Deputy Commissioner of Taxation v Warrick

Judgment (8 paragraphs)

[1]

REASONS FOR JUDGMENT Introduction 1 A Deputy Commissioner of Taxation instituted proceedings against a taxpayer for recovery of unpaid income tax and penalties on 18 September 2003 in the Supreme Court of Western Australia. The proceedings have been transferred to the Federal Court. The Deputy Commissioner has applied for summary judgment. The taxpayer seeks to defend that application by arguing that the assessments relied upon by the Deputy Commissioner are invalid and should be set aside. Formal defects, breach of the rules of natural justice, want of bona fides and improper purposes are alleged against the Deputy Commissioner by the taxpayer. 2 For the reasons which follow, the matters raised by the taxpayer do not provide an arguable defence to the recovery action and the Deputy Commissioner is entitled to summary judgment. However because the Australian Taxation Office ('ATO') has delayed in resolving the taxpayer's objections to the assessments without any satisfactory explanation, execution of the judgment will be stayed until 28 January 2005. The taxpayer may still pursue his contentions about the correctness of the assessments through the appeal processes provided for in Pt IVC of the Taxation Administration Act 1953 (Cth ) ('TAA'). Procedural History 3 On 11 December 2002, the Commissioner of Taxation issued five notices of amended assessments of income tax to Wayne Patrick Warrick. The notices related to the income years ended 30 June 1998 through to 30 June 2002 inclusive. The amounts of the assessments included amounts for understatement penalty and interest. 4 On 19 December 2002, Mr Warrick's solicitors wrote to the ATO seeking information about the factual and legal bases for the amended assessments and, without admitting liability, requesting an extension of time for the payment of the tax assessed. 5 On 20 December 2002, two notices of assessment of penalty for having a tax shortfall issued to Mr Warrick in respect of the years ended 30 June 2001 and 30 June 2002. 6 Objections to all the assessments were lodged. The objection to the assessment for the year ended 30 June 1998 was lodged on 21 February 2003. The objections to the other assessments were lodged on 8 July 2003. On 4 August 2003, the ATO wrote to Mr Warrick's solicitors refusing the request for a deferment of legal action and requiring payment of $1,409,634.57 within seven days of the date of the letter. The objections have not yet been determined. 7 On 18 September 2003, the Deputy Commissioner of Taxation issued a writ of summons out of the Supreme Court of Western Australia claiming a total amount of $1,429,791.03 against Mr Warrick together with further general interest charges pursuant to s 204 of the Income Tax Assessment Act 1936 (Cth) ('ITAA 1936') and s 298-25 of the TAA. On 19 November 2003, Mr Warrick filed a defence and counterclaim in the Supreme Court. 8 In respect of each year of income Mr Warrick admitted that he had not paid the tax assessed but denied that the Deputy Commissioner had 'properly or validly made an assessment of income tax according to law'. He alleged that by reason of those matters he was not obliged as a matter of law to pay the tax or any part of it. He alleged that each of the disputed assessments had been issued to him on the basis of taxable income purportedly received when in fact no such taxable income was ever derived for the purposes of the ITAA 1936 in respect of any of the relevant years. He also alleged that none of the disputed assessments reflected any rational assessment of his income tax liability. By virtue of those matters and others he asserted that each of the disputed assessments was respectively void, invalid and not 'an assessment' as contemplated by the ITAA 1936. 9 Mr Warrick further pleaded that none of the disputed assessments was issued 'in any bona fide exercise or purported exercise of powers under the Act'. This allegation was particularised. The particulars will be referred to later. He further alleged that none of the assessments was issued 'for any proper purpose under the Act' and that they were all issued 'for an ulterior purpose'. Again, particulars of the ulterior purpose were provided. 10 Mr Warrick went on to refer to the lodgment of notices of objection against each of the disputed assessments and the failure or refusal of the Commissioner to make a determination in relation to any of the objections. In respect of the two assessments of administrative penalties the defence raised similar grounds for their invalidity. 11 Mr Warrick also asserted in his defence that the institution and continuation of the recovery action was an abuse of process in circumstances where each of the disputed assessments is null and void, and that the writ was issued at a time when the objections to the assessments were undecided. 12 The pleas going to the validity of assessments and the abuse of process were repeated by reference in the counterclaim. The relief claimed in the counterclaim was a declaration that the assessments are each null and void, a stay of the proceedings until determination of the objections and alternatively, in the event the objections are not upheld, a stay until determination of appeals to be lodged in the Administrative Appeals Tribunal. 13 On 24 December 2003, the Deputy Commissioner of Taxation filed an application in the Supreme Court seeking summary judgment pursuant to O 14 r 1 of the Supreme Court Rules. On 12 February 2004, consent orders were made transferring the proceedings to this Court. On 23 April 2004, a declaration was made that the proceedings had been validly cross-vested pursuant to the consent order - Deputy Commissioner of Taxation v Warrick [2004] FCA 488. Directions were made for the hearing of the summary judgment application. The application was set down for hearing on 4 June 2004. On 3 June 2004, Mr Warrick filed a motion seeking a stay of proceedings pursuant to O 20 r 2(1)(c) until the determination of his objections and penalty objections to the amended assessments. The Commissioner's Evidence 14 The Deputy Commissioner's application was supported by the affidavit of Victor John Eikelboom, sworn 24 December 2003, which exhibited copies of the notices of assessment as to income tax and the assessment of administrative penalties, certified by Deputy Commissioner Holland as true copies. Also exhibited to the affidavit was an evidentiary certificate under s 255-45 of Schedule 1 of the TAA. Bearing a facsimile signature of Deputy Commissioner Holland it certified that notice of the assessments for the years ended 30 June 1998 to 30 June 2002 'were, or are taken to have been served on Wayne Patrick Warrick under a taxation law...'. Notices of amounts of administrative penalties imposed pursuant to s 284-75(1) of the TAA for the years ended 30 June 2001 and 30 June 2002 were also covered by the certificate. The certificate went on to state that the sum of $1,475,386.99 was, at 24 December 2003, a debt due and payable by Mr Warrick to the Commonwealth. Mr Warrick's Evidence 15 Mr Warrick's affidavits of 28 May 2004 and 4 June 2004 set out a history of dealings and transactions to which the contested assessments relate and of his dealings with the ATO. The history is somewhat convoluted. As set out here it does not embody findings of fact but rather an account of the background which Mr Warrick claims is relevant to the determination of his liability and to the question whether he should be given leave to defend the action. 16 Mr Warrick is an accountant. In August 1992, he became bankrupt on a creditor's petition. He attributed the bankruptcy to claims against him which he could not meet and which arose out of a misappropriation of funds, by one of his former accounting partners, from the firm's trust account. He was discharged from bankruptcy in November 1995. He continued to work as a contract accountant after his discharge. In July 1996, he became the in-house accountant for a construction firm run by George Ongarezos, retaining a right of private practice. He had previously endeavoured to raise funds to acquire an accounting practice but was unable to do so because of his recent bankruptcy. Mr Ongarezos suggested to him that they should form a company to undertake construction work and also to acquire accounting practices which Mr Warrick could run. He considered that Mr Ongarezos had the financial resources to acquire accounting practices. They decided to set up a company called Queststyle Pty Ltd to undertake the enterprise. Queststyle was formed in late 1996. It acquired two accounting practices, one in Geraldton and one in Leederville. 17 By May 1997, Mr Warrick decided that the arrangement with Queststyle and Mr Ongarezos had become unbearable for a number of reasons. He was concerned that Queststyle would become insolvent. He spoke to a solicitor, Warwick Mowbray, whom he had known for about 15 years. He told him about his problems with Queststyle. Mr Mowbray told Mr Warrick that he had a colleague who was an accountant in Hong Kong with clients looking to invest or to get their funds out of Hong Kong because of the then impending changeover of control from the United Kingdom to the Peoples Republic of China. The accountant's name was Mr Alan Chueng. Mr Mowbray arranged an introduction with Mr Chueng. 18 In June 1997, Mr Warrick telephoned Mr Chueng and between June 1997 and March 1998 had a number of negotiations and discussions with him and another accountant in Hong Kong, Mrs Lillian Fung. As a result of his negotiations Mr Warrick received a letter of approval for a loan of $600,000. The letter signed by Mr Chueng, and dated 3 March 1998, was under the letterhead of 'Fortune House Management'. It said: 'Further to our recent discussions, we are pleased to confirm that we have successfully negotiated a personal loan facility to you for the amount of A$600,000. Given Proof Enterprises Limited, the financier, will issue a formal offer letter for your acceptance prior to your drawdown of the loan.' Two documents, described respectively as a Personal Guarantee and a Corporate Guarantee were executed on 18 March 1998. The first was executed by Mr Warrick and the second by his company, Swanway Enterprises Pty Ltd ('Swanway'). In each case the deed was executed by Given Proof Enterprises Limited ('Given Proof') as lender. Mr Warrick is the sole director of Swanway and has been since March 1996. 19 The first drawdown from the $600,000 loan was made on 18 March 1998 in the amount of $65,000 paid into Swanway's bank account. This money was applied to part payment of the purchase of an accounting practice in Geraldton by Kingprince Holdings Pty Ltd ('Kingprince'), a company of which Mr Warrick was a director, through which he operated his practice, and which traded as WP Warrick & Co. Subsequent drawdowns were made as follows:

According to Mr Warrick the various drawdowns described above were the only moneys advanced under the facility with Given Proof. 24 Mr Warrick described the accounting arrangements for the loan moneys. He said that as between Swanway, Kingprince and himself the loan from Given Proof which he had procured in his own name was treated as a loan made in the first instance to Swanway with Swanway then advancing the moneys to Kingprince or to Mr Warrick himself (in the case of the purchase of the Ascot Waters' land) or to his wife (in the case of her investment in something called the Grampian Olives' project). Mr Warrick did not have his own bank account at any time. He conducted his affairs by making payments using a credit card, with the credit card account paid out by Kingprince or by causing Kingprince to write out cheques reflected in the accounts of Kingprince, including his loan account with it. He recorded moneys lent by Given Proof as a loan to Swanway. It received the moneys. He did not receive any immediate benefit but at all times remained liable to the lender in terms of the original agreement. 25 On 2 November 2002, Mr Warrick repaid the sum of $290,000 to Given Proof. This came from the sale of his house at Noranda. In May 2003, he sold the Kingprince accounting practice in Geraldton to Westwood Accountants for $502,000. He repaid $300,000 to Challenge Bank and paid the balance to Given Proof. In June 2003, Kingprince sold the accounting practice in Carnamah. The sale of the Carnamah practice included the land and buildings on which it was conducted. He could no longer find the documents for this sale but said he believed they were in the Commissioner's possession as a result of the investigations which the Commissioner had carried out. The consideration for the sale of the Geraldton and Carnamah practices was in each case to be provided by way of payments over time which were fulfilled. All payments after settlement were paid to Given Proof. Subsequently Swanway disposed of its interest in the Mindarie Liquor Merchants' partnership and the Circuit Nightclub and from those sales proceeds of $200,000 were paid to Given Proof in reduction of the loan. Having given this account of his dealings with Given Proof, Mr Warrick then turned to the history of his dealings in investment products which were evidently structured to attract tax deductions for the benefit of the investors. 26 In 1997, Mr Warrick was introduced by Mr Mowbray to a product known as 'infomercial investments'. This was described to him as '... an investment in an information type documentary with a product advertising and marketing purpose'. It was to be produced for use on television in the American market. Mr Mowbray showed Mr Warrick a legal opinion which referred to the tax implications of the investment. He made an arrangement for Mr Warrick to meet with Peter Ambrosy, the project manager for the investments. Mr Warrick met Mr Ambrosy at his office in St Kilda. It was at this office that infomercials were to be filmed and edited. 27 Mr Warrick gave his own consideration to the cases and rulings referred to in Mr Mowbray's legal opinion and concluded that the infomercial investments could be of benefit to his accounting clients. He had received from Mr Ambrosy information memoranda concerning the infomercials and he left them in the waiting room of the Kingprince accounting practice. He attached a sheet to the memoranda which set out the cost of the project, the fees to be incurred and tax deductions which would be available to anybody making an investment in them. Kingprince was to charge a fee of 1.5% of the tax deduction actually obtained by its clients who entered into an infomercial investment. This would be charged once a return had been lodged with the ATO and an assessment issued. He never received any money himself on this basis. The only moneys that were received were received by Kingprince. The fees earned by Kingprince in the first year from clients who took up investments in infomercials were in the vicinity of $50,000 to $60,000. They were all paid to Kingprince and accounted for in its records and tax returns. In November 2001, there was an investigation by ASIC in relation to the marketing of the infomercials and other 'tax structured investments'. However, according to Mr Warrick, no further action was taken in this respect. He said that the opportunity presented by the infomercial investments lasted for about two years. Swanway itself invested in the products in the years ended 30 June 1997 and 30 June 1998. Subsequently he found that the ATO '... did not consider the tax advantages which had flowed from the Infomercial Projects to be supportable under the terms of the Income Tax Assessment Act ('Act')'. He denied in his affidavit that he had received any money in respect of the infomercial project investments from any other person by way of commission or otherwise. 28 In 1999, Mr Warrick was introduced, by Mr Don McGregor, to a 'tax structured investment' called 'Theme-Based Music Collaborations'. This was set up in the same way as the infomercial investments. He brought the product to the attention of Kingprince's clients in the same way as he had done for infomercial projects. Information memoranda were made available in the reception areas of the accounting practices carried on by Kingprince. Again, there was a sheet added prepared by either himself or Kingprince's staff showing the costs and benefits. Kingprince's fee for services in getting its client into the investment was 1.5% of any tax deduction payable in the same manner as the fee for the infomercial investments. In the event, the tax benefits were disallowed. Swanway invested in the Theme-Based Music Collaboration projects in the same way as it had done in the infomercial investments. Mr Warrick said he received no moneys from any source in relation to clients of Kingprince who invested in the music projects. 29 At the time that Kingprince's clients were investing in the Theme-Based Music Collaborations projects, Mr Warrick received a brochure or explanatory memorandum for something called the 'Venture Hedge Trading Fund'. This appeared to have come from Mr Chueng's address in Hong Kong. He had never discussed the Venture Hedge Trading Fund with Mr Chueng or with Ms Fung or anyone associated with them. The same went for the infomercial investments and the Theme-Based Music Collaborations investments. After receiving the documentation for the Venture Hedge Trading Fund he telephoned Mr Mowbray and discussed the taxation implications with him so far as they related to the payment of withholding tax. Mr Mowbray told him that withholding tax might not apply as part of the structure for the Venture Hedge Trading Fund would be deemed to be a loan in Australia. An accountant who worked for Kingprince, Mr Cassidy, arranged for some of the clients he controlled to invest in the Fund. None of the clients that Mr Warrick dealt with did so. Mr Cassidy received a fee, which was a fixed fee of maybe $1,000 for each client. Mr Warrick said that neither Kingprince nor he had received any amounts by way of fee, commission or otherwise in relation to the Venture Hedge Trading Fund. 30 In 2000, further documents were received at Kingprince's office, again from Mr Chueng's offices, regarding investments in the Dragon Asia Fund. Mr Warrick asked Mr Mowbray for a 'taxation opinion of Dragon Asia'. Mr Mowbray came to Perth and gave his views about the taxation implications of the Dragon Asia investment to some of Kingprince's clients and two other accountants who were also in attendance. Clients of Kingprince entered into investment with Dragon Asia. Mr Warrick left information memoranda or prospectuses for Dragon Asia in Kingprince's waiting room with an attached sheet setting out other information. Again, Kingprince charged its clients 1.5% of the tax benefit they obtained. Clients of Kingprince did enter into agreements with respect to Dragon Asia and Kingprince was paid fees. According to Mr Warrick these payments were recorded in the company's accounting records and also in its tax returns. He never received any moneys in person by way of commission or otherwise from any person or entity, including Given Proof. He said he had never discussed Dragon Asia with Mr Chueng or with Ms Fung. 31 Swanway invested in Dragon Asia for the year ended 30 June 2000. As with the infomercial project, the deductions claimed in Dragon Asia were disallowed. Mrs Warrick has lodged an objection to an assessment she received in that respect. 32 Sometime after 30 June 2000, Mr Warrick was introduced to an olive growing project known as 'Grampian Olives' by Mr Mil Hanna. He was told by Mr Hanna that the promoter of Grampian Olives was seeking a private ruling from the ATO for one of the investors. Mr Warrick was later told that the Grampian Olives project obtained a positive product ruling in June 2001. Again, he promoted the investment scheme by leaving information memoranda in Kingprince's waiting room with a sheet attached setting out costs and benefits of entering into the project and Kingprince's fee which was fixed at 1.5% of the tax deduction obtained by its client. There was a financier involved in the scheme, known as Saville Finance Pty Ltd. 33 Mr Warrick was told by someone from Saville Finance that money raised for the project had to be deposited in bank accounts in Hong Kong. At that time he held money for clients invested in the project in Swanway's trust account. Kingprince did not have a trust account and he always used Swanway's trust account to hold money on behalf of Kingprince's clients. He said he was not going to release funds until such time as a favourable product ruling was obtained. He was also not prepared to send Kingprince's clients' money to Hong Kong unless he had some control over it by way of being a signatory on the bank account into which the money was deposited. To organise this he flew to Hong Kong, at Kingprince's expense, in March or April 2001 and met with Mr Chueng and Ms Fung. He was advised that it would be very difficult for him to become a signatory on bank accounts in Hong Kong. In the event he arranged with Mr Chueng that Mr Chueng would act as signatory for a fee to be paid by each individual investor. Mr Warrick told Mr Chueng, who agreed, that a full audit trail should be provided including all bank statements, invoices and other documents evidencing the moneys coming into the bank account from the investors. 34 Following the issuing of a positive product ruling on the Grampian Olives project, Mr Warrick said he arranged for moneys to be transferred from Swanways' trust account to the Hong Kong bank accounts. The only money Kingprince received was the 1.5% fee which was recorded in its accounting records and its tax returns. Mr Warrick said he received no moneys whether by way of commission or otherwise from anyone in relation to the Grampian Olives project. His wife had also invested in it. The tax deductions claimed under the project have been disallowed by the ATO. 35 In October 2000, Kingprince's premises were searched by officers of the ATO. Mr Warrick was visited by Paul Robb, an investigator from the ATO who told him he was going to go through all Kingprince's records. The search took two days. Mr Warrick said he did not recall ever receiving a receipt for copies of documents which were taken. He did claim privilege on some of them and these were put in a sealed envelope to be delivered to the Australian Government Solicitor. He called Mr Mowbray to get advice about his own rights and Kingprince's rights. However Mr Mowbray could not talk to him because his offices in Melbourne were also being searched by officers of the ATO. 36 In December 2000, Mr Warrick underwent an examination under s 264 of the ITAA 1936 in which questions were put to him by officers of the ATO. He heard nothing further following that examination until he received a notice to attend another examination under s 264, which he attended and which was held on 17 May 2002. 37 Following the second examination he heard no more until he and his wife received letters from the ATO dated 2 December 2002. The letter addressed to Mr Warrick stated that a review of his income tax returns for the years ended 30 June 1998 to 30 June 2002 had been finalised. The findings of the review resulted in increases of his business income by the following amounts:

Year Ended 30 June 1998 $123,000
Year Ended 30 June 1999 $375,000
Year Ended 30 June 2000 $295,000
Year Ended 30 June 2001 $403,500
Year Ended 30 June 2002 $270,000 The letter recorded that alternatively and without prejudice to anything contained in the letter, the Commissioner was of the opinion that for the years ended 30 June 1998 to 30 June 2002 tax had been avoided due to fraud or evasion: 'As a result, the payments from Given Proof Enterprises Ltd have been included in your business (non-primary production) income in each of the years under review as stated above.' Adjustment sheets and tax shortfall penalty calculations were attached. The letter concluded by advising that relevant notices of assessment including penalties and general interest charges to reflect the adjustments would be issued under separate cover. In each case the adjustment sheet included as the item by which his income was increased 'Funds from Given Proof Enterprises Ltd considered to be commission income'. 38 Mrs Warrick received a similar letter dated 2 December 2002. It notified increases in her income for the relevant financial years on the basis of increasing distributions to her from the LH Warrick Family Trust No 2 in each of those years. It was also claimed by the Commissioner that for the years ended 30 June 1998 to 30 June 2001 tax had been avoided due to fraud or evasion. Adjustment sheets were attached to the letter addressed to Mrs Warrick. 39 Mr Warrick contended that the claims against himself and Kingprince were in effect that the loan from Given Proof was not a loan but somehow income. He inferred from questions asked of him during the course of his second examination that the Commissioner might consider those loans to represent commissions on either all or some of the projects in which his clients invested including the infomercial project, the music project, Dragon Asia and the Grampian Olives project. 40 On 6 December 2002, departure prohibition orders were issued under the TAA to both Mr Warrick and his wife. The order made against Mr Warrick and signed by a delegate of the Commissioner was, in the relevant parts, in the following terms: 'Pursuant to sub-section 14S(1) of the Taxation Administration Act 1953, I Suzette Laker, delegate of the Commissioner of Taxation, believing on reasonable grounds that it is desirable to do so for the purposes of ensuring that Wayne Patrick Warrick, a person subject to the tax liability referred to in the Schedule, does not depart from Australia for a foreign country without - (a) wholly discharging the tax liability; or (b) making arrangements satisfactory to the Commissioner of Taxation for $1,341,057.99 the tax liability to be wholly discharged hereby prohibit the departure of Wayne Patrick Warrick from Australia for a foreign country.' A schedule then set out details of asserted tax liability for each of the financial years from 1998 through to 2002. 41 Notices of amended assessments issued on 11 December 2002 to both Mr Warrick and his wife. The adjustment sheets attached indicated that payments received from Given Proof were considered to be commission income. Mr Warrick caused objections to the assessments to be lodged. Although in his affidavit he says the objections were lodged on 20 February 2003, it appears from the exhibits to the affidavit, that the only objection lodged on that date was an objection in respect of the 1998 assessment. The remaining objections were lodged on 8 July 2003. 42 Considerable correspondence was exchanged between the solicitors then acting for Mr and Mrs Warrick, Minter Ellison, another firm Halsey & Associates who were assisting Minter Ellison in the matter, and the ATO. The correspondence from Minter Ellison and from Halsey & Associates included:

Formal Objections to Assessments by the Respondent 87 In support of the application for summary judgment the Deputy Commissioner relied upon the production of certified copies of the notices of assessments and the certificate of their service upon Mr Warrick. Upon service of the notices Mr Warrick became liable to pay the tax assessed and shown as due to the Commonwealth, payable to the Commissioner and, by s 255-5 of the TAA, recoverable in a court of competent jurisdiction. The evidentiary certificate bearing Deputy Commissioner Holland's facsimile signature was relied upon as evidence of the service of the notices upon Mr Warrick and that the sum of $1,475,386.99 was a debt due and payable to the Commonwealth by him. She relied upon s 255-45 of Schedule 1 of the TAA. 88 A point was taken in the submissions made on behalf of Mr Warrick that Deputy Commissioner Holland did not issue any of the amended assessments or penalty assessments relied upon. They bore the imprinted names of two other persons each described as a Deputy Commissioner. Mr Eikelboom who swore the affidavit exhibiting the certified copies of the notices of assessments was said to be 'clearly wrong and/or relying on inadmissible hearsay' when he said in his affidavit that the documents 'were issued and sent by pre-paid mail by the plaintiff to the defendant'. The fact that he said, in effect, that Deputy Commissioner Holland issued the notices when they clearly bore a different person's name undermined any formal validity or s 177 protection which might otherwise be available to documents of such a class. 89 In my opinion there is no substance in the point. It is plain from Mr Warrick's own affidavit that the notices of assessment and of administrative penalties were sent to and received by him. The production of the notices of assessment was, by virtue of s 177, and subject to other arguments going to their validity, conclusive evidence of their due making not to be undermined by arguments that Mr Eikelboom's affidavit contained hearsay evidence. In any event, Mr Eikelboom's affidavit referred to the issue of the notices of assessment by 'the plaintiff' and in so doing, in my opinion, referred to a person occupying the office of Deputy Commissioner of Taxation. 90 An argument was also advanced that the evidentiary certificate was not signed by 'the Commissioner, a Second Commissioner or a Deputy Commissioner'. Counsel for Mr Warrick accepted that, under reg 172 of the Income Tax Regulations 1936, a Deputy Commissioner can sign by affixing a facsimile of her signature. In this case a facsimile signature of Erin Holland was affixed to the certificate. Below it and below her signature the words 'Deputy Commissioner of Taxation and delegate of the Commissioner of Taxation' appeared. Below these words were handwritten letters 'pp' and an indecipherable signature. It was suggested that it could be inferred from this that some person other than Ms Holland had affixed her facsimile signature. 91 In my opinion, a Deputy Commissioner can affix a facsimile signature personally or through an appropriate officer acting under her authority. The facility of a facsimile signature for which the regulations provide suggests a signature that can be affixed for the Deputy Commissioner by someone acting under her direction or with her authority. In any event, where a certificate, notice or other document bears a facsimile of the signature of a Deputy Commissioner reg 172 has the effect that the onus lies upon the person challenging its authenticity to show that the document was issued without authority. This is not established by the existence of the handwritten letters 'pp' together with another signature. In my opinion there is nothing in the submission to detract from the evidentiary force of the certificate. 92 Section 177 is proof against the contention in the defence that the person who purportedly issued the assessments was not authorised to do so pursuant to the Act. It also stands against the plea that Mr Warrick did not receive the assessed taxable income. That is a matter to be taken up in proceedings under Pt IVC of the TAA. Breach of Natural Justice 93 It was submitted that the making of the relevant assessments was vitiated by want of procedural fairness to Mr Warrick. The case against Mr Warrick, it was said, has never been particularised. He had been given no opportunity to deal properly, in his objections, with the asserted omissions in his returns. By the failure to decide his objections he had been denied access to Pt IVC appeal proceedings. All of this was said to be contrary to the Taxpayer's Charter. 94 Reliance was placed upon the Taxpayer's Charter as giving rise to enforceable legitimate expectations on the part of taxpayers and, in particular, on the part of Mr Warrick that he would be dealt with in a particular way. 95 Arguments as to want of procedural fairness cannot provide any defence against summary judgment in recovery proceedings under the ITAA 1936 and the TAA. This is the combined effect of ss 175 and 177 and the evidence of certified notices of assessment and the evidentiary certificate produced to the Court. For the reasons already set out, the recovery proceedings cannot be resisted upon the basis of jurisdictional error short of the failure of the Commissioner to observe the criteria referred to broadly under the rubric of 'the Hickman principle'. While the failure to determine objections may have a bearing on the question whether a stay of proceedings should be granted, they have no bearing on the question of liability. In my opinion therefore, the argument based upon breach of the requirements of procedural fairness does not provide any defence to the claim. Want of Bona Fides and Ulterior Purpose 96 It was submitted for Mr Warrick that the amended assessments and the tax shortfall penalties were not imposed in a bona fide exercise or attempted exercise of power. This was said to be a proposition at least sufficiently arguable to warrant leave to defend. It was submitted that there had been no real or proper attempt to investigate or determine the facts. The material before the Court was said to point to the Deputy Commissioner acting on a 'hunch' and a speculative 'scenario'. The parallel decision-making process of imposing a departure prohibition order on Mr Warrick revealed decision-making premised upon out dated information, error and half-truth. 97 The alleged capriciousness of the decision-making process relating to the amended assessments and penalties was indicated by the ATO's failure to observe procedural fairness despite the Taxpayer's Charter. When Mr Warrick was interviewed the case against him was never put except as a speculative scenario. His solicitor's requests for grounds and reasons went unanswered. No particulars had ever been given. No position paper was ever issued. His FOI request was met with a requirement for payment of $77,000 to access 'a sea of documents'. Reliance was also placed upon the fact that his objections to the amended assessments had been outstanding since 21 February 2003. There was no evidence that they are even being considered. The Deputy Commissioner had instituted and pursued recovery proceedings while failing to decide the objections. This meant that Mr Warrick could not institute any Pt IVC appeal. 98 It was submitted that the impositions were made for an ulterior purpose, namely that the respondent and his 'entrepreneurial activities' should be targeted because he was seen by the ATO as a tax promoter. Such a purpose was said to be ultra vires of the tax legislation allowing for the making of amended assessments. 99 Counsel referred to the absence of any discernable 'basis' for the ATO's actions. He submitted that there could be no genuine dispute that Mr Warrick obtained the payment in issue from Given Proof. He had deposed on affidavit that they were all loans. He was the borrower. The loan and security documents had been produced. The payments had been accounted for in books and records in Western Australia. The loan documentation and related securities had been produced. Substantial repayments of interest and capital had been made. As at 6 December 2000, the ATO knew that Kingprince was sending money to Given Proof in Hong Kong. The Deputy Commissioner had issued purported assessments labelling the relevant payments the income of both Mr Warrick and Kingprince. The only ground disclosed to Mr Warrick for the amended assessments was that payments from Given Proof were 'considered to be commission income'. 100 In my opinion there is nothing in the materials put before the Court by Mr Warrick that would arguably support a finding of lack of bona fides on the part of the Commissioner. That is so even on the basis that want of bona fides may be established not only by showing bad faith, but also by showing the absence of a diligent and conscientious approach to the decision-making process involved in making an assessment - Applicant WAFV of 2000 v Refugee Review Tribunal (2003) 125 FCR 351. Whatever deficiencies can arguably be inferred about the reasoning process which may have been adopted by the Deputy Commissioner in characterising payments received by Mr Warrick as commission rather than loans, whatever non-sequiturs may be demonstrated, there is not disclosed an arguable failure to endeavour diligently and conscientiously to exercise the power entrusted to her by the statute. In particular, questions put in the course of the s 264 examination do not constitute evidence of the basis upon which the Deputy Commissioner finally made the assessments which are here under challenge. The reasons for the departure prohibition orders are also, at best, a slender basis for any inference and in this case do not support any inference of want of bona fides. The threshold for demonstrating a failure to exercise a power bona fide is not a low one. While it does not require proof of malice or dishonesty it does import a serious dereliction of duty which borders upon, if not amounts to, recklessness in the decision-making process. Want of bona fides is not a vehicle through which the taxpayer may challenge the adequacy of the Commissioner's logic in making assessments of taxable income. 101 By the same token I do not consider that any arguable case of improper purpose has been made out. The reference in the reasons for the departure prohibition order to Mr Warrick's activities as a promoter of tax avoidance arrangements had some basis in facts which were put to him and which emerged in the course of the s 264 examination. That characterisation was made in the context of justification of the departure prohibition order made against him. Its logical support for that order may be questionable but it does not go to demonstrate, even arguably, an ulterior purpose or improper purpose in the making of the assessment. Even if it did, it would not seem to rise higher than the level of an irrelevant consideration which would not be a basis for the grant of prerogative relief in the face of the provisions of ss 175 and 177 as construed by High Court authority. A Constitutional Question - Whether Section 78B Notices are Required 102 The defence appeared to raise a constitutional question. In par 6(p) it was said that the persons responsible for issuing the disputed assessments had not made a calculation of 'taxable income' or an assessment of 'income tax' as authorised by s 51(ii) and/or s 55 of the Constitution. In par 6(q) it was alleged that there is no power under the Constitution '... which empowers the Commissioner or any Officer or any delegate of the Commissioner to assess the defendant to income tax when there is not a sufficient connection between the object of the tax and the subject of the tax'. In the premises it was said in par 6(r) that the disputed assessments were invalid because they were not made or issued 'pursuant to the law with respect to "taxation" within s 51(ii) of the Constitution'. 103 In my opinion there is no viable defence disclosed by these pleadings. They seem to be drawn without regard to the operation of s 51(ii) as a head of legislative power. There was no argument advanced in respect of the constitutional points pleaded. They do not in my opinion lead to the characterisation of these proceedings as involving 'a matter arising under the Constitution or involving its interpretation' for the purposes of s 78B of the Judiciary Act. That section does not impose a duty on the Court not to proceed pending the issue of notices to the Attorneys-General in every case in which the Constitution is mentioned in a pleading no matter how trivial, unarguable or concluded the constitutional point may be - Australian Competition and Consumer Commission v CG Berbatis Holdings Pty Ltd (1999) 167 ALR 303 at 308 [14] and the cases there cited. No arguable defence and no basis for staying the proceedings pursuant to s 78B of the Judiciary Act was disclosed by reason of the reference in the pleadings to the Constitution. Conclusion and Orders 104 In my opinion, for the preceding reasons, no arguable defence has been disclosed to the claim in the recovery action. The Deputy Commissioner is entitled to summary judgment. I am concerned however that these proceedings have been brought notwithstanding the failure to determine the objections lodged by Mr Warrick to the amended assessments and administrative penalty assessments. It is not a complete answer to that concern that Mr Warrick can force the Deputy Commissioner to a deemed disallowance of the objections under s 14ZYA of the TAA. The Commissioner has a clear duty to determine objections so that if there is a basis upon which an assessment can be revisited administratively that can be done expeditiously and with a minimum of expense and inconvenience to both the Commissioner and the taxpayer. 105 Absent a determination of objections and absent any reasonable explanation for the failure to determine them, the question arises whether the recovery proceedings or execution of the judgment should be stayed. In Snow v Deputy Commissioner of Taxation (1987) 14 FCR 199, I set out factors relevant to the question whether or not a stay of recovery proceedings should be ordered. They were as follows: 1. The policy of the ITAA 1936 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. 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 the 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. 106 In the present case, in my opinion, the priority given to recovery of the revenue should be qualified by an appropriate recognition of the taxpayer's right to object and to have his objection determined and the Commissioner's duty in that respect. I express no view as to the merits of Mr Warrick's position with respect to the assessments. Nor do I express any view on whether he is a party to a contrivance to avoid his liability to payment of tax. I do not suggest that the present case is one of abuse of office by the Commissioner, but I do consider that no satisfactory explanation has been given for the delay in and failure to deal with the objections to the assessments. In my opinion, execution of the judgment should be stayed for a period sufficient to enable Mr Warrick to require the making of an objection decision pursuant to s 14ZYA of the TAA and to take advantage of the deemed refusal at the expiry of 60 days from that period to institute a review process. The stay will be subject to liberty to apply. 107 Having regard to the basis upon which I have decided to award summary judgment in this case, it follows that the counterclaim must also be dismissed. I certify that the preceding one hundred and seven (107) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

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