LOGAN J:
2 In Federal Commissioner of Taxation v Clarke (1927) 40 CLR 246 at 276 (Clarke) Isaacs ACJ stated:
The Act so far trusts the Commissioner and does not contemplate, in my opinion, a curial diving into the many official and confidential channels of information to which the Commissioner may have recourse to protect the Treasury.
3 By a cross-claim in the proceedings respectively instituted against them by the respondent, the Commissioner of Taxation (Commissioner), each of the applicants invited the Court to engage in a form of "curial diving".
4 I have had the advantage of reading in draft the reasons for judgment of Robertson J. I agree that, in each case leave to appeal (and a related extension of time) should be granted but that the appeal should be dismissed, with costs.
5 My reasons for expressing that agreement are not completely congruent with those of Robertson J. His Honour has comprehensively summarised pertinent background facts, relevant extracts from the proposed defences and cross-claims, the reasons of the learned primary judge and the submissions of the parties. Save to the extent necessary to explain my reasons for judgment, I do not repeat references to these.
6 The statement of Isaacs ACJ in Clarke, quoted above, was made by reference to s 39 of the Income Tax Assessment Act 1922 (Cth) (ITAA 1922) and to its analogue in its predecessor Federal income tax statute, s 35 of the Income Tax Assessment Act 1915 (Cth). There was also for many years an analogue in its successor income tax statute, s 177 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). A parliamentary value judgment that it was better to co-locate provisions relating to the collection and recovery of a number of Federal taxes has, so far as income tax is concerned, latterly seen s 177 replaced by an equivalent provision of more pervasive application, item 2 in the table to s 350-10(1) in Sch 1 to the Taxation Administration Act 1953 (Cth) (TAA). The effect of each of these provisions is that, except in a taxation appeal or, where alternatively available, on an external merits review relating to the assessment, a notice of assessment is, on production, conclusive evidence that the amounts and particulars of the assessment are correct.
7 Subject to the qualification that it is now additionally necessary to look to the TAA, Sir Isaac Isaacs' observation in Clarke as to an evident absence of parliamentary contemplation in taxation legislation of "curial diving" into the Commissioner's channels of information remains true. So far as income taxation legislation is concerned, the force of that observation is reinforced by the continued presence of ss 166, 167, 169 and 175 in the ITAA 1936:
Assessment
166 From the returns, and from any other information in the Commissioner's possession, or from any one or more of these sources, the Commissioner must make an assessment of:
(a) the amount of the taxable income (or that there is no taxable income) of any taxpayer; and
(b) the amount of the tax payable thereon (or that no tax is payable); and
(c) the total of the taxpayer's tax offset refunds (or that the taxpayer can get no such refunds).
Default assessment
167 If:
(a) any person makes default in furnishing a return; or
(b) the Commissioner is not satisfied with the return furnished by any person; or
(c) the Commissioner has reason to believe that any person who has not furnished a return has derived taxable income;
the Commissioner may make an assessment of the amount upon which in his or her judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166.
Assessments on all persons liable to tax
169 Where under this Act any person is liable to pay tax (including a nil liability), the Commissioner may make an assessment of the amount of such tax (or an assessment that no tax is payable).
Validity of assessment
175 The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with.
8 In Clarke, at 277, Isaacs ACJ also observed that there was a distinction between an action to recover tax, which he termed the "legal enforcement of an ascertained right", in which the assessment ascertaining the amount of tax is, on its production and by virtue of the provision mentioned, conclusive, and a so-called "appeal" in relation to the assessment, in reality an exercise of original jurisdiction. The purpose of that exercise of original jurisdiction, so his Honour stated, was "to correct the assessment and bring it, as an essential factum of liability, into conformity with the requirements of the law, so that whatever liability exists may be adjusted properly by a true factum". The essentiality to which Isaacs ACJ referred, then as now, was derived from the basal, constitutional proposition that a law with respect to taxation is invalid unless it makes provision for the option of recourse to the judicial branch so as to contest on the merits whether or not the criteria for a liability to tax are met: Deputy Federal Commissioner of Taxation (NSW) v Brown (1958) 100 CLR 32 at 40; Giris Pty Ltd v Federal Commissioner of Taxation (1969) 119 CLR 365 at 378-379; MacCormick v Federal Commissioner of Taxation (1984) 158 CLR 622; Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 at [9] (Futuris).
9 Though it is, in this respect also, now necessary additionally to look to the TAA (s 255-5(1) of Sch 1, which makes the amount of, materially, an income tax liability which is due and payable a debt due to the Commonwealth and payable to the Commissioner) to discern the statutory scheme for the collection and recovery of income tax, it remains a feature of that scheme that a distinction is drawn between a taxation appeal (or tribunal review) and other proceedings in relation to an assessment, with an evident legislative intention that an assessment, on production of the notice of assessment, will be conclusive in the way described in all but the former. This distinction has, repeatedly, been recognised in the High Court in cases decided since Clarke, most recently in Futuris at [64].
10 In relation to liability to taxation, the Constitution intrudes not just to qualify legislative competence in the manner described but also executive competence. That is because the Commissioner is an officer of the Commonwealth and his actions or inactions are subject to review by constitutional writ or to restraint or compulsion by injunction by the High Court in the exercise of the original jurisdiction conferred on that court by s 75(v) of the Constitution. As Nettle J recently observed in Construction Forestry Mining and Energy Union v Director of the Fair Work Building Industry Inspectorate [2016] HCA 41 at [22], by reference to a statement made by Sir Owen Dixon in Bank of New South Wales v The Commonwealth (1948) 76 CLR 1 at 363, the "high constitutional purpose of s 75(v) of the Constitution is to make it constitutionally certain that there is a jurisdiction capable of restraining officers of the Commonwealth from exceeding Commonwealth power". It is this same original jurisdiction which, subject to exceptions not presently material, has been conferred on this Court by s 39B(1) of the Judiciary Act 1903 (Cth) (Judiciary Act). Each of the applicants sought to invoke that jurisdiction by their respective cross-claims.
11 Before the learned primary judge, the Commissioner sought summary judgment and orders striking out those cross-claims. In NSD 576 of 2015, the Commissioner also sought an order striking out the respondent's defence. It is these orders which the applicants seek to challenge.
12 The applicants take issue with the deficiencies in their pleadings identified by the primary judge. Their fall-back position is that, even if there were any deficiency, that was not incurable and the allegations and evidence before the primary judge disclosed a case to be answered. In other words, they contend that the case was never one for summary judgment.
13 If, on the material before the primary judge, the case were, truly, one for summary judgment the deficiencies, real or perceived, in those pleadings would be academic. The case would be one for summary judgment if, on that material, the defences and cross-claims had no reasonable prospect of success: s 31A(2)(b) of the Federal Court of Australia Act 1976 (Cth); White Industries Australia Ltd v Federal Commissioner of Taxation (2007) 160 FCR 298 at 309, [47] per Lindgren J, cited with approval by French CJ and Gummow J in Spencer v The Commonwealth [2010] HCA 28; 241 CLR 118 at 131, [23] (Spencer v The Commonwealth). And the exercise of that power of summary determination would necessarily entail caution: Spencer v The Commonwealth at 131, [24].
14 Though I do not, with respect, deny the force of the critique offered by the primary judge or by Robertson J, in my view the adequacy of the applicants' pleadings is a subject upon which reasonable minds might reasonably differ. If proof of that were necessary, it is to be found in Deputy Commissioner of Taxation v Anglo American Investments Pty Ltd [2016] NSWSC 975 at [47]. In that case, Button J regarded a pleading materially indistinguishable from the present as adequate. So do I.
15 In these circumstances, it seems to me that it is better to focus on whether, on the material before the primary judge, the applicants had no reasonable prospect of success such that the Commissioner was entitled to summary judgment. It was to the answering of just this question that the parties devoted the greatest attention in oral submissions.
16 The asserted triable issue arose out of the Commissioner's request for and subsequent obtaining and use of information from the Cayman Islands Tax Information Authority. The agreement between the governments of Australia and the Cayman Islands did not allow for information to be sought except in relation to tax periods commencing on or after 1 July 2010. The applicants asserted that the Commissioner had knowingly sought information under this agreement for the purpose of using it in respect of tax periods prior to 1 July 2010, including in the determining of objections for the 2001 to 2007 tax periods, using it in proceedings challenging objection decisions in respect of tax periods prior to 1 July 2010 and in the making of assessments of their respective liabilities to income tax in respect of tax periods prior to 1 July 2010.
17 It was in respect of those liabilities to tax that the Commissioner sought summary judgment. For that purpose, he produced the assessments concerned, relying upon the conclusive effect of s 350-10(1) in Sch 1 to the TAA and the operation of s 175 of the ITAA 1936. Prima facie, that entitled him to judgment in respect of the assessed taxation liability. The applicants sought to meet this by the allegation that there were no lawful assessments and hence no conclusiveness of proof of liability or operation of s 175 in respect of them, because they were affected by "conscious maladministration" in the way described in Futuris at [66] by Gummow, Hayne, Heydon and Crennan JJ:
What of the operation of s 177(1) as a limitation upon the evidence which may be received in an application for judicial review under s 75(v) of the Constitution or s 39B of the Judiciary Act? What will be in issue there, as explained earlier in these reasons, are allegations of corruption and other deliberate maladministration. The attribution "correct" given by the concluding word of s 177(1) is inapt to describe the situation which would arise were such allegations (properly pleaded) made good in the judicial review proceeding. Considerations applied above in the construction of s 175 apply here also. The result is that, on its proper construction and its application to the present s 39B case, s 177(1) did not conclude against Futuris curial consideration of alleged deliberate maladministration of the Act with respect to the second amended assessment.
18 Before the primary judge and as it emerged in submissions on the appeal, the evidentiary essence of the applicants' allegations of conscious maladministration and the basis upon which it was put that there was a triable issue such that there should be no summary judgment concerned two requests for information made to the Cayman Islands Tax Information Authority by the Commissioner, one on 23 February 2011, the other on 27 May 2011. The emphasis in the case asserted for the applicants was that the procurement of the information from the Cayman Islands Tax Information Authority was attended with conscious maladministration by the Commissioner. They invited a conclusion that these requests were deliberately made not to seek information in respect of tax periods after 1 July 2010 but rather for the purpose of gaining information for use in respect of the making of assessments for tax periods prior to that date.
19 On their face, the requests disclosed no such intention, only conformity with the terms of the agreement with the Cayman Islands government. The basis for the applicants' allegations rose no higher than an exchange with counsel in the evidence in chief given by one of the Commissioner's officers, Ms Lenore Richards, in other proceedings in this Court (Hua Wang Bank Berhad v Federal Commissioner of Taxation (No 7) [2013] FCA 1020; 217 FCR 1 (Hua Wang Bank v FCT)). Within the Australian Taxation Office, Ms Richards was involved in the investigation of the tax affairs of Mr Gould and related entities (or those believed to be related), as was a Mr Matthew Evans. Neither Ms Richards nor Mr Evans authored the information request on behalf of the Commissioner. That person was a Mr Neil Cossins. However, the request was made on Ms Richards' initiative and it was she who prepared it. Ms Richards' evidence concerned the making of the request of 23 February 2011. That part of Ms Richards' evidence relied upon by the applicants is set out by Robertson J in his reasons for judgment. As to the request of 27 May 2011, the inference which the applicants invited to be drawn was that the underlying intention was no different.
20 In my view, taking that evidence at its highest and recalling that it was an application for summary judgment, not a trial on the merits, with which the primary judge was seized, no foundation for the judicial review, on any of the grounds under the rubric of conscious maladministration as described in Futuris, of the making of the assessments in question is made out. That is so even taking into account the caution which must attend the reaching of that conclusion.
21 As stated in Futuris, at [60] by Gummow, Hayne, Heydon and Crennan JJ, citing with approval remarks in this same regard made by Hill, Dowsett and Hely JJ in Kordan Pty Ltd v Federal Commissioner of Taxation [2000] FCA 1807 at [4]; (2000) 46 ATR 191 at 193; [2000] ATC 4812 at 4815, "Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld." The proof of such allegations at trial would attract s 140(2)(c) of the Evidence Act 1995 (Cth) and require heed to the reminder offered by Sir Owen Dixon in Briginshaw v Briginshaw (1938) 60 CLR 336 at 362 that in respect of grave allegations "'reasonable satisfaction' should not be produced by inexact proofs, indefinite testimony, or indirect inferences". Ms Richards' evidence does not suggest to me that the applicants have any reasonable prospect of successfully prosecuting at a trial their conscious maladministration allegations.
22 In reaching this view, I have expressly eschewed any reliance upon observations made by Perram J in Hua Wang Bank v FCT with respect to his acceptance of Ms Richards' evidence. That is not an indication of disrespect, only recognition that, so far as this proceeding is concerned, that before Perram J is res inter alios acta. Even so, Ms Richards' evidence rose no higher than an acknowledgement that, within the Australian Taxation Office, the possibility that prior tax period assessments might be raised in respect of Mr Gould was recognised but that this was not under active contemplation at the time when the information request was made. To acknowledge such a possibility is neither probative of some unarticulated occasion for the making of the request for information nor, more materially, even suggestive that such a case could ever be made out. That apart, her evidence entailed an affirmation that the request related to an examination of Mr Gould's then current tax period taxation affairs under s 168 of the ITAA 1936, with the term "real time review" apparently being used within the Australian Taxation Office to describe such an examination. As at the time of the making of the request for information, such a review would necessarily have related to a period after 1 July 2010 and thus fallen within the terms of the agreement.
23 Ms Richards' evidence does not reveal any endeavour or, reasonably, any prospect of the proof of an endeavour on the part of the Commissioner to depart from the terms of the agreement with the Cayman Islands government by a deliberate deception as to the intended use of the information requested. It offers no foundation for concluding that there is any prospect of ever proving such a grave allegation.
24 Also in reaching my view, I have assumed in favour of the applicants and as they contended that the scope of the process of assessment extends to the procurement of information for the purpose of the making of an assessment. As to what constitutes "assessment" for the purposes of the ITAA 1936, that is a very considerable and generous assumption, for reasons given below. It does not reflect the narrower conception of "assessment" for which the Commissioner contended. In turn though, in relation to judicial review of an assessing decision on the basis of conscious maladministration in public administration within the Australian Taxation Office, that narrower conception may pay insufficient regard to the overall and inter-related statutory responsibilities of the Commissioner with respect to the receipt and procuring of information and related assessment of any income tax liability and the impact of the principle of legality in respect of the content and lawful discharge of those responsibilities. The applicants' difficulty is at the factual level in that, even if the position is as assumed in their favour or as just hypothesized, it offers no evidentiary foundation necessitating the determination of the correctness in law of either position. That means that answering the very large questions of principle which were raised in the applicants' submissions is for another case on different facts. In deference to the submissions of the parties, I merely offer the following observations on those subjects.
25 The applicants' contention takes assessment as the subject of judicial review beyond the definition of "assessment" found in s 6 of the ITAA 1936, which materially provides:
"assessment" means:
(a) the ascertainment:
(i) of the amount of taxable income (or that there is no taxable income); and
(ii) of the tax payable on that taxable income (or that no tax is payable); and
(iii) of the total of a taxpayer's tax offset refunds for a year of income (or that the taxpayer can get no such refunds for the year of income); or …
26 This statutory definition takes up an understanding as to what constitutes "assessment" evident in an earlier judgment of Sir Isaac Isaacs concerning the ITAA 1922, which did not contain a definition of "assessment". In R v Deputy Federal Commissioner of Taxation; ex parte Hooper (1926) 37 CLR 368 Isaacs J said at 372-373:
Before indicating in detail the successive provisions of the Act, one general deduction from those provisions may be stated, a deduction possibly obvious, but very necessary to remember. It is as to the nature of an assessment. An "assessment" is not a piece of paper: it is an official act or operation; it is the Commissioner's ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the amount of tax chargeable to a given taxpayer. When he has completed his ascertainment of the amount, he sends by post a notification thereof called "a notice of assessment."
(Emphasis added.)
27 Later in time is George v Federal Commissioner of Taxation (1952) 86 CLR 183 (George), a case upon which the applicants placed particular reliance. In that case, Dixon CJ, McTiernan, Williams, Webb and Fullagar JJ stated in their joint judgment, at 206-207:
As already has been said, ss. 166 and 167 are together concerned with the process of ascertaining the taxpayer's taxable income and the consequent tax. The clear policy of s. 177 is to distinguish between the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer. The former involves the due making of the assessment. The production of the notice of assessment is conclusive evidence of the due making of the assessment. It would, for example, be absurd to suppose that in an action brought by the commissioner under s. 209 to recover unpaid tax due upon such an assessment as those now under appeal, evidence must be given for the plaintiff that the right officer was not satisfied under s. 167 (b) and formed a judgment as to the amount of the income to be taxed. Yet that is the consequence of the argument. To avoid this consequence, amounting as it does to a reductio ad absurdum of the argument, it was suggested that under s. 177 (1) the amount of the assessment was conclusive, although fulfilment of what the argument treated as conditions precedent to the power given by s. 167 to make the assessment were not covered by the words "due making". But this would mean that ex hypothesi the power to assess the tax was not well exercised. Accordingly the assessment would be bad and there would be nothing to be treated as good. Since tax is only due after it is "assessed" (see, for example, s. 204) a bad assessment would not do, however conclusive as to the amount of the tax a notice of assessment might be. Obviously the "due making of the assessment" was intended to cover all procedural steps, other than those if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal.
Contrary to the applicants' contention, I do not consider that this passage offers any support for the proposition that the process of assessment extends back to the procurement or receipt of information. If anything, in the references to ss 166 and 167, it suggests that the process of assessment commences after the procurement or other receipt of information by the Commissioner has occurred. George and Clarke before it are but two of many cases which establish that the process of assessment includes decisions which are conditions precedent to the making of the assessment with the consequence that the right of appeal (or review) presently found in Part IVC of the TAA is correspondingly comprehensive. This settled approach enables conditions precedent to the making of an assessment to be examined on the merits by an exercise of judicial power (or administrative review) as part of determining whether an assessment has been proved by a taxpayer to be excessive. The comprehensive quality of the right of appeal (or review) explains why, even where the alternative of a proceeding under s 75(v) of the Constitution or s 39B of the Judiciary Act exists, the pendency or availability of a proceeding under Part IVC of the TAA will usually dictate that any constitutional writ or injunctive proceeding ought peremptorily to be dismissed as a matter of discretion: Futuris at [48].
28 It is only in that narrow class of case where the purported "assessment" is, to use the description in George, "bad", such that it is not in law an assessment at all, that there will be occasion to grant relief under s 75(v) of the Constitution or s 39B of the Judiciary Act.
29 There are a number of ways in which this can occur. One is where the Commissioner has, for some reason, refrained from making a definitive ascertainment of a person's taxable income and related taxation liability, instead, as in Federal Commissioner of Taxation v Hoffnung & Co Ltd (1928) 42 CLR 39, issuing what is patently a tentative assessment; for a collation of later examples of this kind see Australia and New Zealand Banking Group Ltd v Federal Commissioner of Taxation [2003] FCA 1410; 137 FCR 1. Another is where, in one or the other of the ways described in Futuris, the making of the assessment is attended with conscious maladministration.
30 I accept, as Robertson J demonstrates, that there are passages in the judgments delivered in each of Denlay v Federal Commissioner of Taxation (2011) 193 FCR 412 and Federal Commissioner of Taxation v Donoghue (2015) 237 FCR 316 that would support the upholding of the order for summary judgment. However, because of the evidentiary insufficiency mentioned, I do not consider that this is an occasion to revisit the correctness of everything that was said in those judgments.
31 It may be that, even though what is entailed in the process of assessment is not as extensive as the applicants contend, there is no bright line to be drawn between bad faith, official corruption or some other form of conscious maladministration on the part of the Commissioner in the receipt or procurement of information and the use of that information for the purpose of the making of an assessment, so far as the availability and aptness of a remedy under either s 75(v) of the Constitution or s 39B of the Judiciary Act.
32 The facts in Clarke offer a pointer as to why that may be so. The report of that case discloses (at 305), that it was the Commissioner personally who made the decision to make the amended assessment, including forming the belief that there had been an avoidance of tax owing to fraud or attempted evasion, which was the condition precedent to amendment. Even in 1926 when that assessing decision was made, it must have been an unusual circumstance for the Commissioner personally to make that decision. The better part of a century later, with the increase over time in population and business activity in Australia, it must now be rare indeed that the Commissioner personally makes an equivalent assessing decision. In Clarke, the formation of the belief was a condition precedent to amendment and fell within the scope of a taxation appeal. But what if the Commissioner personally had engaged in conscious maladministration in the receipt or procurement of the information upon which he based his belief and then assessed?
33 To look at the ITAA 1936 and the TAA is to see that it is the Commissioner who has the general administration of taxation laws, who is empowered to procure or receive information, to make or amend assessments and to determine objections. The practical impossibility of either the Commissioner or even his delegates personally making the myriad of decisions required in the administration of taxation legislation was recognised, in O'Reilly v Commissioners of the State Bank of Victoria (1983) 153 CLR 1, in the upholding of the lawfulness of delegated authority being exercised on behalf of the Commissioner's delegates by authorised officers. But as Fullagar J observed in his supplementary reasons for judgment in George at 207, the Commissioner is only nominally, not personally, a party in taxation proceedings. Taxation appeals, as his Honour noted, "are really proceedings between Crown and subject". An assessed taxation liability is payable to the Commissioner but due to the Commonwealth. It necessarily follows that taxation recovery proceedings are also really proceedings between Crown and subject.
34 The powers conferred on the Commissioner by the ITAA 1936 and the TAA are not for his personal benefit but for the lawful raising of revenue for the Commonwealth. That being so, it is not at all obvious to me why when, for practical reasons of public administration, the tasks of receiving and procuring information and then assessing cannot all personally be undertaken by the Commissioner, bad faith or official corruption or some other form of conscious maladministration in the receipt or gathering of information by one of the Commissioner's officers should nonetheless result in a lawful accretion to the revenues of the Commonwealth, because the assessment reliant upon that information happens to have been made by another of the Commissioner's officers who, in turn, happens to be ignorant of this maladministration. Notably in Electrolux Home Products Pty Ltd v Australian Workers' Union [2004] HCA 40; 221 CLR 309 at 329, [21], Gleeson CJ drew attention to the principle of legality which governs relations between Parliament, the executive and the courts. An aspect of that principle is an assumption in the construction of a statute that "it is highly improbable that Parliament would 'overthrow fundamental principles, infringe rights, or depart from the general system of law' without expressing its intention with 'irresistible clearness'" (referring to Potter v Minahan (1908) 7 CLR 277 at 304, where O'Connor J cited a passage from Maxwell on Statutes, 4th ed (1905), p 122). I prefer to leave as an open question, unnecessary to decide in the circumstances of this case, whether s 166 or, as the case may be, s 167 of the ITAA 1936 has about it the requisite clarity to overthrow, for the benefit of the Commonwealth revenue, such principles, rights and general system of Australian law.
I certify that the preceding thirty-three (33) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan.