Deputy Commissioner of Taxation v Richard Walter Pty Ltd - [1995] HCA 23 - HCA 1995 case summary — Zoe

CTHHCA

Deputy Commissioner of Taxation v Richard Walter Pty Ltd

[1995] HCA 23

High Court of Australia|1995-02-23|Before: Mason CJ, McHugh JJ, Toohey J

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At a glance

Source facts

Court

High Court of Australia

Decision date

1995-02-23

Before

Mason CJ, McHugh JJ, Toohey J

Source

Original judgment source is linked above.

Judgment (250 paragraphs)

[1]

For the reasons stated earlier, the making of a determination by the Commissioner under s 177F of the Act is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , F J Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive.

[2]

Underlying the arguments in the present case is the question whether s 177(1) attempts to oust or cut back the jurisdiction of the courts or whether it merely gives conclusive evidentiary effect to a notice of assessment as to the steps which constitute "due making" and, except in Pt IVC proceedings, as to the amount of tax and the particulars in the notice. For reasons stated in the earlier discussion of s 75(v) of the Constitution, s 177(1) could not affect the constitutional jurisdiction of this Court. And, in none of the judgments in the cases in this Court has it ever been suggested that the sub-section might be seen as an attempt to qualify the jurisdiction of this Court. Nor, for that matter, has it been suggested in those cases that the sub-section might be seen as an attempt to qualify the jurisdiction of the Supreme Court of a State or the Federal Court. The terms of the first limb of the sub-section are not directed to curial jurisdiction or to a party's right to resort to the courts. Instead, the sub-section gives conclusive evidentiary effect to a notice of assessment when produced in much the same way that parties by contract give conclusive effect to a certificate stating the amount of one party's indebtedness to another [24] .

[35]

The amount of taxable income is ascertained by reference to the general provisions of the Act although the quantum of taxable income may be increased by determinations under Pt IVA of the Act. The tax payable in this case was ascertained by reference to Richard Walter's taxable income and the provisions of the relevant Taxing Act. Although the Act and the relevant Taxing Act imposed income tax on taxpayers who had a taxable income in a relevant period, those Acts did not themselves create a debt for tax recoverable by action. They were applied to the particular case by assessment made by the Commissioner. Kitto J described the nature and incidents of an assessment in Batagol v Federal Commissioner of Taxation [39] : The word "assessment" is defined in s 6 to mean, unless the contrary intention appears, the ascertainment of the amount of taxable income and of the tax payable thereon It is here used in an Act under which the service of a notice of assessment is the levying of the tax. Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice or (if no date is specified) on the thirtieth day after the service of the notice: s 204. Thus, and thus only, there is brought about an "ascertainment" of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: see s 177) to be the result flowing from the application of the Act in the particular case. The respective amounts of the taxable income and the tax have been rendered certain. The word "ascertainment" being understood in this sense, the definition of "assessment" means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case. (Emphasis added.) Citing this passage in Federal Commissioner of Taxation v Prestige Motors Pty Ltd [40] , the Court said: Service of the notice on the taxpayer brings the process of assessment to an end in the sense that, in conformity with s 174(1), the notice, which necessarily reflects the requisite elements of the calculation that has been made, is served after the making of that assessment. 1. See Acts No 126 of 1980; No 156 of 1981; No 102 of 1982 and No 106 of 1983. However, income tax on companies has been levied and imposed by the Income Tax Rates Act 1986 Cth in respect of tax years commencing on or after 1 July 1986 and calculated at the rates prescribed by the Income Tax Rates Act 1986 Cth as amended from time to time. 2. Re Dymond (1959) 101 CLR 11 at 18and see Northern Suburbs General Cemetery Reserve Trust v The Commonwealth (1993) 176 CLR 555 at 563, 585. 3. Prior to 14 December 1984 this definition read: " "assessment" means the ascertainment of the amount of taxable income and of the tax payable thereon." 4. (1963) 109 CLR 243 at 251-252. 5. (1994) 181 CLR 1 at 13.

[42]

The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with. On its face, s 175 appears to preserve the validity of an assessment although it has been made in disregard of the general provisions of the Act which prescribe the rules governing the assessment of taxable income and tax liability and which are prima facie binding on the Commissioner in the making of an assessment. The apparent conflict between the rules prescribed by the general provisions of the Act and s 175 raises a question similar to that addressed by Dixon J in R v Hickman; Ex parte Fox and Clinton [46] . The " Hickman principle", as it has been called, reconciles "the prima facie inconsistency between one statutory provision which seems to limit the powers of the [repository of the power] and another provision, the privative clause, which seems to contemplate that the [repository's] order shall operate free from any restriction" [47] . The reconciliation is effected by "reading the two provisions together and giving effect to each" [48] . The privative clause is given effect despite non-compliance with the provisions governing the exercise of the power, but only if the purported exercise is a bona fide attempt to exercise the power, it relates to the subject matter of the legislation and it is reasonably capable of reference to the power given to the body purporting to exercise it [49] . The validating provision cannot be so construed if the impugned act by the repository of the power is not referable to the power given to the repository [50] or exceeds the power which can constitutionally be given to the repository [51] . The Hickman principle has been invoked where a privative clause in a statute is expressed to exclude the jurisdiction of a court judicially to review a purported exercise of a power which, by virtue of other provisions of the statute, can be validly exercised only if the repository complies with prescribed conditions [52] . The privative clause treats an impugned act as if it were valid. In so far as the privative clause withdraws jurisdiction to challenge a purported exercise of power by the repository, the validity of acts done by the repository is expanded [53] . 1. (1945) 70 CLR 598. 2. R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418and see O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 304 3. R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418 4. Hickman (1945) 70 CLR 598 at 615 R v Commonwealth Conciliation and Arbitration Commission; Ex parte Amalgamated Engineering Union (Australian Section) (1967) 118 CLR 219 at 252-253 R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418and see O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 249-250, 275. 5. McDonald v Commissioner of Business Franchises (1992) 175 CLR 472 at 477-478 6. O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 250 Re Australian Railways Union; Ex parte Public Transport Corporation (1993) 67 ALJR 904 at 910117 ALR 17 at 25. 7. See the cases cited in R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 422and see O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 248-249, 251, 274, 286, 304. 8. O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 275

[103]

Such a clause is interpreted as meaning that no decision which is in fact given by the body concerned shall be invalidated on the ground that it has not conformed to the requirements governing its proceedings or the exercise of its authority or has not confined its acts within the limits laid down by the instrument giving it authority, provided always that its decision is a bona fide attempt to exercise its power, that it relates to the subject matter of the legislation, and that it is reasonably capable of reference to the power given to the body. That approach should, in our view, be applied to the construction of s 175 of the Act. The result of its application is that s 175's protection from invalidity is applicable only if the purported "assessment" (i) is "a bona fide attempt" by the Commissioner or other authorised officer to exercise powers conferred by the Act [102] , (ii) "relates to the subject matter" of the Act and (iii) "is reasonably capable of reference to" those powers. If a purported "assessment" does not satisfy those three requirements, the protection of s 175 will be unavailable and the purported "assessment" will be invalid. That being so, s 177(1) of the Act is inconsistent with s 75(v) of the Constitution to the extent that it purports to make a certificate of the Commissioner or a Second or Deputy Commissioner conclusive evidence of the due making of an assessment in proceedings in the original jurisdiction of this Court under s 75(v) in which it is alleged that the assessment does not satisfy one or more of those requirements. In what follows, references to an assessment (or a determination) not being "bona fide" should be understood as encompassing not only failure to satisfy the first requirement but also a failure to satisfy either the second or third. 1. See Coal Miners' Industrial Union of Workers of Western Australia v Amalgamated Collieries of Western Australia Ltd (1960) 104 CLR 437 at 455, per Menzies J. 2. (1945) 70 CLR 598 at 615. 3. See, eg, R v Central Sugar Cane Prices Board; Ex parte Maryborough Sugar Factory Ltd (1959) 101 CLR 246 at 255 R v Commonwealth Conciliation and Arbitration Commission; Ex parte Amalgamated Engineering Union (Australian Section) (1967) 118 CLR 219 at 252-253 R v Coldham; Ex parte Australian Workers' Union (1983) 153 CLR 415 at 418 O'Toole v Charles David Pty Ltd (1991) 171 CLR 232 at 286 4. As the Chief Justice points out in his judgment in this case, a majority of the Court in O'Toole v Charles David Pty Ltd did not accept the view that the requirement of "bona fide attempt" related only to what was apparent on the face of the record and did not extend to an examination of subjective motivation.