FEDERAL COURT OF AUSTRALIA Commissioner of Taxation v Bosanac [2016] FCA 448 File number: WAD 291 of 2015 Judge: MCKERRACHER J Date of judgment: 29 April 2016 Catchwords: ADMINISTRATIVE LAW – whether notices of assessment affected by jurisdictional error – whether conscious maladministration established – whether grounds of jurisdictional error closed – whether a corrupt exercise of statutory power or the exercise of that power with deliberate disregard to the scope of the power in the assessment process – relevant state of mind of the decision-maker TAXATION – whether notices of amended assessment affected by conscious maladministration – treatment of unexplained income as ordinary income – allegedly incorrect tax treatment of properties sold on adjacent land – relevance of failure to file income tax returns and actively participate in tax audit DISCOVERY – relevance of objection to producing documents pursuant to notice to produce in relation to claim of conscious maladministration – whether documents sought a fishing exercise CONSTITUTIONAL LAW – constitutional right to contestability of amended tax assessments – whether summary judgment makes the amended assessments incontestable and outside the power of the Commonwealth where likely to cause bankruptcy – role of trustee in bankruptcy in contesting an assessment PRACTICE AND PROCEDURE – summary judgment – whether reasonable prospects of success – summary judgment granted TAXATION - application for stay of judgment delivery pending objection decision - respondents seek leave to adduce fresh evidence of imminent objection decision - whether evidence of imminent objection decision would impact ruling as to conscious maladministration - orders in relation to Mrs Bosanac not entered to enable parties to seek to vary the judgment pursuant to r 39.04 Federal Court Rules 2011 (Cth) Legislation: Bankruptcy Act 1966 (Cth) ss 134(1)(j) Federal Court of Australia Act 1976 (Cth) s 31A Income Tax Assessment Act 1936 (Cth) ss 166, 174, 195, 204 Income Tax Assessment Act 1997 (Cth) ss 5-15, Income Tax (Transitional Provisions) Act 1997 (Cth) Div 5 Taxation Administration Act 1953 (Cth) ss 255-45, 280-100, 298-25 Cases cited: Carmody v MacKellar (1996) 68 FCR 265 Chevron Holdings Pty Ltd v Commissioner of Taxation (No 4) [2015] FCA 1092 Commissioner of Taxation v Administrative Appeals Tribunal (2011) 191 FCR 400 Commissioner of Taxation v Donoghue [2015] FCAFC 183 Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2012] FCA 61 Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 Deputy Commissioner of Taxation (NSW) v Brown (1958) 100 CLR 32 Deputy Commissioner of Taxation v De Simone [2012] VSC 644 Deputy Commissioner of Taxation v Gould [2015] FCA 1345 Deputy Commissioner of Taxation v Leaver [2015] FCA 1454 Donoghue v Commissioner of Taxation [2015] FCA 235 Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 Foxhat Employment Service Pty Ltd v Deputy Commissioner of Taxation [2014] VSC 218 Gashi v Commissioner of Taxation (2013) 209 FCR 301 Giris Pty Ltd v Commissioner of Taxation (Cth) (1969) 119 CLR 365 Healey v Prentice (No 2) [2000] FCA 1598 Hii v Commissioner of Taxation (2015) 230 FCR 385 Jilani v Wilhelm (2005) 148 FCR 255 MacCormick v Commissioner of Taxation (Cth) (1984) 158 CLR 622 McCallum v Commissioner of Taxation (1997) 75 FCR 458 Minister for Immigration & Multicultural & Indigenous Affairs v SBAN [2002] FCAFC 431 Mount Pritchard & District Community Club Ltd v Federal Commissioner of Taxation (2011) 196 FCR 549 Roberts v Deputy Commissioner of Taxation (2013) 228 FCR 280 Roberts v Deputy Commissioner of Taxation [2015] FCA 238 Robertson Jnr v Deputy Commissioner of Taxation (2004) 137 FCR 513 Seven Network Limited v News Limited (No 11) [2006] FCA 174 Spencer v Commonwealth (2010) 241 CLR 118 Woods v Deputy Commissioner of Taxation (2011) 86 ATR 620 Date of hearing: 1 December 2015 Date of last submissions: 20 December 2015 Registry: Western Australia Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 82 Counsel for the Applicant: Ms F Vernon Solicitor for the Applicant: Australian Government Solicitor Counsel for the Respondents: Mr JW Fickling Solicitor for the Respondents: Cove Legal ORDERS WAD 291 of 2015 BETWEEN: COMMISSIONER OF TAXATION Applicant AND: VLADO BOSANAC First Respondent BERNADETTE BOSANAC Second Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 29 APRIL 2016 1. There be summary judgment for the applicant and against the first respondent in terms of the orders set out hereinafter. 2. The first respondent pay the applicant $9,344,111.89 in respect of his liabilities for income tax, shortfall interest charge, administrative penalties and general interest charge accrued up to 1 December 2015. 3. The first respondent pay the applicant's costs of this application, together with the costs of the respondents' interlocutory application filed 26 April 2016, to be assessed if not agreed. 4. The freezing orders made against the first and second respondents on 17 June 2015, varied and extended on 24 June 2015 and extended on 29 July 2015, varied and extended on 22 October 2015 and extended on 1 December 2015 remain in place until further order of the Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. ORDERS WAD 291 of 2015 BETWEEN: COMMISSIONER OF TAXATION Applicant AND: VLADO BOSANAC First Respondent BERNADETTE BOSANAC Second Respondent JUDGE: MCKERRACHER J DATE OF ORDER: 29 APRIL 2016 1. There be summary judgment for the applicant and against the second respondent in terms of the orders set out hereinafter. 2. Subject to Order 3, the second respondent pay the applicant $5,696,983.19 in respect of her liabilities for income tax, shortfall interest charge, administrative penalties and general interest charge accrued up to 1 December 2015. 3. Entry of judgment against the second respondent be deferred for 14 days. 4. The second respondent pay the applicant's costs of this application, together with the costs of the respondents' interlocutory application filed 26 April 2016, to be assessed if not agreed. 5. The freezing orders made against the first and second respondents on 17 June 2015, varied and extended on 24 June 2015 and extended on 29 July 2015, varied and extended on 22 October 2015 and extended on 1 December 2015 remain in place until further order of the Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT MCKERRACHER J: THE APPLICATION 1 The Commissioner of Taxation seeks summary judgment, having commenced proceedings against the respondents (the Bosanacs) by originating application on 17 June 2015. He seeks declarations of amounts due and payable by the Bosanacs and judgment against each of the Bosanacs in respect of their liability for income tax, administrative penalties, shortfall interest charge and general interest charge. The Commissioner's application was accompanied by an ex parte interlocutory application for freezing orders. Freezing orders were granted and remain in place until further order of the Court. 2 The application is supported by an affidavit of Mr George Khouri sworn on 21 October 2015, an Australian Taxation Office (ATO) officer, and an earlier affidavit of Mr Khouri sworn on 16 June 2015. The Bosanacs also rely on affidavits in response supporting their arguments discussed in these reasons. SUMMARY JUDGMENT 3 Section 31A(1) of the Federal Court of Australia Act 1976 (Cth) (FCA) provides: 31A Summary judgment (1) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is prosecuting the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully defending the proceeding or that part of the proceeding. … 4 The leading authority on the award of summary judgment in this Court is Spencer v Commonwealth (2010) 241 CLR 118. In the joint judgment of French CJ and Gummow J in that case, their Honours said (at [24]) that the exercise of powers to summarily terminate proceedings must be attended with caution, and noted (at [25]): Section 31A(2) [which mirrors s 31A(1)] requires a practical judgment by the Federal Court as to whether the applicant has more than a "fanciful" prospect of success. That may be a judgment of law or of fact, or of mixed law and fact. Where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue. Where the success of a proceeding depends upon propositions of law apparently precluded by existing authority, that may not always be the end of the matter. Existing authority may be overruled, qualified or further explained. Summary processes must not be used to stultify the development of the law. But where the success of proceedings is critically dependent upon a proposition of law which would contradict a binding decision of this Court, the court hearing the application under s 31A could justifiably conclude that the proceedings had no reasonable prospect of success. 5 The Bosanacs oppose the Commissioner's summary judgment application on the basis that: (1) the protection of s 175 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936) extends beyond the two classes of case referred to by the plurality in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 (at [64]-[67]), namely where (1) the assessment is tentative or provisional; or (2) there has been conscious maladministration; (2) there is an arguable defence that the amended assessments on which the application is based are not, in fact, assessments because those assessments may be invalid as a result of conscious maladministration in the process of issuing those assessments on the basis that 'conscious maladministration' encompasses 'recklessness'; and (3) the discretion to order summary judgment should not be exercised: (a) where the effect of that order would result in the Bosanacs being effectively prevented from challenging the assessments, contrary to the constitutional requirement that an incontestable tax may not be levied; and (b) in circumstances where the Commissioner has failed to comply with a notice to produce issued by the Bosanacs filed on 15 October 2015. BACKGROUND 6 The Commissioner's application is based upon statutory assumptions. The detail underlying those is as follows. On 16 June 2015, a Deputy Commissioner of Taxation (DCT) issued to Mr Bosanac notices of amended assessment for the income years ended 30 June 2006 to 30 June 2013 inclusive, giving notice of his liability to pay substantial amounts of tax. 7 By the issue of the notices of amended assessment for those income years, the DCT also gave Mr Bosanac notice of his liability to pay amounts of shortfall interest charge under s 280-100 in Sch 1 of the Taxation Administration Act 1953 (Cth) (TAA 1953). 8 On the same day, the DCT issued Mr Bosanac with notices of assessment for shortfall penalties pursuant to Div 284 in Sch 1 to the TAA 1953 for the income years ended 30 June 2006 to 30 June 2013, which amounts are again identified in the first and second affidavits of Mr Khouri. 9 Those notices of assessment and amended assessments were duly served. Payment was not made. The amounts of tax and shortfall interest charge claimed under the summary judgment application in respect of the Bosanacs are appended to Mr Khouri's affidavits. 10 The Commissioner contends that, in the absence of payment of the income tax, shortfall interest charges or shortfall penalty amounts on or before the due dates for payment, Mr Bosanac became liable to pay the general interest charge pursuant to: s 204 of the ITAA 1936; Div 5 of the Income Tax (Transitional Provisions) Act 1997 (Cth); s 5-15 of the Income Tax Assessment Act 1997 (Cth) (ITAA 1997); s 298-25 in Sch 1 to the TAA 1953; and Pt IIA of the TAA 1953. 11 On 16 June 2015, the DCT also issued Mrs Bosanac notices of amended assessment and notices of her liability to pay amounts of shortfall interest charge and shortfall penalty for the income years ended 30 June 2006 to 30 June 2013. The same formalities and statutory provisions were observed by the Commissioner in relation to Mrs Bosanac in respect of the sums claimed against her. 12 The notices of assessment and amended assessment were accompanied by Reasons for Decision dated 16 June 2015 in the case of both Mr Bosanac (Reasons for Decision - Mr Bosanac) and Mrs Bosanac (Reasons for Decision - Mrs Bosanac). 13 Subsequently, the Commissioner has certified the liability. On 21 October 2015, the Commissioner signed a certificate under s 255-45 in Sch 1 to the TAA 1953 stating that Mr Bosanac owed the sum of $9,156,464.86 in tax related liabilities to the Commonwealth as at 12 October 2015. This process was repeated in a separate certificate in relation to Mrs Bosanac in the sum of $5,624,698.88. Pursuant to s 255-45, these certificates are prima facie evidence of the matter(s) in a proceeding to recover an amount of tax related to liability. STATUTORY FRAMEWORK 14 There is no dispute about the relevant statutory provisions. The focus of the debate is entirely on the question of whether summary judgment should be granted, having regard to the particular circumstances of this case. Nonetheless, for completeness, I will refer to the relevant statutory provisions. 15 By s 166 of the ITAA 1936, the Commissioner shall make an assessment of the amount of taxable income of any taxpayer and of the tax payable thereon (including by reference to the taxpayer's tax offset refunds), from the information in the Commissioner's possession. 16 By s 174 of the ITAA 1936, as soon as conveniently may be after any assessment is made, the Commissioner shall serve notice of the assessment in writing by post or otherwise on the person liable to pay the tax. 17 By s 175 of the ITAA 1936, the validity of an income tax assessment is unaffected by a failure of the Commonwealth to comply with any provision of the ITAA 1936. 18 Production of a notice of assessment is conclusive evidence of the due making of the assessment and, excepting proceedings under Pt IVC of the TAA 1953 on a review or appeal relating to the assessment, the amount and all the particulars of the assessment are deemed to be correct pursuant to s 350-10(1) in Sch 1 to the TAA 1953. 19 The TAA 1953 expressly provides that the fact there may be a review or appeal proceeding does not affect the obligation to pay tax. Section 14ZZM and s 14ZZR provide that a pending review or appeal 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 or appeal were pending. 20 In this proceeding, the Commissioner expressly relies upon the notices of assessment and amended assessment under the hand of the DCT as being conclusive evidence of the due making of the assessment pursuant to s 350-10(1) of Sch 1 of the TAA 1953. In addition to income tax assessed, the Commissioner's position is effectively the same in relation to shortfall interest charge and administrative penalty by virtue of s 280-110(3) in Sch 1 to the TAA 1953 and s 350-10(1) in Sch 1 to the TAA 1953. 21 The legislative scheme reflects a clear policy in favour of the revenue against the taxpayer as has been recognised in many cases. In particular, in Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473, a majority of the High Court (Gummow ACJ, Heydon, Crennan and Kiefel JJ) having regard to the sections in play in this application said (at [44]) (footnotes omitted): But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue. In Deputy Commissioner of Taxation v Niblett, Asprey J struck out pleas of non-liability to a recovery action instituted by the Deputy Commissioner in the Supreme Court of New South Wales while objections were pending under what was then s 185 of the Assessment Act. His Honour observed: "It may be thought to be a hardship that a taxpayer should have to pay the tax assessed when an objection to the assessment has not been decided upon but there are obvious financial considerations of high policy that must be weighed in the balance against cases of individual hardship with which the Commissioner through the appropriate use of his powers under [the Assessment Act] can cope … Where the meaning of the words of a statute is clear 'it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like' – Attorney-General v Carlton Bank. 22 It is unnecessary to explore all the evidentiary provisions in the TAA 1953, as the ground of opposition to the Commissioner's application does not relate to those provisions and I am satisfied that the formalities have been completed. I propose addressing only the arguments expressly advanced on behalf of the Bosanacs as to why summary judgment should not be granted. CONSCIOUS MALADMINISTRATION Legal principles 23 The onus on an allegation of conscious maladministration rests on the Bosanacs: see, for example, Foxhat Employment Service Pty Ltd v Deputy Commissioner of Taxation [2014] VSC 218. 24 If the Bosanacs can establish, as they contend, an arguable case of conscious maladministration in the assessment process, then summary judgment should not be granted. Put simply, a deliberate failure to comply with the provisions of the ITAA 1936 would not give rise to a valid assessment. Both parties refer to Futuris, in which the majority of the High Court held that: (a) s 175 of the ITAA 1936 must be read with s 175A and s 177(1). When read together, the validity of an assessment is unaffected by failure to comply with any provision of the ITAA 1936, but a dissatisfied taxpayer may object to the assessment in the manner set out in Pt IVC of the TAA 1953 (at [24]); (b) in review or appeal proceedings under Pt IVC, the amount and all the particulars of the assessment may be challenged by the taxpayer, but with the burden of proof as provided for in s 14ZZK and s 14ZZO of the TAA 1953 (at [24]) (the burden of proof is not presently relevant to this application for summary judgment); (c) where s 175 of the ITAA 1936 applies, errors in the process of assessment do not go to jurisdiction and therefore do not attract the remedy of a constitutional writ under s 75(v) of the Constitution under s 39B of the Judiciary Act 1903 (Cth) (at [24]). The protection afforded by s 175 of the ITAA 1936 encompasses errors in the process of assessment, such as an error in the calculation of tax due. Those matters may be challenged only in the context of Pt IVC proceedings (at [45]); and (d) two categories of jurisdictional error remain outside the scope of s 175 of the ITAA 1936. Namely, where a purported assessment is 'tentative or provisional', or where there has been 'conscious maladministration of the assessment process' (at [25], [49]-[50], [55]-[56]). 25 In order to establish conscious maladministration it is necessary to demonstrate the equivalent of a corrupt exercise of statutory power or the exercise of that power with deliberate disregard to the scope of the power: Futuris (at [55], [57] and [60]). 26 The Full Court has held that an allegation of conscious maladministration requires proof of actual bad faith on the part of the decision-maker and not some form of constructive bad faith: Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412 per Keane CJ, Dowsett and Reeves JJ (at [76] and [78]). It may be accepted that determination of the existence of bad faith requires consideration of the actual state of mind of the decision-maker. It is not demonstrated simply by showing error: Minister for Immigration & Multicultural & Indigenous Affairs v SBAN [2002] FCAFC 431 per Heerey and Kiefel JJ (at [8]). 27 As the plurality in Futuris observed (at [60]), an allegation of conscious maladministration is a serious allegation that should never be lightly made and will rarely succeed. Besanko J in Roberts v Deputy Commissioner of Taxation (2013) 228 FCR 280 (at [42]) expressly rejected any suggestion that 'recklessness in an expanded sense or carelessness in the administrative process' (emphasis added) was sufficient to establish conscious maladministration. This view was also endorsed by Mansfield J on an application for leave to appeal in Roberts v Deputy Commissioner of Taxation [2015] FCA 238 (at [35]). In Roberts [2015] FCA 238, Mansfield J said (at [14]–[15] and [29]-[32]): 14. As to conscious maladministration, the primary judge at [27] recognised correctly that the applicant's contention both at first instance, and on this appeal, was to assert that the 2008 assessments were the product of reckless maladministration, and that that is a sufficient basis upon which to set aside those assessments. 15. The primary judge then addressed the content of the asserted reckless administration, over the succeeding section of those reasons [27]-[42]. In particular, attention was drawn in the course of submissions by counsel on behalf of the appellant to the passage at [28] as follows: It seems to me that recklessness is very close to conscious maladministration in that it is proceeding with a course of conduct well knowing that it is likely that it is not in accordance with the law and prescribed administrative processes, but careless or indifferent to that fact. It includes a serious departure from the law and prescribed administrative processes, but careless or indifferent to that fact. It includes a serious departure from the law and prescribed administrative processes to the point that one can infer wilful blindness or a state of mind akin to that. And later at [42], his Honour said: I accept as arguable for the purposes of this application that that form of recklessness which bears a close affinity with deliberate conduct (and which I have described above) may be sufficient and I will proceed on that basis. (emphasis added) … 29 The applicant's contention at [27] of his written submissions illustrate, in a short sentence, the difference in emphasis between the approach of the primary judge as to what is required to show maladministration (including, as his Honour said, recklessness) and the applicant's contention that "recklessness and want of a diligent and conscientious approach" suffice. 30 As the use of a label, the term "recklessness" is capable of conveying a range of qualitatively assessed content. In Applicant WAFV of 2002 v Refugee Review Tribunal [2003] FCA 16 French J at [40] described "good faith" as a "protean term", and his Honour then over the succeeding paragraphs of his reasons referred to a number of statutory contexts and judicial comments to support that proposition. It may be accepted that, in an appropriate context, the lack of good faith, or the demonstration of bad faith, by an administrative decision-maker may be demonstrated by other than conscious maladministration of the decision-making process. As suggested by the observations of Porter J in Woods v Deputy Commissioner of Taxation (2001) 86 ATR 620 (Woods) and emphasised at [72], each case needs to be considered in the light of its own facts and circumstances. In that matter, ultimately, the entry of summary judgment in favour of the Commissioner required the rejection of evidence which, at that point was unchallenged or untested. Porter J decided at [74] that there was an error in proceeding to enter summary judgment where that evidence had not been tested. That is, there had been (as his Honour said at [71]), the resolution of a factual issue against the taxpayer by making a judgment on the likely outcome of a factual dispute when it was not appropriate to do so. Earlier in his reasons at [50] (in relation to a different contention, namely that there was no assessment because a necessary pre-condition to the making of an assessment –the forming of an opinion for the purposes of s 170(2) – did not happen) his Honour opined that a fair reading of Futuris produced the result that there had not been a definitive limiting of the categories of case available to be reviewed for jurisdictional error, outside the scope of s 175 of the ITAA 1936. He said that it was at least arguable, based upon the view of Kirby J in Futuris, that there was no intention to limit the categories of reviewable judicial error outside the operation of s 175 to the two mentioned in Futuris. However, that does not lead to the conclusion that, in the present context, the lack of good faith asserted by the applicant is made out by the arguably evidenced conduct of the Commissioner in the making of the 2008 assessments. … 32 By reference to [24] and [25] of the plurality judgment in Futuris, it can be seen that an assessment is not affected by failure to comply with any provision of the Act. Pt IVC of the Taxation Administration Act 1953 (Cth) (the TAA 1953) provides for a process of objection, and then review, and appeal, as the available path to challenge an assessment. Their Honours said at [24]: Where s 175 applies, errors in the process of assessment do not go to jurisdiction and so do not attract the remedy of a constitutional writ under s 75(v) of the Constitution or under s 39B of the Judiciary Act. In the following paragraph, their Honours said that s 175 operates only where there has been what answers the statutory description of an "assessment", so that a tentative or provisional assessment is not an assessment as defined, and conscious maladministration will also remove a purported assessment from being an assessment. That was then the issue upon which the analysis of the character of the decision-making of the respondent in that case took place. In that case, the allegation was that there was deliberate double counting in circumstances which indicated maladministration on the part of the respondent. That allegation did not succeed. It is not necessary to explore the reasons for that conclusion. As was pointed out by Porter J in Woods, the plurality in Futuris at [55] made it plain that a public officer who knowingly acts in excess of that officer's power so that there was a deliberate failure to administer the law according to its terms would be a circumstance in which s 39B would be available to challenge the validity of that conduct without being caught within the scope or web of s 175. Later in their Honour's reasons in Futuris at [60], it is said that 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. 28 The Bosanacs rely on the decisions of Hii v Commissioner of Taxation (2015) 230 FCR 385 and Woods v Deputy Commissioner of Taxation (2011) 86 ATR 620 in support of their submission that Futuris has not necessarily closed the grounds of jurisdictional error to those circumstances where (1) the assessment is tentative or provisional; or (2) there has been conscious maladministration. It is the second of these circumstances upon which the Bosanacs rely in the present application. Further, they argue that a challenge may be based on grounds other than these two categories. 29 Hii did not concern an application for summary judgment in debt recovery proceedings, but rather, in part, an application by the Commissioner as respondent for summary dismissal of an application in which declarations were sought, as well as writs of certiorari, prohibition and mandamus in respect of notices of amended assessment issued by the Commissioner. The proceedings were pursued under s 39B of the Judiciary Act. Collier J dismissed the Commissioner's application for summary judgment, in particular on the basis that the issues were complex (at [46]-[47]). Her Honour, however, expressly found that Futuris did limit the basis on which the assessments could be challenged under s 39B of the Judiciary Act to assessments that were tentative or provisional, or produced as a result of conscious maladministration: Hii (at [90]). 30 In the context of a summary judgment application, Porter J in Woods, following Kirby J in Futuris, held that it was arguable that Futuris does not provide for a definitive limiting of the categories of jurisdictional error (at [50]). The Commissioner argues, and I accept, that the Bosanacs' contention on the basis of his Honour's decision in Woods is not supported by the weight of subsequent authority to the contrary, including: (1) Commissioner of Taxation v Administrative Appeals Tribunal (2011) 191 FCR 400 per Keane CJ; Downes and Gordon JJ (at [23]); (2) Mount Pritchard & District Community Club Ltd v Federal Commissioner of Taxation (2011) 196 FCR 549 per Edmonds, Middleton and Jagot JJ (at [47]); (3) Roberts (2013) 228 FCR 280 per Besanko J (at [19] and [36]-[42]); (4) Roberts [2015] FCA 238 per Mansfield J (at [32] and [35]); (5) Gashi v Commissioner of Taxation (2013) 209 FCR 301 per Bennett, Edmonds and Gordon JJ (at [43]); (6) Chevron Holdings Pty Ltd v Commissioner of Taxation (No 4) [2015] FCA 1092 per Robertson J (at [47] ); and (7) Hii per Collier J (at [90]). 31 In my view, it is clear that the present state of the law is that the two categories in which s 175 would not operate in favour of the Commissioner are confined to assessments which are provisional only or assessments which constitute a conscious maladministration in the assessment process. I do not understand the authorities on which the Bosanacs rely (being Donoghue v Commissioner of Taxation [2015] FCA 235 (discussed below), Hii, Roberts [2015] FCA 238 and Woods), properly read, to suggest otherwise. But, if they do, I would respectfully disagree. 32 I prefer the approach taken by Mansfield J in Roberts [2015] FCA 238 that, in a summary judgment application, it is arguable that the (limited) form of recklessness, which bears a close affinity with deliberate conduct, (that is, wilfully turning a blind eye) may be sufficient. As did Besanko J in Roberts (2013) 228 FCR 280 and Mansfield J in Roberts [2015] FCA 238, I will proceed on that basis. 33 Since I heard the summary judgment application, two separate decisions have been delivered. In Deputy Commissioner of Taxation v Leaver [2015] FCA 1454, Pagone J said (at [6]): … what must be shown in a pleading of conscious maladministration is actual bad faith by reference to a state of mind consciously to act contrary to law of those said to have acted in bad faith in the discharge of their statutory duty. That is because the protection of s 175, and of the provisions previously found in s 177, does not extend to the wilful disregard of what the official concerned knows to be required. The sections are designed to protect assessments from collateral challenges of error, including consciously adopted positions which may be erroneous, but they do not extend to actual bad faith. The essence of bad faith in this context is that the person purporting to exercise a statutory power does so knowing that the power is being exercised improperly; that is, that the person is conscious of the unlawfulness. It is the knowledge and awareness of the illegality which is central to establish bad faith to defeat the protection of the provisions. (emphasis added) 34 On the same day, the Full Court (Kenny, Perram and Davies JJ) delivered judgment in the appeal in Commissioner of Taxation v Donoghue [2015] FCAFC 183 (from Donoghue [2015] FCA 235) (which had been relied upon by the Bosanacs in their submissions). At [95] and [96] of the judgment of Kenny and Perram JJ stated: 95 Ordinarily, it would be convenient to resolve these questions [as to the contradictions in the trial judge's conclusions, and any impact upon the finding of conscious maladministration]. However, it is impossible to do so in this case. All of the trial judge's conclusions about the absence of bad faith, Mr Main's honesty and his attitude of reckless indifference were premised upon an assumption that what was being assessed was Mr Main's mental state in relation to an obligation not to use privileged material. As we have endeavoured to explain, however, that assumption about the operation of the law of privilege was incorrect. Although Mr Main was extensively cross-examined about what he thought the law of privilege required and how his own actions measured up against that standard, the underlying premise being put to him was erroneous. So too, the trial judge's conclusion that Mr Main had acted with reckless indifference to Mr Donoghue's right to make a claim for legal professional privilege miscarried because no such right existed and s 166 required the opposite conclusion. Even if it were relevant, it would not be possible, in that circumstance, to transmogrify the trial judge's findings about Mr Main's subjective attitude to the law of privilege into findings about his subjective attitude to the law of confidence. Not only is this so as a matter of logic, it is true as a matter of fairness. Mr Main was never cross-examined about what he thought in relation to an action for breach of confidence. 96 The fact remains, however, that it is clear from s 166 what the correct position was in relation to the way Mr Donoghue's case was conducted. What this Court can say, therefore, is that the findings of the trial judge, carefully drawn and gently expressed as they were, cannot be left to stand. They are premised upon the wrong question. We would pay tribute to the trial judge's careful and restrained assessment of all of the difficult material before him and the balanced manner in which he approached this most delicate case. That does not, however, relieve us of the obligation of observing that despite those matters, these factual findings must be put at nought. It follows, and Mr Main is, we consider, entitled to have it said, that we have detected nothing improper in Mr Main's conduct of the audit process or in his dealings with the documents provided by Simeon Moore. He acted precisely as s 166 required him to do. There were no defaults in his conduct as a public servant. There was no maladministration, still less conscious maladministration. That he was persuaded into making concessions during his cross-examination about what he should have done in relation to privileged documents signifies nothing when it is realised the cross-examination was conducted on a legally erroneous assumption. (emphasis added) 35 The Bosanacs submit, and I accept, that the fundamental issue is whether the Court is satisfied for the purpose of s 31A(1) FCA that the Bosanacs have 'no reasonable prospect', as a matter of fact and law, of demonstrating at trial that the assessments do not 'answer the statutory description of an "assessment".' This questions is capable of being phrased in the alternative as whether there is any reasonably arguable basis for the assertion made by the Bosanacs that, on the material to which they have directed attention or may gain access, there was bad faith (in the sense discussed) in the issuing of the amended assessments for the Bosanacs. 36 For the reasons that follow, the Bosanacs have not demonstrated any reasonable prospect of so establishing conscious maladministration. They have no reasonable prospect of a defence that the amended assessments on which the claim is based are not, in fact, assessments because those assessments may be invalid as a result of conscious maladministration in the process of issuing those assessments. Background: The treatment of Mrs Bosanac's income 37 The first contention for Mrs Bosanac is that the Commissioner, via the DCT, artificially treated sums found on audit in her account as being her undisclosed income when there was no proper basis for doing so. 38 The argument is that, knowing that Mr Bosanac was the only income earner, but that the valuable family home was registered in the name of Mrs Bosanac, the Commissioner artificially contrived to inflate the income of Mrs Bosanac in order to derive the benefit of the value of the home. 39 There was substantial affidavit material before the Court from both parties. From this affidavit material, the Bosanacs rely on the fact that: (a) the Commissioner's audit of the Bosanacs commenced on 31 January 2014; (b) Mrs Bosanac is the sole legal owner of the Property at 82 Phillip Street, Dalkeith, Western Australia, which was worth some millions of dollars. On 2 December 2014, the Commissioner recorded in his internal information system notes that 'the TP's [referring to Mr Bosanac] main residence has been put on the market on 02/12/2014 …'. He also recorded that the case would proceed to the Reasons for Decision and manual priority assessments due to the identification of an immediate risk of asset disposition because the taxpayer's main residence had been put on the market (this note demonstrates, the Bosanacs say, the Commissioner's 'preoccupation' with the Bosanacs' Property; (c) Mr Bosanac is a self-styled venture capitalist, sole director and shareholder of an entity known as 'Dominion', a director of another entity known as 'Greenday Corporate' and the person who derived funds from these entities. This was noted in the Reasons for Decision - Mr Bosanac; (d) the Commissioner was aware that the Bosanac family all lived together at the Property; and (e) a taxpayer may direct his or her income to third parties. The direction of income to third parties does not mean that the income is no longer the income of that taxpayer: s 6-5(4) ITAA 1997. 40 In further support of their argument, the Bosanacs rely upon affidavit evidence of Mr Chris Roos, the Accountant and Registered Tax Agent to the Bosanacs. Mr Roos was engaged on or around 6 July 2015 by the Bosanacs to provide them with advice concerning their tax liabilities in light of the issues in these proceedings and to assist them in preparation of objections to their amended assessments under Pt IVC of the TAA 1953. 41 Those objections were filed on behalf of both Mr and Mrs Bosanac in August 2015. Following the filing there has been ongoing liaison between Mr Roos and the Commissioner concerning requests for further clarification and substantiating documents arising from the objections. Although the process has not been completed, Mr Roos says the progress as at 20 November 2015 was as follows: (a) the Bosanacs' objections have notified the ATO that 'fundamental arithmetic errors' were made within the amended assessments arising from tables within the ATO's schedules being incorrectly added, giving rise to tax liabilities, penalties and interest being overstated in the region of $450,000; (b) the Commissioner has been notified that amended assessments have, in some cases, sought to levy income tax on the same amounts giving rise to double taxation of the same income. One example being taxation of a capital gain derived by the Bosanacs and the subsequent assessment of the receipt of capital proceeds relating to the capital gain. The double taxation of income has led to an overstatement of tax in the region of $2,500,000; (c) alleged tax liabilities, penalties and interest in the region of $600,000 should be deleted on the basis that a single residence that contained two property titles was incorrectly assessed as two separate properties within the amended assessments, such that the entire amount should be excluded from taxation under the main residence capital gains tax provisions; and (d) numerous other adjustments that should be made to the Bosanacs' amended assessments have been notified to the Commissioner, together with substantiating information in support of the majority of adjustments contended. 42 Mr Roos concludes that there are material errors in the purported amended assessments and the amended assessments are grossly excessive when primary tax is considered alone (before interest and penalties are imposed). In the opinion of Mr Roos, the corrected estimated liability before penalties and shortfall interest is in the region of $1.65 to $2.5 million for the Bosanacs, which relates solely to Mr Bosanac's income. Further, there should be an assessment of nil, he says, for Mrs Bosanac. 43 The Bosanacs submit that income must be assessed in the hands of those who have earned it. Further, the law goes to significant lengths to ensure that where one spouse has earned income, the Commissioner does not allow that income to be assessed in the hands of the other spouse or broader family (at lower rates of tax). 44 The Bosanacs further argue that the Commissioner must have been aware that at all relevant times Mrs Bosanac has been engaged in 'home duties' as was noted throughout third party documentation in the possession of the Commissioner, such as loan applications. Notwithstanding what must have been the Commissioner's clear knowledge in the Bosanacs' submission, no reference was made to Mrs Bosanac's home duties in the Reasons for Decision - Mrs Bosanac. 45 Accordingly, the Bosanacs submit that the 'approach of the Commissioner, in the Reasons for Decision [- Mrs Bosanac], to attribute [Mrs Bosanac] with income merely because it has been deposited into joint bank accounts she has held with [Mr Bosanac] and into accounts held by her, must be regarded with the greatest of suspicion as to the ulterior purpose of seeking to raise an amended assessment against an "entity of substance".' (emphasis added) 46 The Bosanacs stress that in the Reasons for Decision - Mrs Bosanac it is apparent that a number of the deposits analysed in respect of Mrs Bosanac included transfers from entities which are clearly those from which Mr Bosanac derives his income. Therefore, it would have been obvious that the income was not her income, but his. Any internal domestic arrangement by which such payments were made into her account did not mean that the amounts should be characterised as income arising from her personal exertion. The Bosanacs expressly submit that the Commissioner assessed Mrs Bosanac for the ulterior purpose of being able to raise a more significant assessment against her, having regard to her position vis-à-vis Mr Bosanac as the 'entity of substance'. It is therefore submitted that the Commissioner's reference to the income being 'unexplained income' was 'disingenuous' and 'self-serving', particularly because of the statement in the Reasons for Decision - Mrs Bosanac that 'amounts were received from either [Mrs Bosanac's] involvement or [Mr Bosanac's] involvement in business activities'. 47 Further, the Bosanacs submit that the Commissioner has misapplied the law to the facts of the case because 'unexplained income' to which reference is made on a number of occasions in the Reasons for Decision - Mrs Bosanac, is not a category forming part of the concept of ordinary income. Rather, in the Bosanacs' submission, unexplained income is a consequence of the burden of proof being on the taxpayer to show that the income in question does not constitute assessable income, where the Commissioner has a reasonable suspicion that it is income to the person. Mrs Bosanac did not have any income from rendering personal services as her occupation was 'home duties' in contrast to being a 'self-styled venture capitalist'. 48 While these arguments are directed to the summary judgment application against Mrs Bosanac, the Bosanacs jointly argue that, given the Commissioner's improper attribution of 'unexplained income' to Mrs Bosanac, this conduct lends weight to a reasonable argument as to the 'infection of the purported amended assessments' for both of the Bosanacs such that a trial of the issues with pre-trial discovery should be pursued. 49 Complaint is also raised by the Bosanacs as to the taxation of the disposal proceeds of a property, which was stated by the DCT in the Reasons for Decision - Mrs Bosanac as not being Mrs Bosanac's main residence at any time. The Bosanacs also argue that the Commissioner must have known that an adjacent residence was Mrs Bosanac's main residence, such that the sale of the properties on the same day should have resulted in the other property also being treated as a main residence for tax purposes as it was 'adjacent land' within the meaning of the ITAA 1997. However, counsel for the Bosanacs concedes in submissions that the tax treatment of the disposal proceeds of the Property may plausibly be attributable to mere carelessness, rather than having an ulterior motive attempting to maximise the amended assessment of Mrs Bosanac (as is contended by the Bosanacs in relation to the treatment of 'unexplained income' set out above). Consideration 50 The Reasons for Decision in the case of both Mr Bosanac and Mrs Bosanac disclose a detailed analysis of the materials made available to the Commissioner. 51 The Commissioner was entirely unassisted with any income tax returns for eight years and entirely unassisted by any cooperation in relation to the audit. Explanations or information that might have led to other conclusions through those processes were not available to the Commissioner. Had there been some active participation in the audit, let alone some income tax returns filed during the eight financial years between 30 June 2006 and 30 June 2013, then it may not have been necessary for the Bosanacs to wait until the Pt IVC appeals before they can clarify the position as to precisely whose income it was that has been deposited into joint accounts and Mrs Bosanac's account. The information as to 'home duties' in third party loan application documentation is relevant, but only one small piece of information. 52 A primary focus of attention in the Bosanacs' argument is that the Reasons for Decision - Mrs Bosanac demonstrate an acceptance that the deposits referred to were attributable to Mr Bosanac's business income not to the income of Mrs Bosanac. In my view, this is not so from a plain reading of the words of the Reasons for Decision - Mrs Bosanac. The words say 'these descriptions identify that the amounts were received from either your involvement or your spouse's involvement in business activities' (emphasis added). Indeed, in the submissions made for the Bosanacs, it is not asserted expressly that all the transfers referred to in the Reasons for Decision - Mrs Bosanac are attributable only to Mr Bosanac. In the search for indicators of conscious maladministration, the Bosanacs take the Court to their description of their occupations and the Commissioner's knowledge of Mr Bosanac's involvement with 'Dominion' and 'Greenday Corporate' from which some of the funds deposited into joint accounts were apparently derived (by reason of descriptions of deposits). In the context of a search for conscious maladministration, this material falls well short of supporting the arguments. The fact that Mr Bosanac may have been the primary income earner does not preclude Mrs Bosanac from deriving various sources of income from those companies, potentially by way of dividends or other transactions. 53 The fact that the property was in the name of Mrs Bosanac and was known by the Commissioner to be so cannot show conscious maladministration in the attribution of income to Mrs Bosanac which was purportedly known to be income of Mr Bosanac. It does not, even with knowledge of ownership and pending sale of the Property, constitute sufficient prima facie evidence to demonstrate an arguable case for the serious allegation of conscious maladministration. 54 The Commissioner points to a further procedural difficulty which I do not need to and do not determine. The procedural difficulty contended by the Commissioner is that the Bosanacs have not commenced proceedings for judicial review of the assessments pursuant to s 39B of the Judiciary Act. Lansdowne AsJ said in Deputy Commissioner of Taxation v De Simone [2012] VSC 644 (at [77]): The defendant claims that the plaintiff has acted in bad faith in a number of respects. The remedy for bad faith where it amounts to jurisdictional error is by way of judicial review in the Federal Court, not by way of defence to recovery proceedings. As held in Futuris s 175 does not prevent a challenge on the basis of jurisdictional error, only a challenge, except in Part IVC proceedings, to the exercise of power within jurisdiction. The bar is of course very high in challenge on the basis of jurisdictional error. Where the claim is really one of an error of calculation, i.e. to the exercise of power or discretion within jurisdiction, the remedy is objection and challenge by way of Part IVC. It is not a basis to resist summary judgment in these proceedings that discovery may support suspicion of jurisdictional error. The need for discovery must relate to a defence that is arguable in these proceedings. 55 As a matter of substance, it may be, ultimately, that the concerns held by Mr Roos are established. It may be that there are errors in the assessments. But none of those errors taken alone or together begin to approach more than a 'fanciful' prospect that the Bosanacs will succeed in establishing bad faith or conscious maladministration in the requisite sense. NOTICE TO PRODUCE/DISCOVERY ARGUMENT 56 The Bosanacs seek to rely on notices to produce to obtain documents which they say might support their argument as to conscious maladministration. The Bosanacs complain about the Commissioner's failure to comply with a Notice to Produce filed 15 October 2015 as conduct 'denying the Commissioner clean hands' which, in itself, constitutes a reason to deny summary judgment. 57 The Bosanacs argue that they should be entitled to the internal meeting notes and notes of the 'technical panel' referred to in the documents that have been produced in order to substantiate and prove their case. The Commissioner objects, essentially on the grounds that it is a fishing exercise and a delay tactic on the part of the Bosanacs. 58 It is clear as a matter of principle that a party who issues a notice to produce carries the onus of proving that the documents the subject of the notice are sufficiently relevant - in the sense that they are 'reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case' - to justify production: Seven Network Limited v News Limited (No 11) [2006] FCA 174 (at [6]-[7]). A party should not be required to produce documents merely on the basis of bare allegations or speculative claims: Jilani v Wilhelm (2005) 148 FCR 255 per Dowsett, Jacobson and Greenwood JJ (at [108]), citing Carmody v MacKellar (1996) 68 FCR 265 per Merkel J (at 280). Such a notice cannot be used for the purposes of 'fishing' or to ascertain whether a party has a supportable case, as distinct from identifying documents that may assist the proving of the legitimate case: Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd [2012] FCA 61 per Collier J (at [6]). As Pagone J explained in Deputy Commissioner of Taxation v Gould [2015] FCA 1345, the reference to a 'fishing expedition': … is that discovery must not be used for the purpose of ascertaining whether a case exists, as distinct from the purpose of compelling the production of documents where there is already some evidence that a case exists. It is not open to achieve something by use of a notice to produce which cannot be achieved by way of discovery. Pursuant to r 20.13 of the Federal Court Rules 2011 (Cth) (FCR), discovery will only be ordered if it is necessary for the determination of the issues in the proceedings: see Practice Note CM 5 (at para 2(a)). I accept the Commissioner's submissions that the documents sought do not fulfil that requirement. 59 The circumstances of the present case are very similar to those in Roberts (2013) 228 FCR 280 (at [70]-[71]) where Besanko J said: 70 In his originating application, the applicant made an application for discovery by way of interlocutory relief. The documents were identified more precisely in paragraph 7 of the affidavit of the applicant's solicitor sworn on 27 March 2013. The applicant asked me to deal with his application for discovery before the respondent's application for summary judgment. I heard them together, but I decline to determine the application for discovery first. If a party is entitled to summary judgment that application should be dealt with as expeditiously as possible. As French CJ and Gummow J said in Spencer, summary judgment may not be warranted because there are issues of fact which may justify "the invocation of pre-trial processes such as discovery and interrogatories" (at [4]). 71 Even if I determined the application for discovery first, that would not avail the applicant. The existing authorities seem to me to justify a refusal of discovery whereas here the applicant falls well short of establishing an arguable case: WA Pines Pty Ltd v Bannerman (1980) 41 FLR 175; Carmody v MacKellar (1996) 68 FCR 265; Jilani v Wilhelm (2005) 148 FCR 255 at [108]. 60 These observations were expressly confirmed by Mansfield J in Roberts [2015] FCA 238 (at [44]), where his Honour said: The third matter raised by the applicant at first instance was only briefly adverted to in the course of submissions on this application. On that issue, it is necessary to review the decision of the primary judge in the exercise of his discretion not to address the application for discovery before addressing the application for summary judgment. However, as the primary judge said, the fact that on the face of the material relied upon by the applicant, there is able to be made a firm judgment that he has no arguable case against the respondent for relief of the type claimed in the primary proceeding, indicates that there was no arguable miscarriage of the discretion to permit discovery in this matter at the time and in the manner which the applicant sought it so as to warrant the grant of leave to appeal. As I too have determined that the application for leave to appeal should be refused on the primary basis asserted by the applicant, that approach on the part of the primary judge is itself also reflected in my views. 61 I have sought to make clear that, in my assessment of the arguments advanced in support of the Bosanacs' primary contention, they are nowhere near establishing conscious maladministration simply by presenting evidence from an accountant who opines as to errors in the assessments, and by relying upon arguments that the Commissioner should have known that certain income was derived by Mr Bosanac, not Mrs Bosanac. In my view, especially in the context of a complete lack of assistance to the Commissioner in the audit or by presentation of any income tax return for eight years, those arguments fall so far short of a more than fanciful prospect of succeeding as to conscious maladministration that there is far too little to warrant the procedure of discovery or production of documents pursuant to the notices to produce. 62 The Commissioner has not complied with the notices. For the preceding reasons, the Commissioner will not be required to comply with the notices to produce. To the extent (which I do not consider to be necessary) it is necessary to exercise a power under r 1.34 of the FCR to dispense with the requirements of the FCR in any given instance in the interests of justice, I confirm that r 20.35 requiring production does not apply to these notices. CONSTITUTIONAL ARGUMENT 63 As an alternative argument, the Bosanacs contend that they have a constitutional right to contestability of the purported amended assessments. Again, reliance is placed on Futuris (at [9], [10] and [65]) (footnotes omitted) where the plurality said: 9 The recourse to the Federal Court (and thereafter by special leave, to this Court) which is provided by Pt IVC of the Administration Act meets the requirement of the Constitution that a tax may not be made incontestable because to do so would place beyond examination the limits upon legislative power. 10 This state of affairs has two pertinent consequences. The first is that under the system provided by Pt IVC being, as to the Federal Court, a law supported by s 77(i) of the Constitution, the contestability of assessments made by the Commissioner is not confined to that measure of judicial review for jurisdictional error which is provided by s 75(v) of the Constitution and by s 39B of the Judiciary Act. The second consequence is that, as a matter of discretion, relief under ss 75(v) and 39B may be (and often will be) withheld where there is another remedy provided by Pt IVC. … 65 In recovery proceedings s 177(1) operates to change what otherwise would be the operation of the relevant laws of evidence. But, given the presence of Pt IVC, s 177(1) does not operate to impose an incontestable tax or otherwise fall foul of the principles which were considered in Nicholas v The Queen and which respect usurpation of the federal judicial power by deeming to exist an ultimate fact. 64 The Bosanacs also rely on Deputy Commissioner of Taxation (NSW) v Brown (1958) 100 CLR 32 per Dixon CJ (at 40), MacCormick v Commissioner of Taxation (Cth) (1984) 158 CLR 622 per Gibbs CJ, Wilson, Deane and Dawson JJ (at 640) and Kirby J in Futuris (at [82] and [84]). In Brown, Dixon CJ said (at 40): The general machinery for assessment is only too familiar. It is unnecessary to refer to it except for the purpose of noting the following points, viz.:—(1) that tax is not due and payable until assessed; (2) that it then becomes a debt to the Crown payable on the date specified in the notice of assessment or, if there be none, on the thirtieth day after service of the notice; (3) that the assessment of liability is conclusive except upon the processes of review and appeal. Although there is no judicial decision to that effect, it has, I think, been generally assumed that under the Constitution liability for tax cannot be imposed upon the subject without leaving open to him some judicial process by which he may show that in truth he was not taxable or not taxable in the sum assessed, that is to say that an administrative assessment could not be made absolutely conclusive upon him if no recourse to the judicial power were allowed. (emphasis added) 65 In MacCormick, Gibbs CJ, Wilson, Deane and Dawson JJ said (at 640-641) (footnotes omitted): For an impost to satisfy the description of a tax it must be possible to differentiate it from an arbitrary exaction and this can only be done by reference to the criteria by which liability to pay the tax is imposed. Not only must it be possible to point to the criteria themselves, but it must be possible to show that the way in which they are applied does not involve the imposition of liability in an arbitrary or capricious manner. In Giris Pty. Ltd. v. Federal Commissioner of Taxation Kitto J. pointed out that the expression "incontestable tax" in the sense in which it is used in Hankin and Brown "refers to a tax provided for by a law which, while making the taxpayer's liability depend upon specified criteria, purports to deny him all right to resist an assessment by proving in the courts that the criteria of liability were not satisfied in his case". The purported tax is thereby converted to an impost which is made payable regardless of whether the circumstances of the case satisfy the criteria relied upon for characterization [sic] of the impost as a tax and for characterization [sic] of the law which imposes it as a law with respect to taxation. Such an incontestable impost is not a tax in the constitutional sense and a law imposing such an impost is not a law with respect to taxation within s. 51(ii). It is in this sense that an incontestable tax is invalid. However, the liability which the legislation imposes to pay recoupment tax is not incontestable in this sense. One of the criteria of liability for recoupment tax is a pre-existing, unpaid liability on the part of a target company to pay company tax. The fact that a person not liable to pay company tax but liable to pay a different tax in the form of recoupment tax has a limited right or no right at all to contest the liability of the relevant target company for company tax is not to the point. It is the existence of the overdue company tax which is one of the criteria of liability for recoupment tax and that existence is established once an assessment of company tax is made and any objection has been finalized for the period for objecting has expired and the tax remains unpaid at the relevant time. Liability to pay recoupment tax does not arise until these events have occurred and it arises only upon the assessment of those persons to whom the legislation applies. The assessment of those persons is open to the ordinary processes of review and appeal. This is because the 1982 Assessment Act incorporates the relevant parts of the Income Tax Assessment Act relating to the assessment and collection of tax, including review and appeal. (emphasis added) 66 The Bosanacs contend that to seek summary judgment where the result is that they will probably become bankrupt before the objection to the amended assessments is determined, thus losing their rights or capacity to object, effectively makes the purported amended assessments incontestable. Therefore, on the Bosanacs' contention, summary judgment in these circumstances is an action outside of the Commonwealth's power and a violation of the Bosanacs' constitutional rights. 67 I should add that Mr Bosanac prepared a statement of his assets (held worldwide) in accordance with an order of the Court. It is unnecessary to disclose the detail of this material, but I will simply observe that it is obvious that the total of the assets falls well short of the sum to which the Commissioner claims entitlement. Similarly, it is clear that the net assets of Mrs Bosanac are a mere fraction of the sum for which the Commissioner seeks summary judgment. 68 For there to be a practical incontestability of the sort described by the Bosanacs, it must be inferred that the Commissioner, if summary judgment is awarded, will proceed to bankrupt the Bosanacs, as a consequence of which, it is argued, they will necessarily be precluded from proceeding with their objections under Pt IVC as a consequence of the operation of the Bankruptcy Act 1966 (Cth). As to the consequences of bankruptcy on a Pt IVC appeal, see Robertson Jnr v Deputy Commissioner of Taxation (2004) 137 FCR 513 (at [20]-[22]). The question cast by the Bosanacs is: because of the bankruptcy which will inevitably follow, thereby resulting in the [Bosanacs] losing standing to contest the amended assessments, would entering into judgment be a gross violation of the [Bosanacs'] constitutional rights to contestability? 69 The Bosanacs argue that the prospect, in a practical sense, of the trustee in bankruptcy pursuing these objections, would be slim. Further, they contend that the current provisions were enacted at a time prior to capital gains tax so that it would not have been then envisaged at the time the ITAA 1936 was introduced, that assessments would, effectively, have the result of terminating taxpayers appeal rights prior to the determination of any objection and appeal process, which did not formerly include allowance for capital gains tax: Kirby J in Futuris (at [82]-[95]). 70 The possible circumstance now confronting the Bosanacs, they say, was also foreshadowed long before Futuris by Whitlam J in McCallum v Commissioner of Taxation (1997) 75 FCR 458, where his Honour said (at 469): The Commissioner issues an assessment. The taxpayer objects to it. The assessment may be recovered as a debt. The Commissioner proceeds to do so. The taxpayer seeks a stay, but on the principles enunciated by the Court of Appeal in Deputy Commissioner of Taxation (Cth) v Mackey (1982) 64 FLR 432 the stay is refused. The Commissioner proceeds to judgment and then issues a bankruptcy notice. That notice can not be challenged because if one sought to go behind the judgment debt one is met by an assessment unchallengeable under s 177: Clyne v Deputy Federal Commissioner of Taxation (Cth) (1982) 82 ATC 4510; Clyne v Deputy Commissioner of Taxation (Cth) (1983) 83 ATC 4532. On the same basis, the taxpayer is made bankrupt. He is insolvent as a result of the tax debt. There may or may not be other creditors. The Commissioner appoints a trustee in bankruptcy or perhaps the Official Receiver becomes trustee. In either case the trustee has no interest in fighting the objection in the Administrative Appeals Tribunal. It is immaterial to the trustee. And the trustee has no funds to do so. Hence the taxpayer loses the right to appeal and is made bankrupt without ever having a right to challenge the assessment. It could not happen, could it? In my view, the Court should adopt an interpretation of s 14ZZ which ensures that taxpayers will always have a right to challenge assessments made against them. … Consideration 71 I note that no Attorneys-General wished to be heard in relation to the 'constitutional matter' in response to notices issued under s 78B of the Judiciary Act on 24 November 2015. 72 Important though this argument may be, I am not satisfied that there is any incontestability in the sense discussed in these authorities. 73 The question of principle which the argument raises is whether the taxation legislation, through s 175 of the ITAA 1936 and s 350-10 of the TAA 1953 imposes as a matter of law, an exaction that is incontestable. As I perceive it, it is a matter of examining the words and actual effect of the legislation, rather than possible outcomes on which there might be speculation. 74 The provisions of Pt IVC of the TAA 1953 permit a taxpayer to challenge an assessment in the Administrative Appeals Tribunal and in this Court and with leave in the High Court. Those provisions satisfy the requirement of the Constitution that a tax not be incontestable. This is evident from what Gummow ACJ, Hayne, Heydon and Crennan JJ said in Futuris (at [9]), quoted above at [63]). 75 The primary focus of the argument is that the Bosanacs will not be able to pursue their rights because of their 'inevitable' bankruptcy. As a matter of practical reality, the Bosanacs have indicated an intention to apply for a stay of execution of any judgment. At present there is no evidence or indication that the Commissioner will bankrupt the Bosanacs. 76 But, assuming bankruptcy, a trustee in bankruptcy clearly has the power to bring, institute or defend any action or other legal proceedings concerned with the administration of a bankrupt's estate pursuant to s 134(1)(j) of the Bankruptcy Act. It is also clear that a review of an objection decision made by the Commissioner under the provisions of the TAA 1953 is such a legal proceeding that the trustee is entitled to institute: McCallum per Whitlam J (at 457-458). It is for the trustee to assess the position and form a view and to make an election in writing as to whether he or she will continue with the proceeding. The election provisions are governed by s 60(2)-(4) of the Bankruptcy Act. 77 It is true that a trustee may well decline to exercise the power to continue with the proceeding. In this event, a bankrupt may apply to the Court under s 178 of the Bankruptcy Act as a person affected by an act or omission by the trustee for the Court to make an order as it thinks just and equitable. As is made clear in cases such as Healey v Prentice (No 2) [2000] FCA 1598 per Madgwick J (see particularly [20]-[21]), the Court's jurisdiction can be invoked in circumstances where a trustee has declined to elect to proceed with litigation. 78 It follows, in a practical sense, that the contestability of an assessment remains open to a trustee of a bankrupt and where that trustee elects not to contest an assessment it is open for the Court to grant a bankrupt relief and to intervene in some fashion. 79 Of course, such relief might not be granted. If it is not granted, it is not the contestability principle that is infringed, nor any other principle. Rather, the assessments under consideration would 'in a purely practical sense' not be susceptible of challenge by the Bosanacs. This, however, is not brought about by incontestability as discussed in Futuris (at [65]). It is simply the operation of the rules of bankruptcy law: Giris Pty Ltd v Commissioner of Taxation (Cth) (1969) 119 CLR 365 per Kitto J (at 378-379). STAY APPLICATIONS 80 The Bosanacs also rely upon detailed written submissions in support of an application for a stay of any summary judgment order until after the hearing has been held. In Woods, Porter J helpfully summarised the relevant considerations (at [79]-[85]). At this stage there is no application for a stay before me, orally or in writing. I do not intend considering any foreshadowed stay application until such an application is filed in accordance with the FCR. As I understand the position, if the Commissioner is informed that a stay application is to be filed and pursued without delay, he will refrain from taking steps in bankruptcy or otherwise executing the judgment until resolution of that application. (Although I note that the transcript of the hearing appears to me to omit the word 'not' in the exchange as to whether the Commissioner would not take steps in bankruptcy.) 81 Finally, three days before delivery of the judgment was scheduled, despite the relevant knowledge being held by the Bosanacs for some weeks, the Bosanacs belatedly sought amongst other things, urgent deferral of delivery of judgment and leave to adduce fresh evidence on the basis that the Commissioner was about to make a decision on Mrs Bosanac's objection. It was argued that the Commissioner had confirmed that the new and imminent decision was likely to be substantially favourable to Mrs Bosanac for reasons advanced on her behalf in this summary judgment application. I am not persuaded that such an outcome, even if correctly predicted and even if the assessment were reduced to nil, would affect the basis upon which summary judgment should now be given pursuant to these reasons. Even if liability were reduced to nil in respect of Mrs Bosanac, that would not point to 'conscious maladministration'. That is the only basis on which the Bosanacs have, somewhat aggressively, challenged the Commissioner's statutory entitlement. Rather, such an outcome would demonstrate a successful objection, a process expressly contemplated by the statute. That said, there is no prospect of the Commissioner recovering from Mrs Bosanac any more than her actual tax liabilities at the time judgment may be sought to be executed if that is necessary. This is because I will, in accordance with an offer made by the Commissioner (but also rejected by the Bosanacs), order that the formal entry of judgment against Mrs Bosanac be deferred for 14 days, so as to allow the parties to seek to vary the judgment pursuant to r 39.04 FCR to reflect the quantum, if any, of any amended assessment in relation to Mrs Bosanac. That deferral will preclude judgment execution on a sum that does not reflect any amended assessment. It will also, importantly, ensure that any judgment entered and given effect to within the meaning of r 39 FCR (noting that judgment may also be set aside in an appropriate case), will reflect only the position of any amended assessment or at least take into account that amended assessment. Subject to that protection, the provisions of the statute dictate that the Commissioner is, and was, entitled to obtain judgment. CONCLUSION 82 For those reasons, I reject the arguments advanced by the Bosanacs. The orders I propose making are for summary judgment in accordance with the Commissioner's application. I certify that the preceding eighty-two (82) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice McKerracher. Associate: Dated: 29 April 2016