RE THAI; EX PARTE DFC of T

Judges:
Davies J

Court:
Federal Court

Judgment date: Judgment handed down 9 May 1994

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Davies J

The petition for bankruptcy, which is brought by a Deputy Commissioner of Taxation, reads:-

``1. The debtor was at the date of the commission of the act of bankruptcy specified in paragraph 4 of this petition ordinarily resident in Australia.

2. The debtor is justly and truly indebted to me in the sum of $636,787.08 for unpaid income tax together with additional tax for late payment.

3. I do not, nor does any person on my behalf, hold any security over the property of the debtor or any part of it for the payment of the amount specified in paragraph 2.

4. The debtor, within six months before the presentation of this petition, committed the following act of bankruptcy, namely that on 17 September 1992 the debtor departed from, and remains outside Australia with the intention of defeating or delaying a creditor.''

The petition was presented on 26 November 1993.

The act of bankruptcy relied upon is that stated in s. 40(1)(c) of the Bankruptcy Act 1966 (Cth) which provides:-

``A debtor commits an act of bankruptcy in each of the following cases:

• ...
• (c) If, with intent to defeat or delay his creditors:
  • (i) he departs or remains out of Australia;
  • (ii) he departs from his dwelling- house or usual place of business;
  • (iii) he otherwise absents himself; or
  • (iv) he begins to keep house.''

Section 44(1) provides that a creditor's petition shall not be presented against a debtor unless the act of bankruptcy on which the petition is founded was committed within 6 months before the presentation of the petition.

The issue of ``intent to defeat or delay his creditors'' has been set apart for separate determination in a hearing listed for 16 and 17 June 1994.

It is not in dispute that if, with the prescribed intent, a debtor departs from Australia and remains out of Australia, he commits an act of bankruptcy on each day on which he so departed and so remains out of Australia. In
Re Alderson [1895] 1 QB 183 at 186, Vaughan- Williams J. stated that ``For a debtor to absent himself with intent to defraud or delay his creditors is a continuing act of bankruptcy''. See also
In Re Burrows: Ex parte Official Receiver v Steel [1944] 1 Ch 49 at 51 and
Re Cook (1946) 13 ABC 245 at 270.

The first issue raised by Mr C.J. Bevan, counsel for the debtor, is that paragraph 4 of the petition in its terms alleges a single act of bankruptcy commencing on 17 September 1992, which was more than 6 months prior to the presentation of the petition. Mr D.B. McGovern of counsel, with whom Mr A.J. O'Brien of counsel appeared for the Deputy Commissioner of Taxation, submitted that it was clear from paragraph 4 that the Deputy Commissioner of Taxation was relying only upon acts which occurred within 6 months before the presentation of the petition. Mr McGovern alternatively sought leave to amend the petition.

In my opinion, paragraph 4 of the petition relies upon an act or acts of bankruptcy which occurred within 6 months before the presentation of the petition. But it is somewhat confusing in form and should be amended to exclude the reference to the departure from Australia, which was outside the 6 months period. I regard the error as a formal defect or irregularity which can be amended under s. 306(1) of the Act, there being no injustice to the debtor by the amendment. I would give leave to amend the petition as proposed by Mr McGovern.

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ATC 4291

Mr Bevan further submitted that there was no debt.

On 2 September 1992, five notices of assessment were issued in relation to Mr Thai's taxable incomes for the years ended 30th June 1986, 1987, 1988, 1989 and 1990. In each case, the due date for payment specified in the notice of assessment was 3 September 1992. The notices were served on 2 September 1992, by being placed by an officer of the Taxation Office in the post office box which was the debtor's address for service for taxation purposes.

Regulation 170(1) of the Income Tax Regulations provides:-

``170(1) Any notice or other communication by or on behalf of the Commissioner may be served upon any person:

• (a) by causing it to be personally served on him; or
• (b) by leaving it at his address for service; or
• (c) by posting it by prepaid letter post, addressed to him at his address for service;

and in any case to which paragraph (c) applies, unless the contrary is proved, service thereof shall be deemed to have been effected at the time when it would, in the ordinary course of post, have arrived at the place to which it was addressed.''

Mr Bevan conceded that the notices were validly served on either 2 September or 3 September, treating the matter as if service had been effected under para. (1)(c) of reg. 170. For my own part, it appears to me that service was effected under para. (1)(b), for the notices were not posted but were left at a post office box which was the address for service. However, no issue arises from this.

Mr Bevan submitted that the notices of assessment were invalid and ineffective. Relevant provisions of the Income Tax Assessment Act 1936 (Cth) (``the Assessment Act'') read:-

``166 From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon.

...

174(1) As soon as conveniently may be after any assessment is made, the Commissioner shall serve notice thereof in writing by post or otherwise upon the person liable to pay the tax.

...

204(1) Subject to the provisions of this Part, any income tax assessed shall be due and payable by the person liable to pay the tax on the date specified in the notice as the date upon which tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice.

...

205(1) Where the Commissioner has reason to believe that a person liable to pay tax may leave Australia before the date on which the tax is due and payable the tax shall be due and payable on such date as the Commissioner notifies to that person.

...

206(1) The Commissioner may in any case grant such extension of time for payment of tax, or permit payment of tax to be made by such instalments and within such time as he considers the circumstances warrant; and in such case the tax shall be due and payable accordingly.

...

208(1) Income tax when it becomes due and payable shall be a debt due to the Commonwealth, and payable to the Commissioner in the manner and at the place prescribed.''

Mr Bevan submitted that, before s. 205 can operate, there must be served a notice under s. 204 which specifies a date upon which tax is due and payable, which is not less than 30 days after the service of the notice, or which does not specify a date, in which case the tax assessed shall be due and payable on the 30th day after the service of the notice. Thus, it was submitted that, until a notice of assessment has issued in accordance with s. 205, the Commissioner could not have reason to believe that the taxpayer ``may leave Australia before the date on which the tax is due and payable'' as s. 205 requires.

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ATC 4292

Mr McGovern submitted that the issue was not one with which the Court could deal. He relied upon s. 177(1) of the Assessment Act which provides:

``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 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.''

Mr McGovern referred to
DFC of T v Niblett (1966) 83 NSW (WN) 405 at 410 where Asprey J. included ``the dates upon which the tax was due and payable'' among those particulars the correctness of which could be conclusively established through the operation of s. 177(1) upon the production of a notice of assessment. He also relied on
McAndrew v FC of T (1956) 11 ATD 131; (1956) 98 CLR 263.

In my opinion, the due date for payment expressed in a notice of assessment is not a particular of the assessment which s. 177(1) makes conclusive. Sections 166, 167, 168 and 169 deal with the making of an assessment. In each case, the assessment is an assessment of the taxable income of the person assessed and of the tax payable. Those provisions appear in Part IV of the Assessment Act. The Assessment Act deals with the question of the date when the assessed tax is due and payable in Division 1 of Part VI.

Section 204 in Division 1 of Part VI makes it clear that a notice of assessment may or may not specify a date upon which tax is due and payable. By giving a legally binding result to the specification in a notice of a date upon which tax is due and payable, not being less than 30 days after the service of the notice, the Assessment Act confers a power upon the Commissioner in his discretion to specify such a date. If the Commissioner specifies a date less than 30 days after the date of service of the notice and does so in purported reliance upon s. 204, his act of specifying a date will be invalid and the notice will be treated as if no date had been specified. Section 204 will operate accordingly. But the incorrect specification of a date for service will not invalidate the assessment, for the specification of the date is not an act of assessment. It is an act taken in the collection and recovery of tax which has been assessed.

Section 206 confers a power on the Commissioner to grant an extension of time and, if the Commissioner exercises that power, s. 206(1) provides that the tax shall be due and payable accordingly. Section 205 confers a power upon the Commissioner to reduce the time for payment in the circumstance that the Commissioner has reason to believe that the person liable to pay the tax may leave Australia before the date on which the tax is due and payable.

The issues which arise under these sections are, in my opinion, questions which are not intended to be dealt with under the objection, review and appeal procedures. They are questions for a court of appropriate jurisdiction to consider should an issue arise as to the date when tax is due and payable. No doubt the production of a notice of assessment will carry with it a presumption of regularity so that, if a date is specified therein, there will be a presumption that it has been validly so specified. But if it is shown that the power conferred by s. 204 or the power conferred by s. 206 was not validly exercised, then a court will so hold.

A point raised in the present case is whether the s. 205 power may be exercised at the time of the issue of the notice of assessment or whether it may be exercised only after the issue and service of a notice of assessment, in which case it must be exercised by notice given otherwise than in the notice of assessment itself.

Mr McGovern relied on McAndrew's case at ATD 133-134, 136, 140; CLR 269-270, 274, 281 and
Batagol v FC of T (1963) 13 ATD 202 at 203-4; (1963) 109 CLR 243 at 251-2. In relation to the phrase ``liable to pay tax'' which appears in sections such as ss. 169 and 205, Mr McGovern submitted that the words are used to refer to an underlying liability to pay tax and not necessarily to the liability as fixed by the service of a notice of assessment. Mr McGovern referred to
Re Mendonca; Ex parte Commr of Taxation (1969) 15 FLR 256 at 259;
Commr of Stamps (WA) v West Australian Trustee, Executor and Agency Co Ltd (Mortimer Kelly's Case) (1925) 36 CLR 98 at 102, 104-5; and
Taylor v DFC of T 87 ATC 4441; (1987) 16 FCR 212.

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ATC 4293

Mr Bevan submitted that the Assessment Act was a taxing Act and, accordingly, ought to be read with all due technicality, weight being given to the principle that a person should not be held liable to a taxable charge unless it was clear from the enactment that the taxable charge was so imposed. See eg
Coltness Iron Company v Black [1881] 6 App Cas 315 at 330;
Russell v Scott [1948] AC 422 at 433 and, more generally, Whiteman on Income Tax, 3rd ed., at 44-45.

However, the Assessment Act, like any other Act, must be given effect according to the words which it uses. If its intention is clear from its terms, the Act must be so interpreted. It should also be remembered that ss. 204, 205, 206 and 208 appeared in the Assessment Act when it was first enacted in 1936. It was not then a statute of great technicality. It laid down a structure for the assessment of income and of taxable income. Many of the provisions, such as s. 25(1) and s. 51(1), have been given a wide meaning so as to give effect to the intent of the enactment.

I approach the issue in the same manner as did Dixon J. in
Resch v FC of T (1942) 6 ATD 203; (1942) 66 CLR 198. The Court was there concerned with an amended assessment which had issued under the Income Tax Assessment Act 1922 (Cth). Section 54(1) of that Act provided that income tax should be due and payable 60 days after service of a notice of assessment. Section 55(a) of that Act empowered the Commissioner to extend the time for payment as he considered the circumstances warranted. In a notice of amended assessment, the Commissioner stated that ``This tax may be paid without fine up to 17th June 1931''. This date was just outside the 60 day period of which s. 54(1) spoke. At ATD 222; CLR 228, Dixon J. said:-

``It appears to me that he [the Commissioner] exercised the power given to him by s. 55 of extending the time for payment as he considered the circumstances warranted it. That power resided in him at the time when he made the original assessment, and there is nothing in the section to support the view that his power arises only after an assessment has been made and served by post. The desire to fix a day so as to obtain complete certainty is a reason which is not foreign to the discretion given to the Commissioner by s. 55.''

In my opinion, s. 205 should be given a similar interpretation so as to authorise the Commissioner to specify an early date for payment in the notice of assessment which is served. That interpretation requires reading the words ``is due and payable'' in the sense of ``will be due and payable''; but obviously the section is speaking of a time prior to the time when payment will be due. Therefore, the interpretation is an appropriate one.

Neither party called evidence as to whether the Commissioner had or had not reason to believe that Mr Thai may leave Australia. The onus would seem to be on the party seeking to challenge the regularity of the notices of assessment to call evidence to the contrary. That was not done. The evidence that an officer of the Taxation Department personally delivered the notices to the address for service on the day that they were issued and the further evidence that the debtor left Australia shortly thereafter on 17 September 1992 leads to an inference that the Commissioner acted under s. 205 of the Assessment Act when specifying the date of 3 September 1992. Indeed, absent evidence to the contrary, the specification of that date would of itself lead to that view.

If the specification of the date was invalid, the effect would be that s. 204 would operate as if no date had been specified in the notice of assessment and, accordingly, the tax would have been due and payable on the 30th day after the service of the notices of amended assessment.

For these reasons, I would dismiss all the objections raised to the petition save that which is listed for separate hearing on 16 and 17 June 1994. The debtor should pay the costs of this hearing. The costs of the proceeding should otherwise be reserved until after the determination of the separate question.

THE COURT ORDERS THAT:

1. Leave to amend the petition is granted.

2. All objections raised to the petition are dismissed save that which is listed for separate hearing on 16 and 17 June 1994.

3. The debtor should pay the costs of the hearing, it being noted that the costs of the proceedings should otherwise be reserved until after the determination of the separate question.

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ATC 4294

4. Counsel should bring in short minutes dealing with any procedural steps necessary for the hearing of the separate question.