Lui v Commissioner of Taxation

THE STATUTORY PROVISIONS 4 Section 14U(1)(b)(ii) of the Taxation Administration Act appears as follows in the provision relating to the granting of departure authorisation certificates: (1) Where, on application made by a person in respect of whom a departure prohibition order is in force: (a) the Commissioner is satisfied: (i) that, if a departure authorisation certificate is issued in respect of the person, it is likely that: (A) the person will depart from Australia and will return to Australia within such period as the Commissioner considers to be appropriate in relation to the person; and (B) circumstances of the kind referred to in paragraph 14T(1)(a) will come into existence within such period as the Commissioner considers to be appropriate in relation to the person; and (ii) that it is not necessary or desirable for the person to give security under subsection (2) for the person's return to Australia; or (b) in a case where the Commissioner is not satisfied with respect to the matters referred to in paragraph (a): (i) the person has given security under subsection (2) to the satisfaction of the Commissioner for the person's return to Australia; or (ii) if the person is unable to give such security, the Commissioner is satisfied that: (A) a departure authorisation certificate should be issued in respect of the person on humanitarian grounds; or (B) a refusal to issue a departure authorisation certificate in respect of the person would be detrimental to the interests of Australia; the Commissioner shall issue a certificate authorizing the person to depart from Australia for a foreign country on or before the seventh day after a day (being a day later than, but not more than 7 days later than, the day on which the certificate is issued) specified in the certificate. 5 A departure prohibition order is an order in force under s 14S of the Taxation Administration Act. Section 14S(1) provides that: (1) Where: (a) a person is subject to a tax liability; and (b) the Commissioner believes on reasonable grounds that it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a foreign country without: (i) wholly discharging the tax liability; or (ii) making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged; the Commissioner may, by order in accordance with the prescribed form, prohibit the departure of the person from Australia for a foreign country.

THE AAT'S REASONS 6 The AAT's reasons for decision record the facts, none of which are in dispute. The Commissioner served a departure prohibition order on Mr Lui on 24 October 2008. This relates to his estimated tax debt which presently stands at about $23 million. Mr Lui applied for a departure authorisation certificate on 4 June 2009 by reason of his former wife's ill health. The Commissioner refused this application on 28 July 2009. Mr Lui made a second application which the Commissioner refused on substantially the same grounds. The Commissioner accepted that Mr Lui's circumstances gave rise to "humanitarian grounds" which could justify the grant of a departure authorisation certificate if the other conditions of grant were satisfied. The Commissioner considered that the other conditions (namely, the precondition that "if the person is unable to give such security…" in s 14U(1)(b)(ii)) were not satisfied. The Commissioner was not satisfied that Mr Lui had disclosed all of his assets. The Commissioner considered Mr Lui's offer of a fixed charge on a residential property in Castle Hill (with an estimated value of less than $350,000) and a floating charge over all of his assets worldwide was impractical as the Commissioner had no way of knowing the value of those assets and thus no way of securing them. 7 Mr Lui's submissions before the AAT are recorded at [18] of the Presidential Member's (Buchanan J's) decision. Mr Lui argued that s 14U(1)(b)(ii): …should be seen as a true alternative to s 14U(1)(b)(i), with the result that consideration of the matters referred to in s 14U(1)(b)(ii)(A) and/or (B) arises in a case where (by contradistinction with s 14U(1)(b)(i)) security satisfactory to the Commissioner has not been given. 8 Mr Lui also argued (at [20]) that: The inability referred to in s 14U(1)(b)(ii) is inability to give such security. Such security is security to the satisfaction of the Commissioner. The notion that security is given, or not given, to the satisfaction of the Commissioner at least leaves room for an argument that the concept of inability is used to mean that a person has been unable to persuade the Commissioner to accept security of a certain kind or of a particular value. That is the position in the present case. Mr Lui has been unable to give security to the satisfaction of the Commissioner because the Commissioner will not accept what has been offered. 9 Although Buchanan J considered the latter (but not the former) construction open (at [18] and [20] respectively), his Honour preferred the Commissioner's competing construction (set out at [21]) that s 14U(1)(b)(ii): …first required a decision maker (either the Commissioner or this Tribunal) to conclude that a person was unable, in the sense of lacking capacity, to give such security and not merely either unwilling to do so or unable to obtain the Commissioner's agreement. In other words, the notion of inability or incapacity is one which operates on or qualifies a person's ability to give security rather than their success or lack of success in obtaining the Commissioner's agreement to the security. In my view this construction is clearly open. 10 Buchanan J preferred the Commissioner's construction on the grounds that it most naturally arises from the language and structure of s 14U(1)(b) and most apparently finds a natural place in the statutory scheme (at [23]). As to the latter, his Honour observed that the grounds upon which a departure authorisation certificate might be granted are very limited. Subject to the final two possibilities in s 14U(1)(b)(ii)(A) and (B), they are directed to minimising the risk of the ultimate non-recovery of outstanding taxes (at [25]). Given this context his Honour concluded (at [26]) that: …it seems most unlikely that departure in the absence of satisfactory security would be contemplated in a case of refusal to provide security or an unsuccessful negotiation about what would constitute satisfactory security. The provisions of s 14U(1)(b)(ii)(A) and (B), identify exigent circumstances which might justify an exemption from an intentionally strict regime. They do not contemplate, however, the reservation of any bargaining power to a person seeking to depart concerning either the tax liability or the necessity for adequate security, if it could be made available. I think it is clear that the legislative expectation is that departure from Australia, if s 14U(1)(a) is not satisfied, will normally only occur under s 14U(1)(b)(i), on condition of provision of adequate security, and that otherwise, even if there are humanitarian grounds, departure will only be permitted if a person does not have the means to comply with that primary requirement. 11 For these reasons, his Honour concluded that "Mr Lui has not satisfied the initial requirements of s 14U(1)(b)(ii). The Commissioner's decisions must therefore be affirmed" (at [27]).

Preliminary issues 12 The Commissioner submitted that the three questions identified in the notice of appeal did not involve pure questions of law as required by s 44(1) of the Administrative Appeals Tribunal Act. As this was a jurisdictional requirement the fact the questions in the notice of appeal may involve questions of law is insufficient (Birdseye v Australian Securities and Investment Commission (2003) 76 ALD 321; [2003] FCAFC 232 at [10]-[18] and Comcare v Etheridge (2006) 149 FCR 522; [2006] FCAFC 27 at [11]-[17]). In the course of the hearing of the appeal, we ruled that although the questions in the notice of appeal may be infelicitously expressed, the only issues in the appeal concern statutory construction. Given the expedition with which this appeal has been brought on and the urgent need for a decision we were not disposed to order the applicant to file an amended notice of appeal. The Commissioner did not submit (and nor could he) that he was in any way prejudiced by this approach. 13 The Commissioner next said that the concession about "humanitarian grounds" before the AAT was based on the facts then in existence. Mr Lui's former wife was gravely ill. She wanted her children with her. Although the children are old enough to travel alone they may well wish for the support of their father while their mother was gravely ill. Mr Lui's former wife, however, died on 22 August 2009. The situation is an evolving one. If the AAT's decision is vitiated for error of law and the matter remitted then the existence, nature and strength of any humanitarian grounds would be a matter for the AAT having regard to the facts found at the time. Mr Lui acknowledged that, given the evolving situation, an order remitting the matter to the AAT if he succeeded in the appeal would have little utility. Mr Lui said, however, that the appeal had utility if (for example) he made another application to the Commissioner for a certificate. We accept that the questions as to whether there are humanitarian grounds and, if so, whether a departure authorisation certificate should be issued involve issues of fact for the Commissioner and, on review, the AAT. Accordingly, if Mr Lui is correct and his appeal allowed the result is not necessarily the setting aside of the Commissioner's decision. In the ordinary course, if Mr Lui succeeded in the appeal the matter would need to be remitted to the AAT for determination in accordance with law on the basis of the facts as then prevailing. 14 In the Commissioner's written submissions, it was said that Mr Lui's arguments on appeal were different from those put before the AAT. Nevertheless, the Commissioner dealt with the arguments on the appeal and thereby implicitly (and properly) accepted that it was open to Mr Lui to make these arguments. Mr Lui is not prevented from making these new arguments (if new they be). The point is one of construction. No question of further evidence arises on the appeal. The Commissioner did not (and could not) suggest any prejudice.

Competing submissions 15 We now turn to the substance of the construction issue. 16 Mr Lui's arguments on the appeal involved seven propositions. 17 First, the Taxation Administration Act vests in the Commissioner a wide power to issue a departure prohibition order. The making of such an order is a "severe intrusion into a person's liberty, privacy and freedom of movement" (Poletti v Deputy Commissioner of Taxation (1994) 52 FCR 154 at 160). 18 Second, the power vested in the Commissioner to issue a departure authorisation certificate, in this context, must be understood as a beneficial and remedial provision, relying on Winter v Federal Commissioner of Taxation (1985) 85 ATC 4654 at 4657 in which Lee J said: It is apparent from the terms of s 14S, s 14T and s 14U that they constitute machinery to facilitate the collection and recovery of tax assessed, giving to the Commissioner both wide powers to make a Departure Prohibition Order and a wide discretion to revoke or vary the same (where revocation is not compulsory under s 14T(1)), and wide discretion to ameliorate the hardship occasioned by a Departure Prohibition Order, by issuing a Departure Authorisation Certificate under s 14U. 19 Third, beneficial and remedial provisions are not to be read down but are to be construed "so as to give the fullest relief which the fair meaning of its language will allow" (Bull v Attorney-General for New South Wales (1913) 17 CLR 370 at 384 cited in Nilant v Macchia (2000) 104 FCR 238; [2000] FCA 1528 at [40]). 20 Fourth, the AAT recognised that two constructions were open on the language of the provision and thus should have adopted the construction supporting "the fullest relief which the fair meaning of its language will allow". Instead, the AAT gave the provision a most narrow and restricted interpretation, requiring that it be impossible for the person to give security. 21 Fifth, it must be recognised that meeting the statutory precondition is not in the exclusive power of the person the subject of the departure prohibition order (in contrast, for example, to the situation in Puglisi v Administrative Decisions Tribunal of New South Wales Appeals Panel (2001) 52 NSWLR 350; [2001] NSWCA 298, to which the AAT referred). The precondition involves an undefined and amorphous standard of such security as is to the satisfaction of the Commissioner. It is thus akin to the last potential meaning of "unable" described in Leeder v Mayor of the Town of Ballarat East [1908] VLR 214 at 223 that "great difficulty is caused by the word 'unable'": Sometimes, where it is used with reference to a person, it connotes an act or series of acts which no human being could do; sometimes an act or series of acts which the particular person referred to could not in any circumstances do; sometimes an act or series of acts which this person could not in existing circumstances do; and sometimes an act or series of acts which in existing circumstances this person could do if he directed his mind to nothing else, but which, having regard to other circumstances, he could not reasonably be expected to do. It therefore sometimes involves a comparison of the various circumstances influencing action or inaction. 22 According to Mr Lui, it follows from the character of the precondition that "unable" includes as part of its meaning "lack of power". Lack of power includes the inability to direct or influence others, in this case, the Commissioner. In other words, the precondition looks to both the position of the person giving the security and the position of the Commissioner determining whether or not such security is satisfactory. Selecting only one of those aspects (the person's ability) is incorrect. It would mean that the Commissioner (as in this case) could rely on his own rejection of Mr Lui's offer of a fixed and floating charge without nomination of what security would be satisfactory in order to require a demonstration of no financial capacity. 23 Sixth, the result for which the Commissioner contends leads to surprising and unexpected results. The same precondition qualifies s 14U(1)(b)(ii)(B) referring to refusal of a departure authorisation certificate being "detrimental to the interests of Australia". According to Mr Lui, it would be surprising if the Commissioner could only act to avoid a situation detrimental to the interests of Australia if the Commissioner is satisfied that increased or further security cannot be provided. This indicates that the reasonably open alternative construction should be preferred (IRG Technical Services Pty Limited v Federal Commissioner of Taxation (2007) 165 FCR 57; [2007] FCA 1867 at [21]). The same consideration must apply to the exception for humanitarian grounds. 24 Seventh, and finally, it was submitted that the construction advanced by Mr Lui is consistent with the extrinsic material. As the AAT accepted the provision was ambiguous, the extrinsic material is relevant (s 15AB(1)(b)(i) of the Acts Interpretation Act 1901 (Cth)). That material does more than provide a summary description of the provision in question. It strongly supports the construction which Mr Lui advances. 25 The Commissioner supported the reasoning of Buchanan J. On this construction the precondition enlivening the discretionary power in s 14U(1)(b)(ii) is that the person does not have the means to give security to the satisfaction of the Commissioner. In the present case, Mr Lui offered security. The Commissioner responded to the effect that he was not satisfied with Mr Lui's answers to questions about his funds. Mr Lui claimed to have offered "everything" and did not improve his offer. The Commissioner remained dissatisfied as to whether Mr Lui had adequately disclosed his assets. 26 According to the Commissioner it is incorrect to characterise s 14U(1)(b)(ii) as a beneficial or remedial provision. The potentially ameliorating effect of the provision is only available after the precondition ("if the person is unable to give such security…") is satisfied. Nilant v Macchia, Puglisi and IRG Technical Services do not assist Mr Lui. The provision must be considered in context having regard to its purpose. The statutory regime is strict. It has the purpose the AAT identified at [25] of its reasons for decision, namely minimising the risk of non-recovery. In that context, it is unsurprising that the legislature has limited access to the ameliorating provisions to cases where the taxpayer does not have the means to provide security to the Commissioner's satisfaction. All this shows is that the legislature ranked the objective of obtaining security for the return of the person to Australia highly. Mr Lui's construction invites circumvention. Mr Lui's submissions do not advance any clear alternative construction. It cannot be the case that the precondition is satisfied merely because Mr Lui did not know what security would satisfy the Commissioner. If that were so, a taxpayer could satisfy the precondition simply be refusing to give the Commissioner such information as might be necessary to decide what security would be satisfactory. The form of security offered by Mr Lui is immaterial. The issue in the appeal is one of statutory interpretation not the adequacy of the security.

Conclusion 27 At first consideration, it appears difficult to accept the Commissioner's submission that Mr Lui's submissions failed to identify a clear construction of s 14U(1)(b) of the Taxation Administration Act. After all, the AAT's reasons identified two competing constructions of the precondition in s 14U(1)(b)(ii) (i.e. "…if the person is unable to give such security, the Commissioner is satisfied that…") both of which the AAT said were open on the language of the provision, namely: - (i) a person has been unable to persuade the Commissioner to accept security of a certain kind or of a particular value (at [20]), or (ii) a person lacks capacity to give security satisfying the Commissioner (at [21]). But closer consideration discloses that it is difficult to articulate the precise meaning of the precondition on the construction which Mr Lui advances. For example, it could be said that the former construction (preferred by Mr Lui) asks whether the Commissioner has been given security to the Commissioner's satisfaction. If not, the person has been unable to give such security. This, indeed, was the extent of Mr Lui's submission to the AAT. The latter construction (preferred by the Commissioner) asks whether the person can give security to the Commissioner's satisfaction. If not, the person has been unable to give such security. As explained below, the former construction tends to yield numerous ambiguities which the AAT recognised in its reasons at [26] in its references to both a refusal to give security and a failed negotiation about security. We return to this point at [34] and following. 28 As the Commissioner acknowledged the words "such security" in s 14U(1)(b)(ii) are a reference back to the text of s 14U(1)(b)(i) and thus mean "security to the satisfaction of the Commissioner for the person's return to Australia". This fact led Buchannan J (correctly, in our view) to accept that the construction advanced by Mr Lui in this appeal is open on the language of the provision. But, for the reasons his Honour gave and as expanded upon below, that fact does not provide support sufficient to accept the construction which Mr Lui advanced. 29 Many of Mr Lui's arguments are answered by an analysis of the scheme as a whole. The imposition of a departure prohibition order under s 14S requires the Commissioner to believe on reasonable grounds that "it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a foreign country" (s 14S(1)(b)). A departure prohibition order remains in force until revoked under s 14T or set aside by a court (s 14(2)). Revocation under s 14T is required in certain circumstances (s 14T(1)) and possible in others (s 14T(2)). As to the latter, the discretion vested in the Commissioner is wide. The Commissioner may "in the Commissioner's discretion and on application being made to the Commissioner to do so or on the Commissioner's own motion, revoke or vary the departure prohibition order". In other words, the granting of a departure authorisation certificate is not the only means by which a person subject to a departure prohibition order may leave Australia. The Commissioner has discretion to vary or revoke the order. This discretion is confined only by the "the subject matter, scope and purpose" of the Taxation Administration Act (Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 40). 30 Section 14U, which sets out the scheme for departure authorisation certificates, provides three circumstances in which a person may be permitted to leave Australia despite a departure prohibition order. In summary, they are as follows. First, the Commissioner may be satisfied that the person is likely to return, the tax debt is likely to be recovered in full or is completely irrecoverable, and that security for the person's return is unnecessary or undesirable (s 14U(1)(a)). Second, and if not satisfied in accordance with s 14U(1)(a), the person may have given security to the Commissioner's satisfaction (s 14U(1)(b)(i)). Third, "if the person is unable to give such security", the Commissioner is satisfied that a departure authorisation certificate should be issued to the person on humanitarian grounds or refusal to so issue a certificate would be detrimental to the interests of Australia. 31 The scheme is to be considered as a whole and its provisions construed in that context. Section 14U(1)(b)(ii) thus is to be construed "on the prima facie basis that its provisions are intended to give effect to harmonious goals" and in such a way as "to give meaning to every word of the provision …" (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [70]-[71]). 32 The words "if the person is unable to give such security" qualify the availability of the discretion to issue a departure authorisation certificate on humanitarian or public interest grounds. Those words must be given work to do. The cases to which Mr Lui referred (Poletti, Puglisi, Winter, Leeder and IRG Technical Services) concern either cases turning on their own facts or general principles of construction. They do not answer the specific question in issue in the appeal. 33 Insofar as Mr Lui relied on the final example in Leeder to support his construction (that is, inability as involving "an act …which in existing circumstances this person could do if he directed his mind to nothing else, but which, having regard to other circumstances, he could not reasonably be expected to do"), there is yet another difficulty. This test depends on a factual assessment of reasonableness in the circumstances. The facts in this case disclose that the Commissioner was not satisfied that Mr Lui had demonstrated that his offer was reasonable in the circumstances. Be that as it may, consideration of the statutory scheme as a whole indicates that, if anything, the precondition involves the penultimate meaning of "unable" as "an act …which this person could not in existing circumstances do", consistent with the approach of Buchanan J. 34 One difficulty for Mr Lui is that his construction of s 14U(1)(b)(ii) would have the same effect if it simply commenced with the words "the Commissioner is satisfied that…". This indicates that the words must mean something more than the mere fact that the Commissioner has not been given security to the Commissioner's satisfaction. 35 This proposition leads to the next difficulty for Mr Lui. Once it is accepted that the words of the precondition "if the person is unable to give such security" cannot simply mean that the Commissioner has not been given security to the Commissioner's satisfaction, a spectrum of possibilities opens up. Whatever else it might mean, "unable" does not mean simply "unwilling", as Mr Lui's submissions acknowledged. Hence, the precondition, on Mr Lui's construction, also requires the person to have offered some security which the Commissioner has rejected as unsatisfactory. If that is so, another question arises. Must the offer be genuine and reasonable or is a mere derisory offer (which the Commissioner inevitably will reject) sufficient to satisfy the precondition? Further, unless the Commissioner knows the person's financial position how can a genuine and reasonable offer be distinguished from a derisory offer? The answers to these questions disclose that the Commissioner's submission, to the effect that Mr Lui's construction invites circumvention, has force. The practical consequence of Mr Lui's construction is to shift the capacity for satisfaction from the Commissioner to the taxpayer. Any "genuine" offer rejected by the Commissioner, irrespective of its relationship to the taxpayer's true assets, would suffice to satisfy the precondition on Mr Lui's approach. As the Commissioner submitted, given the statutory context, this seems unlikely. 36 These problems are avoided by giving the precondition its natural and ordinary meaning, as Buchanan J did. This approach satisfies the fundamental tenets of statutory construction. It gives the precondition work to do. It accords with the overall structure of s 14U in which each option is dependent on the failure to satisfy the preceding option. It also accords with the natural meaning of the language of the precondition by focusing on the person who is unable to give such security, being security to the satisfaction of the Commissioner. 37 We do not find Re Wetzell and Child Support Registrar [2005] AATA 607, to which Mr Lui drew the Court's attention, persuasive to the contrary. The only issue in that case was whether an offer of security funded by a loan involved the person in giving security as required. The facts are different in the present case and raise different questions for consideration. 38 The results of the construction adopted by Buchanan J are not surprising. The departure authorisation certificate scheme is only relevant to a person whom the Commissioner thinks should still be subject to such an order (recognising the Commissioner's power to revoke such an order on application to a court or the Commissioner's own motion). As noted, the option in question is only reached where the Commissioner, in effect, thinks the tax debt is not irrecoverable but is not likely to be discharged soon and that the tax debtor should return to Australia but is unlikely to do so. In those circumstances it is not surprising that the legislature required the tax debtor to be unable to provide security to satisfy the Commissioner before they could avail themselves of the ameliorating provisions relating to humanitarian grounds or the public interest. The persuasive force of Mr Lui's argument based on the public interest is lost once it is recognised that the Commissioner has a very broad discretion to vary or revoke a departure prohibition order. As Buchanan J held, in the context of the statutory scheme as a whole, what would be surprising is if "departure in the absence of satisfactory security would be contemplated in a case of refusal to provide security or an unsuccessful negotiation about what would constitute satisfactory security" (at [26]). Yet this is the practical result of Mr Lui's interpretation. 39 Nor does the extrinsic material suggest that a contrary construction is appropriate. The AAT's reasons set out the relevant extracts at [11]-[14]. It is true that two of the extracts (at [11] and [14]) omit any reference to the person being unable to give security and speak only of departure being authorised on humanitarian or general policy grounds. But one of the references does include a reference to the precondition that the person must be unable to give security (at [12]). At best, the extrinsic material is itself ambiguous. It by no means "strongly supports" Mr Lui's construction as claimed. 40 For these reasons we consider that the questions of law identified in the notice of appeal should each be answered "no". Accordingly, the appeal must be dismissed with costs. I certify that the preceding forty (40) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices Stone, Edmonds and Jagot.

Associate: Dated: 3 September 2009 Counsel for the Applicant: Mr S Gibb SC and Mr I Young

Counsel for the Respondent: Mr D J Fagan SC and Mr G T Johnson

Solicitor for the Respondent: Australian Government Solicitor