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[1996] FCA 807
Federal Court of Australia
1995-03-28
Merkel JJ, Lindgren J, Merkel J, Olney J, Jenkinson J
Original judgment source is linked above.
the AAT but Mr Giretti did not appear. His application for review was dismissed by the AAT. Mr Giretti was in prison at the time. Before us, he said that he was unaware of the hearing date. Counsel for the Commissioner said that Mr Giretti's application to the AAT had been filed by his taxation agent who had been notified of the hearing date.
Mr Nolan pointed out that the petition was before the Court for the third time and that the letter referred to an allowance of only $300 for the giving of advice. According to the transcript, the hearing concluded as follows: "HIS HONOUR: Yes. Yes, well, Mr Giretti, I am disposed, because of the communication you have had with the Legal Aid Commission and with the office of Mr Sevdalis and Associates, to allow you to explore the - or to have the benefit of the legal advice which that correspondence refers to, and I am only prepared to do so - to give you an adjournment for that purpose on your undertaking that if the Legal Aid Commission withdraw assistance or do not extend it for your continued opposition to the petition. You will not, on the adjourned hearing, further oppose the making of a sequestration order. In other words, you will allow the Legal Aid Commission to be the judge of this matter. Do you follow that? MR GIRETTI: ...(indistinct)... HIS HONOUR: Are you prepared to give that undertaking to the Court? MR GIRETTI: I will do that, yes. HIS HONOUR: Yes, very well. In the circumstances, upon the debtor undertaking to the Court that in the event of Legal Aid withdrawn or not extended for his continued opposition to the petition herein, that he will not at the adjourned hearing oppose the making of a sequestration order, it is ordered: (1) that the petition be adjourned to 13 December 1995; (2) that the costs of both parties of this day be reserved. I will return the correspondence about Legal Aid, Mr Giretti. MR NOLAN: If your Honour pleases."
The way in which Ryan J and Olney J dealt with the matter must be understood against the background of certain provisions of the ITAA and of the Taxation Administration Act 1953 ("the TAA") and of a line of decided cases in relation to those provisions. From the returns, and from any other information in his possession, the Commissioner is required to make an assessment of the amount of the taxable income of any taxpayer and of the tax payable thereon (ITAA s 166). If a person defaults in furnishing a return, or the Commissioner is not satisfied with a return furnished or has reason to believe that a person who has not furnished a return has derived taxable income, he may make an assessment of the amount upon which, in his judgment, income tax ought to be levied, and that amount is made the taxable income of that person for the purpose of s 166 (ITAA s 167). (It is common ground that the assessments in the present case were such "betterment assessments".) Where, under the ITAA, any person is liable to pay tax, the Commissioner may make an assessment of the amount of such tax (ITAA s 169). As soon as conveniently may be after any assessment is made, the Commissioner is required to serve notice thereof in writing by post or otherwise upon the person liable to pay the tax (ITAA s 174). The validity of an assessment is not affected by reason that any of the provisions of the ITAA have not been complied with (ITAA s 175). In the present case, the notices of assessment were issued on 2 May 1986 and served on or about that date, Mr Giretti lodged objections against them on 15 May 1986 and the Commissioner disallowed the objections on 27 June 1986. At that time, the relevant provisions for objection, review and appeal were found in Division 2 (ss 184-202) of Part V of the ITAA, although the relevant provisions are, in substance, the same as those introduced by Act No 216 of 1991 as s 175A of the ITAA and Part IVC of the TAA relating to assessments first notified after 1 March 1992. The former s 185, like the present s 175A, permitted a dissatisfied taxpayer to object in writing to the Commissioner. The former s 186, like the present s 14ZY of the TAA, required the Commissioner to decide whether to allow the objection, in whole or in part, or to disallow it, and to notify the taxpayer in writing of his decision (now called "objection decision" in the legislation). The former s 187 provided for a taxpayer dissatisfied with the Commissioner's decision to request in writing the Commissioner to refer the decision on the objection either to a Board of Review (pre 1 July 1986) or the AAT (post 30 June 1986), or to a specified Supreme Court (pre 1 July 1986) or this Court (post 30 June 1986). (With those provisions may be compared the current provisions in Divisions 3, 4 and 5 of Part IVC of the TAA.) Sub-sections 177 (1), (3) and (4) of the ITAA, like s 175 noted earlier, are of particular importance: "177 (1)The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all particulars of the assessment are correct. [At earlier times in the history of the sub-section, the words "except in proceedings under Part IVC of the Taxation Administration Act 1953" did not appear and other words appeared, namely "(except in proceedings on appeal against the assessment)" and later "except in proceedings under Part V on a review or appeal relating to the assessment," but those differences are not of present relevance.] (2) .......................................... (3)The production of a document under the hand of the Commissioner, a Second Commissioner, or a Deputy Commissioner, purporting to be a copy of a document issued by either the Commissioner, a Second Commissioner, or a Deputy Commissioner, shall be conclusive evidence that the document was so issued. (4)The production of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner, purporting to be a copy of or extract from any return or notice of assessment shall be evidence of the matter therein set forth to the same extent as the original would be if it were produced."
Section 201 of the ITAA provided, as ss 14ZZM and 14ZZR of the TAA currently provide, that the pendency of any reference, review or appeal, as the case may be, did not in the meantime interfere with or affect the assessment, and that any income tax might be recovered as if no such reference, review or appeal was pending. Any income tax assessed is made due and payable on the date specified in the notice as the date upon which the tax is due and payable, not being less than 30 days after the service of the notice, or, if no date is so specified, on the thirtieth day after the service of the notice (ITAA s 204). There is provision for additional tax if any tax remains unpaid after the time when it became due and payable (ITAA sub-s 207 (1)). The Commissioner may sue for recovery of any tax unpaid immediately after the expiry of the time when it becomes due and payable (ITAA sub-s 207 (2)). Importantly, income tax (including any additional tax), when it becomes due and payable, is made a "debt" due to the Commonwealth payable to the Commissioner (ITAA s 208). Any unpaid tax may be sued for and recovered in any court of competent jurisdiction by the Commissioner or a Deputy Commissioner suing in his official name (ITAA sub-s 209 (1)). Unless constrained by authority to conclude otherwise, I would have thought that the ineluctable result of the foregoing provisions and the fact that there has been no suggestion by or on behalf of Mr Giretti or in any document that the conditions which activated them did not exist, is that there was, in truth and reality, a "debt" "underlying" and providing "the consideration for" the Commissioner's judgment against Mr Giretti. Far from detracting from this view, the authorities uniformly support it; see McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 269-270 (Dixon CJ, McTiernan, Webb JJ), 273-275 (Kitto J), 280 (Taylor J); In re Noonan; Ex parte Deputy Commissioner of Taxation (1964) 13 ATD 409; F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360 esp at 377-378 (Mason and Wilson JJ, with whom Stephen and Aickin JJ agreed); Clyne v Deputy Commissioner of Taxation (NSW) (1982) 56 ALJR 857 (HCA/Mason ACJ) at 858-9, 43 ALR 342 at 344; Clyne v Deputy Commissioner of Taxation (1983) 57 ALJR 673, 48 ALR 545; Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 esp at 183-184 (Mason CJ), 211 (Deane, Gaudron JJ); Hoare Bros Pty Ltd v Deputy Commissioner of Taxation 95 ATC 4156 (FCA/Olney J), affirmed at 96 ATC 4163 (FCA/FC); Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation 95 ATC 4519 (FCA/Olney J); Walkom v Cutcher & Neale Pty Ltd 96 ATC 4127 (NSW/Bainton J); Wobelea Pty Ltd v Deputy Commissioner of Taxation, (1996) 20 ACSR 436 (FCA/Sundberg J) at 440. Of these cases, In re Noonan and the second Clyne case were instances of creditor's petitions by the Commissioner. There was no suggestion before Ryan J (or later before Olney J) that the assessments were not final or were vitiated by improper purpose or bad faith on the part of the Commissioner; cf Deputy Commissioner of Taxation v Richard Walter Pty Ltd, supra. The only grounds of opposition raised by Mr Giretti, namely that he had not derived any income in the three years in question and that the Commissioner had relied on "hearsay" evidence that he had which was in fact false, did not afford grounds on which it was permissible to go behind the judgment, in view of the clear intention of the legislature acknowledged in the cases noted above. Provided Ryan J was satisfied with the proof of the matters referred to in s 52 of the Bankruptcy Act 1966, his discretion to make the sequestration order against the estate of Mr Giretti would inevitably be exercised in favour of the making of the order. It was the reference by Ms Harrison to "Legal Aid" that caused his Honour to refrain from taking that course immediately. Perhaps his Honour thought it desirable that Mr Giretti have the benefit of professional legal advice, even if that advice would only be to the effect that on the basis of what he had said, he was in a hopeless position. Perhaps his Honour took into account the fact that in the light of the legislation and the cases discussed above, it was only in exceptional and closely defined circumstances (not suggested in Mr Giretti's grounds of opposition or affidavit) which would be understood by professional legal advisers but probably not easily by Mr Giretti, that Mr Giretti could hope to persuade the Court to go behind the judgment. Perhaps his Honour contemplated the possibility of an application by Mr Giretti to the AAT for reinstatement of his earlier application. Having heard already what was said by Ms Harrison on behalf of Mr Giretti, his Honour understandably wished to ensure that there was not a second opportunity for Mr Giretti, or Ms Harrison on his behalf, to repeat the grounds of opposition which they had put forward which, having regard to the statutory provisions, could not prevail. It would have been possible and, in my view proper, for his Honour to have treated the petition as "part heard" before him and adjourned the further hearing of it, subject to a direction in terms appropriate to give effect to that intention (para 33 (1) (a) of the Bankruptcy Act 1966 empowers the Court "upon such terms as it thinks fit, at any time [to] adjourn any proceeding before it, either to a fixed date or generally"). However, his Honour followed a different course. He adjourned the entire hearing of the petition to 13 December 1995 subject to Mr Giretti's undertaking to the Court, that "In the event of Legal Aid [being] withdrawn or not extended for his continued opposition to the petition herein, ... he will not at the adjourned hearing oppose the making of a sequestration order ..."
His Honour did not expressly decide that the matters advanced on behalf of Mr Giretti did not provide good cause for going behind the judgment. It should be inferred, however, that that was his Honour's view. At the same time, it should also be accepted, that he did not regard himself as having embarked upon a hearing of the petition or as having been called upon to decide anything. In view of the conclusions which I reach below in relation to the hearing before Olney J on 13 December 1995, it is not necessary for me to reach a final view as to the appropriateness of Ryan J's acceptance of Mr Giretti's undertaking. However, as the matter was debated on the hearing and as we were told that the practice has been adopted in other cases, I think it right, but sufficient, for me to say that I have serious doubt as to the appropriateness of the course that was followed. In effect, without having the benefit of reasons or a decision of one judge, Mr Giretti had to undertake not to oppose, when the petition came on for hearing before a different judge, the making of a sequestration order if he did not by then have Legal Aid. With respect, it is at least strongly arguable that this course did not accord procedural fairness to Mr Giretti. I say this not overlooking the facts that the adjournment was granted as an indulgence to Mr Giretti on the third occasion when the creditor's petition was before the Court; that it was granted for the purpose, stated by him, of enabling him to obtain Legal Aid; and that it was granted against the background that a refusal of an adjournment would have resulted in the immediate making of a sequestration order. When the petition came on for hearing before Olney J on 13 December 1995, his Honour first explored with Mr Giretti the question of the undertaking which he had given to Ryan J on 15 November. Importantly, he then asked Mr Giretti what his grounds of opposition to the petition were, and Mr Giretti stated them. Again, they went only to the factual issues whether he had derived taxable income during the years in question and whether the Commissioner had relied on evidence which was in fact false. His Honour next obtained Mr Giretti's assent to the proposition that he had no current proceeding before the AAT or this Court seeking review of, or appealing against, the assessments. It is perhaps not amiss to note that his Honour had decided Hoare Bros Pty Ltd v Deputy Commissioner of Taxation, supra, on 7 March 1995 and Kalis Nominees Pty Ltd v Deputy Commissioner of Taxation, supra, on 14 August 1995, in which the effect of the statutory provisions mentioned earlier was referred to. The nature of Mr Giretti's opposition to the petition and the lack of any subsisting challenge to the assessments made it virtually inevitable that a sequestration order would be made, in the light of the statutory provisions and authorities referred to earlier. In the short reasons for Judgment given by his Honour, he began by saying "I propose to hold you to the undertaking you gave on 15 November." This demonstrates that his Honour did not regard the undertaking as something to which Mr Giretti was being held for no reason other than that he had given it. The question which his Honour was, in substance, addressing was whether there was any point in not holding Mr Giretti to his undertaking. His Honour gave two reasons for holding him to it. The first was that the price of his being granted his request for an adjournment had been his undertaking not to oppose the making of a sequestration order. The second was that the nature of the grounds of Mr Giretti's opposition did not justify the Court's going behind the judgment. For the reasons which I attempted to state earlier, the second ground was clearly a proper one on which his Honour might proceed, without further ado, to make a sequestration order, subject to proof by the petitioning creditor of the matters required by the Act. Having heard the grounds on which Mr Giretti's opposition was founded, Olney J decided afresh, and on the case as it was put to him by Mr Giretti, as the authorities compelled him to do, not to go behind the judgment. It should be accepted that his Honour's view that the Court was not justified in going behind the judgment was an independent ground for his decision not to allow Mr Giretti to elaborate on that ground, unaffected and not contributed to by anything that had happened before Ryan J; cf Twist v Randwick Municipal Council (1976) 136 CLR 106 at 116 per Mason J and cases there cited; Preston v Carmody (1993) 44 FCR 1 (Wilcox J) at 16. In substance, if not in form, Mr Giretti was heard by Olney J on 13 December 1995 in opposition to the petition. If, contrary to the view that I have expressed above, a failure to accord procedural fairness tainted what transpired before Olney J, nonetheless there is an alternative ground on which the appeal should be dismissed. We have heard at some length from Mr Giretti and, with his consent, from Ms Harrison. Nothing has emerged to put a different complexion on the nature of Mr Giretti's ground of opposition to the petition as it was explained to Olney J. What they said can be summarised as being that Mr Giretti did not in fact have "illegal earnings" from "trafficking" (T 8.05, 8.09) and that in making the betterment assessments in question the Commissioner had acted on evidence which was false. It is clear that if Mr Giretti's undertaking to Ryan J had not been given or, having been given, had been ignored by Olney J, a sequestration order would nonetheless have been made by his Honour. This is so because Mr Giretti's ground of opposition, as elaborated upon on the hearing before Olney J and on the appeal would not have provided a ground on which his Honour would have been entitled to go behind the judgment. In sum, Mr Giretti was not deprived of the possibility of avoiding the making of a sequestration order; cf Stead v State Government Insurance Commission (1986) 161 CLR 141; Simmonds v Spooner (No 3), unreported, Supreme Court of New South Wales, Court of Appeal, 28 March 1995. In Stead v State Government Insurance Commission, supra, in an action for damages for personal injury, counsel for the plaintiff was induced not to address in relation to the evidence given by a doctor called by the defendant, by the trial Judge's statement that she need not do so because he did not accept the doctor's evidence. In the event, however, he did accept that evidence. An appeal was dismissed by the Full Court of the Supreme Court of South Australia which held that the making of the submissions could not have affected the result. There was a further appeal to the High Court. There are various expressions of the applicable principle or principles in the joint judgment of the members of the Court. At page 145, their Honours said this: " ... an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility."
This passage suggests a forward-looking test. Subsequently (at 145-146) their Honours said: "It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact." This suggests a backward-looking test, and in applying this test to the facts of the case, their Honours continued: "We do not see how the Full Court, denied the important advantage of seeing and assessing the witnesses, could satisfactorily conclude that had the appellant's counsel been given a reasonable opportunity to present submissions on the issue, it could have made no possible difference to the result." (at 146)
Finally, in a paragraph which, in my respectful opinion, seems intended to encapsulate the Court's conclusion on the matter before them, their Honours said this: "Alternatively, if the full Court is properly to be understood as saying no more than that a new trial would probably make no difference to the result, their Honours failed to apply the correct criterion. All that the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result." (at 147 emphasis supplied)
Stead's case has been referred to subsequently. As in Stead's case itself, the distinction between the forward-looking test and the backward-looking test does not appear to have attracted attention. However, most references to Stead's case suggest that it has been understood to have laid down a backward-looking test, that is to say, a test in conformity with the passage last quoted above. Reference may be made to Australian and Overseas Telecommunications Corporation Ltd v McAuslan (1993) 47 FCR 492 per Burchett J (at 496G), Miles J (at 511G-512B and 515B-516C, but cf 515C and 516C) and Foster J (at 519C-E), and Simmonds v Spooner (No 3), supra, Kirby P (at 7, 8) and Cole JA (at 4-5) (with both of whom Rolfe AJA agreed). No doubt in most cases, the application of the two tests will yield the same result. Perhaps the better view is that there is scope for the operation of both tests as alternatives in the sense that it is a ground for denying relief either that there was or that there is no possibility of a different result (cf the section heading in De Smith, Woolf and Jowell, Judicial Review of Administrative Action (5th ed, 1995) at 498, "Where the defect of natural justice has made no difference to the result; where to require fairness or natural justice would be futile; where no prejudice has been caused to the applicant" and discussion following). At least, it seems correct in principle that a backward-looking test should have scope to exclude relief. It is difficult to accept readily that a person who has been denied the benefit of procedural fairness should be entitled to be placed in a better position than if he or she had not been. Olney J had a discretion whether to make a sequestration order: Bankruptcy Act 1966, sub-s 52 (1). His Honour did not refer to this. But he had heard what Mr Giretti had to say as to why an order should not be made. The Commissioner had a prima facie right to a sequestration order: Re Debtor (No 452 of 1948); Ex parte The Debtor v M R Le Mee-Power [1949] 1 All ER 652 (CA). Nothing said by Mr Giretti was of a kind that could have properly displaced that prima facie right since, again, it went only to the factual question whether he had derived income. On the basis of Mr Giretti's grounds of opposition, his affidavit, his oral submissions and the statutory provisions to which I have earlier referred, it would have been a perverse exercise of discretion for Olney J to have done otherwise than to make a sequestration order. Applying the backward-looking test to the facts of the present case, I am of the opinion that if, contrary to the view expressed earlier, there was a failure by Olney J to accord procedural fairness to Mr Giretti, this did not deprive him of even a possibility of avoiding the making of a sequestration order. On this alternative ground, the appeal should be dismissed with costs. In my respectful view, application of the forward-looking test produces the same result. If the sequestration order were to be set aside and the matter remitted to Olney J or to another judge, Mr Giretti would propound the same grounds of opposition and it would be a perverse exercise of discretion for the judge hearing the petition not to make a sequestration order. I do not think that the reference in Stead's case to a "possibility" of a different result, although it imposes a test which very strongly favours the granting of relief, requires or admits of speculation or guesswork as to matters not suggested by the evidence or by the parties. An example would be that Mr Giretti might somehow even now obtain legal representation and mount a new and different attack on the assessments based on "the Hickman test" (R v Hickman; Ex parte Fox and Clinton (1945) 70 CLR 598); cf Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168. In the context of the forward-looking test, one final matter should be noted. It is true that by the time of the hearing before Olney J on 13 December 1995, the 28 day period for appeal to this Court on a question of law from the decision of the AAT on 8 December 1995 had not expired (if it had commenced to run - see para 44 (2A) (a) of the AAT Act). Mr Giretti's application for reinstatement of his dismissed application for review of the Commissioner's objection decisions was required to be made within 28 days after his receipt of notification of the dismissal: AAT Act, sub-s 42A (8). Mr Giretti's first hurdle had been to persuade the AAT to exercise its discretion under sub-s 29 (7) of the AAT Act to extend that time. It is against that background that the reasoning of Senior Member Pascoe of the AAT as recounted by Mr McBurney and noted earlier in these Reasons is to be understood. Mr Giretti was represented by counsel before the AAT on 8 December 1995. Mr Giretti has never suggested that he proposed to appeal to this Court against the AAT's discretionary decision on that date and no error committed by the AAT in the making of that discretionary decision suggests itself.
CONCLUSION In my view, the appeal should be dismissed with costs.
I certify that this and the preceding 32 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren. Associate: Dated: 11September 1996
IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY GENERAL DIVISION NO. VG 06 OF 1996 On appeal from a Judge of the Federal Court of Australia
BETWEEN: MARIO GIRETTI Appellant AND: DEPUTY COMMISSIONER OF TAXATION Respondent CORAM: Jenkinson, Lindgren, Merkel JJ PLACE: Melbourne DATE: 11 September 1996 REASONS FOR JUDGMENT Merkel J Introduction The facts giving rise to this appeal, which was argued by the appellant in person, are not in dispute. They have been set out in detail in the reasons for judgment of Lindgren J. The grounds of appeal as stated in the appellant's Notice of Appeal were:
There is an important distinction between a Court declining to permit a person to oppose the grant of relief and a Court regulating the manner in which a person may oppose the grant of relief. Opposition is a matter of right but regulation of that right is a matter of discretion. In considering which of the two situations occurred in the present case I approach the issue as one of substance rather than form. After service of the bankruptcy petition, Mr. Giretti filed a Notice of Intention to Appear at the hearing of the petition. His grounds of opposition to the petition were stated as follows:
The entitlement to an opportunity to be heard flows from and is a particular manifestation of the more general right of a party to oppose the making of any order which may be to the prejudice of that party. It is difficult to conceive of an instance in which a final order has been made in the exercise of judicial power, in circumstances in which the party against whom it is made has not been permitted to exercise the right to oppose it. In my view, absent some extraordinary or exceptional circumstance, it is not a proper exercise of the judicial power to determine a matter in a hearing in which only the case of one side is permitted to be put by the Court. The fact that it appears to the Court that the proposed opposition is likely to fail or even that it is virtually doomed to failure, ought not to constitute such a circumstance: see Doyle v. Commonwealth of Australia (1985) 156 CLR 510 at 518. Accordingly, in my view, the trial was not conducted in accordance with law. It was also not a fair trial as one party has not been permitted to "put his case properly before the Judge": see Jones at 67. It is true that Olney J offered the appellant the opportunity of stating the grounds of his opposition to a sequestration order but that only afforded him the opportunity of being heard on whether he should be released from his undertaking. Having decided to hold the appellant to his undertaking, His Honour disposed of the matter as an unopposed petition. For the reasons I have set out earlier, the short explanation given by the appellant to Olney J of the grounds on which he wished to oppose the petition, for the purpose of being released from his undertaking not to oppose the petition, was not equivalent to putting his case and being heard in opposition to the petition. The underlying principle is that a proper exercise of judicial power in accordance with law requires that parties to a proceeding in which the power is exercised, be entitled to oppose the exercise of the power and concomitantly be afforded the opportunity of so doing. It should be emphasised that the manner in which the right is exercised and the concomitant opportunity afforded may always be regulated by Rules of Court, procedural directions or judicial discretion in a particular case, provided that the right itself is not denied. In the present case by requiring, accepting and holding the appellant to his undertaking not to oppose the petition unless legal aid was provided to him, the appellant was deprived of his right of opposition and the opportunity to be heard in the exercise of that right. The present case is one of denial, rather than regulation, of the right to oppose. It may be that such an outcome was an inevitable consequence of the undertaking given to Ryan J. In my view the undertaking was inappropriate. Ryan J had not formed any concluded view on the merits of Mr. Giretti's opposition. On a fair reading of the transcript, his Honour only dealt with an adjournment application. Having decided to grant the adjournment Ryan J stopped Mr. Giretti from embarking on any discussion of the merits of his opposition to the Petition. The fact that his Honour had not formed any concluded view appears to be clear from - . the following exchange which occurred when counsel for the Deputy Commissioner ventured into the area of the assessments and the reason for Mr. Giretti's imprisonment - MR GIRETTI:I object to that, your Honour. There has never been any proof, therefore this - this should not mention even be in jail. The reason is this case is not finished yet. Therefore I object to --- HIS HONOUR:Well, I do not propose to go into that today, Mr. Giretti. MR GIRETTI:Thank you, sir. . the reason given by His Honour for the adjournment which was to allow Mr. Giretti to explore and have the benefit of legal advice in relation to grounds upon which he may oppose the petition and dispute the appellant's liability to pay tax to the Commissioner. In these circumstances there was no appropriate basis for imposing a condition which thereafter left the issue of Mr. Giretti's right to oppose the petition in the hands of the Legal Aid Commission. In explaining the effect of the undertaking Ryan J said - "In other words you will allow the Legal Aid Commission to be the judge of this matter". Mr. Giretti had to provide the undertaking required without the Court having heard or considered his case on the merits, without the benefit of the legal advice he was seeking in relation to it and as Lindgren J has pointed out, without having the benefit of reasons or a decision of one Judge in relation to it. In my view, in those circumstances the imposition of the undertaking, as the price for the adjournment, did not accord procedural fairness to the appellant. It must follow that when the matter came on for hearing before Olney J, it was "unjust" to continue to hold the appellant to his undertaking as it ought not to have been imposed and accepted by the Court in the first place. The Court, by holding the appellant to an undertaking that ought not to have been imposed and accepted, in effect denied him the right to oppose and be heard in opposition to the petition. That resulted in the denial of a fair trial and also amounted to not according procedural fairness to the appellant. Should the Court allow the appeal and remit the matter for rehearing? In Stead v. State Government Insurance Commission (1986) 161 CLR 141 at 145-6 per Mason, Wilson, Brennan Deane and Dawson JJ the High Court stated an important qualification to the right to a new trial where the original trial has been determined to be unfair. That qualification is that an appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility. For this reason not every departure from the rules of natural justice at a trial will entitle the aggrieved party to a new trial. By way of illustration, if all that happened at a trial was that a party was denied the opportunity of making submissions on a question of law, when, in the opinion of the appellate court, the question of law must clearly be answered unfavourably to the aggrieved party, it would be futile to order a new trial. Where, however, the denial of natural justice affects the entitlement of a party to make submissions on an issue of fact, especially when the issue is whether the evidence of a particular witness should be accepted, it is more difficult for a court of appeal to conclude that compliance with the requirements of natural justice could have made no difference. True it is that an appeal to the Full Court from a judgment or order of a judge is by way of rehearing and that on hearing such an appeal the Full Court has all the powers and duties of the primary judge, including the power to draw inferences of fact (Supreme Court Rules O 58, rr 6 and 14). However, when the Full Court is invited by a respondent to exercise these powers in order to arrive at a conclusion that a new trial, sought to remedy a denial of natural justice relevant to a finding of fact, could make no difference to the result already reached, it should proceed with caution. It is no easy task for a court of appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact. And this difficulty is magnified when the issue concerns the acceptance or rejection of the testimony of a witness at the trial. (Emphasis added)
In my view, as the underlined passages demonstrate, the issue was framed by the High Court in terms of whether an order for a new trial will "inevitably result in the making of the same order" rather than whether procedural fairness would have made any difference to the result at the impugned hearing. The High Court considered whether it was open to the Full Court of the Supreme Court of South Australia to conclude that the denial of natural justice made no difference to the result. In that regard at 146 their Honours said: We do not see how the Full Court, denied the important advantage of seeing and assessing the witnesses, could satisfactorily conclude that had the appellant's counsel been given a reasonable opportunity to present submissions on the issue, it could have made no possible difference to the result. Then, after considering certain of the reasons given for the Full Court's conclusion their Honours expressed their conclusion at 146-7 as follows: ...in our view, the Full Court was disabled in the circumstances of this case from reaching a sound conclusion that a new trial in which the applicant's counsel would have an adequate opportunity of presenting submissions on the issue of causation could make no difference to the result. (Emphasis added) I have emphasised the passages in Stead which I consider to be critical. There has been some ambivalence in the decisions since Stead as to whether the qualification stipulated by the High Court to the right to a fair trial is whether a new trial will "inevitably result in the making of the same order" or whether according natural justice or procedural fairness would have made any difference to the result at the impugned hearing. Although in most cases the answer will be the same, determining which of the two approaches is the correct one, may involve an important issue of principle. In my view the relevant "qualification" was formulated by their Honours at 145: That qualification is that the appellate court will not order a new trial if it would inevitably result in the making of the same order as that made by the primary judge at the first trial. An order for a new trial in such a case would be a futility. (Emphasis added) It is true that in certain passages their Honours discussed whether the denial of natural justice made any difference to the result but in my view that was in the context of dealing with the Full Court's reasons for refusing a new trial. Further, determining that question will usually be the most logical way of ascertaining the ultimate issue, namely whether an order for a new trial would be a "futility". The High Court recognised as much in the conclusion at 147: All the appellant needed to show was that the denial of natural justice deprived him of the possibility of a successful outcome. In order to negate that possibility, it was, as we have said, necessary for the Full Court to find that a properly conducted trial could not possibly have produced a different result. In his reasons for judgment on the appeal Lindgren J has expressed his preference for the "backward" rather than the "forward" looking test. On that approach it must be shown that the denial of natural justice or procedural fairness deprived the appellant of the possibility of a successful outcome at the impugned hearing. In my respectful view that approach does not accord with the reasoning of the High Court in Stead's case. The analogous area of administrative law provides additional reasoning as to why a backward looking test ought not to be accepted: see the discussion in Judicial Review of Administrative Action de Smith, Woolf and Jowell Fifth Edition at 498-502. I endeavoured to discuss those reasons in Trong v. The Minister for Immigration Local Government & Ethnic Affairs (unreported, 2 August 1996). In that case in response to the Minister's submission that his decision would have been the same had he provided the applicant with an opportunity to be heard prior to his decision, I stated that compliance with the rules of natural justice or procedural fairness has been long accepted as a "condition" for validity. In General Medical Council v. Spackman [1943] AC 627 at 644-645 Lord Wright said: If the principles of natural justice are violated in respect of any decision, it is, indeed, immaterial whether the same decision would have been arrived at in the absence of the departure from the essential principles of justice. The decision must be declared to be no decision. In Kioa v. West (1985) 159 CLR 550 at 629 Brennan J said of the non-observance of the principles of natural justice: The result is that the condition governing the power to make the deportation orders was not satisfied and the orders must be set aside. There are instances where Courts have denied relief on the ground that the outcome would have been no different if a fair hearing had been given: see Glynn v. Keele University [1971] 1 WLR 487; Malloch v. Aberdeen Corporation [1971] 1 WLR 1579; Cinnamond v. British Airports Authority [1980] 1 WLR 582 and R. v. The Chief Constable of Thames Valley Police Ex parte Cotton [1990] IRLR 64. However, in my view such decisions ought to be explained either as part of a consideration that the rules of fairness had not been infringed in the particular case or as arising from the Court's discretion to refuse to grant relief if it is futile to do so. An example of the latter situation arises where it is established that a properly conducted hearing could not produce a different result. The dangers of the backward looking test were pointed out by Bingham LJ in R. v. The Chief Constable of Thames Valley Police Ex parte Cotton (1990) IRLR 344, 352 and discussed by him in "Should Public Law Remedies be Discretionary?" [1991] Public Law 64, 72-3 in the following terms: Inevitability of outcome Judges of the highest distinction have held that an applicant who has been unlawfully and unfairly denied a right to be heard may be denied relief if the outcome would have been no different if he had been heard. Sir William Wade has referred to "the dubious doctrine that a hearing would make no difference." and in a recent case I gave six reasons for expecting (by which I really meant hoping) that such cases would be of great rarity. Since the case has not been widely reported, perhaps I may repeat them here: (i) Unless the subject of the decision has had an opportunity to put his case, it may not be easy to know what case he could or would have put if he had the chance. (ii) As memorably pointed out by Megarry J in John v. Rees, experience shows that that which is confidently expected is by no means always that which happens. (iii)It is generally desirable that decision-makers should be reasonably receptive to argument, and it would therefore be unfortunate if the complainant's position became weaker as the decision-maker's mind became more closed. (iv) In considering whether the complainant's representations would have made any difference to the outcome, the court may unconsciously stray from its proper province of reviewing the propriety of the decision-making process into the forbidden territory of evaluating the substantial merits of a decision. (v) This is a field in which appearances are generally thought to matter.
(vi) Where a decision-maker is under a duty to act fairly the subject of the decision may properly be said to have a right to be heard, and rights are not to be lightly denied. Although the nature, content and extent of the right to be heard may vary from case to case, the right, once established does not. An approach in law which requires the determination of whether the right exists, whether it has been infringed and if so whether there are discretionary grounds for refusing the relief sought, is consistent with both principle and authority. Neither principle or authority require the interposition of an additional criterion, namely that the infringement of the right made a difference to the result at the impugned hearing. Finally, as has been said in a different context in Santa Sabina College v. Minister for Education (1985) 58 ALR 527 at 540 per Beaumont J: It is not for the court to speculate or suggest the ultimate fate of the applicants' application for subsidy. The Minister may well prove to be right in the long run. Yet the authorities show that a party in the position of the applicants is entitled to have his case put again to the Executive in the present circumstances: it is enough that it is possible that the Minister may change her mind (see British Oxygen Co. Ltd. v. Minister of Technology[1971] AC 610 at 624-5; R.V. Secretary of State for Environment; Ex parte Brent London Borough Council [1982] 1 QB 593 at 646). Accordingly, I propose to grant the applicants certain of the limited relief they seek. Clearly there are significant distinctions between reviewing a judicial decision on appeal and ordering a new trial and reviewing an administrative decision and remitting a matter back to an administrative decision maker. However those distinctions ought not to affect the applicability of the reasoning set out above. The right to a fair trial in accordance with law in the exercise of the judicial power is no less than the right to be accorded procedural fairness in the exercise of administrative power. Further, as each right is concerned with a denial of fair and proper procedural processes in a particular case there is no obvious reason why denial of the right should give rise to different relief depending upon whether the denial was in the exercise of judicial rather than administrative power. My conclusions are consistent with the discussion of the importance of the qualification to the right to a fair trial by Kirby P in Government Insurance Office of New South Wales v. Bailey (1992) 27 NSWR 304 at 315: The question then arises as to what should occur, if it is found that an irregularity by the use of undisclosed matter in the conduct of the trial vitiates the judgment under challenge. Upon this point, the High Court of Australia instead has adopted a stringent requirement. Subject to "an important qualification", a new trial must then be ordered. This is not only to uphold the requirements of justice to a particular party. It is to uphold the integrity of the administration of justice itself. It should cause no surprise that the High Court had adopted this stringent rule. It has done so in other areas of the administration of justice, for example, in the case of apprehended bias on the part of a judicial officer where no suggestion is made that the judicial officer was actually biased. The test is what a reasonable observer might have concluded from the circumstances as to the judicial officer's capacity to bring an independent mind to bear upon the issues for trial: see Livesey v. New South Wales Bar Association (1983) 151 CLR 288 at 300 and Vakauta v. Kelly (at 584). The stringency of this standard, which is defensive of the reputation of the courts for integrity and manifest impartiality, was called to attention in Australian National Industries Ltd. v. Spedley Securities Ltd. (In Liquidation) (1992) 26 NSWLR 411: see especially my own reasons (at 418D) and per Mahoney JA (at 439B); and The exception allowed by the "important qualification" which the High Court acknowledged instead (at 145) was whether the information would "possibly have made any difference". An appellate court will not order a new trial if it would "inevitably result in the making of the same order as that made by the primary Judge at the first trial". It would hold its hand in that circumstance because a new trial would then be "a futility". The test of "possibility" is the same in this area of the law's operation as in the case of imputed bias. It is so because the same interest is at stake: the protection of the reputation of the integrity of the judicial process and the entitlement of each party which comes to our courts to have a fair trial by an impartial tribunal. New trials have been called an "evil". The legal system struggles against the delay, inconvenience, expense and emotional burden which new trials occasion: cf. Baalenzuela v. De Gail (1959) 101 CLR 226 at 233; see also the Supreme Court Rules 1970, Pt 51 r 16. but where the complaint is one, in effect, that a party has not had a fair trial, and that the rules of procedural fairness have been breached, a "new" trial may be required because only by this means can the parties have the resolution of their dispute as the law provides. Furthermore, only by this means can the integrity of the judicial process be upheld. At stake is not only the micro-concerns of the particular litigants but the macro-concern of the administration of justice. In Stead (at 145), the High Court acknowledged the powers of a Full Court to conduct an appeal by way of re-hearing. Such a power is enjoyed by this Court: see Supreme Court Act 1970, s.75A. but the High Court also cautioned (at 145-146) that, in cases where the first trial has miscarried for denial of natural justice, an appellate court should proceed "with caution". "...It is no easy task for a Court of Appeal to satisfy itself that what appears on its face to have been a denial of natural justice could have had no bearing on the outcome of the trial of an issue of fact. And this difficulty is magnified when the issue concerns the acceptance or rejection of the testimony of a witness at the trial". It was held that the refusal of a new trial was mistaken in Stead. In Camilleri this Court applied the test propounded in Stead. Although it had all of the relevant evidence before it, it could not conclude that the same result was inevitable. A re-trial was therefore ordered. Although Kirby P was in dissent in the result in Bailey, as he later stated in Simmonds v. Spooner (unreported, Supreme Court of New South Wales, Court of Appeal, 28 March 1995) at 6, he did not understand that the statement of the principles set forth by him were controversial. There is attraction in the argument that a backward looking test ensures that a person who has been denied procedural fairness is not placed in any better position than that person would have been in if procedural fairness had not been denied. However, in my view that is not the preferable approach as - . it is inherent in the administrative or common law remedies of remitting a matter for a rehearing or a new trial, where procedural fairness was denied in the original hearing, that the rehearing or new trial may proceed quite differently and more advantageously to one of the parties than the original hearing or trial; . the remedy in question is one which gives effect to a right to a fair hearing; when the right has been denied the proper vindication of it, subject to discretionary considerations, is the provision of the fair hearing to which the party was entitled which will be an appropriate rehearing or a new trial once a decision has been made at the impugned hearing. . for the reasons set out earlier, whether the alleged denial made a difference ought to be relevant to whether there was a denial of procedural fairness rather than to whether a remedy should be denied. . such an approach not only sanctions the unfair trial but in a case such as the present legitimises the decision to decline to permit the appellant to exercise his right to oppose the relief sought against him. In the present case I have found that the applicant was denied his right to a fair trial conducted in accordance with law. Therefore, the issue arising is whether there are any discretionary grounds for refusing the relief sought by him namely, setting aside the sequestration order made against him and remitting the matter for a new trial. I have already indicated that relief may be refused as a matter of discretion if it is demonstrated that it is futile to grant it.
In the present case it cannot be concluded that a new trial will be futile in that it will inevitably produce the same result. There are several reasons for that conclusion. First, the tax liability arose from "betterment" assessments based on alleged illegal earnings. No Court or Tribunal has considered the appellant's case in opposition to the tax assessed on its merits. Although Mr. Giretti has had a somewhat hapless journey in seeking to challenge his tax liability, as pointed out earlier, his application to re-instate his application to review the assessment was only refused on 8 December 1995 and at the date of the hearing before Olney J on 13 December 1995 the time for appeal to the Federal Court on a question of law had not expired. Whilst he has not stated that he proposes to take such a course it remains a "possibility". In that regard it is to be noted that it appears that he has had no legal representation since 8 December 1995 and since the making of the sequestration order on 13 December 1995, the possibility and utility of any further proceedings by him in relation to the assessments could be expected to have to await the outcome of this appeal. It may also be open to the appellant to take other proceedings challenging the assessment. The fact that no proceedings were on foot as at 13 December 1995 is not determinative of whether it is "possible" that they may be taken hereafter. If such proceedings were taken that fact alone could be relevant to, although not determinative of, any order made, including an adjournment, at a new trial. Secondly, even if proceedings were not taken to challenge the assessments it is open to the appellant to apply to the Court to go behind the judgment and inquire into the validity of the underlying debt. The conclusiveness of the assessment under s.177 of the Assessment Act is an important but not necessarily decisive factor in that regard. A similar issue was considered recently by the Full Court in Madden v. Madden & Others (1996) 136 ALR 98. It was accepted by each member of the Court (Foster J at 127-133, Sheppard J at 100 and Einfield J at 109-112) that as a result of the recent decision in Deputy Commissioner of Taxation v. Richard Walter Pty. Ltd. (1995) 183 CLR 168 the protection of ss.175 and 177 (including conclusiveness of the assessment) under the Income Tax Assessment Act 1936 is now subject to the Hickman test i.e. that the assessment was a "bona fide attempt" by the Commissioner to exercise powers conferred by the Act, related to the subject matter of the Act and was reasonably capable of reference to those powers. I note that Foster J (with whom Sheppard J agreed) at 133 also adopted the following passage in the 1995 Australia Federal Tax Reporter CCH Australia Ltd. at p. 47901 in relation to the Richard Walter decision. The decision in Richard Walteris ... authority for the proposition that in a case of bad faith or a tentative assessment, a taxpayer is entitled to use s.39B to challenge the validity of the assessment. The strict approach of Bloemen, in which the court held that the only circumstances in which s.175 and 177 permit a court to investigate the validity of an assessment is where no assessment or copy is produced or where the circumstances are the same as those in Hoffnung,has also been effectively broadened. The practical effect of this decision is that unless a taxpayer can show evidence of bad faith on the part of the Commissioner or that the purported assessment is not an "assessment" for the purposes of the Act, then the taxpayer will not be able to challenge the validity of the assessment. The taxpayer's only option will be to dispute the substantive liability under the assessment pursuant to the procedures under Pt IVc of the Taxation Administration Act.
In the present case there has been no evidence as to how the assessments were arrived at or made. As these issues relating to the assessments have not been considered, let alone determined by the Court, it is not open to conclude that they must inevitably fail. It is sufficient for present purposes to say that such issues are capable of being raised at a new trial. There is no material before this Court which demonstrates that they will not or cannot be raised or if raised that they must fail. Although the appellant did not state his grounds of opposition to the petition in terms of "bad faith" the grounds suggest that some kind of challenge to the bona fides of the assessments was intended by him. In that regard it is relevant that the grounds do not appear to have been prepared by a lawyer, relate to "betterment" assessments and state that the assessments were based upon "wrongful information, false accounting and hearsay". Thirdly, it is not to the point that the prospects of success for the appellant on all of these issues may be very slim indeed. That is apparent on the basis of the material he has put forward to date. However he has denied, on affidavit, that he received the income the subject of the assessments. It remains to be seen whether further or other evidence can or will be adduced on these matters and more importantly, if adduced, whether that material may affect the future course of the matter if a new trial is ordered. Importantly, even if, as may be likely, the conclusiveness of the assessments stand unimpugned the evidence adduced by the appellant denying receipt of the income as alleged is capable of being relevant to the issue of whether there is otherwise "sufficient cause" to dismiss the petition under s.52(2)(b). In that regard the Full Court in Clyne v. Deputy Commissioner of Taxation (1985) 5 FCR 1 at 5 said: The circumstances which may constitute "other sufficient cause" for dismissing a bankruptcy petition are extremely variable. It is not appropriate to attempt to catalogue or circumscribe them: see Cain v. Whyte (1933) 48 CLR 639 at 645. I have already drawn attention to the fact that as Olney J treated the Petition as unopposed, it was unnecessary for him to consider s.52(2)(b). For present purposes it is sufficient that it was open to him to treat such evidence as relevant to his discretion to further adjourn the petition to allow any additional evidence to be adduced or to act upon or reject the evidence already adduced for the purposes of exercising or refusing to exercise, the discretion conferred under s.52(2)(b). Fourthly, when the ground of denial of procedural fairness is that a party has not been afforded the opportunity of putting a case in opposition to the relief sought, it is a heavy burden indeed to persuade an appellate court that there is no case that could possibly succeed. In my view given the wide powers conferred on the Court under the Act, including the power of adjournment, the present case is not one in which it could be concluded that it is inevitable that a sequestration order would be made at a rehearing of the matter. Finally, the caution expressed by Megarry J in John v. Rees (1970) Ch. 345 at 402 is apposite: As everybody who had anything to do with the law well knows, the path of the law is strewn with examples of open and shut cases which, somehow, were not; of unanswerable charges which, in the event, were completely answered; of inexplicable conduct which was fully explained; of fixed and unalterable determinations that, by discussion, suffered a change. See also Doyle at 518. In my view the present case, involving as it does issues of law, fact and discretion, is not one in which an appellate Court could reach the conclusion that an order for a new trial will be futile as the same result is inevitable. If, contrary to the views I have expressed, the test is a backward looking one the same conclusion should be reached. If Olney J had permitted the appellant to oppose the petition it is a matter of pure speculation as to whether the same result must have followed. Mr. Giretti may have stated he wished to appeal the AAT decision if he became aware of his right to do so. The issue of the trial Judge exercising his discretion under s.52(2)(b) may have arisen and time may have been requested by either party to file further evidence on the issue of the non receipt of income. I say by "either party" as it is "possible" that if the trial Judge was prepared to consider the issue of the exercise of the discretion conferred under s.52(2)(b), the Deputy Commissioner, having regard to the width of the discretion under the section, may not have been prepared to allow the appellant's evidence on that question to stand unchallenged. As His Honour determined that the petition was to proceed as an unopposed matter, none of these issues arose. I am not prepared to conclude that if a different course had been taken these and possibly other issues could not have arisen. Conclusion For the reasons I have given, the appeal ought to be allowed, the sequestration order made should be set aside and the matter remitted for rehearing on a nominated date with directions for the filing of all affidavits upon which the appellant and the Deputy Commissioner may wish to rely. It may well be that any victory of the appellant on the appeal will be a short lived one. However, if a sequestration order is ultimately made it is important that it be made after a fair hearing at which the appellant has been afforded the opportunity of properly putting his case in opposition to the making of the sequestration order sought against his estate. Finally, although I have found that error occurred in the conduct of the hearings below I should add that that error is perfectly understandable in the situation that confronted their Honours. The appellant was not legally represented and their Honours received no submissions on behalf of the appellant on the legal issues relevant to the undertakings or to the appellant's case. Importantly, on the first occasion Ryan J endeavoured to assist the appellant by granting the adjournment sought by him on terms. On the second occasion Olney J accorded to the appellant a fair hearing on the issue of whether he should be released from the undertaking and having decided to hold the appellant to his undertaking, had no choice but to make the sequestration order he made. The problem arising in this appeal was inherent in the nature of the undertaking imposed, accepted and enforced by the Court. Hopefully as a result of the decision in this case, the practice in respect of such undertakings, to the extent that they have been given, will cease and hereafter in similar circumstances there will be a regulation of the right to oppose rather than a denial of it. I certify that this and the preceding 31 pages are a true copy of the Reasons for Judgment of the Honourable Justice Merkel
VG6 of 1996 Appellant in person Counsel for the Respondent Mr. J. A. Nolan instructed by Australian Government Solicitor Date of Hearing: 14 June 1996 Date of Judgment: 11 September, 1996
(1972) 126 CLR 212
(1987) 76 ALR 137
(1956) 98 CLR 263
(1981) 147 CLR 360
(1982) 56 ALJR 857
(1983) 57 ALJR 673
(1995) 183 CLR 168
(1976) 136 CLR 106
(1993) 44 FCR 1
(1986) 161 CLR 141
(1993) 47 FCR 492
(1945) 70 CLR 598
(1981) 148 CLR 170
(1985) 5 FCR 1
(1996) 70 ALJR 495
(1922) 177 CLR 292
(1912) 15 CLR 679
(1985) 156 CLR 510
(1985) 159 CLR 550
(1985) 58 ALR 527
(1983) 151 CLR 288
(1992) 26 NSWLR 411
(1959) 101 CLR 226
(1996) 136 ALR 98
(1933) 48 CLR 639