Re Peter John Ridsdale Snow v Deputy Commmissioner of Taxation [1987] FCA 21 (4 February 1987)

FEDERAL COURT OF AUSTRALIA

Re: PETER JOHN RIDSDALE SNOW
And: DEPUTY COMMMISSIONER OF TAXATION
No. WA G113 of 1986
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
French J.

CATCHWORDS

Administrative Law - judicial Review - Income Tax Assessment Act 1936 - Decision to refuse extension of time to pay tax - decision to institute recovery proceedings - claim for stay order restraining institution of recovery proceedings - source of power to order stay - principles governing exercise of discretion to order stay - content and relevance of principles governing stay applications in State Courts - relevance of exclusion of decision reviewed from application of s.13 of Judicial Review Act - general approach in income tax recovery cases - failure of Deputy Commissioner to refer objection as requested.

Administrative Decisions (Judicial Review) Act 1977 Federal Court of Australia Act 1976

Rifki v. Minister for Immigration and Ethnic Affairs (1983) 46 ALR 301, 303 per Toohey J.

Piroglu v. Minister for Immigration and Ethnic Affairs (1982) 43 ALR 569, 571 per Lockhart J.

Dallikavak v. Minister for Immigration and Ethnic Affairs (1985) 61 ALR 471

Perkins v. Cuthill (1981) 34 ALR 669, 671 per Keely J.

Collins v. Minister for Immigration and Ethnic Affairs (No. 2) (1982) 5 ALD 32, 33 per Bowen CJ.

Videto v. Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 (Toohey J.)

Capello v. Minister for Immigration and Ethnic Affairs (1980) 49 FLR 40, 2 ALD 1014

Faingold v. Zammit (1984) 1 FCR 87

The Hells Angels Ltd v. Deputy Commissioner of Taxation (1985) 7 FCR 311 at 318.

Terrule Pty Limited v. Deputy Federal Commissioner of Taxation (1985) 5 FCR 153 at 156

St. Justins Properties Pty Ltd v. Rule Holdings Pty Ltd (1980) 40 FLR 282

Deputy Commissioner of Taxation v. Australia Machinery and Investment Co. (1945) 47 WALR 9, 17

Deputy Federal Commissioner of Taxation v. Hells Angels Limited (No. 1) 84 ATC 4545 at 4547

Marina Estates Pty Ltd v. Deputy Commissioner of Taxation 76 ATC 4166 at 4168

Re: Roma Industries Pty Ltd 76 ATC 4113 at 4116

Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation of the Commonwealth of Australia (1978) VR 83

Clyne v. Deputy Commissioner of Taxation (NSW) (1982) 43 ALR 342

Federal Commissioner of Taxation v. Mackey (1982) 64 FLR 432

Deputy Federal Commissioner of Taxation v. The Hells Angels Limited (No. 2) 84 ATC 4548

Deputy Federal Commissioner of Taxation v. Ewen 84 ATC 4550 at 4552

Deputy Federal Commissioner of Taxation v. Steel Fabrication Pty Ltd 84 ATC 4639

Deputy Federal Commissioner of Taxation v. Truehold Benefit 85 ATC 4058

Deputy Federal Commissioner of Taxation v. Manners 85 ATC 4294

Koadlow v. Deputy Federal Commissioner of Taxation 85 ATC 4147 at 4151

Deputy Federal Commissioner of Taxation v. Trower 86 ATC 4157

Deputy Federal Commissioner of Taxation v. Jonrich Pty Ltd 86 ATC 4560

Murphy v. K.R.M. Holdings Pty Ltd (1985) 8 FCR 349 at 351

HEARING

PERTH
4:2:1987

Solicitor for the Applicant: Mr P. Fletcher instructed by Messrs. Phillips Fox

Solicitor for the Respondent: Ms P. Chong instructed by the Australian Government Solicitor

ORDER

The Respondent be and is hereby restrained from instituting proceedings against the Applicant for the recovery of income tax the subject of notices of amended assessment dated 16 January 1986 until he shall have referred to the Administrative Appeals Tribunal in accordance with the Applicant's request his decision to disallow the Applicant's objection to the amended assessments or until the determination of this application whichever is the earlier.

The Applicant's claim for interlocutory relief is other- wise dismissed.

The costs of the claim for interlocutory relief be reserved.

Note: Settlement and entry of orders is dealt with
in Order 36 of the Federal Court Rules.
(See also Order 37 rule 2(3).)

DECISION

On 16 January 1986 the applicant, Peter Snow, received a bill for $429,955.00 from the respondent, the Deputy Commissioner of Taxation.

2. It came in the form of amended assessments of his income tax for the years ended 30 June 1974, 1975 and 1976. It included a figure of $276,381.00 additional tax for lodgement of incorrect returns for those years. It was payable on 17 February 1986. It has not been paid and additional tax for late payment is accruing at the rate of $253.53 per day.

3. The assessments have been objected to but the objections have been disallowed. The applicant has asked the respondent to refer his disallowance of the objections to the Administrative Appeals Tribunal under Part V of the Income Tax Assessment Act 1936 (ITAA). This has not yet been done.

4. The applicant has also asked the respondent to grant him an extension of time for payment, to not impose additional tax for late payment, and to not issue any writ for recovery of the amounts due until he has exhausted his avenues of appeal against the amended assessments.

5. These requests have all been refused.

6. The applicant has therefore begun proceedings in this Court ("the primary proceedings") under the Administrative Decisions (Judicial Review) Act 1977 ("the Judicial Review Act") seeking a review of the respondent's decisions refusing his requests.

7. Pending the hearing of the primary proceedings the applicant asks the Court to make an order suspending the operation of the respondent's decision to issue a writ for recovery of the tax.

8. In so doing his counsel relies upon s.15 of the Judicial Review Act and in the alternative s.23 of the Federal Court of Australia Act 1976.

Decisions Challenged

9. In the primary proceedings the applicant seeks review of decisions of the respondent which are described in the application as follows:-

"A. On or about 12th September 1986 he decided to
refuse the Applicant's requests made by letter
dated 19th August 1986 that the Respondent:-

(a) Grant an extension of time pursuant to Section
206 of the Income Tax Assessment Act, 1936 as
amended ("ITAA") for payment of the tax
assessed and notified in amended assessments
of income tax, which issued to the Applicant
for the years ended 30th June 1974, 1975 and
1976, until such time as each Assessment has
been confirmed and no further avenue of appeal
is available to the Applicant pursuant to Part
V of the ITAA.

(b) Determine that pursuant to Section 207 of the
ITAA the date from which penalty tax shall be
computed shall be the date upon which each
amended Assessment is confirmed with no
further avenue of appeal being available to
the Applicant pursuant to Part V of the ITAA;

(c) Defer the issue of a Writ or Writs for the
recovery of tax assessed and outstanding
pursuant to the said amended Assessments until
such time as the said amended Assessments are
confirmed with no further avenue of appeal
being available to the Applicant pursuant to
Part V of the ITAA.

B. On or about 15th September 1986 he decided to
instruct his solicitor to proceed to cause a Writ
or Writs to issue to the Applicant claiming payment
of the said tax assessed."

10. The applicant is said to be "a person who is aggrieved by the decisions" within the meaning of that phrase in s.5 of the Judicial Review Act.

11. The respondent did not dispute his standing and no issue arises in that regard for present purposes.

The Factual Background

12. The background to the institution of the primary proceedings is set out in an affidavit sworn by the applicant on 20th November 1986. The contents of the affidavit were not challenged by the respondent.

13. The applicant deposed that in the years ended 30th June 1974, 1975 and 1976 respectively his income was comprised entirely of salary and director's fees, and in 1976 a payment on termination of employment.

14. He lodged income tax returns for each of these years "as requested by the respondent" although the Court was not told when the requests were made or the returns lodged.

15. The applicant said that in the returns he declared his total income and was assessed on it.

16. By amended assessments the respondent assessed additional income to the applicant for each of the three years in question.

17. The apparent basis for the assessments is set out in a report dated 15 November 1985 and signed by an officer of the Australian Taxation Office, J.F. Jancey. The applicant exhibited the report to his affidavit.

18. In that document addressed to a person designated "Supervisor", Mr Jancey reported the completion of an investigation into the affairs of the applicant for the years ended 30 June 1974 to 30 June 1980.

19. The report referred to the applicant's "involvement in the tax avoidance industry" during the years under review.

20. He was said to have derived significant income from the promotion of tax avoidance schemes in those years through his association with what was described in the Report as the "West Australian branch of the Brian Maher organisation", an association which ceased in 1978.

21. The majority of his income during the years reviewed was said either not to have been returned as income or "manipulated so that little tax was paid". The report claimed that payments received by the applicant through his association with the Maher Organisation were disguised as private company dividends. The commissions, according to the report, were earned progressively each year and periodically paid to the applicant by way of loans or advances.

22. At the end of each financial year a final accounting was completed and the total amount earned was determined. The amounts due were then said to be paid in a disguised form, usually in the following year and the loans previously received were repaid.

23. On this approach certain amounts of income were said to have been received by the applicant "from his tax avoidance activities" and on which tax was avoided.

24. For the years in question the relevant amounts were;-

1974 - $ 29,200.00
1975 - $112,200.00
1976 - $103,600.00

25. The report then set out an analysis of the alleged additional income for each of these years. In the body of his affidavit the applicant gave his own account of the payments.

(i) The 1974 Financial Year

26. With respect to the sum of $29,200 treated as income for the year ended 30 June 1974, Jancey said that this had taken the form of two dividend payments by a company called Demos Pty Ltd.

27. Demos Pty Ltd he said, had been acquired by Brian Maher on 31 May 1974.

28. On 7 June 1974 it made allotments of redeemable preference shares and the next day resolved to pay a dividend on the shares.

29. The funds were held on deposit with B.J. Maher & Co. then paid out on 2 July 1974. $8,000 of the dividends so paid was paid to an entity described both in Jancey's report and the Applicant's affidavit as "The Snow Family Trust".

30. This can be treated as a reference to a trustee of a trust whose beneficiaries include members of the applicant's family. The trustee is identified in another part of the Report as Snow Nominees Pty Ltd.

31. The sum of $8,000 so paid was according to Jancey, distributed to members of the applicant's Family "therefore involving very little tax".

32. The applicant did not deny this payment nor that it came by way of a dividend from Demos Pty Ltd.

33. He added that the money was distributed to four beneficiaries of the trust and assessed as income in their hands by the respondent.

34. The balance of the $29,200 namely $21,200 regarded by Jancey as income received by the applicant was part of a dividend of $106,000 paid by Demos Pty Ltd to Federated Management Ltd a West Australian Company said to be controlled by Maher. $21,200 or 20% of the total dividend was treated as if paid to the applicant, for, according to Jancey, he had a 20% interest in the latter company.

35. The applicant agreed that the dividend was paid as alleged but said that although he was a salaried director of Federated Management Ltd he had "no direct shareholding" in it and had "only a 2% indirect beneficial interest in the company."

36. The reference to a 2% interest appears to be a typographical error for 20%. Later in the affidavit the applicant refers to a company called International Secretariat Pty Ltd which he evidently controlled and which had a 20% shareholding in Federated Management Ltd.

(ii) The 1975 Financial Year

37. The sum of $112,200 derived as income in the 1975 financial year was, on Jancey's analysis, comprised of three amounts, one of $9,000 and two of $51,600.

38. The $9,000 component was said to be one half of a dividend of $18,000 paid by a company called Bonavista Securities Pty Ltd and described by Jancey as a "Maher Company".

39. The dividend was paid to Sotheby Securities Pty Ltd a Western Australian Company in which the applicant "effectively held a 50% interest". Sotheby Securities filed a return including the dividend in 1975 and dividends were paid to its shareholders in 1976.

40. The applicant did not disagree with this account but added that the $9,000 was paid as a dividend by Sotheby Securities Pty Ltd to Snow Corporation Pty Ltd which brought the sum to account in its 1976 tax return. The money was paid through to the trustee of the Snow Family Trust and distributed with the net income of that trust to the trustee of another trust called the Shanadar Trust. It was distributed by that trustee to beneficiaries whom the applicant did not identify. He said that the amounts so paid were returned as income by the recipients and assessed accordingly.

41. As to the two sums of $51,600 Jancey reported that on 29th January 1975 two companies controlled by the applicant, namely Snow Nominees Pty Ltd as trustee of the Snow Family Trust and Management Consortiums Pty Ltd were allotted 10 shares each in Bedouri Pty Ltd, a company incorporated on 17 July 1974 with two initial shareholders who were the Applicant and a Mr Tolhurst.

42. It appears from the report that there were 100 shares in all in the company allotted to entities associated with Maher, a man called Donnelly, Tolhurst and the applicant.

43. The company lodged a return of income for the year ended 30 June 1975 declaring dividends totalling $516,740 comprising $217,740 received from Pastoral Properties Pty Ltd and $299,000 received from Bonavista Securities Pty Ltd.

44. On 21st January 1976 Snow Nominees Pty Ltd and Management Consortiums Pty Ltd sold their 10 shareholdings for $51,600. This yielded a profit in each case of $51,590 which, as Jancey reported, was included as income in their returns under s.26AAA of the Income Tax Assessment Act.

45. According to Jancey both companies offset this income by participation in a share trading partnership named "Mahvista" which led them in each case to claim a loss of $51,590.

46. The respondent has evidently disallowed these losses and according to Jancey both cases have proceeded to the appeal stage.

47. The applicant in his affidavit says that the two companies did each receive $51,600 for the sale in each case of 10 shares in Bedouri Pty Ltd. Each company brought the receipt in to account as income pursuant to s.26AAA of the ITAA and was assessed accordingly.

48. In respect of tax assessed on this income the respondent has issued a writ out of the Supreme Court of Western Australia (No. 1949 of 1985).

49. As to the $51,600 derived by Management Consortiums Pty Ltd from the sale of its 10 shares in Bedouri Pty Ltd the applicant deposed that this sum was declared as income pursuant to s.26AAA of the ITAA and that the company was assessed on it.

50. Further, he said, the respondent had issued assessments to his wife and himself and other shareholders of Management Consortiums Pty Ltd in respect of the tax said to be due by the company in relation to the share sale proceeds, but not paid by it.

51. These assessments were issued under the Taxation (Unpaid Company Tax) Assessment Act. Proceedings to recover the tax so assessed have been instituted against the applicant's wife in the District Court of Western Australia (Action No. 2694 of 1985) and against the applicant himself in the Local Court.

52. The applicant also says that other former shareholders of Management Consortiums Pty Ltd have paid the tax on the assessments issued to them although he does not disclose the time and amounts of such payments.

53. As the applicant puts it, the respondent now seeks to sue him for tax on the same income on the basis that it was derived by him rather than by Management Consortiums Pty Ltd.

(iii) The 1976 Financial Year

54. The sum of $103,600 which was treated as part of the applicant's income for the year ended 30th June 1976 represents 20% of a $518,000 dividend payment made to Federated Management Ltd. The 20% figure in turn represents what Jancey contended was the size of the applicant's interest in Federated Management Ltd. That company included the dividends in its income tax return for 1977 but the taxable income was fully rebateable under s.46 of the ITAA.

55. The applicant in his affidavit said that International Secretariat Pty Ltd was a 20% shareholder in Federated Management Pty Ltd. International Secretariat Pty Ltd was, according to Jancey's report, controlled by the applicant.

56. In June 1978, according to Jancey, the shareholders in Federated Management Ltd sold their shares to one Lloyd Faint.

57. International Secretariat Pty Ltd received $105,000 for this sale of 5000 $1.00 shares, which was treated in its return as yielding a capital gain of $100,000.

58. In relation to the disposition Jancey's report said:-

"The T (UCT) legislation will be applied in respect of
the Division 7 Assessment for Federated Management to
recoup the tax from the vendor shareholders."

59. After reciting events relating to the years 1977 to 1980 which are not relevant for present purposes, Jancey's report noted that "the only asset held in the Applicant's name" was a half interest in a residence at Greenwood valued at about $200,000 to $250,000.

60. This interest was said to be encumbered by a mortgage securing an advance of $250,000 from a company controlled by the applicant. He was on this basis said to have "an effective nil net asset position".

61. The applicant seems to agree with that assessment for at paragraph 9 of his affidavit he said:-

"On page 6 of the Annexure "A" it is acknowledged that
my only asset is a half share in the family residence in
which because of a mortgage, I have no equity and
effectively I have a nil net asset position."

62. Jancey said in his report that during the years 1974 to 1976 inclusive the applicant was employed full time by Federated Management Ltd a company controlled by and forming part of the "Maher Organisation".

63. He contended that any commissions received by Snow were derived in the employment and should have been returned as income. Specifically in relation to the sum of $103,200 treated as income for the year 1976 Jancey said that this would be "followed up as part of the T (UCT) action on Federated Management Ltd".

64. The report conceded that there would be "in effect a doubling up of assessments in regard to some of the income" but nevertheless expressed the disturbing recommendation "that this position should be retained until Mr Snow's reactions and intentions toward the assessment can be gauged."

65. Jancey then addressed the question of issuing amended assessments in respect of the years 1974 to 1976 which he described as "outside the 6 year period".

66. This was a reference to the provisions of subsection 170(2) of the ITAA which as at the date of the issue of the amended assessments was in the following terms:-

"Where a taxpayer has not made to the Commissioner a
full and true disclosure of all the material facts
necessary for his assessment, and there has been an
avoidance of tax, the Commissioner may -

(a) where he is of opinion that the avoidance of
tax is due to fraud or evasion - at any time;
and

(b) In any other case - within 6 years from the
date upon which the tax became due and payable
under the assessment,

amend the assessment by making such alterations therein
or additions thereto as he thinks necessary to correct
an error in calculation or a mistake of fact or to
prevent avoidance of tax as the case may be."

67. He set out various factors which the respondent could rely upon in forming an opinion that the applicant had avoided tax by fraud or evasion.

68. These factors were as follows:-

(a) The applicant was a known agent of the Brian Maher
Tax Avoidance Organisation;

(b) He has not made a full and true disclosure of all
the material facts necessary for the making of an
assessment for the years ended 30 June 1974, 1975
and 1976;

(c) Commission income derived in 1974 to 1976 inclusive
was knowingly disguised as private company
dividends and/or profit on sale of shares and
brought to account as income of related entities;

(d) The applicant had knowingly understated his income
in each of the years by so disguising the amounts
received;

(e) He has failed to keep records which would enable
his assessable income to be readily ascertained
i.e. records of commissions received or due from
the Maher Organisation.

69. On this basis it was recommended that the assessments for the applicant for the 3 years in question should be amended by the inclusion of the sums mentioned above as part of his income for those years.

The Amended Assessments
- Issue, Objection and Recovery Action

70. The recommendation was accepted and amended assessments issued on 16th January 1986 as follows:-

1974 - $ 48,402.23
1975 - $203,429.29
1976 - $178,123.50
Total $429,955.02

71. Of this tax some $276,381.00 is by way of penalty for lodgment of incorrect returns.

72. Objections were lodged to the amended assessments and disallowed. Notice of the disallowance was given on 29 July 1986.

73. The applicant then requested, pursuant to s.187 of the ITAA, that the respondent refer the disallowance decision to the Administrative Appeals Tribunal. At the time of the hearing of this motion the respondent had not complied with the request.

74. I was however informed by Counsel for the applicant that no notice had been given by the applicant to the respondent requiring him to refer the decision to the Tribunal under s.189A of the ITAA.

75. On 19th August 1986 the solicitors for the applicant wrote to the respondent making the requests referred to at the commencement of these reasons.

76. By a letter dated 24th September the respondent advised that legal action would not be deferred and a writ of summons would issue without further notice if payment was not received by 15th September.

77. In a Statement of Reasons dated 10th November 1986 and delivered pursuant to s.13 of the Judicial Review Act the respondent set out his reasons for the decision not to defer payment of the assessed tax as follows:-

(a) There was no express ground specified in the letter
dated 19 August 1986 as justifying an extension of
time for payment other than the fact that the
requests for reference, lodged pursuant to Part V
of the Income Tax Assessment Act 1936, as amended,
had yet to be determined.

(b) There was no evidence that the taxpayer was unable
to achieve payment of his income tax in full by the
due date.

(c) No acceptable proposal had been submitted by the
taxpayer for payment within set office guidelines
and there is no decision against the Commissioner
in respect of the substantive issue in dispute.

(c) It was considered that the matters raised in the
taxpayer's objections related to an artificial
scheme and did not constitute a genuine dispute.
The directions given in Taxation Rulings IT2091 and
IT 2156 were directly applicable to this case.

78. The letter also advised that as at 12 September 1986 additional tax for late payment assessed under s.207 was $48,764.08.

79. The total liability of the applicant for the 3 years in question, after a credit of $109.05 under a 1985 assessment, was $478,610.03.

80. The additional tax for late payment has been accruing at the rate of $253.53 per day since that time.

The Grounds of the Application

81. The Application for an Order of Review set out a variety of grounds of review under the Judicial Review Act and included extensive particulars.

82. On the motion for interlocutory relief the applicant relied principally upon the following grounds:-

"(a) Each decision involved an error of law.

(b) The making of each decision was an improper
exercise of the power conferred by the relevant
section of the ITAA by reason of the fact that:-

(i) The respondent took irrelevant
considerations into account;

(ii) The respondent failed to take into
account a relevant consideration in the
exercise of his power."

83. The argument concentrated upon the alleged failure of the respondent to take into account relevant considerations itemised in the Application as follows:-

"(a) The tax assessed and outstanding was raised on
income which had, at least in part, also been
returned by, and assessed as the income of, another
taxpayer or taxpayers;

(b) Part at least of the tax on the said income, having
been assessed to a taxpayer other than the
Applicant, had already been paid to the respondent
by that person;

(c) Part at least of the tax on the said income was
already the subject of legal recovery action
instituted by the Respondent against a taxpayer
other than the Applicant;

(d) The Applicant is already being sued by the
Respondent pursuant to assessments raised under the
Taxation Unpaid Company Tax Assessment Act which
assessments are based upon the treatment by the
Respondent of part at least of the said income as
the income of an entity other than the Applicant;

(e) There is a genuine dispute between the Applicant
and the Respondent as to whether the income the
subject of the said assessments was derived by the
Applicant or by others and as to whether the
Applicant has been guilty of tax avoidance by fraud
or evasion in the absence of which the
issue of the amended assessment is statute barred;

(f) That the allegation that the applicant was a "known
member of the Brian Maher Tax Avoidance
Organisation" was relied upon by the Respondent as
evidence of fraudulent intent so as to justify the
issue of the amended assessments and whereas prior
to the making of the decisions the subject of this
application the Respondent well knew that the
dismissal of charges of conspiracy to defraud the
Commonwealth brought against the Applicant by
reason of his involvement with Mr Brian Maher threw
considerable doubt on the validity of the
conclusion that that association was in itself a
ground for concluding that the Applicant had
fraudulently avoided tax. As a consequence the
probability that the amended assessments would
ultimately be set aside was increased.

(g) The objections to the amended assessments raise
issues of such substance that it is probable that
the amended assessments will ultimately be set
aside.

(h) The Applicant does not have the means to pay the
tax assessed.

(i) That exaction from the Applicant at this time of
the tax assessed would, given the financial
circumstances of the Applicant, seriously prejudice
his ability to pursue the action which he has
instituted under Part V of the ITAA to establish
the amended assessments as excessive and invalid.

(j) Deferral of collection of the tax assessment would
not, given the known present financial position of
the Applicant, materially diminish the Respondent's
prospects of recovery of the tax assessed.

(k) The imposition of s.207 penalty cannot, given the
present financial circumstances of the Applicant
reasonably be expected to produce the result that
he will be encouraged to pay the debt arising from
the amended assessments.

(l) The issue of the amended assessments demanding
payment within one month of tax totalling
$429,955.00 occurred 10, 11 and 12 years
respectively after the years in which the Applicant
allegedly derived the income giving rise to the
tax.

(m) The Respondent has been requested to forward his
decisions on the objections to the amended
assessments to the Administrative Appeals Tribunal
for review and he has to date failed to comply with
his statutory duty in that regard.

(n) Valid requests that the Respondent refer to the
Administrative Appeals Tribunal his decisions on
the objections to the amended assessments for the
years ended 30 June 1975 and 1976 as well as 1974
have been lodged by the Applicant.

(o) There are decisions against the Respondent in
respect of the substantive issues in dispute."

84. The irrelevant considerations which the respondent was said to have taken into account in making the impugned decisions were particularised in the Application as follows:-

(a) There was no express ground specified in the letter
dated 19 August 1986 as justifying an extension of
time for payment other than the fact that the
requests for reference lodged pursuant to Part V of
the ITAA had yet to be determined.

(b) No acceptable proposal had been submitted by the
applicant for payment within set office guidelines.

85. The errors of law identified were:-

"(i) The fact that s.206 of the ITAA requires the
Respondent to ask himself the question "what do the
circumstances warrant" and the Respondent has
failed to ask this question or has in asking it
failed to consider all relevant circumstances.

(ii) The fact that the Respondent took into account
irrelevant considerations.

(iii) The conclusion that in each of the years in
question the Applicant participated in an
artificial scheme of tax avoidance."

The Source of the Discretion to Order a Stay

86. As indicated by his counsel, the applicant seeks interlocutory relief under either s.15 of the Judicial Review Act or s.23 of the Federal Court Act.

87. The motion therefore proceeds on the assumption that each provision is available as a source of the power to ground the relief sought.

88. Section 15 provides:-

"(1) The making of an application to the Court under
Section 5 in relation to a decision does not affect the
operation of the decision or prevent the taking of
action to implement the decision but -

(a) The court or a judge may, by order, on such
conditions (if any) as it or he thinks fit, suspend
the operation of the decision; and

(b) The court or a judge may order, on such conditions
(if any) as it or he thinks fit, a stay of all or
any proceedings under the decision.

(2) The court or a judge may make an order under
subsection (1) of its or his own motion or on the
application of the person who made the application under
Section 5."

89. Section 23 of the Federal Court Act provides:-

"The Court has power, in relation to matters in which it
has jurisdiction, to make orders of such kinds,
including interlocutory orders, and to issue, or direct
the issue of writs of such kinds, as the Court thinks
appropriate."

90. Section 15 does not exclude the application of s.23 to proceedings brought under the Judicial Review Act - Rifki v. Minister for Immigration and Ethnic Affairs (1983) 46 ALR 301, 303 per Toohey J., Piroglu v. Minister for Immigration and Ethnic Affairs (1982) 43 ALR 569,571 per Lockhart J.

91. These decisions each invoked s.23 where the conduct the subject of interlocutory relief did not fall within the description "proceedings under the decision" which may be stayed under s.15. The question remains whether s.23 may be invoked in judicial review proceedings to restrain conduct which could be the subject of a stay order under s.15.

92. It was a question addressed briefly and apparently by way of obiter in the joint judgment of Northrop and Pincus JJ. in Dallikavak v. Minister for Immigration and Ethnic Affairs (1985) 61 ALR 471. That was an appeal against a refusal by Keely J. of interlocutory relief pending the hearing and determination of proceedings under the Judicial Review Act in respect of the appellant's imminent deportation.

93. The appeal was dismissed by the Full Court. Northrop and Pincus JJ. did so on the basis that there was no reviewable decision for the purposes of s.5 of the Judicial Review Act. (476 at line 5).

94. They went on to express the view that even had the impugned decision been reviewable they would have dismissed the appeal. In doing so their Honours said at 478:-

"The appellant submitted, rightly as it seems to us that
the learned primary judge had two sources of power to
suspend or stay the decision sought to be reviewed.
They were Section 15 of the Judicial Review Act and
Section 23 of the Federal Court of Australia Act 1976
(Cth)."

95. The proposition was not further elaborated. The other member of that Full Court, Jenkinson J., observed that the application to the primary judge had been made under s.15 and said that if s.15 would not have authorised the orders sought the appellant would have had to invoke an exercise of the power conferred by s.23. (emphasis added)

96. In a number of cases members of this Court have said that the principles which have evolved to govern the grant of interlocutory injunctions will not necessarily be appropriate in the application of s.15 - Perkins v. Cuthill (1981) 34 ALR 669, 671 per Keely J., Collins v. Minister for Immigration and Ethnic Affairs (No. 2) (1982) 5 ALD 32, 33 per Bowen CJ, Gaillard v. Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.) and Gonaseela v. Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (Morling J.) Videto v. Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 (Toohey J.).

97. The propounded overlap of ss.15 and 23 might be of little practical consequence if there were no circumstance in which the discretion under s.15 could be governed by more restrictive principles than those regulating the grant of interlocutory relief under s.23.

98. In my opinion however there may be cases where, for reasons peculiar to the administration of the Judicial Review Act and the particular legislative scheme on which it is operating, the establishment of a "serious question" to be tried and a balance of convenience in favour of an applicant, ordinarily sufficient to justify the grant of an interlocutory injunction, will be insufficient to warrant the making of an order under s.15.

99. It is unnecessary for present purposes to attempt an exhaustive definition of the boundaries within which the powers conferred by the two sections may operate.

100. Even if there be an overlap in the powers conferred by the two sections the existence of s.15 and its special operation would weigh against the exercise of any congruent general discretion arising under s.23.

101. In this case I am of the view that whether it is a matter of power or of discretion, the applicant's claim for interlocutory relief must stand or fall with the exercise of the discretion under s.15.

102. The principles on which that discretion should be exercised can now be addressed.

Principles Governing the Discretion
Under Section 15 of the Judicial Review Act

103. Decisions of the Court on applications for suspensory or stay orders under s.15 of the Judicial Review Act have utilised a number of verbal formulae to describe the principles regulating the exercise of the discretion.

104. The first reported case was Capello v. Minister for Immigration and Ethnic Affairs (1980) 49 FLR 40, 2 ALD 1014.

105. Franki J. there suspended the operation of a deportation order for five days "to enable the applicant to present a case which would show that upon a final hearing of the matter there was at least a reasonable argument for the granting of relief under s.16 of the Act".

106. No such argument being presented the suspense order was not renewed.

107. The decision indicates that in a case of urgency a suspense order or a stay may be granted under s.15 prior to any determination as to whether the applicant has a reasonable argument.

108. It is consistent with a broad discretion under s.15 to be applied according to circumstances which may change even within the one application.

109. The discretion was so characterised by Keely J. in Perkins v. Cuthill (1981) 34 ALR 669. His Honour rejected a submission that in its exercise he should apply the principles relevant to the grant of interlocutory injunctions. At 671 he said:-

"In my opinion Section 15(1)(a) requires an Applicant to
satisfy the Court that reasons or circumstances exist
which make it just that the Court should make the orders
sought, but it is not necessary for the Applicant to
show that those reasons are in any sense special or
exceptional."

110. In Collins v. Minister for Immigration and Ethnic Affairs
(No.2) (1982) 5 ALD 32, Bowen CJ, also took a broad view of the discretion. He did not consider standards imported from other areas of the law necessarily applicable in the administration of the Judicial Review Act.

111. At 33 his Honour said:-

"Whether Section 15 requires an applicant to make out a
prima facie case in the sense laid down in Beecham Group
Limited v. Bristol Laboratories Pty Ltd [1968] HCA 1; (1968) 118 CLR
618 or whether it is sufficient to show an arguable case
as mentioned in Capello v. Minister for Immigration and
Ethnic Affairs (1980) 2 ALD 1014 might be a question.
Each case I think will depend upon its own circumstances
in the exercise of discretion. The Court will naturally
be very concerned to see whether there are any prospects
of success in the application; if the prospects of
success are very high the Court will be more concerned
to try and hold the position by way of a stay, if it can
do so, than it will be if there appear to be virtually
no prospects of success."

112. Collins was followed in Gaillard v. Minister for Immigration and Ethnic Affairs (1983) 5 ALN 25 (Lockhart J.) and Gonaseela v. Minister for Immigration and Ethnic Affairs (1985) 7 ALN 168 (Morling J.).

113. A Full Court considered the operation of s.15 in Faingold v. Zammit (1984) 1 FCR 87. That case was an appeal against the refusal by Northrop J. to stay the appellant's removal from Australia pursuant to sub-s.36A(5) of the Migration Act.

114. The Court rejected the appellant's submission that Northrop J. had erred in applying to the exercise of his discretion under s.15, the test propounded for the grant of interlocutory injunctions by Gibbs CJ. in The Australian Coarse Grain Pool Pty Ltd v. The Barley Marketing Board of Queensland (1983) 57 ALJ 425.

115. That test requires the applicant for relief to show that there is a serious question to be tried and that the balance of convenience favours the grant of the relief.

116. The appellant submitted that the appropriate test was that laid down in Perkins v. Cuthill (supra).

117. The Court said of this submission:-

"In our opinion it will be difficult for an appellant to
show that reasons or circumstances exist which make it
just that the court should make the order sought unless
it is demonstrated that the applicant has a point of
substance to argue which if successful will result in
judgment in his favour. In this respect it does not
appear to us that the two tests are in practical terms
very different."

118. That response in my respectful opinion, establishes what for many cases will be a necessary condition of the exercise of the discretion. Consistently with that decision however there are circumstances in which a short term "holding" order is warranted.

119. In that very case such an order was granted at first instance by Northrop J. Franki J. as already observed had made a similar short term order in Capello (supra).

120. In Videto v. Minister for Immigration and Ethnic Affairs (1985) 8 ALN 237 Toohey J. expressed strong reservations as to the appropriateness of applying the test for the grant of an ordinary interlocutory injunction to an application for a stay under s.15 of the Judicial Review Act.

121. His Honour there expressly approved the criterion enunciated by Keely J. in Perkins v. Cuthill (supra).

122. More recently in Phang Yook Yah v. Mahoney (unreported Pincus J. 1 May 1986) Pincus J. accepted that under s.15 a short stay can be ordered where its only purpose is to enable an interlocutory application to be brought on proper material.

123. There may also be cases as I have already said, where a "serious question" or a "point of substance" and a balance of convenience favouring the applicant are insufficient to warrant the making of an order. The nature of the decision to be reviewed and the policy of its governing legislation may give rise to other considerations. Indeed the present is just such a case.

124. The discretion is broad and its scope best expressed by the kind of broad terminology used in Perkins v. Cuthill even though in many cases the practical application of that formulation may be little distinguishable from the application of principles governing the grant of interlocutory injunctions.

125. It is now necessary to consider the application of that discretion in the present case against the statutory framework which regulates the making and issuing of assessments and amended assessments and the institution of proceedings for the recovery of tax assessed.

Statutory Framework

126. The process of assessment is defined in s.6(1) of the ITAA in the following terms:-

""Assessment" means -

(a) the ascertainment of the amount of taxable income
and of the tax payable thereon; or

(b) the ascertainment of the amount of additional tax
payable under a provision of Part VII."

127. The power of the Commissioner to make an assessment is set out in s.169:-

"Where under this Act any person is liable to pay tax,
the Commissioner may make an assessment of the amount
of such tax."

128. The making of amended assessments is provided for in s.170 of the Act which, at the date of issue of the notices of amended assessments now in question, read in the relevant parts as follows:-

"(1) The Commissioner may, subject to this section, at
any time amend any assessment by making such alterations
therein or additions thereto as he thinks necessary,
notwithstanding that tax may have been paid in respect
of the assessment.

(2) Where a taxpayer has not made to the Commissioner
a full and true disclosure of all the material facts
necessary for his assessment, and there has been an
avoidance of tax, the Commissioner may -

(a) where he is of opinion that the avoidance of
tax is due to fraud or evasion - at any time;
and

(b) in any other case - within six years from the
date upon which the tax became due and payable
under the assessment,

amend the assessment by making such alterations therein
or additions thereto as he thinks necessary to correct
an error in calculation or a mistake of fact or to
prevent avoidance of tax as the case may be.

(3) Where a taxpayer has made to the Commissioner a
full and true disclosure of all the material facts
necessary for his assessment, and an assessment is made
after that disclosure, no amendment of the assessment
increasing the liability of the taxpayer in any
particular shall be made after the expiration of three
years from the date upon which the tax became due and
payable under that assessment."

129. The application to amended assessments of provisions of the Act relating to assessments is effected by s.173:-

"Except as otherwise provided every amended assessment
shall be an assessment for all the purposes of this
Act."

130. The Commissioner is required under s.174 to serve notice of any assessment upon the person liable to pay the tax and to do so as soon as conveniently may be after any assessment is made.

131. The time at which tax assessed becomes payable is provided for in s.204 as follows:-

"(1) Subject to the provisions of this part, any income
tax assessed shall be due and payable by the person
liable to pay the tax on the date specified in the
notice as the date upon which the tax is due and
payable, not being less than 30 days after the service
of the notice, or if no date is specified, on the 30th
day after the service of the notice.

(2) In sub-s.(1), "income tax" includes additional tax
under Part VII."

132. The time for payment may be extended and provision for such extension is contained in s.206:-

"The Commissioner may in any case grant such extension
of time for payment of tax, or permit payment of tax to
be made by such instalments and within such time as he
considers the circumstances warrant; and in such case
the tax shall be due and payable accordingly."

133. The penalty for late payment is covered by s.207 which, in the relevant part provides:-

"(1) If any tax remains unpaid after the time when it
became due and payable or would, but for section 206,
have become due and payable, additional tax is due and
payable by way of penalty by the person liable to pay
the tax at the rate of 20% per annum on the amount
unpaid, computed from that time or, where, under section
206 the Commissioner has granted an extension of time
for payment of the tax or has permitted payment of the
tax to be made by instalments, from such date as the
Commissioner determines, not being a date prior to the
date on which the tax was originally due and payable.
.
.
.

(2) Notwithstanding anything contained in this section
the Commissioner may sue for recovery of any tax unpaid
immediately after the expiry of the time when it becomes
due and payable."

134. Section 208 renders income tax due and payable a debt due to the Commonwealth:-

"(1) 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;

(2) In subsection (1), "income tax" includes additional
tax under section 207 or Part VII."

135. The recovery of tax in any court of competent jurisdiction is provided for in s.209 which is in its terms a provision conferring power on the Commissioner or a Deputy Commissioner to institute and carry on proceedings:-

"(1) 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.

(2) In subsection (1), "tax" includes additional tax
under section 207 or Part VII."

136. The recovery of tax is not delayed by the fact that a review or appeal is pending and provision in this regard is contained in s.201 which reads:-

"(1) The fact that a review or appeal is pending does
not in the meantime interfere with, or affect, the
assessment and income tax may be recovered as if no
review or appeal were pending.

(2) In subsection (1), "income tax" includes additional
tax under section 207 or Part VII."

137. The recovery process is expedited by s.177(1) which provides:-

"The production of a notice of assessment, or of a
document under the hand of the Commissioner, a Second
Commissioner, or a Deputy Commissioner, purporting to be
a copy of a notice of assessment, shall be conclusive
evidence of the due making of the assessment and (except
in proceedings on appeal against the assessment) that
the amount and all the particulars of the assessment are
correct."

The Nature of the Decision to be Suspended

138. The suspensory order sought by the applicant relates to the decision of the respondent to issue a writ for the recovery of the tax due notwithstanding that the respondent has not exhausted his avenues of appeal against the amended assessments.

139. The decision is a decision to which the Judicial Review Act applies - The Hells Angels Ltd v. Deputy Commissioner of Taxation (1985) 7 FCR 311 at 318 per Northrop J.

140. His Honour in that case said that the decision to sue arises under ss. 8 and 208 of the ITAA.

141. In Terrule Pty Limited v. Deputy Federal Commissioner of Taxation (1985)5 FCR 153 at 156 Jenkinson J. said he would regard ss. 8 and 208 as part of a legislative context in which s.209 is seen to afford the Commissioner and 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.

142. I would respectfully adopt the analysis by Jenkinson J. Section 209 in its terms confers the relevant decision making power.

143. It is appropriate to have regard to the fact that the decision does not of itself create or affect rights or liabilities. It is also relevant to consider that a restraint upon the institution of recovery proceedings will bar for its duration, the respondent's access to a court invested with appropriate federal jurisdiction pursuant to s.39 of the Judiciary Act and s.75(iii) of the Constitution.

144. This Court of course has been prepared in the past in appropriate cases to exercise its powers under s.23 of the Federal Court Act or s.15 of the Judicial Review Act and to restrain litigants from taking steps in proceedings in the superior courts of the States.

145. In St. Justins Properties Pty Ltd v. Rule Holdings Pty Ltd (1980) 40 FLR 282, Toohey J. at 285 rejected a submission that such orders are contrary to the public interest.

146. On the other hand a conservative approach to such a use of the power under s.15 is reflected in the judgment of Jenkins on J. in Terrule Pty Ltd v. Deputy Federal Commissioner of Taxation (supra) at page 158:-

"...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."

147. That is a proposition with which I respectfully agree .

148. Consistently with this conservative principle it is in my opinion, proper for this Court to take into account the existence of a power in the superior courts of the States to restrain proceedings instituted in them. It is appropriate also to have regard to the way in which that power has been exercised in connection with proceedings to recover income tax.

149. For in exercising or declining to exercise the power the courts have explored the considerations to be taken into account in implementing the policy of the ITAA manifested by its legislative scheme in relation to recovery proceedings.

The Inherent Power of State Courts
To Stay Recovery Proceedings

150. The Supreme Courts of the States pursuant to their own inherent jurisdictions have power to stay recovery proceedings instituted in them under the ITAA - Deputy Commissioner of Taxation v. Australia Machinery and Investment Co. (1945) 47 WALR 9, 17.

151. There have been numerous decisions on the criteria to be applied in the exercise of that power.

152. Generally speaking those decisions support the view that the legislative scheme established in relation to income tax recovery especially as manifested in s.201 of the ITAA, reflects a clear policy favouring the revenue against the taxpayer.

153. As the High Court said in Clyne v. Deputy Federal Commissioner of Taxation 83 ATC 4532 at 4534, the Commissioner is placed by the legislature in a position of special advantage.

154. In Deputy Federal Commissioner of Taxation v. Hells Angels Limited (No. 1) 84 ATC 4545 at 4547 in the Supreme Court of Victoria Beach J. said:-

"That provision can only be consistent with an intention
by the legislature that the Deputy Commissioner take all
appropriate steps to recover tax due (including the
institution of legal proceedings) despite the fact that
an appeal is pending."

155. On this basis the power to grant a stay must be exercised sparingly - Marina Estates Pty Ltd v. Deputy Commissioner of Taxation 76 ATC 4166 at 4168 per Hoare J.

156. In the context of a petition by the Commissioner of Taxation to wind up a corporate taxpayer in respect of unpaid tax and penalties where the assessments were under appeal, Bowen CJ (in Eq) said:-

"...the provisions of sec.201 of the Income Tax
Assessment Act require me to treat the debt as in effect
undisputed. Such a statutory provision may in some cases
lead to hardship on a taxpayer, particularly where he
has paid the amount of tax assessed and later wins his
appeal, whereupon the money is repaid to him without
interest. This lead Higgins J. in Hickman v. FC of T [1922] HCA 57; 31
CLR 232 at 245) to describe it as "unjust and even
baneful", but it remains in the Act...

Whatever the merits or demerits of the provision may be,
it will generally lead the court to refuse a stay."

- Re: Roma Industries Pty Ltd 76 ATC 4113 at 4116.

157. On the other hand, in Fortuna Holdings Pty Ltd v. The Deputy Commissioner of Taxation of the Commonwealth of Australia (1978) VR 83, McGarvie J. was not sure that he would reach the same conclusion as Bowen CJ. At 101 his Honour said:<-

"The decisions cited to me and those referred to in the
article by Mr Castan suggest to me that the particular
circumstances of cases involving s.201 lead courts
sometimes to grant and sometimes to refuse a stay rather
than that the section generally leads a court to refuse
a stay".

158. In Federal Commissioner of Taxation v. Bevz (1981) 54 FLR 355 Jenkinson J. was not prepared to allow a stay of recovery proceedings where the prospects of success on an appeal under Part V of the ITAA were remote. His Honour however left open the question whether a greater chance of success should attract an exercise of the discretion to grant a stay in favour of the taxpayer.

159. Mason ACJ in Clyne v. Deputy Commissioner of Taxation (NSW) (1982) 43 ALR 342 was informed by counsel for the Deputy Commissioner that it was a somewhat unusual course for him to commence proceedings for recovery in a court relying on a notice of assessment which is under challenge in proceedings under Part V of the ITAA.

160. His Honour observed at 344:-

"It is to be hoped that this is so. The institution of
proceedings for recovery on a notice of assessment which
is challenged in proceedings under Pt V may operate
oppressively and unfairly to a taxpayer. Fortunately,
and this is conceded by Mr Priestley QC for the Deputy
Commissioner, the Courts in which recovery is sought
have a jurisdiction to stay or adjourn recovery
proceedings when the notice of assessment is under
challenge in Pt V proceedings, insisting, if it be
appropriate on the taxpayer giving suitable security or
a suitable undertaking to meet the exigencies of the
situation."

161. Section 201 as his Honour acknowledged is the Deputy Commissioner's "charter to commence proceedings notwithstanding a challenge in Pt V to the correctness of the assessment".

162. The New South Wales Court of Appeal in Federal Commissioner of Taxation v. Mackey (1982) 64 FLR 432 considered at some length the impact of s.201 on the discretion to order a stay in recovery proceedings.

163. In allowing an appeal against the decision of Yeldham J. granting a stay in a case involving reliance by the taxpayer on what was held to be "a contrived scheme" Moffitt P. accepted that great weight should be given to s.201 and the policy of the legislation implicit in it.

164. It might not be given the force warranted, he said, if the exercise of the discretion depended heavily or merely on whether the taxpayer had an arguable case and where the balance of convenience lay ( at 436):-

"The policy of s.201 is that when an assessment has been
made the Deputy Commissioner has a right to have the tax
paid, despite the pendency of an appeal. While hardship
to the taxpayer and the merits of the appeal are
relevant matters, other considerations are involved
including the Commissioner's right to have the tax
assessed paid. The exercise of discretion may involve
... some examination of the nature and basis of the
liability on which the disputed tax has been assessed
and the nature of the dispute."

165. His Honour was of the view that in a case where a taxpayer had been a party to a "contrivance" to avoid his liability to pay tax, then the Court should not, otherwise than in quite exceptional circumstances, intervene to stay proceedings. But he distinguished that case from the case in which, in the ordinary course of business, a situation arose giving rise to a dispute concerning the liability of the taxpayer for tax.

166. Hutley and Glass JJA. generally agreed with Moffitt P. although Hutley JA appears to have differed to the extent that he was of opinion that speculation as to the result of appeals was not a significant matter to be borne in mind.

167. Both Hutley and Glass JJA. also appeared to have stated the effect of s.201 on the exercise of the discretion rather more broadly than Moffitt P. who confined his remarks to the case of a taxpayer relying upon a contrived scheme.

168. Thus at 437 Hutley JA. observed that the power to stay should be exercised with great caution and only under special circumstances:-

"In deciding whether to exercise it there is no
similarity whatsoever to the issue which faces the court
when it is asked to grant an interlocutory injunction.
A person who applies for an interlocutory injunction is
applying for an exercise of the court's power in his
favour and the burden lies on him to establish his right
to it.

The Commissioner starts off with rights under s.201 and
the taxpayer is seeking on special bases to have a
special discretion exercised in his favour. It is not
possible to work out in advance all possible bases for
the exercise of such a discretion and it would not be
proper even to attempt to do so. It is an open ended
discretion."

169. His Honour identified what he said were the only two cases where it is clear that the Court would exercise its discretion:-

1. Abuse of office by the Commissioner.

2. Extreme personal hardship to a taxpayer called on to
pay.

170. Glass JA agreed that it was a misconception to treat an application for a stay in the same way as an interim injunction application. To use the metaphor of a scale the effect of s.201 was that the needle stood in the Commissioner's favour close to 100 and it would require a weighty case to be presented by the taxpayer to depress it below the half way mark.

171. Further, the legislative scheme established in relation to income tax recovery, especially as manifested in ss.177 and 201 of the ITAA reflects a clear legislative intent favouring the revenue against the taxpayer.

172. On an application for a stay of execution in Deputy Federal Commissioner of Taxation v. The Hells Angels Limited (No. 2) 84 ATC 4548 Beach J. declined the stay.

173. The grounds upon which it was sought were that hardship would be caused to the taxpayer and that he was likely to succeed on appeal.

174. Following Hutley JA in Mackey's case his Honour that the obligation to pay tax cast upon the defendant by law was not a hardship of itself. Like Hutley JA also, but it seems contrary to Moffitt P. and Glass JA in Mackey's case, his Honour took the view that speculation as to the result of appeals was not to be taken into account in exercising the discretion to grant a stay.

175. In Deputy Federal Commissioner of Taxation v. Ewen 84 ATC 4550 at 4552, O'Brien J. relying upon Mackey's case, saw s.201 as imposing an onus on the taxpayer to show cause why the court should intervene to stay proceedings.

176. Contrary to the views of Hutley JA in the Mackey case and Beach J. in the The Hells Angels Limited (No. 2) (supra), Needham J. in Deputy Federal Commissioner of Taxation v. Steel Fabrication Pty Ltd 84 ATC 4639, accepted the relevance of evidence as to the substantive nature of the grounds of an appeal under Part V of the ITAA in deciding whether to stay proceedings for the winding up of a company the subject of a disputed assessment to income tax.

177. The genuineness of a taxpayer's appeal against assessment has been clearly accepted as a relevant factor in the exercise of the Court's discretion to adjourn or dismiss a sequestration petition under s.52(2) of the Bankruptcy Act - Clyne v Deputy Federal Commissioner of Taxation (1982) 45 ALR 323, 328 and Re: Verma Ex Parte Deputy Federal Commissioner of Taxation 84 ATC 4864, 4868 per Beaumont J.

178. In Deputy Federal Commissioner of Taxation v. Truehold Benefit 85 ATC 4058 the taxpayer had been assessed under the Income Tax (Unpaid Company Tax) Assessment Act 1982 and was the subject of a winding up petition by the Commissioner.

179. The company had demurred to the statement of claim in the recovery proceedings on the basis that the Act under which it was assessed was not a valid law of the Commonwealth. The demurrer was plainly going to be overruled at first instance and in the Full Court because of the decision of the High Court in MacCormick v. Federal Commissioner of Taxation (1984) 58 ALJR 268. The avowed object of the demurrer was to persuade the High Court to reconsider the decision in MacCormick's case.

180. In staying the presentation of the winding up petition Connolly J. referred to ss.177(1) and 201 of the ITAA and said:-

"I am not ... persuaded that either of these provisions
would justify the winding up of the company in reliance
upon a statute the constitutionality of which the
any with whatever prospects of success genuinely
desires to challenge."

181. In my respectful opinion the view there expressed by his Honour should be seen as related to the nature of the proceedings in question, namely winding up proceedings. It should not be transposed as a proposition generally applicable to recovery proceedings.

182. In Deputy Federal Commissioner of Taxation v. Manners 85 ATC 4294 Phillips J. on an application for a stay of execution after summary judgment for the Deputy Commissioner, agreed with O'Brien J. in Deputy Federal Commissioner of Taxation v. Ewen (supra) that s.201 of the ITAA imposes an onus on a defendant to show cause why the court should intervene to stay proceedings. He also agreed with the observations of Hutley JA in Mackey's case that a defendant might discharge this onus by demonstrating extreme personal hardship.

183. His Honour left open the question of the relevance of the merits of the Part V appeal in such an application. He noted the differing views on that point expressed respectively by Moffitt P. in Mackey's case and Mason ACJ in Clyne's case on the one hand and Hutley JA in Mackey's case and Beach J. in The Hells Angels Limited (No.2) on the other.

184. In the event, assuming the relevance of the merits of the defendant's appeal, his Honour was unable to determine them and they did not therefore impinge upon the significance to be attached to the provisions of s.201 in the exercise of his discretion.

185. In Koadlow v. Deputy Federal Commissioner of Taxation 85 ATC 4147 at 4151 the Victorian Full Court accepted that a request for reference of an objection to a Board of Review was a factor relevant to the exercise of the discretion to stay proceedings.

186. Another relevant factor they said was the prospect of success on such a reference in the sense that if it were shown that a taxpayer's objection were frivolous or hopeless no stay of proceedings would be granted.

187. In Deputy Federal Commissioner of Taxation v. Trower 86 ATC 4157 McGarvie J. declined to grant a stay of execution in recovery proceedings although the taxpayer had genuine and substantial grounds of objection to the assessment and the Commissioner had delayed in referring the decision to a Board of Review. In so deciding his Honour took into account the fact that the taxpayer relied substantially on contrived tax avoidance schemes.

188. It is in my opinion, important to note what his Honour said at 4163 namely:-

"The considerations relevant to the exercise of
discretion on an application for a stay are different
from those on the determination of whether a taxpayer is
liable for income tax. On the latter issue, if the use
of an artificial contrivance results in law in a
taxpayer being not liable for tax, it makes no
difference that this result was reached by artificial
contrivance."

189. In the decision of the Queensland Full Court in Deputy Federal Commissioner of Taxation v. Jonrich Pty Ltd 86 ATC 4560 Connolly J. at 4573, stated correctly in my respectful opinion, that s.201 was in one sense otiose in providing that income tax might be recovered notwithstanding the pendency of an appeal or reference. Section 204, as already noted, makes income tax due and payable on the dates set out in the notice of assessment or thirty days after service." His Honour said:-

"The real effect of s.201 was to state a policy and its
practical consequence was to provide a powerful factor
influencing the courts against staying proceedings
pending appeal or reference."

190. It may generally be concluded from the preceding review, that the power of State Courts to stay recovery proceedings instituted in them under the ITAA is well established and that Courts exercising it have regard to the following propositions:-

1. The policy of the ITAA as reflected in its
provisions gives priority to recovery of the
revenue against the determination of the taxpayer's
appeal against his assessment.

2. The power to grant a stay is therefore exercised
sparingly and the onus is on the taxpayer to
justify it.

3. The merits of the taxpayer's appeal constitute a
factor to be taken into account in the exercise of
the discretion (although some Judges have expressed

4. Irrespective of the legal merits of the appeal a
stay will not usually be granted where the taxpayer
is party to a contrivance to avoid his liability to
payment of the tax.

5. A stay may be granted in a case of abuse of office
by the Commissioner or extreme personal hardship to
the taxpayer called on to pay.

6. The mere imposition of the obligation to pay does
not constitute hardship.

7. The existence of a request for reference of an
objection for review where appeal is a factor
relevant to the exercise of the discretion.

Limits of Accountability

191. It may be thought significant that the decision to institute recovery proceedings falls into the class of decisions described in paragraph (f) of the Second Schedule to the Judicial Review Act. It is therefore, by operation of s.13(11) of the Act excluded from the classes of decision in respect of which the decision maker can be required to provide a statement of reasons.

192. It was suggested by Fox J. (Beaumont J. agreeing) in Murphy v. K.R.M. Holdings Pty Ltd (1985) 8 FCR 349 at 351 that the general idea behind paragraph (f) of the Second Schedule is that civil procedure will itself take care of what s.13 seeks to achieve when it requires reasons to be given and that civil procedure is not to be complicated by the s.13 procedure.

193. It might seem that that rationale could constitute an argument against the availability of judicial review of such classes of decision at all.

194. Such decisions are reviewable, but their inclusion in the Second Schedule may indicate that the legislature did not intend such review to be easily pursued - see Murchison v. Keating (1984) 1 FCR at 343-344.

195. On the other hand Toohey J. in Ryder v. Morley (Unreported Toohey J. 19/1/87) did not infer from s.13 and Schedule 2 any clear legislative policy in regard to the use of interlocutory procedures, whether by way of countenancing or precluding them.

196. In my opinion, it is not appropriate to draw any clear conclusion one way or the other as to the legislative policy underlying the limits on official accountability for this class of decision which is, after all, reviewable under the Act. This difficulty is compounded by the fact that the decision under s.206 of the ITAA refusing to grant an extension to pay tax assessed, does not appear to fall within any of the classes mentioned in the Second Schedule.

Judicial Review of Decisions
to Institute Recovery Proceedings

197. The Judicial Review Act applies to a wide range of decisions of Commonwealth ministers and officials each within a particular statutory framework.

198. The Act is not designed to affect the substantive legislative policies expressed by the enactments in respect of which it operates.

199. As the Full Court said in Lamb v. Moss (1983) 49 ALR 533 at 557, its broad purpose was to invest the court with jurisdiction to supervise administrative action in the Commonwealth sphere in all its aspects. Such a broad purpose encompassing as it does many classes of decision and differing statutory context is necessarily accompanied by broad discretions in the granting or withholding of relief, be it interlocutory or final:-

"....this court has conferred upon it a wide discretion
to grant or refuse relief in a particular case. It is
in the exercise of that discretion that the court will
exercise control over the circumstances in which and the
stage at which judicial review will be embarked upon.
Furthermore it should be understood that the court's
discretion is not limited to what is to occur when it
comes to the question of whether to grant or refuse
final relief. By s.15 of the Act there is no automatic
stay of the operation of a decision upon the making of
an application to the court. It will always be for the
court carefully to consider whether a stay should be
granted."

200. Within the wide discretions so created it is open to the Court in appropriate cases, to identify general approaches to particular classes of decision based upon their nature and the policy of the legislation under which they arise.

201. In respect of the class of reviewable decisions relating to committal proceedings for criminal offences against laws of the Commonwealth, the court in Lamb v. Moss (supra) stated a general approach to the exercise of its discretion in the following terms at 564:-

"The power to make an order of review under the Act in
respect of committal proceedings should be exercised
only in most exceptional cases especially in respect of
a decision in the course of proceedings."

202. In my opinion, a general approach not dissimilar in its effect should be applied to applications to restrain the commencement or continuance of recovery proceedings under the ITAA.

203. A proper recognition of the legislative policy embodied in s.201 of the ITAA as explained in the cases referred to above will weigh significantly in the balance against the grant of the restraint order sought. So too does the existence of the power in the State Courts to stay recovery proceedings and their preparedness to take into account the existence of a pending appeal or review and its merits in doing so.

204. The fact that the mere institution of such proceedings is itself determinative of no rights or liabilities also weighs against the making of a restraining order.

205. To some extent the strength of that consideration is lessened by the preclusive operation of s.177 of the ITAA and the comparative rapidity and ease with which, in most cases, the Commissioner can proceed to obtain summary judgment.

206. It has already been noted that on at least some if not the preponderance of authority, the merits of the taxpayer's objection to the assessments may be taken into account by the court in which recovery proceedings are instituted when such court is moved for a stay of those proceedings.

207. However the weight of such considerations in the exercise of the Commissioner's discretion to extend time or hold his hand with respect to recovery proceedings is attenuated by the fact that it is his assessment whose strength is in question.

208. That is not to say that there may not be cases where it is appropriate for the Commissioner to take into account the strength of an objection to an assessment in determining whether or not to extend time or to institute proceedings.

209. However it is not necessary or desirable for present purposes to exemplify those possibilities.

210. In my opinion, while there is a serious question as to the merits of the applicant's objections in this case, they do not, for the purposes of the interlocutory restraint sought, displace the legislative policy and other factors referred to.

211. Weighing against him also in this case is the apparently contrived nature of the arrangements he has made to minimise his liability to pay income tax. That is not to say of course that those arrangements will not prove to be legally effective.

212. Further, although the applicant claims he will suffer hardship if recovery proceedings go ahead, it is difficult to reconcile that contention with his assertion of a nil net asset position.

213. Further there is nothing on the materials before the Court to justify a restraint of the scope and extent sought which evidently contemplates that the respondent should be prevented from instituting recovery proceedings until the applicant has exhausted all avenues of appeal against the assessments up to and including an application for special leave to appeal to the High Court.

214. In the end and taking account of the various factors which I have mentioned and on the assumption that there is substance in the applicant's objections, I am not prepared to grant the suspensory orders sought by him.

215. I recognise that in so doing the applicant's claim for final relief, at least in so far as it relates to the institution of recovery proceedings, may be rendered nugatory and have for that reason given the matter extended consideration.

216. I have been troubled by the fact that as at the date of the hearing of the motion the applicant had requested that the disallowance of his objections be referred to the Administrative Appeals Tribunal and that request had not been complied with.

217. It is in my opinion, quite unacceptable, in the absence of explanation, that the respondent should fail to refer an objection in accordance with a request by the applicant under s.187 of the ITAA and yet seek immediately to institute recovery proceedings.

218. It is difficult to imagine circumstances, though no doubt they may exist, in which such conduct could not be described as oppressive.

219. Of course I acknowledge that in this case the respondent gave the Court an undertaking not to institute recovery proceedings pending its decision on the claim for interlocutory relief.

220. The applicant contends in his grounds for review that the existence of his request for a reference of the objections to the Tribunal and the failure by the respondent to act upon it was relevant to the exercise of the discretions in question in this application.

221. In my opinion that is a legitimate although limited basis for obtaining review of the decisions impugned.

222. If it be the case that as of the date of delivery of this decision the respondent has still not referred the applicant's objections to the Administrative Appeals Tribunal, then I will be prepared to make an order restraining him from instituting recovery proceedings until the objections have been referred to the Tribunal in accordance with the applicant's request or until the determination of the application whichever is the earlier.

223. Otherwise the applicant's motion will be dismissed.