an interlocutory judgment are well known and it is unnecessary to repeat them.  (See:  Adam P Brown Male Fashions Proprietary Limited v Philip Morris Incorporated and Another (1981) 148 CLR 170 at 177; Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397; Jarrett v Seymour (1993) 46 FCR 557).  In summary there must be an error of principle, or sufficient doubt attaching to the correctness of the judgment, to justify review of an interlocutory decision on appeal and, furthermore, the judgment to be appealed from must be the cause of substantial injustice if not corrected.

3                     By an amended application filed on 31 January 2003 the applicants sought, inter alia, declarations that amended assessments made by the respondent pursuant to the Income Tax Assessment Act 1936 (Cth) (“the Act”) of the liability of the applicants to pay income tax in respect of particular years of income, were nullities being acts not authorised by powers vested in the respondent by the Act.

4                     A statement of claim in support of the amended application was filed on 5 March 2003.  Deficiencies in that pleading are described at length in the reasons for judgment provided by his Honour.  His Honour struck out the statement of claim but gave leave to the applicants to file another statement of claim subject to the grounds on which the foregoing declarations were sought being restricted to a contention that the amended assessments were not made in good faith.

5                     His Honour’s orders turned on the conclusion that the proper construction of the effect of ss 175 and 177 of the Act was well settled, namely, that they were provisions which protected the process of assessment under the Act from judicial scrutiny under s 75(v) of the Constitution or s 39B of the Judiciary Act 1903 (Cth) except in cases of absence of good faith or where, in truth, no assessment had been made.  This was said to be an application of the so-called “Hickman principles”.  (See:  R v Hickman; ex parte Fox and Clinton (1945) 70 CLR 598).  

6                     The thrust of the applicants’ argument appeared to be that the Commissioner’s power to amend an assessment was confined by the terms of s 170 of the Act and if the conditions specified therein for the exercise of the power to amend did not exist a purported exercise of the power by the respondent would be a nullity and a judicial declaration to that effect could be made.  On its face that proposition may be thought to have been consistent with both the facts of, and the ultimate decision in, Hickman.  (See:  S157/2002 v Commonwealth (2003) 195 ALR 24 per Gleeson CJ at [18]).

7                     However, the privative effect of s 177 is a matter of construction having regard to the terms of the Act as a whole.  As his Honour pointed out there is clear and long-standing authority from the High Court that s 177 is to be read as ensuring that the validity of an assessment will not depend upon compliance with the provisions of the Act or considerations of purpose.  (See:  McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 per Dixon CJ, McTiernan, Webb JJ, at 269, per Taylor J at 281, 282; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 per Mason CJ at 188; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 per Mason, Wilson JJ at 370-375).

8                     The provisions of the Act which give a taxpayer full opportunity to contest a liability to pay income tax imposed by an assessment, include the right to object to, and to have set aside, an amended assessment where the conditions specified in s 170(2) for the exercise of the power to make such an amendment have not been satisfied.  (See:  McAndrew at 269).  Those provisions have been taken into account by the courts in construing the privative operation of s 177.

9                     It follows from the foregoing that neither an error principle nor sufficient doubt as to the correctness of his Honour’s decision exists to warrant the grant to the applicants of leave to appeal from his Honour’s interlocutory decision.

10                  The motions must be dismissed with costs.

Associate:

Dated:              21 October 2003