FEDERAL COURT OF AUSTRALIA

Rawson Finances Pty Limited v Deputy Commissioner of Taxation

[2010] FCA 538

THE COURT ORDERS THAT:

1.                  The application for an order of review filed on 30 November 2009 be struck out.

2.                  The applicant’s notice of motion filed on 11 March 2010 seeking a declaration that it is entitled to a statement of reasons pursuant to s 13 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) be dismissed.

3.                  The applicant’s notice of motion filed on 11 March 2010 seeking leave to file and serve an amended application for an order of review in the form of the pleading annexed thereto be dismissed.

4.                  Leave be granted to the applicant to file in this proceeding an amended application seeking relief based on the jurisdiction conferred by s 39B of the Judiciary Act 1903 (Cth).

5.                  The applicant pay the respondent’s costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.

REASONS FOR JUDGMENT

introduction

1                     The applicant seeks judicial review of a decision by the respondent to commence legal action to recover income tax assessed to the applicant  It also seeks judicial review of what it identifies as a separate and distinct decision to refuse to refrain from commencing that legal action. 

2                     An application for an order of review, made under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the AD(JR) Act), was filed on 30 November 2009.  The applicant alleges that the making of the challenged decisions was an improper exercise of the power conferred by s 255-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (the TAA) in pursuance of which the decisions were purportedly made, because the respondent failed to take into account relevant considerations, took into account an irrelevant consideration and simply applied Australian Taxation Office policy without considering the individual circumstances or merits of the case. 

3                     On 22 January 2010 the respondent filed a notice of objection to competency pursuant to O 54 r 4 of the Federal Court Rules.  The respondent alleges that the application for an order of review does not relate to a decision of an administrative character made under an enactment that is reviewable under the AD(JR) Act.  The notice of objection was amended on 1 February 2010 in minor ways that are not relevant to the disposition of the objection. 

4                     The respondent’s notice of objection to competency is before the Court for determination together with two motions, notices of which were filed on 11 March 2010 by the applicant.  The first motion seeks the leave of the Court to file and serve an amended application for an order of review.  The second motion seeks a declaration that the applicant is entitled to a statement of reasons pursuant to s 13 of the AD(JR) Act. 

5                     The proposed amended application for an order of review recasts the application as presently filed to identify more explicitly that there are two decisions for which judicial review is sought: a decision to commence legal action (which the applicant called the recovery decision) and a decision to refuse to refrain from commencing legal action (which the applicant called the refusal decision).  The proposed amended application also identifies an additional or alternative jurisdictional basis for judicial review, namely s 39B of the Judiciary Act 1903 (Cth) (the Judiciary Act).  In this connection the applicant would seek a declaration pursuant to s 21 of the Federal Court of Australia Act 1976 (Cth) (the Federal Court Act) that the recovery decision and the refusal decision are invalid, and orders pursuant to s 23 of the Federal Court Act prohibiting the respondent from implementing each of those decisions.  The proposed amended application for an order of review also identifies a further relevant consideration (which it is alleged the respondent failed to take into account) and a further irrelevant consideration (which it is alleged the respondent took into account).

6                     The respondent does not oppose the filing of the proposed amended application to the extent that it invokes s 39B of the Judiciary Act.  However, the respondent has been careful to make clear that this attitude does not carry with it any concession as to the merits of a claim for judicial review on this differently-framed basis.  Indeed, the respondent has advanced in a preliminary way a number of contentions as to why, ultimately, relief based on the jurisdiction conferred by s 39B of the Judiciary Act should be refused.  Those contentions do not fall for decision at the present time.  Nevertheless, if the respondent’s objection to competency succeeds, it would follow that leave to file the proposed amended application should be refused because that embodiment of the application would still seek to maintain a claim under the AD(JR) Act.  It would not necessarily follow, however, that leave would be refused to file in this proceeding an amended application seeking relief based on the jurisdiction conferred by s 39B of the Judiciary Act.

7                     The utility of determining the objection to competency now is really related to whether the applicant’s second motion should succeed, such that a declaration should be made that the applicant is entitled to a statement of reasons pursuant to s 13 of the AD(JR) Act.  If the respondent’s objection to competency succeeds then it would follow that the applicant’s motion for a declaration should be refused.  This is because s 13(1) is itself expressly premised on the existence of an entitlement in the applicant to make an application for judicial review under the AD(JR) Act.  If, however, the respondent’s objection to competency fails, a further question will arise, namely, whether the refusal decision  (being the decision in respect of which reasons are sought) is one included in any of the classes of decisions set out in Schedule 2 to the AD(JR) Act.  If so, the applicant’s motion must be refused because the decision will not be one to which s 13 applies: see s 13(1) and s 13(11) set out below.

background

8                     The respondent issued (a) notices of assessment for the years ended 30 June 1997 to 30 June 2004; (b) notices of amended assessment for the years ended 30 June 2005 to 30 June 2008; and (c) notices of assessment and liability to pay penalty for the years ended 30 June 2001 to 30 June 2008 to the applicant (“the assessments”).

9                     On 21 August 2009 the respondent wrote to the applicant regarding the applicant’s tax liabilities under the assessments. Relevantly, the letter stated:

As you would be aware, notwithstanding your intention to lodge an objection against the notice of assessments for the income years ended 30 June 97 to 30 June 2004 and amended assessments for the years ended 30 June 2005 to 30 June 2008, section 204 of the Income Tax Assessment Act 1936 (ITAA 1936) provides that any assessed income tax is due for payment on the date specified in the notice. Section 255-5 of the Taxation Administration Act 1953 (TAA 1953) provides that an amount of a tax related liability that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner who may seek to recover an amount that remains unpaid after it has become due and payable in a court of competent jurisdiction.

The Legislative framework, which underpins the Commissioner’s policy in the collection and recovery of disputed debt, is designed to ensure that taxation debts are due and payable notwithstanding that the underlying liability may be disputed by taxpayers. Accordingly, General Interest Charge (GIC) is payable on tax which remains unpaid after it becomes payable (s.204(3) ITAA) and the Commissioner can take legal action to recover outstanding tax irrespective of whether the tax is subject to an objection, review or appeal.

Sections 14ZZM and 14ZZR of the TAA 1953, in particular, articulate that the fact a review (or appeal) is pending (other than a registration-type sales tax decision) does not in the meantime interfere with, or affect, the decision and any tax, additional charges or other amount may be recovered as if no  review (or appeal) were pending.

Notwithstanding the above, the Commissioner is prepared to defer legal recovery action pending the outcome of an objection decision upon:

1.    payment of 50% of the disputed debt;

2.    payment in full of any undisputed debt; and

3.    the provision of acceptable security for the balance.

…

Please advice [sic] of the taxpayer’s intentions regarding the outstanding assessments in writing within 21 days from the date of this letter.

10                  The applicant lodged objections to the assessments on 15, 18, 21 and 28 September 2009 (“the objections”).The respondent acknowledged receipt of the objections in a letter dated 1 October 2009.

11                  On 7 October 2009 the applicant’s solicitors wrote to the respondent, requesting that the Commissioner defer recovery action in respect of the tax debts pending the determination of the objections, and requesting a statement of reasons in accordance with s 13 of the AD(JR) Act in the event that the request for deferral was refused.  On 13 October 2009 the respondent wrote to the applicant’s solicitors advising that additional information was required to make a decision based on the grounds set out in the objections.  The letter specified the nature of the information required. On 27 October 2009 the applicant’s solicitors again wrote to the respondent, enclosing their letter of 7 October 2009 requesting a deferral of recovery action.

12                  On 6 November 2009 the respondent wrote to the applicant’s solicitors. In relation to the request for a statement of reasons pursuant to s 13, the letter stated:

We wish to point out that your request was considered under s 255-5 of the TAA53, which is a decision to defer legal action. This is not a decision to which the ADJR Act applies as it is not a decision under an enactment and is specifically excluded by schedule 2(f) (see Ruddy v. DFC of T 98 ATC 4369); (Golden City Car & Truck Centre Pty Ltd & Anor v. DFC of T 99 ATC 4131) and thus we decline to furnish any statement to you.

13                  The letter repeated the conditions on which the Commissioner would consider a deferral of legal action set out in the letter of 21 August 2009 and stated:

Moreover, our letter of 21 August 2009 sets out clearly our intention to take action to recover the liability.

Therefore, we wish to reiterate to you that your client has only until 4.45pm Friday 20 November 2009 to enter into an acceptable arrangement with the Commissioner.

14                  There is no evidence that the applicant has entered into an acceptable arrangement with the Commissioner.

RELEVANT LEGISLATION

The AD(JR) Act

15                  Section 5(1) of the AD(JR) Actgives a person aggrieved by a “decision to which this Act applies” the right to apply to the Court for an order of review on specified grounds.  The phrase “decision to which this Act applies” is defined in s 3(1) of the AD(JR) Act as follows:

decision to which this Act applies means a decision of an administrative character made, proposed to be made, or required to be made (whether in the exercise of a discretion or not and whether before or after the commencement of this definition):

(a)  under an enactment referred to in paragraph (a), (b), (c) or (d) of the definition of enactment; or

(b)  by a Commonwealth authority or an officer of the Commonwealth under an enactment referred to in paragraph (ca) or (cb) of the definition of enactment;

other than:

(c)  a decision by the Governor‑General; or

(d)  a decision included in any of the classes of decisions set out in Schedule 1.

16                  The term “decision” is not itself defined in the AD(JR) Act.

17                  The definition in s 3(1) is also relevant to s 13 of the AD(JR) Act, concerning the furnishing of a written statement of reasons.  Section 13(1) provides that:

Where a person makes a decision to which this section applies, any person who is entitled to make an application to the Federal Court or the Federal Magistrates Court under section 5 in relation to the decision may, by notice in writing given to the person who made the decision, request him or her to furnish a statement in writing setting out the findings on material questions of fact, referring to the evidence or other material on which those findings were based and giving the reasons for the decision.

18                  Section 13(11) relevantly provides that:

In this section, decision to which this section applies means a decision that is a decision to which this Act applies, but does not include:

…

(c) a decision included in any of the classes of decision set out in Schedule 2.

19                  Schedule 2, paragraph (f) excludes from the operation of s 13(1):

decisions in connection with the institution or conduct of proceedings in a civil court, including decisions that relate to, or may result in, the bringing of such proceedings for the recovery of pecuniary penalties arising from contraventions of enactments …

The Taxation Acts

20                  Section 255-5 of Schedule 1 to the TAA provides as follows:

255‑5   Recovering a tax‑related liability that is due and payable

(1)  An amount of a *tax‑related liability that is due and payable:

(a)  is a debt due to the Commonwealth; and

(b)  is payable to the Commissioner.

(2)  The Commissioner, a Second Commissioner or a Deputy Commissioner may sue in his or her official name in a court of competent jurisdiction to recover an amount of a *tax‑related liability that remains unpaid after it has become due and payable.

Note: The tables in section 250‑10 set out each provision that specifies when an amount of a tax‑related liability becomes due and payable. The Commissioner may vary that time under Subdivision 255‑B.

21                  Section 250-10(1) of Schedule 1 to the TAA includes an index of tax-related liabilities under the Income Tax Assessment Act 1936 (Cth) (the ITAA).  Item 55 in the index refers to “income tax, including any liability taken to be income tax for the purposes of section 204.”

22                  Section 175 of the ITAA provides that the validity of any assessment shall not be affected by reason that any of the provisions of that Act have not been complied with.  Section 177(1) of the ITAA provides that:

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

23                  Section 175A(1) of the ITAA provides that a taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the TAA dealing with taxation objections, reviews and appeals.

24                  Within Part IVC of the TAA, s 14ZZM provides that:

The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending.

25                  Similarly, s 14ZZR provides that:

The fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax, or other amount may be recovered as if no appeal were pending.

26                  The Commissioner must pursue the recovery of the tax-related liabilities that are due as debts: Piccinin v Deputy Commissioner of Taxation [2002] FCAFC 282 at [29]; Golden City Car and Truck Centre Pty Ltd  v Deputy Commissioner of Taxation (1999) 56 ALD 177; [1999] FCA 29 at [25]; s 47 Financial Management and Accountability Act 1997 (Cth). Although, in cases of serious hardship affecting certain taxpayers (not relevantly applicable to the applicant in this case), the Commissioner may release the taxpayer, in whole or in part, from a liability: see s 340-5 of Schedule 1 to the TAA.   

27                  Where legal proceedings have been commenced, the provisions of ss 14ZZM and 14ZZR of the TAA do not deprive a court of the jurisdiction to grant a stay.  In Deputy Commissioner of Taxation v Mackey (1982) 45 ALR 284 Hutley JA (at 289) referred to the discretion to grant a stay in such circumstances as an “open-ended”, albeit special, discretion.  However, as the reasons for judgment in that case reveal, in considering whether a stay should be granted, great weight must be attached to the policy inherent in those provisions: see at 286, 289 and 290.  Those provisions combined with ss 175 and 177 of the ITAA mean that, as a general rule, it will be extremely difficult to resist judgment being given against the taxpayer in recovery proceedings, even though an objection under Part IVC of the TAA is pending.  As was stated in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [52], where a statute creates a debt, special provisions may make inapplicable pleas that might otherwise tender an issue for trial of an action to recover that debt: see also at [40]-[50] and the cases there cited, for the significance of taxation legislation in this regard.

28                  In addition to commencing legal proceedings pursuant to s 255‑5(2) of the TAA, the Commissioner may for the purpose of recovering a tax-related liability that is due and owing  (a) collect amounts from third parties who owe or may later owe money to the tax debtor: s 260-5 of Schedule 1 to the TAA; (b) exercise a discretion to defer the payment time of a tax-related liability: s 255-10 of Schedule 1 to the TAA; and/ or (c) permit payments by instalments: s 255-15 of Schedule 1 to the TAA.

consideration

29                  Although the applicant has identified two decisions for review, the repository of the power to make each decision was said to be the same, namely s 255-5(2) of Schedule 1 to the TAA.  It was submitted that each decision was expressly or impliedly authorised by that provision.  It may be a matter for debate whether, as the applicant submitted, the decisions were separate and distinct.  I refer to that matter further below.  Certainly, so far as the objection to competency is concerned, the refusal decision can be in no better position than the recovery decision.  The distinction between the two decisions, if there be one, only assumes significance when dealing with the applicant’s claimed entitlement under s 13 of the AD(JR) Act to a statement of reasons because, on the applicant’s argument, a decision to refuse to refrain from commencing legal action to recover the applicant’s tax debts was not a decision in connection with the institution of proceedings in a civil court and, hence, was not excluded from the operation of s 13 by paragraph (f) of Schedule 2 to the AD(JR) Act. 

30                  The issue that assumed importance for dealing with the objection to competency was not so much whether there was a statutory source of power for the decisions but whether, notwithstanding the power in s 255-5(2), the decisions were nevertheless reviewable under the AD(JR) Act.

31                  The decision in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 illustrates that, having regard to the text, purpose and scope of the AD(JR) Act, the phrase “decision to which this Act applies” gives the AD(JR) Act a relatively limited field of operation.  The rights conferred by the AD(JR) Act certainly do not exhaustively cover the field of federal administrative law: Griffith University v Tang (2005) 221 CLR 99 at [32].  Thus, in some circumstances, the AD(JR) Act may provide a more restricted form of judicial review than might otherwise be available: Tang at [3].

32                  In Lamb v Moss (1983) 49 ALR 533 at 555-556 a Full Court of this Court attributed a wide meaning to the word “decision” to include any decision of an administrative character.  Specifically the Full Court expressed the opinion that the AD(JR) Act imposed no limitation which restricted the class of decision which may be reviewed to decisions which finally determine rights or obligations or which have an ultimate and operative effect.

33                  In Bond, however, Mason CJ (with whom Brennan J (at 365) and, in relevant respects, Deane J (at 369) agreed) did not favour an interpretation as broad as that preferred by the Full Court in Lamb.  In that regard Mason CJ (at 337-338) identified two essential qualities that a decision must have to be one that is reviewable under the AD(JR) Act.

34                  First, such a decision will generally, but not always, be a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration.  His Honour also accepted that what he described as an “intermediate decision” might also be a reviewable decision.  His Honour said (at 337):

… A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment.

35                  On this issue Toohey and Gaudron JJ (at 377) expressed a similar view.  Their Honours said:

… If an enactment requires that a particular finding be made as a condition precedent to the exercise of or refusal to exercise a substantive power, a finding to that effect is readily characterized as a decision "under an enactment". However, it is otherwise with respect to findings which are not themselves required by an enactment but merely bear upon some issue for determination or some issue relevant to the exercise of a discretion. Findings of that nature are not themselves "decisions under an enactment"; they are merely findings on the way to a decision under an enactment.

36                  Secondly, Mason CJ said that a decision must be a substantive determination.  In this regard his Honour contrasted a substantive determination with a procedural determination which was not reviewable under the AD(JR) Act: see at 337-338.  

37                  The concept of a substantive determination was elaborated on in Tang when the High Court considered the provisions of s 4(a) of the Judicial Review Act 1991 (Qld) which are in terms that follow the definition of “decision to which this Act applies” in s 3 of the AD(JR) Act.  Gummow, Callinan and Heydon JJ at [79] posed the question:

… What is it, in the course of administration, that flows from or arises out of the decision taken so as to give that significance which has merited the legislative conferral of a right of judicial review upon those aggrieved?

38                  At [80] their Honours said:

The answer in general terms is the affecting of legal rights and obligations.  Do legal rights or duties owe in an immediate sense their existence to the decision, or depend upon the presence of the decision for their enforcement?  To adapt what was said by Lehane J in Lewins, does the decision in question derive from the enactment the capacity to affect legal rights and obligations?  Are legal rights and obligations affected not under the general law but by virtue of the statute?

(references to footnotes omitted)

39                  Further, at [89] their Honours said:

The determination of whether a decision is "made ... under an enactment" involves two criteria: first, the decision must be expressly or impliedly required or authorised by the enactment; and, secondly, the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment. A decision will only be "made ... under an enactment" if both these criteria are met. It should be emphasised that this construction of the statutory definition does not require the relevant decision to affect or alter existing rights or obligations, and it will be sufficient that the enactment requires or authorises decisions from which new rights or obligations arise. Similarly, it is not necessary that the relevantly affected legal rights owe their existence to the enactment in question. Affection of rights or obligations derived from the general law or statute will suffice.

40                  The applicant advanced three contentions as to why the challenged decisions were reviewable under the AD(JR) Act.  First, it contended that the decisions possessed the characteristics of an “intermediate decision” of the kind referred to by Mason CJ in Bond at 337.  The applicant described this as “the rider” to the earlier statement by Mason CJ that the decision generally must be final or operative and determinative.  Secondly, it contended that the decisions were final and operative, and had practical legal effect.  Thirdly, it contended that the weight of authority favoured the conclusion that the decisions were reviewable under the AD(JR) Act. 

41                  In my view the decisions do not have the characteristics for which the applicant contends.  Moreover, in my view, the weight of authority is clearly against the contention that the challenged decisions are reviewable under the AD(JR) Act.  It is convenient to deal with each of the applicant’s contentions in turn. 

Contention 1:  an “intermediate” decision

42                  The applicant asserted that, but did not elaborate on why, each of the challenged decisions possessed the characteristics of an “intermediate decision”. 

43                  In Bond the Australian Broadcasting Tribunal (the ABT) had held an inquiry under the Broadcasting Act 1942 (Cth) (the Broadcasting Act) into the question of whether it was advisable in the public interest to suspend or revoke any of the commercial licences held by certain companies, each of which was a subsidiary of Bond Media Ltd (Bond Media).  The ABT found that Alan Bond was able to determine the composition of the boards of directors of Bond Media and the licensee companies.  The ABT found that Mr Bond had been guilty of improper conduct in various respects and concluded that he would not be found to be a fit and proper person to hold a licence under the Broadcasting Act.  As a consequence the ABT decided that, because Mr Bond controlled the licensees, they were not fit and proper persons to hold the licences.  Mr Bond and others sought a review under the AD(JR) Act of various decisions, findings and rulings by the ABT.  The licensees commenced a separate proceeding for review under the AD(JR) Act.  The case raised the question of the limits of the jurisdiction of this Court under the AD(JR) Act to review conclusions (including findings of fact) that were relevant in the chain of reasoning leading to an ultimate administrative decision.

44                  Mason CJ exemplified the nature and character of an “intermediate” decision that was reviewable under the AD(JR) Act by reference to s 88(2) of the Broadcasting Act.

45                  Section 88(2) provided:

The Tribunal may suspend or revoke a commercial licence if it appears to the Tribunal that it is advisable in the public interest to do so, having regard only to the following matters or circumstances: ... (b) the Tribunal is satisfied that the licensee (i) is no longer a fit and proper person to hold the licence; or (ii) no longer has the financial, technical and management capabilities necessary to provide an adequate and comprehensive service pursuant to the licence ...

46                  Mason CJ (with Brennan and Deane JJ agreeing) held that the ABT’s decision that the licensees were not fit and proper persons to hold their licences under the Broadcasting Act was a reviewable decision.  His Honour said at 339: 

It follows from my interpretation of the word "decision" that the Federal Court had jurisdiction under s 3(1) of the AD(JR) Act to review the Tribunal's finding that the licensees were no longer fit and proper persons to hold their broadcasting licences under the Act. Although that decision was an intermediate determination made on the way to deciding whether to revoke or suspend the licences or to impose conditions on them, it was a decision on a matter of substance for which the statute provided as an essential preliminary to the making of the ultimate decision.

47                  However, the conclusion that Mr Bond would not be a fit and proper person to hold a licence was not of that character; it was no more than a step in the ABT’s reasoning.  His Honour said:

… True it was an essential step in the reasoning by which the Tribunal chose to support its determination concerning the licensees, but this circumstance is not enough to invest the conclusion with the characteristics which would qualify it as a reviewable decision.

48                  Section 255-5 of Schedule 1 to the TAA does not possess, as a matter of structure or substance, the tiered decision-making process embodied in s 88(2) of the Broadcasting Act.  A decision pursuant to s 255-5(2) to sue (or to refuse to refrain from suing) to recover an amount of an unpaid tax-related liability cannot reasonably be seen to be a decision for which the TAA provides as an essential preliminary or as a condition precedent to the making of another decision.  In the context of the present matter, the applicant did not seek to identify the other decision to which either of the challenged decisions was said to be antecedent.  In my view the challenged decisions are devoid of the characteristics of an intermediate decision to which Mason CJ referred in Bond. 

49                  Moreover, with respect to the refusal decision, s 255-5(2) does not provide for or require some separate and preliminary finding or ruling to be made dealing with the question of whether or not to refrain from making a decision to sue.  Should the decision-maker come to consider whether to refrain from commencing legal proceedings as part of the recovery process, that would only be a matter bearing upon, but not an essential preliminary or condition precedent to, the exercise of the power to sue.  Indeed, in this respect, a decision to refuse to refrain from suing, if made, seems to be inseparable from, if not identical to, a decision to sue.   This was illustrated by the applicant’s submission that the respondent’s letter of 6 November 2009 contained the relevant decisions and involved the “re-making” of the recovery decision evidenced by the respondent’s letter of 21 August 2009. 

Contention 2:  the decisions were final and operative and had practical legal effect

50                  It is to be remembered that, in Bond, Mason CJ spoke of a reviewable decision as being one that generally is final or operative and determinative.  Significantly, his Honour referred to the necessity for the decision to be a substantive determination as opposed to a procedural determination.  This essential characteristic was confirmed in Tang: the decision must itself confer, alter or otherwise affect legal rights or obligations (at [89]).      

51                  The applicant submitted that the challenged decisions had a practical legal effect upon the taxpayer because (a) the combined operation of ss 175 and 177 of the ITAA means that, once a decision to sue is made, the taxpayer effectively has no defence; (b) the combined operation of ss 14ZZM and 14ZZR of the TAA means that it is extremely difficult to get a stay of recovery proceedings; and (c) should the Commissioner proceed to judgment in recovery proceedings against an individual and a sequestration order be subsequently made against the individual based on the judgment debt, the taxpayer will loose his or her right to object against the assessment originally creating the tax liability.

52                  As to the last matter, the applicant relied upon McCallum v Commissioner of Taxation (1997) 75 FCR 458.  It is difficult to see, however, how the decision in McCallum has direct relevance to the subject matter of the present proceeding.  The case concerned the question of whether a taxpayer who had duly objected to an assessment made by the Commissioner was entitled to challenge the disallowance of the objection in the Administrative Appeals Tribunal (the AAT) in circumstances where, subsequent to the making of the objection, the taxpayer became a bankrupt on the application of another creditor.  The AAT had held that the right to prosecute the review against the objection decision vested solely in the trustee in bankruptcy, to the exclusion of the bankrupt taxpayer.  On an appeal to a Full Court of this Court the majority held that the trustee in bankruptcy had standing to apply for a review of the objection decision having regard to the operation of s 134(1)(j) of the Bankruptcy Act 1966 (Cth), but that the bankrupt taxpayer did not necessarily have such standing.  The AAT’s decision was set aside and the matter was remitted to the AAT for further consideration (in accordance with the reasons given) of the question whether the bankrupt taxpayer could establish his standing, concurrently with the trustee in bankruptcy, to seek review in the AAT.  In that connection the majority considered that it was conceivable, although perhaps unlikely in the circumstances, that there may be some basis that the bankrupt taxpayer was relevantly “dissatisfied” within the meaning of s 14ZZ of the TAA (which conferred the right either to apply for a review by the AAT or to appeal to this Court with respect to the objection decision).  Lehane J at 475 expressed the view that the bankrupt taxpayer will not have standing merely because a successful challenge to the objection decision may result in a surplus in his bankrupt estate or because of any effect that the assessments and the objection decision may have upon his reputation.

53                  The competency of the present proceeding should not be determined as an abstract question.  It should be determined by reference to the challenged decisions as they affect the applicant.  The applicant is not an individual and the decisions sought to be reviewed are not decisions concerning an individual taxpayer.  The position of the applicant in the present proceeding is far removed from the position of the applicant in McCallum. 

54                  In any event, in my view, considerations of the kind raised by the applicant do not lead to the conclusion that the challenged decisions are reviewable decisions under the AD(JR) Act.  In the present case the applicant’s liability to the Commonwealth arose upon the making of the assessments. The challenged decisions made under s 255-5 did not, and could not, alter or affect that liability.    Sections 175 and 177(1) of the ITAA had effect as soon as the assessments were made, prior to any decision to sue (or to refuse to refrain from suing) or to take any other step to recover the amount of that liability.  The decision to sue (or to refuse to refrain from suing) to recover the amount of the liability did not alter the pre-existing effect of those provisions in relation to that liability; nor could either decision alter the future effect of those provisions in relation to that liability.  Similarly, ss 14ZZM and 14ZZR of the TAA had effect as soon as the assessments were made.   The decision to sue (or to refuse to refrain from suing) did not alter and could not alter the effect of those provisions in relation to the liability.  The decision to sue (or to refuse to refrain from suing) did no more than initiate the process of recovery which, at all times, the Commissioner was obliged to undertake should the debt representing that liability remain unpaid after it had become due and payable.  The commencement of legal proceedings would expose the applicant to the prospect of substantive determinations being made in those proceedings by the separate exercise of judicial power.  But the challenged decisions themselves did not confer, alter or otherwise affect legal rights or obligations respecting the applicant.  They were not substantive determinations of any kind or in any sense. 

Contention 3:  the weight of authority

55                  There are conflicting decisions on whether a decision to sue to recover the amount of a tax-related liability is a reviewable decision under the AD(JR) Act.

56                  The extent to which a judge is bound to follow decisions of co-ordinate authority is discussed fully in Undershaft (No 1) Ltd v Federal Commissioner of Taxation (2009) 175 FCR 150 at [68]-[88]; see also Businessworld Computers Pty Ltd v Australian Telecommunications Commission (1988) 82 ALR 499 at 504 and La Macchia v Minister for Primary Industries and Energy (1992) 110 ALR 201 at 204.  It is not necessary for me to set out the relevant principles as there discussed in any detail.  It is sufficient for me to note that, firstly, I am not bound to follow a decision of co-ordinate authority and should not follow such a decision if I am of the view that the decision is “clearly wrong” or “plainly wrong”.  Secondly, I must embark upon my own independent consideration of the issues with a view to reaching my own independent conclusions.  Thirdly, considerations of certainty and stability in judicial decision-making are relevant considerations to be taken into account in deciding whether as a matter of discretion I should follow an earlier decision which, while not, in my view, “clearly wrong” or “plainly wrong”, is nevertheless inconsistent with my own conclusions.

57                  The applicant relied on The Hell’s Angels Ltd v Commissioner of Taxation (1984) 7 FCR 311, Terrule Pty Ltd  v Deputy Commissioner of Taxation (1985) 5 FCR 153, and Snow v Deputy Commissioner of Taxation (1987) 14 FCR 119 as authority for the contention that the challenged decisions are reviewable under the AD(JR) Act.  Each of these cases was decided before Bond.

58                  In Hell’s Angels and Terrule it was held that a decision taken under the then s 209 of the ITAA (which now finds its counterpart in s 255-5(2) of Schedule 1 to the TAA) to sue to recover income tax as assessed was a decision that was reviewable under the AD(JR) Act.  In Snow, French J (as he then was) granted limited injunctive relief pursuant to s 15 of the AD(JR) Act restraining the Deputy Commissioner of Taxation from instituting recovery proceedings for income tax and additional tax, in proceedings which had been commenced under that Act to review a number of decisions, including the decision to sue for the debt.  In so doing, his Honour followed Hell’s Angels and Terrule and held that the decision was one to which the AD(JR) Act applied (at 134).  Significantly, however, his Honour noted that a decision under s 209 is one that does not of itself create or affect rights.  That observation is contrary to the submissions now advanced by the applicant.  More importantly, it shows that, in light of Bond and Tang, such a decision lacks an essential characteristic of a reviewable decision for the purposes of the AD(JR) Act. 

59                  In my view these decisions, insofar as they hold that a decision to sue to recover a tax debt is a reviewable decision for the purposes of the AD(JR) Act, do not survive the analysis in Bond and Tang concerning the characteristics of a reviewable decision and, to that extent, should not be followed. 

60                  Moreover, as the applicant recognised, its submission faced the formidable obstacle that a number of decisions post-Bond support the conclusion that the challenged decisions are not reviewable under the AD(JR) Act.  

61                  The decision in Golden Cityis directly on point.  It too concerned a decision taken under the then s 209 of the ITAA to commence proceedings to recover income tax assessed to the applicant taxpayers.  Cooper J was of the view that the decision was not reviewable under the AD(JR) Act.  His Honour (at [26]) saw the decision as but one step in the recovery process and found that there was nothing in the decision which was final or determinative or which removed a benefit or exposed the applicant taxpayers to a detriment to which they were not already subject. The applicant submitted that Golden City was wrongly decided and that I should not follow it.  In my respectful opinion, however, Golden City was correctly decided and I propose to follow it for the reasons I have expressed in [54] above. 

62                  The following cases, each decided in the context of proceedings under the AD(JR) Act, are also relevant to the determination of the present objection to competency: Strictly Stainless Pty Ltd v Deputy Commissioner of Taxation (unreported, Davies J, 5 November 1993) (a decision to commence proceedings for the winding up of a company is not a reviewable decision); Hutchins v Commissioner of Taxation (1996) 65 FCR 269 (a decision by the Deputy Commissioner of Taxation to vote against a motion put to a meeting of creditors convened under Part X of the Bankruptcy Act 1966 is not a reviewable decision); Ruddy v Commissioner of Taxation (1998) 82 FCR 337 (a decision to commence proceedings to recover directors’ penalties under s 222AQA of the ITAA is not a reviewable decision); and Guss v Commissioner of Taxation (2005) 147 FCR 115 (a decision to commence proceedings for recovery of a directors’ penalty imposed by s 222APE of the ITAA is not a reviewable decision.  I note that this finding was not disturbed on appeal:  see Guss v Commissioner of Taxation (2006) 152 FCR 88). 

63                  The applicant submitted that these cases were distinguishable for one reason or another.  However, whatever their differences in point of fact, these cases are consistent in the application of the principles that can be derived from Bond and Tang with respect to the characteristics of a reviewable decision under the AD(JR) Act.  Certainly Sundberg J at first instance in Guss did not see Golden City and the other cases referred to above as being distinguishable in point of principle from the case before him:  see at [22].  His Honour also saw Cooper J’s observations in Golden City as being directly applicable to a decision under ss 255-5(1) and (2):  see at [18].  The applicant placed specific reliance on the operation of ss 175 and 177(1) as providing a distinguishing feature in the present case.  As I have discussed, however, this consideration does not avail the applicant.  A similar submission was advanced in Golden City at [24] and appears to have been rejected by Cooper J.  In my view, the analysis undertaken in each of these other cases with respect to the decisions sought to be reviewed under the AD(JR) Act confirms the correctness of the analysis in Golden City.  Reference may also be made in this regard to the observations of Cooper J in Century Yuasa Batteries Pty Ltd v Commissioner of Taxation (1997) 73 FCR 528 at 540F-541A (not disturbed on appeal in Commissioner of Taxation v Yuasa Batteries Pty Ltd (1998) 82 FCR 288).

64                  The applicant did bring to my attention the fact that Spender J in Hutchins at 279 expressed the view, obiter, that a decision to sue for unpaid tax in a court was reviewable under the AD(JR) Act.  However, for the reasons I have already given, I would, respectfully, disagree with his Honour’s conclusion.  The applicant also brought to my attention the fact that, in that case at first instance (Hutchins v Deputy Commissioner of Taxation (1994) 123 ALR 133), Jenkinson J expressed the view that Hell’s Angels and Terrule were not inconsistent with what had been said in Bond: see at 138. His Honour did, however, acknowledge the possibility that neither Hell’s Angels nor Terrule could stand with the statement by Davies and Einfeld JJ in General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 169 that, for the purposes of the AD(JR) Act, a decision taken under an enactment is an action or a refusal to act which, by virtue of the statute, affects legal rights and/or obligations.  I agree.  This statement reflects the characteristics of a reviewable decision referred to by Mason CJ in Bond and by the plurality in Tang. 

Conclusion

65                  In my view the challenged decisions are not reviewable under the AD(JR) Act.  It follows that the respondent’s objection to competency succeeds.  It also follows that the applicant’s motion to file and serve the proposed amended application should be refused, for the reason that, in the proposed form, it includes a claim for review of the challenged decisions under the AD(JR) Act.  I would, however, grant leave to file an amended application in this proceeding seeking relief based on the jurisdiction conferred by s 39B of the Judiciary Act.

66                  It also follows that the applicant’s motion seeking a declaration that it is entitled under s 13 of the AD(JR) Act to a statement of reasons should be refused.  As the applicant is not a person who is entitled to make an application under s 5 of the AD(JR) Act in relation to the challenged decisions, and as, by definition, neither of the challenged decisions is for the purposes of s 13 a “decision to which this section applies”, the applicant is not entitled to request a statement of the kind referred to in s 13 of the AD(JR) Act.  In those circumstances, it is not necessary for me to consider whether the exemption in s 13(11) applies. 

DISPOSITION

67                  The application for an order of review filed on 30 November 2009 should be struck out.  The applicant’s motion filed on 11 March 2010 seeking leave to file and serve an amended application for an order of review should be dismissed. However the applicant should be given leave to file in this proceeding an amended application seeking relief based on the jurisdiction conferred by s 39B of the Judiciary Act.  The applicant’s motion filed on 11 March 2010 seeking a declaration that the applicant is entitled to a statement of reasons pursuant to s 13 of the AD(JR) Act should also be dismissed. The applicant should pay the respondent’s costs.

Associate:

Dated:         31 May 2010