Re Terrule Pty Limited and Geoffrey George Manners v Deputy Commissioner of Taxation of the Commonwealth of Australia [1985] FCA 33; 85 Atc 4173 / 5 FCR 153 (18 February 1985)

FEDERAL COURT OF AUSTRALIA

Re: TERRULE PTY. LIMITED and GEOFFREY GEORGE MANNERS
And: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA
Nos. VG 307 and 326 of 1984
Administrative Law
[1985] FCA 33; 85 ATC 4173 / 5 FCR 153

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
Jenkinson J.(1)

CATCHWORDS

Administrative Law - application for order of review - decisions under Income Tax Assessment Act 1936 relating to recovery of income tax assessed - objection to competency - whether decision to sue for recovery of income tax is a decision made under an enactment - whether decision to sue for recovery of income tax is a decision of an administrative character - restraint of respondent from entering judgment in the Supreme Court of Victoria for recovery of income tax until the hearing and determination of the application for order of review.

Income Tax Assessment Act 1936, ss. 8, 201, 207, 208, 209 Administrative Decisions (Judicial Review) Act 1977, ss. 5, 7, 15(1), 16(1) Audit Act 1901, s.70C

James v. Deputy Commissioner of Taxation [1957] HCA 36; (1957) 97 CLR 23

Re W. Carter Smith; Ex Parte Commissioner of Taxation (1908) 8 SR (NSW) 246

The Hells Angels Limited v. Deputy Commissioner of Taxation VG113 of 1984, unreported, judgment 20 December 1984

Director General of Social Services v. Hangen [1982] FCA 262; (1982) 45 ALR 23

Director General of Social Services v. Hales [1983] FCA 81; (1983) 47 ALR 281

Administrative Law - Judicial review - Decisions to institute proceedings for the recovery of income tax - Whether decision made under an enactment - Whether decision of an administrative character - Income Tax Assessment Act 1936 (Cth), ss 8, 201, 207, 208 and 209; Administrative Decisions (Judicial Review) Act 1977 (Cth), ss 5, 7, 15(1) and 16(1). A decision by a Deputy Commissioner of Taxation to institute proceedings for the recovery of income tax is a decision of an administrative character made under an enactment.

James v. Deputy Commissioner of Taxation [1957] HCA 36; (1957) 97 CLR 23; Re W. Carter Smith; Ex parte Commissioner of Taxation (1908) 8 SR (NSW) 246; The Hells Angels Ltd v. Deputy Commissioner of Taxation (1985) 85 ATC 4034; Director-General of Social Services v. Hangan [1982] FCA 262; (1982) 70 FLR 212; Director-General of Social Services v. Hales [1983] FCA 81; (1983) 47 ALR 281, referred to.

HEARING

Melbourne, 1985, February 8, 11, 13, 14, 18. 18:2:1985
OBJECTION TO COMPETENCY

Objection to competency of an application for orders of review pursuant to the Administrative Decisions (Judicial Review) Act 1977.

N. H. M. Forsyth QC and J. De Wijn, for the applicant.

D. R. Meagher QC and R. A. Finkelstein, for the respondent.
Cur adv vult

Solicitor for the applicant: Hinty, Jepson & Kelly.

Solicitor for the respondent: Australian Government Solicitor.
GFV

ORDER

1. The objection to competency of the application with respect to the decision specified in paragraph 8 of the originating application be overruled.

2. The applicant's costs of the said objection to competency be paid by the respondent.

3. Execution of the said order for costs be stayed until the hearing and determination of the originating application or further order.

4. The hearing of the application for an order of review with respect to the decision specified in paragraph 8 of the originating application and with respect to the decisions specified in paragraphs 4 and 5 of the said application be fixed for 27 February 1985.

5. Except upon a contrary direction at the hearing evidence on that said hearing be given orally.

6. Until further order no notice of discovery or notice requiring answers to interrogatories be filed or served.

7. Each party's costs to and including this day of the directions hearing and of the motion of which notice was filed 14 January 1985 be reserved.
The Court Further Orders upon the undertaking of the respondent by his counsel that until the hearing and determination of the applications with respect to the said decisions specified in paragraphs 8, 4 and 5 of the originating application or until further order the respondent will not move for an order that judgment be entered against the applicant or enter judgment against the applicant in action No. 5101 of 1984 in the Supreme Court of Victoria except after the expiration of 5 days from service on the applicant's solicitor of written notice of his intention so to move or so to enter judgment that

1. Each of the directions hearing and the said motion be adjourned to a date to be fixed by either party on reasonable notice to the other party.

2. The hearing of the motion of which notice was filed on 15 February 1985 be adjourned until 9.30 a.m. on 19 February 1985. Orders accordingly

DECISION

Objection to the competency of an application for an order of review in respect of an administrative decision; and other interlocutory proceedings.

2. The respondent has sued the aplicant in the Supreme Court of Victoria to recover sums of money alleged to be due under the Income Tax Assessment Act 1936. The action, numbered 5101 of 1984, is pending. Before the action was commenced on 30 November 1984 the applicant, to which I will refer as Terrule, had been assessed to income tax as a trustee in respect of the years of income ended 30 June 1980 and 1981. Notices of the assessments specifying the date on which the tax should be due and payable had been served on Terrule and each of those dates had passed. Objection against each assessment has been lodged, disallowed and referred to a Board of Review, but neither reference has been heard. The action against Terrule is for recovery of the income tax assessed and additional tax pursuant to section 207 of the Income Tax Assessment Act aggregating $3,335,948.80 and interest thereon from the date of the writ. By a single application filed 30 Noveber 1984, Terrule aplied for an order of review under section 5 of the Administrative Decisions (Judicial Review) Act 1977 in respect of each of a number of decisions made by the respondent in relation to the recovery of the income tax assessed. The respondent having filed and served a notice of objection to the competency of several of those applications, I ordered that the objection to the competency of the application for an order of review in respect of one of the decisions be heard and determined before the hearing of the application to which that objection relates. That decision is described in paragraph 8 of the originating application thus:

"The decision of the respondent to institute
proceedings in the Supreme Court of Victoria
for the immediate recovery of income tax
alleged to be due and payable and additional
tax under section 207 of the act alleged to be
due and payable by the applicant."

3. The grounds of objection to competency stated in the notice are that the decision was not a decision of an adinistrative character and that that decision was not made under an enactment. In support of the second of those grounds, Mr. Meagher Q.C., who appeared with Mr. Finkelstein for the respondent, submitted that the debt which section 208 of the Income Tax Assessment Act creates is one which the Executive Government of the Commonwealth may recover by suit in a court by virtue of the common law. Mr. Meagher spoke of the Commonwealth's power to recover monies due to the Commonwealth as a prerogative power, but his argument may be accommodated to a description of the power as an inherent power of the Executive Government deriving from Chapter II of the Constitution. Section 208 of the Income Tax Assessment Act provides:

"Income tax when it becomes due and payable
shall be a debt due to the Commonwealth and
payable to the Commissioner in the manner and
at the place prescribed."

Section 209 of the Act provides:

"Any tax unpaid may be sued for and recovered
in any court of competent jurisdiction by the
Commissioner or a Deputy Commissioner suing in
his official name."

The provisions of section 209 of the Income Tax Assessment Act are to be understood, Mr. Meagher submitted, merely as authorising suit by the Crown through the agency of the Commissioner or a Deputy Commissioner, and the use for that purpose of his official name. Neither that section nor any other provision of an Act authorised the bringing of suit for recovery of income tax and a decision of the Commissioner or of a Deputy Commissioner to institute such a proceeding was therefore not a decision made under an enactment, it was submitted.

4. In support of that submission Mr. Meagher cited a passage in the judgment of Dixon C.J. Fullagar and Kitto J.J. in James v. Deputy Commissioner of Taxation [1957] HCA 36; (1957) 97 CLR 23 at 35:

"We think that the commissioner or deputy
commissioner is empowered to take proceedings
in bankruptcy for the recovery of the tax as a
Crown debt. The officer may proceed in his
own name but he sues for the Crown and as
plaintiff or actor it is not in his own right
but that of the Crown that he proceeds. If he
has no statutory power himself to compound,
nevertheless a composition in his name may no
doubt be made by the Government of the day.
His is but an official name, but it is the
correct name in which the Crown sues."

When the Commissioner or a Deputy Commissioner decides to commence such an action as was commenced against Terrule in this case, he merely discharges a duty which the Income Tax Assessment Act lays upon him, according to the submission, and he does not make that decision in the exercise of any power or authority which any provision of that Act confers upon him. He merely exercises, as the appropriate agent of the Executive Government, that Government's inherent power to recover a debt due to the Commonwealth, Mr. Meagher submitted. Section 209 does no more than authorise the use of the official name of the Commissioner or Deputy Commissioner as plaintiff, it was said.

5. The passage in James v. Deputy Commissioner of Taxation, supra, on which reliance was placed was directed to several objections on behalf of a judgment debtor against whom the Deputy Commissioner of Taxation, suing in his official name, had recovered a judgment for income tax. Thereafter the Deputy Commissioner, in his official name, procured the issue of a bankruptcy notice founded on that judgment debt and presented a petition for sequestration of the judgment debtor's estate on the ground of the debtor's failure to comply with the notice. It was objected, inter alia, that the Bankruptcy Act required that the notice and the petition be the notice and the petition of the creditor, which the Deputy Commissioner of Taxation was not. The passage on which reliance was placed is part of the following passage (97 C.L.R. at 34-35):

"The substantial points taken are (1) that the
Crown is the creditor not the deputy
commissioner; (2) that a set-off etc. against
the Crown must be enough and certainly this
requirement of the notice should not be
limited to one against the deputy
commissioner; (3) that the deputy could not
compound the debt or take security; and (4)
that his satisfaction in any case would be
irrelevant. All those difficulties arise out
of incongruities of, on the one hand, the form
supplied by the rules, the rules themselves
and expressions in the text of s.52(j) and
s.54 of the Act with, on the other hand, the
situation which ss. 208 and 209 of the Income
Tax and Social Services Contribution
Assessment Act produce, a situation which
verbally the language of the form, the rules
and the sections does not aptly fit. We
agree, however, in the general view of
provisions like ss. 208 and 209 which Street
J. took in Re W. Carter Smith; Ex Parte
Commissioner of Taxation ((1908) 8 SR (NSW)
246). We think that the commissioner or
deputy commissioner is empowered to take
proceedings in bankruptcy for the recovery of
the tax as a Crown debt. The officer may
proceed in his own name but he sues for the
Crown and as plaintiff or actor it is not in
his own right but that of the Crown that he
proceeds. If he has no statutory power
himself to compound, nevertheless a
composition in his name may no doubt be made
by the Government of the day. His is but an
official name, but it is the correct name in
which the Crown sues. This is not the
occasion to consider what if any descriptions
of set-off might be available to the judgment
debtor. It is enough to indicate our general
view of the position. It is unnecessary in
this case to consider whether as a matter of
expression the notice should be amended to
conform with that view. It is enough to say
that in substance we think the contentions
mentioned should fail."

6. In Re W. Carter-Smith; ex parte The Commissioners of Taxation, supra, Street J. rejected, in the pages of the report of that case cited by Dixon C.J., Fullagar and Kitto JJ., an argument that a section of the New South Wales Land and Income Tax Assessment Act of 1895 corresponding with section 209 of the Income Tax Assessment Act 1936 authorises only curial proceedings terminating in judgment for or against recovery of income tax, and did not authorise the Commissioners to present a petition in bankruptcy. Street J. held that the intention of the legislature in enacting the section was "to clothe the Commissioners with power to resort to any tribunal competent to assist them in recovering amounts which might be owing."

7. The passage in James's Case on which Mr. Meagher relied cannot in my opinion be regarded as indicating that section 209 does not confer on the Commissioner and a Deputy Commissioner power to take curial proceedings for recovery of income tax. In my opinion section 209 does confer such a power. It may be assumed that, if section 209 had not been enacted, the Executive Government might have empowered the Commissioner and Deputy Commissioners to take such proceedings as an agent of that Government. But Parliament has, by section 209, granted the power, in my opinion, and has to that extent limited the freedom of the Executive Government in the exercise of its inherent power. It is unnecessary for present purpoes to consider the extent of the limitation. Certainly the freedom of the Executive Government to exclude the Commissioner and a Deputy Commissioner from the number of persons authorised to exercise that power as its agent has been abrogated by section 209.

8. In The Hells Angels Limited v. Deputy Commissioner of Taxation (VG 113 of 1984; unreported; judgment 20 December 1984) Northrop J. observed of a decision similar to that under present consideration:

"In the present case The Hell's Angels Company
challenges the decision to sue and for that
purpose has identified the decision made under
an enactment being sections 201 and 209 of the
Act. On a proper analysis of the Act the
decision to sue arises from sections 8 and 208
of the Act. On any view, the decision is a
decision to which the Judicial Review Act
applies; see s.3 of that Act."

Section 201 provides:

"The fact that an appeal or reference is
pending shall not in the meantime interfere
with or affect the assessment the subject of
the appeal or reference and income tax may be
recovered on the assessment as if no appeal or
reference were pending."

Section 8 provides:

"The Commissioner shall have the general
administration of this Act."

9. I would regard the sections, other than section 209, to which reference is there made as part of the legislative context in which section 209 is seen to afford the Commissioner and a Deputy Commissioner power to bring curial proceedings for the recovery of income tax, and is seen to be the source of a power to decide that such a proceeding shall, and to decide that such a proceeding shall not, be instituted at a particular time against a particular person.

10. The other ground of objection to the competency of the application - that the decision to commence the action was not a decision of an administrative character - was supported by the argument that such a decision involved no, or virtually no discretionary evaluation of considerations for and against commencing the action, but was dictated by the respondent's duty to sue for the recovery of income tax due and payable. Discretionary considerations were relevant in making other decisions concerning payment of, and the extent of liability to, tax under the Income Tax Assessment Act, it was said, and sections 206, 207 and 265 of that Act and section 70C of the Audit Act 1901 were said to authorise decisions of that kind. A decision to sue for recovery of income tax was distinguishable, it was submitted, from a decision to sue for recovery of moneys overpaid, which was held to be reviewable in Director General of Social Services v. Hangan, [1982] FCA 262; (1982), 45 ALR 23 and in Director General of Social Services v. Hales [1983] FCA 81; (1983) 47 ALR 281.

11. It may be that a decision to sue for recovery of income tax may be reached upon a consideration of fewer, and more easily ascertained, circumstances than a decision of the kind under consideration in Hangan's Case and Hales' Case. It may be - I need express no opinion at this stage - that misericordious considerations are not relevant to a decision to sue for recovery of income tax. It is, however, a decision of an administrative character, in my opinion, which can be reached only after opinions have been formed that the money to be recovered is due and payable and that the commencement of the action at the particular time selected will better serve the purpose of protecting the revenue than some other course.

12. The objection to competency will be overruled.

13. Terrule has moved for an order that the respondent "be restrained from proceeding further with proceedings in action number 5101 of 1984 against the applicant until the hearing and determination of the application herein". In that action the respondent sues not only Terrule, but also Geoffrey George Manners upon distinct causes of action for income tax and additional tax alleged to be due and payable by Mr. Manners. Mr. Manners has instituted in this court applications of the same kind as those instituted by Terrule. On 30 November 1984 O'Bryan J. made an order in chambers in the action that Terrule be restrained until further order "from disposing, mortgaging or otherwise dealing in any manner whatsoever with any of its assets without the prior consent of the plaintiffs or the plaintiffs' solicitors." I was informed by counsel for Terrule that, although the order was not made by consent of Terrule, counsel for Terrule was present when the order was made and did not make any submission in opposition to an order in the terms of the order made. Counsel for Terrule sought an interlocutory order by this court, having the effect of compelling the respondent to consent to transactions which would, if the respondent's consent were not given, contravene the order of O'Bryan J., but which were, according to counsel's submission, reasonably incidental to the normal conduct of Terrule's business operations, and fraught with no risk of a dissipation of Terrule's assets to the prejudice of the respondent. It was alleged that the respondent's failure to give consent to a number of such transactions was motivated by a desire to preserve Terrule's assets so they might be available to satisfy, not only a judgment in the action against Terrule, but also a judgment against the other defendant. Counsel for the respondent alleges that a number of assets in the nominal ownership of Terrule are beneficially owned by that other defendant, Mr. Manners.

14. In my opinion there is no occasion for the exercise of any power this court might have to control the exercise of the respondent's power to grant or withhold consent to dealings by Terrule with its assets. If Terrule considers the terms of the order of O'Bryan J. to be inappropriate in the present circumstances, or if Terrule considers that the respondent's exercise of the power which that order conceded to the respondent has been unreasonable, the jurisdiction of the Supreme Court of Victoria to vary its interlocutory order and to correct the misuse of the respondent's power to withhold consent may be invoked and will, in my opinion, prove adequate to enable that Court to protect the applicant from injustice.

15. The Supreme Court of Victoria is expected to determine within the next few months whether any and what injunctive restraint of Terrule's power to dispose of its property as it thinks fit is to continue until the hearing and determination of the action, unless in the mean time leave is granted under Order XIV of that Court's Rules to the respondent to enter judgment against Terrule for the amount claimed in the action. An application by summons for that leave is pending. Terrule's application includes an application for review of the respondent's decision not to extend time for payment of the tax assessed in respect of the year ended 30 June 1980, as well as the decision to commence against Terrule the Supreme Court action.

16. If either decision were set aside, this court might then think it appropriate to order that the respondent refrain from proceeding further in the action against Terrule for some period. If, before the application for orders of review in respect of those decisions has been heard and determined, judgment in the action were entered against Terrule, this court might, if either decision were thereafter set aside, restrain the respondent from proceeding in execution of the judgment. An exercise of the power conferred by section 16(1)(d) of the Administrative Decisions (Judicial Review) Act 1977 to compel the respondent to apply to set aside the judgment might well be thought inappropriate, even if this court considered that the Supreme Court would accede to such an application. And restraint of execution may work an inadequate redress of the prejudicial consequences of either of those decisions of the respondent. It is therefore in my opinion appropriate in the circumstances presently disclosed that the power conferred by section 15(1)(b) of the Administrative Decisions (Judicial Review) Act be exercised to ensure that the respondent does not recover against Terrule a judgment in the action until the application for an order of review in respect of those decisions has been heard and determined by this court.

17. On the other hand, the exercise of that power should, in my opinion, extend no further in interference with proceedings in a superior court of record than can be seen to be necessary. It is not, in my opinion, necessary that restraint of the respondent from prosecution of the action against Terrule be ordered. All that is necessary is that the respondent be restrained from taking the last step, of entering judgment or of moving for an order that judgment be entered. This court should not, in my opinion, otherwise restrain the parties, or either of them, from proceeding in the action. It is, of course, possible that if either of the decisions of the respondent to commence the action and to refuse to extend the time for payment is set aside on review, legal costs expended hereafter by Terrule in defending the action may be seen to have been unnecessarily incurred. I shall assume that costs thrown away could not be recouped to Terrule by an exercise of the power conferred by section 16(1)(d) of the Administrative Decisions (Judicial Review) Act. But the likelihood of an order setting aside either decision is not, on the evidence before me, very great. On the other hand, in all the circumstances which that evidence discloses, it seems to me desirable that if neither decision is set aside, the date at which judgment in the action against Terrule is to be given, whether it be judgment for the respondent or for Terrule, be as soon as may be. In making the foregoing observations, I recognise that it will be for the Supreme Court to determine whether, and on what terms, and to what stage, the action should proceed against Terrule while the respondent remains under injunctive restraint from entering, and from moving for, judgment against Terrule. Nothing I have said is intended to imply any opinion of mine as to what those determinations of the Supreme Court will be, much less what they should be.

18. Terrule desires to have discovery before the hearing and may, after discovery, desire to interrogate. I am prepared to hear the application to review the two decisions to which I have referred at the end of this month. It may prove impossible to commence the hearing then if much discovery or interrogation is undertaken. The grounds of the application in relation to each decision are stated in identical terms, that is to say, in the terms of ss. 5(1)(b), 5(1)(d), 5(1)(e), 5(2)(g), 5(2)(h), 5(1)(j) and 7(1) of the Administrative Decisions (Judicial Review) Act, and without any particulars except in so far as particulars may be inferred from the contents of affidavits filed in support of the application. In discussion with counsel for Terrule in the course of the hearing of the motion, some further particulars were adumbrated. In my opinion, it is inappropriate that the respondent be required to give discovery or to answer interrogatories unless and until Terrule alleges, by particulars in writing, circumstances which may reasonably establish one or other of the grounds.

19. I had proposed to order that the hearing of the application for an order of review with respect to the decision specified in paragraph 8 of the application and with respect to the decisions specified in paragraphs 4 and 5 of the application be fixed for 27 February 1985; that evidence on that hearing be given orally; that the respondent be restrained until further order from moving for an order that judgment be entered against the applicant, and from entering judgment against the applicant, in the action number 5101 of 1984 in the Supreme Court of Victoria; that until further order no notice of discovery or notice requiring answers to interrogatories be filed or served; that each party's costs to and including this day of the directions hearing, and of the motion of which notice was filed on 14 January 1985 be reserved; and that each of the directions hearing and the said motion be adjourned to a date to be fixed by either party on reasonable notice to the other party.

20. Counsel for the respondent offers, and counsel for the applicant is content with, an undertaking by counsel on behalf of the respondent, that until the hearing and determination of the originating application or further order the respondent will not move for an order that judgment be entered against the applicant or enter judgment against the applicant in the action number 5101 of 1984 in the Supreme Court of Victoria, except after the expiration of five days from service on the applicant's solicitors of written notice of his intention so to move or so to enter judgment.

21. I will accept such an undertaking and refrain from pronouncing any injunctive order.