Bonnell v Deputy Commissioner of Taxation

Introduction 1 The applications presently before the Court call for consideration to be given to the 'power of remission' conferred on the respondent by s 227(3) of the Income Tax Assessment Act 1936 (Cth) ('the Assessment Act') as it stood on 29 July 2004. 2 Part IV of the Assessment Act made provision for the lodgement of income tax returns and the making of assessments of taxable income and the tax payable thereon. 3 Under s 170(1) of the Assessment Act the Commissioner was empowered to amend any assessment. Section 170(1) provided as follows: '170(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.' 4 Generally speaking, the Assessment Act imposed a four year limit upon the making of amended assessments but there was no issue, in this case, as to the timeliness of the Commissioner's relevant amended assessment. 5 Part VII of the Assessment Act dealt with the imposition of 'penalty tax'. Relevantly for present purposes reference needs to be made to s 226K of the Assessment Act. That section rendered a taxpayer liable to pay, by way of penalty, additional tax equal to 25% of the amount of the relevant tax shortfall for a year. The expression 'tax shortfall' was defined in s 222A(1) of the Assessment Act to mean 'the amount … by which the taxpayer's statement tax for [the given] year at the time at which it was lowest is less than the taxpayer's proper tax for that year'. 6 Section 226K provided as follows: '226K Subject to this Part, if: (a) a taxpayer has a tax shortfall for a year; and (b) the shortfall or part of it was caused by the taxpayer, in a taxation statement, treating an income tax law as applying in relation to a matter or identical matters in a particular way; and (c) the shortfall or part, as the case may be, so caused exceeded whichever is the higher of: (i) $10,000; or (ii) 1% of the taxpayer's return tax for that year; and (d) when the statement was made, it was not reasonably arguable that the way in which the application of the law was treated was correct; the taxpayer is liable to pay, by way of penalty, additional tax equal to 25% of the amount of the shortfall or part.' 7 Section 227(1) of the Assessment Act empowered the Commissioner to make an assessment of the additional tax payable by a person under, relevantly, s 226K of the Assessment Act. Furthermore, s 227(2) empowered the respondent to incorporate in a notice of amended assessment under s 170(1) of the Assessment Act, notice of an assessment of additional tax payable under s 226K. 8 The power of remission, which is central to the issues presently before the Court, was contained in s 227(3) of the Assessment Act which permitted the Commissioner, in his discretion, to 'remit the whole or any part of the additional tax payable by a person under a provision of this Part'. 9 Section 227 provided as follows: '227(1) The Commissioner shall make an assessment of the additional tax payable by a person under a provision of this Part. (2) Nothing in this Act shall be taken to preclude notice of an assessment made in respect of a person under subsection (1) from being incorporated in notice of any other assessment made in respect of the person under this Act. (3) The Commissioner may, in the Commissioner's discretion, remit the whole or any part of the additional tax payable by a person under a provision of this Part, but, for the purposes of the application of subsection 33(1) of the Acts Interpretation Act 1901 to the power of remission conferred by this subsection, nothing in this Act shall be taken to preclude the exercise of the power at a time before an assessment is made under subsection (1) of the additional tax.' Section 33(1) of the Acts Interpretation Act 1901 (Cth) provided: '33(1) Where an Act confers a power or imposes a duty, then, unless the contrary intention appears, the power may be exercised and the duty shall be performed from time to time as occasion requires.' 10 Other provisions of the Assessment Act dealt with the imposition of interest and the possible remission of interest but those matters are not the subject of any contest in the present proceedings. 11 In short compass the facts of the present case are that in respect of the year of income ended 30 June 1999, the taxpayer claimed as an allowable deduction an amount of $5 million. The Commissioner's original assessment of the taxpayer's taxable income and the tax payable thereon proceeded on the basis that the deduction of $5 million was properly allowed. 12 By a Notice of Amended Assessment issued on 29 July 2004 the Commissioner disallowed the claimed deduction of $5 million with the consequence that tax of approximately $2.4 million became payable in respect of the applicant's taxable income. There being no present issue in relation to the satisfaction of the preconditions (a) - (d) to the imposition of additional tax in accordance with s 226K of the Assessment Act, the additional tax for which the applicant became liable, by way of penalty, equalled 25% of the amount of the shortfall, i.e. approximately $600,000. The precise amount of additional tax was $606,250.00, none of which has been remitted by the Commissioner in accordance with s 227(3) of the Assessment Act. 13 The Commissioner contends that he addressed the discretion conferred upon him by s 227(3) of the Assessment Act and made a decision not to remit any part of the additional tax payable by the applicant, prior to the issue of the Notice of Amended Assessment on 29 July 2004. In paragraph 6 of the 'Outline of Submissions of the Respondent' counsel for the respondent said: '6. The Notice of Amended Assessment document also comprised notice to the Applicant of an assessment by the Commissioner of additional tax under s 227(1) of the ITAA 1936 (the Penalty Assessment). The amount of additional tax assessed was $660,250.00 (sic) … . The Commissioner did not remit any of the additional tax under s 227(3) of the ITAA 1936 (the Remission Decision).' 14 Were the Commissioner's contention correct, a decision not to remit any part of the additional tax payable by the applicant would not be a decision of an administrative character which was amenable to review under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('the ADJR Act'), since decisions to which that Act applied did not include 'a decision included in any of the classes of decisions set out in Schedule 1' (see the definition of 'decision to which this Act applies' in s 3(1) of the ADJR Act). Schedule 1 to the ADJR Act relevantly identified in paragraph (e) one of the classes of decisions that were not decisions to which the ADJR Act applied. Paragraph (e) relevantly provided: '(e) decisions making, or forming part of the process of making, or leading up to the making of, assessments … of tax, … or decisions amending … assessments or calculations of tax … under any of the following Acts: … Income Tax Assessment Act 1977 …'

The Hickman provisos 15 The applicant contends that any decision by the Commissioner not to remit any part of the additional tax payable by the applicant was other than a bona fide attempt by the Commissioner to exercise the power conferred upon him and further that any such decision did not relate to the subject matter of the Assessment Act. In advancing these submissions the applicant relied upon two of the three provisos referred to in the judgment of Dixon J, as his Honour then was, in R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598 ('Hickman') at 615. 16 Hickman was a case concerning so-called orders made by a Local Reference Board established under the National Security (Coal Mining Industry Employment) Regulations on 1 May 1945 and 10 May 1945. The Reference Board had power, amongst other things, to settle disputes as to any local matters likely to affect the amicable relations of employers and employees in the coal mining industry. The prosecutors were carrying contractors whose vehicles and employees were engaged in carrying coal from mine heads to various points, including railway stations and sidings. The question which arose in Hickman was whether awards governing certain employees, including lorry drivers, in the coalmining industry applied to the employees of the prosecutors who were engaged in carrying coal from mine heads to various points as indicated. The question depended upon a proper understanding and application of the indefinite description 'coal mining industry'. The Local Reference Board was of the opinion that the operations of the prosecutors fell within the natural meaning of the expression 'coal mining industry'. The Court took a different view and made orders absolute for prohibition against the Local Reference Board and the New South Wales branch of the Federated Mining Mechanics Association of Australasia prohibiting them and each of them from proceeding further upon the relevant orders. The proceedings required consideration to be given to regulation 17 of the National Security (Coal Mining Industry Employment) Regulations which provided that a decision of a Local Reference Board should not be challenged, appealed against, quashed or called into question, or be subject to prohibition, mandamus or injunction, in any Court on any account whatever. In his reasons for judgment Dixon J, as his Honour then was, addressed whether and to what extent regulation 17 was ineffectual to protect the decisions of the Board from invalidation. Section 75(v) of the Constitution of the Commonwealth of Australia ('the Constitution') relevantly provided: '75. In all matters - … (v.) In which a writ of Mandamus or prohibition or an injunction is sought against an officer of the Commonwealth: the High Court shall have original jurisdiction.' The prosecutors in Hickman invoked s 75(v) of the Constitution upon the footing that the members of the Local Reference Board were officers of the Commonwealth and persons to whom a writ of prohibition lay. Dixon J observed that a provision such as regulation 17 could not, under the Constitution, affect the jurisdiction of the High Court to grant a writ of prohibition against officers of the Commonwealth 'when the legal situation requires that remedy' (at 614). His Honour then said at 614-615: '… But a writ of prohibition is a remedy that lies only to restrain persons acting judicially from exceeding their power or authority. It is therefore necessary to ascertain before issuing a writ whether the persons or body against which it is sought are acting in excess of their powers; and that means whether their determination, when made, would be void. The Board derives its power from Regulations of which reg. 17 forms a part, and that regulation must be taken into account in ascertaining what are the true limits of the authority of the Board, and whether its decision is void. The particular regulation is expressed in a manner that has grown familiar. But under Commonwealth law, and in jurisdictions where there is a unitary constitution, the interpretation of provisions of the general nature of reg. 17 is well established. … Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body.' (Emphasis added) 17 As Allsop J said in NAAG of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 195 ALR 207 at 215, [24]: '… It is not appropriate to attempt a comprehensive definition of the phrase "bona fide". Dixon J in R v Murray; Ex parte Proctor [(1949) 77 CLR 387], at 400, made it clear that the phrase involves an "honest" attempt to deal with the subject matter conferred to the executive. Bad faith is not just a matter of poor execution or poor decision-making involving error. It is a lack of an honest or genuine attempt to undertake the task in a way meriting personal criticism of the tribunal or officer in question. …' 18 In relation to the second and third aspects of Hickman Deane, Gaudron and McHugh JJ said in O'Toole v Charles David Proprietary Limited (1991) 171 CLR 232 at 287: '… The second and third conditions are related. Both involve objective tests. The requirement that the award relate "to the subject matter of the legislation" will ordinarily be satisfied if the purported award deals with industrial matters. Putting to one side breach of the rules of procedural fairness, the requirement that the award be "reasonably capable of being referred to the power" will be satisfied if, on the face of the record, it appears that the award was made by the Commission in purported exercise of the power of conciliation or arbitration conferred by the Act: see Amalgamated Engineering Union [(1967) 118 CLR 219 at 252-253] where it was said that the requirement is satisfied if "the purported exercise [of power] … is reasonably capable of being referred to the power (i.e. does not on its face go beyond the power)".' 19 The applicant in this case contends that this Court may grant constitutional writ relief in respect of a decision of the Commissioner not to remit any part of the additional tax payable by the applicant (see s 77(i) of the Constitution and s 39B(1) of the Judiciary Act 1903 (Cth) ('the Judiciary Act'), notwithstanding ss 175 and 177(1) of the Assessment Act) provided that the case falls within one of the Hickman provisos referred to in the judgment of Dixon J.

The privative provisions of the Assessment Act 20 Section 175 of the Assessment Act provided: '175 The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.' 21 Section 177(1) of the Assessment Act relevantly provided: '177(1) The production of a notice of assessment, … under the hand of … 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 under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.' 22 On the hearing of the current applications a Notice of Amended Assessment (Exhibit NM-A) duly certified by a Deputy Commissioner was tendered which recorded that the applicant's taxable income for the year ended 30 June 1999 had been assessed at $5,936,606, that the tax payable thereon was $2,780,806.82, that the relevant Medicare levy was $89,049.09 and that $2,106,915.40 was payable by way of Understatement Penalty and Interest. The Notice of Amended Assessment showed the balance of assessment at $4,899,790.31 after allowance of a 'Credit for 1999 Provisional Tax' of $76,756 and 'Tax Offsets and Other Credits' of $225. The balance of the applicant's previous 1999 Assessment was noted at $367,874.91, which produced a 'Difference between this and previous Assessment' of $4,531,915.40. The 'Net amount payable' was accordingly shown as $4,531,915.40 which was payable under the Notice of Amended Assessment issued on 29 July 2004, by 2 September 2004. By way of 'Additional Information' the Notice of Assessment recorded that '[t]he amount at Label D [$2,106,915.40] consists of $606,250.00 penalty and $1,500,665.40 interest'. 23 On or about 15 July 2005 proceedings were commenced in the Supreme Court of New South Wales by the Deputy Commissioner of Taxation against the applicant, therein referred to as 'David Bonnell' in respect of the applicant's failure to pay income tax for the year ended 30 June 1999 on or before the due date. A total of $5,021,494.54 was claimed together with a further general interest charge and costs. The amount of $5,021.494.54 was derived from the amount payable under the Notice of Amended Assessment of $4,531,915.40 and a general interest charge up to and including 14 July 2005 of $492,326.41 against which a credit of $2,747.27 was allowed. 24 On 2 March 2006 a default judgment was entered for the Deputy Commissioner of Taxation against the applicant in the Supreme Court proceedings requiring the applicant to pay the Deputy Commissioner of Taxation the sum of $5,411,557.65 together with costs in the sum of $684.00. 25 Section 175A of the Assessment Act provided for taxpayers who were dissatisfied with assessments made in relation to them to object against the relevant assessment 'in the manner set out in Part IVC of the [Taxation Administration Act 1953 (Cth)]' ('the Administration Act'). 26 As at 29 July 2004 Part IVC of the Administration Act commenced with s 14ZL and concluded with s 14ZZS. The Part consisted of five Divisions which bore the headings: Division 1 - Introduction Division 2 - Interpretative Provisions Division 3 - Taxation Objections Division 4 - AAT Review of Objection Decisions and Extension of Time Refusal Decisions Division 5 - Federal Court Appeals Against Objection Decisions 27 Section 14ZL(1) of the Administration Act provided a connection between Part IVC of the Administration Act and s 175A of the Assessment Act. It relevantly provided: '14ZL(1) This Part applies if a provision of an Act … provides that a person who is dissatisfied with an assessment, determination, notice or decision may object against it in the manner set out in this Part.' Part IVC proceeded to provide for the review by the Administrative Appeals Tribunal of decisions by the Commissioner in relation to certain taxation objections and requests for extension of time and for appeals to this Court against decisions by the Commissioner in relation to certain taxation objections. 28 Haritopoulos Pty Ltd v Deputy Commissioner of Taxation [2007] FCA 394 ('Haritopoulos') was a decision of Besanko J on an application for summary dismissal of an application filed by Haritopoulos Pty limited on 30 March 2006 seeking relief under s 39B of the Judiciary Act in relation to an assessment and penalty assessment made by the Deputy Commissioner of Taxation. His Honour ordered that the proceeding be dismissed. Relevantly, the case concerned the consequences of the Deputy Commissioner failing to consider a package of information said to be relevant to the assessment in question which was said to have been provided to the Deputy Commissioner before the assessment was made. At [31] his Honour said: '… on this application it is appropriate that I assume that it [the package] was information relevant to the assessment. No undertaking was given by the respondent prior to the making of the assessment that the package of information would be considered; in fact, it was made clear that it would not be considered, but held by the respondent pending an objection to the assessment. … The applicant claims that the respondent's failure to consider the package of information constitutes an arguable case of bad faith or an arguable case of a breach of s 166 of the [Assessment] Act or an arguable case of a breach of the rules of procedural fairness and, in particular, the hearing rule.' 29 At [32] Besanko J said: ' … I do not think the fact that the respondent did not consider the package of information before making the assessment constitutes an arguable case of bad faith. More would be required to give the respondent's conduct even the flavour of bad faith. …' In relation to s 166 of the Assessment Act, Besanko J drew attention to the fact that the Commissioner's power to make an assessment of a taxpayer's taxable income and of the tax payable thereon was predicated upon the words '[f]rom the returns, and from any other information in his possession, or from any one or more of these sources'. His Honour also referred to the privative provisions of ss 175 and 177 of the Assessment Act. At [37] his Honour said: '[37] In my opinion, there is a good deal to be said for the proposition that the hearing rule has been excluded from a decision to make an assessment. …' His Honour proceeded to address the various judgments in Deputy Commissioner of Taxation of the Commonwealth of Australia v Richard Walter Pty Limited (1995) 183 CLR 168 ('Richard Walter') in relation to the privative clauses to be found in ss 175 and 177 of the Assessment Act. He then concluded that to successfully challenge an assessment in s 39B proceedings under the Judiciary Act one of the Hickman provisos must be established (at [47]). At [48] his Honour summarised his conclusions as follows: '48 … There is no arguable case of bad faith. There is no arguable case of a breach of s 166 and, even if there was, there is no arguable case that such a breach affects the validity of the assessment. Even if at common law there was an obligation to observe the hearing rule in connection with the making of an assessment the decision in Richard Walter means that there is no arguable case that a breach of such an obligation can form the basis of a successful challenge under s 39B of the Judiciary Act.' 30 In Richard Walter, Mason CJ took the view that the relevant provisions of the Assessment Act did no more than require the making of an assessment, due compliance with the statutory provisions not being essential to the validity of the assessment (at 187). His Honour said at 187 - 188: '… The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantial liability to tax.' 31 Mason CJ said of s 175 of the Assessment Act at 187: '… That provision is of critical importance because it indicates that compliance with any of the provisions of the Act is not essential to validity.' Earlier at 186 his Honour said: '… The effect of s 177(1) … is to condition the exercise of jurisdiction upon production of the notice of assessment or a copy of it so that it is treated as valid, otherwise than in Pt IVC proceedings.' At 187 His Honour said: '… Viewed in the light of s 175, s 177(1) is a provision which gives effect to the substantive expression of intention in the earlier section. The reference to "due making" of the assessment in s 177(1) reflects the content of s 175.' 32 Mason CJ observed at 187 that the paramount purpose of the Act was to ascertain the liability of taxpayers to tax and that the Act, with that object in view, set up a legislative regime whereby the Commissioner assessed the taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunals or an appeal under Pt IVC to the Federal Court. His Honour said at 187: '… In such an appeal, it is for the taxpayer to show that the assessment is excessive.' (See also per Gyles J in Syngenta Crop Protection Pty Ltd (ACN 002 933 717) v Commissioner of Taxation [2005] FCA 1646 at [12]). 33 It will be appreciated that Part IVC of the Administration Act gives the taxpayer the option to seek review of reviewable objection decisions, as defined in s 14ZQ, in the Administrative Appeals Tribunal, or to appeal to the Federal Court against an appealable objection decision, as defined in that section (see s 14ZZ of the Administration Act). In relation to applications for review, s 14ZZK of the Administration Act dealt with the issue of grounds of objection and burden of proof as follows: '14ZZK On an application for review of a reviewable objection decision: (a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and (b) the applicant has the burden of proving that: (i) if the taxation decision concerned is an assessment … the assessment is excessive; …' 34 In relation to appeals to the Federal Court, s 14ZZO of the Administration Act relevantly dealt with the issue of grounds of objection and burden of proof as follows: '14ZZO In proceedings on an appeal under section 14ZZ to the Federal Court against an appealable objection decision: (a) the appellant is, unless the Court orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and (b) the appellant has the burden of proving that: (i) if the taxation decision concerned is an assessment … - the assessment is excessive; …' 35 Mason CJ found that the first limb of s 177(1) of the Assessment Act was effective to preclude a challenge by a taxpayer, in proceedings in the Federal Court under s 39B of the Judiciary Act, to the validity of an assessment where the Commissioner had included the same amounts in the taxable income of more than one taxpayer. His Honour said at 188: '… Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the [Assessment] Act or considerations of purpose. On this view, s 177(1) is consistent with the Hickman principle.' 36 In Richard Walter Brennan J, as his Honour then was, observed at 199: 'The jurisdiction of the Federal Court on appeal from, or of the Administrative Appeals Tribunal on review of, a decision on an objection extends to every issue which affects the amounts ultimately included in the taxable income or tax liability of a taxpayer. If any of these issues be resolved in favour of the taxpayer, an amendment of the assessment so as to reduce the taxable income or the tax liability of the taxpayer must follow. The width of that jurisdiction and the evident purpose of the Act to channel all issues as to the true tax liability of the taxpayer into the objection, review and appeal procedures found the clearest implication that exceptions to the broadest literal application of s 175 must be narrowly confined and a corresponding operation must be attributed to s 177(1).' (Footnotes omitted) In relation to the Hickman principle Brennan J had said at 194: '… The privative clause is given effect despite non-compliance with the provisions governing the exercise of the power, but only if the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation and it is reasonably capable of reference to the power given to the body purporting to exercise it. The validating provision cannot be so construed if the impugned act by the repository of the power is not referable to the power given to the repository or exceeds the power which can constitutionally be given to the repository.' (Footnotes omitted) 37 At 195 Brennan J said: '… There are two features of the legislative scheme which, in my opinion, indicate that the Hickman principle should be applied in the construction of s 175. These features are consistent with two objectives which the principle is designed to achieve: according legal effect to an act or instrument which is not done or made in compliance with conditions expressed to govern the power to do or make it, and attributing effect to the governing conditions except to the extent necessary to accord legal effect to the impugned act or instrument. The first feature is the legislative intention to protect the validity of the notice of assessment as a central and critical link in the chain of imposing liability for income tax on and the recovery of tax from the taxpayer. The second feature is the full opportunity afforded by the taxpayer to object to the assessment and, in the event that the objection is dismissed, to challenge the assessment. The challenge may be made before either an administrative or a judicial tribunal (at the taxpayer's election) on any ground which affects the taxpayer's liability to tax or the quantum thereof including the Commissioner's power to make the assessment to which the taxpayer has objected.' 38 In Richard Walter, Deane and Gaudron JJ accepted the 'classical' statement of the prima facie approach to the construction of a privative clause such as s 175 of the Assessment Act as expounded by Dixon J in Hickman (at 210). At 211 their Honours considered that if a purported 'assessment' did not satisfy the three Hickman provisos the protection of s 175 would be unavailable and the purported 'assessment' would be invalid. 39 Dawson J acknowledged the existence of the Hickman principle (at 222) but did not consider that anything in Richard Walter warranted the application of the principle either directly or by way of analogy. 40 At 232 Toohey J said: 'The effect of s 177(1) of the [Assessment] Act is not to deprive the Federal Court of the jurisdiction which s 39B of the Judiciary Act confers. Certainly, s 177(1) constrains the jurisdiction of any court to inquire into the making of an assessment but it does so only in the context that a system of objections, determinations, reviews and appeals is provided for. That system is now to be found in Pt IVC of the Taxation Administration Act.' 41 At 233 Toohey J said that the Hickman test operated where it was sought to reconcile an exercise of statutory authority with a provision which protected the determination under challenge, notwithstanding that it may be in excess of power. His Honour proceeded to point out that in his opinion s 177(1) did not purport to immunise an assessment from challenge. Equally, his Honour said that s 175 was only concerned to protect an assessment from challenge by reason of some defect or irregularity in the making of the assessment. He observed that it did not operate where the power of the Commissioner to make an assessment was at issue. At 233 he said: 'Nothing in s 177(1) can be said to deprive the Federal Court of the jurisdiction which s 39B confers on that Court, being a jurisdiction with respect to any matter in which prerogative relief is sought against an officer of the Commonwealth.' 42 McHugh J observed that the procedural steps by which the Commissioner makes an assessment are not justiciable in courts invested with Federal jurisdiction. He regarded the statement of principle enunciated by Dixon J in Hickman to be authoritative in the High Court. At 240 he said: 'Section 175 provides that the validity of any assessment is not affected by the failure of the Commissioner to comply with any of the provisions of the Act; the first limb of s 177 is designed to further the policy of s 175 by ensuring that the "due making" of the assessment cannot be litigated in any court or tribunal. But, under the second or exception limb of s 177, matters affecting the substantive liability of the taxpayer are open to challenge in Pt IVC proceedings.' 43 Having considered the various judgments in Richard Walter, Besanko J said in Haritopoulos at [40]: '… At least a majority of the Court considered that an assessment cannot be challenged on an application under s 39B of the Judiciary Act unless one of the three matters identified by Dixon J (as he then was) in [Hickman] is established …' (see also [47])

The current applications 44 By an application filed 10 October 2006 in the current proceedings NSD 1963/2006 the applicant sought the following substantive relief: '1. an order for prohibition, prohibiting the respondent from acting or continuing to act upon the Assessment; 2. a declaration that the Assessment notified to the applicant in the notice of assessment issued on 29 July 2004 was invalid or was not validly made; 3. a declaration that the notice of assessment issued on 29 July 2004 was invalid; 4. an order setting aside the Assessment; …' 45 The accompanying Statement of Claim filed 10 October 2006 contained a number of allegations of fact which may shortly be summarised as follows: · The applicant was a solicitor who provided taxation advice; · In about May 1998, when the applicant was a partner in Gadens Lawyers, the then First Assistant Commissioner, Mr N Petroulias, represented to the applicant that tax practitioners could avoid being targeted for investigation if arrangements which they considered tax effective were disclosed to the respondent's Strategic Intelligence Analysis Unit by seeking private rulings before they advised clients to implement arrangements; · In or about September 1998 the applicant lodged a ruling request which described a proposed controlling interest superannuation arrangement and which sought a ruling whether a contribution by the applicant to a non-complying superannuation fund would be deductible; · On or about 29 September 1998 the respondent issued a ruling that a contribution by the applicant to the proposed fund would be deductible; · The applicant made contributions totalling $5 million; · The applicant advised more than 300 clients on similar arrangements to that the subject of the ruling in respect of the applicant; · On 19 May 1999 the respondent issued a media release indicating that in his view controlling interest superannuation arrangements 'fail both at law and in their implementation'; · In or about August 2000 clients of the applicant who had sought income tax rulings in respect of the deductibility of their contributions to controlling interest superannuation funds were advised by the respondent that rulings would not be provided and of an intention to carry out a tax audit in respect of them; · On 29 November 2001 the respondent agreed to remove all penalties imposed upon those clients of the applicant who had sought rulings in respect of the deductibility of their contributions to controlling interest superannuation funds on the applicant's advice on the basis that they would not pursue their request for binding rulings; · On or about 14 March 2003 the respondent announced that following Prebble v Commissioner of Taxation (2002) 51 ATR 459, which had been handed down on 22 November 2002, the respondent would 'waive all penalties in other controlling interest superannuation schemes provided a genuine contribution was made to a superannuation fund'; · The penalties imposed by the respondent upon all of the clients of the applicant were remitted in full by the respondent; · The Notice of Amended Assessment issued to the applicant on 29 July 2004 was invalid 'because the amendment decision to impose penalties was not a bona fide attempt by the Respondent or the Respondent's officers to exercise the Respondent's power to amend'. 46 The applications which are presently before the Court are two Notices of Motion, one filed by the applicant and the other by the respondent. The applicant's original Notice of Motion was filed on 5 March 2007. It was superseded by an Amended Notice of Motion filed on 11 April 2007 at the conclusion of the hearing. The orders sought by the applicant in the Amended Notice of Motion were as follows: '1A Granting leave to the applicant to file and serve an amended application in the form of the draft amended application attached to the affidavit of Bruce Elliott Rowntree, sworn and affirmed (sic) 5 March 2006; 1. Granting leave to the applicant to file and serve an amended statement of claim in the form of exhibit NM1 on the hearing of the notice of motion filed 5 March 2007. 2. that should the statement of claim be struck out, leave to amend or an order under Order 10 Rule 1(2)(b) that the application proceed on affidavits; 3. that should the application be struck out, the court grant preliminary discovery under Order 15A Rule 6; 4. that any associated proceedings transferred from the Federal Magistrates Court be heard sequentially at the conclusion of the current proceedings; 5. that the matter proceed on affidavits.' 47 The applicant has indicated that prayer for relief number 4 is not pressed. 48 The respondent's Notice of Motion was filed 9 March 2007. It sought substantive orders as follows: '1. The proceedings be dismissed pursuant to section 31A of the Federal Court Act 1976 and Order 20 rule 2 of the Federal Court Rules. 2. Alternatively, the proceedings be stayed pursuant to Order 20 rule 2 of the Federal Court Rules. 3. Further and in the alternative, the statement of claim be struck out pursuant to Order 11 rule 16 of the Federal Court Rules, and the application be dismissed. …' 49 Section 31A of the Federal Court of Australia Act 1976 (Cth) relevantly provides: '31A (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section … a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. (4) This section does not limit any powers that the Court has apart from this section.' 50 The Amended Application referred to in paragraph 1A of the Amended Notice of Motion filed 11 April 2007 proposed that substantive orders be made in the proceedings as follows: '1. an order for prohibition, prohibiting the respondent from acting or continuing to act upon the Assessment and the Notice; 2. an order restraining the Respondent from acting or continuing to act upon the Assessment and the Notice; 3. a declaration that the Assessment notified to the applicant in the Notice was invalid or was not validly made; 4. a declaration that the Notice was invalid; 5. an order setting aside the Assessment and the Notice; …' 51 The alterations to the Statement of Claim proposed in the Draft Amended Statement of Claim (Exhibit NM-1) added particulars, recast matters previously recorded as particulars as substantive allegations of fact and proposed the introduction of material in relation to the 'decisions' said to have been taken by the respondent which led to the issue of the Notice of Amended Assessment on or about 29 July 2004. The Draft Amended Statement of Claim included the following: '33A. On or about 29 July 2004, the Respondent made a decision to amend the Applicant's income tax assessment for the year of income ended 30 June 1999, disallowing the deduction claimed for the Applicant's contributions made to the Fund during that year of income, imposing penalties or not remitting penalties and imposing interest on a purported tax shortfall amount ("Amendment Decision"). … 34A At the time that the Amendment Decision was made, the Respondent knew each of the facts alleged at paragraphs 1, to 33 above. 35 The Amendment Decision and the Notice were invalid because the Amendment Decision to impose penalties or to refuse to remit penalties ("Remission Decision") made by the Respondent or the Respondent's officers: a. was not a bona fide attempt to exercise the Respondent's power and or; b. was an exercise of the Respondent's power unrelated to the subject matter of the Act. …' 52 The purpose of the proposed amendment to paragraph 35 of the Statement of Claim was clearly to bring the applicant's proposed case within two of the three Hickman provisos and to direct the applicant's challenge to a decision of the Commissioner not to remit any part of the additional tax payable by the applicant in accordance with s 226K of the Assessment Act, no challenge having been made to the satisfaction of the preconditions for the imposition of additional tax under s 226K.

Background Facts 53 The applicant lodged his objection against the Amended Assessment Notice, which was issued on 29 July 2004, on 29 September 2004. In that notice of objection the applicant claimed that the amended assessment was invalid by reason that it was issued for an improper purpose and/or that the amended assessment was invalid in that it was issued in bad faith. In relation to improper purpose and bad faith the notice of objection stated: 'The amended assessment was issued for the purpose of fulfilling the announcement made by the Commissioner in May 2000 (sic). The amended assessment was therefore made for an improper purpose and was not made for the purposes of the Act. The amended assessment was also issued for the purpose of fulfilling the Commissioner's "PASTO" strategy and was therefore made for an improper purpose and was not made for the purposes of the Act. In levying penalties under the amended assessment the Commissioner knowingly sought to punish me as a "promoter". That act was in bad faith and the bad faith vitiates the amended assessment.' 54 It may be observed in passing that a taxpayer is relevantly rendered liable to pay, by way of penalty, additional tax by virtue of s 226K of the Act and not any initiative of the Commissioner. The Commissioner's obligation was to 'make an assessment of the additional tax payable by a person under a provision of this Part' (see s 227(1) of the Assessment Act). The Commissioner's discretion was confined to the remittal of the whole or any part of the additional tax under s 227(3) of the Assessment Act. 55 By letter dated 3 December 2004 the applicant was advised that his objection had been disallowed. In the accompanying 'Reasons for Decision' the following appeared: 'The amended assessment was not issued for an improper purpose or in bad faith 5. The amended assessment was authorised by section 170 of the Income Tax Assessment Act 1936 ('ITAA 1936') and was not issued for an improper purpose or in bad faith. 6. The amended assessment was not issued for the purpose of merely fulfilling any announcement made by the Commissioner and was not issued for the purpose of fulfilling the Commissioner's "PASTO" strategy. The assessment of penalty tax was authorised by Part VII of the ITAA 1936.' 56 In the face of the Commissioner's decision on his objection, the applicant instituted proceedings against the Commissioner of Taxation of the Commonwealth of Australia in this Court on 31 January 2005 by way of an appeal under s 14ZZN of the Administration Act. These proceedings NSD 117 of 2005 came before this Court constituted by Justice Stone on a number of occasions. On 31 March 2005 the respondent Commissioner filed a Statement of Facts, Issues and Contentions and on 9 May 2005 the applicant filed a Statement of Facts, Issues and Contentions. The applicant's Statement of Issues included: '2. Whether the Respondent was permitted by law to assess the Applicant for additional tax by way of penalty. 3. Whether the additional tax by way of penalty levied by the Applicant (sic) was levied for an improper purpose and vitiates the amended assessment.' 57 The applicant's Statement of Contentions included: '3. The Respondent levied additional tax for an improper purpose and this improper purpose causes the entire assessment to be an improper exercise of power.' 58 A number of directions were made by the docket judge in proceedings NSD 117 of 2005 with which the applicant failed to comply. On 19 July 2005 the applicant filed an Amended Statement of Facts, Issues and Contentions which, inter alia, excised issues 2 and 3 as quoted above and excised the applicant's contention that the respondent had levied additional tax for an improper purpose. 59 In an email from the applicant to the solicitor who had conduct of the appeal proceedings NSD 117 of 2005 for the respondent of 5 December 2005 the applicant said: 'As you are aware one of the allegations I have made consistently is that the levying of penalties against me was done for an improper purpose. This allegation was made in my objection and original SFIC in the current proceedings. If the allegation is correct then the amended assessment is vitiated as ultra vires. After considerable discussion of this matter with Messrs Robertson SC and Lloyd it was concluded that these allegations were inappropriate to be the subject of the current appeal. If they are to be pressed then they can only be pressed in an action under section 39B. This was the reason for the amendment of the SFIC.' 60 On 8 March 2006 the applicant's solicitor Mr Bruce Rowntree of Spirefive Legal wrote to the respondent's solicitor in proceedings NSD 117 of 2005 requesting a two week adjournment of the matter which was then due to be the subject of a further directions hearing on the following day, namely 9 March 2006. On 8 March 2006 the Australian Government Solicitor responded to Mr Rowntree's request stating, inter alia: 'We have consulted with our client regarding your request and both we and our client are inclined to think, having regard to the directions made on the last occasion and the present rate of progress of the matter, that her Honour is likely to want to hear from the parties tomorrow. In the circumstances, it seems to us that it would be appropriate for the directions hearing to proceed rather than for the matter to be removed from the list. …' 61 When the matter came before the docket judge on 9 March 2006 the applicant failed to appear. The solicitor with the conduct of the matter in the Australian Government Solicitor's office said: 'Your Honour, in the absence of a motion to have the matter struck out, I don't imagine that dismissal is an option, but we would be seeking orders, at least, that any evidence be filed by a date, and that there be an order that no evidence filed after that date be read without leave. We would certainly be seeking costs of the day. …' 62 The docket judge proceeded to list the matter for further directions at 9.30 am on 16 March 2006 indicating that she would have her associate write to the applicant advising him of the orders that had been made and indicating that if there was non compliance with those orders the Court would consider any application that the respondent may wish to bring to strike out the matter at the directions hearing on 16 March 2006. 63 On 9 March 2006 the docket judge's associate wrote to the solicitor for the applicant as foreshadowed stating: 'At the directions hearing held before Justice Stone this morning in the above matter there was no appearance for the applicant. The date for this directions hearing had been set at the last directions hearing on 6 December 2005. The Court did not receive any communication from you or from the applicant indicating that there would be no appearance. Her Honour has asked me to convey her concern about this discourtesy to the Court and to the respondent. Her Honour has also asked me to advise you that the following orders were made: THE COURT ORDERS THAT 1. The applicant file all of the evidence on which he intends to rely on or before Wednesday 15 March 2006, in default of which the respondent has leave to apply to strike out the application. 2. The matter be listed for further mention on 16 March 2006 at 9:30am. For the avoidance of doubt, her Honour noted that if the applicant failed to file his evidence on or before 15 March 2006 the Court would consider any application made on behalf of the respondent to strike out the application and dismiss the proceedings. Any such application would be considered at the directions hearing on 16 March 2006 at 9:30am.' 64 On 14 March 2006 the applicant sent an email to the solicitor having the conduct of the appeal proceedings NSD 117 of 2005 in the Australian Government Solicitor's office stating: 'I have decided to discontinue my appeal against the objection decision by the Commissioner. I will file a Notice of Discontinuance tomorrow.' 65 Whilst a discontinuance under Order 22 of the Federal Court Rules may not constitute a defence to a proceeding for the same or substantially the same cause of action, it is difficult to see how a discontinuance of an appeal to the Federal Court against an appealable objection decision could be seen as anything other than an abandonment of the appeal given that s 14ZZN of the Administration Act allowed for appeals to be lodged with the Court within 60 days after the person appealing was served with notice of the relevant decision of the Commissioner. As it transpires the applicant did not file any Notice of Discontinuance of his appeal on 16 March 2006, nor did he appear when his appeal was called for directions on 16 March 2006. The solicitor with the conduct of the matter in the Australian Government Solicitor's office proceeded to inform the docket judge as follows: 'Your Honour, on Tuesday afternoon I received an email from Mr Bonnell foreshadowing that he would file a notice of discontinuance yesterday. I received no notice of discontinuance and a check of the website last night suggested one had not been filed but in the absence of the applicant's appearance today and in light of the email which I might hand up a copy, I ask that the matter be dismissed with costs.' Thereupon the docket judge said: '… I'm satisfied from our records that the applicant was notified of the hearing today, of this directions hearing, and it was made abundantly clear last time and in the letters that were sent from the Court that this is likely to happen and therefore I'll order that the application be dismissed with costs.' 66 On 21 March 2006 orders were duly entered in proceedings NSD 117 of 2005 as follows: '1. The application be dismissed. 2. The applicant pay the respondent's costs of the proceeding.' 67 It will be recalled that on 2 March 2006 judgment had been entered for the Deputy Commissioner of Taxation against the applicant in recovery proceedings in the Supreme Court of New South Wales for $5,411,557.65 together with costs in the sum of $684.00. 68 On 15 June 2006 the Official Receiver for the Bankruptcy District of New South Wales proceeded to issue a bankruptcy notice directed to the applicant requiring the applicant to pay to the respondent $5,543,008.60. The Schedule to the bankruptcy notice recorded the amount of the judgment at $5,412,241.65 (the total of the judgment in the Supreme Court together with costs) and an amount of $130,766.95 being interest accrued since the date of the judgment, a total of $5,543,008.60. 69 On 23 June 2006 a copy of the bankruptcy notice was served on the applicant. 70 On 10 October 2006 the applicant was served with a creditor's petition. 71 On 10 October 2006 the solicitor for the applicant wrote to the Commissioner of Taxation stating, inter alia: 'We refer to the Creditor's Peittion (sic) served on our client today. We have been instructed to commence proceedings in the Federal Court under section 39B of the Judiciary Act 1903, to contest the validity of the assessment issued to our client on 29 July 2004. We enclose by way of service the application and Statement of Claim that were filed today.' 72 The scope of the s 39B proceedings presently before the Court was clearly defined by the applicant in paragraph 1 of his 'Outline of Submissions in Reply' of 2 April 2007, which provided: '1. In these proceedings, the applicant seeks to challenge the validity of that part of an amended assessment made by the respondent … which was a decision not to remit penalty tax …. Relief is sought under s39B of the Judiciary Act 1903 (Cth).' 73 The problem with the matter presently before the Court is that the applicant's case in relation to the amended assessment, notice of which was issued on 29 July 2004, has been something of a 'moving feast'. 74 The 'NOTICE OF OBJECTION AGAINST AMENDED ASSESSMENT' lodged on or about 29 September 2004 objected against 'the amended assessment of the amount of the taxable income and of the tax payable thereon in respect of the year of income ended 30 June 1999'. The applicant claimed in relation to the amended assessment that it was 'issued for an improper purpose', that it was issued 'in bad faith' (see [53] above), that it was issued 'out of time', that it was inconsistent with a ruling issued on 29 September 1998, that it wrongly disallowed claimed deductions of $5 million by way of superannuation contributions, that it overstated the applicant's Medicare levy liability and that the 'amended assessment should be reduced by the excision of an amount of $2,106,915.40 described as understatement penalty and interest'. Later in the 'NOTICE OF OBJECTION AGAINST AMENDED ASSESSMENT' the applicant said: 'In making the amended assessment the Commissioner has levied penalties. The levying of penalties is contrary to law …' 75 In the 'NOTICE OF OBJECTION AGAINST AMENDED ASSESSMENT' no mention was made of the Commissioner's discretion under s 227(3) of the Assessment Act to remit the whole or any part of the additional tax payable by the applicant, by way of penalty, under s 226K of the Assessment Act, of its exercise by the Commissioner or of any failure to exercise it. 76 Without retracing the history of the applicant's case in relation to the amended assessment, it is apparent from the applicant's 'OUTLINE OF SUBMISSIONS IN REPLY' of 2 April 2007 that the applicant now seeks to challenge nothing other than 'the validity of that part of [the] amended assessment … which was a decision not to remit penalty tax', and, to do so in proceedings under s 39B of the Judiciary Actin reliance upon two of the Hickman provisos.

The remission of additional tax 77 Needless to say, in the face of the objection as lodged, the Commissioner did not, in his Reasons for Decision supporting his disallowance of the applicant's objection, make mention of s 227(3) of the Assessment Act or record any decision on the remission of the whole or any part of the additional tax for which the applicant was liable by way of penalty under s 226K of the Assessment Act. In the reasons for disallowing in full the applicant's objection the Commissioner simply stated under the heading 'Excision of the penalty and interest imposed is not warranted' that the preconditions for liability to pay additional tax under s 226K of the Assessment Act had been satisfied. In the circumstances, the objection decision recorded that 'penalty tax under section 226K should apply at a rate of 25% of the primary tax applicable to the adjustment'. Then, in relation to interest, the objection decision recorded '[i]n the course of determining Mr Bonnell's objection we have reviewed the interest payable and concluded that no further remission is warranted.' 78 I would not conclude that the use of the heading 'Excision of the penalty and interest imposed is not warranted' constituted any decision by the Commissioner to refrain from exercising the Commissioner's discretion under s 227(3) to remit the whole or any part of the additional tax which was the subject of the Notice of Amended Assessment. 79 The facts of this case are not on all fours with those which applied in Commissioner of Taxation v Queensland Trading & Holding Company Ltd (2006) 152 FCR 456. In that case the bench comprised Ryan, Heerey and Edmonds JJ. Queensland Trading & Holding Company Ltd and its parent, Industrial Equity Ltd, had each been a transferee of losses from Spassked Pty Ltd, another member of the Industrial Equity Limited Group. By Notices of Amended Assessment issued on 11 and 14 April 2003, the Commissioner had disallowed losses transferred to each of Queensland Trading & Holding Company Ltd and Industrial Equity Ltd. The Notices of Amended Assessment also notified the companies in question of an assessment of additional tax under Part VII of the Assessment Act. Each of Industrial Equity Ltd and Queensland Trading & Holding Company Ltd objected against the amended assessments and each objection included a ground that additional tax assessed to each taxpayer should have been remitted pursuant to s 227 of the Assessment Act. The Commissioner disallowed each objection. 80 In the course of their reasons for judgment the Full Court said at 457 - 459: 'By virtue of s 14ZR(1) of the TAA [the Administration Act], what were in fact two "taxation decisions" (s 14ZQ of the TAA) in respect of each of the taxpayers, are deemed, for the purposes of s 175A of the 1936 Act [the Assessment Act] and Pt IVC of the TAA, to be one taxation decision. … By force of s 14ZL of the TAA and s 175A of the 1936 Act a taxation objection includes an objection against an assessment of additional tax. … … Their case [the case of Queensland Trading & Holding Company Ltd and Industrial Equity Ltd] is totally dependent on the premise that a decision not to further or fully remit the additional tax at the objection decision stage, is not part of the objection decision but a separate and discrete decision. However, the premise is false; the Commissioner's refusal to further or fully remit the additional tax is subsumed in the objection decision and, as a result, the objection decision is no less a decision under s 14ZY of the TAA disallowing an objection to an assessment of tax than it would be if the objection on which the decision is made had been grounded solely in matters going to primary tax. …' 81 Given that the applicant's taxation objection did not make any mention of any failure by the Commissioner to remit the whole or any part of the additional tax payable by the applicant by way of penalty under s 226K of the Assessment Act, I do not consider that any decision of the respondent that there should be no remission or any failure on the part of the respondent to make a remission decision could be said to be 'subsumed' in the respondent's decision in relation to the applicant's taxation objection, with the consequence that such a matter could only be challenged in the manner set out in Part IVC of the Administration Act. 82 It may be observed that whilst s 175A of the Assessment Act makes provision for taxpayers, who are dissatisfied with assessments, to be able to object against them in the manner set out in Part IVC of the Administration Act, there does not appear to be any provision for taxpayers who are dissatisfied with remission decisions of the Commissioner under s 227(3) of the Assessment Act enabling them to object against them. 83 By s 14ZL(1) of the Administration Act, Part IVC only applies: 'if a provision of an Act or regulations (including the provision as applied by another Act) provides that a person who is dissatisfied with an assessment, determination, notice or decision may object against it in the manner set out in this Part.' 84 Section 227(3) confers a discretion on the Commissioner which is unlimited in point of time. The Commissioner is not constrained to exercise it, if at all, before the Commissioner discharges his obligation under s 227(1) to make an assessment of the additional tax payable by a taxpayer such as the applicant under s 226K of the Assessment Act, nor is he constrained to exercise it before he makes a decision in relation to any taxation objection. 85 It seems to me that a remission decision under s 227(3) of the Assessment Act will not necessarily be caught by the privative provisions of ss 175 and 177 of the Assessment Act. In my opinion those provisions do not apply to the present case where, as events have transpired, the applicant's present challenge is not, in reality, to any assessment of the amount of his taxable income or of the tax payable thereon. Rather, his challenge relates to a failure on the part of the Commissioner to remit the amount of the additional tax or some part thereof for which he is liable under s 226K of the Assessment Act, whether before or after the issue of the Notice of Amended Assessment in respect thereof. 86 In my opinion, a remission decision would be amenable to review in this Court under s 39B of the Judiciary Act 1903 (Cth) if one or other of the Hickman provisos was satisfied.

'Anshun' estoppel 87 However, the respondent contends that the order made by the docket judge in proceedings NSD 117 of 2005 dismissing the application in that matter on 21 March 2006 gave rise to an 'Anshun' estoppel which precluded the applicant from bringing the present proceedings in which relief is sought under s 39B of the Judiciary Act. 88 Plainly an attempt to re-litigate an issue which is res judicata or one which is affected by issue estoppel or by 'Anshun' estoppel would constitute an abuse of process of the Court. However, in my opinion, no relevant estoppel arises from the making of the order of dismissal in proceedings NSD 117 of 2005 on 16 March 2006 in the circumstances in which that order was made. 89 It seems clear that the relevant order was made under Order 35A rule 3(1) of the Federal Court Rules. Order 35A rules 2 and 3 relevantly provided: '2(1) For this Order, an applicant is in default if the applicant: … (b) fails to attend a directions hearing; or … 3(1) If an applicant is in default, the Court may order that: (a) the proceeding be … dismissed as to the whole or any part of the relief claimed by the applicant; or …' 90 In Wong v Minister for Immigration and Multicultural and Indigenous Affairs 146 FCR 10 ('Wong') a Full Court comprising Emmett, Conti and Selway JJ stated the relevant legal principles at [36] - [39] as follows: 'The relevant legal principles 36 The doctrines of res judicataand issue estoppel are founded on the broad rules of public policy expressed in the maxims nemo debet bis vexari pro una et eadem causa (a person ought not to be vexed twice for one and the same cause) and interest reipublicae ut sit finis litium(it is in the interests of the State that there be an end to litigation). It would be an abuse of process to allow parties to litigate repeatedly matters that have been finally determined by the Court. Also, quite apart from any psychological detriment that might flow from an individual having to undertake litigation of the same issue a second time, the State has an interest in ensuring that, once an issue has been determined according to law and all rights of appeal have been exhausted, that should be an end of the matter. The resources of the community ought not to be expended in the litigation, more than once, of the same issue. 37 A plea in bar may be raised in respect of an issue, not only if the Court in the earlier proceeding was actually required by the parties to form an opinion and pronounce a judgment, but also in relation to every issue that properly belonged to the subject of the earlier litigation and which the parties, exercising reasonable diligence, might have brought forward at the time of the earlier litigation: Port of Melbourne Authority v Anshun Pty Ltd (1981) 147 CLR 589 at 598 and 602. Anshun estoppel arises where the issue, now raised for the first time, properly belonged to the subject of the earlier proceeding but, by negligence, omission or accident, was not raised in earlier proceeding. In essence, where the issue was so relevant to the subject matter of the earlier action that it would be unreasonable not to have raised it at that time, it is an abuse of process to endeavour to raise that issue for the first time in a subsequent proceeding between the parties: Anshun 602 38 Nevertheless, where an issue has not actually been litigated and decided before, there must be exceptions to that general rule (cf the operation of res judicataand issue estoppel where the action/issue has been determined on a final basis). As foreshadowed in Anshun, there will be instances where, even though there is every reason why the matter should have been raised earlier but was not, there are special circumstances that prevail to permit a party to raise the issue in a subsequent proceeding. The Court therefore has a discretion, if it determines that special circumstances exist, to allow an issue to be raised, even where it is found that the point was unreasonably omitted from the earlier proceeding: see Macquarie Bank Ltd v National Mutual Life Association of Australia Ltd (1996) 40 NSWLR 543 at 558. However, the circumstances in which that would be permitted must, because of the principles referred to above, be exceptional, constituting "special circumstances" : see BC v Minister for Immigration and Multicultural Affairs [2002] FCAFC 221 at [30]. What will be sufficient to constitute special circumstances is by no means fixed and may involve consideration of a wide range of factors, all of which bear upon the general discretion of the Court where justice requires the non-application of the general principle: see BC v Minister for Immigration and Multicultural Affairs (2001) 67 ALD 60 (Sackville J) at [50] referring to Port of Melbourne v Anshun (No 2) [1981] VR 81; see also Bryant v Commonwealth Bank of Australia (1995) 57 FCR 287 at 296, 298-299, citing Yat Tung Investments Co Ltd v Dao Heng Bank Ltd [1975] AC 581. 39 Anshun estoppel has been applied to proceedings in the nature of judicial review of administrative action, insofar as Anshun estoppel is aimed at avoiding abuse of process: Taylor v Ansett Transport Industries Ltd (1987) 18 FCR 342 at 355-356 and 365; Stuart v Sanderson (2000) 100 FCR 150 at 156-157, per Madgwick J. However, where the beneficiary of such a principle is a Minister of State, who has no personal interest in the outcome of a proceeding, such a principle may be of only secondary significance." 91 Later, their Honours found that a failure by the Minister to comply with an obligation under the Migration Act 1958 (Cth), which was based upon a mistaken view of the Act and was not contumelious, did not constitute 'special circumstances' which would take a case outside the principle of 'Anshun' estoppel even though the legislative policy reflected in the relevant provision of the Act was frustrated as a consequence. At [52]-[53] they said: '52 … If it were the case that a failure by a Minister to comply with a positive duty constitutes "special circumstances" then it would seem every such failure would be sufficient to invoke the special circumstances exception, requiring the full ventilation of argument on the issue that would otherwise be estopped. Those circumstances alone, do not constitute the requisite special circumstances, such that it would not be an abuse of process for Mr Wong to ventilate issues that it was unreasonable for him not to have raised in either the First Proceeding or the Second Proceeding. 53 … … There may be sound reasons of policy for arguing that Anshun estoppel not apply for the benefit of the executive government and its representatives, but only to individuals. This is because the executive is a respondent by force of statute or of the Constitution and is not subject to the same psychological burden that may weigh on individual litigants; they cannot be "vexed" in the same way by instigation of subsequent proceedings. That may be a more appropriate basis, namely that of accepted public policy, to ensure that representatives of the executive government cannot rely on the principle of Anshun estoppel to frustrate, in effect, the intended legislative mandate. However that proposition does not sit well with the authorities that apply the principle of Anshun estoppel equally to judicial review of administrative action (at [39]).' 92 As indicated in Wong at [37], 'Anshun' estoppel occurs when an applicant puts forward in a later proceeding matters which might have been put in the earlier proceeding. In Henderson v Henderson (1843) 3 Hare 100 at 115 Sir James Wigram VC expressed the principle in these terms: 'where a given matter becomes the subject of litigation in, and of adjudication by, a court of competent jurisdiction, the Court requires the parties to that litigation to bring forward their whole case, and will not (except under special circumstances) permit the same parties to open the same subject of litigation in respect of matter which might have been brought forward as part of the subject in contest, but which was not brought forward, only because they have, from negligence, inadvertence, or even accident, omitted part of their case.' 93 For 'Anshun' estoppel to arise, there must have been a matter which was the subject of 'adjudication' in the earlier litigation. 94 What may come within the 'special circumstances' exception to a finding of 'Anshun' estoppel was dealt with by the Full Court in Wong. Those circumstances need to be 'exceptional' (see also BC v Minister for Immigration & Multicultural Affairs [2002] FCAFC 221 ('BC') at [31] - [33] and [38] and Thayananthan v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 132 FCR 222at 237,[52] - [53].) 95 In Spencer Bower, Turner and Handley's'The Doctrine of Res Judicata' (3rd edition 1996) the learned author of the third edition, Justice Handley, said in respect of 'Dismissal for want of prosecution' at paragraph 35: 'A judgment or order dismissing proceedings for want of prosecution is an interlocutory and not a final order, it does not involve any decision on the merits of the case, and does not give rise to a res judicata. …' 96 Later, at paragraph 46, reference was made by his Honour to Linprint Pty Ltd v Hexham Textiles Pty Ltd (1991) 23 NSWLR 508 ('Linprint') at 517-518 as authority for the proposition: '46 A judgment or order obtained by default, like one obtained by consent, will, unless and until set aside, conclude between the parties the matters expressly decided by its operative and declaratory parts.' 97 In Linprint Clarke JA, with whose reasons Samuels JA agreed, was concerned to determine the effect of an order that a counter-claim be dismissed, such order having been made by a County Court Judge in Victoria on 27 July 1982 following the counter-claimant's withdrawal from the case after an application for adjournment of the trial had been refused on the previous day. Clarke JA considered that the case should be judged solely upon the basis that the counter-claim was dismissed for want of appearance of the counter-claimant at the trial. Under s 73 of the County Court Act 1958 (Vic) ('County Court Act') '[e]very judgment and order made in any action or matter by the court or a Judge, except as in this Act provided, shall be final and conclusive between the parties'. There being no contrary provision in the County Court Act, Clarke JA found that the order dismissing the counter-claim was, by virtue of s 73 'final'. Later, at 526-527 his Honour concluded: '… if a plaintiff withdraws from the trial and an order is made in its absence dismissing its claim than that order will, unless set aside or successfully appealed from, ground a later plea of res judicata in the event that a later attempt is made to litigate the same case. The position is no different than that which arises under a default judgment: Spencer-Bower (at 158).' 98 In his reasons for judgment, Kirby P, as his Honour then was, said at 518: '… It may be understood that if a judgment, on its face, is contingent or provisional, it will not have that element of finality which it is the purpose of the law of res judicata to defend. But where the judgment is on its face final, the mere fact that a party has a privilege to apply to have that judgment set aside cannot convert it to a contingent or provisional judgment forever flawed and incapable of giving rise to res judicata.' 99 It is important to observe that the relevant default order in Linprint was made in the absence of the counter-claimant at the trial, not simply at a directions hearing. 100 The relevant principles in relation to 'Anshun' estoppel were considered in some detail by Lander J in Applicant A184 of 2003 v Minister for Immigration and Multicultural and Indigenous Affairs (2004) 210 ALR 543 ('A184'). An application for review of a decision of the Refugee Review Tribunal came before Hely J in this Court. The applicant did not appear on the first return of the application but was represented by a solicitor. The matter was adjourned because the solicitor's instructions were withdrawn. The applicant was advised in writing of the adjourned hearing. However, when the matter came on again before Hely J his Honour was not sure that the applicant was aware of the hearing date. Nevertheless, on that day Hely J dismissed the application and ordered the applicant to pay the respondent's costs. In doing so his Honour adopted the procedure in Order 32 rule 2(1)(c) of the Federal Court Rules. His Honour did not deal with the matter under Order 32 rule 2(1)(d). Order 32 rule 2 relevantly provided: '2(1) If, when a proceeding is called on for trial, any party is absent, the court may: (a) order that the trial be not had unless the proceeding is again set down for trial, or unless such other steps are taken as the Court may direct; (b) adjourn the trial; (c) if the party absent is an applicant or cross-claimant dismiss the action or the cross-claim; or (d) proceed with the trial generally or so far as concerns any claim for relief in the proceeding. (2) Where the Court proceeds with a trial in the absence of a party, and at or at the conclusion of the trial an order is made, the Court may set aside or vary the order, and may give directions for the further conduct of the proceeding. …' 101 Lander J was clearly of the opinion that Hely J had, by dealing with the matter under Order 32 rule 2(1)(c) rather than rule 2(1)(d), refrained from embarking upon a consideration of the merits of the applicant's case. 102 It is clear from the circumstances of the present case that the docket judge did not at any stage embark upon a consideration of the merits of the applicant's case. She dismissed the application as a result of the applicant's non-attendance at a directions hearing. The matter had not even reached the stage where a date for trial had been fixed. 103 In A184 Lander J did not finally determine the status of Hely J's order of dismissal. However his Honour did say at [112]-[113], [116] and [119]: '[112] In this case, the dismissal of the application before Hely J did not establish any fact or point of law. All it established was that the applicant, for unascertained reasons, did not attend before the court. It might be that he did not receive notice of the hearing. He was not present when the matter was set down. [113] This is not the same as a defendant who allows judgment to be entered against him because a defence was not entered. That might indicate a consent or acquiescence. This was simply an order entered for an undisclosed failure to attend a hearing of which the applicant might or might not have had notice. … [116] I do not think any issue estoppel could arise by reason of Hely J's order. The procedure adopted by his Honour meant that no findings of fact were made or issues decided. … [119] Because I think the issues were the same, I do not think the Anshun principle applies. …' 104 In my opinion the applicant's intimation of 14 March 2006 in the proceedings before Stone J that he had decided to 'discontinue' his appeal did not constitute consent to or an acquiescence in an order of dismissal being made. 105 Before reaching his conclusions in A184 Lander J gave consideration to a number of cases including Rogers v Legal Services Commission of South Australia (1995) 64 SASR 572 ('Rogers') where the Full Court of the Supreme Court of South Australia held that summary dismissal of a claim for damages did not bar the appellant from bringing further proceedings for breach of statutory duty, negligence and misfeasance in public office (at [100]). 106 His Honour repeated part of what he had said in his judgment in Rogersat 594-595, with which Cox and Prior JJ had agreed, (at [101]) namely: 'So also does an action that is dismissed stand in a different position to an action in which judgment has been given after a hearing on the merits. As to whether or not the dismissal of an action gives rise to a matter capable of being pleaded as res judicata, that may depend upon whether the dismissal of the action is seen to have necessarily involved a determination of any particular issue or question of fact or law. If it does not, then the dismissal decides nothing, except the dismissal of the action itself.' 107 I do not consider that any 'Anshun' estoppel arises from the order made by Stone J in proceedings NSD 117 of 2005 on 16 March 2006 in relation to the claims now propounded by the applicant for relief under s 39B of the Judiciary Act with respect to the discretion conferred on the Commissioner by s 227(3) of the Assessment Act. 108 Furthermore, in my opinion no question of 'Anshun' estoppel arises by reference to the default judgment obtained by the Deputy Commissioner of Taxation against the applicant in the recovery proceedings in the Supreme Court of New South Wales on 2 March 2006. 109 The present case bears some similarity to the facts in Jewiss v Deputy Commissioner of Taxation (2006) 65 ATR 222 ('Jewiss'). In that case Mansfield J had before him a motion seeking relief under s 31A(2) of the Federal Court of Australia Act 1976 (Cth) and Order 20 rule 2 and Order 16 rule 11 of the Federal Court Rules in a taxation appeal against certain appealable objection decisions. His Honour held that it would be an abuse of the Court's process to permit Mr Jewiss to re-litigate in the proceedings before him the same matters as had previously been determined against him in the South Australian District Court. His Honour considered that, because the issues which Mr Jewiss sought to raise before him were 'the same issues as those he sought to raise in the District Court proceedings and upon which an adjudication adverse to those claims' had been made, there was no scope for the principle of 'Anshun' estoppel to be applied. His Honour said at [51]: 'It is not a matter of him raising matters now which he did not, but could have, raised in the earlier proceedings.' 110 His Honour proceeded to order that the amended application and the amended statement of claim before him be dismissed. 111 Jewiss was an unusual case in that the recovery proceedings brought against the taxpayer in the District Court of South Australia had been defended and Hickman issues had been raised, on the voir dire, upon a tender of Notices of Assessment or copies thereof which met the requirements of s 177(1) of the Assessment Act. The District Court judge had ruled that the allegations of bad faith which had been advanced had not made out, so that the Notices of Assessment were admissible. In his defence the taxpayer had alleged that he was not liable to pay the outstanding taxation debts, inter alia, because the Commissioner had made the assessments without proper investigation and had fraudulently relied upon certain documentation obtained in his absence; that the Commissioner by issuing the assessments had abused the processes prescribed under the Assessment Act; and that the notices were knowingly false, fraudulent and erroneous. In his final judgment, the District Court judge confirmed that he rejected the defence of impropriety in the making of the assessments. An appeal to the Full Court of the Supreme Court of South Australia was dismissed and an application for special leave to the High Court to appeal from the Full Court was also dismissed. Mansfield J pointed out at [47] that on the hearing of the appeal the Commissioner was 'content to allow the appeal to proceed on the assumption that there was a limited right to challenge the admission of the notices of assessment on the ground that the assessments were an abuse of power and were made for improper purposes'. None of the issues which the applicant in the present proceedings wishes to raise in his proceedings under s 39B of the Judiciary Act were the subject of determination in the Supreme Court recovery proceedings. At least insofar as the applicant seeks prohibition against the respondent in relation to the Commissioner's exercise of, or his failure to exercise, his discretion under s 227(3) of the Assessment Act, it seems clear to me that the Supreme Court of New South Wales did not, in the recovery proceedings, have jurisdiction to grant relief in the form of a writ of prohibition against the Commissioner had the applicant filed a cross-claim asserting that the Commissioner's exercise or failure to exercise his discretion under s 227(3) of the Assessment Act was open to challenge because one or other of the Hickman provisos had not been satisfied.

Conclusions 112 Part of the problem with the applicant's proposed Amended Statement of Claim in this case is that it introduces matter which is collectively and ill-defined as 'Amendment Decision' (see paragraph 33A) and other matter which is collectively and ill-defined as 'Remission Decision' (see paragraph 35). Then, in his 'Outline of Submissions in Reply' the applicant says that he seeks to challenge 'the Remission Decision' which itself is differently defined from 'Remission Decision' in paragraph 35 of the proposed Amended Statement of Claim. 113 The Commissioner did not have power to make a decision to impose penalties. The applicant became liable to pay additional tax by way of penalty by dint of s 226K of the Assessment Act and the Commissioner was obliged by s 227(1) of the Assessment Act to make an assessment of that additional tax. 114 It seems to me that what, relevantly, occurred in this case was that: (a) the Commissioner, in exercise of his power to do so under s 170(1) of the Assessment Act, amended his assessment of the amount of the applicant's taxable income and of the tax payable thereon. This amendment resulted from a disallowance of the applicant's claimed deduction from his assessable income of $5 million by way of contribution to, I assume, the 'Bonnell No. 2 Superannuation Fund'; (b) by s 226K of the Assessment Act, the applicant became liable to pay, by way of penalty, additional tax equal to 25% of the amount of the tax shortfall. That amount was $606,250.00; (d) in fulfilment of his duty under s 227(1) of the Assessment Act to do so, the Commissioner made an assessment of the additional tax payable by the applicant under s 226K; (e) as required by s 174 of the Assessment Act, the Commissioner served the Notice of Amended Assessment issued on 29 July 2004 upon the applicant which Notice included notice of the assessment of the additional tax under s 227(1), as authorised by s 227(2). 115 Whether and when the Commissioner addressed his discretion to remit the whole or any part of the additional tax payable by the applicant is a matter of some conjecture. It is clear that the Commissioner had the power, under s 227(3) of the Assessment Act, to remit the additional tax or part thereof before the Commissioner made the assessment of the additional tax as required by s 227(1). As previously indicated, the exercise of that power was not confined to any particular time period, which has since elapsed. 116 There is no evidence to suggest that the applicant has called on the Commissioner to exercise the discretion conferred on him by s 227(3) in the applicant's favour. What is clear is that if the Commissioner addressed his discretion before 29 July 2004, he did not exercise it in the applicant's favour. As previously indicated (at [13]) the Commissioner contends that he did address the discretion before the issue of the Notice of Amended Assessment on 29 July 2004 and that he made a decision not to remit any part of the additional tax payable by the applicant. However there is no evidence to support that contention and no evidence to indicate that the applicant was ever informed of that fact, if it was the case. 117 In the foregoing circumstances, it remains open to the applicant to challenge any decision of the Commissioner under s 227(3) in proceedings under s 39B of the Judiciary Act in reliance on one or other of the Hickman provisos, as the applicant has indicated he wishes to do. No 'Anshun' estoppel precludes the applicant from making those claims in the present proceedings. 118 Whether any wider basis for a challenge to a s 227(3) decision by the Commissioner is available to the applicant need not be determined in the applications presently before the Court. 119 One thing that is clear is that the present proceedings cannot be used to revive the appeals to this Court against the Commissioner's objection decisions which were the subject of proceedings NSD 117 of 2005. Furthermore, the applicant does not seek to do so. 120 In my opinion it would be premature to address whether or not any relief claimed by the applicant under s 39B of the Judiciary Act, to which he might otherwise be entitled, should be refused on discretionary grounds. 121 On the material presently available and in the absence of any evidence as to the Commissioner's exercise of his discretion under s 227(3) of the Assessment Act, I am not satisfied that the applicant has no reasonable prospect of successfully prosecuting the proceeding insofar as it may claim relief in relation to the exercise of that discretion under s 39B of the Judiciary Act, reliance being placed on one or other of the Hickman provisos. As the applicant said in his email of 5 December 2005 'one of the allegations I have made consistently is that the levying of penalties against me was done for an improper purpose'. Such an allegation in respect of the 'levying of penalties' cannot be sustained in these proceedings. However, an allegation that a decision taken by the Commissioner in exercise of his discretion under s 227(3) of the Assessment Act not to remit the whole or any part of the additional tax payable by the applicant by way of penalty under s 226K of the Assessment Act was taken for 'an improper purpose' may be sustained. On my understanding it is this second allegation which underpins the case the applicant now wishes to bring. 122 I am not satisfied on the evidence presently available that the claims which the applicant now wishes to make are frivolous or vexatious or an abuse of the process of the Court. 123 In the foregoing circumstances, the respondent's Notice of Motion filed 9 March 2007 should be dismissed. However, the conclusions which I have reached in relation to that motion have been largely influenced by the as yet unpleaded case which the applicant has indicated that he wishes to take to trial. In my opinion there should be no order as to costs in respect of the determination of that Notice of Motion. 124 Turning to the applicant's Amended Notice of Motion filed 11 April 2007 it seems clear to me that an order for preliminary discovery under Order 15A rule 6 at this stage would be quite inappropriate especially in the absence of a detailed affidavit from the applicant deposing to matters which would satisfy the prerequisites for such an order. Apart from other considerations, it is difficult to see how the applicant could argue that he does not have sufficient information to enable a decision to be made whether to commence a proceeding in the Court to obtain relief from the respondent in circumstances where he has already commenced such a proceeding (see generally Imperial Chemical Industries plc v Echo Tasmania Pty Limited [2007] FCA 1731 at [14]-[20]). 125 Notwithstanding the fact that an order for preliminary discovery under Order 15A rule 6 would be inappropriate, it seems to me that leave should be granted to the applicant, at an early stage, to file and serve a notice for discovery on the respondent requiring the respondent to give discovery of documents relating to any exercise of the discretion conferred on the Commissioner by s 227(3) of the Act to remit the whole or any part of the additional tax payable by the applicant under the Notice of Amended Assessment issued on 29 July 2004 or any possible exercise by the Commissioner of that discretion. 126 I would not be disposed to grant leave to the applicant to file and serve an Amended Application in the form of the draft Amended Application attached to the affidavit of Bruce Elliott Rowntree sworn and affirmed (sic) 5 March 2006. However an opportunity should be afforded to the applicant to file and serve an Amended Application. The claims for relief in such an application would have to be confined to the applicant's challenge to the Commissioner's exercise or failure to exercise his discretion under s 227(3) of the Assessment Act. It could not 'contest the validity of' the assessment in accordance with s 170(1) of the Assessment Act of the amount of the applicant's taxable income and of the tax payable thereon or the validity of the assessment under s 227(1) of the Assessment Act of the additional tax payable by the applicant under s 226K of the Assessment Act. 127 Were the Application and the Statement of Claim to remain in the form of the documents filed on 10 October 2006, it would plainly be appropriate to order that the proceedings be summarily dismissed. Nothing in the present proceedings can affect the amended assessment by the Commissioner of the amount of the applicant's taxable income and of the tax payable thereon resulting from the disallowance of the claimed deduction of $5 million under s 170(1) of the Assessment Act. However, the applicant should not, in my opinion, be denied an opportunity to put his house in order and bring his application into line with the case which he has indicated he wishes to bring in relation to the Commissioner's exercise or failure to exercise his s 227(3) discretion favourably to the applicant. 128 Turning to the proposed Amended Statement of Claim which is Exhibit NM-1, I am of the opinion that paragraph 36 should be struck out and further that paragraphs 33A, 34A, 35, 35A and 35B should be struck out but with an opportunity afforded to the applicant to replead his case in a manner consistent with these reasons for judgment and his declared limitation of his case to one brought within the Hickman provisos in relation to the s 227(3) exercise of discretion issues, under s 39B of the Judiciary Act. 129 In the foregoing circumstances, leave ought not to be granted to the applicant to file and serve an Amended Statement of Claim in the form of Exhibit NM-1. However, leave should be granted to the applicant to file and serve a Statement of Claim consistent with these reasons following the giving of discovery by the respondent as contemplated above. 130 Subject to a grant of leave to file an Amended Statement of Claim and an Amended Application pursuant to Order 13 rule 2(1) of the Federal Court Rules, orders should be made providing for the Statement of Claim filed 10 October 2006 to be struck out under Order 11 rule 16 in the event that an Amended Statement of Claim is not filed within the time allowed for that purpose and for the Application filed 10 October 2006 to be dismissed generally under Order 20 rule 5 in the event that an Amended Application is not filed within the time allowed for that purpose. 131 Given that the applicant has failed in its endeavour to secure a grant of leave to file the proposed Amended Application and the proposed Amended Statement of Claim, I consider that an order for costs should be made in the respondent's favour in respect of the applicant's Amended Notice of Motion filed 11 April 2007. Given the measure of success on some issues which the applicant has enjoyed, I am of the opinion that the appropriate order as to costs is that the applicant pay one half of the respondent's costs of the applicant's Amended Notice of Motion filed 11 April 2007. In the circumstances of this case it seems to me that it would be appropriate for such costs to be taxed and payable forthwith. I certify that the preceding one hundred and thirty-one (131) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Graham.

Associate: Dated: 8 February 2008 Counsel for the Applicant: M Cashion SC and C W Robinson

Counsel for the Respondent: K M Connor SC and B D O'Donnell

Solicitor for the Respondent: Australian Government Solicitor

Date of Hearing: 4, 5 and 11 April 2007