Domaine Finance Pty. Limited v. Federal Commissioner of Taxation.

Judges:
Fisher J

Court:
Federal Court

Judgment date: Judgment handed down 2 August 1985.

---

Fisher J.

By its application in this matter Domaine Finance Pty. Limited (``the applicant'') seeks a review of the following ``decisions'' of the respondent Federal Commissioner of Taxation (``the Commissioner''), namely the failure of the Commissioner to decide to issue to the applicant two certificates pursuant to sec. 128H of the Income Tax Assessment Act 1936 (``the Act'') in respect of loans made to the applicant on 12 February 1980 and 13 February 1980 respectively.

The application is made pursuant to sec. 7 of the Administrative Decisions (Judicial Review) Act 1977 (``the Judicial Review Act''). Subsection 7(1) entitles the applicant to complain of the failure of the Commissioner to make a decision when there has been unreasonable delay. That subsection is in the following terms:

``7(1) Where -

• (a) a person has a duty to make a decision to which this Act applies;
• (b) there is no law that prescribes a period within which the person is required to make that decision; and
• (c) the person has failed to make that decision,

a person who is aggrieved by the failure of the first-mentioned person to make the decision may apply to the Court for an order of review in respect of the failure to make the decision on the ground that there has been unreasonable delay in making the decision.''

The only question before the Court at this stage is whether the decisions which the applicant alleges the Commissioner has failed to make are decisions to which the Judicial Review Act applies. The Commissioner by a notice of objection to competency alleges that they are not such decisions. The Judicial Review Act defines ``decision to which this Act applies'' as a

``... decision of an administrative character made, proposed to be made, or required to be made, as the case may be (whether in the exercise of a discretion or not) under an enactment, other than a decision by the Governor-General or a decision included in any of the classes of decisions set out in Schedule 1;''

The Commissioner contends that the decisions concerning which the applicant complains fall within para. (e) of Sch. 1, the words of which exclude, to the extent relevant,

``(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

---

ATC 4467

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:

• ...
• Income Tax Assessment Act 1936
• ...''

It was said on behalf of the Commissioner that a decision whether or not to issue a certificate under sec. 128H of the Act was a decision ``forming part of the process of making, or leading up to the making of assessments or calculations of tax''.

Section 128H finds its place in Div. 11A of the Act, a Division which, inter alia, requires that borrowers paying interest to non-residents withhold a certain portion of the interest and pay it to the Commissioner as a ``withholding tax''. Section 128G provides that the Division does not apply to interest on certain loans, and is as follows:

``(1) This section applies to interest in respect of a loan where -

• (a) the loan was raised outside Australia;
• (b) if the loan was raised by the issue of bearer debentures, the debentures were issued outside Australia by a company, the loan was raised in a currency other than the currency of Australia and the interest is or was paid outside Australia in a currency other than the currency of Australia; and
• (c) the Commissioner has issued a certificate under the next succeeding section in respect of the loan.

(2) Tax is not payable, and shall be deemed not to have been payable, in accordance with this Division in respect of interest to which this section applies.''

The applicant seeks certificates in respect of certain loans to enable it to contend under sec. 128G that it is not obliged to withhold any portion of the interest payable under the loans. Section 128H, which provides the circumstances in which a certificate shall be issued by the Commissioner, is to the extent relevant in the following terms:

``(1) An entity that has raised a loan the interest on which could, subject to the issue of a certificate under the next succeeding sub-section in respect of the loan, be interest referred to in the last preceding section may apply to the Commissioner in writing for the issue of such a certificate.

(2) Where an application is made in accordance with the last preceding sub-section and the Commissioner is satisfied that -

• (a) the applicant was an Australian entity throughout the period of 60 days that ended -
  • (i) in the case of a loan raised by the offering of securities for subscription - on the sixtieth day before the earliest day on which any person was or persons were invited to subscribe to the loan; or
  • (ii) in any other case - on the sixtieth day before the day on which the contract for the making of the loan was made;
• (b) the loan moneys have been employed, and are intended to be employed, only for a qualifying use or for making moneys available for a qualifying use;
• (c) in a case in which an amount being the whole or part of the loan moneys has been lent, or is intended to be lent, for use for the purposes of an enterprise in which there is substantial Australian participation, that amount did not exceed, or will not exceed, an amount that can reasonably be regarded, having regard to the extent of that participation, as an appropriate amount to be contributed (in addition to any other contribution) by the Australian entity or Australian entities concerned to the funds required for the purposes of that enterprise; and
• (d) every entity (other than the applicant) that has lent or otherwise expended, or that will lend or otherwise expend, any of the loan moneys in the course of the arrangements by which any of the loan moneys have been or will be made available for the purposes of a qualifying use was or will be an Australian entity throughout the period of 60 days ending on the sixtieth day

  ---

  ATC 4468

  before the day on which it received or receives the moneys that it so lends or otherwise expends,

the Commissioner shall issue to the applicant a certificate containing particulars of the loan and stating that the loan complies with this sub-section, but otherwise he shall refuse the application.

(3)...

(4) At the request of the applicant, the Commissioner may, by reason of special circumstances, apply paragraph (a) or paragraph (d) of sub-section (2) as if another period was, or other periods were, substituted for either or both of the periods referred to in the paragraph.

(5)...

(6) If the Commissioner refuses the application, he shall serve by post or otherwise on the applicant notice in writing that the application has been refused.''

The circumstances in which the applicant alleges it approached the Commissioner for certificates under sec. 128H can now be stated. The applicant was incorporated in the Australian Capital Territory on 3 January 1980. (As this date is less than sixty days prior to the borrowings the applicant will require the exercise by the Commissioner of a further discretion under subsec. 128H(4) above.) On 12 February 1980 the applicant was lent the sum of $A7,872,500 by the Adelong Memorial Society Limited, a company incorporated in the Colony of Hong Kong and having its registered office in that Colony. The effective rate of interest under the loan was 12.475% payable, in respect of the period ending 30 June 1980, on 13 February 1980 and thereafter annually on the anniversary of that date. Interest was payable outside of Australia in Australian currency. On 13 February 1980 the Adelong Memorial Society Limited lent the applicant the further sum of $A374,200 upon the same terms as to the rate of interest and the payment thereof as the first loan.

By a letter dated 26 August 1982 the Commissioner notified the applicant that it was required to remit to the Commissioner withholding tax deductions from interest paid to the Adelong Memorial Society Limited in respect of the years ending 30 June 1980, 1981 and 1982. The Commissioner enclosed certain documents with his notification which he described as an ``assessment'' but it was agreed that such was not a correct description, the documents being forms required to be completed by taxpayers when withholding tax is remitted. The Commissioner doubtless contemplated that thereby he was exercising his powers under subsec. 128C(7) of the Act. However nothing turns on the form of his notification on the aspect of the matter presently before me.

On 13 October 1982 the applicant wrote to the Commissioner enclosing an application for a certificate of exemption pursuant to sec. 128H in respect of each of the two loans. On a number of occasions subsequent to that date and prior to the commencement of proceedings on 11 February 1985 the applicant enquired when a decision could be expected in respect of its applications. The applicant says that it has provided further information required by the Commissioner from time to time but has not received any communication from the Commissioner since 9 April 1983.

In these circumstances the applicant commenced proceedings requesting a review by this Court of the Commissioner's failure to make decisions under subsec. 128H(2).

On 14 February 1985 the Commissioner filed his notice of objection to the competency of the application. The parties agreed that this objection should be determined in the first instance as a preliminary matter.

Counsel for the Commissioner contended that the decisions were not reviewable on two grounds. He relied in the first instance upon the dicta of the Full Court of this Court in
Minister for Industry and Commerce v. Tooheys Ltd. (1982) 42 A.L.R. 260 at p. 271 to the effect that the Judicial Review Act ``Generally... did not intend to confer a second remedy for the same wrong''. He submitted that the reason for excluding decisions such as the present from review under the Judicial Review Act was that a remedy was already available under the Act namely a review by a Taxation Board of Review or the Courts, such remedy being expressly made applicable to sec. 128H decisions by sec. 128P of the Act.

Counsel also contended that the particular decisions were expressly excluded by the words of para. (e) of Sch. 1. He said that the word ``assessment'' and the words ``process of

---

ATC 4469

assessment'' were general words of wide application and should not be confined to the particular technical meanings given thereto or defined in each of the enumerated Acts. Every decision made under the Act, he said, was at least preparatory to the assessment of taxable income and tax thereon.

In my opinion however neither of these submissions can be accepted and I find that the decisions which the applicant desires to have made are reviewable under the Act.

The particular passage in the Full Court reasons for decision in Tooheys' case at p. 271 is as follows:

``Our view that the Minister's decision in the present case does not fall within para (e) is reinforced by the fact that it is an evident purpose of para (e) to exclude from the classes of decision susceptible of review under the Judicial Review Act, decisions which adversely affect the citizen and which are reviewable on appeal generally to Boards of Review or the courts or both. Parliament intended the Judicial Review Act to provide a remedy to an aggrieved person to apply to this court for an `order of review' in respect of a decision of an administrative character made, proposed to be made or required to be made under Commonwealth statutory law. Generally, it did not intend to confer a second remedy for the same wrong.''

Counsel's submission was that as sec. 128P of the Act provided the applicant with an available and appropriate remedy, para. (e) should be construed as excluding the decisions from review under the Judicial Review Act. There are a number of grounds upon which I find this submission unacceptable.

In my opinion sec. 128P does not provide an alternative remedy available to the applicant in the present circumstances. It is in the following terms:

``(1) Subject to this section, the provisions of Division 2 of Part V apply to and in relation to a refusal by the Commissioner of an application for a certificate under this Division in like manner as they apply to and in relation to assessments and, for the purposes of those provisions as so applying -

• (a) a reference in those provisions to an assessment shall be read as a reference to such a refusal;
• (b) a reference in those provisions to a taxpayer shall be read as a reference to a person who has applied for such a certificate; and
• (c) the reference in section 190 to the assessment being excessive shall be read as a reference to the refusal of the application being unjustified.

(2) Upon a reference in accordance with this section to a Board of Review, the Board may either confirm the refusal of the application or direct the issue of a certificate.''

Division 2 of Pt V provides the means whereby a person dissatisfied with an assessment may have the assessment reviewed by a Taxation Board of Review or by the Courts on appeal.

In my opinion sec. 128P is not an appropriate alternative remedy available to a person in the position of the applicant. As a remedy it is only available when the Commissioner has refused the application for a certificate, and only upon such refusal is the applicant entitled to invoke procedures in Div. 2 of Pt V of the Act. Section 128P in no way assists the present applicant to obtain a decision from the Commissioner either to issue or refuse the certificates.

It is also my opinion that, even if sec. 128P did provide an alternative remedy, the Commissioner could not successfully contend that the dicta of the Full Court excluded the decision from review. The Full Court did not state, as counsel submits, that the existence of an alternative remedy meant that, in the instances referred to at least in para. (e), a particular decision is not reviewable. The Full Court of this Court in
D.F.C. of T. v. Clarke and Kann 84 ATC 4273 at p. 4276 made the following comment when a proposition akin to this was put to it:

``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 tax legislation. The absence of an alternative method of review under the income tax legislation may not be immaterial to a

---

ATC 4470

consideration whether a decision is within para. (e) but, in the circumstances, it is unnecessary to consider that question further.''

Furthermore in Tooheys' case the Full Court did not state that it relied upon this approach as the ground for determining whether or not the particular decision was reviewable. Rather it said that its view that that decision did not fall within para. (e) was ``reinforced'' by a reference to the evident purpose of the paragraph. As the decision was not reviewable elsewhere the Court saw this fact as reinforcing its view that it was reviewable under the Judicial Review Act and not excluded by para. (e) of the First Schedule. Counsel for the Commissioner sought to use the dicta as supporting the contrary proposition, namely that because the decision was reviewable elsewhere, para. (e) should be construed to exclude it from review under the Act. It is furthermore my opinion that the Full Court was doubtless also contrasting decisions which are reviewable generally, i.e. on the merits, by Boards of Review or Courts with decisions under the Judicial Review Act which are reviewable only for errors of law.

A conclusive answer to counsel's contention that the Judicial Review Act does not contemplate two remedies is to be found in sec. 10 of that Act, which expressly provides for such a situation. That Act acknowledges that rights conferred by it are additional to and not in derogation of other rights. However the Court has jurisdiction under that section to refuse relief when appropriate. Examples of circumstances which justify the Court refraining from reviewing decisions are to be seen in
Woss v. Jacobsen (Sheppard J. (1984) 56 A.L.R. 254 at p. 261 and an unreported decision of the Full Court delivered 5 June 1985) and
Perry v. Director of Public Prosecutions (an unreported decision delivered 31 May 1985). Section 10 is as an answer to counsel's submission in this matter, whilst not being applicable to the contrary situation in Tooheys' case where there was no alternative remedy. As sec. 128P is in this matter not an alternative remedy, D.F.C. of T. v. Clarke and Kann is authority for the proposition that such a lack is a ``not immaterial consideration'' in determining whether a remedy is excluded by para. (e).

The Commissioner's second contention was that the particular words of para. (e) applied to a decision under sec. 128H. He contended that the word ``assessment'' was a word of wide and general usage and covered every step in the collection of income tax which was the ultimate purpose of the Act. Likewise it would cover every step in achieving the end result of the other enumerated Acts and its meaning should not be confined to the technical sense prescribed in particular Acts. I cannot accept this submission. In the first instance the words of para. (e) indicate that the legislature is referring to assessments under particular Acts when it identifies the decisions as those ``making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax or duty... under any of the following Acts''. The emphasis has been added. In my opinion para. (e) directs attention to the decisions or procedures, frequently quite different, which each Act prescribes for the purpose of assessing or collecting tax or duty.

It follows that in this matter a decision which is excluded from review is any decision ``relating'' (to use a neutral word) to the assessment of tax in the sense or manner which the Act uses or prescribes to achieve that end. It is thus necessary to look to the Act for the purpose of determining what is meant by ``assessment'', and ascertaining what process it provides for making or leading up to the making of assessments. Subsection 6(1) of the Act defines ``assessment'', unless the contrary intention appears, as meaning ``the ascertainment of the amount of taxable income and of the tax payable thereon''. In this respect subsec. 128C(6) is most relevant, namely:

``(6) The ascertainment of the amount of any withholding tax shall not be deemed to be an assessment within the meaning of any of the provisions of this Act.''

Section 128P already discussed accepts that the ascertaining of the amount of withholding tax is not an assessment, but prescribes that if a certificate under sec. 128H is refused the refusal is treated as if it was an assessment for the purpose of review or appeal.

Division 11A therefore provides that the ascertainment of the amount of withholding tax is not an assessment in the sense in which that word is defined and likewise any steps leading

---

ATC 4471

up to the ascertainment of withholding tax are not steps leading to an assessment. It is however desirable to consider, notwithstanding this threshold obstacle, whether a decision under sec. 128H is a decision to which para. (e) refers on the assumption, contrary to my view, that it leads up to the making of an assessment.

In this regard it is necessary to consider the test enunciated by Ellicott J. in Tooheys' case at first instance and subsequent judicial consideration thereof. This test requires consideration to be given to the nature of the decision required to be made under sec. 128H. Ellicott J. said ((1981) 36 A.L.R. 64) at p. 77:

``In applying the provisions of para (e) of Sch 1 to the Review Act I think it is necessary to bear in mind the distinction between those provisions in a taxation Act which lay down the circumstances in which a liability to tax can arise and those under which the amount of tax is calculated or assessed in a particular case.''

Later on p. 78 he said in relation to the particular decision there under consideration:

``The making of it is not part of the process of calculation of duty nor is it, in my view, a decision which can properly be said to be a decision `leading up to the making' of the calculation of duty. The words `leading up to the making' are intended to point to decisions which have to be made, or, in the circumstances, it is appropriate to make, before the actual process of assessment or calculation can begin...

In other words, what para (e) is directed to is the process whereby the liability to tax or duty is calculated in a particular case. A decision to make a by-law or determination is a decision which affects liability. It is not a decision dealing with the calculation of liability. It is only in a temporal sense that it could be said to lead to the making of a calculation of duty, but in my view this is not enough.''

This reasoning and this last paragraph thereof was approved by the Full Court on the appeal reported in
Minister for Industry and Commerce v. Tooheys Ltd. (1982) 42 A.L.R. 260.

In my view this reasoning is exactly applicable to the present matter. The question whether or not a certificate will issue has nothing to do with the actual calculation or assessment of withholding tax. The issue of such a certificate is one of the matters which the applicant has to establish if it hopes to obtain exemption from liability for withholding tax.

For all these reasons it is my opinion that the Commissioner's failure to make a decision is reviewable by this Court under the Judicial Review Act.

The objection to competency is dismissed and the Commissioner must pay to the applicant its costs of and incidental to the objection to competency the same to be taxed if not agreed.

THE COURT ORDERS THAT:

• 1. The objection to competency be dismissed.
• 2. The respondent pay to the applicant its costs of and incidental to the objection to competency, the same to be taxed if not agreed.