LIMITED DISTRIBUTION CATCHWORDS ADMINISTRATIVE LAW ~- Application for judicial review of Commissioner's decision regarding collection of assessed tax - Proceedings pending in Taxation Board of Review ~ Proceedings settled favourably to applicant - Whether Commissioner should pay taxpayer's costs in 'Federal Court. te eee Federal Court of Australia Act 1976 s.43 Income Tax Assessment Act 1936 s.177 NSW G.223 of 1986 DAVID WARD KENDELL v_ DEPUTY FEDERAL COMMISSIONER OF TAXATION Wilcox J Sydney 21 October 1986 ake TT pre re ner ne eelelibeatr beteetnaaten ait ie a , area ~~. IN THE FEDERAL COURT OF AUSTRALIA LIMITED DISTRIBUTION NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION CORAM: PLACE: DATE: BETWEEN: WILCOX J SYDNEY 21 OCTOBER 1986 No. G.223 of 1986 DAVID WARD KENDELL Applicant DEPUTY FEDERAL COMMISSIONER OF TAXATION Respondent MINUTES OF ORDER THE COURT ORDERS THAT: Note: By consent Application dismissed. Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. - ae ae nome Limecrnge coprcee A re on LIMITED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) NEW SOUTH WALES DISTRICT REGISTRY ) No. G.223 of 1986 ) ) GENERAL DIVISION BETWEEN: DAVID WARD KENDELL Applicant DEPUTY FEDERAL ' COMMISSIONER OF , TAXATION Respondent CORAM: WILCOX J PLACE: SYDNEY DATE: 21 OCTOBER 1986 EXTEMPORE REASONS FOR JUDGMENT There are before the Court proceedings under the Administrative Decisions (Judicial Review) Act 1977 by which the applicant taxpayer seeks review of various decisions of the Deputy Commissioner of Taxation in relation to the extension of time for payment of income tax and additional tax totalling $99,240.25 and in relation to his decision not to defer, delay or stay the commencement or prosecution of Supreme Court proceedings for the recovery of that tax. oe wae a weeny, res ran .t wie Mr me pee Re wo os The relevant assessments cover the taxation years 1976 to 1984. There was considerable dispute between the taxpayer and the Commissioner regarding his liability in relation to most, if not all, of those years. In about 1983 the taxpayer paid to the Commissioner an amount which he thought was properly due. The Commissioner disagreed and disallowed various objections submitted by the taxpayer. In about May 1984 these objections were referred to the Taxation Board of Review. Because of the state of the list of that Board, the matters did not come on for hearing prior to the transfer of the Board's :jurisdiction, at the beginning of July 1986, to the Administrative Appeals Tribunal. However, the appeals were apparently amongst a number of matters called over early in 1986 and, I infer, asa result of that activity -- perhaps in conjunction with other activity on behalf of the Commissioner -- further consideration was given to Mr Kendell's claims that the assessments were erroneous. In the result, the parties have agreed as to the fate of the assessments. Mr Kendell has been substantially successful. The Commissioner has agreed that, save in relation to one item totalling $2,733.00, each of the objections made by Mr Kendell should be upheld and that amended assessments should be issued accordingly. re fe Se aes ose Je. caer - In the meantime, the proceedings in this Court, which were commenced on 3 June 1986, have been mentioned on several occasions. A lengthy affidavit was filed on behalf of the applicant to support the Application and a further affidavit has recently been filed, bringing the situation up to date and revealing the settlement. Plainly a deal of work has been done on behalf of the applicant, and no doubt also on behalf of the respondent Commissioner, in preparation for the hearing in this Court. However, it is not clear that the whole of the material which would be sought to be used by the parties if the proceedings had continued, is yet on file. The agreement between the parties as to the amendment of the assessments has ' meant that only a small amount of tax is payable by Mr t Kendell. This amount has been tendered by him, along with tax for 1985. So far as I can make out from 'the correspondence there appears to be no continuing dispute between the parties; and I think that must be said that Mr Kendell's position in relation to the major dispute has been vindicated by the ultimate concessions made by the Commissioner. Under the circumstances the parties have agreed that the proceedings in this Court should be dismissed. However, the applicant seeks an order for payment by the Commissioner of his costs in this Court. The Commissioner opposes this application. He does not reciprocate by seeking an order for payment of his own costs but submits that there ought to be no order for costs. x amit y we een ee ~er soe On behalf of the applicant, Mr Inglis submits that notwithstanding the dismissal by consent, the Court has power to award costs to his client. This proposition has not been contested. The real question is whether it would be a proper exercise of the Court's discretion to make such an order. In essence, Mr Inglis says that his client came to this Court because, at the time, there were proceedings in the Supreme Court which were based upon the issue' of assessments which have now been conceded to be erroneous.: In the Supreme Court, of course, the Commissioner would have;been entitled' to ? rely upon the assessments themselves, notwithstanding the fact that the applications for review were still outstanding (see I s.177 of the Income Tax Assessment Act, 1936).° The submission of the applicant is that, under those circumstances, he faced a real danger of suffering judgment in the Supreme Court and that this was the basis of the Application in this Court. On behalf of the Commissioner it is submitted that, in order to justify an order for costs in favour of the applicant in these proceedings,, the Court would ' have to come to an affirmative conclusion that the applicant would have been likely to succeed in the proceedings in this Court. It is pointed out on behalf of the Commissioner --~ correctly I think -- that the prospects of success in these proceedings are logically distinct from the merit of the ee nt ee nye eee -oroege eee a a . 5 . wig pe eer Tarhd we ee res A zt : Yr raya é ae m contest between the parties before either the Taxation Board of Review or the Supreme Court of New South Wales. It is said that s.177 evinces a policy that the Commissioner is entitled to proceed to collect tax notwithstanding the fact that an objection, or an appeal, has yet to be finalized. Mr Bayliss says that, in order to investigate the merits of his client's decision not to grant an extension of time and to proceed to recover the amount payable under the assessment, it would be necessary for him to adduce additional evidence and that the hearing would be likely to occupy the Court for at least one day. I confess to considerable sympathy for tHe position in which the applicant finds himself. I think it'is unfortunate that a taxpayer who is ultimately conceded not to owe the full amount claimed under assessments issued by the Commissioner, and indeed who paid the amount actually due -- apart from a relatively small amount -~ some years ago, should incur costs in the Supreme Court in attempting to defend himself against claims based upon the assessments subsequently conceded to be wrong and that, in an attempt to shore up the inadequacies of his available defence in the Supreme Court, he should then find it necessary to approach this Court for a review of the Commissioner's decisions in relation to the collection of tax. It is doubly unfortunate if, at the end of all that, he is left to pay his own costs when the original assessments disappear. . mae ern rn However, notwithstanding my sympathy for the applicant's position, I think it is correct to adopt the approach advocated by Mr Bayliss. The question whether or not the applicant -should have his costs of these proceedings must depend upon the question whether he would have been likely to succeed in these proceedings. In other words, the question is, given the structure of the Income Tax Assessment Act including s.177, and, given the unfortunate delays which beset people who object to assessments or who seek to have those assessments reviewed, any legal invalidity attended the Commissioner's decisions concerning the collection of 'tthe tax. ? This is not a case where the delays have been caused by the [ Commissioner; in that respect it contrasts with some 'other cases with which I have had to deal. So far as appears, the problem has arisen because of the time lag in hearings before the Taxation Board of Review. As a matter of principle it must, I think, be conceded that the policy of the Act is that, notwithstanding an outstanding appeal, the Commissioner is entitled to'take recovery proceedings. It is necessary for him to consider in each case whether this is an appropriate course; but the fact that eventually the taxpayer may succeed in the merits does not mean that the decision to exercise the powers given by the Act was legally erroneous. ae res tor ee ne cee - a ele ye ew pee en ore aor There is nothing before me to enable me to 'evaluate the grounds of attack upon the Commissioner's decision. It is not sought that the Court should go into these matters. Essentially, the argument put by the applicant depends upon the fact that he has been ultimately successful on the merits of his taxation liability. I do not think that this is enough. Notwithstanding my regret about the position in which this places the applicant, I think that the proper orders for I me to make is that the proceedings in this Court be dismissed and that there be no order for costs. I certify this and the six (6) preceding pages to be a true copy of the Reasons for Judgment of his Honour Mr Justice Wilcox. associates "Fayed Date: 6 November 1986 Counsel for the Applicant: Mr M W Ingliss Solicitors for the Applicant: Sly & Russell Appearance_for the Respondent: Mr R Bayliss, Solicitor Solicitors for the Respondent: Australian Government : Solicitor Date of hearing: 21 October 1986 De