McDonald v Commissioner of Business Franchises [1992] HCA 59; (1992) 175 CLR 472 (25 November 1992)

HIGH COURT OF AUSTRALIA

McDONALD v. COMMISSIONER OF BUSINESS FRANCHISES [1992] HCA 59; (1992) 175 CLR 472
F.C. 92/047

Evidence

HIGH COURT OF AUSTRALIA
Mason CJ(1), Brennan(1), Deane(1), Dawson(1), Toohey(1), Gaudron and McHugh(1) JJ

CATCHWORDS

Evidence - Statutory conclusive evidence provision - Business franchises - Licence fees - Notice of assessment - Validity - Production of notice to be conclusive evidence of due making of assessment and correctness of amount - Exception of appeal and review proceedings - Assessment challenged in proceedings other than appeal or review - Conclusiveness of notice - Business Franchise (Tobacco) Act 1974 (Vict.), ss. 19A(1)(d), 19E(2).

HEARING

Canberra, 1992, November 11,25. 25:11:1992
APPEAL from the Supreme Court of Victoria.
The Commissioner of Business Franchises sued Noel Walter Alexander McDonald in the Magistrates' Court at Melbourne to recover amounts allegedly due and payable under an assessment made under s. 19A of the Business Franchise (Tobacco) Act 1974 (Vict.) ("the Act"). To prove the Commissioner's case, counsel tendered a number of documents purporting to be copies of notices of assessment made in accordance with s. 19A. The amounts allegedly payable according to the notices represented amounts which McDonald should have paid had he applied for a tobacco wholesaling licence for the months of September 1986 to November 1987 inclusive. Each notice was dated 11 September 1989. As the result of an amendment to the Act made by s. 20(1) of the Business Franchise Acts (Amendment) Act 1988 (Vict.), the power to make an assessment of the amount that should have been paid by a person if that person had applied for a tobacco wholesaling licence was removed from the Act. The magistrate upheld the Commissioner's contention that s. 19E(2) of the Act precluded the Court from going behind the purported notices of assessment to inquire into the Commissioner's power to make the assessments and ordered that McDonald pay the amount claimed. The Appeal Division of the Supreme Court (Murphy, Fullager and O'Bryan JJ discharged an order nisi obtained by McDonald to review the magistrate's decision McDonald v Commissioner of Business Franchises (1992) 1 VR 611. McDonald appealed, by special leave, to the High Court.

DECISION

MASON C.J., BRENNAN, DEANE, DAWSON, TOOHEY, GAUDRON AND McHUGH JJ. The respondent ("the Commissioner") by complaint and summons issued out of the Magistrates' Court at Melbourne sought an order for the payment by the appellant ("McDonald") of moneys claimed to be due to the Commissioner under the Business Franchise (Tobacco) Act 1974 (Vict.) ("the Act"). The Commissioner, pursuant to s.19B of the Act, sued to recover amounts allegedly "due and payable under an assessment" made under s.19A of the Act. Section 19A(1)(d) of the Act prior to its amendment by the Business Franchise Acts (Amendment) Act 1988 (Vict.) ("the 1988 Amendment Act") read as follows:
" (1) If -
(d) the Commissioner has reason to believe that a person
is carrying on or has carried on a business of
tobacco retailing, tobacco wholesaling, petroleum
retailing or petroleum wholesaling without having
made an application for the appropriate licence under
the Business Franchise Acts;
the Commissioner may make an assessment of the amount that
in his judgment should have been paid had the application
been made ... and that person shall be liable to pay that
amount less any amount previously paid by a person in
respect of an application referred to in paragraph (a),
(b), (c) or (e) except insofar as he establishes on
objection or appeal that the assessment is excessive."
2. To prove the Commissioner's case, counsel tendered a number of documents purporting to be copies of notices of assessment made in accordance with s.19A(1) of the Act. The amounts allegedly payable according to the notices represented amounts which McDonald should have paid had he made an application for a tobacco wholesaling licence for the months of September 1986 to November 1987 inclusive. Each of the notices was dated 11 September 1989 and it was common ground that that was the date on which the Commissioner purported to assess the amounts in respect of which the several notices were issued. However, by s.20(1) of the 1988 Amendment Act, which came into operation on 1 December 1988, s.19A(1)(d) had been amended by deleting ", tobacco wholesaling, petroleum retailing or petroleum wholesaling" and by substituting the words "or petroleum retailing". Thus the power to make an assessment of the amount that should have been paid by a person if that person had applied for a tobacco wholesaling licence was removed from the Act.

3. McDonald contends that, when the amendment came into operation on 1 December 1988, the power to make an assessment of amounts that should have been paid in respect of tobacco wholesaling prior to that date ceased and that the notices of assessment were not, and could not purport to be, notices of assessment for the purposes of the Act. The Commissioner contends that that is a submission which s.19E(2) of the Act precludes McDonald from making in proceedings for the recovery of the amounts for which the assessments were raised. An objection for want of power, so the argument runs, can be taken only in proceedings on objection or appeal against the assessment for which the Act provides in ss.16 to 18B ((1) Federal Commissioner of Taxation v. Dalco [1990] HCA 3; (1990) 168 CLR 614, at pp 621-622; McAndrew v. Federal Commissioner of Taxation [1956] HCA 62; (1956) 98 CLR 263, at p 282.).

4. Section 19E(2) reads as follows:

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

5. This provision reproduces the substantive provisions of s.177(1) of the Income Tax Assessment Act 1936 (Cth) which has been considered in this Court in a number of cases. The Commissioner relies on a passage in the joint judgment of Mason and Wilson JJ. in F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation ((2) [1981] HCA 27; (1981) 147 CLR 360, at p 375):

" An explicit and, in our view, correct statement of the
effect of s. 177(1) was made by Taylor J. in McAndrew ((3)
(1956) 98 CLR, at pp 281-282).
For the reasons there expressed his Honour concluded that
's. 177(1) was intended to make it impossible for a
taxpayer, in proceedings other than appeal against it, to
challenge an assessment on any ground'. He conceded that
the word 'excessive' in s. 190(b) was inappropriate.
However, he considered that an assessment 'made in
purported but not justifiable exercise of a statutory
power' could properly be described as 'excessive' ((4) ibid.,
at p 282.).
This interpretation gives expression to the policy which
underlies, and is manifest in, the statutory provisions.
The effect of this policy is that, once the Commissioner
takes advantage of s. 177(1) by producing an appropriate
document, the taxpayer is precluded from contesting
that the Commissioner has made an assessment or that in
making the assessment he has complied with the statutory
formalities. The taxpayer is entitled to dispute his
substantive liability to tax in proceedings under Pt V."

6. Pointing to the form of the copy notices of assessment and submitting that each of those notices is "an appropriate document", the Commissioner contends that s.19E(2) restricts objections to the validity of an assessment for want of power to proceedings "on appeal against or review of the assessment". The Commissioner submits that McDonald cannot challenge the validity of the purported notices of assessment in proceedings brought to recover the amounts specified in the notices. The magistrate upheld the Commissioner's submission that, in the recovery proceedings, the Court could not go behind the purported notices of assessment to inquire into the Commissioner's power to make the assessments. He ordered that McDonald pay the Commissioner's claim for $368,499.60 together with $46,642.63 interest and $2,261.00 costs. On the return of an order nisi to review the magistrate's order, Fullagar J., speaking for the Full Court of the Supreme Court of Victoria ((5) McDonald v. Commissioner of Business Franchises (1992) 1 VR 611.), pointed out that each assessment in the present case relates to alleged tobacco wholesaling in a period of time in which tobacco wholesaling was taxable under the Act. His Honour then referred to certain provisions in s.14(2) of the Interpretation of Legislation Act 1984 (Vict.) reading as follows:

" (2) Where an Act or a provision of an Act -
(a) is repealed or amended; or
(b) expires, lapses or otherwise ceases to have
effect -
the repeal, amendment, expiry, lapsing or ceasing to have
effect of that Act or provision shall not, unless the
contrary intention expressly appears -
...
(e) affect any right, privilege, obligation or
liability acquired, accrued or incurred under that
Act or provision".

His Honour thought it was open to the Commissioner to form the view, in the light of this provision, that she had power to make an assessment after 1 December 1988 in respect of amounts that should have been paid for a tobacco wholesaling licence for periods prior to 1 December 1988. In his Honour's view, that was sufficient to attract the operation of s.19E(2). He said ((6) ibid., at p 618):

" In my opinion mere absence of power appearing after
the recovery court's perusal of the statute relied upon
is not enough to show that the assessments are bad upon
their face. To do that, the view of the law which must
be attributed to the Commissioner to bring the assessments
within power, or the view of the facts which must be taken
in order to bring the assessments within power, must be
so untenable or absurd that it simply could not have been
taken by an honest Commissioner. ... (T)he argument for
the appellant ... certainly cannot succeed in the present
case, because the assessments are not, on their face, other
than assessments under the Franchise Act, and accordingly
the conclusiveness provision makes it impossible to
challenge in the recovery court the due making of the
assessments."

Accordingly, it was held "that the production of each copy notice of assessment in the recovery proceedings was conclusive evidence of the due making of the assessment and conclusive evidence that the amount and all particulars of the assessment are correct" ((7) ibid., at p 620). The order nisi was discharged.

7. The question whether there was in law any power to raise the assessments after 1 December 1988 was not decided by the Full Court; what was decided was that s.19E(2) precluded that question from being agitated in recovery proceedings unless the circumstances satisfied the test expressed by Fullagar J. But, with respect, the application of s.19E(2) depends upon the existence of that power at the time when the purported assessments were made. The notices can neither be, nor purport to be, notices of assessment for the purposes of the Act with respect to amounts that should have been paid for tobacco wholesaling licences if the Act conferred no power on 11 September 1989 to make such assessments at that time. If McDonald can satisfy the Full Court that the Act conferred no power to make the assessments purportedly made on 11 September 1989, the notices cannot be "a document under the hand of the Commissioner purporting to be a copy of a notice of assessment" for the purposes of the Act. A document cannot purport to be a copy of a notice of assessment under the Act if it relates to an "assessment" which, by reference to the Act, the Commissioner is seen to have no power to make.

8. The problem which this case raises does not arise under the Income Tax Assessment Act. There, the power to make an assessment is continuing and a document which purports to be a notice of assessment, if in appropriate form, purports to give notice of an exercise of the statutory power. Such a document attracts the operation of s.177(1) of the Income Tax Assessment Act even though a condition governing the exercise of the power is disputed. A document which purports to notify an exercise of a statutory power to make the assessment can attract the operation of provisions such as s.19E(2) of the Act and s.177(1) of the Income Tax Assessment Act, but a document which purports to notify an "assessment" made when the Act confers no power to make it cannot attract the operation of such protective provisions ((8) Although s.19E(2), like s.177(1) of the Income Tax Assessment Act, refers to a document "purporting to be a copy of a notice of assessment", the legislative protection should be held to extend to purported copies of notices of purported assessments where the document appears to record or evidence a valid exercise of the power to make an assessment: see F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation (1981) 147 CLR, at pp 372, 378.). If it were otherwise, a legislative withdrawal of a power to assess could be overridden by an officer who asserted herself to have the power.

9. In this case, the Full Court's decision turned solely on the application of s.19E(2) of the Act. That provision will apply if on a true construction of the Act and, perhaps, on an application of s.14(2) of the Interpretation of Legislation Act, it is held that there was statutory power enabling the Commissioner on 11 September 1989 to make assessments of amounts which should have been paid by a person who was carrying on a business of tobacco wholesaling prior to that date and had applied for the appropriate licence under the Act. But if there was no such power, s.19E(2) does not apply. The Full Court, approaching the matter from a different viewpoint, did not find it necessary to decide whether there was or was not such a power. Holding s.19E(2) to apply, their Honours did not need to consider McDonald's argument that there was no power conferred on the Commissioner to make the "assessments" of 11 September 1989. For the reasons stated, that question must be determined.

10. We would therefore allow the appeal, set aside the judgment and order of the Full Court of the Supreme Court of Victoria and remit the matter to that Court to determine the matter in accordance with this judgment.

ORDER

Appeal allowed with costs.

Set aside the judgment and order of the Full Court of the Supreme Court of Victoria and remit the matter to that Court to determine the matter in accordance with the judgment of this Court.