ADMINISTRATIVE LAW - Judicial Review - Income Tax Assessment Act 1936 - Decision to refuse extension of time to pay tax - decision to institute recovery proceedings ~ clain for stay order restraining institution of recovery proceedings - source of power to order stay - principles governing exercise of discretion to order stay ~ content and relevance of principles governing stay applications in State Courts - relevance of exclusion of decision reviewed from application of s.13 of Judicial Review Act - general approach in income tax recovery cases - failure of Deputy Commissioner to refer objection as requested. Administrative Decisions (Judicial Review) Act 1977 Federal Court of Australia Act 1976 Rifki v Minister for Immigration and —fthnic Affairs (1983) 46 ALR 301, 303 per Toohey J. Piroglu v Minister for Immigration and Ethnic Affairs (1982) 43 ALR 569, 571 per Lockhart J. Dallikavak v Minister For Immigration and Ethnic Affairs (1985) 61 ALR 471 Perkins v Cuthill (1981) 34 ALR 669, 671 per Keely J. Collins v Minister for Immigration and Ethnic Affairs (No. 2) (1982} 5 ALD 32, 33 per Bowen CJ. Videto v Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 (Toohey J.) - Capello v Minister for Immigration and Ethnic Affairs (1980) 49 FLR 40, 2 ALD 1014 Faingold v Zammit (1984) 1 FCR 87 The Hells Angels Ltd v Deputy Commissioner of Taxation (1985) 7 FCR 311 at 318, Terrule Pty Limited v Deputy Federal Commissioner of Taxation (1985) 5 FCR 153 at 156 St. Justins Properties Pty Ltd v Rule lloldings Pty Ltd (1980) 40 FLR 282 Deputy Commissioner Taxation v Australia Machinery and Investment Co. (1945) a WALR 9, 17 ' - Deput Federal Commissioner of Taxation v Hells angels Limited (No. 1) 84 ATC 4545 at 4547 . , - I tlarina Estates Pty Ltd v Deputy Commissioner of Taxation 76 ATC 4166 at 4168 Re: Roma Industries Pty Ltd 76 ATC 4113 at 4116 Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia (1978) vR 83 Clyne v Deputy Commissioner of Taxation (NS¥7) (1982) 43 ALR 342 Federal Commissioner of Taxation v Mackey (1982) 64 FLR 432 Deputy Federal Commissioner of Taxation Vv The Hells Angels Linited (No. 2) 84 ATC 4548 : Deputy Federal Commissioner of Taxation v Ewen 84 ATC 4550 at 4552 Deputy Federal Commissioner of Taxation v Steel Fabrication Pty Ltd 84 ATC 4639 Deputy Federal Commissioner of Taxation v Truehold Benefit 85 ATC Deputy Federal Commissioner of Taxation v Manners 85 ATC 4294 Koadlow v Deputy Federal Commissioner of Taxation 85 ATC 4147 at Deputy Federal Commissioner of Taxation v Trower 86 ATC 4157 Deputy Federal Commissioner of Taxation v Jonrich Pty Ltd 86 ATC 4560 . Murphy v K.R.M. Holdings Pty Ltd (1985) 8 FCR 349 at 351 PETER JOHN RIDSDALE SNOW v DEPUTY COMMISSIONER OF TAXATION NO. 113 OF 1986 FRENCH J. PERTH 4 FEBRUARY 19387 IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION www wv NO. WAG 113 oF 1986 BETWECDN ;? PETER JOHN RIDSDALE SNOW Applicant and DEPUTY COMMISSIONER OF TAXATION Respondent MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 4 FEBRUARY 1987 WHERE MADE : Perth THE COURT ORDERS THAT: 1. The Respondent be and is hereby restrained from instituting proceedings against the Applicant for the recovery of income tax the subject of notices of amended assessment dated 16 January 1986 until he shall have referred to the Administrative Appeals Tribunal in accordance with the Applicant's request his decision to disallow the Applicant's objection to the amended assessments or until the determination of this application whichever is the earlier. The Applicant's claim for interlocutory relicf is other- wise dismissed. The costs of the claim for interlocutory relief be reserved. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. (See also Order 37 rule 2(3).) IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY GENERAL DIVISION No. 113 of 1986 wee ww BETWEEN: PETER JOHN RIDSDALE SNOW Applicant and DEPUTY COMMISSIONER OF TAXATION Respondent CORAM: FRENCH J 4 February 1987 REASONS FOR JUDGHENT On 16 January 1986 the applicant, Peter Snow, received a bill for $429,955.00 from the respondent, the Deputy Commissioner of Taxation. It came in the form of amended assessments of his income tax for the years ended 30 June 1974, 1975 and 1976. It included a figure of $276,381.00 additional tax for lodgement of incorrect returns for those years. It was payable on 17 February 1986. It has not been paid and additional tax for late payment is accruing at the rate of $253.53 per day. = ee ee ee Le Australia Act 1976. lo The csse srionts hav: Dean objected to but the objections ta have been Jisallowod. The anplicant has asked the respondent to refer his disallowance of the objections to the Administrative Appeals Tribunal under Part V of the Income Tax Assessment Act 1936 (ITAA). This has not yet been done. The applicant has also asked the respondent to grant him an extension of time for payment, to not 1mpose additional tax for late payment, and to not issue any writ for recovery of the amounts due until he has exhausted his avenues of appeal against the amended assessments. These requests have all been refused. The applicant has therefore begun proceedings in this Court ("the primary proceedings") under the Administrative: Decisions (Judicial Review) Act 1977 ("the Judicial Review Act") seeking a review of the respondent's decisions refusing his requests. : ' , Pending the hearing of the primary proceedings the applicant asks the Court to make an order suspending the operation _ of the respondent's decision to issue a writ for recovery of the -* i tax. In so doing his counsel relies upon s.15 of the Judicial Review Act and in the alternative s.23 of the Federal Court of DecrsiEens Challenyed In tne prinary proceedings the applicant seeks review of Gecisions of the respondent which are described in the application wee ee ae ee as fFollows:- "A. On or about 12th September 1986 he decided to refuse the Applicant's requests made by letter dated 19th August 1986 that the Respondent :- (a) (b) (c) Grant an extension of time pursuant to Section 206 of the Income Tax Assessment Act, 1936 as amended ("ITAA") for payment of the tax assessed and notified in amended assessments of income tax, which issued to the Applicant for the years ended 30th June 1974, 1975 and 1976, until such time as each Assessment has been confirmed and no further avenue of appeal is available to the Applicant pursuant to Part Vv of the ITAA. Determine that pursuant to Section 207 of the ITAA the date from which penalty tax shall be computed shall be the date upon which each amended Assessment is confirmed with no further avenue of appeal being available -to the Applicant pursuant to Part V of the ITAA; Defer the issue of a Writ or Writs for the recovery of tax assessed and outstanding" pursuant to the said amended Assessments until such time as the said amended Assessments are~- confirmed with no further avenue of .appeal being available to the Applicant pursuant to Part V of the ITAA. . B. On or about 15th September 1986 he decided to instruct his solicitor to proceed to cause a Writ or Writs to issue to the Applicant claiming payment of the said tax assessed." The esnlicant 18 said to 3e@ "a -erson who 15 aggrieved by the 4ecisions" within tke meaniny of that ohrase in s.5 of the Judicial Review Act. The respondent did not dispute his standing and no issue arises 1n that regard for present purposes. The Factual Background The background to the institution of the primary proceedings 1s set out in an affidavit sworn by the applicant on 20th November 1986. The contents of the affidavit were not challenged by the respondent. The applicant deposed that in the years ended 30th June 1974, 1975 and 1976 respectively his income was comprised entirely of salary and director's fees, and in 1976 a -payment on termination of employment. . He lodged income tax returns for each of these years "as - requested by the respondent" although the Court was not told when- the requests were made or the returns lodged. : . The applicant said that in the returns he declared his total income and was assessed on it. ra oy erended assossnents the respondent assessed additional uncome to the annlaicant for each of the three years in question. The apparent basis for the assessments 1S set out in a report dated 15 November 1985 and signed by an officer of the Australian Taxation Office, J.F. Jancey. The applicant exhibited the report to his affidavit. In that document addressed to a person designated "Supervisor", Mr Jancey reported the completion of an investigation into the affairs of the applicant for the years. ended 30 June 1974 to 30 June 1980. The report referred to the-applicant's "involvement in the tax avoidance industry" during the years under review. He was said to have derived significant income from the promotion of tax avoidance schemes in those years through his: association with what was described in the Report as the "West Australian branch of the Brian Maher organisation", an association which ceased in 1978. : . - The majority of his income during the years reviewed was said either not to have been returned as income or "manipulated so that little tax was paid". The report claimed that payments recerved by the applicant through his association with the Maher 6. Organisalion vere Jisguis2t @s orivate comoaniy aividends. The commissions, according Lo the resort, were earned yvrogressively each year and periodically paid to the applicant by way of loans or advances. At the end of each financial year a final accounting was completed and the total amount earned was determined. The amounts due were then said to be paid in a disguised form, usually in the following year and the loans previously received were repaid. On this approach certain amounts of income were said to have been received by the applicant "from his tax avoidance f activities" and on which tax was avoided. For the years in question the relevant amounts were;- 1974 - $ 29,200.00 1975 - $112,200.00 1976 ~- $103,600.00 ae The report then set out an analysis of the alleged additional income for each of these years. In 'the body of his affidavit the applicant gave his own account of the payments. 7 wd . {1} The 1974 Financial Year with resnect to the sum of $29,200 treated as income for the year ended 30 June 1974, Jancey said that this had taken the forn of two dividend payments by a company called Remos Pty Ltd. Demos Pty Ltd he said, had been acquired by Brian iaher on 31 May 1974, On 7 June 1974 it made allotments of redeemable preference shares and the next day resolved to pay a dividend on the shares. - , . The funds were held on deposit with B.J. Maher & Co. then paid out on 2 July 1974. $8,000 of the dividends so paid was paid to an entity described both in Jancey's report and the Applicant's affidavit as "The Snow Family Trust". Pp This can be treated as a reference to a trustee of a trust whose,beneficiaries include members of the applicant.'s. family. The trustee is identified in another part of the Report as" Snow Nominees Pty Ltd. . Leo The sum of $8,000 so paid was according to Jancey, distributed to members of the applicant's Family "therefore involving very little tax", nets =e ate tid a OTE re eh a THe aAnplicant did nor Ieny this rayment nor that 1t cane by wavy cf a dividend from Demos Pty Ltd. He added that the money was distributed to four beneficiaries of the trust and assessed as income in their hands by the respondent. The balance of the $29,200 namely $21,200 regarded by Jancey as income received by the applicant was part of a dividend of $106,000 paid by Demos Pty Ltd to Federated Management Ltd a West Australian Company said to be controlled by Maher. $21,200 or 20% of the total dividend was treated 'as .if paid to the applicant, for, according to Jancey, he had a 20%: interest in the latter company. The applicant agreed that the dividend was paid as alleged but said that aithough he Was a salaried director of Federated Management Ltd he had "no direct shareholding" in it. and had "only a 2% indirect beneficial interest in the company." t The reference to a 2% interest appears 'to (be a typographical error for 20%. Later in the affidavit- the_ applicant refers to a company called International Secretariat Pty Ltd which he evidently controlled and which had a 20% shareholding in Federated Management Ltd. 9. (12) The 1975 Financial Year The sum of $112,295 derived as anconme in the 1975 financial year was, on Jancey's analysis, comprised of three amounts, one of $9,000 and two of $51,600. The $9,000 component was said to be one half of a dividend of $18,000 paid by a company called Bonavista Securities Pty Ltd and described by Jancey as a "Maher Company". The dividend was paid to Sotheby Securities Pty Ltd a Western Australian Company in which the applicant "effectively held a 50% interest". Sotheby Securities filed a return including the dividend in 1975 and dividends were paid to its shareholders in 1976. The applicant did not disagree with 'this account but-- added that the $9,000 was paid as a dividend by Sotheby Securities: Pty Ltd to Snow Corporation Pty Ltd which brought the sum to - account in its 1976 tax return. The money'was paid through to the trustee of the Snow Family Trust and distributed 'with the net: = income of that trust to the trustee of another trust called the 7 Shanadar Trust. It was distributed by that trustee to beneficiaries whom the applicant did not identify. He said that the amounts so paid were returned as income by the recipients and assessed accordingly. ead UL ee Taye, ct nits oO en SEs eo Se Lee tre suf % + ae ay lO. AS to th of $51,530 TJancey resorted that on fe) c = °3 we) 29th January 19375 tvo comnanies controlled by the applicant, nanely Snow Nominees Pty Ltd as trustee of the Snow Family Trust and Management Consortiruns Pty Ltd were allotted 10 shares each in Bedouri Pty Ltd, a company incorporated on 17 July 1974 with two initial shareholders who were the Applicant and a lr Tolhurst. It appears from the report that there were 100 shares in all in the company allotted to entities associated with Maher, a man called Donnelly, Tolhurst and the applicant. The company lodged a return of income for the year ended 30 June 1975 declaring dividends totalling $516,740 comprising $217,740 received from Pastoral Properties Pty Ltd and $299,000 received from Bonavista Securities Pty Ltd. -7 On 21st January 1976 Snow "Nominees Pty Ltd and Management Consortiums Pty Ltd sold their 10 _shareholIdings- for me $51,600. This yielded a profit in each case of $51,590 which, as' Jancey reported, was included as income in their' returns under — s.2GAAA of the Income Tax Assessment Act. . : A According to Jancey both companies offset this income by participation in a share trading partnership named "Mahvista" which led them in each case to claim a loss of $51,590. ene rate 'Sa eel ~ ay The rcesnorcank has evidently tisalloved these Josses and according to Jancey beth cases have proceeded to the arpeal stage. The applicant in his affidavit says that the two companies did each receive $51,600 for the sale in each case of 10 shares in Bedour1i Pty Ltd. Each company brought the receipt into account as income nursuant to s.26AAA of the ITAA and was assessed accordingly. In respect of tax assessed on this income the respondent has issued a writ out-of the Supreme Court of: Western Australia (No. 1949 of 1985). As to the $51,600 derived by Management Consortiums Pty Ltd from the sale of its 10 shares -in Bedouri Pty Ltd the ~~ applicant deposed that this sum was declared as income pursuant to_ s.26AAA of the ITAA and that the company was assessed on it. Further, he said, the respondent had issued assessments to his wife and himself and other 'shareholders. of Management Consortiums Pty Ltd in respect of the tax said to be due by 'the company in relation to the share sale. proceeds, but not paid by' it. These assessments were issued under the Taxation (Unpaid Company Tax) Assessment Act. Proceedings to recover the tax so assessed have been instituted against the applicant's wife in the 12. District Tourt of Tastern Australia (1ction "o. 2534 of 1985) and against the apmiicent himself in the Local Couct. The applicant also says that other former shareholders of Management Consortiums Pty Ltd have paid the tax on the assessments issued to them although he does not disclose the time and amounts of such payments. As the applicant puts it, the respondent now seeks to sue him for tax on the same income on the basis that it was derived by him rather than by Management Consortiums Pty Ltd. (iii) The 1976 Financial Year The sum of $103,600 which was treated as part of the applicant's income for the year ended 30th June -1976 represents 20% of a $518,000 dividend payment made to Federated Management Ltd. The 20% figure in turn represents what Jancey contended was the size of the applicant's interest in Federated Management Ltd. That company included the dividends in its income- tax return for 1977 but the taxable income was fully rebateable under 3.46 of the ITAA. . we foe The applicant in his affidavit said that International Secretariat Pty Ltd was a 20% shareholder in Federated Management Pty Ltd. International Secretariat Pty Ltd was, according to Jancey's report, controlled by the applicant. robe Men an Ah AE te uw West Zetyn o we dq Mids ig f Ppa re ar fiz aa e In Jun2 ]273, aceoct1ine to Jancey, the shareholders ain Federated Nianacgerenc Ltd solid their shares to one Lloyd Faint. International Secretariat Pty Ltd received $105,000 for this sale of 5090 $1.00 shares, which was treated in its return as yielding a capital gain of $100,000. In relation to the disposition Jancey's report sa1rd:- "The T (UCT) legislation will be applied in respect of the Division 7 Assessment for Federated Management to recoup the tax from the vendor shareholders." After reciting events relating to the years 1977 to 1980 which are not relevant for present purposes, Jancey's report noted that "the only asset held in the Applicant's name" was a half interest in a residence at Greenwood valued at about $200,000 to $250,000. . : ° . This interest was said to be encumbered- by a mortgage securing an advance of $250,000 from a company. controlled by the. applicant. He was on this basis said to have "an effective nil net asset position". The applicant seems to agree with that assessment for at paragraph 9 of his affidavit he said:- "On page 6 of the Annexure "A" it is acknowledged that my only asset is a half share in the family residence in which teeause of 2 nartgqa , I have ago equity and effectively I have a nil net asset position." Jancey said in his reoort that during the years 1974 to 1976 inclusive the applicant was employed full time by Federated Management Ltd a company controlled by and forming part of the "Maher Organisation". He contended that any commissions received by Snow were derived in the employment and should have been returned as income. Specifically in relation to the sum of $103,200 treated as income for the year 1976 Jancey said that this would be' "followed up as part of the T (UCT) action on Federated Management Ltd"." -c- The report conceded that there would be "in effect a doubling up of assessments in regard to some of the income" but - nevertheless expressed the disturbing recommendation "that this position should be retained until Mr Snow's reactions and intentions toward the assessment can be gauged."- _Tancey thén addressed the question of- issuing amended. .- assessments in respect of the years 1974 to 1976 'which he... described as "outside the 6 year period". . Pole! This was a reference to the provisions of subsection 170(2) of the ITAA which as at the date of the issue of the amended assessments was in the following terms:- 15. "thera v tLaynayer SS not made to the Comnmissionor a Full anid true @isclosure of cll the material facts necessary For '16 assessment, and there has been an avoidance of tax, the Cenmnissiorer may - {a) where he 1s of opinion that the avoidance of tax 1s due to fraud or evasion - at any time; and (b) In any other case - within 6 years from the date upon which the tax became due and payable under the assessment, . amend the assessment by making such alterations therein or additions thereto as he thinks necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of tax as the case may be." a TATE iJ ate £ 2 these, He set out various factors which the respondent could rely upon in forming an opinion that the applicant had avoided tax by fraud or evasion. These factors were as follows:- (a) The applicant was a known agent of the Brian Maher Tax Avoidance Organisation; : - (b) He has not made a full and true disclosure of all - the material facts necessary for the making of an - 3 assessment for the years ended 30 June 1974, 1975 et a and 1976; (c) Commission income derived in 1974 to 1976 inclusive was knowingly disguised as private company dividends and/or profit on sale of shares and brought to account as income of related entities; (d) The applicant had knowingly understated his income 16. aguogach of the yeers vy sO Gisyulsing the anounts race1yved; (e) He has failed to keep records which vould enable his assessable income to be readily ascertained 1.e@. records of commissions received or due from the Naher Organisation. On this basis it was recommended that the assessments for the applicant for the 3 years 1n question should be amended by the inclusion of the sums mentioned above as part of his income TELE EEE TNE OL for those years. The Amended Assessments : i - Issue, Objection and Recovery Action . The recommendation was accepted and amended assessments~ - issued on 16th January 1986 as follows:- - - 1974 - $ 48,402.23 HO, 1975 - $203,429.29 - . Se 1976 - $178,123.50 hope : Total $429,955.02 :' 1 -t . . , ' ' ' t ' ' to OE Ra a i ere Of this tax some $276,381.00 is by way of penalty for lodgment of incorrect returns. FRETS A HEUTE OT SR eEgD emp or 17. MsjyectLrons vere loiygea to tie amended assessments and disallowe?. Rotice of tte disallowance was given on 29 July 19386. The applicant then requested, pursuant to s.187 of the ITAA, that the respondent refer the disallowance decision to the Administrative Appeals Tribunal. At the time of the hearing of this motion the respondent had not complied with the request. I was however unformed by Counsel for the applicant that no notice had been given by the applicant to the respondent requiring him to refer the decision to the Tribunal under s.189A --, of the ITAA. On 19th August 1986 the solicitors for the applicant wrote to the respondent making the requests referred to at the commencement of these reasons. ' - ' By a letter dated 24th September the respondent advised that legal action would not be deferred and a writ of summons would issue without further-notice if payment was not received by | - - ye 15th September. > sore 1 In a Statement of Reasons dated 10th November 1986 and delivered pursuant to s.13 of the Judicial Review Act the respondent set out his reasons for the decision not to defer payment of the assessed tax as follows:- - TAS AO AepAress Ground specrFie* in the Joktter 3 19 Awuyust 19235 es justilyiny an ertension of Lime for nivment other than tle fact that the requests for reference, lodged npucsuant to Part V of the Income Tax Assessment Act 1936, as amended, had yet to be determined. (a) Th (b) There was no evidence that the taxpayer was unable to achieve paynent of his income tax in full by the due date, (c) No acceptable proposal had been submitted by the taxpayer for payment within set office guidelines and there is no decision against the Commissioner in respect of the substantive issue in dispute. (c) It was considered that the matters raised in the taxpayer's objections related to an artificial scheme and did not constitute a genuine dispute. The directions given in Taxation Rulings IT2091 and IT 2156 were directly applicable to this case. The letter also advised that as at 12 September 1986 additional tax for late payment assessed under s.207 was $48,764.08. The total liability of the applicant for the 3 years in- question, after a credit of $109.05 under a 1985 assessment, was $478 ,610.03.. The additional_tax for late payment has beén accruing» the rate of $253.53 per day since that time. . - . The Grounds of the Application The Application for an Order of Review set out a variety of grounds of review under the Judicial Review Act and included extensive particulars. my, Sn bez netien for anttrlocutocy celief the anplicant reli2d srincanally unon the follewing qrounds:- "(a) Rach decision involved an error of law. (b) the respondent to take into account relevant considerations itemised in the Application as follows:- The making of each decision was an improper exercise of the power conferred by the relevant section of the ITAA by reason of the fact that:- (1) The respondent took irrelevant considerations into account; (ii) The respondent failed to _ take "into account a relevant consideration in the exercise of his power." The argument concentrated upon the, alleged failure of "(a) The tax assessed-and outstanding was faised on (b) income which had, at least in: part, 'also, been returned by, and assessed as the income of, another taxpayer or taxpayers; , Part at least of the tax on the said income, having been assessed to a taxpayer other "than the Applicant, had already been paid to the respondent by that person; (c) (d) (e) (£) 20. Park abt Jeast of rhe tax on che sait racans «sas already the subject of Ilscgal recovery action unstituted by the Respondent against a taanayer other than the Applicant; The Applicant 1s already being sued by _ the Respondent pursuant to assessments raised under the Taxation Unpaid Company Tax Assessment Act which assessments are based upon the treatment by the Respondent of part at least of the said income as the income of an entity other than the Applicant; There is a genuine dispute between the Applicant and the Respondent as to whether the income' the subject of the said assessments was derived by the Applicant or by others and as to whether the Applicant has been guilty of tax avoidance by fraud or evasion in the absence of which the issue of the amended assessment is statute' barred; That the allegation that the applicant was a "known member -of the Brian Maher ~- Tax Avoidance Organisation" was relied upon by~ the: Respondent as' evidence of fraudulent 'intent so as to -justify the- *- issue of the amended assessments and whereas prior: | to the making of the decisions the subject of this application the Respondent well knew that the dismissa' of charges of conspiracy to defraud the Commonwealth brought against the Applicant by reason of his involvement with Nr Brian MNaher threw (gq) (h) (2) (3) (k) consiverable Foust on the validity we the conclusion thal tet association was in itself a ground for concluding that the Applicant had fraudulently avoided tax. As a consequence the probability that the amended assessments would ultimately be set aside was increased. The objections to the amended assessments raise issues of such substance that it 1s probable that the amended assessments will ultimately be set aside. The Applicant does not have the means to pay the tax assessed. That exaction from the Applicant at this time of the tax assessed would, given the financial circumstances of the Applicant, seriously prejudice his ability to pursue the action which he has instituted under Part V of the ITAA to establish the amended assessments as excessive and invalid. Deferral of collection of the tax assessment would not, given the known present financial position of the Applicant, materially diminish the Respondent's prospects of recovery of the tax assessed. a The imposition of s.207 penaity cannot, given the present financial circumstances of the Applicant reasonably be expected to produce the result that he will be encouraged to pay the debt arising from the amended assessments. (1) Tar issre of the antndai assessnents denaaiding naynenk arlthin One nonth ae ta« totalling $429,955.09 occurred 10, lt and 12 yeacs respectively after the years in which the Applicant allegedly derived the income giving rise to the tax. (m) The Respondent has been requested to forward his decisions on the objections to the amended assessments to the Administrative Appeals Tribunal for review and he has to date failed to comply with his statutory duty in that regard. 7 (n) Valid requests that the Respondent refer to the : Administrative Appeals Tribunal his decisions on the objections to the amended assessments for the * years ended 30 June 1975 and 1976 as well as 1974 have been lodged by the Applicant. (o) There are decisions against the Respondent in respect of the substantive issues in dispute." + The irrelevant considerations which the respondent was" said to have taken into account in making the impugned decisions ba fa were particularised in the Application as follows:- : Se, . (a) There was no express ground specified in the letter dated 19 August 1986 as justifying an extension of time for payment other than the fact that the requests for reference lodged pursuant to Part V of the ITAA had yet to be determined. 23. bh) Po ecerstaenlo araxesal pat heen suomittred by the i?) @onlicant for oéyment witrin set office guidelines, The errors of law identified were:- "(1) The fact that s.206 of the ITAA requires the Respondent to ask himself the question "what do the circumstances warrant" and the Respondent has failed to ask this question or has in asking it failed to consider all relevant circumstances. (ii) The fact that the Respondent took into account irrelevant considerations. (iii) The conclusion that in each of the years in question the Applicant participated in an artificial scheme of tax avoidance." The Source of the Discretion to Order a Stay an , - -- a ' ~. As indicated by his counsel, the applicant seeks", interlocutory relief under either s.15 of the Judicial Review -Act ~ or s.23 of the Federal Court Act. The mot-on therefore proceeds on the assumption that each provision is available as a source of the power to ground the relief sought. ow 24. Section 15 provides:- "(1) The making of an application to the Court under Section 5 in relation to a decision does not affect the operation of the decision or prevent the taking of action to implement the decision but - (a) The court or a judge may, by order, on such conditions (if any) as it or he thinks fit, suspend the operation of the decision; and (b) The court or a judge may order, on such conditions (if any) as it or he thinks Fit, a stay of all or any proceedings under the decision, (2) . The court or a judge may make an order under subsection (1) of its or his own motion or on the application of the person who made the application under Section 5." ' Section 23 of the Federal Court Act provides:- "The Court has power, in relation to matters in which it has jurisdiction, to make orders of such kinds, including interlocutory orders, and to issue, or direct the issue of writs of such kinds, as the Court thinks appropriate." Section 15 does not exclude the application of s.23 to proceedings brought under the Judicial Review Act - Rifki v Minister for Immigration and Ethnic Affairs (1983) 46 ALR 301, 303 per Toohey J., Piroglu v Minister for Immigration and Ethnic Affairs (1982) 43 ALR 569,571 per Lockhart J, These decisions each invoked s.23 where the conduct the subject of interlocutory relief did not fall within the 25. deseription "proceedings under the decision" which may be stayed v4 under s.15. The question remains whether s.23 may be invoked in judicial review proceedings to restrain conduct which could be che subject of a stay order under s.15. It was a question addressed briefly and apparently by way of obiter in the joint judgment of Northrop and Pincus JJ. in Dallikavak v Minister for Immigration and Ethnic Affairs (1985) 61 ALR 471. That was an appeal against a refusal by Keely J. of interlocutory relief pending the hearing and determination of proceedings under the Judicial Review Act in respect of the appellant's imminent deportation. The appeal was dismissed by the Full Court. Northrop and Pincus JJ. did so on the basis that there was no reviewable decision for the purposes of s.5 of the Judicial Review Act. (476 at line 5). They went on to express the view that even had the impugned decision been reviewable they would have dismissed the appeal. In doing so their Honours said at 478:~ "The appellant submitted, rightly as it seems to us that the learned primary judge had two sources of power to suspend or stay the decision sought to be reviewed. They were Section 15 of the Judicial Review Act and Section 23 of the Federal Court of Australia Act 1976 (Cth)." 26. The proposition was not Further elaborated. The other member of that Full Court, Jenkinson J., observed that the application to the primary judge had been made under s.15 and said that if s,15 would not have authorised the orders sought the appellant would have had to invoke an exercise of the power conferred by s.23. (emphasis added) In a number of cases members of this Court have said that the principles which have evolved to govern the grant of interlocutory injunctions will not necessarily be appropriate in the application of s.15 - Perkins v Cuthill (1981) 34 ALR 669, 671 per Keely J., Collins v Minister for'Immigration and Ethnic AEfairs (No. 2) (1982) 5 ALD 32, 33 per Bowen CJ, Gaillard v Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.) and Gonaseela v Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (Norling J.) Videto v Minister for immigration and Cthnic Affairs (1985) 8 ALN 237 (Toohey J.). The propounded overlap of ss.15 and 23 might be of little practical consequence 1f there were no circumstance in which the discretion under s.15 could be governed by more restrictive principles than those regulating the grant of interlocutory relief under s.23. In my opinion however there may be cases where, for reasons peculiar to the administration of the Judicial Review Act and the particular legislative scheme on which it is 27. onorating, the establishment of a "sSorious cu2zstion" te be tried and a halance of convenience ir favour of an arnlicant, oedinarily sufficient to justify the grant of an interlocutory injunction, will be insufficient to warrant the making of an order under s.15. It 1s unnecessary for present purposes to attempt an exhaustive definition of the boundaries within which the powers conferred by the two sections may operate. Even 1f there be an overlap in the powers conferred by the two sections the existence of s.15 and its special operation i . would weigh against the exercise of any congruent general discretion arising under s.23. oe - In this case I am of the view that whether it is a matter of power or of discretion, the applicant's claim for interlocutory relief must stand or fall with the exercise of the discretion under s.15. The principles on which that discretion should be exercised can now be addressed. ot 3, Principles Governing the Discretion Under Section 15 of the Judicial Review Act Decisions of the Court on applications for suspensory or stay orders under s.15 of the Judicial Review Act have utilised a 28. number of verbal formulae to describe the principles regulating the exercise of the discretion. The first reported case was Capello v Minister for Immigration and Ethnic Affairs (1980) 49 FLR 40, 2 ALD 1014. Franki J. there suspended the operation of a deportation order for five days "to enable the applicant to present a case which would show that upon a final hearing of the matter there was at least a reasonable argument for the granting of relief under s.16 of the Act", No such argument being presented the suspense order was not renewed. The decision indicates that in a case of urgency a suspense order or a stay may be granted under s.15 prior to any determination as to whether the applicant has a reasonable argument. It is consistent with a broad discretion under s.15 to be applied according to circumstances which may change even within the one application. The discretion was so characterised by Keely J. in Perkins v Cuthill (1981) 34 ALR 669. His Honour rejected a submission that in its exercise he should apply the principles 29, relovark to bne mank of Inpterlocntocy injunctions. At 671 he eaid:- "In my opinion Section 15(1)(a) requires an Applicant to satisfy the Court that reasons or circumstances cxist which make it just that the Court should make the orders sought, but it 1s not necessary for the Applicant to show that those reasons are 1n any sense special or exceptional." ' In Collins v Minister for Immigration and Ethnic Affairs (No.2) (1982) 5 ALD 32, Bowen CJ, also took a broad view of the discretion. He did not consider standards imported: from other areas of the law necessarily applicable in the -administration of the Judicial Review Act. At 33 his Honour said:- "Whether Section 15 requires an applicant to make out "a prima facie case in the sense laid down in Beecham Group Limited v Bristol Laboratories Pty Ltd (1968) 118 CLR - 618 or whether it is sufficient to show an arguable case ' as mentioned in Capello v Minister for Immigration and Ethnic Affairs (1980) 2 ALD 1014 might be a question. Lach case I think will depend upon its own circumstances in the exercise of discretion. The Court will naturally - be very concerned to see whether there are any prospects of success in the application; if the prospects of- success are very high the Court will be more concerned to try and hold the position by way of a stay, if it can do so, than it will be if there appear to be virtually no prospects of success." Collins was followed in Gaillard v Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.) and Gonaseela v Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (tMorling J.). , re en re ee 30. A Pull Court considered the operation of s.15 in Faingold v Zammit (1984) 1 FCR 87. That case was an appeal against the refusal by Northrop J. to stay the appellant's removal from Australia pursuant to sub-s.36A(5) of the Migration Act. The Court rejected the appellant's submission. that Northrop J. had erred in applying to the exercise of his discretion under s.15, the test propounded For the grant of interlocutory injunctions by Gibbs CJ. in The Australian Coarse Grain Pool Pty Ltd v The Barley Marketing Board of Queensland (1983) 57 ALJ 425. That test requires the applicant for relief to show that there 18 a serious question to be tried and that the balance of convenience favours the grant of the relief. The appellant submitted that the appropriate test was that laid down in Perkins v Cuthill (supra). The Court said of this submission:- "In our opinion it will be difficult for an appellant to show that reasons or circumstances exist which make it just that the court should make the order sought unless it is demonstrated that the applicant has a point of substance to argue which if successful will result in judgment in his favour. In this respect it does not appear to us that the two tests are in practical terms very different." . 31. That response in my respectful opinion, establishes what for many cases will be a necessary condition of the exercise of the discretion. Consistently with that decision however there are circumstances in which a short term "holding" order is warranted. In that very case such an order was granted at first instance by Northrop J. Franki J. as already observed had made a similar short term order in Capello (supra). In Videto v Minister for Immigration and Rthnic Affairs (1985) 8 ALN 237 Toohey J. expressed strong reservations as to the appropriateness of applying the test for' the grant of an ordinary interlocutory injunction to an application for a stay under s.15 of the Judicial Review Act. His Honour there expressly approved the criterion enunciated by Keely J. in Perkins v Cuthill (supra). More recently in Phang Yook Yah v Mahoney (unreported Pincus J. 1 May 1986) Pincus J. accepted that under s.15 a short stay can be ordered where its only purpose is to enable an interlocutory application to be brought on proper material. There may also be cases as I have already said, where a "serious question" or a "point of substance" and a balance of convenience favouring the applicant are insufficient to warrant the making of an order. The nature of the decision to be reviewed ©) and the oolicy of 2is joverninr; legislation ~ay give rise to other The discretion 1s broad and its scope best expressed by the kind of broad terminology used in Perkins v Cuthill even though in many cases the practical application of that formulation may be little distinguishable from the application of principles governing the grant of interlocutory injunctions. It 1s now necessary to consider the application of that discretion in the present case against the statutory framework which regulates the making and issuing of assessments and amended assessments and the institution of proceedings for the recovery of tax assessed. Statutory Framework The process of assessment is defined in s.6(1) of the ITAA in the following terms:- ""Assessment" means — (a) the ascertainment of the amount of taxable income and of the tax payable thereon; or (b) the ascertainment of the amount of additional tax payable under a provision of Part VII." The power of the Commissioner to make an assessment 1S set out in s.169:- a "Wher2 under Lis AcE any sersor4 cne Corarss1ioner may mak of such tax." The making of amended assessments is provided for in s.170 of the Act which, at the date of issue of the notices of amended assessments now in question, read in the relevant parts as follows:- "(1) The Commissioner may, subject to this section, at any time amend any assessment by making such alterations therein or additions thereto as he thinks necessary, notwithstanding that tax may have been paid in respect of the assessment. (2) Where a taxpayer has not made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and there has been an avoidance of tax, the Commissioner may - (a) where he is of opinion that the avoidance of tax is due to fraud or evasion - at any time; and (b) in any other case - within six years from the date upon which the tax became due and payable under the assessment, amend the assessment by making such alterations therein or-.additions thereto as he thinks necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of tax as the case may be. (3) Where a taxpayer has made to the Commissioner a full and true disclosure of all the material facts necessary for his assessment, and an assessment is made after that disclosure, no amendment of the assessment increasing the liability of the taxpayer in any particular shall be made after the expiration of three years from the date upon which the tax became due and payable under chat assessment." E E k BREE cupmedniag Neos) most. sae errenmein res a) Taye 1 tt more) The apnlicarion to amended essessmonts of provisions of the Act relating to assassmonts is 2ffected by s.173:- "Except as otherwise provided every amended assessment shall be an assessment for all the purposes of this Act." The Commissioner is required under s.174 to serve notice of any assessment upon the person liable to pay the tax and to do sO as soon as conveniently may be after any assessment is made. The time at which tax assessed becomes payable is provided for in s.204 as follows:- "(1) Subject to the provisions of this part, any income tax assessed shall be due and payable by the person i liable to pay the tax on the date specified in the notice as the date upon which the tax is due and payable, not being less than 30 days after the service of the notice, or if no date is specified, on the 30th day after the service of the notice. - (2) In sub-s.(1), "income tax" includes additional tax under Part VII." ~~ - ~ The time for payment may be extended, and provision for . such extension is contained in s.206:- - - 2 "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." The penalty for late payment is covered by s.207 which, in the relevant part provides:- 35. TE any tax remains unnaid after Ehe tine wren 1t wecane due and nayable or woulc, but for section 235, have become aur and oayahble, acditional tan is due and payable by way af pensltv by the verson liable toa nay the tax at the rate of 20% per annum on the amount unpaid, computed from that time or, where, under section for tax the Commissioner has granted an extension of time payment of the tax or has pernitted payment of the to be made by instalments, From such date as the Commissioner Getermines, not being a date prior to the date (2) on which the tax was originally due and payable. Notwithstanding anything contained in this section the Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable." Section 208 renders income tax due and payable a debt due to the Commonwealth:- Income tax when it becomes due and payable shall be a debt due to the Commonwealth, and payable to the a Commissioner 1n the manner and at the place prescribed; . (2) In subsection (1), "income tax" includes additional tax under section 207 or Part VII." The recovery of tax in any court of- competent- jurisdiction 1s provided for in s.209 which 1s in its terms a provision Commissioner to institute and carry on proceedings:- an conferring power on the Commissioner. or a Deputy- Any tax unpaid may be sued for and recovered in any court of competent jurisdiction by the Commissioner or a (2) Deputy Commissioner suing in his official name. In subsection (1), "tax" includes additional tax under section 207 or Part VII." 34. TR cucovery Of Lax 18 ner delayes ty, tno fact that a review or Forel LS wenAdinm: antl mrovision in bias res ed 4ari= 156 iS contained in $.201 which reads:- "(1) The fact that a review or apneal is pending does not in the meantime interfere with, or affect, the assessment and income tax may be recovered as 1f no review or appeal were pending. (2) In subsection (1), "income tax" includes additional tax under section 207 or Part VII." The recovery process is expedited by s.177(1) which provides:- "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." i The Nature of the Decision to be Suspended The suspensory order sought by the applicant relates to the decision of the respondent to issue a writ for the recovery. of the tax due notwithstanding that the respondent has not exhatisted his avenues of appeal against the amended assessments. The decision 1s a deciston to which the Judicial Review Act applies - The Hells Angels Ltd v Deputy Commissioner of Taxation (1985) 7 FCR 311 at 318 per Northrop J. ated! ei rye fe ud eerie af Ms gaa teed a Eras a ae NM aA cred ent Fa Aa Py! roaye cia ne #15 fonour in that case sale that tke docision to sue arises under ss. 3 and 298 o€ the ITAA. In Terrule Pty Limited v Deputy Federal Commissioner of Taxation (1985)5 FCR 153 at 156 Jenkinson J. said he would regard ss. 8 and 298 as part of a legislative context in which s.209 is seen to afford the Commissioner and Deputy Commissioner power to bring curial proceedings for the recovery of income tax, and is ' seen to be the source of a power to decide that such a proceeding shall, and to decide that such a proceeding shall not, be instituted at a particular time against a particular person. I would respectfully adopt the analysis by Jenkinson J. Section 209 in its terms confers the relevant decision making i power. It is appropriate to have regard to the fact that the - decision does not of itself create or affect rights or liabilities. It is also relevant to consider that a restraint upon'... . the institution of recovery proceedings will bar for its duration, .- the respondent's access to a court invested with appropriate federal jurisdiction pursuant to s.39 of the Judiciary Act and s.75'iii) of the Constitution. This Courk of course "eg heen aeenere: an the ast un appropriate cases to erercise? LES Mowers undec $.23 of the Teteral Court Act or s.15 of EtEhe Judicial Review Act and to restrain litigants from taking steps in nroceedings in the superior courts of the States. In St. Justins Properties Pty Ltd v Rule Holdings Pty Ltd (1980) 40 FLR 282, Toohey J. at 285 rejected a submission that such orders are contrary to the public interest. On the other hand a conservative approach to such a use of the power under s.15 1s reflected in the judgment of Jenkinson , dg. in Terrule Pty Ltd v Deputy Federal Commissioner of Taxation (supra) at page 158:- ",..the exercise of that power should, in my opinion extend no further in interference with proceedings in a superior court of record than can be seen to be necessary." ' .e That is a proposition with which I respectfully agree. Consistently with this conservative principle it is in My Opinion, proper for this Court to take into account the existence *£ a power 1n the superior courts of the States to restrain "rceceedings instituted in them. It is appropriate also woo sys es tee, hes SOO aN ts 1? He) rad 2 al eau ECL wy We w £ SCVver a's een yxerc1so? ™ to weve vosact to tte sav in whic th i" Cone rct1ron urte scoececdines to cecover incense tax. vi For in exercising or declining to exercise the power the courts have explored the considerations to be taken into account in amplementing the policy of the ITAA manifested by its legislative scheme in relation to recovery proceedings. The Inherent Power of State Courts To Stay Recovery Proceedings The Supreme Courts of the States pursuant to their own inherent jurisdictions have power to stay recovery proceedings instituted in them under the ITAA - Deputy Commissioner of Taxation v Australia Machinery and Investment Co. (1945) 47 WALR- 9, 17. ' -. There have been numerous decisions on the criteria to be applied in the exercise of that power. Generally speaking those decisions support the view that a the legislative scheme established in relation to |.income tax.- 7° recovery especially as manifested in s.201 of the ITAA, reflects a clear policy favouring the revenue against the taxpayer. 'Ss the flagh teurt saws ain Clene v Devuly Tedyeral at Coumissroner of Taxyit1e7 33 ATS 4532 cb 4534, the Commassroner 15 placed by the legislature in a nosition cf snecial advantage. In Deputy Federal Commissioner of Taxation v Hells Angels Limited (No. 1) 34 ATC 4545 at 4547 in the Supreme Court of Victoria Beach J. said:- "That provision can only be consistent with an intention by the legislature that the Deputy Commissioner take all appropriate steps to recover tax due (including the institution of legal proceedings) despite the fact that an appeal is pending." On this basis the power to grant a stay must be exercised sparingly - Marina Estates Pty Ltd v Deputy Commissioner of Taxation 76 ATC 4166 at 4168 per Hoare J. In the context of a petition by the Commissioner of Taxation to wind up a corporate taxpayer in respect of unpaid tax and penalties where the assessments were under appeal, Bowen CJ (in Eq) said:- * - - ",.ethe provisions of sec.201 of the Income Tax _- Assessment Act require me to treat the debt as in effect undisputed. Such a statutory provision may 1n some cases lead to hardship on a taxpayer, particularly where he has paid the amount of tax assessed and later wins his appeal, whereupon the money is repaid to him without unterest. This lead Higgins J. 1n Hickman v FC of T 31 CLR 232 at 245) to describe 1t as "unjust and even baneful", but 1t remains in the Act... rr ee age ane ee ernineermermminnt te wat ere ind sr famreriks of tha provis r 1 Aq ce court ro refuse as Roma Industries Pty Ltd 74 ATC 4113 at 41145, On the other hand, un Fortuna Holdings Pty Ltd v The Deputy Commissioner of Taxation of the Commonwealth of Australia reach the "The (1978) VR 83, ticGarvie J. was not sure that he would same conclusion as Bowen CJ. At 101 his Honour said:- decisions cited to me and those referred to in the article by ltir Castan suggest to me that the particular circumstances of cases involving s.201 lead courts sometimes to grant and sometimes to refuse a stay rather than that the section generally leads a court to refuse a stay". In Federal Commissioner of Taxation v Bevz (1981) 54 FLR 355 Jenkinson J. was not prepared to allow a stay of recovery proceedings where the prospects of success on an appeal under Part v of the ITAA were remote. His Honour. however left open the question whether a greater chance of success should attract an exercise taxpayer. of the discretion to grant a stay in favour of the ~oe Nason ACJ in Clyne v Deputy Commissioner of Taxation-~ (NSW) (1982) 43 ALR 342 was informed by counsel for the Deputy Commissioner that it was a somewhat unusual course for him to commence proceedings for recovery 1n a court relying on a notice of assessment which is under challenge in proceedings under Part V of the ITAA. Eis 'loetuc eLserven ft "It 1s to be hoped that this 1s so. The institution of proceedings for recovery on a notice of assessment which 1s challenged in proceedings under Pt V may operate oppressively and unfairly to a taxpayer. Fortunately, and this 1s conceded by Ilr Priestley 9C for the Deputy Commissioner, the Courts in which recovery 1s sought have a jurisdiction to stay or adjourn recovery proceedings when the notice of assessment is under challenge in Pt V proceedings, insisting, if it be appropriate on the taxpayer giving suitable security or a suitable undertaking to meet the exigencies of the situation." Section 201 as his Honour acknowledged is the Deputy Commissioner's "charter to commence proceedings notwithstanding a challenge in Pt V to the correctness of the assessment". The New South Wales Court of Appeal in Federal Comnissioner of Taxation v Mackey (1982) 64 FLR 432 considered at some length the impact of s.201 on the discretion to order a stay. in recovery. proceedings. ' In allowing an appeal against the decision of Yeldham J. granting a stay in a case involving reliance by the taxpayer on! - what vas held to be "a contrived scheme" Moffitt P. accepted that _ great weight should be given to s.201 and the policy of the legislation implicit in it. It might not be given the force warranted, he said, 1f the exercise of the discretion depended heavily or merely on by ¢ id TS is iS Ned es cob e vrether the taxnayec bat ar azguabls case ant whir? the helance of "The policy of 3.20] 1s that when an assessment has been made the Deputy Commissioner has a right to have the tax paid, despite the pendency of an appeal. thile hardship to the taxpayer and the merits of the appeal are relevant matters, other considerations are involved uncluding the Commissioner's right to have the tax assessed paid. The ecxercise of discretion nay involve --. some examination of the nature and basis of the liability on which the disputed tax has been assessed and the nature of the dispute." His Honour was of the view that in a case where a taxpayer had been a party to a "contrivance" to avoid his liability to pay tax, then the Court should not, otherwise than in quite exceptional circumstances, intervene to -stay proceedings. But he distinguished that case from the case in which, in the ordinary course of business, a situation arose giving rise to a dispute concerning the liability of the taxpayer for tax. Hutley and Glass JJA. generally agreed with Moffitt P. although Hutley JA appears to have differed to the extent that he was of opinion that speculation as to the result of appeals was . not a significant matter to be borne in mind. yt Both Hutley and Glass JJA. also appeared to have stated the effect of s.201 on the exercise of the discretion rather more broadly than Noffitt P. who confined his remarks to the case of a taxpayer relying upon a contrived scheme. ace r aT a ae ~~ a ar er en meine aMT rentitne ae be shoul? of 2eaareiset wit groeak cautien ant only unter spsc2rail circunstances:- "In deciding whether to exercise it there is no similarity whatsoever to the issue which faces the court when it is asked to grant an interlocutory injunction. A person who applies for an interlocutory injunction 1s applying for an exercise of the court's power in his Favour and the burden lics on him to establish his right to it. The Commissioner starts off with rights under s.201 and the taxpayer is seeking on special bases to have a special discretion exercised in his favour. It is not possible to work out in advance all possible bases for the exercise of such a discretion and it would not he proper even to attempt to do so. It is an open ended discretion." His Honour identified what he said were the only two cases where it is clear that the Court would exercise its discretion:- - so 1. Abuse of office by the Commissioner. . 2. Extreme personal hardship to a taxpayer called on to pay. Glass JA agreed that it was a misconception to treat.an application for a stay in the same way as an interim injunction application. To use the metaphor of a scale the effect of s.201 vas that the needle stood in the Commissioner's favour close to 100 and it would require a weighty case to be presented by the taxpayer to depress it below the half way mark. in yep tae re ~ Per ers a) ( rE MNES CNS RECS PR Pah Ta ye Ye Sem fy "Ye. OF Terkbor, O72: leayislrtive sehen asta vlishnZd in relation co uncanen tay cccovery, 2i7tecially as m nifested in $3.177 and 2aL of the ITAA reflects 2@ cleoc Llogislaetive intent favouring the revenue against the taxnayer. On an application for a stay of execution in Deputy Federal Commissioner of Taxation v The Hells Angels Limited (No. 2) 84 ATC 4548 Beach J. declined the stay. The grounds upon which it was sought were that hardship would be caused to the taxpayer and that he was likely to succeed on appeal. Following Hutley JA in Mackey's case his Honour that the obligation to pay tax cast upon the defendant by law was not a hardship of itself. Like Hutley JA also, but it seems contrary to + Moffitt P. and Glass JA in Mackey's case, his Honour took the view that speculation as to the result of appeals was not to be taken. into account in exercising the discretion to grant a stay. In Deputy Federal Commissioner of Taxation v Ewen 84 ATC- .. 4550 at 4552, O'Brien J. relying upon Mackey's case, saw s.201 as imposing an onus on the taxpayer to show cause why the court should intervene to stay proceedings. ge eorrracy cco bie Cie OF TTubley F\ ip the "acvey case avi teach 7.oin tha shoe Ue lis angels Lirited (1a, 2) (supra), Meodhan J. an Deoruty Ceieral Connissionec of Taxation v Steel Pabrication ty Ltd 84 aTc 4639, accented tne relevance of evidence as to the substantive nature of the grounds of an appcal under Part V of the ITAA in deciding whether to stay proccedings For the winding up of a company the subject of a disputed assessment to incone tax. The genuineness of a taxpayer's appeal against assessment has been clearly accepted as a relevant factor in the exercise of the Court's discretion to adjourn ox dismiss a sequestration petition under s.52(2}) of the Bankruptcy Act - Clyne v Deputy Federal Commissz1oner of Taxation (1982) 45 ALR 323, 328 and Re: Verma Ex Parte Deputy Federal Commissioner of Taxation 84 ATC 4864, 4868 per Beaumont J. 7 - In Deputy Federal Commissioner of Taxation v .Trueholid Benefit 85 ATC 4058 the taxpayer had been assessed under the Income Tax (Unpaid Company Tax) Assessment Act 1982 and was the subject of a winding up petition by the Commissioner. The company had demurred to the statement of claim in the recovery proceedings on the basis that the Act under which it was assessed was not a valid law of the Commonwealth. The demurrer was plainly going to be overruled at first instance and in the Pull Court because of the decision of the High Court in wha * ws f pane a ht Peneae bate ete seend) an ata ' ae a ti paper) oe! Lee ee ane ee aoa Time pein fe ry ie aip ays coe ee The avoves oojzet «af L132 seturrer as tO %Ersuacve the hath Courr to ceconsider thea Jd2cision in MNacCoroick's case, In staying the voresentation of the winding up petition Connolly J. referred to ss.177(1) and 201 of the ITAA and said:- "Io am not ... persuaded that either of these provisions would justify the winding up of the company in reliance upon a statute the constitutionality of which the company with whatever prospects of success genuinely desires to challenge." \ In my respectful opinion the view there expressed by his Honour should be seen as related to the nature of the proceedings in question, namely winding up proceedings. It should not be transposed as a proposition generally applicable to recovery _ proceedings. - In Deputy Federal Commissioner of Taxation v Manners 85. ATC 4294 Phillips J. on an application for a stay of execution after summary judgment for the Deputy Commissioner, agreed with O'Brien J. in Deputy Federal Commissioner of Taxation v Ewen (supra) that s.201 of the ITAA imposes an onus 6n a defendant .to show cause why the court should intervene to stay proceedings. He also agreed with the observations of Hutley JA in Mackey's case that a defendant might discharge this onus by denonstrating extreme personal hardship. x Y "Ls qeicus Llefk ssam fea sucsticn oF th relevance of ble merits ef ter Pert " arxvooal ino suca an eaerlication. 'Ie noted Lae liffering Views on that noint exnressold respectively by Hoffitt P. in Mackey's case and Nason ACJ in Clyne's case on the one hand and Hutley JA in Nackey's case and Beach J. in The Hells Angels Linited (No.2) on the other. In the event, assuming the relevance of the merits of the defendant's appeal, his Honour was unable to determine them and they did not therefore impinge upon the significance to be attached to the provisions of s.201 in the exercise of his discretion. In Koadlow v Deputy Federal Commissioner of Taxation 85. ATC 4147 at 4151 the Victorian Full Court accepted that a request for reference of an objection to a Board of Review was a factor relevant to the exercise of the discretion to stay proceedings. Another relevant factor they said was the prospect of success on such a reference in the sense: that if 1t were shown that a taxpayer's objection were frivolous or hopeless no stay of r proceedings would be granted. In Deputy Federal Commissioner of Taxation v Trower 86 ATC 4157 NceGarvie J. declined to grant a stay of execution in recovery proceedings although the taxpayer had genuine and substantial grounds of objection to the assessment and the Sormmissiensy hal solaved in reverringy the deciston to a Beard of Poaviav. In se dtcadane ais denoure Look 1ilo accounk tne fact that the taanayer relied substantially on contcived tax avoidance schenes. It is in my opinion, important to note what his Honour said at 4163 namely:- "The considerations relevant to the exercise of discretion on an application for a stay are different from those on the determination of whether a taxpayer 1s liable for income tax. On the latter issue, if the use of an artificial contrivance results in law in a taxpayer being not liable for tax, it makes no difference that this result was reached by artificial contrivance." - In the decision of the Queensland Full Court in Deputy \ Federal Commissioner of Taxation v Jonrich Pty Ltd 86 ATC 4560 Connolly J. at 4573, stated correctly in my respectful opinion, - that s.201 was in one sense otiose in providing that income tax might be recovered notwithstanding the pendency of an appeal or reference. Section 204, as already noted, makes income tax due and payable on the dates set out in the notice of assessment or thirty days after service." His Honour said:- u . "The real effect of s.201 was to state a policy and its practical consequence was to provide a powerful factor influencing the courts against staying proceedings pending appeal or reference." Eg r Hy SOLER ETT LIEN TL TEI te Erac §£ne Te nay ysenerthl: 93 canclauts' Crom the sarees dang covicy, fowec Of thats Courts to stay rocovery nroce2dings wnstituted an then under the PAA 1s well estavlished and that Courts @xercising 1t have regard to the following propositions:-— The policy of the ITAA as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment. The power to grant a stay is therefore exercised sparingly and the onus 1s on the taxpayer to justify it. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion (although some Judges have expressed different views on this point). Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax. - A stay may be granted in a case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay. The mere imposition of the obligation to pay does not constitute hardship. . The existence of a request for reference of an objection for review where appeal is a factor relevant to the exercise of the discretion. Limits of Accountability . eo It may be thought significant that the decision to institute recovery proceedings falls into the class of decisions Review Act. It 1s therefore, by operation of s.13(11) of the described in paragradh (£) of the Second Schedule to the Judicial Act a eth Adame AMA aa fy wt 2asses CF Ve¢e1sien wn respnack cf which thea od fu a adJ rr > on G HOCLILON M*RST Can GL verre? to proviie o statement of teasons. It was suggested by Fox J. (Beaumont J. agreeing) in Murphy v K.R.N. Holdings Pty Ltd (1985) 8 FCR 349 at 351 that the general idea behind paragraph (f£) of the Second Schedule is that civil procedure will itself take care of what s.13 seeks to achieve when 1t requires reasons to be given and that civil procedure 1s not to be complicated by the s.13 procedure. It might seem that that rationale could constitute an argument against the availability of judicial review of such classes of decision at all. Such decisions are reviewable, but their inclusion in the Second Schedule may indicate that the legislature did not intend such review to be easily pursued - see Murchison v Keating ' (1984) 1 PCR at 343-344. . Te On the other hand Toohey J. in Ryder v Morley , (Unreported Toohey J. 19/1/87) did not infer -from s.13- and Schedule 2 any clear legislative policy in 'regard;to, the use' of = interlocutory procedures, whether by way of countenancing or" precluding them. In my opinion, 1t 1S not appropriate to draw any clear conclusion one way or the other as to the legislative policy F be he] é t G@cezscpun «tien 235, Biter ell, vavicvebloa under the Act, Th1s difficulty ts connounded by the fack that the decision under 5.206 of the ITAA refusing to grant an extension to day tax assessed, does not apnear to fall within any of the classes mentioned in the Secon? Schedule. Judicial Review of Decisions to Institute Recovery Proceedings The Judicial Review Act applies to a wide range of decisions of Commonwealth ministers and officials each within a particular statutory framework. The Act is not designed to -affect the substantive legislative policies expressed by the enactments in respect of which it operates. As the Full Court said in Lamb v Moss (1983) 49 ALR 533 at 557, its broad purpose was to ainvest the court with.: jurisdiction to supervise administrative action in the~ Commonwealth sphere in all its aspects. Such 'a broad purpose encompassing as it does many classes of decision and differing statutory context 1S necessarily accompanied by broad discretions zn the granting or withholding of relief, be it interlocutory or final:- Court in appropriate cases, woe thes ccourek Fas conferred uncn it a ve 71ser%tion to yzant ar cefiuses reliof in 2 mac ELC ular Cause. Tk 15 yn ths sxercise oF CAE duseretion that 'the court will exercise contcol ovec bone "cutistances znovhich and the staye at which judicial revis wo will be embarked unon. Turthernore 1t should be understood that the court's Ciscretion is not Limited to what is to occur when it comes to the question of whether to grant or refuse final relief. By s.15 of the Act there 1s no automatic stay of the operation of a decision upon the making of an apnlication to the court. It will always be for the court carefully to consider whether a stay should be granted." Within the wide discretions so created it is open to the ' to identify general approaches to particular classes of decision based upon their nature and the policy of the legislation under which they arise. In respect of the class of reviewable decisions relating to committal proceedings for criminal offences against laws of the Commonwealth, the court in Lamb v Moss (supra) Stated a general approach to the exercise of its discretion in the following terms at 564;- "The power to make an order of review under the Act in respect of committal proceedings should be exercised only in most exceptional cases especially in.respect of. a decision in the course of proceedings." ' In my opinion, a general approach not dissimilar in its effect should be applied to applications to restrain the conmencement or continuance of recovery proceedings under the ITAA. iS ~ CP ssee ee se yarbhiecn 3f tia leyreleative nolicy smbodies un s.2%) of Lhe TT as @xcteinee 1> the cesas referred to abova will veigh significantly in the balance against the grant of the restraint order sought. So too does the existence of the power in the State Courts to stay recovery proceedings and their preparedness to take into account the existence of a pending appeal or review and its merits in doing so. The fact that the mere institution of such proceedings is itself determinative of no rights or liabilities also weighs Tea bets eT 4 wate Ta aaye against the making of a restraining order. To some extent the strength of that consideration is slr aN . AN lessened by the preclusive operation of s.177 of the ITAA and the rs te! comparative rapidity and ease with which, in most cases, the 'a Commissioner can proceed to obtain summary judgment. It has already been noted that on at least some if not the preponderance of authority, the merits of the taxpayer's 95 i BE 5 352 objectian to the assessments may be taken into account by the ~ court in which recovery proceedings are instituted when such court is moved for a stay of those proceedings. . - , . yy e However the weight of such considerations in the 2a fen exercise of the Commissioner's discretion to extend time or hold rr nee Hse, his hand with respect to recovery proceedings 1s attenuated by the fact that it 1s his assessment whose strength is in question. baa een pe Bs etee tue Phage rm eager LS appro serrate Ine wn2 Cormrreslorerc toa fake ince account the strenyth cf an objection to én assessment in deternining whether or not to extend time or to institute procecdings. However 1t 1S not necessary or desirable for present purposes to exemplify those possibilities. In my opinion, while there is a serious question as to the merits of the applicant's objections in this case, they do not, for the purposes of the interlocutory restraint sought, displace the legislative policy and other factors referred to. Weighing against him also in this case is the apparently contrived nature of the arrangements he has made to minimise his liability to pay income tax. That is not to say of course that those arrangements will not prove to be legally effective. Further, although the applicant claims he will suffer hardship if recovéry proceedings go ahead, it is difficult to reconcile that contention with his assertion of a nil net asset position. . . Further there 1s nothing on the materials before the Court to justify a restraint of the scope and extent sought which evidently contemplates that the respondent should be prevented from unstituting recovery proceedings until the applicant has TRetes WP ee ee Se Peepers ers) enna L = sar pahouskec cll avenuce af tam2al ajeinsk the assessments uo to and Jj ancluding en anclicaticen fer sxeciel leave Court. In the end and taking account of the various Factors which I have mentioned and on the assumption that there 1s substance in the applicant's objections, I am not prepared to grant the suspensory orders sought by him. I recognise that 1n so doing the applicant's claim for final relief, at least in so far as it relates to the institution of recovery proceedings, may be rendered nugatory and have for that reason given the matter extended consideration. I have been troubled by the fact that as at the date of the hearing of the motion the applicant had requested 'that the disallowance of his objections be referred to the -Administrative i . Appeals Tribunal and that request had not been complied with. - aa y . It is in my opinion, quite unacceptable, in the absence ~ of explanation, that the respondent should fail to refer an objection in accordance with a request by the applicant ,under s.187 of the ITAA and yet seek immediately to institute recovery proceedings. It is difficult to imagine circumstances, though no doubt they may exist, in which such conduct could not be described as oppressive. tr ase Ce vam a & a ered mee ee ach tim Mute e+ YE, TED Ts PF oF ee sy ar Se RRR: wy ee QE Covers T acti scutet,2 ghat im cias cave thea resnondent maV2 bue Court AY' uNAWQVESKing nok EO ainstitvues cecovecy c yroceadlings senting 1ts5 decision on the clair for interlocutory I UW I Cf ¥ The applicant contends in his grounds for review that the existence of his request for a reference of the objections to the Tribunal and the Failure by the respondent to act upon it was relevant to the exercise of the discretions in question in this application. In my opinion that is a legitimate although limited basis for obtaining review of the decisions impugned. If it be the case that as of the date of delivery of this decision the respondent has still not 'referred the applicant's objections to the Administrative Appeals" Tribunal, then I will be prepared to make an order restraining him from instituting recovery. proceedings until the objections have been referred to the Tribunal in accordance with the applicant's request or until the determination of the application whichever is the earlier. Otherwise the applicant's motion will be dismissed. n by Tocerkhate chat tac sreceaciag th te savon { 2 7) ca@yes eto a true copy of tno Reasons for Judsqment herein of his Honour iy Justice French. Associate: Dated ; iy * Phtiony y [967 Solicitor for the Applicant : Mr P. Fletcher instructed by Nessrs. Phillips Fox. Solicitor for the Respondent : Ms. P. Chong : a instructed by the Australian Government Solicitor - Date of Hearing: 26 November 1986