FEDERAL COURT OF AUSTRALIA Queensland Maintenance Services Pty Ltd v Commissioner of Taxation [2011] FCA 1443 Citation: Queensland Maintenance Services Pty Ltd v Commissioner of Taxation [2011] FCA 1443 Parties: QUEENSLAND MAINTENANCE SERVICES PTY LTD (ACN 104 887 103) v COMMISSIONER OF TAXATION AND THE DEPUTY COMMISSIONER OF TAXATION and GOODSTART CHILDCARE LIMITED (ACN 139 967 794) File number: QUD 130 of 2011 Judge: COLLIER J Date of judgment: 15 December 2011 Catchwords: ADMINISTRATIVE LAW – application for judicial review under Administrative Decisions (Judicial Review) Act 1977 (Cth), Judiciary Act 1903 (Cth) and Federal Court of Australia Act 1976 (Cth) – uncertainty – relevant considerations – improper purpose – bad faith – unreasonableness TAXATION – amended assessments of tax, shortfall interest charges and shortfall penalties issued to taxpayer – section 260-5 of Schedule 1 to Taxation Administration Act 1953 (Cth) – original notice served by Commissioner of Taxation on third party revoked and new notice served – delegation by Commissioner – whether decision-maker properly authorised – principles in O'Reilly v Commissioners of the State Bank of Victoria (1983) 153 CLR 1 – omission of Australian Company Number or Australian Business Number of recipient from notice – omission of proper officer or public officer of recipient from notice – whether identity of taxpayer certain – genuine dispute of taxpayer in respect of debt – financial impact on taxpayer of service of notice under section 260-5 notice – hardship to third parties – risk to the revenue Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 2, 5, 6, 7 Federal Court of Australia Act 1976 (Cth) ss 21, 23 Income Tax Assessment Act 1936 (Cth) ss 201, 218, 264 Income Tax Assessment Act 1997 (Cth) s 8-1 Judiciary Act 1903 (Cth) s 39B Taxation Administration Act 1953 (Cth) ss 4, 7, 8(1), 14ZZM, 260-5 of Sch 1 Taxation Administration Regulations 1976 (Cth) reg 45(1) Cases cited: Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 cited Carltona Ltd v Commissioners of Works [1943] 2 All ER 560 cited Commissioner of Taxation v Bruton Holdings Pty Limited (in liq) [2008] FCAFC 184 cited Commissioner of Taxation v Donnelly (1989) 25 FCR 432 cited Commissioner of Taxation v Futuris Corporation Limited [2008] 237 CLR 146 cited Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd (1994) 181 CLR 1 cited Conley & Anor v Commissioner of Taxation & Anor (1998) 81 FCR 24 cited Deputy Commissioner of Taxation v Conley (1998) 88 FCR 98 Din v Minister for Immigration and Multicultural Affairs [1997] 147 ALR 673 distinguished Goodin v Federal Commissioner of Taxation [2002] VSC 241 distinguished Jilani v Wilhelm [2005] FCAFC 269 cited Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 cited NANM and NANN of 2002 v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 99 cited O'Reilly v Commissioners of the State Bank of Victoria (1983) 153 CLR 1 applied Re Geoffrey Walter Edelsten v Charles Robert Wilcox & Commissioner of Taxation [1988] FCA 204 considered and distinguished Rochfort v Trade Practices Commission (1982) 153 CLR 134 cited Saitta Pty Ltd v Commissioner of Taxation [2002] FCA 1105 applied Woodroffe v Deputy Commissioner of Taxation [2000] FCA 1379 cited Date of hearing: 9 and 15 August 2011 Date of last submissions: 19 August 2011 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 177 Counsel for the Applicant: Mr H Alexander Solicitor for the Applicant: RJ Winter & Associates Counsel for the First Respondent: Mr P Flanagan SC with Mr V Brennan Solicitor for the First Respondent: Australian Taxation Office Legal Services Branch Solicitor for the Second Respondent: Mr G Bartlett of GoodStart Childcare Limited IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 130 of 2011 BETWEEN: QUEENSLAND MAINTENANCE SERVICES PTY LTD (ACN 104 887 103) Applicant AND: COMMISSIONER OF TAXATION AND THE DEPUTY COMMISSIONER OF TAXATION First Respondent GOODSTART CHILDCARE LIMITED (ACN 139 967 794) Second Respondent JUDGE: COLLIER J DATE OF ORDER: 15 DECEMBER 2011 WHERE MADE: BRISBANE THE COURT ORDERS THAT: The application be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY GENERAL DIVISION QUD 130 of 2011 BETWEEN: QUEENSLAND MAINTENANCE SERVICES PTY LTD (ACN 104 887 103) Applicant AND: COMMISSIONER OF TAXATION AND THE DEPUTY COMMISSIONER OF TAXATION First Respondent GOODSTART CHILDCARE LIMITED (ACN 139 967 794) Second Respondent JUDGE: COLLIER J DATE: 15 DECEMBER 2011 PLACE: BRISBANE REASONS FOR JUDGMENT 1 In its second amended application ("Application") filed 11 July 2011, the applicant seeks remedies in respect of a decision of an officer of the Commissioner of Taxation ("Commissioner") to issue and serve a notice dated 10 June 2011 under s 260-5 of Sch 1 of the Taxation Administration Act 1953 (Cth) ("TAA 1953") to the second respondent, GoodStart Childcare Limited ("GoodStart"). For reasons which will become evident later in this judgment, I will refer to this notice to pay as "the New Notice". The New Notice required the second respondent: to pay to the Commissioner of Taxation every four weeks from the date of this notice, out of each of the amounts of available money you become liable from time to time to make to the debtor, an amount of twenty cents in every dollar of such payments until the amount of $10,093,860 due to the debtor is satisfied. 2 In respect of the New Notice the Application primarily seeks relief pursuant to s 5 and s 6 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("ADJR Act") or pursuant to s 39B of the Judiciary Act 1903 (Cth) ("Judiciary Act"), with the ancillary relief sought pursuant to the Federal Court of Australia Act 1976 (Cth) ("Federal Court Act"). Accordingly, submissions of the parties at the hearing focussed on paragraphs 1 and 2 of the Application whereby the applicant sought: 1. A declaration of right pursuant to s 21 of the Federal Court Act that the decision to issue the notice to pay dated 10 June 2011 was void or invalid and the second respondent was and is not required to pay the first respondent in accordance with the notice to pay or at all. 2. Further or alternatively, an order setting aside the decision to issue the notice to pay dated 10 June 2011 to the second respondent and further or alternatively an order setting aside or quashing the notice to pay or further or alternatively an order permanently staying the notice to pay. 3 The injunctive relief sought by the applicant in paragraph 3 of the Application was abandoned at the hearing on 9 August 2011 (transcript 9 August 2011 p 6 ll 10-12). The hearing in respect of relief sought in paragraphs 4 and 5 of the Application has been adjourned, pending decision by the Court in relation to the relief sought in paragraphs 1 and 2 of the Application. Background 4 The background facts in this proceeding are as follows. 5 The applicant provides maintenance, cleaning and renovation services to childcare centres operated by the second respondent. 6 The sole shareholder of the applicant is Mr Frank Zullo. Mr Zullo is the brother-in-law of Mr Eddie Groves who was a shareholder and Joint Managing Director of ABC Learning Centres Limited ("ABC Group"). ABC Group collapsed in November 2008. I understand that the conduct of childcare centres owned or leased by ABC Group was assumed by GoodStart. Prior to the collapse of ABC Group the applicant had contractual arrangements with ABC Group. 7 In addition to providing services to the second respondent in respect of childcare centres, the applicant owns a subsidiary company, Bright Horizons Australia Childcare Pty Ltd ("Bright Horizons"), which owns or operates approximately 35 childcare centres. 8 In or about March 2009, the Commissioner undertook an audit of the applicant's financial affairs in respect of the income years ended 30 June 2006, 2007 and 2008. On 8 March 2011 the applicant received a 62-page Audit Position Paper ("position paper") from the Australian Taxation Office ("the ATO") and the applicant was invited to respond to the position paper prior to finalisation of the audit. It was clear from the position paper that the ATO had taken a view of certain deductions claimed by the applicant in respect of its contracts with ABC Group. The position paper required a response by 12 April 2011, which was extended to 12 May 2011. 9 On 5 April 2011 Mr Paul Whimp, a director of Harris Black, Chartered Accountants, who were the applicant's accountants, phoned Mr Paul Tully of the Debt Collection Department of the ATO, and informed him that the applicant would be lodging an objection to any amended assessments. 10 On 12 May 2011 the applicant, by its solicitors, responded to the position paper, mainly in respect of the income year ended 30 June 2011, and sought a further extension of time to respond in respect of the income year ended 30 June 2008. 11 The audit was concluded in late May 2011. On 25 May 2011 the Deputy Commissioner issued a finalisation of audit letter entitled "Reasons for Decision – Queensland Maintenance Services Pty Ltd" ("audit letter"). In that audit letter the ATO affirmed the position it had taken in the position paper. The position taken by the ATO can be summarised as follows: 1. The income tax return of the applicant for the year ended 30 June 2007 included a deduction of $35,362,027 for "renovation compensation expense". This charge was levied by 376 childcare centres in the ABC Group on the applicant for purportedly failing to complete childcare centre renovations within specified time frames and/or compensation for disruptions caused to the centres while carrying out the work. The Commissioner formed the view that the transactions were a sham and the amount was not deductible. As an alternative, the Commissioner considered that the amount claimed for renovation compensation expenses was not deductible under s 8-1 of the Income Tax Assessment Act 1997 (Cth) ("ITAA 1997") as there was no nexus to the earning of assessable income. 2. On 1 July 2007 the applicant formed a consolidated group with its subsidiary companies. One of the members of the group, Neighbourhood Early Learning Centres, was appointed to manage 80 childcare centres in the ABC Group by way of a management agreement. The management agreement set a management fee in accordance with a formula. The Commissioner formed the view, based on the facts, that a substantive portion of the management fee was on capital account, and that it was appropriate to apportion the amount paid and allow a deduction of 15% of centre revenue. The balance of the fee claimed was not deductible under s 8-1 of the ITAA 1997 as the amount was capital in nature. 3. The Commissioner considered that, taking into account the facts and evidence as well as the behaviour of the applicant, it was appropriate to impose penalties to the tax shortfalls that arose as a consequence of deductions being disallowed. 4. The Commissioner also considered it appropriate to impose a shortfall interest charge on the shortfall amounts. 12 On 1 June 2011 the Deputy Commissioner issued amended assessments of tax plus shortfall interest charges totalling $18,572,316.80 in respect of the income years ended 30 June 2007 and 30 June 2008, plus related assessments of shortfall penalties totalling $10,093,860.00 in respect of the same income years. 13 On or about 8 June 2011 a third-party notice to pay ("the Original Notice") was issued addressed to the second respondent pursuant to s 260-5 of Sch 1 of the TAA 1953. This notice sought 100 cents in the dollar of monies which the second respondent owed the applicant. The Original Notice was received by the second respondent on 9 June 2011. 14 The applicant commenced proceedings seeking urgent relief against the Original Notice. 15 On 9 June 2011 Mr Whimp and the applicant's solicitor Mr Winter separately contacted the ATO in respect of the Original Notice. Both men spoke with Mr Raymond Thomas of the ATO. There is evidence before the Court that both Mr Whimp and Mr Winter informed Mr Thomas that the continuation in business of the applicant would be seriously jeopardised by the Original Notice, that hundreds of jobs were put at risk, and that the childcare centres owned by Bright Horizons were similarly at risk. 16 On 10 June 2011 a further third-party notice to pay (that is, the New Notice) was issued pursuant to s 260-5 of Sch 1 of the TAA 1953 addressed to the second respondent, for 20 cents in the dollar of the available money payable to the applicant every four weeks until the amount of $10,093,860.00 was satisfied. Evidence of Mr Morelande, an officer employed by the Commissioner, was that he withdrew the Original Notice and issued the New Notice in circumstances where he had been informed that the applicant required 90% of its funds from the second respondent to pay other creditors (affidavit of Craig Morelande filed 14 July 2011 paragraphs 21, 28). 17 The relief sought by the applicant in this proceeding is in respect of the decision ("the Decision") to issue the New Notice. 18 On 30 June 2011 a statement of reasons ("Statement of Reasons") for the Decision was issued. The Statement of Reasons is annexed to the affidavit of Mr Craig Morelande filed on 14 July 2011. 19 In the Application the applicant claims that it is aggrieved by the decision of the Commissioner because, as a result of the New Notice, payment of 20 cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant will be paid to the first respondent instead of the applicant. The applicant claims that it will be unable to pay the wages of its employees and moneys owing to its subcontractors and suppliers for goods and services supplied by the applicant to the second respondent and others, and that the New Notice will seriously and irreparably disrupt and damage the business of the applicant and Bright Horizons. The applicant claims that it may be unable to continue trading and will have to go into administration or liquidation, and may be effectively deprived of its rights of objection and appeal against the tax assessments on which the New Notice is based. Relevant legislation 20 The relevant legislative provisions in this proceeding are s 39B(1) and (1A) of the Judiciary Act, s 5(1) and (2) of the ADJR Act, and s 260-5 of Sch 1 of the TAA 1953. Materially, these provisions are as follows: Section 39 Judiciary Act (1) Subject to subsections (1B), (1C) and (1EA), the original jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer or officers of the Commonwealth. (1A) The original jurisdiction of the Federal Court of Australia also includes jurisdiction in any matter: (a) in which the Commonwealth is seeking an injunction or a declaration; or (b) arising under the Constitution, or involving its interpretation; or (c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter. Section 5(1) and (2) ADJR Act (1) A person who is aggrieved by a decision to which this Act applies that is made after the commencement of this Act may apply to the Federal Court or the Federal Magistrates Court for an order of review in respect of the decision on any one or more of the following grounds: (a) that a breach of the rules of natural justice occurred in connection with the making of the decision; (b) that procedures that were required by law to be observed in connection with the making of the decision were not observed; (c) that the person who purported to make the decision did not have jurisdiction to make the decision; (d) that the decision was not authorized by the enactment in pursuance of which it was purported to be made; (e) that the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made; (f) that the decision involved an error of law, whether or not the error appears on the record of the decision; (g) that the decision was induced or affected by fraud; (h) that there was no evidence or other material to justify the making of the decision; (j) that the decision was otherwise contrary to law. (2) The reference in paragraph (1)(e) to an improper exercise of a power shall be construed as including a reference to: (a) taking an irrelevant consideration into account in the exercise of a power; (b) failing to take a relevant consideration into account in the exercise of a power; (c) an exercise of a power for a purpose other than a purpose for which the power is conferred; (d) an exercise of a discretionary power in bad faith; (e) an exercise of a personal discretionary power at the direction or behest of another person; (f) an exercise of a discretionary power in accordance with a rule or policy without regard to the merits of the particular case; (g) an exercise of a power that is so unreasonable that no reasonable person could have so exercised the power; (h) an exercise of a power in such a way that the result of the exercise of the power is uncertain; and (j) any other exercise of a power in a way that constitutes abuse of the power. Section 260-5 of Schedule 1 to the TAA 1953 260-5 Commissioner may collect amounts from third party Amount recoverable under this Subdivision (1) This Subdivision applies if any of the following amounts (the debt) is payable to the Commonwealth by an entity (the debtor) (whether or not the debt has become due and payable): (a) an amount of a * tax-related liability; (b) a judgment debt for a * tax-related liability; (c) costs for such a judgment debt; (d) an amount that a court has ordered the debtor to pay to the Commissioner following the debtor's conviction for an offence against a * taxation law. Commissioner may give notice to an entity (2) The Commissioner may give a written notice to an entity (the third party) under this section if the third party owes or may later owe money to the debtor. Third party regarded as owing money in these circumstances (3) The third party is taken to owe money (the available money) to the debtor if the third party: (a) is an entity by whom the money is due or accruing to the debtor; or (b) holds the money for or on account of the debtor; or (c) holds the money on account of some other entity for payment to the debtor; or (d) has authority from some other entity to pay the money to the debtor. The third party is so taken to owe the money to the debtor even if: (e) the money is not due, or is not so held, or payable under the authority, unless a condition is fulfilled; and (f) the condition has not been fulfilled. How much is payable under the notice (4) A notice under this section must: (a) require the third party to pay to the Commissioner the lesser of, or a specified amount not exceeding the lesser of: (i) the debt; or (ii) the available money; or (b) if there will be amounts of the available money from time to time--require the third party to pay to the Commissioner a specified amount, or a specified percentage, of each amount of the available money, until the debt is satisfied. When amount must be paid (5) The notice must require the third party to pay an amount under paragraph (4)(a), or each amount under paragraph (4)(b): (a) immediately after; or (b) at or within a specified time after; the amount of the available money concerned becomes an amount owing to the debtor. Debtor must be notified (6) The Commissioner must send a copy of the notice to the debtor. Setting-off amounts (7) If an entity other than the third party has paid an amount to the Commissioner that satisfies all or part of the debt: (a) the Commissioner must notify the third party of that fact; and (b) any amount that the third party is required to pay under the notice is reduced by the amount so paid. Grounds 21 In full, the grounds of review as set out in the Application are as follows: 1. The notice to pay given to the second respondent was not authorised by the enactment nor did it comply with the requirements of the enactment and was invalid or otherwise contrary to law or failure to perform its statutory duty (sic) because: a. Craig Morelande was not authorised by the enactment to make the decision; b. The second respondent was incorrectly named and not clearly identified on the notice to pay and its Australian Company Number was not stated on the notice; c. The notice to pay was uncertain and the second respondent was uncertain as to the identity of the debtor in respect of whom the notice to pay was issued as it did not clearly identify the applicant and the second respondent was required to make further inquiries in order to clearly identify the applicant; d. The notice to pay did not having regard to its form and contents clearly bring to the second respondent that it had a liability or duty to comply with the notice to pay. 2. The making of the decision to issue and serve the notice to pay was not authorised by the enactment and the procedures that were required by law to be observed in connection with making the decision were not observed or the decision did not comply with a statutory requirement essential to its valid and effectual performance or otherwise contrary to law or a failure to perform a statutory duty in that: a. The first respondent did not send a copy of the notice to pay to the applicant in accordance with subsection 260-5 (6) of Schedule 1 of the TAA either (sic) until after the notice to pay had been given to the second respondent 3. The making of the decision to issue and serve the notice to pay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant was a failure to perform a statutory duty or an improper exercise of or abuse of the power conferred by the enactment in pursuance of which it was purported to be made in that the first respondent took into account irrelevant considerations or gave excessive weight to unimportant consideration (sic) including: (i) That shortfall penalties were assessment (sic) or imposed in connection with the notices of amended assessments dated 1 June 2011; (ii) The total amount of the shortfall penalties of $10,093,860.20 under the two notices of assessment of shortfall penalty dated 1 June 2011; (iii) The previous relationship between the applicant and the ABC Group. 4. The making of the decision to issue and serve the notice to pay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant was not authorised by the enactment or the procedures that were required by law to be observed or involved an error of law or was otherwise contrary to law or was a failure to perform a statutory duty or to make a decision that first respondent had a duty to make in that: a. The first respondent should have decided not to issue and serve a notice to pay twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant b. The first respondent must have applied the wrong legal principles in making the decision to issue and serve the notice to pay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant c. Further or alternatively, the first respondent must have failed to consider or apply the legal principles in Edelsten v Wilcox 88 ATC 4484 in making the decision to issue and serve the notice to p ay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant. 5. The making of the decision to issue and serve the notice to pay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay to the applicant was a failure to perform a statutory duty or an improper exercise of or abuse of the power conferred by the enactment in pursuance of which it was purported to be made in that the first respondent failed to take relevant considerations into account or gave little or no weight to important considerations in the exercise of the power including: (i) the applicant had a genuine dispute with the first respondent about the proposed amended assessments of tax and shortfall penalties and the first respondent knew the applicant genuinely disputed the proposed amended assessments and shortfall penalties; (ii) the legitimate right of the applicant to object against the tax assessments and the shortfall penalties for the debt the subject of the notice to pay; (iii) the known or likely consequences and adverse effects the (sic) decision on the financial position of the applicant and the viability of its business or that it should have known or considered or made inquiries about before making the decision; (iv) the known or likely consequences and adverse effects the decision on the financial position of the applicant, its employees, sub-contractors and suppliers or and (sic) the first respondent should have known or considered or made inquiries about that before or in the course of making the decision; (v) that the issue of the notice to pay for twenty cents in every dollar out of each of the amounts of available money the second respondent becomes liable to pay the applicant would cause or was likely to cause serious and irreparable hardship or damage to the applicant and/or its employees, subcontractors and suppliers and the first respondent should have known or considered or made inquiries about that before or in the course of making the decision; (vi) that the issue of the notice to pay would have or was likely to cause consequently (sic) hardship and adverse effects to the second respondent and the parents and children who used the childcare facilities of the second respondent and of any subsidiary of the applicant that owned or operated childcare centres, and its employees, subcontractors and other suppliers, and the first respondent should have known or considered or made inquiries about that before or in the course of making the decision. (vii) that the applicant had been supplying its services to most if not all of the childcare centres of the second respondent at cost (not including overheads) plus 10% since their acquisition from the receivers of the ABC Group, which the first respondent knew or should have known at the time of making the decision; (viii) that at all material times the receivables from the second respondent make up approximately 90% of the applicant's receivables and 90% of its income, and the first respondent knew or should have known that was likely at the time of making its decision; (ix) that without the payment by the second respondent, the applicant would not or would not be likely to be able to pay its employees, subcontractors and suppliers, who would stop or be likely to stop supplying goods and services to the applicant, and the applicant will not be able to continue its enterprise; (x) without the payment, the applicant will be unable to pay its subcontractors who provide services to the second respondent, which owns and operates 600 childcare centres, and to Bright Horizons, which owns and operates 35 childcare centres, and as a result the childcare centres will become non-compliant with regulatory standards in a number of areas and may have to close; (xi) that the applicant supplied its services to Bright Horizons is financially upon the applicant for its operations (sic), and without the payment Bright Horizons will not be able to pay its staff, subcontractors and suppliers or continue its operations and will have to close down its 35 childcare centres; (xii) whether without the payment and the further moneys that will be owed or become owing by the second respondent to the applicant, the applicant and its subsidiaries would or would be likely to have to cease business and be placed in administration or liquidation; (xiii) whether the notice to pay would or would be likely to prevent or seriously hinder the applicant from pursuing its legitimate rights of objection and appeal against the assessments; (xiv) whether the revenue was likely to be placed at greater risk by the issue of the notice to pay for the than not (sic); (xv) whether if the applicant were allowed a reasonable period of time to pay it would be or would be likely to be able to pay the assessments of tax and penalty shortfalls; 6. The making of the decision to issue and serve the notice to pay was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made in that the first respondent acted for a collateral purpose other than the power was conferred in that the notice to pay was issued to prevent or hinder the applicant in continuing to conduct its business or in pursuing its legitimate rights of objection and appeal and as a means for the infliction of punishment upon the applicant, and the applicant repeats and relies on the foregoing. 7. Further or alternatively, the applicant repeats and relies on the foregoing, and in the premises the exercise of the power was so unreasonable that no reasonable person could have so exercised the power. 8. Further or alternatively the applicant had a legitimate expectation that the first respondent would apply its receivables or recovery policy and it failed to do so or further or alternatively the first respondent applied its receivables or recovery policy without regard to the merits of the case. (Reproduced from original, tracked amendments in original accepted.) Section 260-5 - overview 22 Section 260-5 of Sch 1 of the TAA 1953 ("s 260-5") confers a statutory power on the Commissioner to give a written notice to a third party which owes or may later owe money to another entity which has tax-related debts payable to the Commonwealth. The legislation permits the Commissioner to serve such a notice whether or not the debt has become due and payable (s 260-5(3)). While the machinery constructed by the section is analogous to a garnishment, in considering the history of the statutory enactment which is now s 260-5 the Court has previously held that s 260-5 does not generate a garnishee process: Conley & Anor v Commissioner of Taxation & Anor (1998) 81 FCR 24 at 29-30, affirmed by the Full Court in Deputy Commissioner of Taxation v Conley (1998) 88 FCR 98 at 101 and 108-109. On the other hand, the service of a third-party notice pursuant to s 260-5 gives rise to rights in the Commissioner in the nature of a charge over moneys otherwise payable by the third party to the debtor: Commissioner of Taxation v Donnelly (1989) 25 FCR 432, Commissioner of Taxation v Bruton Holdings Pty Limited (in liq) [2008] FCAFC 184. 23 The power conferred on the Commissioner by s 260-5 and its antecedents was described by Burchett J in Re Geoffrey Walter Edelsten v Charles Robert Wilcox & Commissioner of Taxation [1988] FCA 204 at [36] as "extraordinary". Consideration 24 There is considerable repetition in the grounds of review. Further, while the Application claims reliance by the applicant on the ss 5, 6 and 7 of the ADJR Act, s 39B of the Judiciary Act and s 21 and s 23 of the Federal Court Act, there is no specific cross-reference with the grounds of review in paragraphs 1-8 of the Application. Nor does the applicant in its submissions specifically link grounds of review to specific statutory provisions. No issue as to these points was, however taken by the first respondent in this proceeding. To that extent, it appears that the first respondent accepts that the grounds of review as pleaded in the Application are recognised by the ADJR Act, the Judiciary Act and/or the Federal Court Act in the circumstances of this case. 25 In their submissions the parties have grouped the grounds of review under headings. I propose to do the same. Ground 1(a): the authorisation of the decision-maker 26 This ground of review appears to rely upon, inter alia, ss 5(1)(b), 5(1)(c) and 5(1)(d) of the ADJR Act. 27 It is common ground that the decision-maker for the purposes of the New Notice – or in the submission of the applicant, the purported decision-maker – was Mr Craig Morelande. Affidavits of Mr Morelande were filed on 14 July 2011 and 5 August 2011. Mr Morelande also gave oral evidence under cross-examination at the hearing on 9 August 2011. Ground 1(a) of the grounds of review is that Mr Morelande was not authorised by the enactment to make the Decision. 28 The applicant's claim that Mr Morelande was not authorised to make the Decision may be summarised as follows: 1. Section 4 and s 7 of the TAA 1953 provide for the existence of the Commissioner of Taxation, three Second Commissioners and such Deputy Commissioners as are required. 2. Section 8(1) of the TAA 1953 provides for delegation by the Commissioner in the following terms: The Commissioner may, either generally or as otherwise provided by the instrument of delegation, by writing signed by the Commissioner, delegate to a Deputy Commissioner or any other person all or any of the Commissioner's powers or functions under a taxation law or any other law of the Commonwealth or a Territory, other than this power of delegation. 3. In this case by instrument of delegation dated 11 April 2011 the Commissioner delegated his functions and powers to each of the Deputy Commissioners and some senior officers. The instrument of delegation was stated not to revoke any existing delegations. A copy of this instrument is exhibit "CM 11" to the affidavit of Mr Morelande filed 5 August 2011. 4. By an instrument of authorisation dated 11 January 2011 Mr Stephen Vesperman, Deputy Commissioner of Taxation and Chief Operating Officer, authorised all officers: (a) from time to time holding or occupying positions or assigned to duties in Client Account Services, Customer Service and Solutions, Client Contact, Debt and Operations Support and Capability; and/or (b) who exercise powers and functions which result in notices, determinations, correspondence or other documents issued by Client Account Services, Customer Service and Solutions, Debt and Operations Support and Capability. To exercise in the name of the person from time to time holding or occupying the position or assigned to the position of Deputy Commissioner of Taxation and Chief Operating Officer, all powers and functions delegated to the Deputy Commissioner of Taxation and Chief Operating Officer. A copy of this instrument is exhibit "CM 12" to the affidavit of Mr Morelande filed 5 August 2011. 5. The decision-maker in respect of the New Notice issued by the first respondent was Mr Morelande, in the name of Mr Duffus. (I note that, in his affidavit filed 5 August 2011, Mr Morelande deposes that at the time of issue of the New Notice Mr Paul Duffus was Deputy Commissioner and Chief Operating Officer.) 6. The applicant contends that the statutory power under s 260-5 may only be personally exercised by the Deputy Commissioner as delegate of the Commissioner, and that exercise of the power by an authorised officer of the Deputy Commissioner is not authorised by the TAA 1953 on its proper construction having regard to the nature and function of the power and its effects upon income or property owed to the taxpayer. 29 In substance, the first respondent submits that this ground is answered by the decision of the High Court in O'Reilly v Commissioners of the State Bank of Victoria (1983) 153 CLR 1 and that, in effect, the Carltona principle applies (cf Carltona Ltd v Commissioners of Works [1943] 2 All ER 560). 30 The applicant submits that O'Reilly is distinguishable on these facts, or alternatively the dissenting view of Mason J in O'Reilly is the correct construction and approach in this case. O'Reilly 31 In O'Reilly two officers of the Australian Taxation Office, Mr Cornell and Mr Hughes, were investigating the financial affairs and dealings of Mr Lawson, the fourth defendant, members of Mr Lawson's family, and companies and trusts which were connected with Mr Lawson. 32 Mr Hughes served a notice on Mr Lawson pursuant to s 264 of the Income Tax Assessment Act 1936 (Cth) ("s 264") ("ITAA 1936") which at the material time provided: (1) The Commissioner may by notice in writing require any person, whether a taxpayer or not, including any officer employed in or in connexion with any department of a Government or by any public authority: (a) to furnish him with such information as he may require; and (b) to attend and give evidence before him or before any officer authorized by him in that behalf concerning his or any other person's income or assessment, and may require him to produce all books, documents and other papers whatever in his custody or under his control relating thereto. (2) The Commissioner may require the information or evidence to be given on oath and either verbally or in writing, and for that purpose he or the officers so authorized by him may administer an oath. (3) The regulations may prescribe scales of expenses to be allowed to persons required under this section to attend. 33 At the foot of the notice a facsimile signature of the Deputy Commissioner had been affixed by Mr Holland, who at that time was the Chief Investigation Officer in the Australian Taxation Office. The Deputy Commissioner had purported on 23 September 1980 to authorise the Chief Investigation Officer to perform certain functions. The authorisation was said to be: In the exercise of the powers and functions delegated to me by the Commissioner of Taxation. 34 It purported, inter alia, to authorise the Chief Investigation Officer to: (1) "Authorise issue of notices other than notices requiring the giving of information or evidence on oath"; (2) "Imprint facsimile of my signature upon such notices"; and (3) "Examine addressees and receive evidence, books, documents and papers". 35 The notice required Mr Lawson to furnish information to, and to attend and give evidence before, Mr Cornell. 36 Mr Cornell, in his capacity as Supervisor, Investigation Section, was also mentioned in the purported authorisation of 23 September 1980 as being authorised in the same three respects as Mr Holland, the only difference being that Mr Cornell's authorisation to issue notices was said not to extend to notices requiring "attendance to give evidence or to produce books, documents and other papers". 37 It appears that the Deputy Commissioner himself had no knowledge of the notice served on Mr Lawson until after 15 April 1981. It had been Messrs Holland, Hughes and Cornell in conjunction who decided that the notice should be delivered. Mr Lawson did not comply with the s 264 notice. 38 The primary question for decision was whether the giving of the notices was a valid exercise of the power given by s 264. It was not in dispute that: section 264 in terms conferred power only on the Commissioner; the delegation by the Commissioner to the Deputy Commissioner was valid; the Deputy Commissioner had no power of sub-delegation. 39 On behalf of the defendants it was submitted that the authorisation given by the Deputy Commissioner on 23 September 1980 was an invalid sub-delegation or, alternatively, that the Deputy Commissioner had no power to authorise anyone else to exercise the power on his behalf. 40 By majority (Gibbs CJ, Murphy and Wilson JJ, Mason J dissenting) the High Court held that that the powers conferred by s 264(1) were not intended to be exercised only by the Commissioner or his delegate but might be exercised through a properly authorised officer. 41 Gibb CJ said that the question whether s 264 required that the Commissioner (or his delegate) should personally sign the notice in writing was one of construction (at p 10). Further at pp 11-12 his Honour continued: It would serve no useful purpose for me to canvass all the authorities in which questions of this kind have been considered in relation to the exercise of statutory powers; they are discussed in de Smith's Judicial Review of Administrative Action, 4th ed., pp. 303-309. The answer to the question whether the statute requires the power to be exercised personally by the person designated depends on the nature of the power and all the other circumstances of the case: cf. Re Reference under Ombudsman Act, s. 1145, per Brennan J. However, I should mention the line of authorities which commenced with Carltona Ltd. v. Commissioners of Works and which are discussed in In re Golden Chemical Products Ltd. Those authorities established that when a Minister is entrusted with administrative functions he may, in general, act through a duly authorized officer of his department. This result depended in part on the special position of constitutional responsibility which Ministers occupy, and in that respect these authorities are distinguishable from cases such as the present. However, they also rest on the recognition that the functions of a Minister are so multifarious that the business of government could not be carried on if he were required to exercise all his powers personally. Ministers are not alone in that position. This has been judicially recognized. In Commissioners of Customs and Excise v. Cure & Deeley Ltd, it was said that the Commissioners in that case were in a position parallel to that of Ministers, and in Ex parte Forster; Re University of Sydney, the Senate of a University was regarded as being in a similar situation. I can see no reason why, in construing sections of the Act which confer powers on the Commissioner, it should not be proper to consider the undoubted fact that the Commissioner could not possibly exercise all those powers personally. (Footnotes omitted.) 42 His Honour continued at pp 12-13: Section 264 confers on the Commissioner a power whose exercise will be likely adversely to affect rights of individuals. This is a reason for inclining in favour of the view that it must be exercised personally. On the other hand, that section, and a number of other sections of the Act, confer on the Commissioner powers which may be expected to be exercised in myriads of cases. Those other sections include ss. 166-169, 170 and 174, which give power to make and amend assessments and to serve notice of assessments. Since there are literally millions of taxpayers (according to Year Book Australia 1982, p. 577, there were over 5.6 million individual taxpayers in the year 1979-80) it would reduce the administration of the taxation laws to chaos if the powers conferred by those sections could be exercised only by the Commissioner or a Deputy Commissioner personally. It can not be supposed that the Parliament intended such a result. By s. 13 of the Act any reference in the Act to the Commissioner is deemed to include, in respect of matters as to which a Deputy Commissioner has exercised any power or function conferred upon him by delegation, a reference to that Deputy Commissioner. The power of delegation conferred by s. 8(1) of the Taxation Administration Act 1953 (Cth), as amended, enables the Commissioner to make a delegation "to a Deputy Commissioner of Taxation or other person". In Re Reference Under Ombudsman Act, s. 1150, Brennan J. said that "The practical administrative necessity which warrants an authority's exercising his power by the acts of another disappears when the authority is empowered to delegate all of his powers and functions to that other." The existence of a power to delegate is of course an important consideration in deciding whether the designated authority may act through an authorized agent. However, the fact that the Act itself contemplates that the delegation will be to a Deputy Commissioner only (notwithstanding that s. 8(1) of the Taxation Administration Act confers a wider power of delegation) suggests that it was not intended that there should be a wholesale delegation of powers to comparatively minor officials. But in any case it would hardly be practicable to make a delegation of that kind, and it seems to me that there exists, as the Parliament must have known, a practical necessity that the powers conferred on the Commissioner by the Act should be exercised by the officers of his Department who were acting as his authorized agents. On the whole I have reached the conclusion that the powers conferred by s. 264 were not intended to be exercised only by the Commissioner or his delegate personally but may be exercised through a properly authorized officer. This is consistent with the decision in Lee v. Federal Commissioner of Taxation, where it was held that the acts of the Commissioner's officers (no doubt acting within the course of their authority) in performing duties under other sections of the Act were the acts of the Commissioner for the purposes of the Act. In opposition to this view reliance was placed on the fact that express reference to officers authorized by the Commissioner is made in ss. 263 and 264, and this, it was said, indicated an intention to exclude action by authorized officers in other cases. Section 263, which refers to "the Commissioner or any officer authorized by him", is concerned with rights, whereas s. 264 is concerned with powers; one may conclude that a power may be exercised through an agent more readily than that a right is conferred upon an agent. The reference in s. 264(1)(b) to "any officer authorized by him" may be explained by the fact that in the context of that provision it is necessary to specify the officer before whom the recipient of the notice is required to attend. The fact that authorization is expressly mentioned in these provisions does not assist the conclusion that s. 264 otherwise excluded any possibility of authorization. (Footnotes omitted.) 43 Murphy J agreed with the reasons given by the Chief Justice. 44 At p 32 Wilson J observed: The question is whether the existence of the power of delegation requires that the Commissioner or his delegate must direct his mind personally to the exercise of every power or function vested in him. Stated in that way, in my opinion, the question admits only of one answer. The practical administrative necessity to allow a Deputy Commissioner to exercise the powers delegated to him by the actions of officers authorized by him is evident. The opposing argument would oblige the Commissioner himself to delegate his powers, not only to the Deputy Commissioners, but to a host of departmental officers throughout Australia, rendering each of them a Commissioner in his own right. It would be wholly destructive of any semblance of administrative order and efficiency. Finding 45 There is no dispute by the applicant that Mr Duffus was at all material times a delegate of the Commissioner or that he was a Deputy Commissioner of Taxation. In any event, reg 45(1) of the Taxation Administration Regulations 1976 (Cth) provides that judicial notice must be taken of the names and signatures of the persons who are, or were at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner. Similarly, there is no dispute that an authorisation has been executed appointing Mr Morelande to exercise powers pursuant to s 260-5. 46 In summary, the applicant submits that O'Reilly is distinguishable on the facts of this case because: section 260-5 confers an extraordinary power, whereby notices can result in seizure of income or property owed to the taxpayer; section 260-5 notices can interfere in the rights of a taxpayer in an extreme way, unlike s 264 notices which relate only to investigations; and in respect of s 260-5 notices there is not the same practical administrative necessity as s 264 to allow a Deputy Commissioner to exercise the powers delegated to him, by officers authorised by him. Evidence of Mr Morelande given under cross-examination demonstrated that Mr Morelande himself had issued only one third party notice in the previous six months (transcript 9 August 2011 p 42 ll 1-7). 47 In my view, however, O'Reilly is not distinguishable on the facts before me. I consider that the facts before me are on all fours with the principles discussed, and decided, by the High Court in O'Reilly, and that I am bound to apply the decision. In particular, I take this view for the following reasons. 48 First, I do not accept that the consequences of a notice under s 264 are insufficiently serious compared with the position under s 260-5, so as to warrant a distinction in the Court's approach to authorisation in this case. In O'Reilly the fact that a proper investigatory process was essential to the proper administration of the legislation was recognised by Wilson J at p 36. Further, I note observations of Mason J in respect of s 264 at p 19 where his Honour observed: The power to issue a s. 264 notice may have a great impact on the affairs of individual persons. It is not like a power which, being purely administrative in nature or having no consequences of any significance, may perhaps be entrusted to another to exercise despite a statutory proscription against delegation or sub-delegation. It is a power the exercise of which involves a substantial area of discretion. Its exercise may not, therefore, be entrusted to a subordinate in the absence of a great degree of control by the authority. 49 Second, I am not satisfied that the number of s 260-5 notices issued by the first respondent every year are so few that, compared with the position in respect of s 264, there is no practical administrative necessity warranting a construction of s 260-5 permitting notices pursuant to s 260-5 to be issued by officers authorised by a Deputy Commissioner. Notwithstanding the evidence given by Mr Morelande under cross-examination, a very different picture emerged under re-examination. In particular I note evidence at transcript 9 August 2011 pp 44-45 as follows: Now, to your knowledge – to your personal knowledge, how many garnishee-type notices or garnishee notices does the Australian Taxation Office issue per annum, for example?---A lot. In one sense, there has been quite a increase in them lately. Let's say – including the whole of the debt area – I would say 5000; probably more. All right. And in relation to this particular garnishee notice where you reduced it to 20 per cent, you told my learned friend that it's the first garnishee notice that you've actually turned your mind to or issued personally; is that correct?---For about six months or so, yes. The last six months, right. Why is that?---I've moved into a more of a managerial role and less, sort of, case or work on matters. Would it be ordinarily part of your role, apart from Mr Thomas's absence, to be issuing garnishee notices?---No, not ordinarily, no. 50 From this evidence, to which no objection was taken, it appears that a large number of s 260-5 notices are issued by the ATO each year. The practical administrative necessities inherent in this function favour a construction similar to that adopted by the High Court in O'Reilly. 51 Third, Mr Alexander for the applicant also sought to rely on Din v Minister for Immigration and Multicultural Affairs [1997] 147 ALR 673. That case involved judicial review of the rejection of a visa application on the ground that the Minister did not approve, either personally or by an appointed delegate, all relevant English proficiency tests, and/or the times and places at which those tests were to be administered. Wilcox J held that the regulations required the English proficiency tests and the times and places of their administration to have been approved and nominated by the Minister personally or by his appointed delegates and not by an officer responsible to him. In distinguishing O'Reilly on the facts before his Honour, Wilcox J in Din observed at 682-683: Not unnaturally, Mr Robertson placed primary reliance on O'Reilly. That is a strong case, from his point of view, because the Carltona principle was applied by the majority despite the existence of a statutory power of delegation. Yet it is apparent from the reasons of Gibbs CJ and Wilson J that both their Honours thought it was a very special case. Both were heavily influenced by the sheer impossibility of the Commissioner and Deputy Commissioners personally exercising statutory powers in relation to millions of taxpayers. That problem is absent from this case. As is demonstrated by the minister's approval of the first set of papers and the November 1994 test schedule, it was a simple task for the minister personally to approve a batch of papers and a schedule of tests; and if there was likely to be a problem, the minister could have made a delegation under s 496 to an appropriate officer. To pick up the words of Mason J in Peko-Wallsend, this is not a case where "administrative necessity indicated it was impractical for (the minister) to act otherwise than through his officers or officers responsible to him". Accordingly, it is not a case where those who made and approved the regulations must be taken as having accepted that the persons who might exercise the power under cl 816.732 could extend beyond the minister and his reg 1.16 delegates. 52 However the facts in Din are clearly distinguishable from the case before me. Unlike in Din where his Honour described the task of the Minister as approving a batch of papers and a schedule of tests, the evidence of Mr Morelande demonstrates that the administrative burden in issuing up to 5000 notices per annum pursuant to s 260-5 is considerably more complex. 53 Applying O'Reilly to the facts before me, I am satisfied that Mr Morelande was authorised to make the Decision to issue the New Notice. Paragraph 47 of Outline of Argument of Applicant 54 In respect of ground 1(a), the applicant submitted in paragraph 47 of the Outline of Argument of Applicant as follows: Further or alternatively, the delegated power had not been validly exercised by Mr Morelande as the authorised agent of the Deputy Commissioner because it had been exercised by agreement with another person, as Mr Morelande "agreed…. that 20 per cent would be a reasonable amount; it was sort of a mutual sort of reaching an agreement on that amount. We both felt that 20 per cent would be fairly reasonable with the information available." [footnote: Morelande xxn p 14 ll 14-20; cf Margula v Minister for Environment [1999] FCA 730 at [20]]. 55 At the hearing on 15 August 2011 Mr Flanagan SC for the first respondent objected to this paragraph in the Applicant's Outline, on the basis that the submission did not fall within the scope of the Application. 56 In my view the objection ought be upheld. This submission of the applicant falls under ground 1(a) of the Application, namely that "Craig Morelande was not authorised by the enactment to make the decision". That ground does not extend to the claim in paragraph 47, which is to the effect that Mr Morelande exercised his delegated power in conjunction with another person who was not otherwise authorised, namely Ms Kathleen Cameron, a solicitor employed by the ATO. 57 In any event even had I allowed the submission I consider it has no merit. The submission is based on evidence given by Mr Morelande during cross-examination on 9 August 2011 (transcript 9 August 2011 p 14 ll 4-36). However: in re-examination, Mr Morelande gave evidence (which was not challenged) that he had formed a view as to the extent to which the Original Notice should be amended prior to speaking with Ms Cameron (transcript 9 August 2011 p 44 ll 18-20). in my view the proper inference to draw from Mr Morelande's statement that the 20% reduction was "a mutual sort of reaching an agreement on that amount" was that he had had a conversation with Ms Cameron because of her discussions with the legal representatives of the applicant, and that they had both reached the same conclusion as to an affordable quantum for the applicant on the facts known to them. I am not prepared to draw an inference that, because Mr Morelande had formed the same conclusion as Ms Cameron on 10 June 2011, Mr Morelande was therefore acting on Ms Cameron's instructions. 58 In my view ground 1(a) has not been substantiated. Ground 1(b): identity of third party and its proper officer 59 This ground of review appears to rely upon, inter alia, s 5(1)(e) and s 2(h) of the ADJR Act. 60 In this case the New Notice was addressed to "Goodstart Childcare Limited", however: there was no identification of the addressee by its Australian Company Number or Australian Business Number; the New Notice was not addressed to its proper officer or public officer, and did not require the second respondent by its proper officer or its public officer to make the payments or cause those officers to make the payments. 61 The applicant claims that the New Notice was invalid by reason of these issues, and relies in particular on the decision of the Supreme Court in Victoria in Goodin v Federal Commissioner of Taxation [2002] VSC 241 and comments of Mason J in Rochfort v Trade Practices Commission (1982) 153 CLR 134 at 146. Goodin 62 In Goodin the plaintiffs challenged the validity and effectiveness of a notice issued by the Commissioner of Taxation under s 260-5 to the second defendant, Coppard Law Pty Ltd, a corporation trading as "Willerby's Barristers & Solicitors". The second defendant was the solicitor for the taxpayer and had received moneys in respect of a sale of property by the taxpayer. The notice was addressed to: The Senior Partner Willerby's Barristers and Solisitors [sic] 2/474 Nepean Highway Frankston Vic 3199 63 This description of the addressee, absent the address but repeating the misspelling of "solicitors" was repeated in the body of the notice itself. The plaintiffs, who were the liquidators of the taxpayer, contended that there is no such person as identified in the notice, and that whereas "Willerby's Barristers & Solicitors" did exist as the registered business name of Coppard Law Pty Ltd, the second defendant was a company (not a partnership) and, as such, had no senior partner. 64 Pagone J said: [12] A notice issued under Div 260 imposes heavy burdens upon its recipient, alters the rights of others and exposes the recipient to penal sanction for non-compliance: Taxation Administration Act, s 260-20. It is, therefore, appropriate that a notice itself be explicit and be strictly within the terms of the statute: Perpetual Trustee Co (Ltd) v Holdsworth [1966] 2 NSWLR 755 at 757. Similarly, it is essential that the notice itself, for it to be valid, "leave no ambiguity as to the nature of the recipient's obligation": Commissioner of Taxation (Cth) v Government Insurance Office (NSW) (1992) 36 FCR 314 at 320 per Wilcox J at first instance. [13] The description of the person to whom the notice is addressed is not a matter going to the nature of the recipient's obligation, but it does identify the person upon whom the obligation is imposed. It is essential, therefore, that the description of the person to whom the notice is addressed is itself clear and unambiguous. A trivial error in description will not suffice to invalidate the notice (Allen Properties (Qld) Pty Ltd v Encino Holding Pty Ltd (1985) 10 ACLR 104), nor will the addition of surplus words which do not cause ambiguity about the identity of the person to whom the notice is addressed and upon whom the onerous obligations are placed: see Macquarie Health Corporation Ltd v Commissioner of Taxation (1999) 96 FCR 238 where the notice was addressed to "The Public Officer, Macquarie Health Corporation Pty Ltd"; see also s 252(1)(e) of the Income Tax Assessment Act 1936 (Cth) which effectively provided that service upon the public officer was service upon the company. 65 After referring to Commissioner of Taxation (Cth) v Prestige Motors Pty Ltd (1994) 181 CLR 1 his Honour continued: [14] The test for validity where there is a challenge to the description of the addressee of a notice under Div 260, by parity of reasoning, is whether the notice brings to the attention of the intended person that that person has a liability or duty. Whether a notice does so will depend upon a consideration of its form and content rather than what the individuals may subjectively have undertook or fortuitously guessed. 66 His Honour found that the notice should have been addressed to the proper officer of the corporation rather than to the senior partner of a non-existent partnership, and that the misdescription of the entity upon which the heavy obligations of the notice were intended to attach was fatal. His Honour took this view also in light of the exposure to criminal penalties inherent in failure to comply with a s 260-5 notice. Evidence of GoodStart 67 On 15 July 2011 an affidavit sworn by Mr Gavin Bartlett was filed. Mr Bartlett deposes that he is the General Counsel for GoodStart. 68 Materially for the purposes of the present discussion, Mr Bartlett deposes in that affidavit that on 9 June 2011 he received the Original Notice in the internal company mail (paragraph 2) and that on 10 June 2011 GoodStart received by fax the New Notice (paragraph 12). Finding 69 While the importance of the proper description of the addressee of a s 260-5 notice cannot be understated, in my view the omission of the Australian Company Number or the Australian Business Number, as well as the lack of specific reference to the proper officer or public officer of the second respondent, do not result in the invalidation of the New Notice. 70 First, the facts in this case are distinguishable from Goodin. In this proceeding the addressee of the notice was actually the name of the second respondent, unlike in Goodin where the addressee of the notice was a non-existent entity. 71 Second, it is not a requirement of s 260-5 that the third party be identified by reference to any of the Australian Company Number, the Australian Business Number, the proper officer or public officer as submitted by the applicant. Section 260-5 simply requires the notice to be served on "an entity (the third party)". "Entity" is defined in s 8AAZA of the TAA 1953 as follows: (a) a company; (b) a partnership; (c) a person in a particular capacity of trustee; (d) a body politic; (e) a corporation sole; (f) any other person. 72 In this case the New Notice was clearly addressed to the corporate name of the second respondent. 73 Third, as Pagone J said in Goodin, the description of the person to whom a notice is addressed is important because it is a matter going to the identification of the person upon whom the obligation is imposed by s 260-5. In this case, while references to the Australian Company Number, the Australian Business Number, the proper officer and/or the public officer of the second respondent may have been helpful, the identification of the second respondent as the entity to whom the New Notice was addressed was clear and unambiguous. 74 Fourth, although the applicant submitted that it specifically relies on comments of Mason J in Rochfort at 146, I do not find this submission helpful. The relevant comments of his Honour appear to be as follows: The production of documents by a corporation stands in a special position. In the past it seems to have been thought that a problem arose by reason of the corporation's inability to give evidence. This problem can be avoided by serving a subpoena on the corporation itself, requiring it, by its proper officer, to give evidence and produce the documents. 75 In my view this observation in no way supports a finding that a notice served upon a corporation without specific reference to its proper officer is invalid. 76 Finally, it is clear from the evidence of Mr Bartlett that there was no uncertainty in the second respondent as to the fact that it had been served with a notice under s 260-5. 77 In my view ground 1(b) has not been substantiated. Ground 1(c): identity of the debtor 78 This ground of review appears to rely upon, inter alia, s 5(1)(e) and s 2(h) of the ADJR Act. 79 The applicant claims that the New Notice was uncertain, because the second respondent was uncertain as to the identity of the debtor in respect of whom the New Notice was issued, as the New Notice did not clearly identify the applicant and the second respondent was required to make further inquiries. 80 As a general proposition, a s 260-5 notice must be valid on its face, and must leave no ambiguity as to the nature of the recipient's obligation in particular the name of the debtor in respect of whom the notice has been served: Goodin at [12], Conley. In Conley at 33-34, Davies J observed: I do not think that a s 218 notice can be supplemented by oral or written explanations subsequently given. The notice must be valid on its face and must express an obligation, the failure to comply with which will be an offence under the Assessment Act. If a notice is such that a recipient is uncertain as to what is demanded in order to comply with the notice, then the notice will not impose an obligation and failure to comply with the notice will not be an offence. 81 There is evidence before the Court that there was confusion in the second respondent as to the identity of the debtor in respect of whom a s 260-5 notice had been issued, in the case of the Original Notice. In his affidavit filed 15 July 2011 Mr Bartlett deposes that, upon receiving the Original Notice, he had conducted an internet search on the database of the Australian Securities and Investments Commission, and that that search had returned several companies with similar names. Mr Bartlett deposes further that he telephoned the ATO, that Mr Ray Thomas of the ATO confirmed that the debtor was the applicant, and that he subsequently received a faxed letter from the ATO with the ABN of the debtor. 82 However there is no evidence before the Court as to confusion in the second respondent as to the identity of the debtor in the case of the New Notice. It is the New Notice which is the subject of the Application. In his affidavit, Mr Bartlett deposes as follows: 12. On 10 June 2011, GoodStart received by fax another Notice to Pay from the ATO ("the Second Notice"). Now produced and shown to me and marked "GB3" is a true copy of the Notice to Pay received by me. 13. Like the First Notice, the Second Notice did not include the ABN or ACN of the debtor company. From my previous dealing with the ATO, I assumed that the Second Notice is directed towards amounts GoodStart owes to the Applicant. 83 Notwithstanding the absence of such details as an Australian Company Number and/or Australian Business Number from the New Notice identifying the applicant, the evidence demonstrates that, as a matter of fact, the second respondent was not uncertain as to the identity of the debtor in respect of whom the New Notice was issued, following the events of 9 and 10 June 2011 of which the second respondent appeared well aware. Mr Bartlett's "assumption" in paragraph 13 of his affidavit was clearly correct and there was clearly neither contemporaneous nor subsequent confusion in GoodStart in respect of the New Notice. 84 The absence of the Australian Company Number and/or the Australian Business Number identifying a corporation as the relevant taxpayer in a s 260-5 notice may in some circumstances mean that the notice was invalid. Although I do not need to decide this point for the purposes of this judgment, I consider the validity of the Original Notice may have been open to question had the question of the validity of that notice arisen for determination. However on the facts before me I consider that any finding that the "second respondent was uncertain as to the identity of the debtor" in this case in respect of the New Notice would be based on an entirely artificial premise. In light of the dealings on 9 and 10 June 2011 between the second respondent, the applicant and the first respondent, by the time of the issue of the New Notice the second respondent was completely apprised of all material facts. There is no evidence that, after the issue of the New Notice, the second respondent was required to make further inquiries in order to clearly identify the applicant. Clearly, there was no uncertainty in the second respondent as to the applicant's identity for the purposes of the New Notice. 85 Further, and more particularly, it is clear that the New Notice was issued urgently as part of an arrangement between the applicant and the first respondent in the context of the commencement of these legal proceedings. That this is so is clear from the transcript of the proceedings of 10 June 2011 (for example, p 15, ll 16 to 28, p 26 ll 31 to 33, p 30 ll 25 to 30). I agree with the submission of Mr Flanagan SC for the first respondent that allegations of uncertainty by the applicant in relation to the New Notice in ground 1(c) do not sit well with these events. 86 In my view ground 1(c) has not been substantiated. Ground 1(d): GoodStart's liability or duty to comply with the New Notice 87 This ground of review appears to rely upon, inter alia, s 5(1)(e) and s 2(h) of the ADJR Act. 88 I am unable to identify any submissions of the applicant, either written or oral, which specifically address this ground of review. In the absence of submissions addressing this ground it is difficult to know the case of the applicant in this respect. The New Notice, a copy of which is exhibited to Mr Morelande's affidavit filed 14 July 2011, was annexed to a letter to the second respondent, excerpts from the TAA 1953, and stated inter alia: GOODSTART CHILDCARE LIMITED, YOU are a third party who owes, or may later owe, money ("the available money") to QUEENSLAND MAINTENANCE SERVICES PTY LTD ("the debtor") of (or previously of) C/- Harris Black Chartered Accountants, Level 16, 333 Ann Street, Brisbane, QLD, 4000, who in terms of section 260-5 of Schedule 1 of the Taxation Administration Act 1953 had a debt payable to the Commonwealth of $10,093,860.20. In exercise of powers conferred on me as Deputy Commissioner of Taxation by delegation from the Commissioner of Taxation under section 8 of the Taxation Administration Act, YOU, GOODSTART CHILDCARE LIMITED, ARE REQUIRED TO PAY TO THE COMMISSIONER OF TAXATION EVERY FOUR WEEKS from the date of this notice, out of each of the amounts of available money you become liable from time to time to make to the debtor, an amount of TWENTY CENTS IN EVERY DOLLAR of such payments UNTIL the amount of $10,093,860.20 due by the debtor is satisfied. … … WARNING You are legally required to comply with this notice. Should you receive instructions from the debtor or any other party regarding payment which are in contravention of this notice, please notify this office immediately. The Legislation imposes severe penalties upon those who do not comply with its requirements. A penalty of 20 penalty units is prescribed for a failure to comply with the notice. Under s 4AA of the Crimes Act 1914 the current value of a penalty unit is $110. In addition to imposing a penalty on a person convicted of an offence in relation to failing to pay an amount under the notice, the court may order the person to pay to the Commissioner an amount not exceeding that amount. 89 In relation to informing GoodStart of its liability or duty to comply with the New Notice, the terms of the New Notice seem unambiguous. 90 One possible interpretation is that this ground of review raises similar issues to ground 1(c) in that it is a complaint as to the form of the New Notice and the absence of details from the New Notice, namely the Australian Company Number or Australian Business Number of the applicant, so as to unambiguously clarify to the second respondent the identity of the debtor. Again, while as a general proposition it is important that, on the face of a s 260-5 notice, there be no ambiguity including as to the duties and liabilities of recipients, as I have previously found on the facts of this case the second respondent was perfectly aware that it had a liability or duty to comply with the notice to pay and that the liability or duty was in respect of the applicant. That there was no uncertainty in the second respondent as to its obligations is clear from the affidavit of Mr Bartlett. 91 In my view this ground of review is not substantiated. Ground 2: failure to comply with section 250-5(6) 92 This ground of review appears to rely upon, inter alia, s 5(1)(b) and (d) of the ADJR Act. I am unable to identify any submissions of the applicant, either written or oral, which specifically address this ground of review. In the absence of submissions addressing this ground it is difficult to know the case of the applicant in this respect. 93 In substance, the claim appears to be that the first respondent was required by statute to serve the applicant with the New Notice prior to serving GoodStart. 94 The first respondent submits that this allegation is without foundation. As a general proposition, subject to one qualification, I agree. Section 250-5(6) provides that the Commissioner must send a copy of the notice to the debtor. There is no temporal requirement to serve the debtor prior to, or at the same time as, the third party recipient. Indeed, I respectfully adopt the following comments of Mansfield J in Woodroffe v Deputy Commissioner of Taxation [2000] FCA 1379 at [13] (where his Honour considered the antecedent provision s 218 of the ITAA 1936) as equally applicable to the issue of notices pursuant to s 260-5: absent circumstances of the kind which existed in Edelsten, I think it is clear that the decision to issue a s218 notice is not one of which advance notice is required to be given to the proposed recipient of the notice or to others whose money is to be the target of the notice. S5(1)(a) does not impose natural justice obligations beyond those imposed by the common law: Kioa v Minister of State for Immigration and Ethnic Affairs (1985) 159 CLR 550; Safadi v Minister for Immigration and Ethnic Affairs (1981) 38 ALR 399. Those obligations may be excluded by clear legislative intention: Commonwealth v Crowe (1992) 39 FCR 435. In my view, such an intention is clearly evidenced by s218 itself. Its object is to secure the payment of taxation liability. It would frustrate the fulfilment of that object if such advance notice were required to be given, which might facilitate the movement of the funds the subject of the proposed notice: see eg. Walker v Secretary, Department of Social Security (No 2) (1997) 75 FCR 493 at 500, 508. 95 The only qualification is the issue to which Mansfield J adverted in Woodroffe, namely the circumstances as found by Burchett J to exist in Edelsten. This issue may be summarised as where there is a dispute as to the liability of the taxpayer to pay the relevant tax debt, the Commissioner may be required, in accordance with the rules of natural justice, to serve the s 260-5 notice on the taxpayer prior to the recipient, so as to allow the taxpayer to make submissions to the Commissioner in respect of the notice. 96 This issue was discussed by Finkelstein J in Saitta Pty Ltd v Commissioner of Taxation [2002] FCA 1105. His Honour considered the earlier decision in Edelsten, and observed as follows: [10] In many cases, there will be no obligation on the Commissioner to give prior notice of, and an opportunity to make submissions about, the issue of a notice under s260-5. Here I am referring to the common situation where there is an undisputed liability to pay tax, the third party upon whom the notice is to be served owes money to the taxpayer and the collection of the money by the Commissioner will not cause any undue harm to the taxpayer or to any person who deals with the taxpayer. In those circumstances the collection of tax by means of a s260-5 notice does not sufficiently affect the taxpayer's position as to warrant the giving of prior notice. Moreover, there is really nothing that could be said against the issue of the notice. [11] But there will be cases where the Commissioner should give notice of an impending decision. That was the view of Burchett J in Edelsten v Wilcox (1988) 83 ALR 99. The case concerned the issue of a notice under s218 of the Income Tax Assessment Act, which is the forerunner of s260-5. The Commissioner had raised assessments for income tax against the applicant and certain companies with which he was associated for amounts in excess of $5.3 million. It was conceded that the total income tax liability of the applicant and the companies would not exceed $1.7 million. The applicant objected to the assessments, as did the companies. The Commissioner served a notice under s218 requiring the Health Insurance Commission to pay the Commissioner money due to it by the applicant. This was followed by discussions to settle the tax claim during the course of which the Commissioner revoked the notice and served a substitute notice requiring the Commission to pay 45 cents in every dollar it owed to the applicant. Ultimately the settlement negotiations broke down, largely because the applicant could not provide security for a portion of the $1.7 million. Thereafter, the Commissioner issued a fresh notice under s218 requiring the Health Insurance Commission to pay 100 cents in every dollar due to it by the applicant. The decision to issue this notice was attacked on a number of grounds one of which was that the Commissioner failed to give the applicant an opportunity to make submissions regarding the issue of the notice. Burchett J set aside the notice on other grounds so it was not necessary for him to resolve the procedural fairness issue. Nevertheless, he said that the applicant would have been entitled to succeed on that ground. First Burchett J said (at 114-15): I was referred to Kioa v West (1985) 159 CLR 550. I think the principles stated in that case, when applied to s218, make it clear that the rules of natural justice can have no automatic application. The example of Kioa's case (supra) sufficiently illustrates the point. In a case of that kind, the Commissioner must be entitled to act swiftly, before the target of action escapes. However, it is argued that here, after examination of the applicant's position had been made in December 1986 and it had been accepted that the taking of 100 per cent of the health insurance payments was inappropriate, he acquired a legitimate expectation that this decision would not be changed without his being afforded an opportunity to answer any suggestion that there had been a relevant change in the situation, particularly if that suggestion involved an assertion of some improper or inappropriate conduct on his part. Then by reference to the particular facts, the most important being those outlined earlier, Burchett J found that there was a legitimate expectation that the rules of natural justice would be observed. In particular, the fact that the first notice to the Health Insurance Commission requiring payment of 100 cents in the dollar had been withdrawn because it was accepted as inappropriate in the circumstances gave rise to the expectation. [12] Whether or not the Commissioner was required to warn the applicant of the impending issue of the notice in the present case requires some examination of the facts. Since at least 1998, and even before then, the applicant has failed to comply with its obligations to remit to the Commissioner amounts of income tax deducted from the wages paid to its employees. The total amount deducted from wages and not remitted to the Commissioner exceeded $464,000. The applicant is still deducting income tax from wages and not remitting the amount to the Commissioner, so the debt is increasing. No objection has been lodged in respect of the tax due to the Commissioner. A number of cheques received from the applicant in part payment of unpaid tax were dishonoured when presented to the applicant's banker. Penalty notices were served on the directors of the applicant in respect of the unpaid tax. On a number of occasions the applicant agreed to discharge its debt to the Commissioner but failed to honour the agreements. The applicant put forward many proposals for the payment of the unpaid tax by instalments but no agreement was reached and no payments were made save for some relatively small amounts. All in all, the Commissioner waited four years to receive the unpaid tax and all the while the debt was increasing with an ever-diminishing prospect for its recovery. In those circumstances, it is my view that fairness did not require the Commissioner to give notice of his intention to issue the notice. 97 In my view the circumstances of the case before me are not analogous to those in Edelsten, where the Commissioner changed the basis upon which the recipient of the notice was required to remit monies to the ATO without giving prior warning to the taxpayer, and where the change resulted in increased hardship to the taxpayer. As I have already observed, in this case the New Notice was issued as part of an arrangement between the applicant and the first respondent in the context of the commencement of these legal proceedings and discussions between the parties and their legal representatives on the afternoon of 10 June 2011. In these circumstances, the applicant cannot suggest that it was surprised by the issue of the New Notice to the second respondent. 98 In my view this ground of review is not substantiated. Ground 3: Relevant Considerations 99 This ground of review appears to rely upon, inter alia, ss 5(1)(e), (2)(a) and (2)(b) of the ADJR Act. 100 Section 260-5 itself appears to provide the Commissioner with an unqualified discretion to issue a notice, subject to the specific requirements of s 260-5(1). The applicant however submits that the discretion is qualified by provisions of Practice Statement Law Administration PS LA 2011/18 ("PS LA 2011/18"), which is the Commissioner's own document and sets out relevant considerations to which the Commissioner will have regard. As a general proposition both parties rely upon principles explained by Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39-40: The failure of a decision-maker to take into account a relevant consideration in the making of an administrative decision is one instance of an abuse of discretion entitling a party with sufficient standing to seek judicial review of ultra vires administrative action. That ground now appears in s. 5(2)(b) of the A.D.(J.R.) Act which, in this regard, is substantially declaratory of the common law. Together with the related ground of taking into account irrelevant considerations, it has been discussed in a number of decided cases, which have established the following propositions: (a) The ground of failure to take into account a relevant consideration can only be made out if a decision-maker fails to take into account a consideration which he is bound to take into account in making that decision. The statement of Lord Greene M.R. in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation, that a decision-maker must take into account those matters which he "ought to have regard to" should not be understood in any different sense in view of his Lordship's statement on the following page that a person entrusted with a discretion "must call his own attention to the matters which he is bound to consider". (b) What factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion. If the statute expressly states the considerations to be taken into account, it will often be necessary for the court to decide whether those enumerated factors are exhaustive or merely inclusive. If the relevant factors — and in this context I use this expression to refer to the factors which the decision-maker is bound to consider — are not expressly stated, they must be determined by implication from the subject-matter, scope and purpose of the Act. In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation on the factors to which the decision-maker may legitimately have regard. By analogy, where the ground of review is that a relevant consideration has not been taken into account and the discretion is unconfined by the terms of the statute, the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject-matter, scope and purpose of the Act. (c) Not every consideration that a decision-maker is bound to take into account but fails to take into account will justify the court setting aside the impugned decision and ordering that the discretion be re-exercised according to law. A factor might be so insignificant that the failure to take it into account could not have materially affected the decision… A similar principle has been enunciated in cases where regard has been had to irrelevant considerations in the making of an administrative decision. (d) The limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind. It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator. Its role is to set limits on the exercise of that discretion, and a decision made within those boundaries cannot be impugned. 101 It is not in dispute that the principles as articulated by Mason J represent the law so far as concerns the application of s 5(2)(a) of the ADJR Act, and indeed that they are of broader application in respect of administrative law disputes. 102 Ground 3 is directed towards irrelevant considerations allegedly taken into account by the first respondent, or excessive weight given to unimportant considerations, in making the Decision to issue and serve the Notice. In turn, they are: (i) that shortfall penalties were assessed or imposed in connection with the notices of amended assessments dated 1 June 2011; (ii) that the total amount of the shortfall penalties of $10,093,860.20 under the two notices of assessment of shortfall penalty dated 1 June 2011; (iii) the previous relationship between the applicant and the ABC Group. 103 I am unable to identify any submissions of the applicant, either written or oral, which specifically address this ground of review. In the absence of submissions addressing this ground it is difficult to know the case of the applicant in this respect. 104 In relation to grounds 3(i) and (ii), in the absence of argument it is difficult to see how the existence and amount of the shortfall penalties imposed on the applicant were irrelevant considerations in respect of the Decision, or unimportant considerations to which excessive weight was given in making the Decision. Indeed these issues went to a consideration to which the decision-maker was clearly required to have regard by s 260-5(1) – namely that there was debt owing to the Commonwealth in the form of, inter alia, a tax-related liability. In my view these were relevant, as distinct from irrelevant, considerations. 105 In relation to ground 3(iii) there is no evidentiary basis for the contention. However even if there were a basis for such a contention, it is unclear how the previous relationship between the applicant and ABC Group would be irrelevant in the sense contemplated by Mason J in Peko-Wallsend when the amended assessments giving rise to the tax debts were in fact raised in relation to payments made by the applicant to the ABC Group. 106 In my view this ground of review is not substantiated. Ground 4 107 I am unable to identify any submissions of the applicant, either written or oral, which specifically address this ground of review. In the absence of submissions addressing this ground it is difficult to know the case of the applicant in this respect. This is particularly the case because: ground 4(a) is a bald statement without explanation or substantiation; and grounds 4(b) and (c) makes submissions without explanation or substantiation. 108 In may be that these grounds are referable to the hardship and the existence of a genuine dispute claimed by the applicant – indeed the specific reference in ground 4(c) to Edelsten v Wilcox suggests that this is the case. Both hardship and the genuine dispute are, however, dealt with extensively in ground 5. 109 The basis of the limbs of this ground of review is unclear. Ground 4(b) appears referable to, inter alia, s 5 (1)(f) of the ADJR Act, whereas ground 4(c) appears referable to, inter alia, s 5(1)(e) and 5(2)(b) of that Act. 110 While not specifically abandoned, in the absence of any relevant submissions it appears that ground 4(a) and (b) are not pressed. In any event, these grounds are vague to the point of meaningless. In my view they are not substantiated. 111 I will consider ground 4(c) in conjunction with ground 5. Ground 5 112 In respect of ground 5 it is clear that the applicant relies on, inter alia, s 5(1)(e) and 5(2)(b) of the ADJR Act. In respect of each limb of ground 5 the applicant claims that, in making the Decision, the first respondent failed to take into account relevant considerations or gave little or no weight to important considerations. Those considerations are set out in the limbs of ground 5, which may conveniently be divided into the following groups: grounds relating to the applicant's claim that it had a genuine dispute with the first respondent (grounds 5(i)); and grounds relating to the applicant's claim of hardship consequences arising from the Decision including that the Notice would prevent the applicant pursuing its legitimate rights (grounds 5(ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii) and (xv), as well as ground 4(c)); and grounds relating to the risk to the revenue (ground 5(xiv)). 113 I will consider each of these groups separately. Ground 5(i): genuine dispute Edelsten v Wilcox 114 The existence of a genuine dispute as to the liability to tax was considered a relevant consideration in Edelsten v Wilcox. 115 In that case the applicant, Dr Edelsten, had operated multi-disciplinary, 24-hour medical centres in Australia whereby patients were "bulk-billed". This meant that patients at the medical centres did not, as a general rule, pay directly for medical consultations. Rather, patients were generally charged the proportion of the particular consultation fee represented by the applicable Medicare rebate, and that Medicare rebate for the consultation was claimed directly by the taxpayer from the Health Insurance Commissioner. Evidence before the Court indicated that fees from the Health Insurance Commission represented in excess of 99% of all Dr Edelsten's fees, and 96% of his entire income. In October 1986 amended assessments were issued by the ATO in respect of income tax for the years ended 30 June 1977 to 30 June 1985 inclusive in respect of Dr Edelsten. Burchett J observed that the amended assessments were the subject of objections which admittedly raised real issues and went to the whole of the amount assessed, including the acceptance by ATO officers that there had been "doubling up" in the amended assessments, and that either substantial amounts should not be assessed against the applicant, or they should not be assessed against relevant companies. 116 In reliance on s 201 of the ITAA 1936 (cf s 14ZZM TAA 1953) the Commissioner issued a notice dated 8 December 1986 under s 218 of the ITAA 1936 requiring the Health Insurance Commission to pay to the Commissioner the whole of any money due by it to Dr Edelsten until the tax debt had been paid. Dr Edelsten contacted the ATO to seek a reduction of the amount required by the notice, namely from the whole of the moneys due to him by the Health Insurance Commission to a fixed proportion of those moneys. His claim was that, not only was the tax in dispute, but also the payments in question represented almost his entire gross income, a substantial part of which was required to pay the wages of employees and the other expenses of his medical practice. The s 218 notice was withdrawn as a result of the investigation of Dr Edelsten's representations about its effects. Fresh notices were issued, again alleging an amount of $1,183,583.10 was due by Dr Edelsten in respect of tax, but this time requiring payment of an amount of 45 cents in every dollar of each payment to be made by the Health Insurance Commission until the tax should be satisfied. 117 At the time of those events, the objections lodged on behalf of the applicant had not been dealt with, however his Honour observed that the revocation of the original notice and the issue of the fresh notices were treated as part of much wider negotiations with the applicant, involving also the assessments against his companies. His Honour considered that the negotiations were conducted on the footing of an acceptance by the Commissioner, as the truth, that the assessments did involve the duplications in the assessments and that there would be a reduction in the tax payable either by the applicant or his companies (at [9]). 118 Negotiations between the parties came to an end, the Commissioner disallowed Dr Edelsten's objections (whereupon he lodged appeals), and the Commissioner then revoked the existing s 218 notices and issued fresh notices requiring the Health Insurance Commission to pay the Commissioner one hundred cents in every dollar of each payment due to Dr Edelsten. 119 Dr Edelsten sought review of the decision to issue the s 218 notice on grounds including: denial of natural justice by failing to provide Dr Edelsten with an opportunity to make submissions in respect of each of the decisions; failure of the Commissioner to take account of the known financial position of Dr Edelsten; failure to take account of the known consequences and adverse effects of each of the decisions on the financial position of Dr Edelsten; making of the decisions without regard to the known merits of the dispute as to the amount of tax payable, including a failure to take into account the existence of a genuine dispute, the genuineness of which was evidenced by the readiness of the Commissioner's officers to consider a compromise; unreasonableness within the meaning of s 5(1)(e) and 5(2)(g) of the ADJR Act. 120 Burchett J considered the recommendation of the relevant ATO officer that the fresh notices be issued requiring all moneys payable to Dr Edelsten to be paid to the ATO, and observed at [25]: Another significant feature of the recommendation is the absence of any reference by Mr. Barford or the approving officer to the existence of a genuine non-scheme dispute as to the liability to the tax. This had certainly been seen as relevant at the time of the earlier report, and its relevance is made clear by what Mason ACJ. said in Clyne v. Deputy commissioner of Taxation (NSW) (1982) 43 ALR 342 at 343, a passage discussed by Sheppard J. in Ahern v. Deputy Commissioner of Taxation (Qld) (1983) 50 ALR 177 at 189-190; cf. Ahern v. Deputy Commissioner of Taxation (Qld) [1987] FCA 312; (1987) 76 ALR 137. The question is whether later this aspect of the matter was, on the one hand, either overlooked or deliberately discarded, or on the other, considered though not set out in the recommendation. A factor militating against my feeling any confidence that it was considered is the very unsatisfactory treatment in the same document of the applicant's sources of income, whether or not it is correct to conclude that that treatment in itself affords a ground for relief. Also, the document is inaccurate, as I have pointed out. In all the circumstances, I think weight must be given to the omission of any reference to the important consideration of the genuineness of the dispute. I infer that that consideration was in fact not taken into account. The inference being open, I am enabled more confidently to draw it by virtue of the failure of the respondent to call any of the officers concerned in the making of the decisions. (See ARM Constructions Pty. Ltd. v Commissioner of Taxation (1986) 10 FCR 197 at 205.) I do not regard the circumstances of the tender of the document as a sufficient explanation, particularly as the matter was reopened at the Commissioner's request, several months later, for the very purpose of his adducing additional evidence. 121 Edelsten has been followed in this respect in a number of cases of this Court. The applicant's case 122 In relying on the decision in Edelsten, the applicant has made detailed submissions analysing the evidence of Mr Morelande. In summary these are as follows: The only recognition by Mr Morelande of a dispute was in paragraph 9(a) of his first affidavit. Although in his first affidavit Mr Morelande notes that the audit of the applicant involved interviews with the applicant's representatives on 27 April 2009 and 20 April 2010 where the applicant was given an opportunity to respond to the issues raised in the audit, Mr Morelande does not say or suggest that he perused the interviews. The imputation conveyed was that the purpose of the interviews was to disprove the issues raised in the audit, rather than supply information and documents in response to questions and requests made at the interviews. It appears from the transcript 9 August 2011 pp 23-24 that Mr Morelande ignored the references to the oral and documentary evidence in relation to the 2007 income year provided by Mr Zullo and others at the interviews. It appears from the transcript 9 August 2011 p 25 that Mr Morelande ignored the references to oral and documentary evidence relation to the 2008 income year provided by Mr Zullo and others at the interviews. Although Mr Morelande gave evidence that he had Mr Zullo's unsworn affidavit before him for the purpose of making the decision (transcript 9 August 2011 p 12 ll 30-45), there is a real issue as to whether Mr Morelande actually read Mr Zullo's unsworn affidavit. In the circumstances Mr Morelande has disregarded or failed to genuinely consider material about the existence of a genuine dispute that should have been taken into account. The third-party notices were issued in connection with a debt recovery strategy that contemplated their issue immediately after the issue of the assessments and before any objections or appeals were lodged or instituted, and notwithstanding that the audit of the ATO took place over two years because of the complexity of the issues involved. The Statement of Reasons recognised that the applicant intended to lodge an objection to the amended assessments. Evidence of Mr Morelande and Mr Zullo 123 At the time of the Decision to issue the Notice Mr Zullo had already sworn and filed an affidavit in this proceeding. In paragraph 11 of his affidavit sworn 10 June 2011, filed on that date, Mr Zullo deposes: I have instructed my solicitors to object to the Notices of Amended Assessment and Notices of assessment of shortfall penalties. If necessary, I intend to appeal any finding that the Notices are valid. 124 I note as background that as at the date the Notice was issued however no objection had been filed. Indeed while Mr Zullo deposed in his affidavit filed 1 August 2011 that he had instructed his solicitors to lodge an objection to the amended assessment, at the date of hearing closing submissions no objection had been lodged (transcript 15 August 2011 p 35 ll 1-2). 125 The Statement of Reasons appears to be under the hand of Mr Morelande. Paragraphs 17, 18 and 19 of the Statement of Reasons provide as follows: FINDINGS ON MATERIAL QUESTIONS OF FACT 17. I made the following findings of fact which were material the (sic) decision to approve the Notice pursuant to section 260-5 of the Act: (a) The Amended Notices of Assessment for the 2007 and 2008 years and Notices of Administrative Penalty had been issued to the Company; (b) The Original Notice requiring Goodstart to pay to the Tax Office 100% of all amounts it held for the Company would significantly affect the Company's ability to continue trading as it would not have funds to pay employees and trade creditors; (c) Although the taxation liability arose as a result of the Company's failure to substantiate deductions previously claimed when requested to during the audit process, the Company intended to lodge an objection to the amended assessments even though it had not provided material to substantiate its deductions when provided the opportunity to do so; (d)The Company made no proposal to pay the outstanding taxation liabilities. It did not have assets sufficient to pay the amended assessments and administrative penalties in full nor provide security for the outstanding taxation liabilities; (e) The Company was continuing to pay other creditors; (f) There was a significant risk to revenue that the Company would not pay its ongoing tax liabilities voluntarily but would pay trade creditors in preference to the Tax Office, and that in the event of insolvency, the Tax Office would not recover the outstanding taxation liabilities (b) Goodstart pays to the Company approximately $2,500,000.00 each month; (h) The most effective and efficient method of collection of the taxation debt was through a notice issued under section 260-5 of schedule 1 of the Act to Goodstart as a regular payer to the Company (i) There was a risk that services provided by the Company to childcare centres may be interrupted by a continuation of the Original Notice, affecting the ability of those childcare centres to provide childcare services. EVIDENCE ON WHICH THE DECISION TO ISSUE THE NOTICE WAS BASED: 18. In making the material findings of fact listed in paragraph 16 (sic) above, I considered the following evidence and material: (a) The affidavit of Frank Zullo filed 10 June 2011; (b) My telephone conversation with the Company's solicitor, Mr Winters, dated 9 June 2011; (c) An e-mail from Brian Tully advising of his telephone conversation with the Company's accountant dated 15 April 2011; (d) The Reasons for Decision of Audit dated 25 May 2011; (e) Advice from Goodstart as to regular payments made by them each month to the Company; (f) The Amended Notices of Assessment for the 2007 and 2008 years; (g) The Taxpayer's Charter; and (h) The Tax Office's Law Administration Practice Statement 2011/18 REASONS FOR DECISION 19. The Decision was made for the following reasons: (a) Amended assessments had been issued and served on the Company; (b) The Company did not intend to nor have the capacity to pay the tax liabilities by the due date; (c) Prior to the Assessments issuing, the company had been provided with an opportunity to present evidence to substantiate the deductions claimed in its original income tax returns for 2007 and 2008. The company refused or otherwise failed to present the substantiation. (d) The information provided by Frank Zullo in his affidavit showed that the Company could not continue in business or pay its employees and trade creditors if the Original Notice remained in place; (e) A reduction to the amount payable under a Notice from 100% to 20% would allow the company to have access to sufficient funds to continue trading while it prepared and lodged any objection to the Amended Assessments; (f) A notice to Goodstart requiring the payment of 20% of amounts payable to the Company would provide monthly payments against the Company's taxation liabilities of at least $500,000.00, which would be sufficient to cover the General Interest Charges payable on the Company's outstanding tax liabilities as well as reducing the tax debt, while leaving the Company with at least $2,000,000.00 per month with which to continue to conduct its business; (g) The revenue was at risk of other creditors being preferred by the Company, and the most effective and efficient way to protect the revenue while considering the circumstances of the Company was to issue the Notice for 20% of all payments from Goodstart to the Company, which could be reviewed once any objection by the Company to the amended assessments is determined or the time for lodging an objection passes without one being lodged. (Emphasis added.) Finding 126 Section 14ZZM of the TAA 1953 provides that: The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending. 127 The policy underlying s 260-5 is clear – in order to protect the revenue, the Commissioner is entitled to serve a notice pursuant to s 260-5 in the circumstances there prescribed. These circumstances are in no way qualified by the existence of a dispute by the taxpayer as to its tax liability. The requirement of the Commissioner to take into account a genuine dispute by the taxpayer as to its liability in deciding whether to issue the notice pursuant to s 260-5 has been implied by the case law. It is not in dispute, however, that the existence of such a genuine dispute is a relevant consideration for the Commissioner in making such a decision. 128 In my view the facts before me are quite distinguishable from those in Edelsten. Contrary to the submissions of the applicant, I am satisfied on the evidence that Mr Morelande genuinely gave consideration to the applicant's claim that it had a genuine dispute with the first respondent in respect of the amended assessments and shortfall penalties. Indeed, it is clear that Mr Morelande not only recognised that the applicant intended to lodge an objection, but recognised further that, at the time of the Decision, the applicant had not communicated to the first respondent the basis of such objection. That this is so is clear from the Statement of Reasons, in particular paragraphs 17(c), 18(a), 19(c), 19(e) and 19(g). 129 Mr Alexander for the applicant urged the Court to infer from both the affidavit evidence of Mr Morelande and his evidence given under cross-examination that, in essence, Mr Morelande had given no genuine consideration to the proposed objections by the applicant. I do not accept this submission. It is clear on the material before me that Mr Morelande recognised the expressed intention of the applicant to object, and that it disputed the position taken by the ATO. However in the absence of an objection made or grounds of substantiation, it is not for the ATO to second-guess the basis of such objection. 130 Further, the inferences the applicant sought me to draw from the cross-examination of Mr Morelande were, in my view, based on flimsy grounds. So, for example, the fact that Mr Morelande did not specifically depose that he perused the relevant interviews is scarcely a basis for a finding that he had not genuinely taken into account existence of a genuine dispute in the face of the clear evidence that the genuine dispute was considered. 131 Finally, the facts of this case are clearly far removed from those in Edelsten, where a notice was issued in circumstances where the ATO had clearly accepted the merits of aspects of Dr Edelsten's dispute. No such situation exists here. 132 In my view ground 5(i) is not substantiated. Grounds 5(ii), (iii), (iv), (v), (vi), (vii), (viii), (ix), (x), (xi), (xii), (xiii) and (xv) and ground 4(c): hardship 133 That redirection of monies payable by GoodStart to the applicant would cause hardship was the subject of extensive evidence by Mr Frank Zullo, the sole director of the applicant, in his affidavit filed 10 June 2011. While this evidence was filed prior to the issue of the Notice and referred to the hardship likely to be suffered by the continuation of the Original Notice, the first respondent does not challenge the continued relevance of the following paragraphs: Effect of the redirection of the Payment on QMS and its employees 18. GoodStart is QMS's largest client 19. Approximately 90% of QMS's income is received from GoodStart. Now produced and shown to me and marked "FZ6" is a copy of the current receivables reconciliation for QMS. It shos that receivables from GoodStart make up 91.75% of QMS's total receivables.20. QMS intended to use the Payment to pay suppliers, subcontractors and wages. 21. QMS had promised its suppliers and subcontractors that they would be paid on Friday, 10 June 2011. Without the Payment, QMS will not be able to pay its suppliers or subcontractors. If they are not paid, the suppliers and subcontractors will stop supplying goods and services to QMS and QMS will not be able to continue operations. 22. QMS has approximately $150,000 in wages owing to approximately 50 people payable on Tuesday, 14 June 2011. If the Payment is not received, QMS will not be able to pay these wages. 134 At paragraph 40 of the affidavit, Mr Zullo also deposed: 40. If the ATO is permitted to redirect the Payment and any further money owing by GoodStart to QMS, QMS will not be able to continue to trade and will have to (sic) choice but to go into liquidation or administration. 135 Mr Zullo also gave evidence in paragraphs 25-35 of his affidavit of 10 June 2011 in relation to the effect of the redirection of payments on GoodStart and Bright Horizons. These paragraphs provide as follows: Effect of the redirection of the Payment on childcare centres 25. GoodStart owns and operates approximately 680 childcare centres. 26. QMS provides the following services to GoodStart: a. Sanitary; b. Industrial bins; c. Pest control; d. Women sanitary services; e. Cleaning of centres; f. Maintenance on centres to rectify compliance issues; g. Renovations to centres which have been flood damages; and h. Maintaining of centre buildings and grounds. 27. QMS is the only company that provides these services to GoodStart. 28. QMS provides the same services to Bright Horizons Australia Childcare Pty Ltd ("Bright Horizons"), a subsidiary of QMS. QMS is the only company that provides these services to Bright Horizons. 29. Bright Horizons owns approximately 35 childcare centres. 30. Without the Payment, QMS will be unable to pay its subcontractors who provide the services to GoodStart and Bright Horizons. If the subcontractors are not paid they will cease providing these services. If that occurs, the childcare centres will be immediately non compliant with regulatory standards in a number of areas until somebody else can be found to provide those services. It will take GoodStart and Bright Horizons a significant number of days to find replacement people to supply these services. Effect of the redirection of the Payment on Bright Horizons 31. In addition, Bright Horizons is financially reliant upon QMS. QMS has not billed Bright Horizons for the work it carries out for Bright Horizons. 32. If QMS is not able to provide these services to Bright Horizons, Bright Horizons will have to find someone else to do so. Bright Horizons does not earn sufficient income to pay someone else to provide these services. 33. Therefore, if QMS ceases operations, Bright Horizons will have to go out of business and close down the 35 childcare centres. 34. Approximately 3,000 children attend the Bright Horizons childcare centres. If the childcare centres close down, the parents of these children will have to make alternative childcare arrangements, if they are able to. 35. Bright Horizons employs approximately 500 staff. If Bright Horizons goes out of business it will no longer employ these staff. 136 There is considerable overlap between the limbs of ground 5 in respect of the hardship pleaded by the applicant, and to which the applicant claims the first respondent failed to give sufficient consideration. However the hardship pleaded can conveniently be divided into two groups, namely: that compliance with the New Notice would deprive the applicant of the funds it requires to pursue its legitimate rights of objection and appeal against the assessments (grounds 5(ii) and (xiii)); and that compliance with the New Notice would create hardship to the applicant and its subsidiaries (grounds 5(iii), (v), (vii), (viii), (ix), (x), (xi), (xii) and (xv)), its employees, subcontractors and suppliers (grounds 5(iv), (v)), GoodStart and its employees, subcontractors and other suppliers (ground 5(vi), (x)) and parents and children who use the childcare facilities of GoodStart (ground 5(vi)). Relevant considerations 137 It is clear that hardship to the taxpayer is a relevant consideration to which the first respondent should have regard in deciding whether to issue a s 260-5 notice. 138 That this is so was confirmed by Burchett J in Edelsten v Wilcox. There his Honour observed as follows: [33] The statutory context of Part VI includes such discretions as that contained in s.206, clearly requiring the Commissioner of Taxation to have regard to the particular position of an individual taxpayer. Section 218 must, I think, be seen as part of the whole scheme of the Act for the collection and recovery of tax, which of course includes rights of objection and appeal. It is a strong power designed to protect the revenue, but it was not intended to subvert the principle which has been established at least since Magna Carta, that a citizen's property should not be subject to arbitrary seizure. It cannot have been contemplated that the power should be used to negate the rights to contest assessments contained in the Act by the complete wiping out of the business of a taxpayer who is genuinely pursuing proper avenues of appeal. … 37. Section 218 was not intended to become an instrument of oppression, to be utilized for a collateral purpose of extorting money from other sources, such as friends or relatives, by making it impossible for the taxpayer to continue to earn his living by the ordinary conduct of his business or profession. Nor was such a facility for the collection of tax intended as a means for the infliction of punishment upon a taxpayer who in the past had adopted, or was presently persisting in, legal and permissible means for the limitation of his liability to tax. If the means employed exceed what is truly permissible, well known provisions of the Act may be attracted, but that does not entail the consequence that s.218 may be employed, not to collect tax from the source which attracts its operation, but to penalise the taxpayer's conduct, or to abolish his business. … 39. It is not irrelevant to observe that if, at the date of the decisions, the applicant's appeals had all been determined, and determined against him, judgments had been entered for the tax assessed, a sequestration order had been made (as, in fact, it has been since), and an order had been sought in bankruptcy in respect of the current earnings of his medical practice, a proper allowance would inevitably have been made to enable him to meet the expenses of carrying on his practice and, unless most exceptional circumstances were shown, all ordinary living expenses. When the legislature conferred the discretion to require part only of each payment made to be paid to the Commissioner, it is difficult to see a reason why it should have intended that discretion to be exercised on some harsher basis than would, in the circumstances I have outlined, prevail in bankruptcy. … 41. I have concluded that, in this case, it was a relevant consideration, which the Commissioner was bound to take into account, that the payments from the Health Insurance Commission constituted almost the whole of the taxpayer's income, and were required to meet not only a proportion of his living expenses but also the expenses of his practice. I have also concluded that this consideration was not truly taken into account by the adoption of a wholly artificial projection of a previous year's figures, although it was known that actual information had been supplied, and especially as there was added a substantial actual figure which that information showed would not be available in the relevant period. Similarly, I think there was a failure to take into account a relevant consideration, which the Commissioner was bound to take into account, in that the existence of a genuine non-scheme dispute, previously acknowledged, was simply ignored. In all the circumstances, I also hold that the exercise of the power to revoke the previous notices, and substitute notices relating to 100% of the amount of the payments, was so unreasonable that no reasonable person could have so exercised the power. I do not reach that view lightly, bearing in mind the limitations upon the ground it invokes which are well summarised in Prof. Peiris's article Wednesbury Unreasonableness: The Expanding Canvas (1987) 46 Cambridge L.J. 53 at 56. However, it must not be forgotten that, in Australia, the ground has statutory basis. 139 That the impact of a s 260-5 notice on the taxpayer is a relevant consideration in respect of the decision to issue is accepted by the first respondent. PS LA 2011/18 is annexed to Mr Morelande's affidavit filed 5 August 2011. An introductory statement in PS LA 2011/18 provides: This practice statement is issued under the authority of the Commissioner of Taxation and must be read in conjunction with Law Administration Practice Statement PS LA 1998/1. It must be followed by tax officers unless doing so creates unintended consequences or where it is considered incorrect. Where this occurs tax officers must follow their business line's escalation process. 140 Annexure C to PS LA 2011/18 deals with "Statutory Garnishees". It is clear from paragraph 51 of Annexure C that the annexure deals with s 260-5 notices. Paragraph 54 of Annexure C provides: 54. In considering whether to issue a garnishee notice, we will have regard to: • The financial position of the debtor and the steps taken to make payment in the shortest possible timeframe having regard to the particular circumstances of the debtor • The extent of any other debts owed by the debtor • Whether the revenue is placed at risk because of the actions of the debtor, such as the debtor making payment to other creditors in preference to paying the Commissioner • The likely implications of issuing a notice on a debtor's ability to provide for a family or to maintain the viability of a business. 141 At paragraph 27 of his affidavit filed 14 July 2011 Mr Morelande deposes: As a result of the affidavit material filed and served on the first respondent on 10 June 2011, I determined in accordance with Law Administration Practice Statement 2011/18 that, given the significant proportion of the Applicant's income that was allegedly derived from the Second Respondent and the advised potential impact of the Original Notice on the employees and related entities of the applicant, it was appropriate to withdraw the Original Notice for recovery of 100% of funds payable by the Second Respondent to the Applicant and replace it with a notice to recover only 20% of each payment made by the second respondent to the Applicant, allowing the remaining 80% of each payment to be paid to the Applicant. The applicant's case 142 Detailed submissions were filed by the applicant in relation to the consequences of the issue of the New Notice. In my view these submissions can be reduced to the following: at the time of the Decision the first respondent knew that approximately 90% of the applicant's income was received from GoodStart. it was clear from paragraph 19(d) of the Statement of Reasons that the first respondent recognised that the applicant could not continue in business or pay its employees and trade creditors if the Original Notice remained in place. it was clear from paragraphs 19(e) and (f) of the Statement of Reasons that the first respondent considered that a reduction in the amount payable under a s 260-5 notice from 100% to 20% would allow the applicant to have access to sufficient funds to continue trading while it prepared objections. however, the evidence demonstrates there was no consideration or no real consideration of the financial position of the company or its continuing financial viability, or the continuing financial viability of the trade creditors. The real reason for the determination to deduct 20% of GoodStart's revenue was that it was sufficient to cover the general interest charge as well as some tax. Paragraph 19(f) of the Statement of Reasons provides: (f) A notice to Goodstart requiring the payment of 20% of amounts payable to the Company would provide monthly payments against the Company's taxation liabilities of at least $500,000.00, which would be sufficient to cover the General Interest Charges payable on the Company's outstanding tax liabilities as well as reducing the tax debt, while leaving the Company with at least $2,000,000.00 per month with which to continue to conduct its business. Mr Morelande had not asked for the financial documents of the applicant which were available, and which would have shown the tight margins on which the applicant operated. The first respondent has not considered the hardship to the applicant, its employees, subcontractors and suppliers, Bright Horizons, and the GoodStart childcare centres. Finding 143 First, I am not persuaded that, as a matter of law, the first respondent was required to take into consideration the impact of its decision to issue the New Notice on the wide range of stakeholders identified by the applicant in both ground 5 of the Application and its submissions, including the applicant's employees, subcontractors, suppliers and subsidiaries, GoodStart, and the patrons of the childcare centres operated by GoodStart and Bright Horizons. As I also noted earlier, Edelsten was subsequently considered in Saitta. I particularly note comments of Finkelstein J in Saitta where his Honour said: 18 My acceptance of the proposition that the Commissioner is required to take into account the particular circumstances of the taxpayer should not be understood as imposing a universal requirement that in every case the Commissioner must consider every way the service of a s 260-5 notice may affect a taxpayer. Nor must the Commissioner in every case take into account the effect on third parties of the service of a notice. The principal object of s 260 is to establish an efficient means of recovering money due to the Commonwealth. When a taxpayer pays his taxes that may cause him inconvenience. On other occasions, the effect of the payment might be more dramatic. Third parties, including creditors of the taxpayer, may be affected especially if the taxpayer does not have the funds with which to pay all of his liabilities. Speaking generally, none of this is of any concern to the Commissioner… 144 I respectfully adopt these comments of Finkelstein J in respect of the facts before me. While the far-ranging impact on third parties described by Mr Zullo in his affidavit of 10 June 2011 is concerning, the law does not require the Commissioner to have regard to such impact in pursuance of his purpose of recovering debts due to the Commonwealth. 145 Second, that the first respondent was required to have regard to the impact of the Decision on the business of the applicant is not in dispute. Indeed, and contrary to the submissions of the applicant, on the facts before me it is clear that the primary issue influencing Mr Morelande in respect of the percentage payable by GoodStart under the New Notice was the financial impact of such a notice on the applicant, arising from the fact that approximately 90% of the applicant's income was derived from GoodStart. This is clear not only from the Statement of Reasons, but from the sworn evidence of Mr Morelande (in particular the affidavit of Mr Morelande filed 14 July 2011 paragraph 27), and indeed the transcript of 10 June 2011 following the commencement of proceedings in relation to the Original Notice. The revocation of the Original Notice and the substantial reduction in the amount payable by GoodStart was because of the first respondent's consideration of the financial hardship which might otherwise have been experienced by the applicant, and the belief that the reduction in the amount redirected from GoodStart would permit the applicant to continue to operate its business. 146 Third, the applicant submits that the first respondent did not genuinely take into account relevant considerations regarding the effect of the New Notice for 20% of the revenue from GoodStart upon the financial position of the applicant. 147 I do not accept this submission. I am satisfied that Mr Morelande took into consideration all the evidence which the applicant provided to him at the time of the Decision, including that the applicant obviously received 10% of its income from sources other than GoodStart. 148 Further, despite the claim in ground 5(vii) that the first respondent ought to have taken into consideration the fact that the applicant had been supplying its services to most (if not all) of the childcare centres of the second respondent at cost (not including overheads) plus 10% since their acquisition from the receivers of the ABC Group, this evidence was not in the affidavit of Mr Zullo of 10 June 2011 which had been provided to Mr Morelande. I accept the submission of the first respondent that, accordingly, this could not have been a consideration to which the first respondent ought to, but did not, have regard. 149 I am not satisfied that Mr Morelande failed to take into account material before him from which he should have known that the applicant could not maintain a viable business in the event that 20% of the revenue from GoodStart was redirected to the ATO. I note the submission of the applicant that, when considering Mr Zullo's (later sworn) affidavit on 10 June 2011, Mr Morelande did not ask for the exhibits to that affidavit which had not been provided to him by the applicant. As Mr Flanagan SC for the first respondent submitted however, exhibit "FZ7" to Mr Zullo's affidavit of 10 June 2011, being the Balance Sheet to May 2011 of the applicant, would not have assisted the applicant because it indicated a healthy financial position of the applicant in respect of net assets in the sum of $16,135,666.00. An inference could be drawn that, had Mr Morelande had access to the applicant's Balance Sheet prior to making the Decision, the information in the Balance Sheet would have supported a view that the New Notice would not impact deleteriously on the financial position of the applicant, rather than detracted from such a view. 150 Fourth, I am not satisfied that the "real reason" for issuing the New Notice was that 20% of the funds payable by GoodStart were sufficient to cover the general interest charge as well as some tax. While this may have been one reason, I am not persuaded that it was the only reason. 151 Finally, it is difficult to know how to assess ground 5(xv). The evidence before the Court indicates that, at the time of the Decision, there was no offer by the applicant to pay or secure the amount or part of the amount of the amended assessments. This was referred to in the Statement of Reasons at paragraph 17(d). In light of this fact, the question whether the first respondent ought to have considered whether to allow the applicant a reasonable period of time to pay appears to have been, at the material time, moot. 152 In my view these limbs of ground 5 are not substantiated. Further, to the extent that ground 4(c) relates to the application of principles in Edelsten relevant to the issue of financial hardship to the applicant, I am satisfied that ground 4(c) is similarly unsubstantiated. Ground 5(xiv): risk to the revenue 153 The protection of the revenue is clearly a relevant consideration in a decision to issue a s 260-5 notice (see, for example, Edelsten v Wilcox at [33]). 154 In this case the first respondent clearly took account of the consideration that there was a significant risk to the revenue that the applicant would pay trade creditors in preference to the ATO, and that in the event of insolvency of the applicant the ATO would not recover the outstanding taxation liabilities (Statement of Reasons paragraph 17(f), cf paragraph 19(g)). This risk was based on findings of fact by the first respondent that the applicant did not have sufficient assets to pay the assessments in full nor provide security for the outstanding tax liabilities, and that the company was continuing to pay other creditors (Statement of Reasons paragraphs 17(d) and (e)). 155 The applicant submits, in summary, that there was no evidence before the first respondent that there was a risk of other creditors being preferred to the Commissioner. I do not accept this submission. 156 First, as I have already found, there is no foundation to the applicant's submission that, at the time of the Decision, the first respondent knew the applicant's business model was based on a 10% margin of the cost of services and supplies provided by the trade creditors to the childcare centres. 157 Second, in my view there was every reason for the first respondent to be concerned that the applicant would prefer other creditors to the Commissioner. In his affidavit of 10 June 2011, Mr Zullo had made it clear that the continued viability of the applicant's business depended on the applicant's ability to continue to pay its trade, and other, creditors. The risk to the revenue of the applicant's objective in continuing to pay creditors in preference to the ATO was a relevant consideration for the decision-maker in these circumstances. 158 Finally, the claim of the applicant that the first respondent failed to take into account the relevant consideration of whether there was a greater risk to the revenue by issuing the New Notice than not doing so is unsupported by argument. In the circumstances of this case, where the amended assessments indicated an unpaid tax liability in the applicant totalling almost $30 million, this submission, and to that extent this ground of review, has no merit. 159 In my view this ground of review is not substantiated. Ground 6 – collateral purpose to prevent/hinder the applicant continuing to conduct its business and to punish the applicant 160 In respect of this ground of review the applicant repeats and relies on previous grounds. New elements are, however, introduced in respect of the claims of collateral purposes, including the alleged objective of the first respondent to inflict punishment on the applicant. 161 In that this ground of review appears to invoke allegations of bad faith, the applicant seems to rely on, inter alia, s 5(1)(e) and 5(2)(c), (d) and (j) of the ADJR Act. 162 However in my view this ground of review has no merit. I form this view for the following reasons. 163 First, while the applicant provides detailed submissions in support of its claim that the first respondent issued the New Notice in order to prevent the applicant continuing its business and/or pursuing its legitimate rights of objection or appeal, in fact the picture painted by the evidence is one where the first respondent acted to reduce the payments originally required by the Original Notice in an attempt to permit the applicant sufficient funds to trade and – by extension – to pursue any objections in the ordinary way. 164 In cross-examination, Mr Morelande denied that the ATO had any intention to wind up the applicant (transcript 9 August 2011 p 32 ll 23-40), and further denied that the purpose of issuing the s 260-5 notice was to "cut off trade creditors" (transcript 9 August 2011 p 33 l 44). The applicant submits that the issuing of the New Notice would disrupt the applicant's business, however as Finkelstein J observed in Saitta at [18] when a taxpayer pays his taxes that may cause him inconvenience. The applicant's submissions seem to equate the very act of issuing the New Notice with a collateral purpose in so doing, and to that extent are baseless. 165 Second, bad faith is a very serious allegation. As the High Court observed in Commissioner of Taxation v Futuris Corporation Limited [2008] 237 CLR 146 at [60]: Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld. Remarks by Hill, Dowsett and Hely JJ in Kordan Pty Ltd v Federal Commissioner of Taxation are in point. Their Honours said: 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. Indeed one would hope that this was and would continue to be the case. As Hill J said in San Remo Macaroni Company Pty Ltd v FCT it would be a rare case where a taxpayer will succeed in showing that an assessment has in the relevant sense been made in bad faith and should for that reason be set aside. 166 In this case no explanation or evidence is given by the applicant as to why the first respondent would seek to "punish" the applicant. In the absence of such particularisation the claim of bad faith should be rejected (cf Jilani v Wilhelm [2005] FCAFC 269 at [98]-[101], NANM and NANN of 2002 v Minister for Immigration & Multicultural & Indigenous Affairs [2003] FCAFC 99 at [17]). Ground 7: unreasonableness 167 In respect of this ground the applicant specifically refers in submissions to s 5(2)(g) of the ADJR Act. Section 5(1)(e) of the ADJR Act is also relevant. 168 In the well-known passage from Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 230, Lord Greene MR said: It is true to say that, if a decision on a competent matter is so unreasonable that no reasonable authority could ever have come to it, then the courts can interfere. That, I think, is quite right; but to prove a case of that kind would require something overwhelming, and, in this case, the facts do not come anywhere near anything of that kind. 169 In summary the applicant submits that the Decision was manifestly unreasonable because: the first respondent knew or was sufficiently aware the applicant's business depended upon charging a 10% margin on the cost of its services to childcare centres, but nevertheless in effect guessed that taking 20% of 90% of the applicant's monthly revenue would leave sufficient funds to pay its trade creditors; the financial documents of the applicant, which were readily available, demonstrate a profit margin of no more than 10%; the evidence before the first respondent did not suggest any risk to the revenue. 170 In my view these submissions do not warrant a finding of overwhelming circumstances, such that the exercise of the power by the first respondent was so unreasonable that no reasonable person could have so exercised the power. The facts are fairly clear. I have already observed that I am not satisfied that the first respondent knew that the applicant's business model was based on a 10% margin. I am not prepared to find that the first respondent acted unreasonably in finding that there was a risk to the revenue. 171 In my view this ground of review is not substantiated. Ground 8: application of receivables or recovery policy 172 In respect of this ground of review the applicant seems to rely on, inter alia, s 5(1)(e) and 5(2)(b) of the ADJR Act. 173 I am unable to identify any submissions of the applicant, either written or oral, which specifically address this ground of review. In the absence of submissions addressing this ground it is difficult to know the case of the applicant in this respect. 174 To the extent that this ground refers to PS LA 2011/18 and a possible claim that the first respondent clearly did not take into account the terms of that document, this contention cannot be sustained in light of the matters to which the first respondent had regard in the Statement of Reasons including PS LA 2011/18. 175 In my view this ground of review is not substantiated. Conclusion 176 In my view none of the applicant's grounds of review are substantiated. It follows that the applicant is unsuccessful in respect of the orders sought in paragraphs 1 and 2 as claimed. In that light, it is not necessary for the Court to consider the orders sought in paragraphs 4 and 5 as claimed. 177 The appropriate order is that the application be dismissed. I certify that the preceding one hundred and seventy-seven (177) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Collier. Associate: Dated: 15 December 2011