Commissioner of Taxation v McGrouther

THE DECISION BELOW 16 In the Court below, the Commissioner advanced the contention that a taxpayer has an implied power, or right, to withdraw or revoke, a s 14ZYA(2) notice. The primary judge rejected that contention for four reasons. 17 First, the primary judge reasoned that a notice under s 14ZY does not require the Commissioner to do anything, but simply "starts the clock ticking" so that there is no utility in implying such a right. The primary judge said at [35]-[36]: In deciding whether a person has an implied power, or right, to withdraw, or revoke, a s 14ZYA notice previously given, it is necessary to properly appreciate what it is that service of a s 14ZYA notice on the Commissioner does: it does nothing other than "starts the clock ticking" by which the Commissioner is to make his objection decision, failing which, on the sixtieth day after the giving of the notice he is deemed by the statute to have disallowed the objection. Contrary to the Commissioner's written submissions at para 22 it does not provide "a process by which a taxpayer can require the Commissioner to make a decision on the taxpayer's objection". That requirement exists, in the form of a duty through s 14ZY of the TAA, from the time the taxpayer lodges his objection. Section 14ZYA does not add to that requirement. Indeed, a s 14ZYA notice does not require the Commissioner to do anything. If, after having been served with a s 14ZYA notice, the Commissioner does nothing, a position he may well take, even if it is in breach of his statutory duty, then after a period of 60 days from service of the s 14ZYA notice, he is deemed to have disallowed the objection. So understood, the giving of a s 14ZYA notice does not have the consequences that the giving of other notices have, such as a notice of objection to an assessment, or a notice by way of application for a permit or licence to do something. A s 14ZYA notice does not require the Commissioner to do anything; it merely starts time running so that if the Commissioner does not perform his duty to decide the objection within a certain time, on the expiration of that time, the objection is deemed to be disallowed. The primary judge distinguished the cases on which the Commissioner relied where such a power or right has been implied, reasoning that they were all cases where, on the withdrawal of an application, the relevant authority was relieved from any duty or obligation imposed by statute to deal with the application. The primary judge observed at [41]-[42]: … all these cases involved the giving of notices or the making of applications where the body or entity served with the notice or application had to consider, address and decide something which they otherwise did not have to consider, address and decide. Consequently, there was utility in implying a power or right of withdrawal on the part of the person or applicant giving or making the notice or application if they no longer wanted the body or entity served with the notice or application to consider, address and decide it; the exercise of that implied power or right would relieve that body or entity from the obligation or duty imposed by the statute. That is not this case. The exercise of any implied power or right of withdrawal or revocation by the giver of a s 14ZYA notice would not relieve the Commissioner of anything; he would remain under the duty to decide the notice of objection in accordance with s 14ZY. All that would occur is that the running of time under s 14ZYA(3) would cease, at least until a new s 14ZY notice was given. 18 Secondly, the primary judge rejected the Commissioner's contention that s 14ZYA should be interpreted beneficially to include the implication of a right to revoke a s 14ZYA notice (before the deeming effect of s 14ZYA(3)). The Commissioner had argued that "otherwise" a taxpayer could suffer prejudice if the taxpayer was bound by a notice that could not be withdrawn and submitted, by way of example, that it may limit the opportunity for a taxpayer to settle with, or provide further information to, the Commissioner. The primary judge was not persuaded by this argument, stating that neither the opportunity for settlement nor the opportunity to provide further information to the Commissioner would be limited or inhibited by the absence of an implied power or right of withdrawal or revocation of a s 14ZYA notice. 19 Thirdly, the primary judge reasoned at [46] that the implication of a right to withdraw a s 14ZYA notice would carry with it the right to give successive s 14ZYA notices in respect of the same objection (provided the preceding s 1ZYA notice had been withdrawn) which, in the primary judge's view: … would not be consistent with the policy and purpose of s 14ZYA, namely, of providing a non-curial mechanism for a taxpayer to expedite the objection process and bring it to an end, so that the taxpayer is free, but only if the taxpayer wishes, to appeal to this Court or refer the objection decision to the Administrative Appeals Tribunal. Not only is it inconsistent with the policy and purpose of s 14ZYA, but the wording of s 14ZYA gives no indication that the option of expediting the objection process is exercisable on more than one occasion in relation to the same objection. 20 Fourthly, the primary judge reasoned at [48] that: … if taxpayers are permitted to serve and then withdraw s 14ZYA notices at will the effect is to create administrative inconvenience in public administration by forcing the allocation of resources to objections that ultimately do not need to be satisfied within 60 days. A power of revocation destroys the very certainty s 14ZYA otherwise creates. 21 The primary judge also referred to McLaren v Deputy Commissioner for Taxation (2001) 46 ATR 421; [2001] FCA 311. In that case, application was made for an interlocutory injunction restraining the Commissioner from conducting a s 264 examination pending the resolution of judicial review proceedings challenging the validity of the s 264 notice. In considering the balance of convenience, Gray J took into account that the applicants had given s 14ZYA notices and that the period of 60 days was running. At [14] Gray J concluded: I am therefore left with the choice of effectively ending any opportunity the Commissioner might have to ask questions of the first applicant or allowing the interview to proceed. I considered at one point the possibility of granting an injunction but making it conditional upon the withdrawal of the notice under s 14ZYA and the non-delivery of a further similar notice. I am by no means certain that it is possible for a taxpayer who has given a notice under s 14ZYA to withdraw it and thereby to prevent the 60 day period from running. My concern would be that a withdrawal could be regarded as ineffective and that therefore the result that would flow from the s 14ZYA notice would flow in any event. In my view that would be extremely undesirable. [Emphasis added by the primary judge.] In the primary judge's view, Gray J's uncertainty as to whether it is possible for a taxpayer who has given a notice under s 14ZYA to withdraw it and thereby to prevent the 60 day period from running was totally justified.

consideration 22 The Commissioner argued differently before this Court on his application for leave by basing his contention that a taxpayer can withdraw a s 14ZYA notice on the canon of statutory construction that statutory rights that are not jurisdictional are capable of waiver, unless the provision was enacted for some public interest wider than that of the private parties. The Commissioner argued that the principle applies to the construction of s 14ZY because the section confers statutory rights of a kind on a taxpayer that are not jurisdictional and do not have a wider public interest purpose, but which are personal to the taxpayer exercising them: namely, the right to require the Commissioner to make an objection decision on the taxpayer's objection within 60 days from the giving of the notice and the right to a deemed objection decision under s 14ZYA(3) in the event that no objection decision is made within that time. It was submitted that those rights, being for the sole benefit of the taxpayer, may be waived by the taxpayer and, specifically, that the deeming operation of s 14ZYA(3) is able to be waived by a taxpayer withdrawing a notice that the taxpayer has given under s 14ZYA(2). 23 The principle to which the Commissioner referred - expressed in the maxim quilibet potest renunciare juri pro se introducto (any person can waive a statutory provision that is entirely for his or her own benefit) - is well supported by authority: Commonwealth of Australia v Verwayen (1990) 170 CLR 394 at 406-7, 496-7; Gordon v Berowra Holdings Pty Ltd (2005) 62 NSWLR 427 at 435; Clarkson v Commissioner of Corrective Services (NSW) [2007] NSWCA 58 at [25]-[26]; Jones O (ed), Bennion on Statutory Interpretation (6th ed, LexisNexis Butterworths, 2013) pp. 29-33; Pearce DC and Geddes RS (eds), Statutory Interpretation in Australia (7th ed, LexisNexis Butterworths, 2011) pp. 365-6. In Verwayen Brennan J explained the principle as follows at 424: The general principle was stated by Alderson B. in Graham v. Ingleby (1848) 1 Ex. 651, at p 657: "[I]t is evident that a party who has a benefit given him by statute, may waive it if he thinks fit. There are many cases in which no action can be commenced except after certain notice of action. That is a requirement by statute; but if a plaintiff went to trial, and the defendant did not then object to the want of notice, could he afterwards set aside the whole proceedings because no notice was given? It is clear that he could not." In Wilson v. McIntosh [1894] AC 129, a caveat had been lodged against an application to bring land under the Real Property Act 1862 (N.S.W.) (26 Vict. No. 9) and, the time limited for the caveator to take proceedings to establish her title having passed, the caveat lapsed and the applicant was entitled to have the caveat removed. But the applicant proceeded to state his case and secured an order that the caveator should state her case, which she did. The applicant, having neglected to take any steps to set the matter down for hearing, applied to have the caveat removed on the ground that it had expired. The Privy Council ordered that the motion for removal be refused. Davey L.J. said (at p. 133): "Their Lordships are of opinion that the maxim 'Quilibet potest renunciare juri pro se introducto' applies to this case, that it was competent for the applicant to waive the limit of the three months and the lapse of the caveat by sect. 23, and that the respondent did waive it by stating a case and applying for and obtaining an order upon the appellant to state her case, both which steps assumed and proceeded on the assumption of the continued existence of the caveat." The maxim quoted by Davey L.J. is translated in Broom's Legal Maxims, 10th ed. (1939), p 477, as follows: "Any one may, at his pleasure, renounce the benefit of a stipulation or other right introduced entirely in his own favour." As the cases show, rights conferred by a statutory provision are capable of waiver unless the provision is one that is enacted for the benefit of the public or where the observance of the provision is a condition precedent to the exercise of a statutory power. 24 The respondents contended that the principle does not apply here because s 14ZYA has a wider public purpose than conferring a right on a taxpayer to "require" the Commissioner to make an objection decision within the time limit imposed by the section. It was contended that the provision "also reflects a legislative judgment about the amount of time that should properly be spent on any one taxpayer objection" and "is much about good public administration as it is about benefiting taxpayers". It was further contended that s 14ZYA does not confer the rights identified by the Commissioner in that s 14ZYA(3) contemplates that an objection will not necessarily be determined within 60 days of service of a s 14ZYA(2) notice, and that the only right available for a taxpayer to waive after the giving of s 14ZYA(2) notice is the right to commence Part IVC proceedings in the Court or the AAT. It was also contended that any right to waive the consequences of a s 14ZYA(2) notice is excluded by s 14ZYA(3) which is expressed in mandatory terms and the consequences of a statutory election cannot be waived after the election has been made. We disagree. 25 Section 14ZYA, by its express terms, confers on taxpayers the statutory rights that are identified by the Commissioner: (1) the right to give a notice (s 14ZYA(2); and (2) the right to a deemed objection decision on the taxpayer's objection by the operation of s 14ZYA(3). The statutory context of s 14ZYA makes it clear that these rights are personal to the taxpayer exercising them and do not have some wider public purpose. Under the scheme of the legislation, no fixed time limit is imposed on the Commissioner within which to make the objection decision, but if no objection decision has been made by the expiry of the time periods in s 14ZYA(1), a taxpayer, at the taxpayer's election, may, in effect, impose a deadline for the determination of that taxpayer's objection by giving a notice under s 14ZYA(2). The Commissioner is not obliged to decide the taxpayer's objection within 60 days after a notice is given, but if an objection decision is not made within that time the taxpayer can rely on the deeming provision in s 14ZYA(3) to exercise the right to apply for review or to appeal under s 14ZZ of the TAA. In these circumstances, it is undoubted that the rights conferred by s 14ZYA, and the statutory consequences that flow, exist solely for the personal benefit of the taxpayer exercising them, and notions of good public administration and timely objection decisions do not turn the provision into a provision with a wider public interest. The power conferred upon a taxpayer by s 14ZYA(2) to give the Commissioner a notice is purely permissive and entirely at the discretion of the taxpayer. The power is conferred upon the taxpayer purely for the taxpayer's benefit in any individual case and may be exercised or not at will. A notice given under s 14ZYA(2) is not a notice that in 60 days' time the Commissioner will be deemed to have disallowed an objection decision, but rather is a notice "requiring the Commissioner to make an objection decision". The primary purpose of s 14ZYA, and the primary object of a notice being given, is to progress the Commissioner's decision-making function. That is a benefit which exists only for the taxpayer able to give a notice. As a matter of construction, moreover, there is nothing within the terms of s 14ZYA that would prevent a taxpayer from subsequently withdrawing a notice, given at the taxpayer's election, thereby waiving or abandoning the right to a deemed objection decision on the taxpayer's objection, as the deeming provision in s 14ZYA(3) only operates where a taxpayer elects to give a notice requiring the Commissioner to make a decision on the taxpayer's objection. The giving of a notice under s 14ZY(2) is a prerequisite to the operation of s 14ZYA(3). 26 It follows that the answer to whether a taxpayer can withdraw a s 14ZYA(2) notice lies in the application of the principle referred to in Verwayen that a person who has the sole benefit of a statutory provision can waive that provision (within the limitations of that principle). The application of that principle means that a taxpayer's right to a deemed objection decision by the operation of s 14ZYA(3) is capable of waiver. In Clarkson v Commissioner of Corrective Services [2007] NSWCA 58, Beazley JA (with whom Sully and Howie JJ agreed) pointed out at [25] that: "Waiver" has been expressed to be "a term of shifting meaning": see Commonwealth v Verwayen (1990) 170 CLR 394 per Brennan J at 422; Smyth & Co v Bailey & Co [1940] 3 All ER 60 at 70. In Smyth, Lord Wright included amongst its meanings the case where "a party expressly or impliedly gives up a right". In Verwayen itself, Brennan J stated that the sense in which the word "waiver" was being used was "a unilateral release or abandonment of a right" or, as his Honour said later, "waiver recognises the unilateral divestiture of certain rights". Upon that basis, the withdrawal by a taxpayer of a notice given by the taxpayer under s 14ZYA(2) before the deeming operation of s 14ZYA(3) would be sufficient to take effect is an act of waiver of the statutory consequences of giving that notice: Verwayen (1990) 170 CLR 394 at 424 (Brennan J). The notice having been withdrawn, s 14ZYA(3) could not have operative effect because the deeming operation is conditional upon a notice to the Commissioner invoking the section. 27 The construction of s 14ZYA which permits the taxpayer to waive the effect of s 14ZYA(3) both facilitates proper administration and furthers the purpose of s 14ZYA of providing a benefit to the taxpayer who may invoke its terms. There is nothing in the provisions to exclude the principle that the benefit of the power once exercised cannot be waived, and "where alternative constructions are equally open, that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating": Shannon Realties Ltd v Ville de St Michel [1924] AC 185, 192-3. 28 The approach taken by the primary judge in deciding that a notice cannot be withdrawn is explained by the way in which the case was conducted before him. The question that the parties posed for his Honour's determination was whether a power or right of withdrawal or revocation of a notice can be implied from the terms of the section. However, for the reasons given, the relevant question was whether the rights given to a taxpayer under s 14ZYA are rights that are capable of waiver. Regrettably, the primary judge did not have the benefit of the arguments based on the waiver principle and was not taken to the authorities which have applied that principle, which were plainly relevant. The respondents' arguments before this Court, in so far as they are based on the authorities and principles concerned with implying words into a statute, do not engage with the relevant construction question and can be dismissed for that reason. 29 Additionally, we are, with respect, unable to agree with the primary judge's basic reasoning. As the primary judge stated, s 14ZYA provides a mechanism by which a taxpayer can expedite the objection process and a s 14ZYA notice "starts the clock ticking" to bring the objection process to completion. The evident purpose of s 14ZY is to enable taxpayers, at their election, to impose a time limit on the determination of their objections. The certainty created by a notice given by a taxpayer under s 14ZYA is that the taxpayer will have an objection decision by the end of the 60 day period which can then be reviewed or appealed under Part IVC proceedings. Significantly, the certainty only arises as the result of the exercise by a taxpayer of a personal right. Significantly also, the Commissioner is not obliged to make a decision within 60 days from when the notice is given. Rather, because the section contains a deeming provision that operates if the Commissioner does not make a decision before the 60 day period has elapsed, the taxpayer at the end of the 60 day period is placed in the same position in respect of the statutory right to seek a review or to appeal an adverse objection decision, as if an adverse objection decision had actually had been made by the Commissioner. In those circumstances, there is no reason why the grant of the right to give a notice should not be capable of exercise more than once in relation to an objection which has not been determined. Moreover, it is not difficult to conceive that there may be circumstances where it would be to the advantage of a taxpayer to avoid the deemed adverse objection decision, and to seek an actual decision by the Commissioner as to whether to allow an objection in whole or in part. Nor is there reason why a withdrawal would have the effect of creating administrative inconvenience, given that the giving of a notice does not relieve the Commissioner from the duty to determine the objection. The only consequence of withdrawing a notice is that the taxpayer does not get a deemed objection decision.

leave to appeal should be granted 30 It is appropriate that leave to appeal be given in this case because the judgment of the primary judge is attended by sufficient doubt to warrant it being reconsidered by the Full Court and substantial injustice would result if leave were refused supposing the decision to be wrong: Decor Corp Pty Ltd v Dart Industries Inc (1991) 33 FCR 397, 398-9; Samsung Electronics Co Ltd v Apple Inc [2013] FCAFC 138, [18]. In this case, the decision would result in the Court's erroneous assumption of jurisdiction to deal with an appeal under Part IVC of the TAA. The issues raised by the appeal are limited to those necessary to determine the Court's jurisdiction and their determination will affect the administration of taxation disputes, and potentially other proceedings, in this Court and the Administrative Appeals Tribunal. The controversy between the parties in this appeal affects the administration of the Australian Taxation Office and the way in which the Commissioner and taxpayers may conduct themselves. That controversy ought to be resolved quickly in the interests of public administration. Furthermore, the appeal will dispose of the proceeding currently before the Court. It will, in that event, alter the positions of the parties by reference to the statutory rights and obligations available to them in dealing with the respondent's particular tax assessment. The particular statutory construction raised by the appeal will, as indicated, also have an impact upon dealings between the Commissioner and taxpayers other than the respondents. The ability of a taxpayer to waive an entitlement to the consequences of giving a notice under s 14ZYA may be a significant factor about which both the Commissioner and taxpayers need certainty. That ability is itself of potential benefit to a taxpayer in ongoing dealings with the Commissioner and in how the Commissioner may deal with tax disputes. 31 A matter relevant to whether substantial injustice would result if leave were refused, is that the Commissioner had not put to the trial judge the line of authority adopting the principle that a person can waive a statutory provision that is entirely for his or her own benefit. Reliance upon that principle seeks to raise purely a question of law in respect of an issue which is itself purely a question of statutory construction. The case had proceeded before his Honour on the basis that the dispute between the parties was about whether s 14ZYA should be construed as if there were a power to withdraw a notice which had been given, rather than whether the entitlement consequent upon the giving of a notice could be waived by a taxpayer before another provision had taken effect by the passage of time. It is important for leave to be granted to enable that issue to be raised because the application of that principle may be seen to further and facilitate the beneficial purpose of s 14ZYA for taxpayers who invoke its provision. The respondents' tendentious submission that the Commissioner is "contending for an outcome in the instant case that this court should regard with distaste" and which "should weigh heavily in any consideration of whether to grant leave" is wholly unmeritorious and rejected.

costs 32 The respondents submitted that if leave is given and the appeal is allowed, the Commissioner should not receive his costs below but rather that each party should bear their own costs below by reason that the Commissioner has been successful on a different argument. We do not accept that submission. In both courts the issue has been one of construction and this is not a case where the Commissioner has presented an entirely different case, as was the position in Consolidated Media Holdings Ltd v Federal Commissioner of Taxation (2012) 201 FCR 470 and Siminton v Australian Prudential Regulation Authority (2006) 152 FCR 129 on which the respondents relied. Those cases were quite different and can be distinguished. I certify that the preceding twenty-one (21) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Pagone and Davies.