Administrative law - ludicial review - decision by Commissioner ot Taxation that notices ot obiection invalid as lodaed outside statutorv time limit - time limit expressed to run from date of service of notice of assessments - evidence of taxpayer as to date of serwice not accepted by Commissioner as sufficient to displace statutory deeming provision - summary of principles applicable to review under Administrative Decisions (Judicial Review) Act - need to establish one of the grounds in s.5 Administrative Decisions iJudicial Review) Act 1977 ss.5, 16 Income Tax 'Assessment Act 1936 s.185 Income Tax Requlations reas.29, 59 HENRY GEORGE JOHNSON v. THE COMMISSIONER OF TAXATION No. WA G7 of 1986 TOOHEY J. PERTH 24 APRIL 1986 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. WA G7 of 1986 wee ew BETWEEN: HENRY GEORGE JOHNSON Applicant and THE COMMISSIONER OF TAXATION Respondent MINUTE OF ORDER JUDGE MAKING ORDER: TOOHEY J. DATE OF ORDER: 24 April 1986 WHERE MADE: Perth THE COURT ORDERS THAT: 1. The application is dismissed. 2. Liberty to the respondent to apply on the question of costs. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTFALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION BETWEEN: HENRY GEORGE JOHNSON Applicant and THE COMMISSIONER OF TAXATION Respondent CORAM: TOOHEY J. 24 April 1986 REASONS FOR JUDGMENT This 1s an application under the provisions of the Administrative Decisions (Judicial Review) Act 1977. The decision sought to be reviewed is one by the Commissioner of Taxation that two notices of objection adaainst assessment of income tax were not valid because they were not posted to or lodged with the Commissioner within sixty davs after service of notices of assessment to which the obiections related. The story 1s a relatively simple one though it has some curious aspects. The applicant Henry George Johnson 1s not the taxpaver to whom the notices of assessment related. The assessments were addressed to his daughter Lynette Annandale. They related to trusts apparentiv established by Mr. Johnson in 2. which Mrs. Annandale was a benericiary toa very substantial extent although 1t 1s not clear whether in fact she received anv income from Che trusts. These are not matters with which the Court 1s presently concerned except as part of the background to events qiving rise to this application. Darrell Barrey Paull is a public accountant practising in Gosnells. His practice relates mainiy to the preparation of income tax returns for salary and wage earners and for small partnerships. He was engaged by Mrs. Annandale to prepare her uncome tax returns for the years ended 30 June 1984 and 1985. Her income. as returned for those years, was quite modest. Mr. Paull played no part in the preparation of Mrs. Annandale''s returns for the vears ended 30 June 1979, 1980 and 1981. However. assessments relating to each of those years were sent to Mrs. Annandale care of Mr. Paull at his office in Gosnells. Presumably that was done because, at the time those assessments were issued, Mr. Paull had furnished returns for Mrs. Annandale in respect of 1984 and 1985 so that his name appeared in Mrs. Annandale's file. Requlation 59 of the Income Tax Requlations reads: "59 Any notice or other communication by or on behalf of the Commissioner may be served upon any person - {a) bv causing it to be personally served on him; or (b) by leaving it at his address for service; or (c) by posting it by pre-paid letter post, addressed to him at his address for service; and in any case to which paragraph (c) of this requlation applies, unless the contrary 1s proved, service thereof shall be deemed to have been effected a ab the time when it would, in the ordinary course of post, have arrived at the place to which it was addressed." While Mr. Paull's office was undoubtedly Mrs. Annandale's address for service in regard to her 1984 and 1985 returns. 1t could not have been the address shown on her earlier returns. However no point was made of this by the applicant because rea.29 identifies as the "address for service" the address for service last qiven to the Commissioner. It was an aqgreed fact, for the purposes of the hearing, that notices of assessment were posted on 26 February 1985, that those notices were addressed to the taxpayer's address for service and that in the ordinary course they would have been served upon the taxpayer on 27 or 28 February. Section 185 of the Income Tax Assessment Act 1936 provides that a taxpayer, dissatisfied with an assessment, may within 60 days after service of the notice of assessment, post to or lodge with the Commissioner an objection in writing. Mr. Paull claimed that, notwithstanding the issue date of 26 February 1985 shown on each of the assessments, they were not received by him until "on or about 9th April". Mr. Paull had no system of date stamping or otherwise recording incoming mail and mail was opened by him, his employed accountant or his secretary. In evidence he said that when he received the assessments he took no particular notice of the issue date which was only brought to his attention during the telephone conversation with Mr. Johnson mentioned later in these reasons. I have some difficulty in accepting this statement. The amounts shown to be payable for each of the three years were $33,344.81, $46,458.01 and $46,991.44 respectively. Mr. Faull himself said that most of his clients did not have a taxable income of $47,000. Furthermore. not only was the issue date more than a month earlier; the amounts were due and pavable on 29 March 1985, a date that had then passed. I think it more likely that Mr. Paull was not aqreatly concerned about the implications of the assessments at first since the relevant tax returns had not been prepared by him and he did not see himself as responsible for them. Mr. Paull said that, on receipt of the assessments, he asked his staff to telephone Mrs. Annandale at home. They tried to do so over two or three days but were unsuccessful. They then tried to contact her at her place of employment in Willetton but were told that she no longer worked there. Mr. and Mrs. Annandale were not living together but Mr. Paull asked his secretary to ring Mr. Annandale, which she did. Mr. Paull told Mr. Annandale that he was trying to get in touch with his wife. Mr. Annandale said that he would contact her and qet her to ring Mr. Paull. Mr. Paull did not hear from Mrs. Annandale so on 1 May he wrote to her at her home address asking her to contact him regarding her returns for 1979 to 1981. A photocopy of the relevant assessments and adjustment sheets was attached to the letter. Two or three days later Mrs. Annandale rang Mr. Paull to say that she did not know about the trusts mentioned in the adjustment sheets. She said that the reference to Johnson Transport Trust and Jack Johnson Family Trust must be a reference to her father with whom she was not on speaking terms. Mr. Paull mn asked Mrs. Annandale Eo qet her tather to ring him and Mr. Johnson canay a couple of davs later. Ourina that conversation Mr, Johnsen asked Mr. Faull when he had received the assessments. Mr. Paull replied "About four weeks ado". Mr. Johnson placed the matter in the hands of his leqal adviser and a notice of objection was prepared in regard to the 1979 and 1980 assessments. No obiection was taken to the 1981 assessment. The obiections were lenathy and detailed. They were provided to Mr. Paull who lodged them with the Australian Tax Office. in each case toqether with a statutory declaration made 23 May 1985 reciting that he received the assessments on or about 9 April and referring to his attempts to contact Mrs. Annandale. The contents of the statutory declaration are consistent with the evidence qiven by Mr. Paull though not in the same detail. In particular, thev offer no basis for the assertion that the assessments were received on or about 9 April. Asked in evidence whether there was any particular reason for selecting 9 April as the date on which the assessments were received, Mr. Paull answered: "When Mr. Johnson rana me and asked me when I have received them, I said about four weeks aqo. And he said, well could you be precise and that is when I worked back four weeks from whenever I was speaking to him from and said on or about that date. I had tried for two or three days to aet Mrs. Annandale and then her husband on a couple of days and a couple of weeks before I had written to her, so that was about the time it took. And I calculated that back from my discussion with Mr. Johnson". The Commissioner declined to treat the notices of obiection as having been lodged in compliance with s.185 of the Assessment Act. Implicit in this rejection is that there had been no proof to the contrary in accordance with req.59. The applicant seeks to review that decision. Although he 1s not the taxpayer to whom the assessments related, it seems that he 1s the person who will bear the responsibility for any income tax that may be payable. The respondent acknowledged that the applicant was a person "agarieved" by the decision within the meaning of sub-s.5(1) of the Judicial Review Act. The respondent also conceded that the decision the subject of the application was a decision to which the Act applied. The Judicial Review Act has been in operation for more than five years and in manv respects the nature and scope of the legislation have been clarified by judicial decision. However, having regard to the way in which this application was presented and resisted, it seems necessary to restate a few basic principles. The Act has been described as "but one of a package of four federal statutes - collectively known as 'The New Administrative Law' - which have established, in the federal jurisdiction, a real system of institutions designed to provide for effective review of administrative action" (Hotop, Principles of Australian Administrative Law 6th ed. 326). The other statutes are the Administrative Appeais Tribunal Act 1975, the Ombudsman Act 1976 and the Freedom of Information Act 1982. Each Act serves a different purpose. Of the four statutes comprising the package, the Administrative Appeals Tribunal Act 1s the closest 1n operation ta the Judicial Review Act. The former empowers the Administrative Appeals Tribunal to review decisions made in the exercise of powers conferred bv enactments, including those enactments mentioned in Schedule 1 to the Act. A review bv the Tribunal is a review on the merits and the question for the Tribunal 1s whether the decision under review was the correct or preferable one on the material before it, not on the material before the decision-maker. Re Becker and Minister for Immiqration and Ethnic Affairs (1977) 32 F.L.R. 469; Drake v. Minister for Immigration and Ethnic Affairs (1979) 46 F.L.R. 409; Nevistic v. Minister for Immigration and Ethnic Affairs (1981) 51 F.L.R. 325. The function of the Federal Court under the Judicial Review Act is to review the legality, not the merits, of administrative decisions and the Court does not substitute its own decision for that of the decision-maker. Hamblyn v. Duffy (1981) 50 F.L.R. 308; Turner v. Minister for Immigration and Ethnic Affairs (1981) 55 F.L.R. 180; Sean Investments Pty. Ltd. v. MacKellar (1981) 38 A.L.R. 363; Borkovic v. Minister for Immigration and Ethnic Affairs (1981) 39 A.L.R. 186. The reasons why I have thought it necessary to restate these basic principles are two-fold. First, in the course of his final address, counsel for the Commissioner was disposed to say that the outcome of the application was virtually dependent upon the view taken by the Court of Mr. Paull's evidence, in particular his evidence as to the date of receipt of the assessments. Counsel resiled from that position later. Second, counsel for the 8. applicant submitted in effect that his client did not have to bring himself within one of the grounds in sub-s.5(1) of the Judic1ral Review Act, as 1f the powers conferred on the Court by s.16 did not depend upon establishment of one of the qrounds in 5.5. £ rejyect both approaches to the legislation. The Court does not sit as a court of appeal From the decision-maker and there 1S no appeal by wav of rehearina. A person who invokes the Judicial Review Act must bring himself within one of the qrounds in s.5, at any rate where he claims to be a person aaqarieved by a decision as opposed to conduct as described in s.6. The qrounds in s.5 focus on the decision and the c1rrcumstances surrounding its makina. The Court may review the decision onany of those grounds. The Court 1s not empowered to review the decision on the Merits except in the sense that it may hold that there was no evidence or other material to justify the making of the decision or that there was an exercise of power so unreasonable that no reasonable person could have so exercised the power or perhaps in the limited way arising from some of the other grounds. The Court is not empowered to substitute its own decision. The applicant does not succeed in the present case merely by callina evidence which, if accepted by the Court, would show that the assessments were not served until 9 May or thereabouts, with the consequence that the obiections were lodged in time. The applicant must persuade the Court that the decision-maker erred on one of the grounds in sub-s.5(1). That 1s not to say that an applicant may not qive evidence of events Ls leading up to fhe makina of a decision: and sometimes an applicant. without obiection, gives evidence qoina te the merits or the decision. Put, before exercising anv powers under 5.16, the Court must be satisfied that one of the arounds in sub-s.5(1) has been made out. As already mentioned, rea.59 of the Income Tax Requlations deals with service of notices by the Commissioner, deeming service to have been effected at a particular time "unless the contrary is proved". The use of this expression is somewhat curious, suggesting as it does a hearina before a court or tribunal. The Income Tax Assessment Act contains many references to the Commissioner being "satisfied" about a particular matter and that lanquage is understandable having reqard to the administrative steps with which the Act deals. But the reference in req.59 to proof creates difficulties. It is no doubt possible in legal proceedings to test the application of the expression to particular circumstances. But in my view it is not within the jurisdiction of the Court under the Judicial Review Act to make a positive finding that a taxpayer has proved the contrary for the purposes of req.59, at any rate without first having set aside the decision under challenge by reference to one of the grounds in sub-s.5(1). It may then be appropriate, in exercise of the powers conferred by para.16(1)(c), to declare the rights of the parties by reference to that requlation. This rather long excursus has been necessary in order to reach the heart of the matter viz. the decision by the Commissioner that the notices of objection were invalid because 10. thev failed to comply with s.185 of the Income Tax Assessment Act. While the Commissioner was the nominal decision-maker, the officer most directly concerned with the matter was Mrs. Susan Owen from the compliance section. Mrs. Owen first became involved with the matter when she received a telephone call from the applicant's legal adviser on 17 Mav 1985. She was told that Mr. Paull had not received the assessments until on or about 9 April 1985 and = she checked the departmental records to ensure that the date of assessment was 26 February as she had been told in the telephone call. She also checked Mrs. Annandale's file to ensure that there was no indication of the assessments having been returned from another address: there was no evidence to suaqgest that this had happened. On 6 June 1985 the respondent wrote to the applicant's leqal adviser, drawing attention to req.59 and pointing out that, unless proof was provided that the taxpayer was not served in the erdinary course of post, the objections would not be accepted as valid. At that time neither Mrs. Owen nor Mr. Davy, the officer who drafted the letter, had seen the statutory declaration by Mr. Paull which accompanied the notices of objection. Nevertheless, Mrs. Owen confirmed in evidence that the notices and statutory declaration were received by the Australian Tax Office on 30 May. This points up the need to identify in an application under the Judicial Review Act the precise decision sought to he reviewed and the date of that decision. If the letter of 6 June 1985 was a decision rejecting the notices of objection, the applicant's case would be a simple one. It would be that the li. decision was made without anv regard to the statutory declaration, hence an improper exercise of power in that the decision-maker tarled to take a relevant consideration into account (para.5(2)(b) of the Judicial Review Act). But that was not an araument advanced by the applicant: the way the matter was put by counsel in opening was as follows: "Your Honour, there were various items of correspondence with the Deputy Commissioner of Taxation in this matter and they eventually led up to a decision on 11 October 1985 confirming an earlier decision not to accept the objection as valid". Much cross-examination was directed to Mrs. Owen by reference to the statutory declaration and the weight attached to that document by her, cross-examination that would have been entirely unnecessary had there been an attack on the letter of 6 June asa decision. Of course the applicant's advisers may not have been aware of the fact that the statutory declaration had not been taken into account by the respondent when the letter of 6 June was written, but the point emerged in examination-in-chief of Mrs. Owen. On that approach, the applicant may have placed himself in an unnecessarily difficult position. But that, I think, is explicable because of the terms of the letter of 6 June and the ambulatory nature of reg.59. The process of proving the contrary in terms of that requlation may take place over many weeks, involving an exchange of correspondence on both sides and possibly oral representations. No doubt for that reason the applicant 12. took as the relevant decisz1on the letter otf 11 October, the first paraaraph of which reads: "Further to vour letter of 12 September 1985, it 1s hereby confirmed that as the obiection notices aqainst the 1979, 1980 and 1981 assessments of the abovenamed taxpaver have not been accepted as valid objections, the Commissioner cannot subsequently amend to reduce the taxpaver's liability to correct a mistake of law". That letter was preceded by a letter from the Commissioner to Mrs. Lynette Calautti care of Mr. Paull at his Gosnells office and dated 1 August 1985. Mrs. Annandale was then Mrs. Calautti. It appears that the letter was not received by Mr. Paull and, in response to a request from him, a copy was sent to him in September. That letter itself contains a decision in these terms: "The letter received in this office on 30 May 1985 cannot be treated as a valid objection as the period allowed for lodament expired on 27 April 1985". The reference to "letter" was a reference to the notices of objection and accompanving statutory declaration, the term letter being used to make clear the Taxation Office's stand that notices of obiection in accordance with the Act had not been received. The picture is thus a confusing one. But, having regard to the way in which the applicant's case was presented, I have no choice but to take the letter of 11 October as the relevant decision. It is clear from Mrs. Owen's evidence that, at the time the letter of 11 October was written, she had before her the bh lat statutory declaration and letters written bv the applicant's leaal adviser. Mrs. Gwen was a clear and frank witness and I accept her testimony. She said that she considered the contents of the statutory declaration but concluded that Mr. Paull "was trying to recollect, or relying on his memory for the date of receipt". She considered that the statutory declaration was not proof to the contrary within req.59 because "the declaration seems to suagest that he relied on his memory that there would not have been proper records indicating the actual date of receipt". There was an attempt in cross-examination to sugqdest that Mrs. Owen had a particular objection to trust stripping and that this was an important reason for her decision not to accept the objections. Mrs. Owen rejected the suggestion and I accept her rezection. It was also put to her that she had not appreciated the force of a statutory declaration, having regard to the penalties imposed by the Statutory Declarations Act 1959 on a person who wilfully makes a false statement in a statutory declaration. Mrs. Owen said that she was aware that there were penalties for making false declarations though she did not know precisely what thev were. In the end, it seems to me, Mrs. Owen was saying that Mr. Paull appeared to he relying on his memory of the date of receipt of the assessments, that he was not specific as to the actual date, and that in the absence of records he should have provided additional evidence such as a statement from his secretary or a letter from the postal authorities explaining the delav. 14. It was put to Mrs. Owen in cross-examination that' she fFalled ta have reaard to the status of Mr. Paull as an associate ef the Australian Society of Accountants and asa certificated practising accountant and as well his position as a Commissioner for Declarations. Mrs. Owen's reply was that she was not aware of these matters but that she did not consider it was for her to enquire as to Mr. Paull's position. I see nothing wrong in that approach. Regulation 59 casts an onus upon the taxpayer and it is for the taxpayer to decide how much material to present to the Commissioner, though if there is some lack of clarity in the material, it may be unreasonable for the Commissioner not to seek clarity. There 1s only one other matter in Mrs. Owen's evidence to which reference need be made. She was asked about the fact that a copy of the Commissioner's letter of 1 August 1985 was sent to the applicant's legal adviser and it was put to her that this implied acceptance of the fact that the original had not been received. Mrs. Owen's response, which I accept, was that the issue of a copy of a letter did not affect any decision and was not crucial to any determination. Although there are some curious aspects of Mr. Paull's evidence, I am prepared to accept his testimony that the assessments were not received until 9 April 1985 or thereabouts, in particular that they were not received until a date which allowed the notices of objection to comply with s.185 of the Income Tax Assessment Act. Why the assessments took so long to 15. reach him was simply unexplained. Mr. Paull was cross-examined with a view to showing that he could not be certain of the date on which he received the assessments. But it was not put to him that he did receive them at the time he would have received them in the ordinary course of post. However, to find as I have just found does not conclude the case for the applicant; indeed it may well be said that such a finding is irrelevant in these proceedinas except for the light 1t throws upon the sequence of events. The applicant must still show that the decision is reviewable in accordance with s.5 of the Judicial Review Act. The application casts its net widely by referring to most of the grounds in sub-s.5(1), though in the unsatisfactory way of simply repeating the lanquage of the statute without any particulars of the matters to be relied upon in support of the grounds. Although I have given close consideration to each of the grounds in sub-s.5(1), I am not persuaded that the applicant has made qood any one of them. The decision to reject the notices of obiection involved no error of law or procedure, nor did it take an irrelevant consideration into account or fail to take a relevant consideration into account. It was an exercise of judament based on material provided by the applicant, in particular the statutory declaration. It was not an unreasonable exercise. The respondent might well have accepted the applicant's explanation, as I accept it. But in the light of the material before the respondent I am unable to say that there was anything wrong with the legality of the decision, using that term to comprehend the various grounds in s.5. It 1s of considerable 16. importance that the applicant did not offer any proot other than a statutory declaration couched in rather vague terms. The position 1s clearlv unsatisfactory, not yust from the point of view of the applicant, but having regard to the current scope for review of administrative decisions. The decision in the present case had particularly adverse consequences for the applicant in so far as it deprived him of the opportunity to test the relevant assessments. It seems to me that it is still open to the respondent to reconsider the matter in the light of the evidence qiven at the hearing and to conclude, if it be thought appropriate, that the taxpaver has now provided proof to the contrary in terms of reqa.59. But that must be a matter for the respondent; 1t cannot affect the outcome of this application. I am not to be taken as suggesting that there is no way that a decision of the Commissioner refusing an objection on the grounds that it is out of time may not be challenged. That would be a surprising situation. To begin with, s.39B of the Judiciary Act 1903 includes in the original jurisdiction of the Federal Court any matter in which a writ of mandamus is sought against an officer of the Commonwealth. Furthermore, it seems that from time to time the Commissioner has, at the request of a taxpayer and in accordance with s.187 of the Income Tax Assessment Act, referred his disallowance of obyection to a Board of Review or to a Supreme Court, notwithstanding his contention that the notice of objection did not comply with s.185. This practice may stem from the comments of Dixon and Evatt JJ. in Trautwein v. Federal Commissioner of Taxation (1936) 56 C.L.R. 63 at p.110 that: 17. "J... 1t would be more convenient if the commissioner adopted the practice of complying with the taxpaver's request to forward the obrvections to the court, notwithstanding that the commissioner considers no appeal lies. His contention that an appeal cannot be entertained would not be prejudiced by his doing so and he could, in forwardina the obiections, notify the reaistrar and the taxpayer that he had qiven his decision and torwarded the objection subject to and under the cover of an obiection on his part that' the alteration or addition was not subject to objzection and appeal by the taxpayer". Dixon and Evatt JJ. expressly refrained from deciding whether the Commissioner had "an absolute duty" in those circumstances to forward the objection; in that case the Commissioner was prepared to take the course suaqgested. There appears to be a diversity of opinion among Boards of Review as to whether a board has power to decide whether a reference is properly before it. See Reference nos. 6/1981 and 122-123/1981 (1982) 25 C.T.B.R.(NS) case 69. I express no views about the appropriateness or otherwise of these or any other avenues in the present case. I mention them only to make 1t clear that careful consideration must be given to the course of action to be followed by a taxpayer ina situation such as the present one, particularly given the limitations on the scope for review under the Judicial Review Act. Some comment may also be made about the arbitrary nature of s.185 of the Income Tax Assessment Act. See Federal Commissioner of Taxation v. Hoffnung & Co. Ltd. (1928) 42 C.L.R. 39 at p.54. At a time when limitation periods are almost invariably qualified by provisions for extension, s.185 may be saad Lo be vut ob ster in 350 rar as 1t presents an absolute bar to the lodging or an chrection arter eu days rrom service or Ehe notice or assessment, no matter how extenuating Ehe circumstances u mav be. No doubt a cE1ime limit in absolute terms adds to the administrative efficiency or the Australian Tax uffice but it mav, trom time to time. create substantial iuniustice. It would not he hard to provide for an extension or time. but in such a wav as to cast a substantial onus on the taxpayer. Again the Court can do no more than bring this matter to the attention of the relevant authorities. I should add that no attack was made upon the validity of rea.59. No wround under s.5 of the JdJudacial Review Act having been made out, the application must be dismissed. I certify that this and the preceding seventeen pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Toohey Associate Dated: 23 April 1986