McDonald v Commissioner of Business Franchises

The respondent ("the Commissioner") by complaint and summons issued out of the Magistrates' Court at Melbourne sought an order for the payment by the appellant ("McDonald") of moneys claimed to be due to the Commissioner under the Business Franchise (Tobacco) Act 1974 Vic ("the Act"). The Commissioner, pursuant to s. 19B of the Act, sued to recover amounts allegedly "due and payable under an assessment" made under s. 19A of the Act. Section 19A(1)(d) of the Act prior to its amendment by the Business Franchise Acts (Amendment) Act 1988 Vic ("the 1988 Amendment Act") read as follows:

(d) the Commissioner has reason to believe that a person is carrying on or has carried on a business of tobacco retailing, tobacco wholesaling, petroleum retailing or petroleum wholesaling without having made an application for the appropriate licence under the Business Franchise Acts;

the Commissioner may make an assessment of the amount that in his judgment should have been paid had the application been made and that person shall be liable to pay that amount less any amount previously paid by a person in respect of an application referred to in paragraph (a), (b), (c) or (e) except insofar as he establishes on objection or appeal that the assessment is excessive.

To prove the Commissioner's case, counsel tendered a number of documents purporting to be copies of notices of assessment made in accordance with s. 19A(1) of the Act. The amounts allegedly payable according to the notices represented amounts which McDonald should have paid had he made an application for a tobacco wholesaling licence for the months of September 1986 to November 1987 inclusive. Each of the notices was dated 11 September 1989 and it was common ground that that was the date on which the Commissioner purported to assess the amounts in respect of which the several notices were issued. However, by s. 20(1) of the 1988 Amendment Act, which came into operation on 1 December 1988, s. 19A(1)(d) had been amended by deleting ", tobacco wholesaling, petroleum retailing or petroleum wholesaling" and by substituting the words "or petroleum retailing". Thus the power to make an assessment of the amount that should have been paid by a person if that person had applied for a tobacco wholesaling licence was removed from the Act.

McDonald contends that, when the amendment came into operation on 1 December 1988, the power to make an assessment of amounts that should have been paid in respect of tobacco wholesaling prior to that date ceased and that the notices of assessment were not, and could not purport to be, notices of assessment for the purposes of the Act. The Commissioner contends that that is a submission which s. 19E(2) of the Act precludes McDonald from making in proceedings for the recovery of the amounts for which the assessments were raised. An objection for want of power, so the argument runs, can be taken only in proceedings on objection or appeal against the assessment for which the Act provides in ss. 16-18B [1] .

1. Federal Commissioner of Taxation v Dalco (1990), 168 C.L.R. 614, at pp. 621-622; McAndrew v Federal Commissioner of Taxation (1956), 98 C.L.R. 263, at p. 282.

The production of a notice of assessment, or a document under the hand of the Commissioner purporting to be a copy of a notice of assessment is conclusive evidence of the due making of the assessment and (except in proceedings on appeal against or review of the assessment) that the amount and all particulars of the assessment are correct.

This provision reproduces the substantive provisions of s. 177(1) of the Income Tax Assessment Act 1936 Cth which has been considered in this Court in a number of cases. The Commissioner relies on a passage in the joint judgment of Mason and Wilson JJ. in F. J. Bloemen Pty Ltd v Federal Commissioner of Taxation [2] :

An explicit and, in our view, correct statement of the effect of s. 177(1) was made by Taylor J. in McAndrew [3] . For the reasons there expressed his Honour concluded that "s. 177(1) was intended to make it impossible for a taxpayer, in proceedings other than appeal against it, to challenge an assessment on any ground". He conceded that the word "excessive" in s. 190(b) was inappropriate. However, he considered that an assessment "made in purported but not justifiable exercise of a statutory power" could properly be described as "excessive" [4] .

This interpretation gives expression to the policy which underlies, and is manifest in, the statutory provisions. The effect of this policy is that, once the Commissioner takes advantage of s. 177(1) by producing an appropriate document, the taxpayer is precluded from contesting that the Commissioner has made an assessment or that in making the assessment he has complied with the statutory formalities. The taxpayer is entitled to dispute his substantive liability to tax in proceedings under Pt V.

1. (1981) 147 C.L.R. 360, at p. 375. 2. (1956) 98 C.L.R., at pp. 281-282. 3. ibid., at p. 282.

Pointing to the form of the copy notices of assessment and submitting that each of those notices is "an appropriate document", the Commissioner contends that s. 19E(2) restricts objections to the validity of an assessment for want of power to proceedings "on appeal against or review of the assessment". The Commissioner submits that McDonald cannot challenge the validity of the purported notices of assessment in proceedings brought to recover the amounts specified in the notices. The magistrate upheld the Commissioner's submission that, in the recovery proceedings, the Court could not go behind the purported notices of assessment to inquire into the Commissioner's power to make the assessments. He ordered that McDonald pay the Commissioner's claim for $368,499.60 together with $46,642.63 interest and $2,261 costs. On the return of an order nisi to review the magistrate's order, Fullagar J., speaking for the Appeal Division of the Supreme Court of Victoria [5] , pointed out that each assessment in the present case relates to alleged tobacco wholesaling in a period of time in which tobacco wholesaling was taxable under the Act. His Honour then referred to certain provisions in s. 14(2) of the Interpretation of Legislation Act 1984 Vic reading as follows:

(b) expires, lapses or otherwise ceases to have effect -

the repeal, amendment, expiry, lapsing or ceasing to have effect of that Act or provision shall not, unless the contrary intention expressly appears -

(e) affect any right, privilege, obligation or liability acquired, accrued or incurred under that Act or provision.

His Honour thought it was open to the Commissioner to form the view, in the light of this provision, that she had power to make an assessment after 1 December 1988 in respect of amounts that should have been paid for a tobacco wholesaling licence for periods prior to 1 December 1988. In his Honour's view, that was sufficient to attract the operation of s. 19E(2). He said [6] : In my opinion mere absence of power appearing after the recovery court's perusal of the statute relied upon is not enough to show that the assessments are bad upon their face. To do that, the view of the law which must be attributed to the Commissioner to bring the assessments within power, or the view of the facts which must be taken in order to bring the assessments within power, must be so untenable or absurd that it simply could not have been taken by an honest Commissioner. [T]he argument for the appellant certainly cannot succeed in the present case, because the assessments are not, on their face, other than assessments under the Franchise Act, and accordingly the conclusiveness provision makes it impossible to challenge in the recovery court the due making of the assessments. Accordingly, it was held "that the production of each copy notice of assessment in the recovery proceedings was conclusive evidence of the due making of the assessment and conclusive evidence that the amount and all particulars of the assessment are correct" [7] . The order nisi was discharged. 1. McDonald v Commissioner of Business Franchises [1992] 1 VR. 611. 2. ibid., at p. 618. 3. [1992] 1 V.R., at p. 620.

The question whether there was in law any power to raise the assessments after 1 December 1988 was not decided by the Appeal Division; what was decided was that s. 19E(2) precluded that question from being agitated in recovery proceedings unless the circumstances satisfied the test expressed by Fullagar J. But, with respect, the application of s. 19E(2) depends upon the existence of that power at the time when the purported assessments were made. The notices can neither be, nor purport to be, notices of assessment for the purposes of the Act with respect to amounts that should have been paid for tobacco wholesaling licences if the Act conferred no power on 11 September 1989 to make such assessments at that time. If McDonald can satisfy the Appeal Division that the Act conferred no power to make the assessments purportedly made on 11 September 1989, the notices cannot be "a document under the hand of the Commissioner purporting to be a copy of a notice of assessment" for the purposes of the Act. A document cannot purport to be a copy of a notice of assessment under the Act if it relates to an "assessment" which, by reference to the Act, the Commissioner is seen to have no power to make.

The problem which this case raises does not arise under the Income Tax Assessment Act. There, the power to make an assessment is continuing and a document which purports to be a notice of assessment, if in appropriate form, purports to give notice of an exercise of the statutory power. Such a document attracts the operation of s. 177(1) of the Income Tax Assessment Act even though a condition governing the exercise of the power is disputed. A document which purports to notify an exercise of a statutory power to make the assessment can attract the operation of provisions such as s. 19E(2) of the Act and s. 177(1) of the Income Tax Assessment Act, but a document which purports to notify an "assessment" made when the Act confers no power to make it cannot attract the operation of such protective provisions [8] . If it were otherwise, a legislative withdrawal of a power to assess could be overridden by an officer who asserted herself to have the power.

1. Although s. 19E(2), like s. 177(1) of the Income Tax Assessment Act, refers to a document "purporting to be a copy of a notice of assessment", the legislative protection should be held to extend to purported copies of notices of purported assessments where the document appears to record or evidence a valid exercise of the power to make an assessment: see F. J. Bloemen Pty Ltd v Federal Commissioner of Taxation (1981), 147 C.L.R., at pp. 372, 378.

In this case, the Appeal Division's decision turned solely on the application of s. 19E(2) of the Act. That provision will apply if on a true construction of the Act and, perhaps, on an application of s. 14(2) of the Interpretation of Legislation Act, it is held that there was statutory power enabling the Commissioner on 11 September 1989 to make assessments of amounts which should have been paid by a person who was carrying on a business of tobacco wholesaling prior to that date and had applied for the appropriate licence under the Act. But if there was no such power, s. 19E(2) does not apply. The Appeal Division, approaching the matter from a different viewpoint, did not find it necessary to decide whether there was or was not such a power. Holding s. 19E(2) to apply, their Honours did not need to consider McDonald's argument that there was no power conferred on the Commissioner to make the "assessments" of 11 September 1989. For the reasons stated, that question must be determined.

We would therefore allow the appeal, set aside the judgment and order of the Appeal Division of the Supreme Court of Victoria and remit the matter to that Court to determine the matter in accordance with this judgment.