Commonwealth of Australia v. Opiel.

Judges:
Enderby J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 19 December 1986.

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Enderby J.

This matter comes to the court as a stated case pursuant to sec. 101 of the Justices Act.

The relevant facts briefly are as follows:

On 3 April 1978 the Deputy Commissioner of Taxation issued and served on the defendant a notice of assessment in respect of income tax. He claimed an amount of tax payable, after various adjustments and credits, of $2,054.85. The defendant did not pay the $2,054.85.

On 23 April 1979 the Deputy Commissioner issued and served a notice of amended assessment. It stated that the defendant was entitled to a refund of $2,227.25 and that amount was paid to the defendant.

The notice of amended assessment recited in the column headed ``Balances and Adjustments'' that an amount of $172.40 was a credit, an amount $2,054.85 was a debit and the amount of $2,227.25 was a credit.

The plaintiff's claim before the magistrate was for the recovery of money paid to the defendant by the plaintiff under a mistake of fact, or alternatively, a claim for the recovery of money paid to the defendant out of consolidated revenue without lawful authority. I was referred to sec. 83 of the Constitution.

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ATC 5015

The alternative claim was made pursuant to the well known principles stated in
Auckland Harbour Board v. The King (1924) A.C. 318. The amount claimed was the $2,054.85 which was in error included in the $2,227.25 refund paid to the defendant. The magistrate found that the refund figure of $2,227.25 was clearly an error. He also found that the descriptions of debit and credit given to the two other items in the amended assessment had to be wrong.

It is not certain how the error or mistake was made although it seems the reality is that the Deputy Commissioner, in deciding on a ``refund'' of $2,227.25 had overlooked the fact that the $2,054.85 had not been paid by the defendant. The Deputy Commissioner had arrived at the figure of $2,227.25 on the assumption that it had been paid. This seems to have been the initial error although it is not entirely clear.

Before the proceedings had begun there had been an amendment to the plaint. The amendment deleted the name of the plaintiff ``Deputy Commissioner of Taxation'' and substituted the ``Commonwealth of Australia''.

I was told in the hearing before me that the amendment to the plaint was made because the Deputy Commissioner was only entitled to sue for amounts owed to him pursuant to the Income Tax Assessment Act and it was said that the amount claimed was not so owed. It was said that the Commonwealth of Australia was the only party who could sue to recover the $2,054.85.

Both the notice of assessment and notice of amended assessment were tendered in evidence before the magistrate.

Notwithstanding that it was clear that $2,054.85 was owing, on the evidence before him, the magistrate declined to hold that it was so and that it was included in the $2,227.85 and that it had been paid under a mistake of fact. He stated his opinion that the claim stood or fell on the determination of the question of whether the payment had been made as a mistake of fact and he said:

``... (xi) Were it not for the provisions of s. 177(1) (of the Income Tax Act) I could have inferred... that the defendant received the subject sum of $2,054.85 due to a mistake of fact.''

He found however that sec. 177(1) governed the situation and that it made the Notice of Amendment conclusive evidence not only of the making of the amended assessment but also of the correctness of the amount of the refund in the amended notice. He said that the amended assessment took the place of the original assessment. He found that the alternative way of presenting the claim did not avail the Commonwealth because as he said:

``... if it was established that the $2,054.85 was paid under a mistake of fact, then it would follow that it was `paid' out of consolidated revenue without authority...''

Further:

``The claim stood or fell on the determination of the question of whether a payment under a mistake of fact had been established.''

He thus did not consider the alternative basis for the claim and found against the plaintiff because of his opinion about the conclusiveness given by sec. 177(1).

He noted that the Deputy Commissioner could have availed himself of the powers given by sec. 170(3) to amend again but had not done so.

Section 177 of the Income Tax Assessment Act 1936 in the following terms:

``Evidence

177(1) 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 on appeal against the assessment) that the amount and all the particulars of the assessment are correct.

(2) The production of a Gazette containing a notice purporting to be issued by the Commissioner shall be conclusive evidence that the notice was so issued.

(3) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy

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ATC 5016

Commissioner, shall be conclusive evidence that the document was so issued.

(4) The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment, shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced.''

It requires that the meaning of assessment be considered and the definition is in sec. 6 and is in the following terms:

```assessment' means -

• (a) the ascertainment of the amount of taxable income and of the tax payable thereon...,''

Section 173 makes an amended assessment an assessment for the purposes of the Act.

I say at the outset that, in my opinion, sec. 177(1) was never intended by the Parliament to have the consequence contended for by the defendant in this case. However, the question remains, intended or not, whether that consequence must follow if the subsection is properly construed.

The first point to note is that the conclusiveness referred to in sec. 177(1) is confined to the making of the assessment and to the amount of the assessment and to the particulars thereof. It does not expressly extend to an amount claimed to be payable in a notice or an amount said to be refundable. It is an evidentiary section. It makes the production of the notice conclusive evidence of the making of the assessment and the correctness of the amount of the assessment and the particulars given thereof.

As I read the stated case, the learned magistrate came to the opinion that sec. 177(1) prevented him from considering the question of mistake when the $2,054.85 was paid out as part of the refund and he gave effect to that opinion. He found that sec. 177 made it conclusive that the $2,227.25 refund owing to the taxpayer was correct and it followed that the $2,054.85 had either been received from the defendant or had otherwise been properly included in the refund.

His findings thus raise the question of whether sec. 177(1) has such an effect in relation to a stated refund where it is shown in a notice of an amended assessment.

A not dissimilar question was considered by Hunt J. in
D.F.C. of T. v. Clyne 82 ATC 4070. In that case, the taxpayer had argued that a notice of assessment which had showed an amount of provisional tax due for the previous year as a credit, when it had not in fact been paid, was binding by the Deputy Commissioner, and constituted an admission by the Deputy Commissioner that he had either received it or that for some reason or other he no longer claimed it. It was argued that the stated provisional tax was a particular within the meaning of sec. 177(1).

At p. 4071 Hunt J. said:

``... But... `particulars of the assessment' do not, in my view, include the `CREDIT' with which we are presently concerned. What the Commissioner is bound by sec. 166 to assess is the amount of the taxable income and the amount of the tax payable thereon. These amounts are the only `particulars of assessment' to which sec. 177 refers. This means that the `TAXABLE INCOME' stated at the top of the Notice and the figure in the first column under the heading `Tax Assessed' are conclusively established by the production of the Notice. It is also submitted by the Deputy Commissioner that the particulars stated of any additional tax imposed by way of penalty for a late or an incorrect return would similarly be conclusively established also: see
Richardson v. F.C. of T. (1932) 48 C.L.R. 192, at pp. 202-204 and 215. That submission may well be correct. But none of the other items on the Notice which form part of the equation leading to the end balance payable is a particular of the assessment which attracts the evidentiary provisions of sec. 177. They might perhaps in circumstances be properly described as particulars of the notice, but they are not, in my view, particulars of the assessment itself. And it is only the latter category of particulars which comes within sec. 177.''

His Honour's words are particularly apt in the case I am considering.

I was also referred to a number of other authorities which included Auckland Harbour
Board v. The King (1924) A.C. 318;
Commonwealth of Australia v. Burns (1971) V.R. 825;

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ATC 5017

Batagol v. F.C. of T. (1963) 109 C.L.R. 243;
Commonwealth of Australia v. Crothall Hospital Services (Aust.) Ltd. (1981) 36 A.L.R. 567;
Kelly v. The King (1902) 27 V.L.R. 552;
Attorney-General v. Gray (1977) 1 N.S.W.L.R. 406;
Dorney v. F.C. of T. 80 ATC 4206; (1980) 1 N.S.W.L.R. 404;
F.J. Bloemen Pty. Ltd. v. F.C. of T. 81 ATC 4280; (1980-1981) 147 C.L.R. 360 and
Holt v. Markham (1923) 1 K.B. 504. These cases concern the right to recover money paid illegally and without authority, the nature and meaning of ``assessment'' and the operation of the principles of estoppel. There is some light shone on sec. 177(1) in Kelly v. The King and in Dorney v. F.C. of T. and F.J. Bloemen Pty. Ltd. v. F.C. of T. but in my opinion, there is nothing there that is binding on me that goes against the arguments put by Mr Bloom, who appears for the plaintiff.

The essential questions for me are does sec. 177(1) apply to the stated refund and is the stated refund within the expression ``the amount of the assessment'' or ``the particulars of the assessment'', and does its proper operation prevent the magistrate making the finding he was asked to make which he almost certainly would have made had he not decided sec. 177(1) prevented him. The two assessments read together reveal the mistaken belief that the defendant had paid the $2,054.85 to the Deputy Commissioner and how it was wrongly refunded to the defendant.

In my opinion sec. 177(1) does not have the effect of making what is so obviously a mistake of this kind, not a mistake, or not provable as such in proceedings. There is no effect produced by sec. 177(1) that prevents it being considered and found to be a mistake. I am of the opinion that although the amended notice can ordinarily be regarded as taking the place of the original notice (as stated by the magistrate) on the facts in this case, it is permissible to look at both with the fact of non-payment for the purpose of discovering the mistake. The original notice shows $2,054.85 as owing and it was never paid. It can still be sued for notwithstanding the mistake about it being wrongly believed to have been paid and the appearance of confirmation given to that mistake by the notice of amended assessment. The original notice did in the second notice.

I find that the magistrate, with the two notices before him, was not prevented by the operation of sec. 177(1) from considering whether the $2,054.85 as a part of the refund, had been paid to the defendant under a mistake of fact. Contrary to what he states in para. (xi) of the stated case that he was prevented by sec. 177(1) from finding mistake, and in para. (xiii) that he was bound by the conclusiveness of the figures in the amended notice and that the conclusiveness overrode the facts which he could otherwise have inferred, I find that he could and should have done so.

As Hunt J. pointed out in D.F.C. of T. v. Clyne, what the Commissioner is bound by sec. 166 of the Act to assess, is the amount of the taxable income and the amount of the tax payable thereon. It is the taxable income and the tax assessed on it and the particulars thereof that are made conclusive by sec. 177(1).

It should be remembered that an amended assessment is assessment for the purposes of the Act only and that it is sec. 172 that deals with refunds. Section 172 is in the following terms:

``Where, by reason of an amendment, the taxpayer's liability to tax... is reduced... the Commissioner shall refund any amount overpaid...''

Any reduction in liability that occurred in this case did not produce the amount of the refund. The amount of $2,227.25 was arrived at because a mistake had been made in believing the original ``amount payable'' had been paid.

There remains the alternative claim for repayment of the $2,054.85 because it is said the refund was made from consolidated revenue illegally and without lawful authority. It was this alternative claim that gave rise to the amendment to the plaint.

Mr Dillon for the defendant has argued that the payment of the refund was made with lawful authority and he has pointed to several statutes of general operation. None deal with payments made by mistake or without authority.

As I have stated, sec. 172 is the source in the Income Tax Assessment Act of the power to make a refund and it relates to amounts overpaid. There was no overpayment by the taxpayer within the meaning of that section.

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ATC 5018

There was thus no authority to pay the $2,054.85 to the defendant. This alone is enough to find against Mr Dillon's submissions even without accepting Mr Bloom's wider set of propositions which I also consider to be valid.

I find the magistrate was in error in the views he came to regarding the scope of sec. 177(1) and I find that he could and should have proceeded to find that the money was paid out by the plaintiff through its agent the Deputy Commissioner under a mistake of fact and that it was paid to the defendant by the Commonwealth without lawful authority.

I make the order asked for in para. 1 of the summons.

Mr Bloom suggested at the end of his submissions that in the event I came to the opinion that the plaintiff should succeed that I should make the necessary order myself. The question was not argued and I am not satisfied at this stage this can or should be done and I remit the case to the magistrate. Should the parties wish it to be argued, I give leave to apply.

I would answer the questions in para. 4 of the stated case as follows:

• 1. Yes
• 2. Yes.
• 3. Yes.
• 4. Yes.
• 5. Yes.

The defendant will pay the plaintiff's costs.