Deputy Federal Commissioner of Taxation v. Clarke & Kann.

Judges:
Bowen CJ
Lockhart J
Fitzgerald J

Court:
Full Federal Court

Judgment date: Judgment handed down 11 April 1984.

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Bowen C.J., Lockhart and Fitzgerald JJ.

This is an appeal from a judgment of a single Judge of this Court delivered on 4 November 1983 overruling an objection by the appellant to the competency of an application made under the Administrative Decisions (Judicial Review) Act 1977 (``the Judicial Review Act'') and ordering the appellant to pay the costs of the objection to competency.

The respondent is a firm of solicitors in Brisbane. On 2 August 1983, the appellant served three notices upon the respondent, each requiring information concerning the sale of shares in a former client. Each notice was expressed to be issued ``pursuant to para. 264(1)(a) of the Income Tax Assessment Act 1936 as that paragraph is incorporated with the Taxation (Unpaid Company Tax) Assessment Act 1982''.

The Taxation (Unpaid Company Tax) Assessment Act 1982 (``the Recoupment Act'') came into force on 13 December 1982. For the purposes of this case, it is sufficient to state that it purports to make liable for company tax, unpaid as a result of a company's financial failure, certain persons including former shareholders, directors and promoters, if shares in the company were sold pursuant to a scheme as therein defined before the Recoupment Act came into force.

Subsection 4(1) of the Recoupment Act is as follows:

``Unless the contrary intention appears in this Act, sections 6 and 7A, Part II, section 21, Parts IV and V, Division 1 of Part VI, and Parts VII and VIII of the Assessment Act, and regulations made under that Act, apply for the purposes of the assessment and collection of recoupment tax, and the collection of late payment tax, in like manner, mutatis mutandis, as those provisions apply for the purposes of the assessment and collection of income tax under the Assessment Act.''

Paragraph 264(1)(a) of the Income Tax Assessment Act 1936 (as amended) (``the

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Assessment Act''), which is Pt. VIII of the Assessment Act, provides:

``264(1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority -

• (a) to furnish him with such information as he may require;
• ...''

The validity of the Recoupment Act was challenged in the High Court in two cases,
MacCormick v. F.C. of T. (S 45 of 1983);
Camad Investments Pty. Ltd. v. F.C. of T. (S 59 of 1983). The hearing of the cases had been concluded and the High Court had reserved its decision when the notices to the respondent were issued by the appellant. The High Court had not delivered judgment when the primary Judge gave the decision under appeal. The High Court's judgment upholding the validity of the Recoupment Act was delivered on 10 April 1984, the day upon which the Court embarked upon the hearing of the present appeal. [CCH Note: the High Court's decision is reported at 84 ATC 4230.]

Upon receipt of the notices, the respondent wrote to the appellant pointing out that a conflict existed between its duty of confidentiality and any obligation it might have to supply information pursuant to the notices which could not be resolved until the High Court determined the validity of the Recoupment Act. Requests were made for extensions of time to comply with the notices until after the High Court decision and later, when those requests were refused, until after reasons were given by the appellant under the Judicial Review Act. An undertaking was offered ``not to do any act which would impair the capacity of the firm to supply the information requested...''. The requests for extra time were refused.

Immediately after the final refusal, applications were commenced under the Judicial Review Act seeking to review both the decisions to issue the notices and the decisions to refuse extensions of time for compliance with the notices. An order was made that day suspending the operation of the notices until further order.

The remaining grounds of the respondent's application under the Judicial Review Act and the particular provisions of the Judicial Review Act relied upon are as follows:

• (1) the appellant did not have jurisdiction to make the decision - para. 5(1)(c);
• (2) the decision was not authorised by the enactment in pursuance of which it was purported to be made - para. 5(1)(d);
• (3) the decision was otherwise contrary to the law - para. 5(1)(j).

The sole basis for each ground was a contention that the Recoupment Act is invalid.

Although the real interest in opposing the provision of information under the notices lies with those to whose affairs the information relates, it was not suggested that the respondent did not have standing to bring the application under the Judicial Review Act. The appellant's objection to the competency of the application was based upon two grounds which were also relied upon to support the appeal. Briefly stated, the appellant's grounds are:

• (1) the decisions sought to be reviewed are not decisions to which the Judicial Review Act applies by virtue of subsec. 3(1) and para. 1(e) of Sch. 1;
• (2) it is not a ground for review under the Judicial Review Act that the enactment under which a decision was made is invalid, and in an application under the Judicial Review Act the validity of the enactment under which the decision was made must be assumed.

Evidence was led by the appellant in connection with ground (1). The effect of the evidence was that the object of the notices was to obtain information to determine whether income taxation is payable under the Recoupment Act by one or more identified individuals (not being members of the respondent firm) and, if so, to assess the tax payable.

A further ground that the appellant had no power to extend the time for compliance with the notices was not raised in the objection to competency and, although stated in the notice of appeal, was not argued.

The appellant's argument in support of ground 1 applied principally, if not solely, to the notices, as distinct from the refusals to extend time. It was submitted that the notices were not decisions to which the Judicial Review Act applies because they were ``decisions... leading

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up to the making of assessments or calculations of tax'' under the Recoupment Act. Subsection 3(1) of the Judicial Review Act provides that, unless the contrary intention appears, a ``decision to which this Act applies means a decision of an administrative character made... under an enactment, other than... a decision included in any of the classes of decisions set out in Schedule 1''. That Schedule includes:

``(e) Decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty, or decisions disallowing objections to assessments or calculations of tax or duty, or decisions amending, or refusing to amend, assessments or calculations of tax or duty, under any of the following Acts:

• ...
• Taxation (Unpaid Company Tax) Assessment Act 1982
• ...''

Because para. (e) plainly intends to exclude from review some decisions which are made prior to assessment, it must be taken to refer not only to assessments which have been made but to those which will be made.

The decisions which are excluded from review by para. (e) of the Schedule are decisions making assessments, decisions forming part of the process of making assessments, and decisions leading up to the making of assessments. Each category provides for some extension of the former, but the overall effect is to emphasise the essential need for a connection between the decision and an assessment.

It is inappropriate to attempt to define the boundary between those decisions which are and those which are not ``decisions leading up to'' the making of an assessment. However, a decision does not lead to the making of an assessment merely because it precedes the making of an assessment or because its purpose is to enable or facilitate the making of any assessment which may be made. A decision is not a decision leading up to the making of an assessment unless the making of an assessment has followed or will follow from the decision.

The notices are decisions because they are demands for information (Judicial Review Act, para. 3(2)(e)). Although a sharp distinction cannot be drawn between the appellant's inquisitorial function and his assessment function, where, as in this case, no assessment has been made and there can be no certainty that an assessment will be made, it cannot be concluded that a demand for information which does not form part of the making of an assessment necessarily is leading up to the making of an assessment. The information produced by the demand may result in an assessment, or in a decision not to assess, or may be of no utility. There is no sufficient relationship between the demands for information and the making of an assessment to attract para. (e) of the Schedule.

It was argued for the respondent that that paragraph only excludes from review those of the appellant's decisions which are otherwise reviewable under income taxation legislation. The absence of an alternative method of review under the income tax legislation may not be immaterial to a consideration whether a decision is within para. (e) but, in the circumstances, it is unnecessary to consider that question further.

It was submitted by the appellant in support of ground 2 that none of the grounds for an order of review under the Judicial Review Act specified in subsec. 5(1) encompass a decision made under an invalid Commonwealth enactment. The argument was essentially one of construction of the Judicial Review Act. It was submitted before the learned primary Judge and this Court on appeal that only decisions made ``under an enactment'' may be reviewed, that decisions under an invalid enactment ex hypothesi cannot answer that description because an invalid enactment is not ``an enactment''. It was submitted that, if the legislature had intended otherwise, it could have said so and that none of the language of sec. 5 is apposite to include decisions made under an invalid enactment.

We reject this submission. Decisions made under Commonwealth enactments are susceptible of review under the Judicial Review Act on grounds which are many and varied including the absence of jurisdiction of the decision-maker to make the decision (para. 5(1)(c)); the fact that the decision was not authorised by the enactment in pursuance of which it was purported to be made (para. 5(1)(d)); and that the decision was contrary to law otherwise than as specified in grounds (a) to (h) (para. 5(1)(j)). Similar grounds are available where review is sought of conduct engaged in or

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proposed to be engaged in for the purpose of making a decision to which the Judicial Review Act applies (sec. 6). Generally, the question for the Court is whether the action is lawful.

We see no warrant for construing the Judicial Review Act narrowly. It is enabling legislation designed to provide a remedy for citizens who are aggrieved by decisions of an administrative character which purport to be made under Commonwealth enactments. If in the course of deciding whether a decision was within jurisdiction, or was authorised by the enactment in pursuance of which it was purported to be made, or was otherwise contrary to law, it becomes necessary to look at the question whether the enactment relied upon is valid, that must be a proper subject of inquiry. If decisions are made under invalid enactments plainly they may be reviewed under the Judicial Review Act.

The appeal should be dismissed with costs.