POLETTI v DFC of T
Judges:Lockhart J
Gummow J
Foster J
Court:
Federal Court
Lockhart, Gummow and Foster JJ
This appeal from the judgment of a judge of the Court (Beazley J.) raises the question of the nature of an appeal to the Court under s. 14V of the Income Tax Administration Act 1953 (the Act) against an order of the Commissioner of Taxation made pursuant to s. 14S(1) of the Act.
Section 14S(1) empowers the Commissioner, by order in accordance with the prescribed form, to prohibit the departure of a person from Australia for a foreign country, where:- (a) the person is subject to a tax liability; and (b) the Commissioner believes on reasonable grounds that it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a foreign country without - (i) wholly discharging the tax liability; or (ii) making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged.
The expression ``tax liability'' is defined by s. 2 (the interpretation section of the Act) as meaning ``a liability to the Commonwealth arising under, or by virtue of, a taxation law''.
The function of s. 14S has been considered on a number of occasions by the courts. The cases include
Dalco v FC of T (1987) 19 ATR 443;
Edelsten v FC of T 89 ATC 4120; (1989) 85 ALR 226 (Einfeld J.) and
Skase v FC of T 92 ATC 4001; (1991) 32 FCR 206 (Pincus J.); and most recently the judgment of a Full Court of this Court in
Thai v DFC of T 94 ATC 4489.
On 10 August 1994 a delegate of the Deputy Commissioner of Taxation made an order under s. 14S(1) of the Act prohibiting the applicant from departing Australia for a foreign country. The appellant appealed to the Court against the making of that order pursuant to s. 14V(1) of the Act, the terms of which we shall set out later. The appeal was heard by the learned
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primary Judge who dismissed the appeal. The appellant then appealed to the Full Court from that judgment.On Tuesday, 16 August 1994 this Full Court heard the appeal and, since it was important to the appellant (for reasons which appear later) to know the result of it as soon as possible, upon the conclusion of argument we dismissed the appeal with costs and said that the Court would publish its reasons for judgment later. These are those reasons.
Two questions arise on the appeal: the first is of general importance as it raises for determination the nature of an appeal to the Court under s. 14V(1). The second question is peculiar to the facts of this case, namely, whether the primary Judge took into account all the relevant evidence in reaching her conclusions or only part of it.
We turn to the first question. It arises because counsel for the appellant submitted that the primary Judge rejected the argument that an appeal under s. 14V is in the nature of a rehearing de novo which, it was argued, is the true nature of such appeal.
The primary Judge said that an appeal under s. 14V involves the Court ``determining objectively whether the Commissioner held the requisite belief on reasonable grounds''; and that ``a determination has to be made as to whether there were objective grounds for the holding of that belief''.
To determine the nature of an appeal from an order of the Commissioner under s. 14S(1) involves an analysis of Part IVA of the Act in which it is included, since it is the statutory context in which a right of appeal is conferred that must be the starting point for the inquiry:
Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd & Anor (1976) 135 CLR 616 per Mason J., with whose judgment Barwick C.J. and Stephen J. agreed at 621. See also Halsbury's Laws of Australia, Administrative Law (written by Dr Margaret Allars) at para. 10-1405 and Cairns, Australian Civil Procedure, 3rd. ed., 1992 at 509-510.
There are numerous reported cases where the nature of appeals has been considered including for example,
The Victorian Stevedoring and General Contracting Co Pty Ltd v Dignan (1931) 46 CLR 73;
Australian Sporting Club Ltd; Re Dash (1947) 45 SR (NSW) 283;
Turnbull v NSW Medical Board [1976] 2 NSWLR 281;
Cummins v Mackenzie & Anor [1979] 2 NSWLR 803;
Workers' Compensation (Dust Diseases) Board v Veksans (1993) 32 NSWLR 221); but the question is ultimately answered by elucidating the intention of the legislature.
This is particularly so in the case of appeals to federal courts or state courts exercising federal jurisdiction from decisions of officers of the Commonwealth where the rights of appeal are conferred by federal statutes. Appeals from decisions of Commonwealth officers or federal administrative tribunals, though called appeals, are not appeals in the strict sense. The right of ``appeal'' is to a court exercising the judicial power of the Commonwealth, for it is the first occasion on which a court is seized with jurisdiction to consider a matter after it has been dealt with by administrative bodies. Appeals of this kind, of which there are numerous examples (notably appeals to the Federal Court from decisions of the Administrative Appeals Tribunal (s. 44 of the Administrative Appeals Tribunal Act 1975) and appeals under Part V of the Income Tax Assessment Act 1936 directly from decisions of the Commissioner to the Federal Court), lie to the Federal Court in the exercise of its original, not appellate, jurisdiction.
There is a fundamental distinction between an appeal to a court from the decision of an administrative body, which may necessarily include a rehearing, frequently de novo, and an appeal to a federal court or state or territory court exercising federal jurisdiction, in each case exercising the judicial power of the Commonwealth under Chapter III of the Constitution (a distinction emphasized by Mason J. in Sperway at 621). The reason is, of course, that federal courts or other courts exercising federal jurisdiction exercise only the judicial power of the Commonwealth, and do not act administratively or exercise administrative or executive powers by, for example, substituting their own discretion for the discretion of the original decision-maker. This distinction must be kept sharply in mind in this case because it argues powerfully against the appeal from the Commissioners order under s. 14S(1) of the Act being a rehearing de novo.
This case is not concerned with another aspect of federal judicial power, that dealing with the delegation by a court exercising the judicial power of the Commonwealth of some
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of its powers and functions to officers of the court. In these cases, the existence of review by way of a hearing de novo may be essential to the validity of the delegation:Harris v Caladine (1990-1991) 172 CLR 84 at 85, 122-3, 153-4, 164.
Hence, it is necessary to examine the terms of Part IVA of the Act. Part IVA (the heading of which is ``Departure from Australia of certain tax debtors'') was introduced into the Act by the Taxation Laws Amendment Act 1984 (Act No 123 of 1984). It contains four divisions: Division 1 - Interpretation; Division 2 - Prohibition and Authorization of Departure of Certain Tax Debtors; Division 3 - Appeals from, and review of, decisions of the Commissioner; and Division 4 - Enforcement.
We have already stated the terms of s. 14S(1). Subject to subsection (3) of s. 14S (which concerns deportation orders made in respect of persons during a period when an order under the Migration Act 1958 for the deportation of the person is in force, and which has no application to the present case), a departure prohibition order remains in force unless and until revoked under s. 14T or set aside by a court (s. 14S(2)).
A person in respect of whom a departure prohibition order is in force and who knows that such an order is in force, is prohibited from departing from Australia for a foreign country unless the departure is authorized by a departure authorization certificate (s. 14R). Contravention of s. 14R constitutes an offence, punishable by penalty or imprisonment, or both.
Section 14T of the Act requires or permits the Commissioner to revoke or vary a departure prohibition order in the circumstances there specified. Under s. 14T(1) the Commissioner is required to revoke a departure prohibition order either on the application of the person concerned or on the Commissioners own motion, if the tax liabilities to which the person is subject have been wholly discharged and the Commissioner is satisfied that any known future tax liabilities are likely to be wholly discharged or become completely irrecoverable (s. 14T(1)(a)). Alternatively, the order must be revoked by the Commissioner if he is satisfied that the tax liabilities to which the person is subject are completely irrecoverable (s. 14T(1)(b)).
By s. 14T(2) a departure prohibition order may be revoked or varied by the Commissioner for any reason in the Commissioner's discretion.
Section 14V is included in Division 3. Section 14V(1) provides that a person aggrieved by the making of a departure prohibition order may appeal to the Federal Court or the Supreme Court of a State or Territory against the making of the order.
Section 14V(2) provides that s. 14V has effect - (a) subject to Chapter III of the Constitution; and (b) notwithstanding anything contained in s. 9 of the Administrative Decisions (Judicial Review) Act 1977 (the ADJR Act).
The explanatory memorandum explaining the provisions of the Taxation Laws Amendment Bill 1984 (which became the Taxation Laws Amendment Act 1984) states that s. 14V(2):
``is a drafting measure to ensure that nothing in s. 14V exceeds the constitutional jurisdiction of the judicial arm of government, and to establish the jurisdiction of Supreme Courts in appeals under the section notwithstanding section 9 of the Administrative Decisions (Judicial Review) Act 1977 which could otherwise oust the jurisdiction of the Supreme Courts.''
Thus, paragraph (a) of s. 14V(2) ensures that the Federal Court (a court established by the Parliament) and the Supreme Courts of States or Territories, when exercising federal jurisdiction to hear appeals from decisions of the Commissioner under Division III, exercise only the judicial power of the Commonwealth and do not act administratively or otherwise exercise administrative powers.
Section 9 of the ADJR Act reflects a long existing policy of the Parliament of restricting the jurisdiction of State courts to review Commonwealth administrative decisions. For example, s. 38(e) of the Judiciary Act 1903 makes it clear that, despite the broad terms of provisions such as s. 39, State Courts are not invested with federal jurisdiction to grant injunctions, mandamus or prohibition against officers of the Commonwealth. Section 9 of the ADJR Act denies to State courts federal jurisdiction they otherwise might have to review decisions to which the ADJR Act applies and any other decisions or conduct of Commonwealth officers notwithstanding that such decisions are not reviewable under the Act. See generally,
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Aerolineas Argentinas &
Section 14W(1) provides that an appeal to the Federal Court or the Supreme Court of a State or Territory under s. 14V shall be exercised by a single judge or justice. Section 14W(2) authorizes an appeal to the Federal Court from a judgment or order of the Supreme Court of a State or Territory exercising jurisdiction under s. 14V. Where a case is heard at first instance by a judge of the Federal Court, similar rights of appeal exist under s. 24 of the Federal Court of Australia Act 1976.
Section 14W(3), combined with s. 33(3) of the Federal Court of Australia Act, permits appeals to the High Court to be brought by special leave of the High Court from a judgment or order of the Federal Court. Section 14W(4) makes it clear that an appeal lies from a judgment or order of a Supreme Court of a State or Territory only where it is the decision of a single judge or justice of that Court to the Federal Court in the exercise of its appellate jurisdiction; and that an appeal lies to the High Court only by special leave of the High Court from a judgment or order of the Federal Court.
Section 14X provides that a Court hearing an appeal under s. 14V against the making of a departure prohibition order may, in its discretion, either make an order setting aside the departure prohibition order or dismiss the appeal.
Section 14Y provides that applications may be made to the Administrative Appeals Tribunal (the AAT) for review of decisions of the Commissioner under s. 14T or 14U. Section 14T concerns revocation and variation of departure prohibition orders; and s. 14U relates to departure authorization certificates. Sections 14T and 14U thus confer jurisdiction upon the AAT to hear appeals thereunder in accordance with and pursuant to the Administrative Appeals Tribunal Act 1975.
Under s. 14U a person in respect of whom a departure prohibition order is in force may apply to the Commissioner for, and the Commissioner shall issue, a certificate authorizing the person to depart from Australia for a foreign country at certain times if he is satisfied that it is likely that: (i) (a) the person will depart from Australia and will return to Australia within such period as the Commissioner considers appropriate; and (b) circumstances of the kind referred to in s. 14T(1)(a) will come into existence within such period as the Commissioner considers to be appropriate in relation to the person; and (ii) it is not necessary or desirable for the person to give security under s. 14U(2) for the person's return to Australia. Section 14U(2) deals with the giving of security and certain other matters which it is not necessary for present purposes to mention.
This sufficiently describes the relevant provisions of the Act.
The analysis of the nature of an appeal pursuant to s. 14V(1) is assisted by examining other remedies or avenues of relief available to a person aggrieved by the making of a departure prohibition order. A right to seek in this Court judicial review of the decision that led to the making of the order under the ADJR Act still remains (with the attendant benefit of the availability of a s. 13 statement). Act No. 123 of 1984 did not take away that right by amending the First Schedule to the ADJR Act to exclude decisions of this kind from review under that Act. The original jurisdiction of the Federal Court with respect to matters in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth may also be invoked as an alternative remedy to a person aggrieved by the making of a departure prohibition order (s. 39B of the Judiciary Act 1903).
Counsel for the appellant put, as his initial argument, that an appeal to the Federal Court or the Supreme Court of a State or Territory pursuant to s. 14V is in the nature of a rehearing de novo. In our opinion the appeal under that section is not of that character.
The terms of the Act do not support the notion that the appeal is by way of rehearing de novo. The evident purpose of the right of appeal is to enable departure prohibition orders which the Commissioner may make, to be set aside where the person against whom the order is made is not subject to a tax liability or where the Commissioner's belief (to which para. (b) of s. 14S(1) is directed) is not held bona fide or is not based on reasonable grounds. The requirement that reasonable grounds must exist to support the Commissioner's belief is a safeguard to the taxpayer that departure
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prohibition orders will not be made against him or her in unreasonable circumstances. The making of such an order is a severe intrusion into a person's liberty, privacy and freedom of movement. On the other hand, the protection of the revenue is of great importance to Australia. These two interests must be balanced. Section 14S is an example of a situation where it is necessary to achieve this balance. The appeal is not a rehearing de novo in the traditional sense, where all the issues must be retried so that what the Commissioner considered and did is irrelevant except in so far as it is necessary to know that he made the departure prohibition order to found the Court's exercise of jurisdiction. The Commissioner bears no onus to establish before the Court any of the elements of s. 14S(1) in an appeal of this kind. This would come dangerously close to placing the Court (whether the Federal Court or a State or Territory Supreme Court exercising federal jurisdiction) in the position of exercising non- judicial powers, namely, the administrative function of the Commissioner of making a departure prohibition order which the Parliament has reposed solely in him.In our opinion it is for the person who seeks to attack the departure prohibition order to make good the attack in the appeal. Otherwise any person against whom an order of this kind has been made could, merely by instituting an appeal under s. 14V, place the Commissioner in the position of justifying the making of the order. We see no warrant for construing s. 14V in this fashion.
Is the right of appeal conferred by s. 14V akin to a right of judicial review of the kind to which the ADJR Act is directed? The answer must be no, though the two avenues of relief may overlap. The person against whom a departure prohibition order is made, has available to him, as an alternative avenue of review, an application under the ADJR Act to this Court to review the Commissioner's decision which led to the order being made. The ``right of appeal'' under s. 14V to the Court and to State and Territory Supreme Courts against the making of the order by the Commissioner under s. 14S is different from a right to apply under the ADJR Act for review by this Court of the decision which led to the order, especially as the latter expressly has been preserved by the Parliament. We respectfully disagree with the contrary view expressed by a judge of the Court in Edelsten.
Nor is an appeal under s. 14V solely on a question of law for the reason that the Act does not so limit it. It may be contrasted with an appeal which lies to this Court from a decision of the AAT under s. 44 of the Administrative Appeals Tribunal Act 1975 on a question of law.
An appeal under s. 14V(1) from the making of a departure prohibition order involves the determination by the Court of three principal questions (or such one or more of them as are in issue in the appeal): first, whether the person is subject to a tax liability; secondly, whether the Commissioner held the belief of which the subsection speaks and, thirdly, whether reasonable grounds existed for the formation by the Commissioner of the requisite belief.
Normally, the issue of whether the appellant is subject to a tax liability would be readily ascertainable, and generally (though not always) it would arise once the Commissioner has made a tax assessment and served a notice of assessment pursuant to s. 204 or s. 205 of the Income Tax Assessment Act 1936 (as to the relation between those two sections see Thai v DFC of T).
In some cases an appeal under s. 14V may involve the examination of the Commissioner's belief if there is a suggestion that the belief is not held bona fide. However, the question which, we expect, would be involved most frequently in an appeal under s. 14V is whether reasonable grounds existed for the holding by the Commissioner of the requisite belief, an objectively determined postulate. So it is in the present appeal.
There is no issue in this case that the appellant is, and was at material times, subject to a tax liability. Nor is it disputed that the Commissioner held the belief of which s. 14S(1)(b) speaks. The essential question in the present appeal is whether the Commissioner's belief was held on reasonable grounds.
In our opinion an appeal under s. 14V is an appeal in which the person aggrieved must establish that the order was wrongly made. This view was adopted by the Supreme Court of Western Australia in
Briggs v DFC of T, (6 September 1984 (WAG 79 and 81 of 1985), unreported). This may be done by satisfying the Court that any one of the essential elements of
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the order is absent; but the Commissioner bears no onus of establishing the validity of the order. Questions of the shifting of the evidentiary onus may arise, but we need not consider that matter further because that is a different question.The appeal may involve questions of fact or law or both. In most cases the grounds for the Commissioner's belief would not be known, at least directly, to the taxpayer, because the material which the Commissioner had before him when he made the order would not be known fully to most taxpayers. Such documentary material should be produced to the Court by the Commissioner; and its production may be enforced by the compulsory processes of subpoena or discovery and tested by the appellant. In the present case the material was produced to the Court by the Commissioner of his own volition in the form of affidavits and annexures and exhibits thereto. As the question of the reasonableness of the grounds which founded the Commissioner's belief is the central issue, it is obviously the correct course for the Commissioner to have taken. There may be a need to amend the rules of this Court and Supreme Courts to establish a procedure facilitating the production of relevant material to the court upon the institution of an appeal. However, by whatever means it is achieved, plainly the appellant is entitled to have produced for perusal the material before the Court on which the Commissioner relied; and any other material which was before the Commissioner when he decided to make the order under s. 14S(1) which bears upon the reasonableness of the grounds for his belief. There may be occasions where public interest immunity would prevent disclosure of certain material to the appellant. This question arises not infrequently before courts and it is one that can be easily dealt with in the interests of justice. It did not arise here.
In most cases the material (information including documents) before the Court would be the material that was before the Commissioner when he formed his belief and made his order and not material which he did not have. But there may be cases where material was not before the Commissioner when he formed his belief and made the order under s. 14S(1), but which was then in existence; and if he had it, may have led to a different conclusion. It may have been in the Commissioner's file but he did not have regard to it or it may not have been in fact before him. It may have been only in the taxpayer's possession or within his knowledge. For example, a taxpayer may have assets, income or other means of discharging his tax liabilities available to him of which the Commissioner does not in fact have knowledge; but if he had had that knowledge he would not have made the order. Evidence of this kind can be produced to the Court on the hearing of the appeal and considered by the Court, together with all other relevant material to enable it to determine whether the belief of the Commissioner was held on reasonable grounds.
If, on the other hand, material comes to light after the making of the Commissioner's order which could not have been available at that time because it did not exist, as at present advised we doubt that such material could be relevant to the appeal. The result may be that the Commissioner's order would be upheld and the appeal dismissed pursuant to s. 14X of the Act. But it would bear heavily upon the question of the revocation or variation of the departure prohibition order under s. 14T which would be the next step for the Commissioner to consider taking. This question does not arise here, so we prefer to leave it open to be determined in the appropriate case.
We turn to the second question, whether the primary Judge took into account all the relevant evidence in reaching her conclusion or only part of it.
The Deputy Commissioner raised his assessment to tax of the appellant pursuant to s. 167 of the Assessment Act (a default assessment). The notice of assessment was served on the appellant on 12 July 1994. Further notices of assessment were served on 9 August 1994. They involve substantial amounts of tax, in excess of $1m. The appellant and her son were charged in the United Kingdom with breaches of the Trade Descriptions Act 1968 (UK) relating to the supply by a company, Slimweight Co (UK) Limited, with which the appellant and her son were connected, of goods to which a false trade description was said to have applied, contrary to the Act. It appears that the company sells various cosmetic creams, one of the virtues of which is said to be that it shrinks women's thighs. The alleged offences occurred in 1986 and the matter was listed for hearing in 1988. The company was dealt with in absentia and fined £5,000. The appellant and
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her son did not appear; so, as a consequence bench warrants were issued for the non appearance. Correspondence and discussions took place between the appellant's solicitor and the Warwick Crown Court of the United Kingdom over a period of at least two years. It was initially intended that both the appellant and her son would appear in the Warwick Crown Court on 13 June 1994; but the appellant could not do so because she was in hospital on 15 May 1994, discharged on 19 May 1994 and not in sufficiently good health to enable her to travel to the United Kingdom to attend to the necessary matters involved in the litigation. Her son did appear and the matter was adjourned to 26 July 1994, then later adjourned for sentence to 2 September 1994.The basis of the criticism by the appellant was that her Honour confined herself in her reasons for judgment to the material contained in the Commissioner's file and did not have regard to evidence adduced by the appellant at the hearing before her Honour which was not previously available to the Commissioner, consisting of two affidavits of her solicitor, Mr JJ Cullen, one sworn on 10 August 1994 and the other on 12 August 1994.
It is necessary to consider this argument in the context of the brief curial history of this proceeding.
The notice of appeal pursuant to s. 14V from the Commissioner's order was filed by the appellant during the afternoon of Friday, 12 August 1994. Her Honour heard the case that afternoon because arrangements had been made by the appellant to leave Australia on 14 August for about one month in order to attend the proceedings in the United Kingdom in the Warwick Crown Court. Her Honour gave judgment later that same day. This appeal from the judgment of the primary Judge was heard by this Full Court the following Tuesday, 16 August 1994. In these circumstances it is hardly to be expected that the reasons for judgment of the primary Judge would be as full as otherwise they might be if more generous time had been available to prepare them. Nor is it a valid ground of criticism of a trial Judge's reasons for judgment that they do not refer to every piece of evidence upon which reliance is placed to support a finding. Certainly the primary evidence should be mentioned, but it is an untenable and dangerous proposition that a judgment is open to attack because it does not state specifically each fact on which reliance may have been placed, no matter how small.
It is clear from reading her Honour's reasons for judgment that she did take into account material which was not before her from the Commissioner's file, but was introduced into evidence in affidavits filed in support of the appeal on behalf of the appellant. It is plain from her Honour's reasons for judgment that she had regard to material in the affidavits of Mr Cullen, including her finding that at the time of making the order the delegate of the Deputy Commissioner had in his possession information that the appellant had a return ticket for travel to England on 14 August 1994 and return on 14 September 1994 and that the purposes of her trip were to enable her to deal with the Warwick Crown Court matters with which she has been involved since 1988, also to attend to some business matters. There is no substance in this second ground of challenge to her Honour's judgment.
It is for these reasons that on Tuesday, 16 August 1994 the Court dismissed the appeal with costs.
THE COURT ORDERS THAT:
1. The appeal be dismissed.
2. The appellant pay the respondent's costs of the appeal.
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