Denlay v Commissioner of Taxation [2013] FCA 307 | Case summary

REASONS FOR JUDGMENT 1 On 30 September 2011, a delegate of the Commissioner of Taxation decided to issue two notices under s 260-5 of Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA) (260-5 notices) to BT Funds Management Ltd in respect of debts then due to the Commonwealth by Mr Kevin Vincent Denlay and his wife, Mrs Mirja Helena Denlay respectively. Mr and Mrs Denlay have respectively applied for the judicial review of the decisions to issue these notices. They seek declarations that the decisions to issue the respective notices are invalid and a consequential order for the refunding of the monies garnered from BT Funds Management Ltd pursuant to those notices. The applications are made under both the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) and s 39B of the Judiciary Act 1903 (Cth). 2 The indebtedness of Mr and Mrs Denlay arose under notices of amended assessment issued to them in respect of the 2002 to 2007 income years. Objections by Mr and Mrs Denlay to those assessments were disallowed. At the time when the 260-5 notices were issued, appeals to the Court by Mr and Mrs Denlay under Pt IVC of the TAA against the objection decisions were part heard before me. 3 The Commissioner's letters advising Mr and Mrs Denlay respectively of the issuing of the 260-5 notices were not accompanied by a statement of reasons. Reasons for the Commissioner's decisions were not sought by Mr and Mrs Denlay (via their solicitors) until 22 December 2011. Noting this elapse of time, the Commissioner, by a letter dated 20 January 2012, stated that he declined, pursuant to s 13(5)(a) of the ADJR Act, to furnish a statement of reasons. The Commissioner nonetheless furnished a statement of reasons to Mr and Mrs Denlay in that same letter. At first blush, the Commissioner's response to the request seems incongruous. That impression may well be nothing more than the result of an infelicity of expression on the part of the author of the Commissioner's letter. The author's intention would seem to have been to convey to Mr and Mrs Denlay and to those advising them that, even though the request was made at a time which permitted the Commissioner to decline to furnish reasons, he nonetheless furnished them as a matter of good public administration. 4 The judicial review application was filed on 21 February 2012. 5 It is not necessary to reach a conclusion on the subject of whether the application was lodged within time, because the Commissioner did not object to its competency either on the basis that it was not lodged within time or on the basis that the Denlays were not by then persons aggrieved by those decisions. 6 It may well be that relief under s 39B was alternatively claimed in this case out of an abundance of caution, understandable from the inherent incongruity in the Commissioner's response, as to whether an application under the ADJR Act alone in respect of the decision to issue the 260-5 notices would have been within time. That subject was not explored in submissions. Neither was it submitted that, in the circumstances of this case, there was any relevant distinction between the grounds of review, viewed as grounds under the ADJR Act, as opposed to those same grounds viewed as grounds under the separate jurisdiction conferred by s 39B, the nature of which materially replicates the jurisdiction of the High Court under s 75(v) of The Constitution. The bases upon which judicial review is conducted under these alternative sources of jurisdiction are not co-extensive: Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [47]. Nonetheless, having regard to the way in which the Denlays' case came to be developed, there is no relevant distinction to be drawn in this case between the alternative jurisdictional foundations for their claim for relief. I therefore propose to consider the grounds by reference to the ADJR Act. 7 As amended, the grounds which the Denlays pleaded in their respective judicial review applications were these: 1. The Respondent failed to take relevant considerations into account in the exercise of the power to issue the [260-5] Notice; 2. The Respondent took into account irrelevant considerations in the exercise of the power to issue the [260-5] Notice; 3. The Respondent exercised a discretionary power to issue the [260-5] Notice in accordance with a Rule or Policy without regard to the merits of the particular circumstances of the Applicant[s]; 4. The Respondent failed to observe procedures that were required by law to be observed in connection with the making of the decision to issue the [260-5] Notice. 5. The decision to issue the [260-5] Notice in circumstances where the Respondent had consented to a Stay of the enforcement of Judgment in respect of the alleged tax debt was an exercise of the power conferred by section 260-5 of Schedule 1 to the Taxation Administration Act 1953 which was contrary to law. 8 As pleaded, the grounds alleging a failure to take relevant considerations into account and the taking of irrelevant considerations into account exhibit the vice of a want of particularity. Sub-section 5(2) of the ADJR Act instances the bases upon which a decision to which that Act applies may be judicially reviewed on the ground specified in s 5(1)(e), which is that "the making of the decision was an improper exercise of the power conferred by the enactment in pursuance of which it was purported to be made". A failure to take relevant considerations into account and the taking of irrelevant considerations into account are two of these bases: s 5(2)(b) and s 5(2)(a) of the ADJR Act respectively. An applicant does not furnish particulars of the ground of review specified in s 5(1)(e) of the ADJR Act by an uncritical recitation of the text of s 5(2)(b) and s 5(2)(a). Rather, particulars must be given of the irrelevant consideration allegedly taken into account or, as the case may be, the relevant consideration allegedly not taken into account. Absent such particularity, the ground of review is meaningless. In turn, an application so pleaded fails to meet the requirement found in s 11(1)(b) of the ADJR Act that it "set out the grounds of the application". 9 In the result, an allegation that irrelevant considerations were taken into account was not pressed. 10 In submissions, the following came to be alleged as the relevant considerations not taken into account: (a) the effect of consent orders staying the enforcement of a Queensland Supreme Court judgment in respect of the debts created by the amended assessments; and (b) the effect that the 260-5 notices would have on the Denlays' ability to continue their taxation appeals. 11 Grounds 3 and 4 also exhibit such a want of particularity as to be meaningless. Nothing turns on this because these grounds, too, were not in the end pursued. 12 Even though they were neither contemporaneous to the decisions to issue the 260-5 notices nor furnished as a matter of obligation, as opposed to gratuitously, no controversy attended the reception into evidence of the Commissioner's statements of reasons. It is desirable, albeit at a cost of increasing the length of this judgment, to set out in full the findings on material questions of fact and the reasons set out in the Commissioner's statements of reasons. It is sufficient to set out and proceed further by reference to the reasons in respect of the notice based on Mr Denlay's tax liability. The statement of reasons in respect of Mrs Denlay was to no different effect: Findings on material questions of fact 2. Between 2007 and 2008 the ATO conducted an audit into the taxpayer's taxation affairs as a result of receiving information from a former employee of the Liechtenstein Global Trust (LGT). 3. The former employee of LGT provided documents to the ATO which indicated the following: (a) an entity known as "Dorje Foundation" of Vaduz, Liechtenstein (Dorje Foundation) was founded on 23 November 1992; (b) Dorje Foundation was a non-operating entity with its principal purpose being the investment of assets; (c) as at 31 December 2001, Dorje Foundation held 2 accounts numbered 0146778 and 0245858 with the LGT Bank; (d) the taxpayer was the ultimate financial beneficiary of assets held in the LGT account number 0146778; (c) the origin of funds in the LGT accounts was or was expected to be from the sale of property in Australia and income from business activity in Australia, particularly deep sea diving including exploration, pipeline laying and maintenance and treasure hunting; (f) as at 31 December 2001 funds in the Applicant's LGT account had a value of US$682,859.23 and comprised: Description Amount (USD) USD Account $391.06 EUR Account (EUR549,787.70 converted at 0.880246) $483,948.42 Safe Custody Account $198,519.75

The taxpayer has never disclosed to the ATO whether he has access to any of the funds in his LGT account. 5. The result of the audit was that in November and December 2008 the ATO issued to the taxpayer notices of amended assessments in respect of income tax for the 2002 to 2007 income years inclusive in the total amount of $1,058,123. The notice of amended assessment for the 2007 income year included assessed income tax in respect of the sale of a valuable statute. In addition the ATO imposed administrative penalties in the total amount of $624,785 in respect of these same income years. The taxpayer has not paid any amount in reduction of his tax liabilities. 6. The LGT documents also disclosed that the taxpayer's wife, Mrs Helena Denlay, with whom the taxpayer lives, had an account with the LGT Bank which as at 31 December 2001 had a balance of USD1,204,241. Mrs Helena Denlay has also never disclosed to the ATO whether she has access to any of the funds in her LGT account. 7. In March and May 2008 the taxpayer informed the ATO in a s.264 ITAA 1936 examination that he had interests in: (a) Regular monthly payments of $4,000 from a Hong Kong registered entity called Visual Energy International Limited ("Visual Energy") based in Hong Kong. The payments were being deposited into the taxpayer's Westpac account electronically. (b) Encumbered freehold property at 36 Glengarrie Road, Glengarrie NSW 2486. 8. A [260-5] notice was issued to Westpac in relation to these monthly payments. Following the issue of the 260-5 notice the payments from Visual Energy ceased. 9. On 19 February 2010 the taxpayer refinanced his mortgage and increased it from approximately $100,000 to $380,000. On 14 February 2011 the taxpayer further refinanced his mortgage and increased it from $380,000 to $445,000. The loan agreement provided that the interest for the entire period of the loan had to be paid at the commencement of the loan at a rate of 13.5% per annum. The loan was secured by a first mortgage over his property at 36 Glengarrie Road, Glengarrie, New South Wales. 10. The taxpayer is the holder of an account in the taxpayer's and his wife's Self Managed Superannuation Fund. In July 2011 information was received by the ATO pursuant to section 353-10 of Schedule 1 to the TAA issued on 4 May 2011 to Westpac which disclosed that the Superannuation account was closed on 24 December 2009 with a closing balance of $262,242.33. 11. On 7 September 2011 the ATO received information pursuant to section 353-10 of Schedule 1 to the TAA issued on 9 August 2011 to BT Funds Management Ltd which disclosed that a new Superannuation account was opened on 24 December 2009 and an amount of $262,242.33 was deposited and that as at 30 August 2011 the balance in the account had reduced to $62,268.11. 12. In May 2011 the taxpayer and the ATO agreed that the ATO would stay the execution of the judgment obtained in the Supreme Court of Queensland in relation to the taxpayer's tax liabilities. The stay was in place at the time of the decision. 13. At the time of the decision the taxpayer's appeal under Part IVC of the TAA was part heard in the Federal Court of Australia. Evidence or other material upon which those findings of fact were based 14. I relied on the following evidence and other material to make the aforementioned findings on material questions of fact: (a) The LGT documents. (b) Various notices of amended assessment for income tax for the income years 2002 to 2007. (c) Various notices of assessment of penalty for the income years 2002 to 2007. (d) Transcripts of s264 ITAA 1936 examinations with the taxpayer. (e) Information obtained under s263 ITAA 1936 access to the taxpayer's premises. (f) Information obtained under various s353-10 notices as referred to above. (g) Various conversations with the case office Arlene Cupay in the Debt Business Line. (h) Australian Government Solicitor advice. Reasons for Decision 15. As at 30 September 2011, the taxpayer was indebted to the Commissioner of Taxation in respect of income tax in the amount of $3,049,459.96 including general interest charge (GIC) up to 29 September 2011. 16. Between the issuing of the notices of amended assessments in November/December 2008 and 7 September 2011 the taxpayer's net assets within the jurisdiction had reduced by approximately $545,000. The $545,000 is made up of the increase in the loan secured by the mortgage ($445,000 less the original mortgage amount of $100,000) loan and the reduction as at 30 August 2011 - amounting to approximately $200,000 - of the taxpayer's financial interest in his superannuation account. 17. As at 30 August 2011 only $62,268.11 remained in the taxpayer's superannuation account. The risk to the revenue arising from not issuing the notice was substantial in view of the significant size of the tax liabilities. 18. In making the decision to issue the notice I had regard to the principles set out in the Taxpayer's Charter and the ATO Receivables Policy. 19. I formed the view that the issuing of the notice was not in breach of the stay of execution of the judgment in relation to the taxpayer's tax liabilities. 20. I formed the view that the taxpayer in all probability still had access to monies located outside the jurisdiction. I also formed the view that in all probability the taxpayer's wife, Mrs Helena Denlay had significant funds outside the jurisdiction. 21. There is a risk that the taxpayer would not be able to pay the tax assessed pursuant to the various assessments from his remaining interests in his property which is now mortgaged to the extent of $445,000 to a third party. The reduction in equity in the property by reason of the mortgage represents a significant proportion of the total value of the property. 22. The taxpayer has not paid any part of the tax or penalties assessed. 13 Even though, in the taxation appeals, certain of the Commissioner's "Findings on material questions of fact" concerning any interest in or control by Mr and Mrs Denlay of funds at the LGT Bank were controversial, the judicial review application was neither pleaded nor conducted on the basis that there was no material before the Commissioner upon which any of the recorded findings as to control could reasonably have been made administratively. I thus propose to determine the judicial review application on the basis that those findings were open. 14 The judicial review applications proceeded on the basis that, even accepting that these findings of fact were reasonably open, the decisions to issue the 260-5 notices were flawed on either or each of the grounds which came to be pressed. Further, solely for the purposes of this proceeding, the Commissioner conceded the correctness of the statement, made by affidavit by Mr Denlay, that, at the time when the s 260-5 notices were issued, neither he nor his wife had available in Australia any funds other than what they might have been able to borrow (if an undertaking as to further encumbrance given by them to the Queensland Supreme Court had been varied) against remaining equity in real property in Australia owned by them or what they could have accessed (but for what came to be garnered in from BT Funds Management Ltd by those notices), from the balances in the superannuation fund accounts in their respective names with that company. In making that concession, the Commissioner did not concede that he had any knowledge of these conceded facts at the time when the decision to issue the s 260-5 notices came to be made. 15 A consideration will be "relevant" for the purposes of s 5(2)(b) of the ADJR Act only if it is one which the decision-maker is bound to take into account: Minister for Aboriginal Affairs v Peko-Wallsend Ltd (1986) 162 CLR 24 at 39 (Peko-Wallsend at 39-40, emphasis in original). A decision-maker will be bound to take a consideration into account if either expressly or by necessary implication, having regard to the language of the provision which confers the power, its statutory context and the subject matter, scope and purpose of that provision and the Act within which it is found, the Act requires this consideration to be taken into account. 16 Even though, as pleaded, ground 5 in the grounds of review might be thought to indicate reliance upon the "otherwise contrary to law" ground found in s 5(1)(j) of the ADJR Act, that is not the way in which this ground was developed in argument on behalf of Mr and Mrs Denlay. Instead, it was submitted that the issuing of the 260-5 notices in circumstances where there was a stay of the enforcement of the Queensland Supreme Court judgment in respect of the Denlays' amended assessment based taxation liabilities, and while the tax appeals were part heard was, in terms of s 5(2)(g) of the ADJR Act, so unreasonable that no reasonable decision-maker could have so exercised the power. As developed in submissions, ground 5 was therefore an alternative basis upon which it was alleged that the decisions to issue the 260-5 notices was, for the purposes of s 5(1)(e) of the ADJR Act, an improper exercise of the power conferred by s 260-5 of Sch 1 to the TAA. 17 As has been observed (Re Minister for Immigration and Multicultural Affairs; ex parte Applicant S20/2002 (2003) 77 ALJR 1165 at [66] per McHugh and Gummow JJ (Applicant S20)), "the phrase in s 5(2)(g) of the ADJR Act … followed the words used by Lord Greene MR in Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 230". In respect of this error ground, it is salutary to recall the attention directed by McHugh and Gummow JJ in Applicant S20 at [69] to the following statement made by Dixon CJ in Klein v Domus Pty Ltd (1963) 109 CLR 467 at 473: This Court has in many and diverse connexions dealt with discretions which are given by legislation to bodies, sometimes judicial, sometimes administrative, without defining the grounds on which the discretion is to be exercised and in a sense this is one such case. We have invariably said that wherever the legislature has given a discretion of that kind you must look at the scope and purpose of the provision and at what is its real object. If it appears that the dominating, actuating reason for the decision is outside the scope of the purpose of the enactment, that vitiates the supposed exercise of the discretion. But within that very general statement of the purpose of the enactment, the real object of the legislature in such cases is to leave scope for the judicial or other officer who is investigating the facts and considering the general purpose of the enactment to give effect to his view of the justice of the case. 18 To like effect is a passage in Wade HWR, Administrative Law (6th ed, Clarendon Press, Oxford, 1988) at p 407, cited with approval in Reg. v. Boundary Commission; Ex parte Foot [1983] QB 600 at 626, which was highlighted by Brennan J in Attorney-General (NSW) v Quin (1990) 170 CLR 1 at 36-37 in the course of his discussing the limited nature of review on what has come to be called a "Wednesbury unreasonableness" ground: The doctrine that powers must be exercised reasonably has to be reconciled with the no less important doctrine that the court must not usurp the discretion of the public authority which Parliament appointed to take the decision. Within the bounds of legal reasonableness is the area in which the deciding authority has genuinely free discretion. If it passes those bounds, it acts ultra vires. The court must therefore resist the temptation to draw the bounds too tightly, merely according to its own opinion. It must strive to apply an objective standard which leaves to the deciding authority the full range of choices which the legislature is presumed to have intended. In short, in respect of this error ground and in the circumstances of this case, it is a necessary discipline, flowing from the separation of powers under The Constitution, for this Court to recognise that the task of determining whether occasion has arisen on the facts for the exercise of the statutory power to issue a 260-5 notice under the TAA has been consigned by the Parliament to the Commissioner, not to the judiciary. If, in so doing, the Commissioner has, materially, taken into account the considerations which the TAA has made relevant and exercised the power reasonably, it is nothing to the point that the Court might not have so exercised the power on the basis of the material before the Commissioner. The Commissioner's decision will be unreasonable only if no reasonable administrator on that material could have so exercised the power. 19 The limited place of judicial review is not the only constitutional consideration which intrudes in this case. The limits of legislative competence with respect to taxation also intrude. A law will not validly be one with respect to taxation if it involves "the imposition of liability in an arbitrary or capricious manner; that is to say, the law must not purport to deny to the taxpayer 'all right to resist assessment by proving in the courts that the criteria of liability were not satisfied in this case'": W R Carpenter Holdings Pty Limited v Federal Commissioner of Taxation (2008) 237 CLR 198 at [9] (W R Carpenter). The right of recourse to an exercise of Commonwealth judicial power, conferred by Pt IVC of the TAA on a person dissatisfied with a decision by the Commissioner in respect of an assessment, satisfies this constitutionally derived requirement. It was this right which Mr and Mrs Denlay had engaged and were actively prosecuting at the time when the decision to issue the 260-5 notices was made. 20 What then were the considerations which were "relevant" in the sense described in respect of the decision to issue the 260-5 notices? 21 Looking first to s 260-5 of Sch 1 of the TAA itself, the following are expressly made relevant considerations: (a) the existence of a "debt", as defined by s 260-5(1) of the TAA, payable to the Commonwealth by a debtor; (b) the existence of a third party who owes or may later owe money to that debtor; and (c) whether to require the third party to pay to the Commissioner the lesser of, or a specified amount not exceeding the lesser of: (i) the debt; or (ii) the available money. 22 Section 260-5 of Sch 1 of the TAA was inserted into the TAA by amendments made to that Act by the A New Tax System (Tax Administration) Act 1999 (Cth) (1999 Amendment Act). An analogue, s 218, was then present in the Income Tax Assessment Act 1936 (Cth) (1936 Act). It was then and had been since that section was originally enacted a feature of s 218 that, by definition, a judgment debt was expressly included in the term "tax": s 218(6). The 1999 Amendment Act limited the operation of that analogue by inserting a new s 218(8) in these terms, "The Commissioner must not issue a notice under this section (including the extended operation that this section has because of any other provision of this Act) on or after 1 July 2000". This amendment formed part of an overall legislative scheme to co-ordinate the introduction of generic collection and recovery provision in the TAA with the commencement of the goods and services tax regime. 23 It is, as did Emmett, Wilcox and Tamberlin JJ agreeing, in Deputy Federal Commissioner of Taxation v Conley (1998) 88 FCR 98 at 103-104, possible to trace the origins of s 260-5 of Sch 1 of the TAA back to yet earlier analogues in federal income tax legislation. The first was s 50A of the Income Tax Assessment Act 1915 (Cth) (1915 Act), introduced by the Income Tax Assessment Act 1918 (Cth). That was an era when as a nation and by our Parliament we were able, even under the revenue demands of a world war, to encapsulate everything then considered necessary not only for the assessment of liability to income tax but also for its collection and recovery into a statute of no more than 25 pages of provisions readily comprehensible by a literate layman. A century later, neither of these features remains in our current income tax law. 24 This is neither the occasion nor is it appropriate judicially to reflect upon what that may say about our nation or its Parliament in modern times. Further, it is to the text of the provision as it now stands and the present legislative context, subject matter, scope and purpose to which one must look for what is or is not a relevant consideration in relation to the making of a decision under s 260-5 of Sch 1 of the TAA. For present purposes, the value in the recollection of legislative history lies in the appreciation that, even before and ever since an analogue of s 260-5 of Sch 1 of the TAA formed part of our scheme for the collection and recovery of income tax, it has also been a feature of our income tax law that: [t]he fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal were pending See, materially, the present s 14ZZR, TAA (s 14ZZM is to like effect in respect of administrative review proceedings,), the exact counterpart of which was s 39(1) of the 1915 Act. 25 Such an appreciation serves to highlight what I regard as a number of other relevant considerations in relation to the making of a decision under s 260-5 of Sch 1 of the TAA. 26 Section 260-5 of Sch 1 of the TAA is not to be read or administered in isolation either from the overall scheme for the collection and recovery of tax or from the constitutionally necessary provision for recourse, if desired, to an exercise of the judicial power of the Commonwealth so as to challenge an administratively determined liability to tax which enlivens an ability to exercise the discretion conferred by s 260-5. In Deputy Federal Commissioner of Taxation v Jonrich Pty Ltd (1986) 86 FLR 25 at 29 (Jonrich) Connolly J observed of the then successor of s 39(1) of the 1915 Act, s 201 of the 1936 Act: The real effect of s 201 was to state a policy; and its practical consequence was to provide a powerful factor influencing the courts against staying proceedings pending appeal or reference. 27 Nothing which was said by the High Court in a subsequent, successful appeal in a case heard in the Queensland Full Court at the same time as Jonrich, Deputy Federal Commissioner of Taxation v Moorebank Pty Ltd (1988) 165 CLR 55, calls into question the correctness of this observation by Connolly J. Notwithstanding the translation of the counterparts of s 201 into the TAA, the observation remains true of s 14ZZR and s 14ZZM. 28 As did their predecessors, these sections give voice to a legislative policy in respect of the interface between the creation of a liability to tax upon assessment under statute by an officer of the Executive, the Commissioner and the constitutionally necessary ability for the recipient of an assessment to be able to challenge that asserted liability by an invocation of judicial power. The outstanding tax may, not must, be recovered even though there is a subsisting taxation appeal or administrative review proceeding. 29 Another judicial observation with respect to s 201 of the 1936 Act is also of enduring relevance, especially because it was not just quoted with approval in relation to s 14ZZM and s 14ZZR of the TAA but emphasised by Gummow A-CJ, Heydon, Crennan and Kiefel JJ in Deputy Federal Commissioner of Taxation v Broadbeach Properties Pty Ltd (2008) 237 CLR 473 at [45] (Broadbeach Properties). That is the observation made by Bowen CJ in Eq in Deputy Federal Commissioner of Taxation v Roma Industries Pty Ltd (1976) 6 ATR 54 at 57 (Roma Industries): It must be appreciated that from the point of view of the revenue it is a protection against that class of taxpayer who might withhold payment and use the money as the sinews of war to conduct appeals against the Commissioner and who, being finally unsuccessful, was found to be unable to meet his tax liability, having spent his money on the litigation. The emphatic approval in Broadbeach Properties of this observation followed an acknowledgement by Gummow A-CJ, Heydon, Crennan and Kiefel JJ, 237 CLR 473 at [43], by reference to a statement to this effect by Mason A-CJ in Clyne v Deputy Federal Commissioner of Taxation (1982) 56 ALJR 857 at 858-859, that the policy evident in what is now s 14ZZM and s 14ZZR may operate in a harsh manner. 30 One way in which, in the circumstances of a particular case, the harsh manner of operation of s 14ZZM and s 14ZZR of the TAA may be ameliorated, in the event that the Commissioner institutes a recovery proceeding in respect of an assessment debt while a challenge to that assessment is pending before this Court or the Administrative Appeals Tribunal is by the granting by the court in which that recovery proceeding is instituted of a stay of the enforcement of any judgment in respect of the assessment debt. 31 That there exists jurisdiction in such a court to grant such a stay, even against the background of a legislative regime for the collection and recovery of tax which includes the legislative statement now found in s 14ZZM and s 14ZZR of the TAA and at the time found in s 201 of the 1936 Act is settled by longstanding High Court authority: Australian Machinery & Investment Co Ltd v Deputy Federal Commissioner of Taxation (1945) 8 ATD 133 at 135 per Latham CJ, Rich, Dixon and Williams JJ (Australian Machinery & Investment Co). Also settled by that case is that, in the exercise of that jurisdiction, the existence of that legislative statement is a factor to which great weight ought to be given. 32 It was not considered necessary in Australian Machinery & Investment Co to explore why it was that the legislative statement now found in s 14ZZM and s 14ZZR of the TAA could not amount to any more than a relevant consideration to which great weight should be attached. It is not necessary to reach any concluded view on that subject in this case, because the Commissioner did not assert that the statement had any greater operation than this. I would though venture this observation. One reason why the legislative statement could not be construed as having any greater operation may be that so to do would impair the institutional integrity of a court exercising jurisdiction under Ch III of The Constitution and so offend against the constitutional principle stated in Kable v Director of Public Prosecutions (NSW) (1996) 189 CLR 51, as explained in Forge v Australian Securities and Investments Commission (2006) 228 CLR 45 at [63]. To construe the legislative statement as removing the power of a court to grant a stay of a judgment given by it may be to remove one of the defining characteristics of that court. Another reason may be that an inability to grant a stay in the face of the legislative statement would, in the circumstances of a particular case, permit indirectly what neither Parliament nor the Commissioner may do directly, that is arbitrarily to exact money from a person without an ability for that person to challenge the exaction by recourse to an exercise of judicial power. In short, the construction of the then s 201 of the 1936 Act adopted in Australian Machinery & Investment Co, repeatedly judicially applied ever since, may well have a "constructional underpinning": W R Carpenter at [10]. 33 In Deputy Federal Commissioner of Taxation v TDE Nominees Pty Ltd (No 2) [2011] NSWSC 1528, in respect of an application for a stay of taxation recovery proceedings, Gzell J regarded the following summary offered by French J (as his Honour then was) in Snow v Deputy Federal Commissioner of Taxation (1987) 14 FCR 119 at 139 (Snow) as authoritative as to considerations relevant to whether or not to grant a stay:
1. The policy of the ITAA [1936 Act] as reflected in its provisions gives priority to recovery of the revenue against the determination of the taxpayer's appeal against his assessment.
2. The power to grant a stay is therefore exercised sparingly and the onus is on the taxpayer to justify it.
3. The merits of the taxpayer's appeal constitute a factor to be taken into account in the exercise of the discretion (although some judges have expressed different views on this point).
4. Irrespective of the legal merits of the appeal a stay will not usually be granted where the taxpayer is party to a contrivance to avoid his liability to payment of the tax.
5. A stay may be granted in a case of abuse of office by the Commissioner or extreme personal hardship to the taxpayer called on to pay.
6. The mere imposition of the obligation to pay does not constitute hardship.
7. The existence of a request for reference of an objection for review or appeal is a factor relevant to the exercise of the discretion. 34 That these considerations are relevant in relation to deciding whether or not to stay a taxation recovery judgment secured by the Commissioner was recently confirmed by the Full Court in Southgate Investment Funds Limited v Deputy Federal Commissioner of Taxation [2013] FCAFC 10 (Southgate Investment Funds). That the merits of a taxpayer's appeal were indeed relevant was settled by Southgate Investment Funds. 35 These considerations are not explicitly stated in the present s 255-5 of Sch 1 of the TAA or its predecessors. Rather, they are derived from a consideration of the overall statutory scheme for the collection, recovery and disputing of a taxation liability. That scheme includes s 14ZZR and s 14ZZM of the TAA. It also includes s 260-5 of Sch 1 of the TAA. 36 Suing a taxpayer in a court of competent jurisdiction for the debt due to the Commonwealth created by an assessment (s 255-5 of Sch 1 of the TAA) is but one of a number of non-mutually exclusive options offered to the Commissioner after assessment in respect of the collection and recovery of tax. Another is to be found in the "running balance account" (RBA) regime found in Pt IIB of the TAA. The Commissioner is, by s 8AAZC of the TAA, entitled to establish an RBA in respect of any "entity". Taxation liabilities created by assessments may be allocated to an RBA and credits otherwise payable to a taxpayer may be applied in that RBA against that liability with the Commissioner only then liable to refund any surplus. The obtaining from third parties under s 260-5 of Sch 1 of the TAA is yet another recovery option offered to the Commissioner. 37 Section 260-5 of Sch 1 of the TAA confers a discretionary power on the Commissioner. The section also forms part of the overall statutory scheme, found materially not only in the TAA but also the 1936 Act and the Income Tax Assessment Act 1997 (Cth) (ITAA97) for the ascertainment, assessment, collection, recovery and disputing of a taxation liability. Because of that, the considerations set out in Snow are, in my view, likewise relevant to an exercise by the Commissioner of the discretion which by 260-5 of Sch 1 of the TAA Parliament has reposed in him with respect to the collection from third parties of amounts owed by them to a taxation debtor. 38 In the exercise of that discretion and where, as here, it is raised on the facts, whether and on what terms any judgment in respect of the outstanding tax has been stayed is also, in my view, a relevant consideration. That this consideration is relevant is necessarily implicit in the express recognition by Parliament in s 260-5 that the outstanding tax may be the subject of a judgment. 39 It is a feature of the Commissioner's statement of reasons (paragraph 12) that no reference at all is made by the decision-maker to the origins of the stay of execution of the judgments for the recovery of tax which the Commissioner obtained in the Supreme Court of Queensland. To read the statement of reasons one might be forgiven for thinking that this stay was purely consensual. This was not so. 40 By the time when the Commissioner came, on 30 September 2011, to decide to issue these 260-5 notices, there had developed a considerable history between him and Mr and Mrs Denlay, including a considerable litigious history both in this Court and in the Queensland Supreme Court. 41 It was submitted on behalf of the Commissioner that I should infer from the Commissioner's bare reference in the statement of reasons to the stay and to the fact that the tax appeals were part heard that the decision-maker was aware of the basis upon which the stay had been granted and extended and had also adverted to the merits of the taxation appeals. I am not prepared to do this. If anything, the absence of detailed reference and the nature of the decision which came to be made is eloquent that these features were not considered. 42 In its continued operation, the stay of the respective taxation recovery judgments was, as the Commissioner recorded, consensual, but in origin that stay of enforcement was not only secured after a close contest between Mr and Mrs Denlay and the Commissioner in the Trial Division of the Supreme Court of Queensland (Ann Lyons J) but also emphatically vindicated by a dismissal by the Queensland Court of Appeal of the Commissioner's subsequent appeal against the granting of that stay: Deputy Federal Commissioner of Taxation v Denlay (2010) 80 ATR 109 (Qld Court of Appeal) (Denlay QCA). The Denlays had consented to the entry of judgment against them but sought a stay pending the hearing and determination of their challenges in this Court to the assessments. 43 Judgment was entered for the Commissioner against Mr Denlay in the amount of $1,040,527.63 and against Mrs Denlay in the amount of $2,024,412.32. By the time when the s 260-5 notices were issued on 30 September 2011, their debts were, according to the recitation in those notices, $3,049,459.96 and $4,392,281.72 respectively. It is no part of the present proceedings to determine whether these specified liabilities were excessive or how the liabilities had incrementally increased in the time after entry of judgment. 44 On 14 December 2009, the Queensland Supreme Court (Ann Lyons J) made orders staying the enforcement of the judgments entered for the Commissioner against Mr and Mrs Denlay, initially until February 2010. 45 The reasons for judgment of Ann Lyons J for the granting of a stay are not reported but pertinent passages from her Honour's judgment were reproduced by Chesterman JA (with whom McMurdo P and Muir JA agreed) in his judgment in the Court of Appeal. It is instructive for present purposes to reproduce those same passages, as well as the grounds upon which the Commissioner appealed unsuccessfully against the granting of a stay. The Commissioner's appeal against the granting of the stay was lodged on 5 January 2010, heard in the Court of Appeal on 26 July 2010 and dismissed on 20 August 2010. In the meantime, Ann Lyons J had on 2 June 2010 extended the stay originally granted for a further period of 6 months. 46 The following are the excerpts from the judgment of Ann Lyons J, reproduced by Chesterman JA, Denlay QCA at [8], [11] and [12]. … The (respondents) have applied, pursuant to section 244(7) of the Supreme Court Act 1995 (Qld) or alternatively r 16 of the Uniform Civil Procedure Rules 1999 (Cth), for a stay of the proceedings until a conclusion of the Federal Court Appeals or further order. Alternatively, they seek a stay upon the enforcement of any judgment obtained in a proceeding pursuant to r 800 of the UCPR. Section 244 permits the Court to direct a stay of proceedings in any cause of matter if the Court sees fit and it is clear that is part of the Court's inherent jurisdiction. In fact, the (respondent) essentially seeks to rely on the application to stay the enforcement of any judgment … pursuant to r 800. The relevant principles were set out by Justice [PD] McMurdo in Deputy Commissioner of Taxation v Jennings [2005] QSC 312. It's clear that there is a broad discretion but the exercise of that discretion is informed by a substantial body of case law and particular considerations apply in relation to tax recovery proceedings because of the operations of the Taxation Administration Act, in particular ss 14ZZM and 14ZZR … . By section 14ZZM, the fact that a review of the assessment is pending does not affect the assessment and … tax may be recovered as if no review were pending but, as is common ground, the Court retains its power to stay a judgment in an appropriate case." … " … (the respondents) swear that in the event … any judgment is enforceable against them they do not have sufficient resources to satisfy it. I consider that bankruptcy is highly likely, although there is clearly a discretion as to whether bankruptcy will follow and that will depend on the merits in many cases of any appeal. It would seem to me that a bankruptcy in the present case is highly likely … there is no suggestion by the (appellant) that bankruptcy proceedings would not be pursued if the judgments were not stayed. Each (respondent) swears that the real property … they have is incapable of being put to market to realise its equity because of the conduct of the (appellant). Even if … sold in a timely way, the value of the … property is substantially less than the amount (of the judgment). The (respondents) set out in their affidavit material that if … bankrupted they would not be capable of prosecuting the appeal. … Clearly, therefore, that fact of bankruptcy has the potential to defeat a meritorious appeal in the present case. … The total of the … real estate they hold … is ($1,000,000.00). There is an ability to draw from superannuation an amount of $500 per week. Clearly … neither (respondent) has the capacity to meet a judgment for the claimed amounts … . Mr Denlay has the capacity to work overseas, however, bankruptcy would impede him in that regard. Mrs Denlay is … unable to earn an income." … "In the circumstances … I consider that … there will be extreme personal hardship given their personal circumstances and the fact that the pursuit of the proceedings in the Federal Court will not proceed if bankruptcy follows. Accordingly, there will be an order in terms of a stay." 47 The grounds upon which the Commissioner unsuccessfully sought to challenge the granting of the stay were these, Denlay QCA at [7]: (a) the learned Judge erred in granting a stay of enforcement of the judgment(s) … ; (b) in exercising her discretion to grant the stay, the learned judge erred by failing to give sufficient weight to the operation of the legislative scheme for the recovery of tax debts reflected in section 14ZZR of the Taxation Administration Act 1953 (Cth); (b)A the learned judge erred in finding that, in the event that a stay of judgment was not granted, bankruptcy of the respondent(s) was "highly likely"; (b)B the learned judge erred in finding that, in the event that a stay of judgment was not granted and bankruptcy followed, the pursuit of an appeal to the Federal Court of Australia by the respondent(s) … would not proceed; (c) in exercising her discretion to grant the said stay, the learned judge erred by taking into account an irrelevant consideration, namely that the Respondent(s) would … have insufficient funds to properly prosecute … the Federal Court appeal. (c)A in the premises of the matters asserted in grounds (b), (b)A, (b)B and (c) herein or any one or more thereof, in exercising her discretion to grant the said stay, the discretion exercised by the learned judge miscarried. 48 The stay of enforcement was upheld by the Court of Appeal on the basis that it involved no error of principle and was neither more nor less than a discretionary value judgment on particular facts. In so doing, Chesterman JA rejected a submission by the Commissioner that the likelihood of bankruptcy and with that the loss of their estates and the likely inability to prosecute their challenges to the assessments, so evidently a persuasive concern on the part of the primary judge, was not sufficient to justify a stay. His Honour stated, Denlay QCA at [47] - [50]: [47] … The submission was that the outcome of any bankruptcy proceedings would be determined by a federal court which might not order sequestration because of the pendency of the appeals. … [48] I would reject the submission. It seeks to deprive the Supreme Court altogether of its power to stay execution in appropriate cases. The effect of the submission is that only a federal judicial officer can stand between a judgment debtor indebted to a Deputy Commissioner, and bankruptcy. But the Supreme Court's power to stay such judgments is undoubted. While the power should be exercised "sparingly" or "with great caution" it is a power that can be exercised in appropriate circumstances. It is not to be surrendered. [49] It should not be overlooked that bankruptcy is not the only avenue open to the appellant to obtain satisfaction of the judgments. Absent the stays the appellant can enforce the judgments by any of the means of execution provided for by the UCPR. He has already exercised powers given to him by the ITA Act and the TAA to recover money from the respondents. He has issued garnishee orders. There is no reason to suppose that the appellant is not aware of his rights, or is not prepared to exercise them. Although the primary judge's reasons referred only to the likelihood of bankruptcy, it is, I consider, equally likely that the appellant might move to satisfy the judgments by execution, in the absence of the stays. [50] This leads to the appellant's third point, that the loss of their property and consequent inability to prosecute their appeals does not constitute extreme personal hardship. The point may be answered shortly. It is preposterous to contend that the loss of the respondents' entire estate, and with it any chance of demonstrating that the basis for the assessments was wrong so that they should not have lost their property, could not be a hardship rightly called extreme. It is not easy to imagine a greater hardship in this context. Certainly the primary judge cannot be criticised for so regarding it. [sic] 49 In short, against the background of the evidence presented in the Trial Division of the Queensland Supreme Court, a judge exercising federal jurisdiction had made a considered value judgment, applying proper principles, that a stay was warranted in the circumstances as not so to do would in all likelihood lead to the bankruptcy of the Denlays and a related consequential inability on their part to prosecute their challenges to the assessments which grounded their taxation liability. 50 That background notably included details of the Denlays' real property holdings, of their available superannuation funds and of their intention to use these assets to prosecute their challenges to the assessments concerned. 51 It is also apparent that the Supreme Court was aware of the Commissioner's earlier use of s 260-5 notices, inferentially the same notices referred to by the decision-maker at paragraph 7(a) of the statement of reasons (those directed to Westpac Banking Corporation in respect of the account into which "Visual Energy" remittances were then being transferred electronically). These payments had ceased in late 2008. Reference was made in the Commissioner's affidavit material in the judicial review applications to the absence of a reply to an inquiry by the Commissioner of the Denlays' solicitors of 23 December 2010 concerning Visual Energy. The decision-maker made nothing of this absence of reply in his statement of reasons. All the decision-maker referred to in this regard was a fact known to the Commissioner which antedated both the Supreme Court stay judgment and the Commissioner's own decision in April 2011 to consent to the continuation of the stay. 52 Prior to its expiry, the Denlays sought from the Queensland Supreme Court a further extension of the stay originally granted by Lyons J as further extended by her Honour. In support of that application, an affidavit of their solicitor, Mr Tiplady, was served on the Commissioner in November 2010. In that he deposed on information from the Denlays his belief, inter alios that: (a) … (b) [They had been] accessing the equity in the [Glengarrie NSW property] together with superannuation monies (which monies total approximately $400,000.00) are the source of funding for the Denlays day to day living expenses and legal expenses in a situation where both Mr and Mrs Denlay have been unable to earn an income for the past two years owing to medical conditions and an inability to travel overseas as a result of Departure Prohibition Orders against them by the commissioner of Taxation (given that Mr Denlay's income is derived overseas). (c) … (d) [They] are concerned that, if the judgments are enforced they will be made bankrupt and hence the tax appeals and section 39B proceedings will not be advanced (which is their current intention and instructions to me). 53 The Glengarrie NSW property referred to by Mr Tiplady in this affidavit is the same as that mentioned in paragraph 7(b) of the statement of reasons in respect of the issuing of the s 260-5 notices. Eventually, after negotiations, the stay applications were disposed of by the Queensland Supreme Court by orders made by Philippides J on 29 April 2011 by consent. Those orders provided, materially: Upon the undertaking by [the Denlays], by their solicitor not to further encumber [the Glengarrie NSW property] by further borrowings secured over that property: save to the extent that the [Commissioner] consents in writing to … further encumbering, or alternatively; save to the extent that [the Denlays] are released from, or the said undertaking is varied by order of this court, the right to make such application being expressly reserved. THE ORDER OF THE COURT IS THAT: … (2) The stay of enforcement of the judgment ordered in favour of [the Denlays] … pursuant to the orders made by Justice A Lyons on 14 December 2009 be further extended for a period until 5pm on the date which is 28 days after the determination by the making of final orders in the Tax Appeal in proceeding QUD 151 of 2009 in the Federal Court of Australia, or for a period until 5pm on the date which is 28 days after the Determination of the Appeal in the Judiciary Act proceedings QUD347 of 2010, whichever is the latter or for such further period as may be the subject of any further order of this Court. (3) each party shall have Liberty to Apply in respect of any release, modification or variation sought to be made to the undertaking given by [the Denlays] and referred to in this Order, and the giving of that undertaking is without prejudice to the right of the [Denlays] to so apply. 54 The evidence before me included reference to changes in the persons holding mortgage security over the Glengarrie NSW property prior to April 2011. Inferentially, having regard to paragraph 9 of the statement of reasons, this information was before the decision-maker but he made nothing of these changes per se, only the reduction in the equity in that property over time. 55 When the stay order was originally made, it was in the contemplation of the Supreme Court that equity in the Glengarrie NSW property and superannuation funds would be used to fund challenges to the assessments. That this had occurred was confirmed to the Commissioner by their solicitor in November 2010. 56 An undertaking not further to encumber the Glengarrie NSW property formed part of the foundation for the consensual extension of the stay. The diminution of equity in the Glengarrie NSW property, referred to by the decision-maker, was, at the time when decision to issue the s 260-5 notices was made, stale information. The Commissioner had no information before him which suggested that there had been any breach of the undertakings given to the Queensland Supreme Court not further to encumber the Glengarrie NSW property either without his consent or the leave of the Supreme Court. Such information would certainly not have been stale information. 57 Necessarily, the orders made in April 2011 contemplated, consensually, that the Denlays might continue permissibly to use their superannuation funds for the purposes which included the further prosecution of their challenges to the assessments. The Commissioner's affidavit material before me included reference to an Australian Government Solicitor's letter of 14 April 2011 inquiring of the Denlays' solicitors the fate of the winding up of a superannuation fund of the Denlays (Desup Superannuation Fund) in December 2009 and to the fact that no reply was made to this inquiry. The decision-maker made nothing of this absence of reply in his statement of reasons. Nor, evidently, did the Commissioner or his legal advisers make anything of this in consenting only a fortnight later, on 29 April 2011, to the continuation of the stay. It was the diminution in the superannuation fund balance itself with which the decision-maker was concerned. Inferentially, having regard to paragraphs 10 and 11 of the statement of reasons, the decision-maker was aware that all that had occurred in December 2009 was the rolling over of the whole of the then existing balances from one superannuation fund into one managed by BT Funds Management Ltd. 58 I note, in passing only, because it was not submitted to be a relevant consideration or a feature of why the decision was said to be unreasonable, that the decision-maker has not at all considered whether any of the funds garnered by the s 260-5 notices from BT Funds Management Ltd would, having regard to s 116(2)(d)(iii) of the Bankruptcy Act 1966 (Cth), have formed part of the property of the bankrupt estates of Mr and Mrs Denlay in the event that the Commissioner were successful in any future sequestration application. 59 In short, the apparently alarmist position of real property asset encumbrance and related equity diminution and superannuation fund diminution is, on closer analysis, exactly what was in the contemplation of the Supreme Court when the stay order was first made. As noted, this had been confirmed to be occurring by the Denlays' solicitors well prior to the consensual extension of that stay order. None of these features of the stay order has been assimilated by the decision-maker. 60 The decision-maker also found that the Denlays continued to have access to funds maintained overseas. The finding that they had such access was based on no new information, only that which was in the Commissioner's possession and ventilated prior to the original ordering of the stay by the Queensland Supreme Court. The decision-maker did not in the statement of reasons suggest otherwise. He did not, for example, make any estimate as to what their legal costs to date might have been and infer that their available funds in Australia by way of encumbering the Glengarrie NSW property or superannuation fund draw downs must have been insufficient to meet these costs. 61 The Denlays' challenge to the assessments in question was bifurcated. They challenged the lawfulness of those assessments on judicial review under s 39B of the Judiciary Act as well as contended in separate, taxation appeal proceedings under Pt IVC of the TAA that they were excessive. The taxation appeals were commenced on 23 June 2009. The judicial review applications were commenced later, on 23 August 2010 but it is fair to say that the controversy as to whether it was permissible for the Commissioner to rely upon what are termed the "LGT documents" for the purpose of assessing the Denlays had long been at large. 62 For reasons which commended themselves to all parties and to me at the time, the judicial review proceedings were heard separately from the taxation appeals. They were heard before me on 14 to 16 September 2010 and dismissed on 17 December 2010: Denlay v Federal Commissioner of Taxation (2010) 276 ALR 675 (Denlay JR). A subsequent appeal by the Denlays against this dismissal of the judicial review challenge to the Full Court was heard on 31 March 2011 and dismissed on 11 May 2011: Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412. 63 I commenced hearing the taxation appeals on 6 June 2011. The hearing continued on 7, 8, 9, 10, 14, 15, 16 and 17 June 2011. At that stage it proved necessary to adjourn the appeals part-heard not just because the time estimated and originally allowed for the completion of their hearing had proved insufficient, but also because of an unfortunate medical condition from which Mrs Denlay was suffering. By then, Mr Denlay had just commenced his cross-examination with Mrs Denlay also awaiting cross examination. By consent, the Commissioner had led evidence from his informant in respect of the LGT documents, in advance. Each party had filed extensive evidence in chief by affidavit. 64 The appeals were brought back for mention on 14 October 2011 so as to review the then state of the evidence concerning Mrs Denlay's medical condition and her prognosis after treatment. In December 2011, following the payments by BT Funds Management Ltd to the Commissioner pursuant to the s 260-5 notices, the Denlays became bankrupt on their own petitions. The trustees of their bankrupt estates are Messrs Jason Bettles and Raj Khatri of the firm Worrells Chartered Accountants. Their bankruptcy trustees elected not to pursue the taxation appeals and, though given an opportunity to be heard, Mr and Mrs Denlay did not oppose an order that the appeals be dismissed: Denlay v Federal Commissioner of Taxation (No 3) [2012] FCA 317. 65 The appeals having in these circumstances been dismissed, it would not be appropriate to express any concluded view as to what would have been their fate had their hearing been completed. 66 It was, nonetheless, relevant for the decision-maker to take into account the merits of those appeals, especially given the advanced state of their then progress in the judicial system. This he did not do. 67 The Commissioner himself had provided a convenient summary of the factual background to the assessments under challenge in a covering letter to the Denlays, excerpts from which (as applicable to Mr Denlay) I set out in Denlay JR at [44]: MATERIAL FACTS AND EVIDENCE

Attorney-General (NSW) v Quin (1990) 170 CLR 1 at 35-36 per Brennan J 74 It was not submitted that consideration of the merits was of no moment for example because, even if taken into account, it must necessarily have led to a conclusion that the Denlays ultimate tax liability would in any event exceed the amounts held by BT Funds Management. Because of this, I have not explored that subject. 75 In the present case, what is equally, if not more significant, than the merits per se of the taxation appeals is whether the Commissioner was obliged to take into account the effect which the issuing of the s 260-5 notices might have on the Denlays' ability further to prosecute them. There is nothing on the face of the reasons which suggests that the Commissioner took into account what might be this effect. 76 It is settled that a decision-maker's reasons must not be read narrowly and with an eye for error: Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 271-272. Even so, I am not prepared, in respect of a statement of reasons which makes no reference to a Supreme Court judgment which expressly took into account the prospect that not to grant a stay might render nugatory the then extant taxation appeals, to infer that the decision-maker took this same prospect into account. Instead, what I infer from the absence of reference is that the Commissioner did not take the potential impact on the taxation appeals into account. 77 I reach that conclusion without regard to the fact that the Denlays did later become bankrupt and that this did result in the dismissal of the taxation appeals without completion of the hearing. What the Commissioner did or did not take into account must be judged by the circumstances prevailing at the time when the decisions under review were made and by reference to the reasons which the decision-maker gave, not by the wisdom of hindsight. 78 That conclusion does not carry with it the further conclusion that the Commissioner deliberately set out to hamstring the Denlays' ability to complete the prosecution of their taxation appeals. Such a finding ought not to lightly be made, even in a civil proceeding. Such a decision would not just be invalid but might also evidence a grave contempt of court. In this instance, the decisions are grounded in ignorance, not malice. That the Commissioner chose, voluntarily, to disclose his reasons for making the decisions reinforces why the further conclusion is not open. 79 On analysis, the prospect that the appeals might be rendered nugatory if the s 260-5 notices were issued is another way of stating the personal hardship consideration which Snow states is relevant and to which the Queensland Supreme Court expressly adverted. It is a consideration to be weighed in the balance as against the apprehended merits of an appeal. To put matters this way is also to reconcile what might be thought to be a tension between the "sinews of war" reference by Bowen CJ in Eq in Roma Industries in the passage quoted above with the express recognition in Australian Machinery & Investment Co of the jurisdiction to grant a stay of a tax recovery judgment. Sir Nigel Bowen was not in Roma Industries laying down as a rule of universal application that it was of no moment that a tax recovery process might deprive a taxpayer of the means of contesting the very assessment which grounded the taxation liability, only that there was a class of taxpayer who might, irrespective of merits, prefer to dissipate in litigation his assets rather than have them collected by the Commissioner. Where an assessment is under active challenge, the making of a s 260-5 notice decision may, and in the present case did, call for a critical value judgment to be made taking into account all of the considerations referred to in Snow. Here again, the importance of taking into account the provenance of the stay is underscored, because it necessarily follows from the outcome of the contest in original and appellate jurisdictions in respect of the stay that the Queensland Supreme Court was not persuaded that Mr and Mrs Denlay fell into the class of taxpayer described in Roma Industries. 80 The "risk to the revenue" referred to by the decision-maker is undoubtedly a relevant consideration in the making of a s 260-5 notice decision, just as it is in deciding whether or not to grant a stay of a judgment. Reference to that consideration is not a panacea for a failure to consider others. Further, "risk to the revenue" is not to be considered in the abstract. In the circumstances of the present case, it was impossible reasonably to consider that risk without adverting to the present position and merits of the taxation appeals and without appreciating that risk had already been taken into account and a considered value judgment in respect of that and other factors had been made by the Queensland Supreme Court. 81 The result is that the decision to issue the s 260-5 notices must be quashed. 82 The ADJR Act confers power to quash a decision either from the date of the Court's order or from an earlier date: s 16(1)(a). Given the Denlays' supervening bankruptcy and the source of the funds garnered under the notices, to quash the decision otherwise than from the date on which the decision was made may be to do less than justice to Mr and Mrs Denlay. Equally, that is not an ancillary order which should be made without affording their bankruptcy trustees an opportunity to be heard on that subject. The monies garnered must be refunded but, again in light of the supervening bankruptcies, a question arises as to whom? I propose therefore to direct the District Registrar to give notice of the quashing order and to send a copy of these reasons for judgment to those officials. It will also be necessary to hear the parties with respect to costs, including whether, in light of these reasons, any special order as to costs is sought. 83 There will be orders accordingly. I certify that the preceding eighty-three (83) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.

Denlay v Commissioner of Taxation

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