High Court of Australia Williams J. Taxation, Commissioner of (Cth) v Bayly [1952] HCA 31 ORDER Judgment for the plaintiff for £870 13s. 0d. with costs. Cur. adv. vult. J Williams delivered the following written judgment:— June 23 Williams J This is an action in which the Deputy Commissioner of Taxation for the State of New South Wales of the Commonwealth of Australia is suing the defendant who is the secretary of the Wellington Combined Race Club to recover thirteen separate amounts totalling £1,018 17s. 5d. alleged to be due as entertainments tax in respect of thirteen race meetings held by the club on certain dates between 13th October 1943 and 22nd September 1948. The defendant is sued as the proprietor of these entertainments. Under the Entertainments Tax Assessment Act 1942-1949, s. 4, "proprietor" includes, in relation to any entertainment, any person responsible for the management thereof. No objection has been taken to the form of the action which is in effect an action against the club. The action has now been settled with respect to the amounts sued for in respect of the meetings held on 21st and 22nd September 1948 on the basis that the defendant will pay the amount of £99 8s. 1d. claimed in respect of 21st September and the plaintiff will waive his claim to the amount of £148 4s. 5d. claimed in respect of 22nd September. It is therefore only necessary to deal with the first eleven amounts. They fall into three categories—(1) those claimed in respect of the meetings held on 13th October 1943, 10th August and 16th November 1946; (2) those claimed in respect of the meetings held on 1st, 2nd and 21st May; 12th July; 16th August; and 15th November 1947; and (3) those claimed in respect of the meetings held on 29th March 1947; and 21st February 1948. The action has been tried without pleadings. If there had been pleadings it would have been apparent that the real issue between the parties was whether the defendant was entitled to a refund of tax under the provisions of s. 18 of the Act. This section provides so far as material that where the commissioner is satisfied that the whole of the net proceeds of an entertainment are or will be devoted to public, patriotic, philanthropic, religious, or charitable purposes and that the whole of the expenses of the entertainment do not exceed 50 per cent of the receipts, he shall repay to the proprietor the amount of the entertainments tax in respect of the entertainment. The section contemplates that the tax has already been paid and obliges the commissioner to refund the tax in the circumstances mentioned. This is presumably because the tax is usually paid in advance by stamping the admission tickets but the Act also provides machinery for the proprietor making returns of the admissions and paying the tax after the entertainment and this was the course adopted in the present case. The plaintiff contended that a letter of 7th July 1948 from the plaintiff to the defendant relating to the first eleven amounts claimed was a notice of assessment within the meaning of s. 16D of the Act and that since the defendant had not objected to the assessment the plaintiff was entitled to judgment. That section provides that where the commissioner has caused an assessment to be made of the tax or further tax which in his judgment should be paid, the person assessed shall be liable to pay the tax or further tax so assessed except in so far as he establishes on objection that the assessment is excessive. I gave a provisional ruling that the letter was not a notice of assessment and to that ruling I adhere. The letter is at most a letter of demand. One of the amounts claimed was for an entertainment held in 1943 but s. 16D was not introduced into the Act until the amending Act of 1944 which came into force on 3rd April 1944. In my opinion a notice in writing of an assessment, in order to comply with s. 16D (3), must state that it is a notice in writing of an assessment under that section, and to be a fair notice, such as one would expect to emanate from the department, it should warn the taxpayer that the effect of the notice is to create a liability to pay the tax except in so far as he establishes on objection that the assessment is excessive, and at least summarize the procedure upon objection. In view of this ruling it is unnecessary to discuss other questions relating to s. 16D that were touched on during the hearing. But it should not be assumed, where there has been no objection, that the commissioner can succeed under the section simply by tendering a notice of assessment without proof of the existence of one of the conditions which authorizes him to make the assessment and of the making of the assessment. Further, as I pointed out during the argument, the only remedy open to the person assessed whose objection has been disallowed by the commissioner is to request the commissioner to refer his decision to a board of review. If that is done the only appeal to this Court is on a question of law. In this respect the legislation differs from that in the Income Tax and Social Services Contribution Assessment Act 1936-1952 and other Tax Assessment Acts which give the taxpayer an option either to have the commissioner's decision on his objection referred to a board of review or to appeal to this Court or the Supreme Court. In the absence of a full right of appeal on fact and law from such a decision to this or some other court in which the judicial power of the Commonwealth is vested under Chapter III. of the Constitution, a grave constitutional question may arise whether the Commonwealth Parliament can, without infringing the judicial power, provide that a controversy between the Crown and the subject as to whether the latter is liable to pay a tax imposed by an Act depending upon disputed facts can be conclusively determined by an administrative body. Alternatively the plaintiff relied on a certificate in writing signed by the Deputy Commissioner of Taxation for the State of New South Wales certifying that the defendant owed the sum of £1,018 17s. 5d. (the total amount claimed in the writ) as prima-facie evidence that the amount was due. I held that this certificate was sufficient prima-facie evidence to prove the plaintiff's case and that the plaintiff must succeed unless the defendant went into evidence: Entertainments Tax Regulations, S.R. 1942 No. 421, reg. 57. There is no dispute that in all eleven instances the whole of the proceeds of the entertainment were devoted to a public &c. purpose. The dispute is as to whether the whole of the expenses of the entertainment did not exceed 50 per cent of the receipts. The commissioner was satisfied that in each instance the whole of the expenses exceeded 50 per cent of the receipts. The right to a refund under s. 18 depends upon the satisfaction of the commissioner. But the satisfaction is not an arbitrary satisfaction. It must be exercised according to law and not humour. The taxpayer must place before the commissioner facts which should be sufficient in law to satisfy him that the whole of the net proceeds will be devoted to public &c. purposes and that the whole of the expenses do not exceed 50 per cent of the receipts. The Court can examine the facts proved by the evidence to have been placed before the commissioner. If it is proved that the commissioner has not applied his mind to the real question for his determination but has acted capriciously or arbitrarily or upon irrelevant considerations the Court can order the commissioner to reconsider the matter according to law. It may be that the Court can go further and, if it is of opinion that on the facts the commissioner was bound in law to be satisfied, the Court can order the commissioner to refund the tax. The section provides that the commissioner upon satisfaction shall repay the tax and in a case where the commissioner was bound to be satisfied such an order would do no more than require the commissioner to perform the duty imposed upon him by the section: see the orders in R. v. Blakeley; Ex parte Association of Architects, Engineers, Surveyors and Draughtsmen of Australia [1] ; Minister of National Revenue v. Wrights' Canadian Ropes Ltd. [1] . Either form of order would be an order appropriate to be made on an application for a writ of mandamus. But it may be open to this Court, having regard to ss. 32 and 33 of the Judiciary Act 1903-1950, to make the order in an action. 1. (1950) 82 C.L.R. 54. 2. (1947) A.C. 109. In the present case I am of opinion that no such order should be made. Section 18 clearly intends, I think, that the public &c. purpose shall benefit, that is shall be better off than it was before, as a result of the entertainment, by a sum equal to more than 50 per cent of the true receipts. In the case of the entertainments in the first category the net proceeds were paid to the Wellington District Hospital and Commercial Travellers Cot Fund, to the C.W.A. Baby Health Centre Building Fund, and to the Boy Scouts Building Fund. They were paid sums which appeared to be more than 50 per cent of the receipts, but included in these sums were amounts equal to the amounts of simultaneous contra payments which the charities made to the defendant as alleged donations to the entertainments. These contra payments were not true receipts. Charities do not make donations to entertainments held for their particular benefit. The purpose of these payments was to make it appear that the charities had received more than 50 per cent of the receipts. But they really only benefited to the extent of the balance remaining after deducting these donations from the cheques paid to them by the defendant. They did not benefit to the extent intended by the section. They did not receive more than 50 per cent of the true receipts of the entertainment. As the plaintiff said in his letter of 7th July 1948, "these payments cannot for entertainments tax purposes be regarded as forming part of the proceeds of the race meeting in question and by their exclusion from the receipts the expenses of each of the three entertainments exceeded 50 per cent of the receipts involving the payment of entertainments tax". The public &c. purpose to which the net proceeds of the entertainments in the second and third categories were devoted was to benefit the improvement fund of the Wellington Show and Sports Ground. Facts were placed before the plaintiff tending to prove an agreement between the defendant and the trustees of the ground that if the race club devoted the net proceeds of these entertainments to this purpose the trustees would pay for certain specific items of expenditure, namely prize money, wages and rebates. This was in effect an agreement that the beneficiary should make a donation equal to the total amount of these items. In the case of the meeting of 29th March 1947 the trustees contributed an amount equal to the expenditure on prize money and rebates. In the case of the meeting of 21st February 1948, the trustees contributed an amount equal to the expenditure on prize money, wages and rebates. All these items, prize money, wages and rebates were expenses of the race meeting which should have been borne by the club. Again the beneficiary only benefited to the extent of the balance remaining after deducting the amount which it had contributed to the expenses from the cheque it received from the defendant and this balance was less than 50 per cent of the true receipts. In the case of the entertainments in category 2, no payments were in fact made by the trustees towards prize money or wages or rebates. The net proceeds in each of these cases were less than 50 per cent of the total receipts and the defendant in the end did not contend that he could claim a refund in respect of these entertainments. The defendant has failed to make a case for the court interfering with the decision of the commissioner in respect of any of the eleven cases, even assuming that an order in the nature of a mandamus can be made in an action. If it were relevant for me to express an opinion I would say that I agree with his decision. For these reasons I must give judgment for the plaintiff for the whole of the amounts claimed except the last amount of £148 4s. 5d. that is to say I must give judgment for £870 13s. 0d. with costs.