FEDERAL COURT OF AUSTRALIA Engler v Commissioner of Taxation (No 2) [2003] FCA 411 TAXATION – judicial review – notices of amended assessment – allegations of invalidity – want of compliance with statutory time limit – production of notices of assessment under hand of Deputy Commissioner – application of ss 175 and 177 of Income Tax Assessment Act – statement of claim struck out – leave to replead with allegation of want of good faith – criteria for pleading of want of good faith – obligations of legal profession in respect thereof – alternative proposed pleading by unrepresented applicants – wide ranging allegations of ultra vires action, negligence, breach of statutory and fraud – convoluted and conceptually confused – leave to replead Income Tax Assessment Act 1936 (Cth) s 166, s 170, s 173, s 175, s 175A, s 177(1) Judiciary Act 1903 (Cth) s 39B Engler v Commissioner of Taxation [2002] FCA 226 cited Engler v Commissioner of Taxation [2002] FCA 620 cited McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 followed FJ Bloemen v Federal Commissioner of Taxation (1981) 147 CLR 360 followed Federal Commissioner of Taxation v Dalco (1989) 168 CLR 214 cited Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 cited R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 cited Re Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 69 ALR 185 cited Plaintiff S157 v The Commonwealth (2003) 195 ALR 24 SCAS v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 397 cited SBBS v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 361 cited WAFV of 2002 v Refugee Review Tribunal [2003] FCA 16 cited Kordan Pty Ltd v Federal Commissioner of Taxation 2000 ATC 4812 cited San Remo Macaroni Company Pty Ltd v Federal Commissioner of Taxation 99 ATC 5138 cited CLAUDIA CHARLOTTE ENGLER and JEFFREY KENNETH GATES v COMMISSIONER OF TAXATION W245 OF 2001 FRENCH J 6 MAY 2003 PERTH IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W245 OF 2001 BETWEEN: CLAUDIA CHARLOTTE ENGLER FIRST APPLICANT JEFFREY KENNETH GATES SECOND APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: FRENCH J DATE OF ORDER: 6 MAY 2003 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The statement of claim filed on 5 March 2003 is struck out. 2. If it be the applicants' contention that the notices of amended assessment referred to in paragraph 9 of the statement of claim were issued other than in good faith, there is liberty to amend the statement of claim on or before 6 July 2003 to raise such an allegation. 3. Any additional pleading of want of good faith will not exceed two pages inclusive of particulars. 4. The applicants are to pay the respondent's costs of the motion of 25 March 2003. 5. The applicants' motion filed 31 March 2003 is dismissed. 6. The applicants' motions filed 6 December 2002 and 14 March 2003 are adjourned to the next directions hearing. 7. The directions hearing is relisted for 11 July 2003 at 9am. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY W245 OF 2001 BETWEEN: CLAUDIA CHARLOTTE ENGLER FIRST APPLICANT JEFFREY KENNETH GATES SECOND APPLICANT AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: FRENCH J DATE: 6 MAY 2003 PLACE: PERTH REASONS FOR DECISION ON MOTION TO STRIKE OUT STATEMENT OF CLAIM Introduction 1 The applicants sue the Commissioner of Taxation in respect of the conduct of an audit of their tax affairs and the issue to them of notices of amended assessments in September 1998. The application they originally filed was struck out on 8 March 2002. They have now filed an amended application and a statement of claim pursuant to orders which I made then. The amended application and statement of claim have been prepared with the assistance of pro bono counsel who has since ceased to act for them. The respondent moves to strike out that statement of claim and for an order that the application be dismissed or permanently stayed. The applicants have foreshadowed, in an amended application and further statement of claim attached to a motion filed on 14 March 2003, a wide range of claims of ultra vires action, negligence, breach of statutory duty and fraud on the part of the Commissioner and his officers. 2 For the reasons that follow I will order that the statement of claim filed on 5 March 2003 be struck out. The statement of claim challenges the validity of the notices of amended assessment issued to the applicants. That challenge cannot succeed having regard to the provisions of ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth) and the production in Court of copies of the notices of amended assessment under the hand of a Deputy Commissioner of Taxation. I have however decided to give the applicants leave to re-plead to raise, as it appears they may wish to do, allegations of bad faith on the part of the Commissioner vitiating the issue of the notices of amended assessments. I will not permit the lodgement of a pleading along the lines of the further statement of claim which comprises some 108 pages and 104 paragraphs including extraordinarily wide-ranging allegations of fraud on the part of the Commissioner and his officers. Making due allowance for the fact that the applicants prepared that document without legal assistance, it does not provide a basis upon which these proceedings could fairly be allowed to continue. 3 I will make an order under Order 80 of the Federal Court Rules with a view to securing further pro bono legal assistance to the applicants at least for the purpose of advising and, if appropriate, assisting them in formulating their repleading in accordance with the conditions which I have imposed which are directed to a pleading which can be expressed in a concise and disciplined way and which exposes the real issues in the case. There is of course no guarantee that pro bono legal assistance will be available or that any practitioner providing such assistance will consider there is a proper basis to support a pleading of bad faith. I propose to allow two months from the present time to afford the applicants sufficient opportunity to secure advice if it is available and otherwise to consider their position. If no viable pleading can be produced at the end of that time, I will not be inclined to allow the matter to proceed further. The History of these Proceedings 4 The applicants commenced proceedings in this Court against the Commissioner of Taxation on 18 June 2001. In their application they sought declarations that notices and amended notices of assessments issued to them under the Income Tax Assessment Act were void. The relevant assessments and amended assessments were: 1. An Amended Notice of Assessment issued to the first applicant on 24 September 1998 relating to the financial years ended 30 June 1992, 1993, 1994, 1995 and 1996 and a Notice of Assessment issued on the same date for the year ended 30 June 1997. 2. A Notice of Amended Assessment issued to the second applicant on 15 September 1998 relating to the financial year ended 30 June 1992. Other declaratory and injunctive relief was also sought. 5 On 8 March 2002, I made an order that the application be struck out and the applicants have leave to file an amended application within twenty one days of the determination of proceedings then pending in the Administrative Appeals Tribunal. I also directed that the amended application be accompanied by a statement of claim which complied with the Federal Court Rules. The reasons for these orders were set out in the judgment – Engler v Commissioner of Taxation [2002] FCA 226. On 16 May 2002, RD Nicholson J dismissed motions filed by the applicants seeking extensions of time within which to appeal or seek leave to appeal to the Full Court against those orders – Engler v Commissioner of Taxation [2002] FCA 620. 6 The parties were referred to mediation by the District Registrar by an order made on 15 August 2002 and the directions hearing held on that date was adjourned to 10 December 2002. The mediation did not resolve the application. On 24 October 2002, the applicants requested that the Court make an order under O 80 for the provision of pro bono assistance if that were available. Ms C Searle of counsel agreed to provide assistance to the applicants in late November 2003. 7 The applicants filed a notice of motion on their own behalf on 6 December 2002 seeking orders in the following terms: "1. that this notice of motion be heard at the time of the directions hearing on 10 December 2002. 2. an order, interim decision or interim judgement that the Second Applicant's notice of assessment dated 12 December 1996 for the year ending 30 June 1995 is a notice of assessment to which section 170 of the Income Tax Assessment Act 1936 applies. 3. an order, interim decision or interim judgement that the Second Applicant's notice of assessment dated 12 December 1996 for the year ending 30 June 1996 is a notice of assessment to which section 170 of the Income Tax Assessment Act 1936 applies. 4. that the Respondent provide discovery prior to the Applicants having to file an amended application and statement of claim and produce to the Registrar of this Court all documents concerning the Applicants and Gates & Assoc – Builders including those from the Australian Taxation Office Legal Practice and Australian Government Solicitors 5. restraining the Respondent from commencing recovery action against either the First and or Second Applicant for any disputed amounts until the outcome of these proceedings 6. any other order this Honourable Court thinks just. 7. the Respondent pay the Applicants cost of the application and this motion." 8 On 10 December 2002, Ms Searle appeared for the applicants at a directions hearing and orders were made adjourning the motion filed on 6 December to the next directions hearing on 16 January 2003. The time limited by the orders made on 8 March 2002 for the filing of an amended application was extended to 31 January 2003. At the time of the directions hearing Ms Searle had not yet had an opportunity to come fully to grips with the matters raised by the applicants' claims. She had not then discussed with them their motion of 6 December 2002. 9 The second applicant indicated to the Court at that time that any pleading put in without discovery would have to be amended. The Court was also then informed by counsel for the respondent that the Administrative Appeals Tribunal proceedings had been discontinued. 10 On 16 January 2003, the directions hearing was further adjourned to 18 February 2003. On 31 January 2003, an amended application was filed seeking relief in the following terms: "1. A declaration that the assessments issued to the First Applicant on 24 September 1998 for the years 1992 to 1997 are issued beyond power and are a nullity under section 170 of the Income Tax Assessment Act ("the Act"). 2. A declaration that the purported changes made to the Second Applicant's assessments for the years 1993 to 1996 made on or about 8 September 1998 are issued beyond power and are a nullity under section 170 of the Act. 3. An injunction preventing the Respondent from seeking recovery of any sums payable by the Applicants under the Assessments. 4. A declaration stating that the Respondent is not to deal with the Applicants joint or several taxation affairs in the future concerning all or any matter other than strictly in accordance with the Respondent's statutory duty and the Taxpayers Charter. 5. Damages for the losses incurred by the Applicants as a result of the issuing of the Assessments. 6. Costs. 7. Such further or other relief as this Honourable Court deems appropriate." Although the amended application referred to an "accompanying statement of claim" there was no statement of claim filed with it. On 3 February 2003, however, a consent order was made extending the time for filing the statement of claim to 7 March 2003. 11 The matter came on again for directions on 18 February 2003. Ms Searle then informed the Court that the statement of claim was in draft and that she had taken instructions on its terms. She also informed the Court that she had advised the applicants that she would not be able to continue with the matter and that there might be someone on the pro bono panel who could assist with them with a greater level of expertise in administrative law than she had. She would however complete the drafting of the statement of claim. In a discussion that followed with the second applicant at that directions hearing, I indicated to him that the question of any further pro bono representation could be considered if there were a viable statement of claim. There would be difficulty associated with getting anyone else to take on their case given the substantial nature of the commitment required. The Registrar made an order on 5 March 2003 under Order 80 rule 8 granting leave to Ms Searle to cease to provide legal assistance to the applicants. 12 A statement of claim was filed on 5 March 2003. In an affidavit filed on 13 March 2003, the first applicant deposed that the statement of claim which Ms Searle had prepared did not disclose all of their causes of action. It only covered some points and left a lot of claims out. However Ms Searle had informed the applicants that she could not add anything to their statement of claim. A notice of amendment to the statement of claim filed by the applicants on 5 March 2003 corrected certain dates in that pleading. 13 On 14 March 2003, the applicants filed a motion seeking decisions on some eight "preliminary questions" and orders that amended assessments and assessments issued to the applicants were ultra vires. The motion also sought the hearing of the motion filed on 6 December 2002. It sought an order that an attached amended application and amended statement of claim be substituted for the amended application filed on 31 January 2003 and the statement of claim filed on 5 March 2003 "…only if their filing does not prevent the orders and decisions being sought in this motion". The motion also sought an order for discovery and an order for the filing of a defence. 14 At a further directions hearing held on 18 March 2003, orders were made requiring the respondent to file and serve any motion to strike out the statement of claim and written submissions in support of such motion on or before 25 March 2003. The applicants were to file and serve written submissions in reply and any submissions in support of their motion filed on 14 March 2003 by 1 April 2003. Their motions and the respondent's motion were to be listed for 3 April 2003. 15 On 25 March 2003, the respondent filed a motion seeking the dismissal of the applicants' notices of motion dated 6 December 2002 and 14 March 2003, the striking out of the statement of claim, the dismissal of the amended application and, alternatively, a permanent stay of the proceedings. This led to the filing of a further motion by the applicants on 31 March 2003 seeking the dismissal of the respondent's motion of 25 March 2003 on the basis that it had failed to comply with O 19 r 1(2) of the Federal Court Rules and, alternatively, that it was frivolous and/or vexatious and an abuse of the process of the Court. 16 On 1 April 2003, an affidavit of Tasso Thomas Beckett-Cooper was filed on behalf of the respondent. Mr Beckett-Cooper is an Executive Level 1 officer employed in the Small Business Compliance Interpretation at the Northbridge office of the Australian Taxation Office. He deposed to the issue of notices of amended assessment to the first applicant for the income years ended 30 June 1992, 1993, 1994, 1995 and 1996. In each case he exhibited to the affidavit a copy of the notice affixing the facsimile signature of the Deputy Commissioner of Taxation. He also deposed to the issue of a notice of assessment for the income year dated 30 June 1997 for the first applicant and a notice of amended assessment for the income year ended 30 June 1992 to the second applicant. Copies of these assessments with the facsimile signature of the Deputy Commissioner of Taxation attached were also exhibited to the affidavit. Each of the amended assessments and the assessment issued to the first applicant was issued on 24 September 1998. The amended assessment issued to the second applicant, issued on 15 September 1998. 17 The respondent's strike out motion came on for hearing on 3 April 2003. The applicants' motions of 6 December 2002 and 14 March 2003 were also before the Court. The argument advanced by the respondent concerned both the viability of the amended application and the statement of claim which had been filed. I did not hear argument on the applicants' motions for preliminary decisions, discovery and other orders which were referred to earlier in these reasons. This was a convenient mode of proceeding as the threshold question which the Court had to deal with was whether the applicants, on their amended application and statement of claim as filed, had disclosed any cause of action. The second applicant suggested that the proposed amended application and statement of claim attached to their motion of 14 March 2003 be regarded as particulars of the statement of claim filed on 5 March. I am prepared to regard the amended application and amended statement of claim as an alternative pleading in the event that the statement of claim filed on 5 March is struck out. I will have regard to it in order to determine, if it be necessary to do so, whether that amended pleading or any further amended pleading should be permitted. 18 It should be clear however, that the applicants stated that they were relying upon the statement of claim filed on 5 March 2003 as their statement of claim and that was the pleading addressed by counsel for the respondent, Ms Price, in the first instance. The Statement of Claim Filed on 5 March 2003 19 The statement of claim begins by alleging that the applicants are Australian residents and taxpayers (pars 1 and 2). It pleads the lodgement by the first applicant of her income tax returns for the years ended 30 June 1992, 1993, 1994, 1995 and 1996 and the dates of those lodgements (par 3). A similar pleading is made in respect of the second applicant (par 4). It is said that the applicants received notices of assessment in respect of each of the years of income and two tables are provided setting out, against each year of income from the year ending 30 June 1992 to the year ending 30 June 1996, the date of the relevant assessment, the taxable income, the amount payable and the date it was payable (par 5). Then it is said that in April and November 1995, the first and second applicants respectively were advised by officers of the respondent that their taxation affairs for the years of income were subject to audit (pars 6 and 7). There follows the allegation that the respondent issued amended notices of assessment to each of the two applicants for the years ended 30 June 1992 to 30 June 1996 respectively and an original assessment for the first applicant for the year ended 30 June 1997. The amended assessments and the original assessment issued to the first applicant in respect of those years are each said to have been issued on 24 September 1998. The amended assessments issued to the second applicant are said to have been issued on 15 September 1998 (par 8). 20 Paragraph 9 of the statement of claim alleges that the notices of amended assessment issued by the respondent to the applicants were ultra vires the respondent having been issued contrary to s 170 of the Income Tax Assessment Act. The particulars of this contention are as follows: "(a) The Applicants made true and full disclosure of all matters relevant to the assessment of their taxable incomes for each of the years of income. (b) In the alternative, if the Applicants omitted any material from their returns of income for any of the years of income, this omission was disclosed in a timely manner to the Respondent. (c) The Applicants did not avoid or seek to avoid any tax in their returns of income. (d) By virtue of having been issued more than four years after the dates of the tax became due and payable under each of the assessments for the Applicants. (e) The Respondent did not seek any extension of time within which to complete any examination of the affairs of the Applicants. (f) No application was made to the Federal Court by the Respondent seeking an extension of time within which to amend any assessment of either of the Applicants." The officers of the respondent who issued the amended assessments are said to have acted beyond power in circumstances where statutory time limits were readily ascertainable from the terms of the Act (par 10). The loss and damage suffered by the applicants is said to be a foreseeable consequence of the issue of the amended assessments (par 11). Paragraph 12 sets out heads of loss and damage said to have been suffered by the applicants. The relief sought in the amended application is then set out. Statutory Framework 21 Central to the applicants' case are the provisions of the Income Tax Assessment Act relating to the making of assessments and amended assessments and the conduct of audits of taxpayer's affairs. The duty of every person to lodge a return for a year of income is imposed by s 161(1) of the Act. It must be in a form approved in writing by the Commissioner for the purpose and must contain the prescribed information (s 161A(1)). The duty of the Commissioner to make an assessment of taxable income and of tax payable thereon is imposed by s 166: "166 From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon." Where a person is liable to pay tax under the Act, the Commissioner is required to make an assessment of the amount of that tax (s 169). For the purposes of making an assessment the Commissioner may accept, either in whole or in part, a statement in the return of the assessable income derived by the taxpayer and of any allowable deductions or rebates to which it is claimed that the taxpayer is entitled and any other statement in the return or otherwise made by or on behalf of the taxpayer (s 169A(1)). Section 170 concerns the amendment of assessments and, at the relevant time, provided: "170(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. . . . 170(2) Subject to this section, where there has been an avoidance of tax, the Commissioner may: (a) if the Commissioner is of the opinion that the avoidance of tax is due to fraud or evasion - at any time; and (b) in any other case: (i) where the taxpayer is a relevant entity within the meaning of Division 1B of Part VI and the assessment is deemed by section 166A to have been made - within 4 years from the date upon which the assessment is so deemed to have been made; or (ii) otherwise - within 4 years from the date upon which the tax became due and payable under the assessment; amend the assessment by making such alterations in it or additions to it as the Commissioner thinks necessary to correct the assessment. . . . 170(4) Where: (a) the Commissioner has begun an examination of the affairs of a taxpayer; and (b) the examination was not completed within the period within which the Commissioner may amend an assessment to which the examination relates under subsection (2) or, if that period has been extended by any previous order or orders of the Federal Court of Australia made under subsection (4A), or by any previous consent or consents of the taxpayer given under subsection (4B), within that period as so extended; the Commissioner may, before the end of the period referred to in paragraph (b) of this subsection, apply to the Federal Court for an order extending, or request the taxpayer to consent to the extension of the period within which the Commissioner may amend the assessment under paragraph (2)(b). 170(4A) If, on application made to the Federal Court of Australia in accordance with subsection (4), the Court is satisfied that it was not reasonably practicable, or it was inappropriate, for the Commissioner to complete the examination within the period referred to in paragraph (4)(b) because of any action taken by the taxpayer or any failure of the taxpayer to take action that it would have been reasonable for the taxpayer to take, the Court may make an order extending the period within which the Commissioner may amend the assessment under paragraph (2)(b) for such period as the Court considers appropriate." 22 Also relevant are the provisions of ss 173, 175 and 177. Relevantly they are: "173 Except as otherwise provided every amended assessment shall be an assessment for all the purposes of this Act. . . . 175 The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with. 175A A taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953. . . . 177(1) The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct." The Commissioner's Contentions 23 The Commissioner contends that ss 175 and 177 have the effect that the question whether he was empowered to amend the applicants' assessments can only be tested in proceedings brought under Pt IVC of the Taxation Administration Act. If in such proceedings it were established that the amended assessments were not valid because the preconditions imposed by s 170 had not been satisfied, then the assessment would be excessive and could be set aside. Reference was made to McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263; FJ Bloemen v Federal Commissioner of Taxation (1981) 147 CLR 360; Federal Commissioner of Taxation v Dalco (1989) 168 CLR 614 and Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168. It was submitted that the allegations made in the amended application raise an issue to be pursued under Pt IVC of the Taxation Administration Act. 24 It was further submitted that the case as pleaded did not raise any of the so called Hickman provisoes which might avoid the application of ss 175 and 177. So it was said the amended application and statement of claim did not disclose any justiciable case against the respondent which is within the jurisdiction of the Court under s 39B of the Judiciary Act 1903 Cth). The Amended Application and Statement of Claim Attached to the Applicants' Motion Filed 14 March 2003 25 The amended application attached to the motion filed on 14 March claims relief extending well beyond that sought in the amended application of 31 January 2003. It names the partnership "Gates & Assoc Builders" as third applicant. It contains claims for damages under s 59B of the Federal Court of Australia Act 1976 (Cth) and damages and exemplary damages against the respondent at common law. It also separately claims damages for negligent misstatement and breach of the respondent's duty of care (pars 1, 7 and 9). A variety of declarations is sought including declarations that the amended assessments issued to the first and second applicants are a nullity (pars 2 and 9) and that conduct of the respondent referred to in various paragraphs of the amended statement of claim was unlawful (pars 4, 5 and 6). Other relief claimed is said to be declaratory but is in its terms injunctive, eg: "A declaration that the Respondent issue to the First Applicant an assessment for the financial year ending 30 June 1997 in line with the audit assessments issued on 26 July 1995 and 6 November 1996." (par 3) Other declarations which are injunctive in their terms are sought in paragraphs 10, 11 and 12. 26 The statement of claim which accompanies the amended application runs for some 108 pages comprising 104 paragraphs, the numbering of some of which is out of sequence or duplicated. It provides a lengthy and convoluted history of dealings between the applicants and the respondent. The respondent in his submission conveniently identifies the core material facts in this statement of claim as follows: 1. An audit letter from the respondent in April 1995 was not acted on for some time and the applicants assumed the assessments issued for the income years ended 30 June 1992 to 1995 were final. 2. Contact by the auditors resumed in November 1995 and on 11 January 1996 a further audit letter issued informing the applicants that the audit was extended to include the 1995 income year. 3. The January 1996 audit letter was not acted on for some time and the applicants assumed the audit had been concluded and they lodged income tax returns for the 1995, 1996 and 1997 income years. Assessments issued for the 1995 and 1996 years. 4. In May 1998 the applicants were told the audit was not complete and audit action continued. In August 1998 the applicants were informed the audit was now complete and that amended assessments would issue. The amended assessments issued in September 1998. The respondent further characterises the allegations based on these primary facts in the 14 March statement of claim as directed at: (a) The manner in which the audit was conducted. (b) The power of the respondent to audit after he had issued assessments. (c) Whether the statutory preconditions to amending the assessments were satisfied. This encapsulation of the further statement of claim is essentially correct although it does little justice to the number and variety of allegations embedded in the pleading. 27 In the further statement of claim the respondent is said to have been negligent in making various representations and warranties (par 100). Some sixty paragraphs of particulars are provided setting out matters in respect of which the respondent is said to have failed to undertake "any or any adequate inquiry" in making "all the said representations and warranties". These particulars include, among other things, a contention that the respondent refused to investigate a claim by the second applicant that assessments for the 1995 and 1996 year were "fabrications thought to have been prepared in about 2001 and not 1996" (par (a)(xlii) of the particulars to paragraph 100). Many of the matters in respect of which the respondent is said to have failed to make any or any adequate inquiry are said to be the respondent's own wrongful conduct or failures by the respondent to do various things, eg: "(lv) why did the Respondent issue the 1992 amended assessment to the Second Applicant when he knew or ought reasonably know it could not be done in law or under the Act as later admitted when the Second Applicant objected." (sic) It is also alleged that the various "representations and warranties" pleaded "constituted conduct that was contrary to the Act, intention of the Act and a proper purpose of the Act" (par 101.2). 28 At paragraph 103 it is said that the respondent and his delegates made various representations and warranties referred to in paragraphs 65.1, 68, 70 to 72, 76, 79, 81, 82, 84, 87, 89, 91, 94 and 96, fraudulently either knowing them to be false or recklessly not caring whether they were true or false. It is useful at this point to refer to the allegedly fraudulent representations and warranties set out in these various paragraphs. 29 Paragraph 65.1 alleges representations that an audit had not been completed, that the respondent had not been able to locate the applicants, that he would have issued amended assessments in or about 1997 but did not do so in fairness to the applicants, that an agreement was sought from the applicants to finalise the audit, that the respondent intended to proceed with the audit in any event, that the respondent would take legal action against the applicants to enforce compliance if they would not cooperate and that matters stated by the second applicant were unsustainable. 30 Paragraph 68 asserts that the applicant had found out various things including that an officer of the respondent, Mr Endall, had no right to continue the audit. Paragraph 68 pleads no representation or warranty by any one. Paragraphs 70 to 72 allege that the applicants discussed their complaints against Mr Endall with another officer of the respondent, Mr Hedemann, of the Problem Resolution Section of the Australian Taxation Office. Paragraph 70 sets out particulars of these complaints and the issues raised with Mr Hedemann in sub-paragraphs 70.1 to 70.20. Paragraph 71 alleges that, in June 1998, the applicants again informed Mr Hedemann and other officers of the respondent that they could no longer supply Mr Endall with requested information because he had breached s 16 of the Income Tax Assessment Act, the confidentiality provision, and the Privacy Act. Paragraphs 70 and 71, it will be seen, allege no representation or warranty by any one. Paragraph 72 says that Mr Hedemann represented and warranted to the applicants that all their complaints would be investigated in accordance with the respondent's statutory and other responsibilities and/or the Charter. He is also said to have represented "… that Mr Endall actions would be suspended and further that any information they had concerning Mr Endall's request for more information if not sent to the Respondent then should be completed and retained in the event that it was required later" (sic). How these representations could be falsified does not appear. 31 Paragraph 76 alleges that another of the respondent's officers, Mr Dickens, represented to the applicants that the tapes of interviews conducted with them on 13 February 1996 (par 33) and 26 February 1996 (pars 37 and 38) had been lost and that no transcript could be located. Mr Dickens is also said to have represented that he would conduct an investigation into the matters raised by the applicants with Mr Hedemann. 32 Paragraph 79 sets out what is said to have been "further information" provided to the applicants by the respondent, eg that Mr Endall had not breached s 16 of the Act or the Privacy Act. 33 Paragraph 81 contains no allegation of any representation or warranty. Paragraph 82 asserts that on or about 31 August 1998 the respondent told the first applicant that the audit of the first applicant's taxation affairs had been completed. This paragraph then alleges that the respondent told the first applicant of various decisions to issue assessments and amended assessments. 34 Paragraph 84 alleges further representations by the respondent that the audit of the applicants' tax affairs had been completed. Various other assorted representations are set out. 35 Paragraph 87 claims that Mr Hedemann sent a report to the applicants on 11 September 1998 representing and warranting various things including that "both the Respondent and the Applicants were at fault in finalising the audit" (par 87.3) and that "… it was open to the Applicants to complain to the Commonwealth Ombudsman if dissatisfied with the investigation" (par 87.13). Both these representations together with every other representation in the paragraphs referred to in paragraph 103 are said to have been made fraudulently or recklessly not caring whether they were true or false. 36 Paragraph 89, another source of allegedly fraudulent representations, pleads a report sent to the applicants by a Ms Wijetunge on or about 23 September 1998 and some twenty five representations or warranties contained in this report, all of which are said in paragraph 103 to be fraudulent. 37 Paragraph 91, contains no allegation of representations or warranties fraudulent or otherwise. Nor does paragraph 94 which is largely argumentative. Paragraph 96 asserts various other representations, some twenty four in number, all said to have been made by "the Respondent and various officers and others in furtherance" of the representations alleged in the paragraphs mentioned earlier. All of them, in paragraph 96, unspecified as to date or author, are said, in paragraph 103, to have been fraudulent. 38 The statement of claim of 14 March 2003 cannot, by any stretch of the imagination, be regarded as particulars of the matters alleged in the statement of claim filed on 5 March 2003. Moreover it is so prolix and confused as to be incapable of providing an alternative pleading or otherwise any intelligible basis upon which the proceeding could continue. Having regard to the restrictions on legal practitioners in the pleading of allegations of fraud or dishonesty and the duty upon practitioners to ensure that such allegations, if pleaded, have some basis, it is perhaps not surprising that these matters did not find their way into the pleading drafted by Ms Searle. 39 In considering the document filed on 14 March 2003 and the current statement of claim, I have also considered the various submissions filed by the applicants entitled: 1. Applicants Response to Respondent's Strike out Motion – filed 1 April 2003. 2. Specific Comments Related to the Respondent's Submission Outline – filed 1 April 2003. 3. General Case Outline – filed 17 March 2003. 4. The First Applicant's Case Outline – filed 17 March 2003. 5. Case Outline for the Second Applicant – filed 17 March 2003. 6. The Third Applicant's Case Outline – filed 17 March 2003. Whether the Statement of Claim of 5 March 2003 Should be Struck Out 40 The heart of the applicants' claim as set out in the statement of claim of 5 March 2003 is that the notices of amended assessment are ultra vires. Copies of the relevant notices of amended assessment and assessment have been produced to the Court under the hand of a Deputy Commissioner. The notices are therefore taken, by operation of s 177(1), to be "conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct". 41 In McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 269, Dixon CJ, McTiernan and Webb JJ described the ground over which s 177(1) gives conclusiveness to the assessment as "… the due making of the assessment and the correctness of the amount and all the particulars of the assessment". Their Honours went on to say that: "It is the manifest policy, one may now almost say the historical policy, of the legislation on the one hand to give to the taxpayer full opportunity on objecting to his assessment of contesting his liability in every respect before a court or before a board of review but on the other hand to require that in proceedings for the recovery of the tax the taxpayer will be concluded by the assessment and will not be entitled to go behind it for any purpose. The question whether the conditions laid down by s 170(2) are fulfilled so that the commissioner might amend the assessment is clearly within this policy." At 281 Taylor J said: "There seems to be no doubt that s 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground and, accordingly, there is every reason for thinking that the second limb in s 177(1) covers all grounds upon which an assessment may be challenged other than those covered by the first limb." And again at 282: "In my view s 170(1) [evidently a reference to s 177(1)] should be understood as precluding a taxpayer in proceedings other than an appeal (or a reference) under the Act from challenging an assessment on any ground." 42 Section 177 was described in FJ Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 at 370-375 as protecting the validity of an assessment, once made, from the consequences that might otherwise flow from the Commissioner's failure to comply with any provision of the Act (Mason and Wilson JJ, Stephen and Aickin JJ agreeing). Their Honours also agreed with the view expressed by Taylor J in the passage cited earlier from McAndrew. They said, at 375: "The effect of this policy is that once the Commissioner takes advantage of s 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V." 43 In Deputy Commissioner of Taxation v Richard Walter Pty Ltd (995) 183 CLR 168 the taxpayer had commenced proceedings in the Federal Court under s 39B of the Judiciary Act seeking declarations that various assessments made against it were void and of no effect. There it was held that s 177, as a privative clause, did not preclude a challenge or review of assessments in the Federal Court where its jurisdiction under s 39B was invoked. The grounds of such challenge however were limited by s 177 and the principles relating to the construction of privative clauses to be derived from R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598. The effect of s 177 in such proceedings were stated by Mason CJ thus, at 188: "Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the Act or considerations of purpose. On this view, s 177(1) is consistent with the Hickman principle." This statement does not preclude a challenge under s 39B to an assessment where it is alleged that the assessment was issued other than bona fide. Brennan J at 195 referred to "the legislative intention to protect the validity of the notice of assessment as a central and critical link in the chain of imposing liability for income tax on and recovery of tax from the taxpayer". He referred also to "… the full opportunity afforded to the taxpayer to object to the assessment and, in the event that the objection is dismissed, to challenge the assessment". See also Dawson J at 223 and Toohey J at 241. 44 The course of authority with respect to the operation of ss 175 and 177 is well established. It does not preclude a challenge under s 75(v) of the Constitution or s 39B of the Judiciary Act based on want on bona fides or where it is contended that in truth no assessment was made – Re Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 69 ALR 185. There is nothing in the recent consideration of a privative clause in the Migration Act 1958 (Cth) by the High Court in Plaintiff S157 v The Commonwealth (2003) 195 ALR 24 to detract from the authority of the cases to which I have referred. 45 It follows that the statement of claim filed on 5 March 2003, which asserts want of power to issue the relevant notices of amended assessment, cannot succeed on that basis. The loss and damage claimed by the applicants in that pleading itself depends upon the contention that the issue of the amended assessments was invalid, a contention which cannot be advanced in these proceedings having regard to ss 175 and 177 and the production of the notices of assessment by the respondent. It follows that the statement of claim must be struck out. Whether the Application Should be Dismissed 46 Having regard to the observations I have already made about the statement of claim filed by the applicants themselves on 14 March 2003, I would not permit them to replead in terms of that document. It seems clear enough however, that what they seek to do, inter alia, is to allege that the issue of the notices of amended assessment was not done in good faith. Such an allegation is not lightly to be made for it may involve claims of dishonesty. No legal practitioner, acting properly, will plead such an allegation unless he or she is satisfied that there is a proper basis for it. In SCAS v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 397 at [19] the Full Court said: "…because of the nature of the allegation of bad faith, serious questions of professional ethics arise. It should be clearly understood that an allegation of bad faith, like an allegation of fraud, should not be advanced by an advocate unless there are proper grounds for doing so." There may of course be a question whether a want of good faith that will avoid the application of a privative clause is to be equated to bad faith. In SBBS v Minister for Immigration & Multicultural & Indigenous Affairs [2002] FCAFC 361, the Full Court extracted from the authorities a number of propositions relating to lack of good faith in the following terms: 1. An allegation of bad faith is a serious matter involving personal fault on the part of the decision maker. 2. The allegation is not to be lightly made and must be clearly alleged and proved. 3. There are many ways in which bad faith can occur and it is not possible to give a comprehensive definition. 4. The presence or absence of honesty will often be crucial. 5. The circumstances in which the Court will find an administrative decision maker had not acted in good faith are rare and extreme. This is especially so where all that the applicant relies upon is the written reasons for the decision under review. 6. Mere error or irrationality does not of itself demonstrate lack of good faith. Bad faith is not to be found simply because of poor decision making. It is a large step to jump from a decision involving errors of fact and law to a finding that the decision maker did not undertake its task in a way which involves personal criticism. 7. Errors of fact or law and illogicality will not demonstrate bad faith in the absence of other circumstances which show capriciousness. 8. The Court must make a decision as to whether or not bad faith is shown by inference from what the Tribunal has done or failed to do and from the extent to which the reasons disclose how the Tribunal approached its task. 9. It is not necessary to demonstrate that the decision maker knew the decision was wrong. It is sufficient to demonstrate recklessness in the exercise of the power. See also WAFV of 2002 v Refugee Review Tribunal [2003] FCA 16. In the context of litigation against the Taxation Commissioner and the application of s 177 the comments of the Full Court in Kordan Pty Ltd v Federal Commissioner of Taxation 2000 ATC 4812 at 4815 are apposite: "The allegation that the Commissioner, or those exercising his powers by delegation, acted other than in good faith in assessing a taxpayer to income tax is a serious allegation and not one lightly to be made. It is, thus, not particularly surprising that applications directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful." See also San Remo Macaroni Company Pty Ltd v Federal Commissioner of Taxation 99 ATC 5138 at 5154. 47 The welter of allegations made by the applicants in their own pleadings and submissions does not offer much promise of a properly framed plea of want of good faith. I have regard however to the fact that the applicants have been, for the most part unrepresented, and that it is appropriate to make some allowance for that fact. I will therefore give them limited leave to replead the statement of claim filed on 5 March 2003 to allege that the amended assessments were not issued in good faith and to provide particulars of that allegation. This should involve the assertion of no more than one or two new substantive paragraphs after paragraph 10 of the present pleading. I will also sign a fresh certificate under Order 80 so that the Registrar may inquire whether there is any practitioner prepared to advise on or settle such a pleading on a pro bono basis. There is no guarantee that any practitioner will be available or that if available, any such practitioner will be satisfied that there is a proper basis for such a pleading. I should add that the striking out of the statement of claim involves no reflection on Ms Searle who prepared it. She appears to have done what she could to express such aspects of the applicants' contentions as translated into a possible cause of action. That cause of action was defeated in this case by the production in Court of the notices of assessment under the hand of a Deputy Commissioner. 48 In respect of the outstanding motions seeking various preliminary decisions and discovery, these will not be entertained unless and until there is a viable pleading in place. Even then, it is unlikely that I will be disposed to make the orders sought in those motions. I will not however deal with them at the present time, but stand them over for the next directions hearing. CONCLUSION 49 For the preceding reasons, the orders I will make are as follows: 1. The statement of claim filed on 5 March 2003 is struck out. 2. If it be the applicants' contention that the notices of amended assessment referred to in paragraph 9 of the statement of claim were issued other than in good faith, there is liberty to amend the statement of claim on or before 6 July 2003 to raise such an allegation. 3. Any additional pleading of want of good faith will not exceed two pages inclusive of particulars. 4. The applicants are to pay the respondent's costs of the motion of 25 March 2003. 5. The applicants' motion filed 31 March 2003 is dismissed. 6. The applicants' motions filed 6 December 2002 and 14 March 2003 are adjourned to the next directions hearing. 7. The directions hearing is relisted for 11 July 2003 at 9am. I certify that the preceding forty-nine (49) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.. Associate: Dated: 6 May 2003 Counsel for the Applicant: The Applicants appeared by telephone. Counsel for the Respondent: Ms L Price Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 3 April 2003 Date of Judgment: 6 May 2003