ON = CA * - CATCHWORDS scoala atte Income taxation =- challenge to assessments - application to_ dismiss proceedings for want of reasonable cause ~ whether challenge to assessments precluded by s. 177 Income Tax Assessment Act 1936 or by i operation of doctrine of res judicata - whether a seriously arguable case. 4. DEPUTY COMMISSIONER OF TAXATICN FOR THE STATE OF WESTERN AUSTRALIA, ' R.A. GILL, GEOFFREY THOMAS WIGGINS and PETER ROBERT KNOX PEACOCK Ex Parte P. BRIGGS _—— | G162 of 1986 a aren LOCKHART J. er SYDNEY 4 JULY 1986 IN THE FEDERAL COURT OF AUSTRALIA } ) NEW SOUTH WALES DISTRICT REGISTRY } No. G162 of 1986 ) GENERAL DIVISION } . APPLICATION FOR WRITS OF MANDAMUS AND PROHIBITION AGAINST DEPUTY COMMISSIONER OF TAXATION FOR THE STATE OF WESTERN AUSTRALIA First Respondent R-A. GILL Second Respondent GEOFFREY THOMAS WIGGINS Third Respondent PETER ROBERT KNOX PRACOCK Fourth Respondent Ex Parte P. BRIGGS Prosecutor MINUTE OF ORDER JUDGE MAKING ORDER: LOCKHART J. DATE OF ORDER: 4 JULY 1986 WHERE MADE: SYDNEY The Court orders that: 1. The respondents' notice of motion dated 11 June 1986 be dismissed. ——- 2. The prosecutor's costs of the notice of motion be the prosecutor's costs in the proceedings. NOTE: Settlement and entry oforders is dealt with in order 36 of the Federal Court Rules. a wey eee eee greene os . seer caadinaaiianatihed ed IN THD FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY )} No. G162 of 1986 ) GENERAL DIVISION ) APPLICATION FOR WRITS OF : MANDAMUS AND PROHIBITION AGAINST DEPUTY COMMISSIONER OF TAXATION FOR THE STATE OF WESTERN AUSTRALIA First Respondent R.A. GILL Second Respondent GEOFFREY THOMAS WIGGINS Third Respondent PETER ROBERT KNOX PEACOCK Fourth Respondent Ex Parte P. BRIGGS Prosecutor REASONS FOR JUDGMENT LOCKHART J. This 1S a motion pursuant to 0. 20 R. 2 of this Court's Rules for an order that the proceeding be stayed or dismissed generally on the basis that no reasonable cause of action is dasclosed, or the proceeding 1s frivolous or vexatious, or the proceeding is an abuse of the Court's process. The proceedings were instituted pursuant to s. 39B of the Judaciary Act 1903 by Peter Briggs as prosecutor, to whom I shall refer for convenience, in view of the nature of the case, as 2. "the taxpayer". The taxpayer seeks orders in substance quashing decisions of the Deputy Commissioner of Taxation for the State of Western Australia to issue notices of assessments and amended assessments to income tax for the years ended 30 June 1976 to 1981. Following an investigation into the affairs of the taxpayer the Deputy Commissioner issued notices of assessment to income tax to the taxpayer for the six years in question. The case concerns both assessments and amended assessments, but I shall for convenience simply refer to them as assessments or notices of assessment as the case may be. The notice of assessment for the year ended 30 June 1976 stated that the taxable income of the taxpayer was $75,000. Each of the assessments for subsequent years stated the taxable income at a figure $25,000 higher than its predecessor. All notices of assessment issued on the same day: 4 July 1983. The total income tax payable pursuant to the six notices of assessment together with penalties is a substantial sum, in excess of $1 million. The taxpayer objected to the assessments and the Deputy Commissioner disallowed the obzyections. The taxpayer has requested the Deputy Commissioner to take the necessary steps to enable appeals to be instituted in the Supreme Court of Western Australia, challenging each of the purported assessments. The Commissioner has not yet taken those steps. ane nme wee yao enter eee to quash I shall, 3. The taxpayer brought proceedings in this Court in substance the following decisions and conduct, the description of which for convenience, take from the order nisi which was granted by another judge of this Court on 29 April 1986: (a) Decisions of the Deputy Commissioner to issue the notices of assessment in question, and (b) Recommendations by the third and fourth respondents who are officers of the Deputy Commissioner's Western Australian branch, to issue the notices of assessment. As the grounds of the application are fully set out in the application itself and the order to show cause I shall briefly and broadly summarise them. As to the decisions to issue the notices of assessment, they are attacked on the following bases: (a) (b) (c) That they were in excess of the power conferred by the Income Tax Assessment Act 1936 ("the Act") or, alternatively, were not authorised by the Act; They were an abuse of the power conferred by the Act in that the decisions were made in bad faith or, alternatively, for a purpose not authorised by the Act; They were made in such a manner as to be both a denial to the taxpayer of an opportunity of being heard and a denial of an opportunity of being heard by an impartial person as required by the rules of natural justice; ated were ep rep ee = eaten ~ yr tlm . . b |. t= (d) (e) (£) (g) (h) (3) 4. They were not taken in purported exercise of any power conferred by the Act and, if any such power is reposed in the Commissioner, then the power was exercised by taking into account irrelevant considerations and by not taking into account relevant considerations; The decisions were an unreasonable exercise of the relevant statutory powers and discretions; They were vitiated and rendered null and void by reason of an error or errors of law; There was no evidence to support the decisions; The decisions were otherwise contrary to law; and The decisions were vitiated by fraud of the relevant officers of the Taxation Department, being the second, third, and fourth respondents. the 'application for the order to show cause sets forth the various particulars relied upon to substantiate certain of these allegations, but it is unnecessary that I cite them. The orders sought by the taxpayer are as follows: An order quashing the assessments; Alternatively, an order prohibiting the Commissioner or Deputy Commissioner from further proceeding to recover tax payable pursuant to the assessments; An order quashing the relevant recommendations of the departmental officers that the assessments issue; ve oem "2 5. 4. Alternatively to order 3, an order prohibiting the Deputy Commissioner and his officers from further proceeding with any investigation into the affairs of the taxpayer on the basis of the relevant recommendations of the officers; 5. An order compelling the Commissioner to issue notices of assessment for the relevant years in accordance with law and in accordance with the Act and in accordance with returns of income which have been lodged by the taxpayer; Ge Damages; 7. An assessment of damages; 8. Interest; 9. The customary prayer for further or other orders; and 40. Costs. . The grounds of the application to which I have already referred are broadly reflected in the grounds of challenge to the relevant recommendations of the departmental officers. Counsel for the Deputy Commissioner advanced three primary arguments in support of the motion to dismiss this proceeding. First, he argued that s- 177 of the Act is fatal to the success of this proceeding because it precludes, other than in an appeal under Part V of the Act, any challenge of any kind to the assessments. Second, it was argued that the matters relied upon by the taxpayer to upset the assessments could and should have been raised in earlier proceedings bropght by the Deputy Commissioner in the Supreme Court of Western Australia for recovery of tax, which culminated early this year in ewe eee a yt ayn ae eet Veo Ye 6. judgment being entered for the Deputy Commissioner. That decision is under appeal to the Full Court of the Supreme Court of Western Australia and execution on the judgment has been stayed in the meantime. As the taxpayer defended those Supreme Court proceedings, but not on the grounds raised in the application presently before this Court, counsel for the Deputy Commissioner submitted that the taxpayer is prohibited from pursuing them on the principle of res judicata. Reliance was placed in particular upon Port of Melbourne Authority v. Anshun Pty. Limited (1984) 147 C.L.R. 589 and Yat Tung Investment Co. Limited v. Dao Heng Bank Limited [1975] A.c. 581. Third, counsel for the Deputy Commissioner submitted that none of the relief sought by the taxpayer in the proceedings in this Court can be, or alternatively, should be granted and that the proceeding was in the circumstances fundamentally misconceived. Counsel for the taxpayer joined issue with those submissions and submitted that the s. 177 does not bar this proceeding because it has no application where there is no assessment to tax at all. Counsel recognized the well established principle that, although courts have jurisidiction to decide whether an assessment has been duly made, once a document satisfying the terms of sub=-s. 177(1) of the Act is produced in judicial proceedings a court is compelled to treat it as conclusive evidence of the making of the assessment including the fact that it has been duly made and that the Deputy Commissioner has duly complied with all statutory formalities. I need not refer to the various cases that touch this question, other than to mention the leading case, being a decision of a Full Bench of the High 7. Court of Australia, in F.d. Bloemen Pty. Limited v.- Commissioner of Taxation of the Commonwealth of Australia (1981) 147 C.LeR. 360. Counsel argued that the material presently before the Court establishes that the Deputy Commissioner took no steps to embark on the process of assessment at all and that in those circumstances Bloemen's Case has no application. Accordingly, it was submitted, the Matter is open to be determined afresh by the courts. Counsel for the taxpayer also argued that there is no room for the operation in this case of the doctrine of res judicata because the material facts and matters relevant to the taxpayer's present submissions were not disclosed to the taxpayer until evidence was given in certain proceedings in the Administrative Appeals Tribunal under the Freedom of Information Act 1982. Those proceedings were not heard until after the Supreme Court proceedings in Western Australia had been heard. He also relied upon other matters to establish the conclusion that it would be inappropriate at this stage of the case to apply the doctrine of res judicata. Finally, counsel for the taxpayer contended that on any view of the matter it was at least seriously open to argument that the doctrine could not apply in this case. The principles governing applications of the kind before the Court yesterday and today to dismiss or stay proceedings are well established so I need not refer to them except to say that they are to be found in the weil known judgment of the High Court in General Steel Industries Incorporated v. Commissioner for Railways (New South Wales) 8. (1964) 112 C.L.R.e 125. The principles there expressed, especially by Barwick C.J., have been applied in many cases since, including many decisions of this Court. The Deputy Commissioner accepts for the purposes of this motion that the grounds of the application in support of the taxpayer's case are established; that is, he accepts that the case against him must be treated as being at the highest point that it could be in favour of the taxpayer. I have already set out in summary form those grounds. The Deputy Commissioner also accepts for the purposes of this motion that prior to the issue and service of the relevant notices of assessment he made no attempt to ascertain the taxpayer's taxable income, that he did not intend to undertake any relevant process of calculation but issued the notices of assessment for the purpose of forcing the taxpayer to consult with him or his officers. The Deputy Commissioner does not, of course, concede those matters generally in this case, nor does he concede them for the purposes of the final hearing. He concedes them solely for the purposes of the motion presently before the Court. I assume, then, for the purposes of this motion that: (1) The Deputy Commissioner made no attempt to ascertain the taxpayer's taxable income prior to the issue and service of the notices of assessment; wri ete ae rte iy rte - ae 9. (2) The Deputy Commissioner did not intend to undertake any relevant process of calculation; (3) The Deputy Commissioner issued the notices of assessment for the purpose of forcing the taxpayer to consult with him or his officers; and (4) The decisions to issue the notices of assessment and the recommendations which led to them were not made in good faith. Acting on these assumptions it is, I think, reasonably arguable that the Deputy Commissioner did not engage in the process of assessment at all. I need only refer, on this point, to Bloemen's Case (supra) and in particular to what is said by Mason and Wilson Jd. in their joint reasons for judgment at 371. It is, I think reasonably arguable that this case raises a question which has not been considered before, even in Bloemen's Case. It is also reasonably arguable that the decided cases to which I have been referred, including Bloemen's Case, proceed on the assumption that there is an assessment which has in fact been made by the Commissioner though not necessarily duly made. If a challenge to an assessment is based on the absence of good faith or related matters, or the desire to harass or exert pressure on a taxpayer, then it is well established that those matters may be raised in appeals under Part V of the Act or on review before the Administrative Appeals Tribunal but not otherwise. But the soaps ee er ye ps a 10. assumptions which I referred to earlier raise a real question whether an assessment was made at ali. It may be that s. 177 confines the taxpayer to establishing the matters presently the basis of the assumptions mentioned by me in his Part V appeal to the Supreme Court of Western Australia; but it is not demonstrably clear that the question must be answered adversely to the taxpayer. The other matters to which I have referred and certain other submissions concerning the form of relief are not, in my view, sufficiently free from argument to lead me in the exercise of the Court's discretion to accede to the motion. I should add that I have no final view on any of the matters that have been argued before me, but in view of the principles that govern applications of this nature, I do not feel the case of the taxpayer is so demonstrably poor or hopeless that it should not be allowed to proceed to a final hearing. Accordingly, the notice of motion is dismissed. | certfy that this and the fie (9 : tua cepy cf the ors Fonour ee eee oars tos aeyetoae errr sage ey sos ospee