GORDON J. Part VIII of the Family Law Act 1975 (Cth) provides for spousal maintenance and the division of the property of the parties to a marriage. In proceedings with respect to the property of the parties to a marriage, s 79 in Pt VIII provides that a court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property, but that the court shall not make such an order unless it is satisfied that in all the circumstances it is just and equitable to make the order. In considering what order (if any) should be made, the court must take into account prescribed matters. One matter the court must consider is the effect of any proposed order on the ability of a creditor of a party to the marriage to recover the creditor's debt, so far as that effect is relevant.
Part VIIIAA of the Family Law Act was introduced in 2003 to, relevantly, allow a court to make an order under s 79 that "is directed to, or alters the rights, liabilities or property interests of a third party". One of the orders the court may make binding a third party under Pt VIIIAA is an order directed to a creditor of one party to the marriage to substitute the other party to the marriage in relation to the debt owed to that creditor.
This appeal from a judgment of the Full Court of the Family Court of Australia, on a question of law stated by a judge of the Federal Circuit Court of Australia under s 94A(3) of the Family Law Act, is concerned with the interaction between Pts VIII and VIIIAA and, in particular, whether a court in proceedings under s 79 in Pt VIII has power under s 90AE(1) in Pt VIIIAA to make an order directed to the appellant, the Commissioner, to substitute the husband for the wife in relation to a debt owed to the Commonwealth which arises under a taxation law. The Commissioner contended that he was not bound by s 90AE. The wife contended that the Commissioner was bound, and that the court had power to order the Commissioner to substitute the husband for the wife in relation to a debt owed to the Commonwealth arising under a taxation law.
These reasons will show that, under Pt VIIIAA, the court has jurisdiction over debts owed to the Commonwealth; and the court has the power under s 90AE in that Part to order the Commissioner to substitute the husband for the wife in relation to a debt owed to the Commonwealth arising under a taxation law. But these reasons will also show that there will seldom, if ever, be occasion to exercise that power.
Case stated
The question of law stated by the trial judge for the opinion of the Full Court was as follows:
"Does s 90AE(1)-(2) of the [Family Law Act] grant the court power to make Order 8 of the final orders sought in the amended initiating application of the [w]ife?"
Order 8 was in the following terms:
"Pursuant to section 90AE(1)(b) of the [Family Law Act], in respect of the [wife's] indebtedness to the [Commissioner] [for] taxation related liabilities in the amount of $256,078.32 as at 9 August 2016 plus General Interest Charge (GIC), the [husband] be substituted for the [wife] as the debtor and the [husband] be solely liable to the [Commissioner] for the said debt."
The Full Court answered that question:
Yes, but with the proviso that s 90AE(1) confers power only to make an order that the Commissioner be directed to substitute the husband for the wife in relation to the debt owed by the wife to the Commissioner.
As is apparent, the Full Court rejected the Commissioner's contention that, upon the proper construction of s 90AE in Pt VIIIAA, the court did not have power to make an order under s 90AE directed to the Commissioner.
But the question of law stated for the opinion of the Full Court, and therefore the answer provided by the Full Court, said nothing about the fact that, upon the proper construction of Pt VIIIAA, read with Pt VIII of the Family Law Act, a court would rarely, if ever, make such an order directed to the Commissioner in relation to a debt owed to the Commonwealth which arises under a taxation law. In other words, the confined nature of the power conferred was relevant, and was not fully explored.
In the circumstances of this matter, the stated case procedure was inappropriate, and the answer given incomplete.
Background
The wife and husband, the first and second respondents, married in July 1992. They separated in July 2009. During the marriage, the Commissioner issued various assessments requiring the wife to pay, among other things, income tax, the Medicare levy, penalties and the general interest charge ("GIC"). The wife failed to pay the amounts assessed, and did not lodge objections under Pt IVC of the Taxation Administration Act 1953 (Cth) ("the TAA"). On 12 November 2009, the Commissioner obtained default judgment against the wife for $127,669.36. GIC continues to accrue on that judgment debt.
The husband was declared bankrupt on 5 November 2013. On 20 December 2013, the wife commenced proceedings in the Federal Circuit Court against the husband seeking, relevantly, orders under s 79 for alteration of their property interests. The wife's application, as originally filed, sought, among other things, the following orders:
"8. That the [husband] be responsible for all income tax assessed on income received or deemed to have been received by the [wife] for the income tax year ending 30 June 2009 to the date of payment under Order 2.
9. The [husband] shall do all acts and things and sign all documents as are necessary to release the [wife] from and indemnify the [wife] against any liability present or contingent including tax and bank liabilities, in respect of the [husband] or a related party of the [husband]."
In February 2016, the trial judge granted the Commissioner leave to intervene in the proceedings in relation to those orders. As at 9 August 2016, the wife's liabilities to the Commissioner stood at $256,078.32, comprised of the judgment debt of $127,669.36, income tax credits and credit interest on overpayments in the amount of $516.77, and further GIC in the amount of $128,925.73. That month, the trial judge granted the wife leave to amend Order 8 in the terms set out above and stated the question of law for the opinion of the Full Court.
Full Court
As noted earlier, the Full Court (Thackray and Strickland JJ, Aldridge J agreeing generally, but writing separately) answered the question in the affirmative but with the proviso that s 90AE(1) confers power to make only an order that the Commissioner be directed to substitute the husband for the wife in relation to the debt owed by the wife to the Commissioner. Thackray and Strickland JJ held that the additional words sought by the wife - that the husband be solely liable to the Commissioner for the debt - could create the impression that whatever rights the wife had to challenge the debt were extinguished by the order. Given that their Honours were not persuaded such rights would be extinguished, they declined to make the additional order.
In formulating that answer, all members of the Court considered the question of Crown immunity from statute at some length.
Two members of the Court, Thackray and Strickland JJ, held that the presumption that the Crown is not bound by statute applies only to provisions which impose an obligation or restraint on the Crown; and that there was no place for the presumption if the provision, properly construed, conferred a benefit on the Crown.
Thackray and Strickland JJ were of the view that it was reasonably arguable that s 90AE could only impose a benefit on the Crown on the basis, among other things, that the Commissioner would have a greater chance of recovering a tax liability given that s 90AE allowed substitution of one party or for both parties to be jointly responsible for the debt, and that, in accordance with s 90AE(3)(b), the order could not be made where it was foreseeable the debt would not be paid. In light of those matters, their Honours saw no place for the presumption.
In case they were wrong on the question of benefit, Thackray and Strickland JJ also considered, and rejected, arguments advanced by the Commissioner that the presumption applied and that s 90AE did not rebut that presumption. Two key arguments were advanced by the Commissioner. First, other provisions in the Family Law Act provided means through which one spouse could be made responsible for the taxation liability incurred by the other spouse. Second, the construction advanced by the wife would create absurdities in the application of the taxation law because s 90AE could not operate to transfer the objection, review and appeal rights associated with the tax debt.
In relation to the first argument, Thackray and Strickland JJ accepted that other provisions in the Family Law Act provided the means through which one spouse could be directed to meet the taxation liability incurred by the other spouse, but held that such an order provided the original taxpayer with no defence against a claim by the Commissioner; and, further, that the same argument could be made about any other kind of debt.
In relation to the second argument - the impact of s 90AE on the application of the taxation law - despite not wishing to express a firm view, Thackray and Strickland JJ were not persuaded that the rights of objection, review and appeal would not pass to the substituted spouse in the event that a s 90AE order were made; and that, if they were wrong in relation to the transferability of objection rights, their Honours were of the view that the Crown would derive a benefit rather than suffer a detriment.
Their Honours further noted that the Commissioner had always been treated as a "creditor" for the purposes of ss 79 and 79A. Given the express link between s 79 and s 90AE, it would be "surprising", their Honours said, if different meanings were given to the words "creditor" and "debt" appearing in those linked sections. Their Honours further held that the failure of Parliament to include an express carve out, together with the purported benefits that flow to the Commissioner from the making of orders under s 90AE, suggested a legislative intention that the Commissioner be bound by s 90AE.
Aldridge J agreed with Thackray and Strickland JJ, subject to certain provisos. First, the principle in relation to Crown immunity now to be applied was that articulated in Bropho v Western Australia. Aldridge J held that whilst the issue of benefit to, or burden upon, the Crown might be a relevant consideration in determining whether the Crown was bound by a statute, it could not be considered as a starting point or threshold issue. As his Honour observed, a historically rigid conception of Crown immunity, whereby an Act of Parliament would not bind the Crown unless by express provision or necessary implication, was discarded in Bropho; and that was a rejection, at least in part, of the earlier decisions which had endorsed the benefit or burden dichotomy.
Second, contrary to the views of Thackray and Strickland JJ, his Honour concluded that, given that an order under s 90AE operates to interfere with the legal rights and entitlements of the third party, it is not legislation beneficial to the Crown. Aldridge J was also doubtful that one spouse could be substituted for the other in relation to rights of objection and appeal in respect of tax liabilities. However, his Honour was of the view that the issue was not of critical significance because, among other things, it was unlikely that any orders would be made under s 90AE if there were genuine issues of substance that would justify an objection or appeal.
Crown immunity
The relevant provisions of the Family Law Act do not expressly state that they bind the Crown. The presumption that general words of statutory provisions will not bind the Crown operates as no more than a general principle of statutory construction; or an aid to statutory construction. In certain circumstances, the presumption may represent little more than the starting point of the ascertainment of the relevant legislative intent. The ultimate question must be whether the presumption has, in all the circumstances, been rebutted and, if it has, the extent to which it was the legislative intent that the relevant statutory provisions should bind the Crown. The "circumstances include the terms of the statute, its subject matter, the nature of the mischief to be redressed, the general purpose and effect of the statute, and the nature of the activities of the Executive Government which would be affected if the Crown is bound". That list is by no means exhaustive.
As identified by Gleeson CJ and Gaudron J in The Commonwealth v Western Australia (Mining Act Case), a rationale for the presumption of Crown immunity is that, in general, acts of the legislature are meant to regulate and direct the acts and rights of citizens and, in most cases, the reasoning applicable to them applies with very different, and often contrary, force to the government itself. Thus, in applying the presumption in ascertaining legislative intent, the operation of the legislation - its impact or effect on the Crown - is relevant. The task is to construe the statute in context, adopting a flexible approach to construction which takes into account the nature of the statutory provisions in question and the activities of government to which they might apply.
The impact of a legislative provision on the Crown is not a new consideration. It has also arisen in the context of subjects of the Crown seeking to claim the benefit of the immunity. Kitto J in Wynyard Investments Pty Ltd v Commissioner for Railways (NSW) referred to the need to consider the impact on the Crown when identifying classes of cases where a statutory provision not binding on the Crown should be denied an incidence on a subject of the Crown because that incidence would be a legal effect upon the Crown. Relatedly, in Registrar of the Accident Compensation Tribunal v Federal Commissioner of Taxation, Mason CJ, Deane, Toohey and Gaudron JJ stated that it was clear from Bropho that the presumption that general words do not bind the Crown must yield to the circumstances involved, including the content and purpose of the provision; the way the provision would operate; and whether the provision would bind servants or agents of the government in relation to acts they do or property which they own or occupy in that capacity. Their Honours went on to state that there was now no basis for applying the presumption that the Crown was not bound by statute unless the provision in issue would operate to have some effect upon the government.
Whether the relevant provisions of the Family Law Act apply to, and bind, the Crown as creditor cannot be determined without first identifying how those provisions operate. And, here, the operation of the relevant provisions must be understood in the context of the whole of the Family Law Act, but with particular reference to Pt VIII and then Pt VIIIAA.
Statutory framework
Part VIII
Part VIII of the Family Law Act provides for spousal maintenance and the division of the property of parties to a marriage. Proceedings with respect to the maintenance of a party to a marriage are referred to as "spousal maintenance proceedings". Proceedings with respect to the property of the parties to a marriage, or either of them, are defined as "property settlement proceedings". The right of a spouse to maintenance is separate from, but inextricably linked to, the division of property. In relation to the parties to a marriage, or either of them, "property" is defined, relevantly, to mean property to which one or both of the parties are entitled "whether in possession or reversion".
In property settlement proceedings, s 79 in Pt VIII provides that a court may make such order as it considers appropriate altering the interests of the parties to the marriage in the property. However, the court must not make an order under s 79 unless it is satisfied that in all the circumstances it is just and equitable to make the order and, in considering what order (if any) should be made in property settlement proceedings, the court must take into account certain matters. Those matters include the financial and non‑financial contributions, both direct and indirect, by the parties to the marriage to the acquisition, conservation or improvement of any of the property of the parties to the marriage; the effect of any proposed order on the earning capacity of either party to the marriage; any other order made under the Family Law Act affecting a party to the marriage; and the matters referred to in s 75(2), so far as they are relevant.
The matters listed in s 75(2) are the matters to be taken into consideration by the court in exercising its jurisdiction in relation to spousal maintenance. The list includes the income, property and financial resources of each of the parties and the effect of any proposed order on the ability of a creditor of a party to the marriage to recover the creditor's debt. That list recognises that when determining what orders the court might make under s 79, the financial resources of the parties to a marriage must be considered; and that also relevant are liabilities owed to the creditors of the parties to the marriage and the effect of any order on the ability of those creditors to recover their debt.
The duty of the court, so far as is practicable, is to make orders that will finally determine the financial relationships between the parties to the marriage and avoid further proceedings between them. In exercising its powers under Pt VIII, the court may make a variety of orders including: that a specified transfer or settlement of property be made by way of maintenance for a party to a marriage; that payments be made direct to a party to a marriage, to a trustee to be appointed or into court or to a public authority for the benefit of a party to the marriage; and any other order which the court thinks it is necessary to make to do justice.
The Commissioner did not dispute that, for the purposes of s 80(1)(f) of the Family Law Act, the Commonwealth was a "public authority" or that a court may direct a party to a marriage to pay a debt owed to the Commonwealth by the other party.
Consistent with the dual objectives of finality and justice in Pt VIII of the Family Law Act, the court has power to adjourn property settlement proceedings if the court is of the opinion that, among other things, there is likely to be a significant change in the financial circumstances of the parties to the marriage and, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings.
Further, where an application is made for an order under s 79 by a party to the marriage then certain persons, whose interests would be affected by the making of the order, are "entitled to become a party" to the proceedings. Relevantly, a creditor of a party to the proceedings may do so if the creditor may not be able to recover their debt if the order were made. As Thackray and Strickland JJ noted, the Commissioner has always been treated as a "creditor" for the purposes of ss 79 and 79A.
Part VIII recognises, however, that although the orders being made under s 79 are intended to be final, circumstances change. Therefore, s 79A provides that a person affected by an order made under s 79 may apply for that order to be varied or set aside and, if appropriate, another order substituted in its place. But for another order to be substituted, the court must be satisfied that at least one of the circumstances prescribed in s 79A(1) exists. Those circumstances include that: there has been a miscarriage of justice; it is impracticable, in the circumstances that have arisen since the order was made, for the order, or for a part of the order, to be carried out; or a person has defaulted in carrying out an obligation imposed on that person by the order and, as a result of that default, it is just and equitable to vary the order or to set the order aside and make another order in substitution for that order. A creditor of a party to the proceedings in which the order under s 79 was made is deemed to be a person whose interests are affected by the order if the creditor may not be able to recover their debt because the order has been made. Put in different terms, it is difficult to identify a circumstance where any order would be made under s 79 if it diminished the ability of any creditor to recover a debt owed to them by one or both parties to the marriage.
It is against that background that Pt VIIIAA must be construed.
Part VIIIAA
Part VIIIAA was introduced into the Family Law Act by the Family Law Amendment Act 2003 (Cth). Its stated object is, relevantly, to allow a court, in relation to the property of a party to a marriage, to make an order in property settlement proceedings under s 79 in Pt VIII that "is directed to, or alters the rights, liabilities or property interests of a third party". A "third party", in relation to a marriage, means a person who is not a party to the marriage. The Commissioner accepted that the Commonwealth was a third party for the purposes of Pt VIIIAA.
Section 90ADA provides that Pt VIIIAA "does not affect the operation of any other provision" of the Family Law Act. Indeed, the example given in the statute is that certain provisions of s 90AE "do not limit the operation of any other provisions of [the Family Law Act] that require or permit the court to take matters into account in making an order in proceedings under section 79". In other words, Pt VIIIAA is to be construed as sitting alongside, and ancillary to, Pt VIII. That view of Pt VIIIAA is reinforced by further provisions.
First, for the purposes of Pt VIIIAA only, s 90AD(1) provides that a debt owed by a party to a marriage is "to be treated as property for the purposes of paragraph (ca) of the definition of matrimonial cause" in s 4(1) of the Family Law Act. This provision was necessary to give the court in s 79 proceedings the authority to deal with a debt owed by a party to a marriage. Having expanded the jurisdiction of the court over those debts, Pt VIIIAA also confers specific powers on the court in relation to that jurisdiction. With the expansion of jurisdiction in Pt VIIIAA, in property settlement proceedings under s 79 in Pt VIII the orders that the court is empowered to make include orders specifically directed to, or against, third parties. Part VIIIAA confers powers to make orders directed to, or altering the rights, liabilities or property interests of, a third party.
Second, the orders that a court may make under s 79 and s 90AE which bind a third party are confined by the terms of s 90AE. Sub-sections (1) and (2) of s 90AE identify the third party orders that the court may make as:
"(1) ...
(a) an order directed to a creditor of the parties to the marriage to substitute one party for both parties in relation to the debt owed to the creditor;
(b) an order directed to a creditor of one party to a marriage to substitute the other party, or both parties, to the marriage for that party in relation to the debt owed to the creditor;
(c) an order directed to a creditor of the parties to the marriage that the parties be liable for a different proportion of the debt owed to the creditor than the proportion the parties are liable to before the order is made;
…
(2) ... any other order that:
(a) directs a third party to do a thing in relation to the property of a party to the marriage; or
(b) alters the rights, liabilities or property interests of a third party in relation to the marriage."
Having identified the orders that the court is empowered to make under s 90AE(1) or (2), s 90AE(3) provides that a court may only make an order under s 90AE(1) or (2) if:
"(a) the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage; and
(b) if the order concerns a debt of a party to the marriage - it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and
(c) the third party has been accorded procedural fairness in relation to the making of the order; and
(d) the court is satisfied that, in all the circumstances, it is just and equitable to make the order; and
(e) the court is satisfied that the order takes into account the matters mentioned in [s 90AE(4)]." (emphasis added)
The matters listed in s 90AE(4) are:
"(a) the taxation effect (if any) of the order on the parties to the marriage;
(b) the taxation effect (if any) of the order on the third party;
…
(e) if the order concerns a debt of a party to the marriage - the capacity of a party to the marriage to repay the debt after the order is made;
(f) the economic, legal or other capacity of the third party to comply with the order;
(g) if, as a result of the third party being accorded procedural fairness in relation to the making of the order, the third party raises any other matters - those matters;
(h) any other matter that the court considers relevant." (emphasis added)
Section 90AE was intended to cover, and covers, a range of possible arrangements that a party to the marriage may have which involve a third party, including ownership of life insurance products, shares in corporate entities and the creditors of the parties to a marriage whether they are family, friends or financial institutions. The range of available orders was "intended to be broad and include[d] substitution of the party liable for a debt, adjusting the proportion of a debt that each party is liable for or ordering the transfer of shares between the parties to the marriage".
However, the circumstances in which the orders may be made against a third party are confined. Relevantly for the purposes of this appeal, the court may only make an order concerning a debt of a party to a marriage which binds a third party if "it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full" (emphasis added). As will become apparent, this provision is important in applying s 90AE to a debt owed to the Commonwealth which arises under a taxation law.
Part VIIIAA is facultative and protective. It relevantly provides that Pt VIIIAA has effect despite anything to the contrary in any other law (written or unwritten) of the Commonwealth, a State or Territory, and anything in a trust deed or other instrument, and that a third party in relation to a marriage is not liable for loss or damage suffered by any person because of things done (or not done) by the third party in good faith in reliance on an order made by a court in accordance with Pt VIIIAA.
Finally, the drafters specifically addressed the effects of the provisions on the executive functions of government. That is evident in two separate ways. First, s 90AE imposes a duty on the court to be satisfied that any order takes into account the taxation effect (if any) of the order on the parties to the marriage and on the third party as well as the social security effect (if any) of the order on the parties to the marriage. Second, Pt VIIIAA had a deferred commencement. The Senate's Supplementary Explanatory Memorandum explained that the purpose of the deferred commencement was to:
"ensure that any affected third parties, such as banks or financial services bodies, are given sufficient time to make any necessary changes, for example to their operating systems, as a result of the introduction of these provisions. The deferred commencement will also ensure that any necessary consequential amendments, such as amendments to taxation or social security legislation, can be made before the provisions commence."
No subsequent consequential amendment to the taxation or social security legislation was identified in argument.
Parts VIII and VIIIAA: The application of Crown immunity
The presumption that Pt VIIIAA does not apply to the Crown has, in all the circumstances, been rebutted.
First, Pts VIII and VIIIAA disclose a legislative intent that the relevant provisions of Pt VIIIAA bind the Crown, when regard is had to: the generality of the language and the express reach of the provisions (including s 90AC); the fact that Pt VIIIAA was introduced specifically to address third parties and restrictions on the ability of a court to direct a third party to act in order to give effect to property settlements; the fact that a purpose of Pts VIII and VIIIAA is to finalise financial relationships between the parties to a marriage; and, finally, the fact that the effect of the provisions on third parties is confined in the manner described earlier.
Second, the Commissioner's contention that, although the Commissioner was a "creditor" for the purposes of ss 79 and 79A, he was not a "creditor" for the purposes of Pt VIIIAA is misplaced and should be rejected. The Commonwealth, not the Commissioner, was and remains the creditor. Moreover, the contention finds no support in the language of the two Parts and, in fact, is contrary to the express words of the relevant provisions as well as the mischief that Pt VIIIAA was intended to address. For example, Pt VIIIAA must be construed in light of the Commissioner's acceptance that Pt VIII permits the making of orders affecting a "public authority"; and that "public authority" includes the Commonwealth. Further, Pt VIIIAA operates to extend the powers in s 79 in Pt VIII. There is no logical basis for distinguishing between the treatment of the Commonwealth in Pt VIII (as a creditor, and subject to that Part) and the treatment of the Commonwealth in Pt VIIIAA (which extends the court's powers under Pt VIII).
Third, the conclusion that Pts VIII and VIIIAA disclose a legislative intent that the relevant provisions of Pt VIIIAA bind the Crown is reinforced when one considers the application of s 90AE to the Commonwealth as creditor as well as the Commissioner, as a holder of a statutory office, with responsibilities in relation to debts owed to the Commonwealth under a taxation law. As was stated earlier, the impact or effect on the Crown of specific legislation, and whether it was intended by Parliament that the legislation have this impact or effect, are relevant. Here, in the application of s 90AE, there is, and there can be, no relevant impact or effect on the Commonwealth, or on the Commissioner, as a holder of a statutory office, with responsibilities in relation to debts owed to the Commonwealth under a taxation law. This is because of s 90AE(3): the Commonwealth is not treated differently from any other third party, and, contrary to the Commissioner's submissions, the Commonwealth can be no worse off. When looked at from an operational perspective, not only is the Commonwealth revenue protected but Pt VIIIAA does not "disrupt" the taxation law. That last statement requires further explanation.
As we have seen, s 90AE(3)(b) provides that the court may only make an order concerning a debt of a party to a marriage which binds a creditor under s 90AE(1) if "it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full" (emphasis added). Practically, a s 90AE order would rarely, if ever, be made substituting one party of the marriage for another party in relation to a debt owed to the Commonwealth arising under or as a result of the application of a taxation law.
The fact that a court will rarely, if ever, make an order under s 90AE in relation to a tax debt - a debt owed to the Commonwealth - may be illustrated by considering a primary tax debt arising from an assessment issued by the Commissioner under Div 155 of Sch 1 to the TAA.
A "tax debt" is a "primary tax debt" (relevantly defined to mean any amount due to the Commonwealth directly under a taxation law including any amount that is not yet payable) or a "secondary tax debt" (defined to mean an amount that is not a primary tax debt but is due to the Commonwealth in connection with a primary tax debt). An amount due under an assessment issued by the Commissioner is an example of a primary tax debt. An amount due to the Commonwealth under an order of a court made in a proceeding for recovery of a primary tax debt is an example of a secondary tax debt.
The relevant primary tax debt in this appeal was income tax. Income tax is only due and payable when the Commissioner makes an assessment of income tax. That assessed amount is a "tax‑related liability" - a pecuniary liability to the Commonwealth arising directly under a taxation law.
A tax-related liability that is due and payable is a debt due to the Commonwealth and is payable to the Commissioner and the Commissioner may sue to recover any amount of that tax-related liability that remains unpaid after it becomes due and payable. Not only is the notice of assessment conclusive evidence that the assessment was properly made and, except in proceedings under Pt IVC of the TAA, that the amounts and particulars of the assessment are correct, but the Commissioner may proceed to recover that tax‑related liability even though the taxpayer has commenced proceedings under Pt IVC of the TAA.
Moreover, the Commissioner has certain statutory rights to assist in the recovery of tax-related liabilities. Some of those rights extend beyond the person liable to pay an amount of a tax‑related liability. And for certain tax-related liabilities, the amount of the debt continues to accrue on a daily basis because a person is liable to pay the GIC on unpaid amounts. The GIC is charged not only daily but also at a rate well above the 90-day Bank Accepted Bill rate published by the Reserve Bank of Australia and is due and payable to the Commissioner at the end of each day.
The objection, review and appeal rights under Pt IVC of the TAA in respect of assessments are limited. Although s 14ZL(1) of the TAA relevantly states that Pt IVC applies if a provision of an Act provides that a "person" who is dissatisfied with an assessment may object against it, the "person" is relevantly the person or persons who may, because of a provision of the taxation law, lodge an objection against the assessment. So, for example, s 175A(1) of the Income Tax Assessment Act 1936 (Cth) ("the 1936 Act") provides that a "taxpayer" who is dissatisfied with an assessment "made in relation to the taxpayer" may object against the assessment in the manner set out in Pt IVC of the TAA. Thus, the effect of s 14ZL of the TAA is to confer objection, review and appeal rights under Pt IVC of the TAA upon the person described in s 175A(1) of the 1936 Act - the "taxpayer" - "in relation to" whom the assessment has been made. It is that taxpayer who is the "person" who has rights and obligations under s 14ZU of the TAA (a "person" making a taxation objection must comply with certain administrative requirements), s 14ZY of the TAA (the Commissioner must make a decision on a taxation objection and serve written notice of the decision "on the person") and s 14ZZ of the TAA (if the "person" is dissatisfied with the objection decision, the "person" may (if the decision is a reviewable objection decision) seek review in the Administrative Appeals Tribunal or appeal to the Federal Court of Australia).
The difficulties for any court faced with a request, in relation to a debt owed to the Commonwealth under a taxation law, that it make an order under s 90AE(1) that one party to the marriage be substituted for the other party as the debtor are that these (and other) aspects of the taxation law would appear to prevent a court being satisfied of the two matters identified in s 90AE(3)(b) and (d) - that it is not foreseeable that making the order would result in the debt not being paid in full; and that, in all the circumstances, it is just and equitable to make the order.
The fact that the husband in this appeal was bankrupt is reason enough not to make the order sought by the wife under s 90AE. But there are other facts, matters and circumstances which compel the same conclusion in this appeal: the inability of the husband to exercise the Pt IVC rights of objection and review (both because the time allowed to the wife for objections has long expired, and because of the difficulties identified above); the fact that the debt owed to the Commonwealth, in relation to which the Commissioner has obtained default judgment, is long overdue; and the fact that the size of that Commonwealth debt continues to increase, not just on a daily basis, but at a higher rate, because of the accruing GIC. That list is not and cannot be exhaustive. However, those facts and matters, or even some of them, compel the conclusion that a court could not be satisfied of the matters prescribed in s 90AE(3) and, therefore, the court would not be empowered to make a substitution order under s 90AE(1) in Pt VIIIAA.
The matter may be tested this way. Part VIII empowers a court to make an order under s 80(1)(f) directing a party to a marriage to pay a debt owed by the other party, which could include a direction to pay a tax debt owed to the Commonwealth. If the husband had cash or another immediately realisable asset or assets to meet that debt, an order would be made under s 80(1)(f) directing the husband to make a payment direct to a public authority for the benefit of the wife. If that form of order could not be made (because of the lack of means to meet such a debt), then, contrary to the requirements of s 90AE(3), it would be foreseeable that if an order were made under s 90AE(1), it would result in the debt not being paid in full and, in all the circumstances, it would not be just and equitable to make the order. That is, the fact that the husband could not satisfy an order under s 80(1)(f) strongly suggests, even requires, the conclusion that two requirements of s 90AE(3) - that it must not be foreseeable that if the order were made, it would result in the debt not being paid in full, and that it must be just and equitable to make the order - would not be satisfied.
Further, as we have seen, Pt VIII expressly empowers a court to adjourn property settlement proceedings if the court is of the opinion that there is likely to be a significant change in the financial circumstances of the parties to the marriage and, having regard to the time when that change is likely to take place, it is reasonable to adjourn the proceedings. That possibility of an adjournment permits a party to the marriage who owes a debt to the Commonwealth under a taxation law to exercise their rights of objection, review and appeal under Pt IVC of the TAA.
Thus, the scope for a s 90AE(1) order in the circumstances of a debt owed to the Commonwealth arising under, or as a result of the application of, the taxation law is limited.
A statute may give some kinds of debts owed to the Commonwealth particular attributes (like the taxation law), but to acknowledge that is to put forward a proposition about statute law, not about some abstract notion of either "the Crown" or "debts owed to the Commonwealth". The priority of debts owed to the "Crown in right of the Commonwealth" is dealt with by the Crown Debts (Priority) Act 1981 (Cth) and that Act does not draw any relevant distinction between the classes or sources of debts owed to the Crown in right of the Commonwealth. Nor should any such distinction be drawn here. The Commissioner's invitation to single out special attributes of a tax debt as a basis for finding that the Commonwealth is not bound by Pt VIIIAA should be rejected. That framing is artificial and apt to mislead. The real question posed in the appeal was whether Pt VIIIAA binds the Commonwealth: for the reasons given above, the answer is yes.
Reconciliation of the treatment of debts owed to the Commonwealth under a taxation law, on the one hand, and property settlement proceedings under Pt VIII of the Family Law Act, on the other, finds resolution not in the concept of Crown immunity but, rather, in the proper construction and application of Pts VIII and VIIIAA of the Family Law Act. In particular, once Pts VIII and VIIIAA are properly construed, what might otherwise appear to be a tension between the treatment of debts arising under, or as a result of, the taxation law and the power of the court under Pt VIIIAA to order substitution of a debtor to the Commonwealth falls away.
Case stated procedure
Section 94A(1) of the Family Law Act relevantly provides that where a question of law arises which the judge and at least one of the parties wish to have determined by the Full Court of the Family Court before the proceedings are further dealt with, the judge shall state the facts and question in the form of a special case for the opinion of the Full Court and the Full Court must hear and determine the question.
This procedure should be used only in exceptional circumstances. It is more often than not productive of difficulty, delay and artificiality, and should be adopted cautiously.
When deciding whether to state a case, it is the obligation of the court to explore all of the options and weigh the advantages and disadvantages in a particular case, to determine whether the stating of the case would be reasonable. The problems inherent in the procedure include that a Full Court may be asked to determine a question of law on incomplete facts or assumptions or in circumstances which render it impossible to answer the question in other than a hypothetical fashion; the question of law is determined on the basis of a statement of facts agreed by the parties or settled by the judge but those facts may differ from those ultimately established by the evidence; and there is additional delay and cost.
In the circumstances of this matter, the stated case procedure was inappropriate. Hearing and determining the property settlement proceedings would have been cheaper and quicker. But, no less importantly, on the proper construction of Pts VIII and VIIIAA, the question of whether the Commonwealth was bound by s 90AE(1) and (2) would not have arisen for determination because of s 90AE(3). That is, even if the Federal Circuit Court had been asked to make the substitution order under s 90AE(1)(b), under s 90AE(3) the Court could only make that order if it was reasonably necessary or reasonably appropriate and adapted to effect a division of property between the parties to the marriage; it was not foreseeable that to make the order would result in the debt not being paid in full; and in all the circumstances, it was just and equitable to make the order. As just explained, given the taxation law, and, further, the circumstances of the husband and the property of the parties to the marriage in this appeal, it is unlikely that s 90AE(3) could ever be satisfied.
Conclusion and orders
For those reasons, the appeal should be dismissed but the question of law stated by the trial judge for the opinion of the Full Court should be answered as follows:
"Does s 90AE(1)-(2) of the [Family Law Act] grant the court power to make Order 8 of the final orders sought in the amended initiating application of the [w]ife?",
where Order 8 was amended to read:
"Pursuant to section 90AE(1)(b) of the [Family Law Act], in respect of the [wife's] indebtedness to the [Commissioner] [for] taxation related liabilities in the amount of $256,078.32 as at 9 August 2016 plus [GIC], the [husband] be substituted for the [wife] as the debtor and the [husband] be solely liable to the [Commissioner] for the said debt."
Answer: Although in relation to a debt owed to the Commonwealth by a party to a marriage s 90AE(1) confers power to make an order that the Commissioner be directed to substitute the husband for the wife in relation to that debt, it is otherwise inappropriate to answer the question without it being found, or agreed, that, within the meaning of s 90AE(3), the making of the order is reasonably necessary, or reasonably appropriate and adapted, to effect a division of property between the parties to the marriage, and it is not foreseeable at the time that the order is made that to make the order would result in the debt not being paid in full; and without the court being satisfied that, in all the circumstances, it is just and equitable to make the order.