|
|
Home
| Databases
| WorldLII
| Search
| Feedback
High Court of Australia Transcripts |
Sydney No S195 of 2002
B e t w e e n -
MICHAEL JOHN GLENNAN
Appellant
and
COMMISSIONER OF TAXATION
Respondent
Office of the Registry
Sydney No S457 of 2002
In the matter of -
An application for Writs of Prohibition, Mandamus and Certiorari against MICHAEL CARMODY in his capacity as Commissioner of Taxation of the Commonwealth of Australia
First Respondent
THE JUDGES OF THE FEDERAL COURT OF AUSTRALIA
Second Respondents
Ex parte -
MICHAEL JOHN GLENNAN
Applicant/Prosecutor
GUMMOW J
HAYNE J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON FRIDAY, 7 MARCH 2003 AT 10.02 AM
Copyright in the High Court of Australia
MR J.D. HARRIS, SC: May it please the Court, in the first matter I appear for the appellant. In the second matter I appear for the applicant/prosecutor. (instructed by Higgins Solicitors)
MR D.B. McGOVERN, SC: May it please the Court, I appear with my learned friend, MR A.J. O'BRIEN, on behalf of the Commissioner in the first matter and on behalf of Mr Carmody in the second matter. (instructed by Australian Government Solicitor)
GUMMOW J: In the second matter, the Court holds a certificate from the Deputy Registrar stating that she has been informed by the Solicitor for the second respondents, who are the judges of the Federal Court, that the second respondents will abide by any order of the Court save as to costs. Yes, Mr Harris.
MR HARRIS: As your Honour has just observed, there are two proceedings before the Court. The first is matter 195 of 2002 which is an appeal from the judgment of his Honour the Chief Justice. The second is matter 457 of 2002 which is a fresh application for writs and ancillary relief relying on the original jurisdiction of the Court and section 75(v) in particular. The first, 195, is listed for hearing in final determination, as I understand it. The second, 457, may be depending upon the Court's disposition. As to the second matter it could, if the Court is so minded, be dealt with to a conclusion or it could be dealt with to order nisi stage today.
GUMMOW J: No, we have considered the matter and we would be indebted to you if you pursued it to a conclusion.
MR HARRIS: May it please the Court. Could I begin, if the Court pleases, with 195, the appeal matter. An amended notice of appeal was filed on 20 February 2003. It is not contained, of course, in the appeal book.
GUMMOW J: Yes, we have that. We also have your amended submissions dated 5 March and your opponent's amended submissions of the same date.
MR HARRIS: Yes. In 195, at an earlier time, an affidavit was filed on behalf of Mr Glennan dated 8 November 2002. The purpose of that affidavit at the time it was filed was in support of an application to amend the notice of appeal, the amendment then being pursued has been superseded, but the affidavit served the purpose of annexing a number of documents. They are set out in paragraph 6 on page 4 of the affidavit. They are in order the various decisions and judgments of, first, the Administrative Appeals Tribunal and then the Full Federal Court as the matter has progressed.
Those documents are not directly relevant to the appeal matter, but if your Honours are to deal with the application for writs, in which, in substance, it is sought to - well, prerogative relief is sought to, in effect, stay those earlier judgments, then your Honours will need - - -
GUMMOW J: Yes, we have it.
MR HARRIS: In due course we will ask that those documents presently filed in 195 be received in the application 457.
GUMMOW J: Yes.
MR HARRIS: Your Honour, the essential issue on the appeal matter is this: should the appellant have been shut out summarily from having his case heard in the ordinary way? The composite statement of claim, which is found in volume 2 of the appeal book, beginning at page 363, is a long and complex one. It sets out at some length - perhaps at some unusual length - the history of the commercial dealings which led to some terms of settlement being prepared which in turn annexed or contained a joint venture agreement, as part of the terms. It sets out the process by which Mr Glennan was ultimately issued with an assessment for taxation upon the receipt by him of the moneys payable pursuant to the terms of settlement, and his attempts to challenge that assessment in the Administrative Appeals Tribunal and subsequently in the Federal Court. He, in his statement of claim, seeks a variety of forms of relief, and they are set out beginning at page 408 of volume 2.
He claims declarations to the effect that the assessment was unenforceable and of no legal effect and that the decisions and judgments of the Administrative Appeals Tribunal and the Federal Court of Australia, which ultimately upheld the assessment, declarations that they are a nullity and of no legal force and effect. He seeks an order setting aside those decisions and judgments and then at paragraph 7 he seeks damages, amongst other things.
The essential cause of action on which he sues is to the effect that the decision of the Commissioner and then the subsequent decisions of the Administrative Appeals Tribunal and the Federal Court were obtained by a form of equitable fraud, he having asserted earlier in the statement of claim a constitutional right - a legal right - to challenge the assessment for taxation in the original jurisdiction of this Court. He is saying that that is an alternative remedy which must always be open to him and which cannot be taken away by an appellate procedure established by the taxation legislation; in other words, he has the alternative remedies of approaching this Court or, alternatively, appealing through the appellate process provided and that those remedies are not mutually exclusive.
As I have attempted to develop in the submissions - could I leave aside for a moment ground 3 in the notice of appeal which complains of a failure to issue a notice pursuant to section 78B of the Judiciary Act 1936 . I will come back to that if I may. It is submitted that the test for summary dismissal is well known. The proceedings must be demonstrated to be hopeless or inarguable and will ordinarily be dealt with on the pleadings - the facts pleaded will be assumed for the purposes of the application.
The respondent in response says, whilst that may be the general proposition, and it is undoubtedly so, there is also well-established authority for the proposition that in some instances it is appropriate for the Court to receive and rely on evidence additional to the that pleaded so as to demonstrate that the cause of action is truly hopeless or unarguable, and furthermore, it is open to the Court to receive argument on complex legal issues for the purpose of demonstrating that matter as well.
It is accepted that if one adopts the submissions of both parties on those matters one has a full statement of the position and I do not dispute the matters that my learned friend has raised in his written submissions to that effect, but the argument that we seek to advance is that the facts alleged in this case involve an allegation that the - I am sorry, would your Honours just excuse for a moment, I will just find a note.
It is submitted that the facts which should have been assumed for the purposes of the application are that the appellant received a lump sum payment in compromise of the 1987 action, which itself involved a multiplicity of causes of action and, as we understand it, those substantive facts were not disputed, but the additional fact which the respondent says his Honour was correct to take into account was the fact the Full Court was of the view, and so held, that the claims were wholly for loss of revenue. In other words, that although the fact that there was a lump sum payment received and that lump sum payment was in compromise of - - -
GUMMOW J: This is the Full Federal Court decision in [1999] FCA 297; 90 FCR 538?
MR HARRIS: Yes.
GUMMOW J: Yes, we have read that.
MR HARRIS: So that the appellant asserts for the purposes of his argument that his Honour the Chief Justice should merely have assumed the fact pleaded that the payment was a lump sum received in compromise of earlier Supreme Court actions or suits. The respondent, on the other hand, says, "Well, whilst that fact may be so, you are also met with the fact that the Full Court has held that that lump sum payment was wholly for loss of revenue and that it was proper for his Honour to take that additional fact into account". The respondent submits that that additional fact, the existence of the Federal Court judgment and what the court held, should have been irrelevant to the factual basis to be assumed for the purposes of the application.
GUMMOW J: Is that point you are just making developed in your written outline?
MR HARRIS: It is developed, I think, at paragraphs 5.5 and 5.6 on page 8.
GUMMOW J: Thank you. Grounds 4 and 5?
MR HARRIS: Yes. The reason - if I can attempt to formulate it this way - that the Federal Court judgment should be irrelevant to the factual basis to be assumed for the purposes of the summary dismissal application is that that judgment in itself is one of the matters that the appellant seeks to impugn in his action in the original jurisdiction of the court. In other words, it is said that judgment is obtained and is colourable by reason of the equitable fraud that was employed to obtain it, and therefore it itself should not be the fact which is assumed for the purpose of defeating the cause of action on a summary dismissal. It would be unconscionable to submit it for that matter to be taken into account. That is a matter which lies at the heart of the very issue that the appellant seeks to litigate and for that reason it is not a fact which should be relied upon on a summary judgment application. Rather, the matters pleaded in this case should be those which are relied on for the purposes of the summary judgment application.
It is perhaps useful if I move to the matter set out in paragraph 5.7 and following of the submissions because they deal with the essential allegation of equitable fraud. His Honour the Chief Justice characterised the allegation of equitable fraud as being an alleged failure by the Commissioner to refer to a public tax ruling in his assessment and subsequently when the matter came before the Administrative Appeals Tribunal and the Federal Court. His Honour - - -
GUMMOW J: Do we have the text of that ruling?
MR HARRIS: Yes, it is in volume 2 of the appeal book at pages 295 and 296. At 295 at line 37, the paragraph begins:
The equitable fraud alleged relates to the tax ruling, the representations said to have been involved in it -
and so on. His Honour says at about line 46:
The ruling was a public ruling. It was never concealed from anybody. The plaintiff himself brought it to the notice of the Full Court of the Federal Court before the Full Court delivered judgment.
I think it is not disputed that there were some additional written submissions very late in the day after the hearing had concluded. I think, in any event, what his Honour says is right.
GUMMOW J: But the text of the actual ruling, the actual text of the rule.
MR HARRIS: Yes.
MR McGOVERN: Volume 1 page 271, your Honour.
GUMMOW J: Page 271 in volume 1.
MR HARRIS: I am sorry; I was at cross-purposes with your Honour, I am sorry. It is TD93/58, yes, and, as your Honour sees, the text of the ruling refers to Allsop and McLaurin and it, in substance, I think both parties submit, reproduces the law as stated in those authorities and, perhaps, as later developed in CSR in the decision of the Federal Court of Australia. So that his Honour the Chief Justice said at 296:
to make the absence of reference to the ruling the basis of an allegation of equitable fraud against the defendant goes beyond the bounds of even the most enthusiastic advocacy.
On that basis, he concluded that what was complained of could not amount to equitable fraud. With respect, if one accepts his Honour's characterisation of the appellant's case, one could not argue with his Honour's conclusion. But the submission is that, as I have attempted to mention in paragraph 5.7 of the submissions, the appellant's point is not that the public tax ruling was merely concealed or that it was not drawn to attention; the point rather is that within the regime of self-assessment, which regime involves a process of public tax rulings and a system whereby a taxpayer who self-assesses in conformity with a published public tax ruling, whether he knows it or not, is entitled to the benefit of the public tax ruling even if there is doubt about its application or not. If, under the self-assessment regime, one - - -
CALLINAN J: Mr Harris, what was the year of receipt of the payment?
MR HARRIS: It certainly predated the public tax ruling.
CALLINAN J: What year? What income - - -
GUMMOW J: The year of income is 30 June 1988.
MR HARRIS: 30 June 1988, yes, and that presents another obstacle in my way, your Honour, which, if I may, I will come to in a moment. I hope I am not going too slowly, but your Honour has gone straight to an obstacle which I will attempt to address in a moment.
CALLINAN J: That is, in fact, what the determination states, specifically, does it not, also, that it:
does not apply to taxpayers to the extent that it conflicts with the terms of a settlement of a dispute agreed to before the date of issue of the Determination -
in the heading to the ruling that you took us to at page 271?
MR HARRIS: Yes. I will attempt to submit, your Honour, that that particular qualification to the determination does not have application in the present case because the determination is not in conflict, but the terms of settlement of the dispute.
HAYNE J: The dispute mentioned in that sentence of the determination might be thought to be a dispute between the Commissioner and the taxpayer of a kind dealt with in Taxation Ruling 92/20, see page 268 of the appeal book.
MR HARRIS: Yes. So, in my respectful submission, that particular qualification does not present a difficulty, but there is, nonetheless, a problem with the timing which I will need to address.
I was attempting, I think, to demonstrate that his Honour the Chief Justice's characterisation of the substance of the appellant's complaint as being a mere failure to notify - absence of reference, his Honour put it, to the ruling - is really an understatement and, with respect to his Honour, an inaccurate characterisation of the appellant's claim.
The appellant's claim is that by reason of the system of self-assessment and the role that public tax rulings play in it and the advantage to be given to the taxpayer in the event of a self-assessment in conformity with the public tax ruling, it would be argued by the appellant on the hearing of the cause that a positive duty applies to the Commissioner to give the taxpayer the benefit of the regime and the public tax ruling and that, by necessary implication, the giving of the benefit of the scheme and the ruling extends to applying it himself and, of course, drawing it to the attention of other decision-makers.
In the case of the Administrative Appeals Tribunal, there is no need to resort to implication, as there is a statutory duty under section 37 of the Administrative Appeals Tribunal Act to list all relevant documents. So it would be argued on the hearing of the action that in the face of such a positive duty to draw attention to these matters, a failure to satisfy that duty, it would be argued, could constitute an equitable fraud. As I have attempted to submit in paragraph 5.8, it can constitute an equitable fraud because such a failure results in an improper exaction of income tax to the financial detriment of the taxpayer.
CALLINAN J: Mr Harris, does not the ruling simply state what the law was up until that time?
MR HARRIS: It does, and, indeed, your Honour, that is another way of looking at the appellant's case.
CALLINAN J: Well, it is assumed to be known by everybody.
MR HARRIS: That is another matter that his Honour the Chief Justice held. The appellant submits that that casts an extraordinary burden on - - -
CALLINAN J: I do not know why the respondent made the ruling.
MR HARRIS: Indeed. My friend says, sotto voce, he wishes he had not. I submit the reason is this, that whilst the substantive law is not changed by the public tax ruling, it merely restates, perhaps in short form, what was already held in Allsop and McLaurin's Case. The point is that it restates it in a public tax ruling which then fits into the regime of self-assessment and as a consequence, the appellant says, the taxpayer - he - obtains a benefit if he self-assesses in accordance with or in compliance with - or arguably, as the legislation makes clear, arguably in conformity with the public tax ruling, and if that self-assessment is to his advantage when compared with other assessments which may be available, then he, the taxpayer, gets the advantage of that advantageous self-assessment. So that is the change that occurs by reason of the law being restated in a public tax ruling. It is not that the substantive law is changed but an advantage is derived by the taxpayer within the scheme of self-assessment.
CALLINAN J: What is the advantage? I do not quite understand.
MR HARRIS: Yes, I have not explained it at all well. I think I confused myself in attempting to, I will try again. If a taxpayer self-assesses and his self-assessment is in accordance with the public tax ruling or is arguably in accordance with the public tax ruling, but there is the possibility of debate as to whether that is the correct assessment or some other assessment which is less advantageous to the taxpayer is open, and in the event of a dispute between the Commissioner and the taxpayer, then the taxpayer is entitled to an assessment in accordance - or the taxpayer's self-assessment will prevail, provided - - -
CALLINAN J: But it would prevail if it is in accordance with the law and a ruling is no different from the law.
MR HARRIS: Yes, but the Commissioner is not entitled in that circumstance to pursue the matter any further. The system of self-assessment - it might be as well if I attempt to take - - -
CALLINAN J: But the Commissioner is not entitled to pursue the matter any further if the self-assessment is in accordance with the law. He might try to do so but he is not entitled to. He is obliged to act lawfully in the same way as anybody else.
MR HARRIS: Yes, your Honour is quite right, of course, and that would be clear in cases of a black and white - - -
CALLINAN J: At any rate, I understand your submission now.
MR HARRIS: Yes. So it is said that in those circumstances a failure on the part of the Commissioner to apply that law can constitute an equitable fraud and his Honour's characterisation is, with respect, inaccurate. That submission, I think, is as shortly stated as I can make it in paragraphs 5.7 and 5.8.
Now, at paragraph 5.11 of the submissions, I attempt to deal with grounds 10 and 12 of the amended notice of appeal. The essential basis, as I understand his Honour's judgment, for the summary dismissal of the appellant's action was that there exists the judgment of the Full Court of the Federal Court and it is impermissible to mount a collateral challenge to a decision of the Full Court by separate proceedings.
It is clear, your Honours, that there is well-established law to support the proposition that ordinarily a collateral challenge to a decision of a superior court by separate action in another Court is impermissible and clearly that must be so. But it is submitted that this case is different because this case, it is submitted, involves a right which is provided to the taxpayer by the Constitution to challenge an assessment and it is a right which is constitutionally guaranteed.
So that whilst one accepts that in the ordinary course of events an impermissible course is such a collateral challenge, it is submitted that that principle must bow to the constitutional entitlement of the appellant to come to this Court challenging the assessment. That constitutional entitlement is said to arise from, firstly, the Bill of Rights, Article 4. It is said to then arise by operation of section 5 of the Commonwealth of Australia Constitution Act and it is an entitlement which has been referred to in a variety of authorities, and I think the one that I have referred to in the written submissions is Mooney v The Commissioner of Taxation [1905] HCA 61; (1906) 3 CLR 221.
GUMMOW J: Is that in the written submissions?
MR HARRIS: It is. It is not actually mentioned in paragraph 5.11 but you will see it in 5.19, your Honour.
GUMMOW J: This concerned New South Wales legislation, did it not?
MR HARRIS: It did. The passages beginning at page 236 are the relevant ones. Unless it would be of assistance to your Honours for me to read particular passages, I would not propose to do so because I rely, I suppose, on the reasoning which is developed between pages 236 to 241 of the judgment in particular.
GUMMOW J: We can study that.
MR HARRIS: His Honour held that, consistent with general principle, it was impermissible to mount a collateral challenge to the decision of the Full Court and, incidentally, to the judgment of his Honour Justice Kirby which is - - -
GUMMOW J: [2000] HCA 37; 173 ALR 145 - we have read that too.
MR HARRIS: Yes, thank you, your Honour. I suspect your Honour is substantially ahead of me. I hope I am not going too slowly.
GUMMOW J: No, no.
MR HARRIS: The submission is that, again, as that judgment - that is, the judgment of the Full Court of the Federal Court - is the product of a statutory review process and as the cases such as Mooney establish that the right of the appellant to come to this Court in exercise of its original jurisdiction cannot be taken away by the existence of a parallel, if you like, statutory review process, the product of that statutory review process cannot be relied upon as an insurmountable obstacle to the appellant coming to this Court in its original jurisdiction.
So that it is not open, it is submitted, to this Court to decline to exercise its original jurisdiction and to decline to afford the appellant his entitlement to come to the Court on the basis of the collateral challenge principle. The principle to the extent that it might otherwise operate must yield to the constitutional right that I have been referring to it is submitted. In any event, it is submitted, the proceedings which concluded in the judgment of the Federal Court were incompetent and the judgment is a nullity, and that is picked up in ground 7 of the amended notice of appeal and it is referred to in paragraph 5.16 of the outline of submissions.
It is submitted that the law as established by McLaurin and Allsop, confirmed in CSR 104 FCR, and as dealt with in the relevant public tax ruling - and particularly as dealt with in the public tax ruling - I am sorry, may I withdraw that and start again. It is submitted that the Commonwealth of Australia Constitution Act, section 5, provides that:
all laws made by the Parliament of the Commonwealth under the Constitution, shall be binding on the courts -
that is a fundamental constitutional command to all courts. It cannot be overridden by any common law principle or, indeed, by a law of the Federal Parliament. It is submitted that the public tax ruling, it being a product of the legislative scheme, falls within the category of a law of the Parliament of the Commonwealth, and to the extent that the Federal Court failed to apply it, the court failed in its constitutional obligation to comply with the Constitution Act, section 5, and in that respect, the proceedings in that court fundamentally miscarried and the judgment is a nullity.
Now, in the same way it is said that subsidiary legislation, regulations and matters of that sort can be said to be laws of the Parliament of the Commonwealth, so it is said that the public tax ruling falls into that category. For that reason also, it is submitted, his Honour the Chief Justice erred in concluding that the judgment of the Federal Court is an insurmountable obstacle to the appellant proceeding in the original jurisdiction of this Court.
A similar argument applies when one comes to consider the judgment of his Honour Justice Kirby at 173 ALR, that is that to the extent that his Honour also failed to apply the ruling, his judgment was in breach of that constitutional command.
Now, the point of those submissions was to this effect, that to the extent that his Honour the Chief Justice relied upon those judgments as a stopper, if I could put it that way, to the appellant's action, that constituted an error on his Honour's part, but at paragraph 5.18 and following a similar - - -
GUMMOW J: You seem to be venturing into darker waters there.
MR HARRIS: At 5.18 and following?
GUMMOW J: Yes.
MR HARRIS: Yes.
GUMMOW J: Now, section 23 of the Judiciary Act has to be read as part of a division commencing with section 19 and section 19 would indicate that it is sufficient for a Full Court to have only two Justices. Section 23 is a qualification to that requiring at least three or more in certain circumstances. It is all about how the Full Court goes about its work. It is not about how single Justices go about their work.
MR HARRIS: Yes. Well, it is certainly clear that, as your Honour observes, section 23 appears within Division 3 and the title to Division 3 is "Full Court".
GUMMOW J: Otherwise you would have to assemble the Full Court in every action in the original jurisdiction where there was some proceeding of the sort involved here.
MR HARRIS: Yes.
GUMMOW J: That has not happened in the last 100 years that I know of.
MR HARRIS: Yes. Well, I concede immediately that it would be a most inconvenient and impractical result but - - -
GUMMOW J: One begins with section 15, it requires only "one".
MR HARRIS: Yes.
GUMMOW J: And then you get to Chambers, which is what was happening here, which is section 16, and then you get into the Full Court.
MR HARRIS: Yes.
GUMMOW J: You may have other and stronger grounds, but that is not the strongest of them.
MR HARRIS: Yes. Could I simply put this, that what I wish to say in connection with that particular submission is contained within the written submissions and I will seek to develop it no further for the present. Could I go back then to the - would your Honour just excuse me for a moment, I am sorry?
GUMMOW J: Yes.
MR HARRIS: I still have not dealt with the section 78B issue. Can I again put that aside for the moment. One of the matters that my learned friend raises in his submissions, and which he develops at paragraph 23 of his submissions, is that the public tax ruling to which we draw attention:
could have no bearing on the tax liability of the Appellant for the 1988 year -
He points to the Taxation Administration Act Part IVAAA and to the Taxation Laws Amendment (Self-Assessment) Act and he submits that:
a Public Binding Ruling under Part IVAAA cannot apply to an arrangement that was carried out before 1 July 1992 -
and he relies on section 12(2) and that was the time issue that I flagged earlier when - - -
GUMMOW J: Yes, that is right.
MR HARRIS: Now, the way in which the appellant seeks to deal with that is, I should say firstly, mentioned and pleaded in what has come to be called the composite statement of claim which begins at page 363 of volume 2 of the appeal book. At paragraph 11 of the composite statement of claim beginning on 379, the appellant deals with the operation of relevant public tax rulings and at paragraph 11.4 on page 380, he refers to the provisions to which my learned friend refers and he asserts at 11.5.1 that in the circumstances of this case, section 14ZAAH(1) applied and that provision is expressed to apply:
"to all arrangements in the class whether past, present or future".
None of that will make much sense until I take your Honours to the legislation itself, but that is the substance of how the appellant puts the argument.
Part IVAAA of the Taxation Administration Act deals with public rulings. Arrangements are defined to include transactions, agreements, understandings, promises or undertakings. In the present case, we are concerned with terms of settlement which had annexed to them or had as part of them a joint venture agreement which was executed at the time of the settlement as part of the settlement. So that on the face of it, that document would appear to fall within the definition of an "arrangement" to be said to be an "agreement" or an "understanding" or a "promise or undertaking".
Then it is submitted section 14ZAAB of the Act under the heading "Contracts for arrangements" provides:
For the purposes of this Part, if a contract requiring an arrangement is entered into, the arrangement is taken to begin to be carried out.
In other words, as I understand it, if there is a contract which requires another arrangement to be entered into at some other time, then the arrangement is taken to begin to be carried out when the original contract is entered into.
If one then goes to the Taxation Laws Amendment (Self Assessment) Act, Act 101 of 1992, which is the provision to which my learned friend refers in his submission, similar provisions appear for the definition of "arrangement" and for the deeming of when an arrangement is taken to begin. In section 12(2), upon which my friend relies, it says:
In spite of section 14ZAAH - - -
GUMMOW J: I am sorry, what section are you at, Mr Harris?
MR HARRIS: I am sorry, your Honour.
GUMMOW J: We are looking at the 1992 Self Assessment Act?
MR HARRIS: Yes, section 12(2):
In spite of section 14ZAAH of the Principal Act as amended by this Act, a public ruling does not apply to any arrangement within the meaning of section 14ZAAA of that Act as so amended that began to be carried out before 1 July 1992 -
The critical words for the purposes of my argument are:
a public ruling does not apply to any arrangement . . . that began to be carried out before 1 July 1992 -
Now, those words, "that began to be carried out", pick up the words of section 14ZAAB, to which I referred earlier, in the Taxation Administration Act, which provides:
if a contract requiring an arrangement is entered into, the arrangement is taken to begin to be carried out.
Those provisions, in my submission, have no application to the present facts, because on the facts of the appellant's case there was only one understanding or arrangement or contract. That was the terms of settlement themselves, which admittedly incorporated another document as part of them, but there was no contract which required an arrangement to be entered into which is taken to begin to be carried out at some future time. It is contracts and arrangements of that kind which section 12(2) catches, and it limits going backwards to 1 July 1992 - it limits retrospective activity on those sorts of contracts or arrangements to 1 July 1992. But where one is not concerned with such an arrangement - that is, one that began to be carried out, to pick up the words of the section - that limiting provision, section 12(2), in our respectful submission, has no application.
GUMMOW J: Because this was not an executory arrangement. It was executed for - - -
MR HARRIS: That is right. Precisely, your Honour.
HAYNE J: Section 12(1) and (2) operating as a qualification to the operation of 14ZAAH, subsection (1) of which provided that:
a public ruling about a class of arrangements applies to all arrangements in the class, whether past, present or future.
MR HARRIS: Quite, your Honour, yes. That was the next provision that I was about to come to. We say it is a complex set of provisions and it is a complex pleading. Perhaps the pleading did not make the point abundantly clear, but that is the way we put it.
GUMMOW J: Well, I think we understand that.
MR HARRIS: So it is submitted that the public tax ruling point is not defeated by section 12(2). Could I turn then to the matter that I have been putting off, which is perhaps another darker waters matter, and that relates to the argument that section 78B was not complied with in respect of the hearing before his Honour the Chief Justice, that the application involved a matter arising under the Constitution - - -
GUMMOW J: I suppose the first question would be: did anyone at the time agitate the need for 78B notice, any party?
MR HARRIS: I think the answer to that is clearly no, your Honour, and that may well be a telling point, but it is submitted that when one goes to the composite statement of claim, perhaps someone should have given thought to it because - - -
GUMMOW J: Like your side.
MR HARRIS: Someone, your Honour. Section A at the very start of the composite statement of claim is headed "The Constitutional Material Facts" and asserts - this appears at page 369 of volume 2 of the appeal book - "CONSTITUTIONAL RIGHT TO CONTEST INCOME TAX ASSESSMENT".
GUMMOW J: Just assuming you are correct about that, it would make 78B a terrible trap for litigants, would it not, if you are right as to the consequences you say flow?
MR HARRIS: Yes.
GUMMOW J: Section 78B does not say that the Court's jurisdiction is withdrawn, nor could it. They are cases brought under section 75.
MR HARRIS: No, it does not say that, but it does use fairly plain language, your Honour.
GUMMOW J: It purports to impose a duty. It may be of imperfect obligation, imperfect in the sense that it does not withdraw jurisdiction.
MR HARRIS: Yes.
GUMMOW J: And it may provide a good appeal point if the constitutional point has legs, but that could all be agitated as it is being agitated now, I suppose.
MR HARRIS: Yes. I suppose the submission might be developed this way too, your Honour, that in a sense this is an unusual appeal, with respect, in my experience in any event, to be conducted in the Full Court of the High Court. This is the sort of application - it was an application for summary dismissal of a statement of a cause of action. It is the sort of thing that happens in District Courts and County Courts and Supreme Courts in a motions list on a Friday and people argue about it. The point I make is that this is an appeal from a judgment or an order for summary dismissal and the appellant submits that he should not have been shut out, as it were, on a summary basis and in dealing with section 78B, as this is not an appeal which has come to this Court after a range of hearings and appeals and special leave applications and matters of that kind, and we are saying - - -
GUMMOW J: It seems to us you have an appeal as of right under section 34, because the Chief Justice actually dismissed the action.
MR HARRIS: Yes. If after a full hearing on the merits and evidence being called and matters of that kind we had come along and said, there was not compliance with section 78B, so it has to go back and your Honour's observation about a duty being - - -
GUMMOW J: Section 78B is protective, first of the Commonwealth, then of the States, because the States got rather upset when things could develop up here in cases of which they had no prior notice.
MR HARRIS: I am not sure that they have ever overcome it.
GUMMOW J: Yes, but they are not here today and for all practical purposes your opponent is the Commonwealth. There has been a round of 78B notices.
MR HARRIS: Yes, there has. The appellant submits that the words are plain, it is the duty of the Court not to proceed and that those words should be given their strict meaning and that the Court should not have proceeded and that for that reason his Honour's judgment should be set aside. Alternatively, as your Honour observes, it is a duty which does not create the result that the Court's judgment is beyond jurisdiction but it nonetheless creates a discretionary matter and it is submitted that in circumstances where all that has happened thus far in the proceedings is an application for summary dismissal, it is not as though a lengthy trial or matters of that kind have been embarked upon and in the exercise of discretion one would - - -
GUMMOW J: Yes, thank you. What is left in the submissions in the appeal?
MR HARRIS: I think, your Honour, they are the matters that I wish to draw to attention on the appeal. Your Honour, there is just perhaps one matter that I might mention and perhaps I should have mentioned it right at the outset. The format, as your Honour knows, of the submissions is to set out a "NARRATIVE STATEMENT OF THE MATERIAL FACTS FOUND OR ACCEPTED" in Part IV. Paragraph 4.3 of the appellant's submissions states that a material fact is that:
The tax disputed receipt was a lump sum payment made pursuant to the settlement of the 1987 action ("the 1987 Terms of Settlement").
That point, or the material fact, is contested.
GUMMOW J: That agitates repayment.....law involved in it, contested; we understand that. We will just take the point on board.
MR HARRIS: Yes, very well. May it please the Court, they are the matters - - -
GUMMOW J: I think we would be assisted if you went straight on to the other matter and then we will hear Mr McGovern on both and then you reply on both.
MR HARRIS: May it please the Court.
GUMMOW J: And as we have indicated, we are treating this as an application for orders absolute in the first instance.
MR HARRIS: Yes. I have just been handed something. Would your Honour just excuse me for a moment, I am sorry?
GUMMOW J: Yes.
MR HARRIS: Your Honour, I am sorry, could I just go back for a moment to the appeal matter? I concentrated all of my submissions on the appeal from the decision of the Chief Justice to enter summary judgment, as it were. There was, of course, a separate application before his Honour, an application for particulars of the assessment. The assessment involves not only the assessment of what might be called income tax, but it also assesses, if I could use that word, or imposes a very substantial sum of penalties, and the application for particulars related especially to particulars of the penalty because it was submitted that the appellant had a very limited understanding of what penalties it was that the Commissioner wished to impose and wished to be in a position to deal with that issue on the statement of claim as well.
It is submitted that the case of Bailey - and I apologise, your Honour, that this authority was not referred to in the outline or in, I think, our submissions - - -
GUMMOW J: Bailey?
MR HARRIS: Bailey v Commissioner of Taxation (1977) 136 CLR 215. I can hand up - photocopies have been prepared.
GUMMOW J: We have Commonwealth Law Reports at hand.
MR HARRIS: I see, thank you, your Honour.
GUMMOW J: 136 CLR?
MR HARRIS: Yes, at page 214. Now, I will not take your Honours to it in any great detail, but I wanted to give your Honours a reference. It was a case where there was an application for some particulars and that issue was dealt with by the High Court.
GUMMOW J: Yes, we remember this case. It was a great case in its day.
HAYNE J: Tying the Commissioner to a particular arrangement. It was a matter of some significance.
MR HARRIS: Yes. There is also a passage which is relevant to - in connection with earlier submissions, may I belatedly give the Court a reference to the passage at the foot of page 216 of the Chief Justice's judgment and leading over to the top of page 217:
The assessment of income tax is the process of applying the Act to a state of fact. The duty of the Commissioner is to assess the tax upon the material contained in the return or otherwise in the possession of the Commissioner -
and so on. It is submitted that in this instance it was arguable that, and indeed it is part of the appellant's case in the composite statement of claim that the Commissioner failed to take that course. What the Commissioner did was to identify the terms of settlement as constituting the substantial facts which were to govern the assessment of taxation, that is, the application of the law, but having identified the terms of settlement as constituting the substantive facts, he then assessed by reference to another set of facts, that is, the joint venture agreement. In other words, he assessed on the basis of the joint venture agreement as if it stood alone and was not merely a part of the settlement of the earlier proceedings.
So it is submitted that that represents another analysis of the way in which the appellant would wish to adduce his case on the composite statement of claim and that he was entitled to take that course. Thank you, your Honour.
Could I turn to the other matter, matter 457. The application is set out in the application book filed on 24 February 2003 and the - - -
GUMMOW J: Now, I gave directions, I think on 10 February.
MR HARRIS: Yes, they are set out on page 1 of the application book.
GUMMOW J: To the effect of achieving a situation where 457 did not duplicate matters to be agitated in 195. Has that been achieved? In other words, that 457 would be new material, new grounds, as it were.
MR HARRIS: Yes. We have attempted to achieve that, your Honour, but I regret to say that we may not have been able to achieve that absolutely because the matters are interrelated, but I certainly would not wish to attempt to agitate the same reasoning.
GUMMOW J: All right, you take your course.
MR HARRIS: Yes. The applicant moves on the notice of motion which begins at page 3 of the application book. It is a lengthy notice of motion but it serves the function, your Honour, perhaps of not only the initiating process but an outline of argument. In that respect it may be thought to be defective, but it perhaps serves that twofold purpose.
The applicant relies on the affidavit of Michael Glennan which begins at page 18 of the book. Before going in detail to that affidavit, may I also have leave to file in Court and rely upon a further affidavit of Michael John Glennan sworn on 6 March 2003. That affidavit - perhaps I should hand it up so that your Honour can at least see what I am talking about in determining whether to permit it to be - - -
GUMMOW J: All right, Mr McGovern had better see it too.
MR HARRIS: Well, perhaps I should allow Mr McGovern to express his view about it. It is an affidavit - just to tell your Honour what it is, so that Mr McGovern can - - -
GUMMOW J: Why do you not hand up three copies at the moment? You will need further copies in due course, though, for the file and Court Reporting and so on.
MR HARRIS: Yes.
GUMMOW J: It might be useful if we took a short adjournment to give Mr McGovern a chance to look at it.
MR HARRIS: Yes.
GUMMOW J: We will take a short adjournment.
AT 11.31 AM SHORT ADJOURNMENT
UPON RESUMING AT 11.35 AM:
GUMMOW J: Yes, Mr McGovern.
MR McGOVERN: Your Honours, I have had an opportunity of looking at the affidavit. I would have an objection to paragraph 3 just in terms of its form, but otherwise I would not object to it.
GUMMOW J: Yes, you probably cannot have paragraph 3, Mr Harris.
MR HARRIS: Yes.
GUMMOW J: It does not matter in the end.
MR HARRIS: I do not press that.
GUMMOW J: We will treat paragraph 3 as not pressed and otherwise we will admit the affidavit of Michael John Glennan sworn 6 March 2003 and filed in Court.
MR HARRIS: Thank you, your Honour. Could I just take a moment or two in relation to that affidavit of 6 March 2003, because it clarifies a matter in respect of which I may have inadvertently misled your Honours earlier. The affidavit has a schedule which lists the exhibits. The first exhibit is MJG-1.
GUMMOW J: Yes, that is the terms of settlement.
MR HARRIS: That is where I have misled your Honours. They are terms of settlement of equity proceedings in the - and this does become clear from the composite statement of claim, but I have confused it in my earlier submissions.
GUMMOW J: There was more than one suit, was there not?
MR HARRIS: There was more than one suit.
GUMMOW J: Yes.
MR HARRIS: The terms of settlement that are constituted by MJG-1 were the original terms of settlement which contained as part of them a joint venture agreement, and that is the agreement dated 29 November 1985.
GUMMOW J: Yes.
MR HARRIS: Then the next document is MGJ-2, which is the relevant taxation return, and it contains a statement at paragraph 7. The very last page of MJG-2 disclosed the position to the Taxation Commissioner on the taxation return. The next document is MJG-3 and it is the objection which was lodged on behalf of the appellant against the income tax assessment. It sets out several pages of argument and then it annexes a statement of claim in some common law proceedings, No 15328 of 1987.
It was those common law proceedings which were settled and the terms of settlement form the second annexure to MJG-3. Your Honour will see some large numbering in the top right-hand corner of the page - large print numbering - and the terms of settlement begin at page 43. Those terms of settlement recite the discontinuance of the proceedings and in paragraph 2 note that the nominated defendants:
release the Plaintiff from all claims with respect to or arising out of:
(i) the Joint Venture Agreement -
which is the document which had formed part of the terms of settlement in the earlier equity proceedings.
GUMMOW J: So at the top of page 44, we need to put a cross-reference to - - -
MR HARRIS: Back to MJG-1.
GUMMOW J: Yes, thank you.
MR HARRIS: Your Honour will see on the page, which is incidentally numbered 46, as part of those terms of settlement - it is the last page of the terms of settlement - there is a schedule provided which provides for the payment of moneys, and it is pursuant to the operation of that schedule that the money was paid to the appellant which ultimately formed the basis of the tax assessment. To the extent that I may have misled your Honours earlier by suggesting that it was the terms of settlement in the equity suit - - -
GUMMOW J: No, we understand.
MR HARRIS: - - - it was in fact the later terms. I also should tender the orders of the Full Court of the Federal Court, which by the application the applicant seeks to quash, I suppose, so that your Honour has the record. So I seek to tender that.
GUMMOW J: Yes, the order of the Full Court dated 26 March 1999 will be exhibit A.
EXHIBIT A: Order of the Full Court dated 26 March 1999
MR HARRIS: May it please the Court.
GUMMOW J: Yes.
MR HARRIS: The first declaration sought in the notice of motion is that the Commissioner exceeded his jurisdiction in issuing or purporting to issue the income tax assessment and seeking a declaration that the assessment is absolutely inoperative or unlawful and similar declarations are then sought in respect of the judgment of his Honour Justice Kirby and then in respect of the judgments of the Administrative Appeals Tribunal and the Federal Court.
The first ground which appears at page 8 of the book is non-compliance with the Judiciary Act section 78B. I do not need to develop that any further. That has been considered. The second paragraph deals with section 75(v) of the Constitution. It is submitted that both the Commissioner of Taxation and the judges of the Federal Court are each respectively officers of the Commonwealth and that the jurisdiction under section 75(v) is attracted.
It is submitted that the essential basis for the application is that the Commissioner of Taxation has acted in excess of his legal authority and that forms the basis of the application for the writs - - -
GUMMOW J: Now, there are provisions in the Rules about time, are there not?
MR HARRIS: Yes, Order 55 rule 17, I think, your Honour. Order 55 rule 17 deals with a writ of certiorari. In my submission, it is limited to that form of writ.
GUMMOW J: Not mandamus?
MR HARRIS: No, it does not deal with mandamus. Mandamus, I think, is dealt with - the rule does not expressly deal with mandamus. The commentary to the - - -
HAYNE J: Well, 55 rule 30, does it?
MR HARRIS: Yes, that seems to be the rule and that provides for a time limit of two months.
GUMMOW J: But I think there is no such restraint for prohibition.
MR HARRIS: No. So that the first matter that I need to convince your Honours of is that time should be extended to allow this application and the basis upon which I do that is simply the nature of the matter.
The applicant submits that the challenge relates to a fundamental failure by the officers of the Commonwealth concerned to give effect to the appellant's constitutional entitlement for the exaction of taxation to be clothed with statutory authority and not otherwise and that such a fundamental claim should not be prevented by operation of the time limits.
HAYNE J: I take it you would say that if you have a good claim you should not be barred by time from pursuing it in circumstances where your client has attempted through various means to agitate claims of at least the same general kind?
MR HARRIS: Yes, thank you, your Honour. I think that is the essential basis upon which to put - and I suppose that no prejudice is pointed to in terms of a status quo having changed or matters of that kind arising in the interim, as far as I understand.
GUMMOW J: We will not rule on that at the moment. In other words, we will wrap it up with the other matters that we have to consider.
MR HARRIS: Moving then to the substance of the application, as the Court is aware, the applicant has previously challenged the Commissioner's assessment through the normal appellate process and it is submitted that the applicant has exhausted all rights of appeal. There was, of course, the entitlement to apply for leave to appeal, which is referred to by his Honour Justice Kirby in an earlier application for prerogative relief, but as to appeals as of right, it is submitted that the applicant has exhausted all rights of appeal and accordingly, subject to any independent or separate cause of action that may arise, the approach to this Court for prerogative or constitutional relief is the only course that is open to him.
It is submitted that the existence of the judgment of the Full Court of the Federal Court is no impediment to the granting of the remedy of prerogative or constitutional writs. In The Judges of the Federal Court of Australia; Ex parte WA Football League [1979] HCA 6; 143 CLR 190 at 206 to 207, the Court spoke of the overarching significance of this relief and it is submitted that, although the relief is spoken of as discretionary and although it may be that the existence of the judgment of the Full Court of the Federal Court may operate in the exercise of discretion, its existence is not an insurmountable impediment to the grant of section 75(v) relief.
I should indicate, although your Honours are clearly aware of it, that the applicant has made an earlier application for this relief and that that application was determined by his Honour Justice Kirby. His Honour, at paragraphs 31 to 38 of his judgment, indicated that he would not have rejected the application then before him on the ground that he was then considering. There it was argued that the order which had been made in the Federal Court by his Honour Justice Foster in which his Honour referred the matter back to the Administrative Appeals Tribunal to make orders constituted an impermissible attempt to delegate the judicial power to an administrative decision-maker and that, at least on that basis, a section 75(v) writ should issue.
I do not seek to develop that argument beyond referring to the authorities mentioned in the report, but it is submitted that prerogative relief might be granted on the basis that his Honour was there considering, and that certainly the judgment that his Honour has given would not form in any respect any bar to this Court considering again the issue of prerogative relief.
I should say, it is submitted, that the existence of his Honour's judgment, dealing with this application, would not form a bar to this Court dealing with the matter again, in any event, but certainly, the ground considered by his Honour, at the paragraphs to which I have referred, in my respectful submission, is open.
That does not, with respect, solve the problem for the applicant, because it leaves standing the orders of the Full Court and it is those orders which the applicant seeks to impeach, as it were, by the issue of further constitutional writs. The basis of the claim for the further constitutional writs is that the Commissioner is obliged to perform his function of assessing the taxpayer's - well, the Commissioner, and indeed the courts which followed, assessing the taxpayer's liability to taxation judicially, that is fairly and according to law, and the offices of the Commonwealth are liable to the controlling jurisdiction of the High Court in that regard. I think that reference has been made in the list of authorities to R v Electricity Commissioners [1924] 1 KB 171, R v The Commonwealth Rent Controller [1947] HCA 32; (1947) 75 CLR 361 and, in particular, Mooney v The Commissioners of Taxation [1905] HCA 61; (1906) 3 CLR 221.
GUMMOW J: Yes, you took us to that.
MR HARRIS: Yes, thank you, your Honour. So it is essentially the same point as was developed earlier and I do not wish to attempt to develop it further, other than to submit that it applies equally here that the decision to characterise the payment to the applicant as income constituted an error of law because it was contrary to the established case law, that is, reference to McLaurin's Case and the cases mentioned earlier, and it was contrary to the Commissioner's public tax ruling. In failing to deal with the assessment of the applicant's liability to taxation by applying that case law and that public tax ruling, there has been a performance of function in excess of lawful authority.
Now, to establish the factual basis for that submission, may I draw your Honours' attention in particular to the affidavit filed today of Michael Glennan sworn 6 March 2003 and, in particular, to the exhibit to that affidavit, MJG-5, which is the statement by the Commissioner to the Administrative Appeals Tribunal pursuant to section 37 of the Administrative Appeals Tribunal Act. That is a statement of findings on material questions of fact, evidence and reasons for the Commissioner's decision then under review in the Administrative Appeals Tribunal. Under the heading of "BACKGROUND", the Commissioner stated that:
The taxpayer lodged these returns, however in the 1988 income year the taxpayer did not include an amount of $1,365,000 received from Kumagai Australia Pty Ltd.
In fact, that did not include as income - it was referred to, of course, as the - - -
GUMMOW J: Yes, it was disclosed.
MR HARRIS: It was disclosed, but it was not - and then by way of background the Commissioner says:
The money was paid under the terms of a Joint Venture Agreement to win the contract for the construction of the Second Sydney Harbour Crossing.
We know from the analysis of the earlier exhibits to the agreement that that statement of fact is not accurate. The money was not paid under the terms of the joint venture agreement. The money was paid pursuant to the terms of settlement of the second cause of action, and it was the common law cause of action. The Commissioner was aware of that because those documents had been placed before the Commissioner - - -
GUMMOW J: This is just the section 37 statement under the AAT Act.
MR HARRIS: Well, it is, yes.
GUMMOW J: Your client had rights before the AAT.
MR HARRIS: Yes, that is so, but what we submit is that that, whilst it may have been possible for that statement of fact to be corrected, it would appear that it never was and so that, as was pointed out in the Bailey and Others Case, what is required is the proper application of the law to the facts as stated before the Commissioner of Taxation.
The facts as stated before the Commissioner of Taxation made it plain that the money was paid pursuant to terms of settlement whereas the Commissioner appears to have dealt with it on the basis that the money was paid under a joint venture agreement and then, we would submit, not only does the Commissioner apply the law to a misstatement of the facts, but he misapplies both the common law, McLaurin's Case and so on, and the public tax ruling. I refer to the last page of that same document, MJG-5, in which the Deputy Commissioner asserts that:
There was no realisation of a capital asset, rather the payment obtained under the Join Venture Agreement was a revenue receipt.
So it is submitted that the Commissioner's error constituted a jurisdictional error of law, was the performance of function outside his lawful authority and, in those circumstances, a writ of prohibition, and perhaps other writs ancillary to that, declarations, is the appropriate remedy in the circumstances.
To the extent that a writ may have been available to the applicant long ago when those errors, we would submit, were first committed by the Commissioner of Taxation, so, in the circumstances of this case, the writ should be available now. The decision of the Full Court of the Federal Court, being some steps removed in the appellant process, nonetheless is infected with the same defect and, accordingly, a writ of prohibition should issue prohibiting that decision from being given effect and, in effect, in aid of that, a writ of certiorari should issue quashing the decision.
I should go back to the notice of motion. On page 8 of the application book it is submitted - I think I have dealt with the matters that are raised on page 8, and page 9 deals with the statement of the law, which we have already dealt with, but which, we submit, forms the basis of an entitlement to prerogative relief as well as an entitlement to pursue the cause of action referred to in the other proceedings. To the extent that the judgment of his Honour Justice Kirby sitting in private chambers - - -
GUMMOW J: He was sitting in chambers - - -
MR HARRIS: I am sorry, sitting in chambers, yes, thank you, your Honour - might be said to operate either as a discretionary matter or in some other way as an obstacle to the granting of relief, the relief sought, it is submitted that those proceedings themselves were defective for a number of reasons. Those matters are set out at pages 12 and following of the application book.
GUMMOW J: That statement on page 12 four lines from the bottom is just wrong. His Honour was sitting in an open court. Paragraph 7.1.2, "sitting in private chambers", that is not so.
MR HARRIS: Yes, that is wrong, your Honour, with respect. I withdraw that. Would your Honour just excuse me for a moment. I am sorry, your Honour, I am struggling over this.
GUMMOW J: Yes.
MR HARRIS: At 7.2 on page 13 there is a matter which is raised by way of challenge to the judgment of his Honour Justice Kirby.
GUMMOW J: Paragraph 7.2.1 cannot be right either, the Court of Kings Bench did not go around prohibiting ministers of the Commonwealth doing things.
MR HARRIS: No. Your Honour, with respect, spent some time discussing the historical background in Aala.
GUMMOW J: Yes, that is right.
MR HARRIS: And I suppose, with respect, that what is set out at paragraph 7.2 really seeks to persuade to a different result or a different conclusion to that which your Honour arrived at in Aala.
GUMMOW J: Does it matter? What is the real point of complaint in 7.2?
MR HARRIS: The real point is this, I suppose, your Honour, that once an application is made it is said that the practice in relation to prerogative writs was that the applicant could elect either - it is 7.2.2(a), (b) and (c):
the Applicant to elect, either:-
(a) to make the subject application, ex parte . . . or
(b) to make that application to a full court, sitting in open court; and
(c) once having elected to -
do one or the other - - -
GUMMOW J: Where does this election come from?
MR HARRIS: It is referred to in particular - - -
GUMMOW J: But what is the legal source of it?
MR HARRIS: The legal source of it is submitted to be the practice before the King's Bench.
GUMMOW J: But we are governed by our own rules.
MR HARRIS: Yes, and your Honour went into some detail in this in Aala, with respect - - -
GUMMOW J: Is the submission that it is frozen at some particular time in another court in another country?
MR HARRIS: It is submitted that by the use of the word in the Constitution and picking up the technical language of the prerogative writ, that in the absence of some very clear statement to the contrary, then the law and procedures relating to that technical prerogative writ are to be adopted and it is submitted that - - -
GUMMOW J: The end point is, is it not, that the proceeding which Justice Kirby disposed of in that way should have gone to a Full Court in the first instance? Is that right?
MR HARRIS: Yes, and, in effect, what happened - - -
GUMMOW J: As is happening today.
MR HARRIS: Yes. Either it should have gone to a Full Court or, as Mr Glennan would submit, should have been dealt with ex parte on that day. He should not have been put in the position of having to give notice and to face a contested application before his Honour Justice Kirby and that he was deprived of what he says is his entitlement to elect to have it dealt with either on an ex parte basis, as he would have done, or to go direct to the Full Court.
CALLINAN J: It is not his election. It is a matter for the Court.
MR HARRIS: Yes, it is submitted - - -
CALLINAN J: Indeed, it is an advantage, or may be of advantage, to him that he be required to give a notice because the matter can then often be finally disposed of on full argument with one hearing.
MR HARRIS: Yes, substantial savings.
CALLINAN J: Savings in time and costs.
MR HARRIS: Yes.
CALLINAN J: Sometimes the writs are granted on - - -
MR HARRIS: Yes. Your Honour, it is clear that as a practical matter what your Honour observes is correct. I think in the list of authorities, which for some reason - - -
GUMMOW J: Anyhow, all of this is on the assumption that a Justice of this Court is liable to relief under 75(v).
MR HARRIS: Yes. I simply put it that his Honour's judgment should not stand in the way of any relief that this Court may be disposed to grant.
GUMMOW J: Yes. So that we can be quite clear about it, that 75(v) does not apply within the Court is made clear reasonably in Re Jarman; Ex parte Cook 188 CLR 595. The authorities are collected in various of the judgments at 603, 610 and 636.
MR HARRIS: I will, I think, proceed no further into those dark waters either. Could I give your Honours just a reference which forms, I think, the basis for the submission about this right to elect. It is on the list of authorities and it is a reference to the text, "The Law of Prohibition at Common Law and under the Justices Acts", by Curlewis and Edwards, Law Book Company 1910.
GUMMOW J: We looked at this in Aala, I think, to some degree.
MR HARRIS: Yes, and there is no need for me to take your Honours to it specifically now, but that is the point of reference for the submission concerning the election.
There are other bases for, as it were, submitting that the judgment of his Honour Justice Kirby would not form the basis of your Honour's refusing relief if your Honour were minded to grant it. I will not trouble your Honours with dealing with it expressly; it is referred to in the notice of motion at about paragraph 7.
Finally, your Honour, in paragraph 9 of the appeal book, which appears at page 16, there is an additional basis put forward for the grant of prerogative relief. It was argued in the other proceedings - in the appeal proceedings - that the failure by the Commissioner to apply the public tax ruling, and the failure by the Commissioner to then draw attention to the public tax ruling in the subsequent Administrative Appeals Tribunal and Federal Court proceedings, could form, in the context of the self-assessment regime, the basis of an allegation of equitable fraud.
Likewise, it is said that the same set of facts, which I will not repeat, gives rise to a denial of procedural fairness to the applicant, because the effect of section 37 of the Administrative Appeals Tribunal Act is to require the applicant to list all documents and all matters of relevance. The applicant, it is submitted, was entitled to and did proceed on the basis that all relevant documents were so listed, and in presenting his case to the Administrative Appeals Tribunal and to the Federal Court was entitled to proceed on the basis that all relevant materials had been disclosed.
Now, one can see the genesis for this sort of argument in the Aala decision. It is submitted that the applicant should have been entitled to present his full argument to the Administrative Appeals Tribunal and to the Federal Court, assuming that all documents and all relevant matters had been disclosed by the Commissioner, and yet a critical document - that is, the public tax ruling and the consequence which flowed from the public tax ruling within the context of the self-assessment regime - was not disclosed to him, and he was therefore not in a position to present what should have been his full argument. On that basis, it is submitted he was denied procedural fairness in much the same way in legal development as the applicant was in Aala's Case, and, on that basis, there is an entitlement to section 75(v) relief.
HAYNE J: Yes, thank you, Mr Harris.
MR HARRIS: Would your Honour just excuse me for a moment?
GUMMOW J: Yes, Mr Harris.
MR HARRIS: Your Honour, I am just being reminded of one authority which is not on our list which I have not given to your Honours and at the moment I do not have a note of it, a decision of the Privy Council, I think, Aaron's Reefs v Twiss - could I have leave to perhaps give your Honours that authority a little later in the day unless events are likely to conclude.
GUMMOW J: Yes, if they do, you can still give it to us as soon as possible thereafter.
MR HARRIS: Yes.
GUMMOW J: Yes, Mr McGovern.
MR McGOVERN: Your Honours, just whilst it is in mind, could I invite your Honours' attention to a provision in the Taxation Administration Act which modifies the obligations of the Commissioner under section 37. We have not put it in our written submissions, but the section in question is section 14ZZF.
GUMMOW J: Have you Reprint No 4?
MR McGOVERN: No, I regret to say we only have the CCH version of the legislation.
GUMMOW J: That can be treacherous.
HAYNE J: I suppose there could be a more confusing method of numbering, could there?
GUMMOW J: Page 173 of the print?
MR McGOVERN: Yes. Your Honours will see that section 37 of the AAT Act applies in relation to, "a view of a reviewable objection decision", and this was before the Administrative Appeals Tribunal such a decision, but the obligation of the Commissioner is to provide - this is (v):
every other document that is in the Commissioner's possession or under the Commissioner's control and is considered by the Commissioner to be necessary to the review of the objection decision concerned - - -
GUMMOW J: Sorry, ZZF?
MR McGOVERN: Section 14ZZF(a)(v).
GUMMOW J: Thank you, subsection (1) - 14ZZF(1)(a)(v).
MR McGOVERN: Yes. So in the function that the Commissioner has to provide the documents to the Administrative Appeals Tribunal, it is conditioned by anterior elements. I mean by that that the Commissioner, of course, exercising an administrative function has to take a view of the taxable facts, but based upon the income tax return of the taxpayer and the objection that is lodged by the taxpayer, the Commissioner then, we say, provided he forms a view which is a bone fide view of the taxable facts, the documentation that he is required to provide to the Administrative Appeals Tribunal are those which he considers to be necessary for the review.
Your Honours, I want to come to the question of the public ruling directly, but could I just deal with a couple of factual matters that I hope to be brief as I may be to set the context in which the Chief Justice dealt with the summary disposition of the claim and the circumstances in which he came to consider the argument based on the public ruling.
Now, the starting point - this will be fairly brief or as brief as I may be - is in fact in the affidavit of Mr Glennan that has been provided to the Court today. I regret to say I am not favoured with a document that has any consecutive numbering, but if your Honours turn through to the first third of the document your Honours will see a copy of the tax return.
GUMMOW J: Yes, we looked at that.
MR McGOVERN: If your Honours turn through to the next document after the tax return, there is a heading, "MICHAEL GLENNAN, SALE OF INTELLECTUAL PROPERTY". May I just invite your Honours' attention to the foot of that page to paragraph 5 which is a reference there to the terms of settlement, before taking your Honours to the top of the next page, which is in paragraph 6 headed, "The SHT Joint Venture Agreement". We might just remind the Court that this was a document appended to the tax return. Your Honours will see, about six lines down, the statement is made:
The total amount of $1.4 million was duly paid to and received by the taxpayer pursuant to the terms of the SHT joint venture agreement. The bulk of these moneys were paid to the taxpayer about the first week of July 1987. (About $40,000.00 was paid to taxpayer in December 1985 as a first instalment of the $1.4 million).
So the balance of the money was the $1.365 million which was the subject of assessment by the Commissioner under section 25(1) of the 1936 Act, but the first statement, if you like, of the characterisation of this payment is a statement contained in the tax return that it is a payment that is made pursuant to the terms of the SHT joint venture agreement.
That is then followed by the objection itself. The notice of objection your Honours will see on the first page of the notice supports or provides a number of contentions. Firstly, the claim that:
the assessed receipt . . . is not income received for services rendered -
and the second contention is that it was:
a capital receipt for the disposal of a pre-CGT asset.
And if your Honours look at the next page, which is the contentions in support thereof, at about paragraph (c) towards the foot of the page, the statement is made:
the payments received were not of a regular or recurring nature. The JVA envisaged payment in two lump sums of $35,000 (upon signing) and of $1,365,000 (upon requisite approvals being obtained).
Then if your Honours look at the next page, the last paragraph there:
The amount received is a capital receipt on disposal of a pre-CGT asset because:
(a) the amount received was a lump sum for the transfer of rights and the sale of the intellectual property owned by the taxpayer prior to 20 September 1985
(b) the designs, patents, and copyrights referred to in Schedule 1 of the JVA -
the joint venture agreement -
being the property disposed of by the taxpayer upon receipt of the Initiators' consideration ($1,365 million) is an asset as defined in S160A of the Act -
et cetera. That was the setting in which the matter went to the Administrative Appeals Tribunal. Could I just give your Honours some references to the Administrative Appeals Tribunal references. They are contained in the bundle of judgments that has been provided to the Court this morning. There are just a couple of passages that I would invite attention to. It is convenient for my purposes to take your Honours to the book in question. If your Honours turn through to the Administrative Appeals Tribunal reasons for decision of 8 November 1996.
GUMMOW J: Page 200.
MR McGOVERN: Page 202, yes, your Honour, that is the commencing point, and those reasons are numbered consecutively at the top of the page. Your Honours will see at the top of page 9, paragraph (c):
The Applicant's contention that the Joint Venture Agreement was executed under duress was demonstrably not tenable, more particularly having regard to the fact that he instituted legal proceedings against the Construction Companies and others relying on the terms of the Joint Venture Agreement, and received payment in full of the amount claimed under it.
And then if I could just take your Honours to page 16 of the reasons of the AAT, in paragraph 15 the statement is recorded there that:
The payment of $1,365,000, which was the subject of the assessment was received in consequence of the institution of the Applicant of legal proceedings. That factor does not, however, affect the character of the receipt, and it retains the same character as it would have done had the payment been made directly under the agreement.
I invite your Honours' attention to that fact because when the matter first came before Justice Foster it is recorded in Justice Foster's judgment that the Tribunal, having referred to the fact that it was paid as the result of the institution of legal proceedings, it was common ground before Justice Foster that that did not affect the character of the receipt In fact, the argument that was advanced before Justice Foster was that the amount in question was in the nature of a windfall gain.
The Full Court then came to consider the matter in the context of those background facts, the parties having by the mechanism of the objection and the claim that was advanced in the Administrative Appeals Tribunal sought to characterise the receipt either as either wholly income or wholly capital, depending upon a characterisation derived from the joint venture agreement. The Tribunal decision, of course, was upheld by the Full Court determining that it was open to the AAT to decide the case on that basis.
When the matter then came before this Court where the applications for special leave had been discontinued and the proceedings before Justice Kirby which were the subject of the application for leave to appeal had themselves been discontinued, just as the Chief Justice dealt with a case which, if you like, was, relatively speaking, shorn of any references to section 75(v) of the Constitution and the claim that was posited by the appellant was a claim based on section 75(iii), the Chief Justice analysed the claim that was made in the pleading. That analysis of the substance of the pleading that was dealt with by the Chief Justice appears at pages 294 to 295 of the second volume. At the foot of page 294 to the top of 295 the Chief Justice analyses the substance of the contention which is, as we understand it, not seriously disputed in terms of its general analysis. The substance of the pleading was in effect that the Commissioner should have assessed in accordance with the public ruling to which reference has been made today and that he issued an assessment contrary to section 170BA of the 1936 Assessment Act.
CALLINAN J: Everything seems to depend upon the correctness of that assertion, does it not?
MR McGOVERN: Yes, your Honour. I suppose the next point to take your Honours to is section 170BA of the 1936 Act.
GUMMOW J: As in force when? When was that put in the Act?
MR McGOVERN: It was put into the Act, I think, in July 1992 as a component of the self-assessment provisions.
GUMMOW J: That it what I thought. What is the date of this assessment?
MR McGOVERN: The assessment is for the year of income ended 30 June 1988 and I think it is - - -
GUMMOW J: When did the assessment issue?
MR McGOVERN: The assessment issued in June of 1995 but pertaining to a year of income prior to the commencement of the public ruling provisions in the Taxation Administration Act which have their companion, if you like, in section 170BA. Section 170BA gives efficacy to the public ruling regime which is this, if I can summarise it for your Honours. If there is a public ruling that is issued by the Commissioner and the way in which the tax law applies, the ordinary law according to the Income Tax Assessment Act applies in a way which is different and less advantageous to the taxpayer than that which is applicable if the public ruling applied, the Commissioner is bound to apply the public ruling. The reference in section 170BA is a reference to the ruled way. I think the income tax law is the other reference.
CALLINAN J: That would really make a ruling that was, in fact, erroneous in law the law for the purposes of a particular taxpayer in a particular - - -
MR McGOVERN: Provided it works an advantage to the taxpayer.
CALLINAN J: Yes, that is right.
MR McGOVERN: Yes, and that is certainly what is intended because under the self-assessment regime, obviously people need to be able to order their affairs. In the system prior to 1 July 1992 the old law, if you like, Wade's Case back in 84 CLR said that any action of the Commissioner could not estop the operation of the Act, so this is obviously designed to achieve certainty for taxpayers who have to self-assess.
CALLINAN J: Mr McGovern, I wonder if you can clear up one matter. That document to which we were taken starts off by saying, "This Determination" and then refers to a public ruling with which this section is concerned.
MR McGOVERN: Yes.
CALLINAN J: Does anything turn on its being called the determination? Why is it not just called the public ruling? I do not quite understand the terminology. I do not think anything turns on it, but - - -
MR McGOVERN: I do not think it does. I will check on that, your Honours, and this perhaps reminds me of something that occurred in argument earlier on and that was the question of whether or not the ruling could simply be put out of court altogether, so to speak, because of the timing question. Now, I leave to one side the question of the construction of the Act and section 12(2) of the self-assessment provision but I think what was stated by your Honour Justice Callinan and also by Justice Hayne I would respectfully submit that - - -
CALLINAN J: I do not know whether Justice Hayne said quite the same as I did. No.
MR McGOVERN: No, no, I think I was going to say that - - -
CALLINAN J: I think Justice Hayne was suggesting that the dispute referred to may have been the dispute between the Commissioner and the taxpayer which was not the way I initially read it and, at the moment, for myself, I am not sure what the answer is.
MR McGOVERN: I think the more natural reading of it is that it refers to a dispute between the Commissioner and the taxpayer and our point is that the ruling regime is applicable from 1 July 1992 and - - -
GUMMOW J: Applicable to what?
MR McGOVERN: Applicable to any arrangements that occur after 1 July 1992 or which are straddling, if you like, 1 July 1992.
HAYNE J: But how does that sit with the sentence immediately before that to which we were taken earlier at page 271:
Unless otherwise stated, this Determination applies to years commencing both before and after its date of issue.
MR McGOVERN: Your Honour, in a way that I will seek to develop later, what I think is intended by a consideration of both the Taxation Administration Act and section 12(2) is to accommodate a position that occurs where there is a ruling which is published after 1 July 1992 which covers the situation from 1 July 1992 onwards, and it is passed in that sense. But I would prefer to come back to that later on if I may to give it a little bit more precision. But what I was taking your Honours to at this stage was section 170BA.
CALLINAN J: Just before you leave that, I think, with respect, what Justice Hayne put to you must be right because it is unlikely that the conflict that is referred to would be a conflict with the terms of a settlement which produced the original payment which is the subject of the dispute, that is, parties other than the Commissioner and the taxpayer. What Justice Hayne put to you, I think, must be correct, with respect.
HAYNE J: For my own part, I would have thought that the relevant starting point is 14ZAAH(1) and its reference to applying:
to all arrangements in the class, whether past, present or future -
in a sense.
MR McGOVERN: Yes, I appreciate what your Honour is putting - - -
HAYNE J: This is perhaps diverting us, is it not, from the core of the present case if I am right in understanding Mr Harris to have said that the ruling in this case simply restated applicable law.
MR McGOVERN: Yes. We are at common ground on that, your Honours, and our point ultimately is that - the fact that there might have been a public ruling that covered the position does not matter at all if it simply constitutes a re-statement of the applicable law.
CALLINAN J: Mr Harris' argument goes beyond that; it says, all right, accepting that to be so, because it is a public ruling in some way it had to be disclosed to, perhaps even indeed specifically brought to the attention of, the taxpayer. It is not clear to me at what stage that is said it should have been done, but that seems to be the argument, so you really do not have to be concerned with the terms of the ruling or the date of its application.
MR McGOVERN: No. The first leg of the argument is to say that if the ruling simply replicates or is co-terminal with the general law, then the second question becomes really unnecessary to decide. We might just parenthetically observe that that is what the Chief Justice was considering when he made the statement that it was unnecessary for him to come to any concluded view about whether the ruling regime would have applied.
The question of the Commissioner's obligation of disclosure, if you like, in the context of a public ruling regime is, in our respectful submission, to be determined having regard to the nature of the ruling. If it simply replicates the general law, then we go to section 170BA(3) of the Income Tax Assessment Act and it is the critical provision because, if I could just take your Honours to subsection (3), it says:
Subject to section 170BC -
and 170BDA, and they are not material for the present purposes -
if:
(a) there is a public ruling on the way in which an income tax law applies to a person in relation to an arrangement ("ruled way"); and
(b) that law applies to a person in relation to that arrangement in a different way; and
(c) the amount of final tax under an assessment in relation to that person would (apart from this section and section 170BC) exceed what it would have been if that law applied in the ruled way;
the assessment and amount of final tax must be what they would be if that law applied in the ruled way.
So it is the section that has the effect of saying that if the Commissioner has provided a public ruling which is contrary to the law, then the Commissioner is bound to assess in accordance with the ruled way. In a situation where both the ruled way and the law are the same, the Commissioner has not any obligation other than to apply the law.
What the Commissioner did in the circumstances of the present case was to come to a view of the taxable facts, to use perhaps an element of jargon from the Rubicon of taxation law, that he was entitled as an administrator to take a view of the taxable facts and he did not have to make a determination of fact one way or the other but, provided he made a bona fide attempt to assess in accordance with what he perceived the law to be, then that is an assessment which, even if it did not satisfy a substantive provision of the Assessment Act, is protected by the combined operation of sections 175 and 177 of the 1936 Act.
The way in which the Commissioner wishes to put the case in relation to the matter that was before the Chief Justice, the claim that was being advanced in the pleading by the present appellant was a pleading which needed to come to terms with the existence of the binding determinative decision of the Full Court of the Federal Court upholding the Administrative Appeals Tribunal.
The way in which it was sought to deal with the question was to assert that there was equitable fraud which had been perpetrated by the Commissioner and that that equitable fraud was sufficient to set aside or to cause this present pleading to go forward and, accordingly, that the judgment of the Full Court could not be relied upon.
GUMMOW J: And with the fresh application, it is brought under the umbrella of procedural fairness and natural justice.
MR McGOVERN: Yes, but his Honour the Chief Justice, I think, referring to a particular brand of advocacy, said that in effect he was satisfied on the materials before him that that was not a sustainable claim. May I develop it this way. In our written submissions, we have referred to the criteria set forth in Wentworth v Rogers (No 5). If I could summarise the criteria for equitable fraud, we would submit all of those elements were absent in the present circumstance. Firstly, there have to be newly discovered facts, secondly, which could not have been discovered by exercise of reasonably diligence previously.
Just pausing there, on the question of a public ruling, we would submit it must be a fortiori in relation to the existence of the fact, and there was an absence of any statement as to why it could not have been availed of by the present appellant at any earlier time. The facts must make it reasonably probable that the case will succeed, and again that is an element that is not sustainable. In the case before the Chief Justice, it was not sustainable because the Chief Justice said - we would respectfully submit, correctly - that the Commissioner's view of the facts that the amount was income was consistent with the ruling. The ruling was not different from the general law position.
So that the availability of the ruling would not itself make any difference, would not lead to any different outcome or reasonably probable - that the case would succeed. Next, the question of whether or not the other party - in this case the Commissioner - who has the advantage of the judgment of the Full Court and the AAT had been in any way responsible for fraud by reason of non-disclosure. We submit that because it was a published ruling, not hidden from anybody - it was available, could have been the basis for an objection, it could have been the basis for a claim that was brought in the Administrative Appeals Tribunal and it was not - that in those circumstances, all of those elements are missing.
In relation to whether the public ruling itself would have made a difference, as we have said at the Bar table, the ruling is consistent with and co-terminal with the general law position. That is common ground. The Commissioner's obligation to assess is not modified in any way by the existence of the ruling beyond what his ordinary obligation to assess as an administrator happens to be - that is, to assess bona fide, and if he does so in a bona fide exercise of statutory power, relating to the subject matter of the legislation, and it is reasonably capable of reference to the power to assess conferred upon the Commissioner by the statute, then the Commissioner's obligation has been discharged.
GUMMOW J: There is another dimension to it too. Insofar as what is involved is impeaching what transpired at the administrative level in the AAT, I am not sure this equitable fraud doctrine is the appropriate field of discourse. It would be some abuse of administrative power.
MR McGOVERN: Yes, and, of course - - -
GUMMOW J: Insofar as it is impeaching the judgment of a court. That is what the document is about.
MR McGOVERN: May I remind your Honours that the function or task of the Administrative Appeals Tribunal is not at large. It is to do over again within the terms of the objection the same administrative function that the Commissioner undertook in the first place, so the Tribunal is necessarily dependent upon the terms of the objection to reach its decision and that in turn is within the taxpayer's camp to provide the necessary basis upon which he wishes to contest the assessment.
CALLINAN J: Mr McGovern, what is the provision for the promulgation of a public ruling? You need not give it to me now, but if you can look it up and give it to me after lunch.
MR McGOVERN: Yes, if I may do that, your Honour.
GUMMOW J: We will sit until 1, Mr McGovern.
MR McGOVERN: Yes, your Honour. Your Honours, our submission is that the assessment in question must be treated to have been produced on the basis that it was reasonably open to the Commissioner to come to that view of the facts. The Commissioner did not conclude that the amount was received as a mixed fund of capital and income or that it was the subject of any compromise of litigation.
Again, I might interpolate that the amount in question, the balance of the payment that was due under the terms of the joint venture agreement, the $1,365,000, was a payment in full of the amount that was obliged to be paid under that agreement. There was no element of compromise of the sort that was material to a consideration of the cases of McLaurin and Allsop where there was a mixed fund of capital and income and where some aspects of the claim were aspects of a claim for capital amounts and some for income tax amounts.
The Administrative Appeals Tribunal and the Full Court, after a complete and comprehensive determination of the matter in Part IVC review proceedings have upheld the Commissioner's view. In those circumstances, our respectful submission is that the application of the ruling could not alter the outcome or give rise to any different result, so that additional element of equitable fraud that is necessary to be established is missing, and in those circumstances, we would respectfully submit that the Chief Justice in dealing with the summary disposal application must be seen to have considered properly, in our submission, the fact that the public ruling was saying nothing more than what the general law position was; that the effect of the decisions of the Full Court affirming the Administrative Appeals Tribunal was that the amount in question was properly assessable as income under section 25(1), and a distillation of the claim that was being propounded by the appellant before the Chief Justice was nothing more than an attempt to reagitate the primary facts which had already been quelled by the controversy - I can finish directly on this point, your Honours, before resuming in due course.
GUMMOW J: Yes, please.
MR McGOVERN: I have just distracted myself. May I take the opportunity to - I think I have looked at too many 14ZZFs in the day.
GUMMOW J: Very well. We will adjourn until 2 pm.
AT 12.59 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.00 PM:
GUMMOW J: Yes, Mr McGovern.
MR McGOVERN: Your Honours, could I attempt to address a couple of the questions that Justice Callinan asked concerning public rulings and in relation to the way in which they obtain their status, if I could invite the Court's attention to section 14ZAAI of the Taxation Administration Act, which in subsection (1) says:
The Commissioner makes a public ruling by publishing it, and publishing notice of it in the Gazette.
And under section 14ZAAJ:
A public ruling is made at the later of the time when it is published and the time when the notice of it is published in the Gazette.
And it can then be withdrawn in two circumstances that are specified in section 14ZAAK either if the Commissioner withdraws the public ruling "by publishing notice of the withdrawal", or 14ZAAK(2):
If the Commissioner makes a public ruling that is inconsistent with an existing public ruling, the existing ruling is taken to have been withdrawn to the extent of the inconsistency.
And I think section 14ZAAL also deals with the effect of withdrawal and the section I was searching for, 14ZAAM that:
If:
(a) the Commissioner makes a public ruling about a tax law (the old law); and
(b) that tax law is re-enacted or remade (with or without modifications, and whether or not the old law is repealed);
the ruling is taken also to be a public ruling about the tax law as re-enacted or remade (the new law), but only so far as the new law expresses the same ideas as the old law.
HAYNE J: If it matters, ZAAM is a later edition to these provisions but I do not know that anything turns on that. I get tangled in what is in operation at what time.
MR McGOVERN: Yes. That does give rise to the question of the timing. As I have emphasised before lunch, that does not matter for the purposes of the argument but it does turn upon a consideration. Firstly, the starting point, in our respectful submission, is to look at the provisions as they are addressed in the Taxation Laws Amendment (Self Assessment) Act No 101 of 1992. At the beginning, it is:
An Act to amend the law relating to taxation so as to improve arrangements for the self assessment of tax, and for related purposes. [Assented to 30 June 1992]
Section 12(2) deals with a situation if an arrangement "began to be carried out before 1 July 1992".
GUMMOW J: Yes, we have seen that provision.
MR McGOVERN: Yes, your Honour.
GUMMOW J: What do you say about this phrase, "that began to be carried out" in 12(2), upon which Mr Harris placed some reliance when he connected it back to - - -
MR McGOVERN: The connection seems to be more referable to section 14ZAAB and to be dealing with a situation which relates to a circumstance where something occurs prior to 1 July 1992 and, if you like, straddles that date, 1 July 1992, and requires other things to occur after 1 July 1992, although it is not - - -
GUMMOW J: How does it apply to this case?
MR McGOVERN: There is nothing precisely in the legislation that addresses the situation of this case but by implication, if you have a situation where you have an arrangement which is wholly completed prior to 1 July 1992, that would not suggest that it would be in a better position than one which involves an arrangement that straddles 1 July 1992 and which is not covered by the public ruling. There is nothing precisely that answers the question other than by the implication to which I have referred.
In our written submissions we did give your Honours a reference to a case of Victoria Co Ltd v Federal Commissioner of Taxation. That is a judgment of the - - -
GUMMOW J: Paragraph?
HAYNE J: Paragraph [23], bullet point 2.
MR McGOVERN: Yes, thank you, I am grateful to your Honour.
GUMMOW J: 182 ALR 463.
MR McGOVERN: Yes, your Honour. That was a situation which involved an original acquisition of a loan in 1991 and a subsequent loan being arranged in 1993. The 1993 loan was used to repay the 1991 debt and so it is what I would call a straddling arrangement, straddling 1 July 1992, and the Full Court of the Federal Court considered the situation pertaining to a claim which was a claim that the public ruling provisions applied in those circumstances. The court took up the issue firstly at paragraph [10] at page 468 which reproduces, helpfully, the applicable provision, starting with section 170BA of the 1936 Act and the applicable provisions that I have taken your Honours to, including 14ZAAA, an arrangement there being very widely defined in an inclusive sense including contracts and in paragraph [12] at page 469, the provisions of the amending Act.
At page 471 in paragraph [18] their Honours draw attention to the definition of "arrangement" which they say:
is expressed in this way to give the broadest flexibility to the commissioner to rule on what may be an arrangement -
and at the foot of page 471 in paragraph [21], the last sentence, their Honours say:
s 12(2) would require that the overall arrangement be one that had begun to be carried out on or after 1 July 1992. However, the present arrangement was in fact commenced to be carried out on 6 September 1991 by the borrowing on that day and could not be the subject of a valid public ruling.
And then the concluding sentence in paragraph [22] they say:
A ruling, therefore, which dealt with the borrowing must, having regard to s 12(2), apply only to an eligible contract that was entered into on or after 1 July 1992. For it to extend to an eligible contract entered into before that date would mean it was beyond power.
That is as far as I can take the question, your Honours, in terms.
GUMMOW J: Thank you.
MR McGOVERN: Your Honours, I had started to deal with the judgment of the Chief Justice and the attack that had been made on the basis of equitable fraud. I do not want to say anything further about that. The jurisdiction that was invoked, section 75(iii), in a context of the discontinuance of the claims for prerogative relief, in our submission, meant that there was no problem in the Chief Justice approaching the matter on the basis of looking at the case as being an abuse of process, either in the sense of being a collateral challenge to existing judgment, or in the other sense of being vexatious, in that it was seeking to relitigate or duplicate litigation that had already been resolved between the parties at an earlier point. In that regard, the Chief Justice, in our submission, at page 294 of the second volume, referred to the cases that we had in turn referred to. Finally, at page 298 of the second volume, he was correct to deal with the matter in the way in which he did.
It is at page 294 at line 12 or thereabouts, the contention that was put on behalf of the Commissioner, referring to those cases - I will not weary your Honours with the reference to the particular passages, but, for example, in Anshun's Case, Justice Brennan, as he then was, talks about it being impermissible to overhaul or to overtake an existing judgment. The only way one can do so is by the mechanism of appeal.
At page 298 in the second volume, his Honour puts the deficiencies of the case on really the two bases that would answer the proposition of being an abuse of process, either being vexatious or, alternatively, a collateral challenge to an existing judgment. The only way in which the appellant could have succeeded on this amended statement of claim was by establishing that the receipt in question was in fact a lump sum consisting partly of capital and partly of income, and that must necessarily involve a direct challenge or a collateral challenge to the Full Court decision.
Your Honours, I do not understand it now to be seriously argued that the Chief Justice was entitled not only to look at the pleadings but that he was also entitled to look at surrounding facts, including affidavits. The rule in question that the Commissioner moved on, I think Order 26 rule 18 covers not only a demurrer but also covers a situation where there is in addition vexation and it is a rule which is borrowed from the equivalent English rule and, for your Honours' assistance, in Metropolitan Bank v Pooley, I think it is, there is an extensive discussion about the origins of the English rule which is replicated in Order 26 rule 18. So it was perfectly appropriate to look at surrounding circumstances, affidavits - - -
CALLINAN J: His Honour could look at them from the Anshun point anyway because the circumstances are relevant to its application.
MR McGOVERN: Yes. We have given reference to Attorney-General v Munnings, I think, and to General Steele, the well-known cases where on summary disposal applications there could be quite extensive argument that is undertaken.
Your Honours, I wanted to briefly deal with a postulated situation of the Commissioner and his obligation to consider a ruling as a springboard to considering the claims that are now made under section 75(v). The short point is, in our submission, that provided the Commissioner assesses bona fide, the assessment attracts the protection of section 175 and section 177 of the Assessment Act and that concludes the question of due making of the assessment. May I give your Honours some references to the judgment of this Court in Richard Walter - - -
GUMMOW J: Are these in your outline?
MR McGOVERN: They are, your Honour.
GUMMOW J: Which paragraph?
MR McGOVERN: Really starting at paragraph 37 of the written submissions, your Honours - the judgment in Richard Walter [1995] HCA 23; 183 CLR 168. There are a number of different passages that would be applicable in the circumstances of the present case, but may I confine myself at this stage just to invite your Honours' attention to what Justice Brennan said at page 194 at about four or six lines down:
The privative clause is given effect despite non-compliance with the provisions governing the exercise of the power, but only if the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation and it is reasonably capable of reference to the power given to the body purporting to exercise it. The validating provision cannot be so construed if the impugned act by the repository of the power is not referable to the power given to the repository -
Just at the top of page 195 in the same judgment, about three lines down, his Honour says that:
when s 175 declares the validity of an assessment to be unaffected by non-compliance with the general provisions of the Act governing the ascertainment of a taxpayer's taxable income and tax liability, that provision is to be given an operation according to its tenor provided the elements of the Hickman principle are satisfied.
GUMMOW J: Paragraph 16 of your outline deals with this as well, and following.
MR McGOVERN: Yes, your Honour. So, accordingly, assuming that the Commissioner failed to have regard for a public ruling, the circumstances in which that might give rise to an undermining of the assessment would only occur if the Hickman principle was not satisfied. If the Commissioner had taken the view, on his administrative view of the facts, that the true position was that a particular tax outcome pertained by reference to a public ruling but deliberately assessed with paying no regard to the ruling. So, in other words, acted in an absence of bona fides.
However, in the present circumstances, as your Honours would see from the application book, at page 42 of the application book, the approach that the Commissioner took - and this is in a context of the facts to which I had earlier taken your Honours to - at the paragraph commencing at line 19 the Commissioner's expressed view was that:
There was no realisation of a capital asset, rather the payment obtained under the Joint Venture Agreement was a revenue receipt. It has therefore been determined that the amount of $1,365,000 received under the Sydney Harbour Tunnel Joint Venture Agreement is assessable income under section 25, or in the alternative section 25A -
and, of course, that was a conclusion which has been considered and upheld by the Tribunal and then by the Full Court under the statutory appeal and review process.
So far as the claim for the issue of constitutional writs is concerned, by submission is that, as was stated by their Honours in the joint judgment in Richard Walter at page 205 in the first full paragraph of the joint judgment of Justices Deane and Gaudron, that although the:
legislative powers which are conferred upon the Parliament by section 51 of the Constitution are all "subject to" the provisions of section 75. That being so, the jurisdiction which section 75(v) confers . . . cannot be withdrawn . . . the right to invoke the jurisdiction is essentially an auxiliary or facultative one - - -
GUMMOW J: It is also concerned with jurisdictional error, as distinct from errors but within jurisdiction.
MR McGOVERN: Yes, your Honour. In the case of the Commissioner having regard to the context of the Part IVC appeal rights and the assessment having been treated as duly made by reference to section 177, the invocation of the jurisdiction under section 75(v) is foreclosed by those sections 177 and 175 as was stated by their Honours in the Richard Walter Case. The procedural steps do not give rise to any legally enforceable duty that can attract the operation of the section.
In my respectful submission, the Full Court of the Federal Court cannot be said to have erred within jurisdiction because it failed to proceed on the basis of the ruling. Firstly, for the reasons already expressed, that the ruling was not referred to in the objection or before the AAT and section 44 of the Administrative Appeals Tribunal Act constrained the Full Court to deal with the matter before it, namely the question of law that was presented for its consideration. It was not unlawful for the Federal Court to have failed to consider the public ruling because it simply was not raised and therefore there could not be any error of law presented for its appellate review. As I have previously submitted, the ruling did not have any part to play in a material sense in the Part IVC proceedings in any event.
Your Honours, what I wanted to say in relation to the application under 75(v) in conclusion is that in the judgment of this Court in McBain, in particular in the judgment of Justice Hayne, the question of discretion looms large. I put it this way, that if your Honours look at the decision in McBain [2002] HCA 16; 188 ALR 1, in dealing with the question of relief in connection with certiorari, I would rely upon the passages in the judgment of Justice Hayne commencing at paragraph [281] page 72 and earlier to paragraphs [278] through to [280] where, as here, the availability of alternative rights of appeal are material to the consideration of whether or not the discretion should be exercised.
If, as here, the appellant has discontinued applications for special leave to appeal or has discontinued an application to leave to appeal from the judgment of Justice Kirby, that is nonetheless an appeal avenue that was available to him and, as a matter of discretion, the Court should refuse relief on that basis, and again on the basis of timeliness, Order 55 rule 17 and Order 55 rule 30 have been referred to in the course of argument. The judgment of the Full Court is nigh on four years old now, I think, certainly March 1999, and in the absence of any challenge to the Full Court decision in the orthodox fashion through an appeal, or an application for special leave, again the discretionary factors should guide the Court to refusing the remedy in any event. They are my submissions, your Honours.
GUMMOW J: Thank you. Yes, Mr Harris.
MR HARRIS: Your Honour, I am instructed to make application for an order, if it is convenient to the Court, which may assist in the orderly resolution of these two matters. During argument I have, and my learned friend has, referred in one matter to evidence which is formally filed in another and vice versa and, for example, my learned friend referred to the affidavit which has today been filed in the writs matter when he was addressing his submissions on the appeal matter, 195, and, therefore, so as to facilitate taking all of that into account, I seek orders in each case that the evidence in one matter be available to be relied on in the other.
GUMMOW J: There is a slight obstacle there insofar as we are hearing an appeal we are limited to the record that was below.
MR HARRIS: Yes.
GUMMOW J: The record that was below looks fairly ample.
MR HARRIS: Yes.
GUMMOW J: The record below certainly includes the decisions of the Full Court and Justice Kirby.
MR HARRIS: Yes.
GUMMOW J: Anyhow, that is the constitutional imperative, section 73 that.....the making of that order.
MR HARRIS: Yes, true.
GUMMOW J: But I am not sure it has any real prejudicial outcome anyway.
MR HARRIS: I hope that that is so, your Honour. It is just that there was some, certainly on my part, perhaps, reference to - - -
GUMMOW J: I did not hear any objections from Mr McGovern, so I think you had better leave the possum in its log.
MR HARRIS: Your Honour, could I give your Honour a couple of references to matters that deal with the exercise of ordinary diligence. The appellant should have been aware of the public tax ruling. The first is the matter that I was trying to remember before lunch.
GUMMOW J: Yes.
MR HARRIS: Aaron's Reefs Limited v Twiss [1896] AC 273, a decision of the Privy Council - I have copies if it is convenient to hand them up.
GUMMOW J: Thank you.
MR HARRIS: Also perhaps I could deal with a couple of others at the same time: Pioneer Laundry and Dry Cleaners Limited [1940] AC 127 and, your Honour, a discussion in an American decision of the Supreme Court of Missouri of 4 November 1889 which talks about distinctions between actual, presumptive and constructive notice and if I could hand those up.
GUMMOW J: The citation of the last case?
MR HARRIS: It is 12 SW 287.
GUMMOW J: Thank you. That is Drey v Doyle.
MR HARRIS: His Honour Justice Callinan made an inquiry of my friend as to how a public tax ruling obtained its status and my friend referred, quite rightly, to section 14ZAAI which he read out. In section 14ZAAI as it existed in the earlier version of the Taxation Administration Act in force during the year of the assessment, the provision reads:
The Commissioner makes a public ruling by publishing it -
I think the provision my friend read earlier went on to "in the Gazette" which I think was added to the section a little later. I do not know that it makes any difference, but it - - -
CALLINAN J: It just provides by publishing it?
MR HARRIS: Yes. I did not understand it to be my friend's submission, but I am instructed that it may have been submitted that the compromise or the settlement upon which the appellant says his taxation return should have been assessed was in some way not genuine. I do not understand that to be the Commissioner's position. Thank you, your Honour.
GUMMOW J: No, I do not think we do, either.
MR HARRIS: Yes. Of course, it is submitted that the factual basis for the assessment is, as settled by CSR, the settlement document alone and not any other surrounding circumstances. May it please the Court.
MR McGOVERN: Just before your Honours retire, I had neglected to invite attention to our submissions in relation to section 78B. I did not want to say anything more than that.
GUMMOW J: We have read them, thank you. The Court will consider its decision in these two matters and we will adjourn until 10.15 am on Tuesday, 11 March in Canberra.
AT 2.34 PM THE MATTER WAS ADJOURNED
AustLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.austlii.edu.au/au/cases/cth/HCATrans/2003/614.html