Macquarie Bank Limited v Commissioner of Taxation

REASONS FOR JUDGMENT Introduction 1 This matter involves an urgent application on an ex parte basis for interlocutory injunctive relief. The applicant seeks to restrain, until further order, the Commissioner of Taxation from issuing amended assessments to the applicant in circumstances where the applicant apprehends that the Commissioner is going to apply, retrospectively, a changed view on the law appertaining to Overseas Banking Unit ('OBU') expense allocations. The proceedings are brought by way of an originating application for judicial review under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and also under the Court's jurisdiction conferred by section 39B of the Judiciary Act 1903 (Cth). 2 The subject matter of the judicial review challenge is a decision, made by an officer of the ATO, recorded in a letter dated 17 January 2013. The applicant was told, in effect, that the ATO will apply retrospectively the Commissioner's new view on the law concerning the allocation of OBU expenses. Briefly stated, the issue relates to what is said to be a change of policy or change of view on the part of the Commissioner as to the accounting methodologies which are acceptable for the purpose of section 125EF of the Income Tax Assessment Act 1936 (Cth). 3 The applicant has asserted that the Commissioner had previously accepted the appropriateness of taxpayers employing what was described as ordinary financial accounting methodologies or management accounting for the purposes of apportioning OBU expenses under that provision. It appears that the Commissioner now takes a different view on that matter and proposes to issue the applicant with amended assessments, covering, it would seem, at least five taxation years. It appears that the time limit for issuing such amended assessments will expire at the end of February in the case of the first two income tax years and sometime in April, insofar as the third of those taxation years is concerned. 4 The applicant complains that the indication given by the Commissioner as to his change of view is in breach of the ATO practice statement PSLA2011/27 (the Practice Statement), which sets out certain procedures which the ATO is required to undertake if it changes its mind on relevant taxation issues. The Practice Statement deals with the circumstances in which the ATO can adopt a change of view and have it apply prospectively. If it wishes that view to apply retrospectively, the applicant argues that certain procedures or requirements need to be followed and it says that they were not in this case. Consideration 5 There are several grounds of judicial review challenge. They include a primary claim that the decision contained in the letter of 17 January 2013 is Wednesbury unreasonable. Further grounds are also raised of illogicality or irrationality, no evidence to support the decision, failure to take into account a relevant consideration or taking into account of an irrelevant consideration, failure to observe the requirements of natural justice, excess of authority resulting in the decision being ultra vires, and a failure to comply with procedures which the decision-maker, it is said, was required to observe. 6 One of the matters which weighs heavily with the Court in an application such as this is the regime which is created by the Income Tax Assessment Act 1936 (Cth) and in particular, the consequences of provisions such as sections 170 and notably section 177 of that Act. 7 It is now well established by numerous decisions (including Deputy Federal Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168, Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146, Independent Holdings v Deputy Federal Commissioner of Taxation (1992) 38 FCR 68 and Lucas v O'Reilly (1979) 36 FLR 102), that in the ordinary scheme of things, a taxpayer who is issued with an assessment is, with some exceptions, to avail himself or herself of the statutory review or appeal procedures that are provided for under Part IVC of the Taxation Administration Act 1953 (Cth), either in the Administrative Appeals Tribunal or in this Court. Save for the purposes of such Part IVC proceedings, the production of an assessment by the Commissioner is conclusive evidence of the correctness of the assessment and the particulars thereof. 8 I referred to there being exceptions to the general approach which is manifest in cases such as Richard Walter and Futuris. They concern rare instances, it should be said, where there are allegations of bad faith or fraud or abuse of power. Such matters are dealt with, in particular, in the High Court decision in Futuris, with particular reference to the relative narrowness of the concept of bad faith in this context. There is no allegation of bad faith made against the Commissioner or his officer in the proceedings here. 9 I have no doubt that the absence of any claim of bad faith reflects a responsible decision taken by the applicant's legal representatives, reflecting the well established principle that such allegations are not to be made lightly and are only to be made where there is a proper basis for doing so. 10 There are a number of first instance decisions which highlight the rare circumstances where a court would restrain the Commissioner from proceeding with the discharge of his statutory obligations and powers under taxation legislation by issuing interlocutory injunctions to restrain the issue of assessments or, in this case, more appropriately, amended assessments. 11 I have in mind decisions such as the decision of the Chief Justice of Victoria in Lucas v O'Reilly and also the decision of Spender J in Independent Holdings Limited. With regard to these cases, the possibility cannot be ruled out that there might, in an exceptional case, be some judicial review basis that might warrant such a restraining order being issued but it would, in my respectful opinion, require a quite exceptional case, perhaps involving bad faith. I do not consider that the matters raised in this originating application amount to such an exceptional case. 12 I have noted that the applicant has proffered an undertaking as to damages and also offers to consent to an extension to the time period for issuing amended assessments, bearing in mind the imminence of the deadlines in the case of three of the income tax years. But the position remains that the balance of convenience here does not favour the applicant when regard is had to the unusual statutory regime. It puts the Commissioner of Taxation in a much more favourable position than private litigants. 13 I have also had some regard to the delay which appears to have occurred in the bringing of these proceedings. As I have indicated above, the decision which is the subject of the judicial review application is a decision contained in a letter dated 17 January 2013. One might infer it was received by the applicant shortly thereafter. More than three and a half weeks passed before the current application was filed. Although I have had regard to a supporting affidavit by Mr Speed, sworn on 12 February 2013, I haven't been taken to any part of that affidavit which would explain why it is that the applicant has taken three and a half weeks to initiate these proceedings. 14 That is a matter to which I have given some but by no means substantial weight in my decision. My decision is primarily based upon the principles that I have outlined above, as reflected in decisions such as Lucas v O'Reilly and Independent Holdings. I do not believe that those decisions are distinguishable from the current interlocutory application on the basis that the challenge here is not to the actual decision to issue the assessments, but rather on an anterior decision. 15 I should also say something about an argument that was put by Mr Jackman SC who, together with Ms Seiden, presented the case very ably for the applicant. That argument was to the effect that there was a concern that the applicant's arguments regarding denial of procedural fairness and non-compliance with the requirements laid out in the Practice Statement, may not be able to be raised in Part IVC proceedings because those matters relate to process, as opposed to substantive issues going to the quantum of the taxation liability. The matter was put no higher than a concern. For my own part (and I do not need to express a final view on it), I am not persuaded that the risk of the applicant not being able to agitate in Part IVC proceedings the sorts of matters that are reflected in the judicial review application are sufficiently certain or clear as to warrant interlocutory relief being granted. Conclusion 16 I am, however, prepared to grant an abridgement of time to enable this matter to come back on Thursday, 14 February 2013 at 2.15 pm, before Edmonds J. For all those reasons, I note the applicant's solicitor undertaking to pay the applicable filing fees, I grant leave to the applicants to file an originating application, dated 12 February 2013, in Court and also, grant leave to file an affidavit of Peter Stuart Speed, sworn on 12 February 2013 in Court. I direct that the originating application be made returnable at 2.15 pm on Thursday, 14 February 2013 before Edmonds J. I abridge the time for service to 6:00 pm Tuesday, 12 February 2013, such service to be made by way of email, both to the relevant officer of the Australian Taxation Office and to the ATO Legal Practice Unit. I further order that exhibit B to the affidavit of Mr Speed be kept confidential and access be restricted to the parties and to their external legal advisers. 17 I otherwise dismiss the interlocutory application. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.