Pratten v Commissioner of Taxation

Federal Court of Australia|2015-12-04|Before: Robertson J

The application be dismissed.
The applicant pay the respondent's costs, as agreed or taxed, those costs to include the costs of the final hearing on 13 October 2015, the costs of the interlocutory hearing on 16 September 2015, and the costs of the directions hearings on 13 May 2015, 27 May 2015, 24 June 2015, 6 August 2015, 16 September 2015 and 23 September 2015. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 403 of 2015

JUDGE: ROBERTSON J DATE: 4 December 2015 PLACE: SYDNEY

Introduction 1 These proceedings under s 39B of the Judiciary Act 1903 (Cth) concern Amended Assessments issued on 4 August 2010 for the financial years ended 30 June 2002 to 30 June 2009 (Amended Assessments). Those Amended Assessments were made by the respondent Commissioner of Taxation (the Commissioner) under s 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA 1936). 2 The applicant, Mr Pratten, who is self-represented, seeks orders that the Amended Assessments be declared invalid and quashed. The originating application also sought "an interlocutory injunction preventing the Respondent from making any further use of the Amended Assessments subject to further Orders of this Court". 3 The applicant thus invokes the jurisdiction of this Court as explained principally in Federal Commissioner of Taxation v Futuris Corporation Ltd [2008] HCA 32; 237 CLR 146 and in Denlay v Federal Commissioner of Taxation [2011] FCAFC 63; 193 FCR 412. The applicant's complaint, therefore, must be one of error attracting the exercise of jurisdiction to issue the remedies conferred on this Court by s 39B. Where s 175 of the ITAA 1936 operates "there will be no affectation of the validity of any assessment": Futuris at [47]. 4 In Futuris, the plurality said, at [25], [54]-[57], [60] and [66]: But what are the limits beyond which s 175 does not reach? The section operates only where there has been what answers the statutory description of an "assessment". Reference is made later in these reasons to so-called tentative or provisional assessments which for that reason do not answer the statutory description in s 175 and which may attract a remedy for jurisdictional error. Further, conscious maladministration of the assessment process may be said also not to produce an "assessment" to which s 175 applies. Whether this be so is an important issue for the present appeal. … If this finding as to mental element in the making of the assessment were to withstand the challenge in this Court by the Commissioner, would that, contrary to what has been concluded thus far in these reasons, enliven principles respecting jurisdictional error? The issue here is whether, upon its proper construction, s 175 of the Act brings within the jurisdiction of the Commissioner when making assessments a deliberate failure to comply with the provisions of the Act. A public officer who knowingly acts in excess of that officer's power may commit the tort of misfeasance in public office in accordance with the principles outlined earlier in these reasons. Members of the Australian Public Service are enjoined by the Public Service Act (s 13) to act with care and diligence and to behave with honesty and integrity. This is indicative of what throughout the whole period of the public administration of the laws of the Commonwealth has been the ethos of an apolitical public service which is skilled and efficient in serving the national interest. These considerations point decisively against a construction of s 175 which would encompass deliberate failures to administer the law according to its terms. Such failures manifest jurisdictional error and attract the jurisdiction to issue the constitutional writs. To the extent that there is any indication to the contrary in what was said by Mason and Wilson JJ in F J Bloemen Pty Ltd v Federal Commissioner of Taxation that should not be followed. It should be added that, with respect to the remedy of injunction, what was said in the joint reasons in Plaintiff S157/2002 v The Commonwealth indicates that injunctive relief clearly is "available for fraud, bribery, dishonesty or other improper purpose". … 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. Remarks by Hill, Dowsett and Hely JJ in Kordan Pty Ltd v Federal Commissioner of Taxation are in point. Their Honours said: "The allegation that the Commissioner, or those exercising his powers by delegation, acted other than in good faith in assessing a taxpayer to income tax is a serious allegation and not one lightly to be made. It is, thus, not particularly surprising that applications directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful. Indeed one would hope that this was and would continue to be the case. As Hill J said in San Remo Macaroni Co Pty Ltd v Federal Commissioner of Taxation it would be a rare case where a taxpayer will succeed in showing that an assessment has in the relevant sense been made in bad faith and should for that reason be set aside." … 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. (Citations omitted.) 5 In broad terms, the jurisdiction of the Court may be invoked where there have been so-called tentative or provisional assessments or where there has been conscious maladministration of the ITAA 1936 in the assessment process. 6 There are proceedings under Pt IVC of the Taxation Administration Act 1953 (Cth) pending in the Administrative Appeals Tribunal in respect of the Amended Assessments. The applicant contends that if the Amended Assessments are invalid, he will be relieved from being put to the expense and effort of discharging the onus of proof that s 14ZZO of the Taxation Administration Act places on him in such a proceeding to prove assessments excessive. In Futuris, the plurality indicated at [10] that, as a matter of discretion, relief under s 39B may be (and often will be) withheld where there is another remedy provided by Pt IVC. In Futuris the plurality said, at [48], the pendency of a proceeding by the taxpayer under Pt IVC should have led the Full Court to refuse declaratory relief in any event.

The statutory provisions 7 The relevant provisions of the ITAA 1936 as then in force were as follows: 166 Assessment From the returns, and from any other information in his possession, or from any one or more of these sources, the Commissioner shall make an assessment of the amount of the taxable income (or that there is no taxable income) of any taxpayer, and of the tax payable thereon (or that no tax is payable). 167 Default assessment 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 judgment income tax ought to be levied, and that amount shall be the taxable income of that person for the purpose of section 166. 173 Amended assessment to be an assessment Except as otherwise provided every amended assessment shall be an assessment for all the purposes of this Act. 175 Validity of assessment The validity of any assessment shall not be affected by reason that any of the provisions of this Act have not been complied with. 177 Evidence (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 the particulars of the assessment are correct. I note that s 177 was repealed with effect from 1 July 2015 by s 3 and item 24 of Sch 2 to the Treasury Legislation Amendment (Repeal Day) Act 2015 (Cth) and a substantially similar provision is now to be found in item 2 of the table in s 350-10(1) of Sch 1 to the Taxation Administration Act.

Chronology 8 In December 2008, to the knowledge of the respondent Commissioner, search warrants were executed by the Australian Federal Police in connection with Commonwealth offences suspected to have been committed by the applicant. 9 In July 2009, the applicant was notified by the Commissioner of his intention to audit the applicant's tax affairs in relation to the financial years ended 30 June 1996 to 30 June 2009. In August and September 2009, the Commissioner issued to the applicant two notices under s 264 of the ITAA 1936 (now substantially replicated in s 353-10(1) of Sch 1 to the Taxation Administration Act), each of which was shortly afterwards withdrawn following correspondence from representatives of the applicant. The first was withdrawn in August 2009 and the second in September 2009. 10 At the end of May 2010, the Commissioner issued a Position Paper to the applicant. At [279] of the Position Paper the Commissioner stated, by reference to certain facts, that there was sufficient basis for him to form the opinion that there had been an avoidance of tax and that the avoidance was due to fraud and evasion. The Position Paper said that for the years of income in which the normal amendment period had expired, the Commissioner was not limited by the two or four year time limit imposed by s 170(2) or s 170(1) of the ITAA 1936. In relation to penalties, the Position Paper stated, at [303] and [306], that certain specified factors indicated that Mr Pratten, the applicant, intentionally disregarded the law and that the tax shortfall was a result of intentional disregard of the tax law for the income years ended 30 June 2002 to 30 June 2009. 11 The applicant did not respond to the Position Paper. 12 On 4 August 2010, the Commissioner issued Notices of Amended Assessment to the applicant for the financial years ended 30 June 2002 to 30 June 2009, together with notices of assessment of penalties. 13 On or about 20 September 2010, the applicant objected against the Amended Assessments and penalty assessments. 14 On 4 October 2011, the Commissioner disallowed the applicant's objections. The reasons for decision considered, in turn, the grounds of objection stated in Mr Pratten's 20 September 2010 objections against the assessments. In the reasons for decision, it was stated, at [162]: "You are not considered to have provided information to rebut listed propositions in the audit position paper as follows …". At [164], after referring to Deputy Commissioner of Taxation v Vereker (1986) 87 ATC 4010 where Marks J applied Jones v Dunkel [1959] HCA 8; 101 CLR 298, the Commissioner's reasons for decision stated that "you have not discharged the burden of proof in showing that the assessments were excessive". In relation to penalties, the reasons noted, at [310], that Mr Pratten's solicitors advised in their letter of 3 May 2011 that in order to minimise any risk of self-incrimination with regard to other criminal proceedings Mr Pratten did not propose to voluntarily produce any further information. At [311], reference was made to an ATO letter of 22 July 2011 noting that it was still open to Mr Pratten to put forward an explanation of what the relevant circumstances were. 15 On 27 November 2011, the applicant commenced proceedings in the Administrative Appeals Tribunal under Pt IVC of the Taxation Administration Act. In August 2013, the Tribunal adjourned the proceedings. They have yet to be heard and determined. 16 On 10 April 2015, the applicant commenced these proceedings under s 39B. 17 I should also add that in September 2010, the applicant was arrested and charged with seven offences of dishonestly obtaining a financial advantage by deception, that is, in respect of each of his income tax returns for the seven financial years ending 30 June 2003 to 30 June 2009. In June 2012, a jury returned guilty verdicts in relation to all seven counts. The applicant's appeal against conviction was allowed by the New South Wales Court of Criminal Appeal on 1 July 2014. On 9 September 2015, following a retrial, a jury returned guilty verdicts in relation to all seven counts.

Admissions 18 The respondent Commissioner made the following six admissions:

The Commissioner has the collective knowledge of his officers (the Commissioner described this as a general legal proposition that the Commissioner did not take exception to in these proceedings);
The Commissioner was aware of the execution of the search warrants and the contents of the search warrants behind tabs 16 to 20 of the tender bundle, those search warrants being issued in early December 2008 and early May 2009 in respect of five properties, and where the third condition of the three conditions in each of the warrants referred to offences between 23 June 2000 and 26 November 2008 relating to defrauding the Australian Taxation Office contrary to s 29D of the Crimes Act 1914 (Cth); dishonestly causing a loss to the Australian Taxation Office contrary to s 135.4(1) of the Criminal Code Act 1995 (Cth); conspiring with the intention of dishonestly causing a loss to the Australian Taxation Office contrary to s 135.4(1) of the Criminal Code Act; and conspiring to deal with money and intending for that money to become an instrument of crime contrary to ss 11.5(1) and 400.3(1) of the Criminal Code Act;
Mr Steven Barns, an officer with the Australian Taxation Office, was aware of the existence of the criminal investigation being undertaken by the Australian Federal Police;
Mr Barns was aware that the focus of the criminal investigation being undertaken by the Australian Federal Police related to funds that had been received directly and indirectly by Mr Pratten from sources in Vanuatu;
The Commissioner received the letters behind tabs 25 and 26 of the tender bundle, those letters being from a firm of solicitors then acting for Mr Pratten. The first letter was dated 7 August 2009 and raised the question whether an examination of Mr Pratten under s 264 of the ITAA 1936 may be an abuse of power if it was to be used "to obtain evidence on providing assistance in a criminal proceeding or any investigation of a criminal proceeding" and stated that Mr Pratten should not be required to answer the s 264 notice in its entirety in the light of "the current criminal investigation". The second letter, dated 10 August 2009, raised the question whether the issue of a s 264 notice at the same time as a criminal investigation, particularly one involving a joint task force, may be an abuse of process. The letter sought the deferral of any s 264 examination from 12 August 2009;
The Commissioner sent the letter dated 15 February 2011 forming part of Exhibit C and received the letter in reply dated 3 May 2011, also forming part of Exhibit C. The first of those letters stated that the Commissioner required additional information to make a decision based on the grounds Mr Pratten had set out in his objection received on 20 September 2010. The letter stated: "You need to provide the additional information by 15 March 2011. If you cannot provide this information by this date, please contact …". The letter continued: What information is required Please provide reasons for the contentions in your objection that the Commissioner • was out of time in making the assessments; • did not take account of your particular circumstances and did not make use of all available and relevant information in issuing the section 167 assessments. What are the particular circumstances and relevant information that you consider were not taken into account by the Commissioner at the audit stage? Please provide any relevant information or evidence to support your contention that the Commissioner did not take into account 'the deductions that would be allowable under the tax act'. What are the allowable deductions that you refer to? In page 2 of your objection against the assessment of administrative penalties you refer to 'facts and my circumstances" that you feel are relevant to the remission of the penalties. Please advise what the particular facts and circumstances are that you are referring to. Please provide any relevant information or evidence to support your contentions in relation to all relevant income years (2002 through to 2009), including that you did not derive the additional amounts of income that were assessed to you. If you do not supply this information If the additional information is not received by 15 March 2011, we may decide your objection based on the facts available. (Bold in original.) The second of those letters was from the lawyers then acting for Mr Pratten who said that they had only recently received instructions to act. The relevant part of the letter was as follows: In your letter dated 15 February 2011 you requested further information concerning Mr Pratten's objections. You also indicated that you may decide the objections on the facts available if the further information was not received by 15 March 2011. As you would be aware, Mr Pratten is currently the subject of a criminal prosecution arising out of the same alleged factual matrix as is contended by the ATO. Without prejudice to the objections, in order to minimise any risk of self-incrimination with regard to the criminal proceedings, we advise that Mr Pratten does not propose to voluntarily produce any further information.

Findings 19 I find that the Commissioner, through his officers, was aware of the contents and execution of the search warrants at the time they were so executed, and thus he was aware that the applicant was under criminal investigation. The Commissioner, through his officers, was also aware of the contents of letters written by the applicant's solicitors to the Commissioner in respect of the s 264 notices those letters being dated 7 August 2009 and 10 August 2009. It is not clear from the terms of those letters, which I have set out at [17(5)] above, that they raised the issues of the applicant's right to silence or privilege against self-incrimination. I also find that the second notice was withdrawn because of concerns expressed by the applicant's then solicitors about self-incrimination. In addition, I find that the Commissioner was aware, from 3 May 2011, that Mr Pratten had decided not to provide voluntarily to the Commissioner further information concerning his objections, in order to minimise any risk of self-incrimination in relation to the criminal proceedings.

The submissions 20 At the heart of the applicant's case was the proposition that the Commissioner knew or ought to have known that the reason that the applicant did not respond to the Position Paper was because he was claiming a right to silence and privilege against self-incrimination. The applicant submitted that for him to respond adequately to the propositions in the Position Paper would have necessarily required him to consider waiving his right to silence. The applicant's submissions raised the following grounds.

Procedural fairness 21 The applicant's evidence was that he did not respond to the Position Paper. He submitted that there was a practical injustice to him, because he had exercised his right to silence and privilege against self-incrimination properly. He had not been contemptuous of the Commissioner's powers. In fact, he had provided much other material in response to similar inquiries conducted at the time in relation to a family company and family trust. And so, the applicant submitted, there was no reason for the Commissioner to take the view that he was not responding because he was in some way recalcitrant or dismissive of those powers. 22 In my opinion, it is to be recalled that the relevant principle of procedural fairness, assuming it to apply to the making of assessments, is that a person should have the opportunity to be heard before the power is exercised. But much narrower considerations apply in light of s 175 of the ITAA 1936. 23 There is specific authority for the proposition that a challenge under s 39B of the Judiciary Act to an assessment is not maintainable on the ground of mere denial of procedural fairness: those cases include Roberts v Deputy Commissioner of Taxation [2013] FCA 1108; 228 FCR 280 at [42] (leave to appeal refused: Roberts v Deputy Commissioner of Taxation [2015] FCA 238]) and Deputy Commissioner of Taxation v Chemical Trustee Ltd [2010] FCA 1297; 81 ATR 237 at [49]. 24 In Roberts, Besanko J said as follows, at [19]: The leading case on the scope of judicial review under s 39B(1) of the Judiciary Act when the decision in question is an assessment under the ITAA 1936 is the decision of the High Court in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146 (Futuris). The following principles emerge from that case: (1) Section 175 must be read with ss 175A and 177(1). The validity of an assessment is not affected by a failure to comply with the Act, but a dissatisfied taxpayer may object against an assessment in the manner set out in Pt IVC of the TAA. Errors in the process of assessment do not go to jurisdiction where s 175 applies and so do not attract constitutional writs (at [24]). (2) Section 175 does not protect from the reach of a constitutional writ a jurisdictional error which means that there is no "assessment" because of one of the following reasons: (a) the "assessment" is tentative or provisional; or (b) the "assessment" is the result of conscious maladministration in the assessment process. (at [25]). (3) The equitable remedies of injunction (s 39B(1) of the Judiciary Act) and declaration (s 21 Federal Court of Australia Act), although not controlled by the principles of jurisdictional error, operate to declare invalidity and restrain unlawful exercises of power. Where s 175 operates there is no invalidity (at [47]). (4) An assessment is tentative or provisional if it fails to specify the amount of the taxable income which has been assessed and the amount of tax payable (at [50]). (5) A deliberate failure to administer the law according to its terms is a case of conscious maladministration and outside the protection afforded by s 175 of the ITAA 1936 (at [55]). 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 (at [60]). (6) Section 177(1) is not a privative clause in the ordinary use of that term. The section operates to change what otherwise would be the operation of the relevant rules of evidence. The section is not going to have any effective operation in the case of proceedings for judicial review because its wording is not apt to cover allegations of "corruption or other deliberate maladministration" (at [64]-[66]). (7) The appeal was to be decided by the path taken in the reasons and not by any course assumed to be mandated by what was said in one or more of the several sets of reasons in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (1995) 183 CLR 168 (Richard Walter Pty Ltd) (at [70]). 25 His Honour identified, by reference to Futuris, particularly at [25] and [66], two categories of error, those categories being so-called tentative or provisional assessments and conscious maladministration of the assessment process. His Honour continued, at [42]: In my opinion there are only two categories of error which are not protected by s 175 of the ITAA 1936. The other forms of what constitutes jurisdictional error in other areas of administrative law are not sufficient, nor is recklessness in an expanded sense or carelessness in the administrative process. I accept as arguable for the purposes of this application that that form of recklessness which bears a close affinity with deliberate conduct (and which I have described above) may be sufficient and I will proceed on that basis. For reasons I will now give, the applicant's case falls well short of establishing an arguable case of conscious maladministration or reckless maladministration in the sense I have described. 26 In Chemical Trustee Ltd, although not referring to Futuris, Kenny J said as follows, at [49]: In summary, on the one hand, the Hickman principle as stated by Mason CJ in Richard Walter does not extend the protection of ss 175 and 177 to assessments that are not made in good faith or to "assessments" that, on their face, are not assessments at all. Nor do these provisions offer protection in the case where the Commissioner concedes that no attempt to ascertain or estimate the taxpayer's taxable income has yet been made: see [Re Briggs; Ex Parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310]. On the other hand, the effect of ss 175 and 177 is to preclude judicial review of assessment decisions in proceedings under s 75(v) of the Constitution or s 39B of the Judiciary Act 1903 (Cth) for error of law, failure to take into account mandatory relevant considerations and breaches of procedural fairness. In conformity with this understanding, Brennan J said in Richard Walter [at 196]: … if s 175 confers validity on assessments made in a bona fide attempt to exercise the power to make them, it authorises the Commissioner to determine in good faith, rightly or wrongly, the application of the general provisions of the Act to the facts of the particular case subject to correction by the objection, review and appeal procedures. That accords with the policy of the Act which most clearly appears from the text of s 177(1). See also Richard Walter [at 211, 213] per Deane and Gaudron JJ, [at 227] per Toohey J and [at 242] per McHugh J. Further, in Warrick (No 2) [Deputy Commissioner of Taxation v Warrick (No 2) (2004) 56 ATR 371 at [86]], French J rejected an argument that the decision of the High Court in Plaintiff S157/2002 v Commonwealth [(2003) 211 CLR 476] required a reconsideration of the authorities with respect to ss 175 and 177 of the ITAA 1936. See also Deputy Commissioner of Taxation v Hua Wang Bank Berhad (No 2) [2010] FCA 1296; 81 ATR 40 at [48] per Kenny J. 27 In my opinion, therefore, the claim of relief under s 39B based on denial of procedural fairness must fail. It fails on the facts, there being no unfairness and no knowledge on the part of the Commissioner of unfairness, and it fails on the law, as explained in Roberts for example. 28 Further, in my opinion, the applicant's central submission that "there is sufficient evidence to demonstrate the Commissioner's audit and like processes leading up to the amendment(s) of the assessments, was performed in reckless disregard of due and fair process, and in a manner contrary to the principles of administrative law and the doctrine of natural justice …" fails on the facts. 29 The Commissioner provided to the applicant the Position Paper and, as I have said, on the applicant's evidence he did not respond to it. I have set out at [17(6)] above the relevant parts of Mr Pratten's solicitors' letter dated 3 May 2011 in response to the Commissioner's request for more information in considering Mr Pratten's objections to the assessments. To the extent that the applicant submitted that the Commissioner should not have made the Amended Assessments until, in effect, notified by the applicant that he did not wish to claim a right to silence or a right against self-incrimination is unsustainable, in my opinion, in light of the Commissioner's duty under s 166 of the ITAA 1936. Put differently, I do not accept the submission that the assessment process must be delayed or deferred because a taxpayer does not provide information for the reason that the taxpayer is exercising his right to silence or privilege against self-incrimination. 30 Mr Pratten also tendered an extract from the Commissioner's Practice Statement Law Administration (PS LA 2007/24) which stated, at paragraph 8, that s 167 of the ITAA 1936 allowed the Commissioner to make an assessment of the amount upon which, in his or her judgment, income tax ought to be levied and that, given the objective nature of this judgment, tax officers must ensure that their decisions are fair, made on reasonable grounds and that there is sufficient information available to them to make a genuine judgment. In my opinion, this statement takes the matter no further.

Unreasonableness 31 The applicant submitted that the respondent Commissioner acted unreasonably. The argument appeared to me to be related to the procedural fairness ground. 32 For the same reasons as I have given in relation to the procedural fairness ground, in my opinion, mere unreasonableness does not give rise to a remedy under s 39B in light of s 175 of the ITAA 1936. 33 The applicant submitted that the Commissioner knew at the time he issued the Position Paper that the applicant had exercised his privilege and that for the applicant to respond to the propositions in the Position Paper, to the degree necessary to satisfy the Commissioner of an alternate position, the applicant would be placed in the invidious position of having to consider waiving the privilege either in totality, or at least substantively, with the effect of rendering the privilege of little utility, if any at all. In these circumstances, the applicant submitted, the Commissioner could not reasonably have held the opinion that the applicant failed to respond to the Position Paper in wilful disregard of it but nevertheless drew adverse inferences and adverse conclusions about the applicant for not rebutting or challenging the listed propositions in the Position Paper. The Commissioner could not reasonably have held the opinion that information from the applicant would not have been significantly relevant to him in forming his judgment in determining the manner in which the assessments would issue and/or in the sums they did. 34 In oral submissions, Mr Pratten said that that conscious maladministration came about by the recklessness of the Commissioner throughout the audit process and in making the Amended Assessments. There was no controversy, Mr Pratten submitted, that the Commissioner accepted that he was aware that Mr Pratten was under a criminal investigation during the course of the audit process at the time the Commissioner issued the Position Paper, at the time he issued the Amended Assessments, and at the time he knew that Mr Pratten had been charged, and criminal proceedings were pending at the time that he made the objection decision. 35 Mr Pratten submitted that when the first s 264 notice was issued, he engaged lawyers who wrote to the Commissioner and raised objections that went to the heart of the matter of his privilege and his concerns that he was under investigation at the time, and the Commissioner by that time was aware of that situation. The Commissioner did not proceed with the first s 264 notice. 36 Mr Pratten was given leave to file further written submissions after the hearing of his application in relation to what the position would be if the Position Paper or the Commissioner's statement of reasons for decision had noted that the Commissioner did not have a response from Mr Pratten because he had claimed his right to silence or privilege against self-incrimination. This leave was not exercised. 37 I find the Commissioner did proceed on the basis that the applicant had not showed that the assessments were excessive and that he was not considered to have provided information to rebut the listed propositions in the audit Position Paper. 38 I accept that the Commissioner in disallowing the objections proceeded on the basis that the applicant could have provided the information. I do not accept Mr Pratten's submission that the Commissioner took the view that Mr Pratten was not responding because he was in some way recalcitrant or dismissive of those powers. 39 In my opinion, the applicant's claim of unreasonableness was not made out. As I have said, he provided no answer to the Position Paper. Although, as I have found, the second notice under s 264 was withdrawn because the applicant's solicitors expressed concerns about self-incrimination, it was not evident to the Commissioner or his officers, nor should it have been, that the applicant wished to claim a right to silence or a right against self-incrimination in respect of the Position Paper. 40 It was not made clear in the applicant's submissions how his claims of a right to silence and privilege against self-incrimination intersected, at a factual level, with the listed propositions. 41 In my opinion, there was no unreasonableness on the part of the Commissioner. It is also to be borne in mind that s 166 of the ITAA 1936 imposes a duty upon the Commissioner. 42 Even if there were unreasonableness, on the facts of the present case I see no basis for concluding that the Amended Assessments were the result of actual bad faith towards the applicant or involved conscious maladministration, as explained in Futuris, affecting the integrity of the Amended Assessments.

Amended Assessments tentative or provisional: no genuine attempt at making an assessment 43 In my opinion, there is no basis for the claim that the Amended Assessments were tentative or provisional or that there was no genuine attempt at making an assessment. 44 In Marijancevic v Mann [2008] FCAFC 161; 73 ATR 709 the Full Court said as follows, at [20]: We accept that, as the Commissioner argued, deliberate or conscious maladministration is not shown by reason of the fact that the assessments under s 167 were subsequently the subject of objections (which were successful in part) and review (which was successful in an even greater part). This was no more than the working out of the processes for which Pt IVC of the TAA provides. It will be recalled that Pt IVC makes provision for the making of taxation objections and their disposition and for review by the Tribunal (as well as provision for what is termed an "appeal" to this court against decisions of the Commissioner upon certain taxation objections). In making default assessments under s 167 of the ITAA 1936, the Commissioner is entitled to exercise his judgment to arrive at the figure upon which income tax ought to be levied even though he is not in possession of all relevant information and he is aware that the figure may well be incorrect: see [R v Deputy Commissioner of Taxation (WA); ex parte Briggs (1987) 14 FCR 249 at 270 per Sheppard J]; and [Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 87-88 per Latham CJ]. As Sheppard J said in Briggs [at 270]: The essential question … is whether there was any assessment at all. The fact that it may have been able to be better done than it was will not make it a nullity if in truth the process of assessment, however unsatisfactorily, or even erroneously, it may have been done, was carried out. What is involved is a judgmental exercise to determine whether what [the Commissioner] did constituted an assessment or was an exercise unrelated to the prosecutor's circumstances. 45 In the present case, there is nothing to suggest that the Commissioner did not make a genuine attempt at assessing the amount upon which income tax ought to be levied. For example, at paragraph 58 of the reasons for decision disallowing the applicant's objections the following was said: Notwithstanding the fact that the Commissioner did not hold full records of all transactions and cash flows, structures and legal relationships, the Commissioner had obtained specific information regarding amounts received by your (sic) or applied on your behalf and arrangements involved. From that information the Commissioner had undertaken a process to ascertain a true and fuller understanding of the facts relevant to your circumstances. 46 Merely because the applicant may have provided further information to the Commissioner at some point after the end of his criminal proceedings does not go anywhere near to establishing that the Amended Assessments were tentative or provisional or that the Commissioner made no genuine attempt to assess the relevant amount. The Amended Assessments were not an exercise unrelated to the applicant's circumstances. There was neither "conscious maladministration" of the assessment process nor any deliberate failure to administer the ITAA 1936 according to its terms.

General consideration 47 The applicant referred in his submissions to the decision in Donoghue v Commissioner of Taxation [2015] FCA 235; 323 ALR 337. I see no analogy between that case, which concerned the Commissioner's use of communications which were held to be subject to legal professional privilege, and the present case, where the applicant's complaint is that the Commissioner should not have issued the Amended Assessments in light of the applicant's claim to exercise a right to silence or privilege against self-incrimination in respect of the Position Paper and the objection decision. It is to be recalled that in Donoghue, at [145], Logan J held that the process of assessment included the tax officer acting in wilful disregard of a right which Mr Donoghue had to claim legal professional privilege in respect of the material supplied to the Australian Taxation Office by one Simeon Moore and which the tax officer always believed might be privileged. It was held that this was not a proper purpose. It was further held that the tax officer was reckless in the sense referred to in Futuris. There is nothing in the present case which could be characterised as recklessness on the part of the Commissioner or his officers. Contrary to Mr Pratten's submissions to this Court, there has been no conscious maladministration of the ITAA 1936. 48 I should add that I see no relevant analogy between s 264 of the ITAA 1936 as then in force, concerning a power to require the provision of information, the production of documents and to attend and give evidence, and the making of an assessment or an amended assessment under s 166 or s 167 of the ITAA 1936. 49 In my opinion, nothing pointed to by the applicant establishes conscious maladministration apt to vitiate the Amended Assessments. As the Full Court pointed out in Denlay v Commissioner of Taxation [2011] FCAFC 63; 193 FCR 412 at [78], conscious maladministration, as explained in Futuris, involves actual bad faith on the part of the Commissioner or his officers. No such actual bad faith has been established.

Discretion 50 The Commissioner submitted that if the applicant's grounds prima facie afforded him the declaratory relief he sought, that relief ought to be declined on discretionary grounds. Reference was made to Futuris at [48] and to Mount Pritchard & District Community Club Ltd v Federal Commissioner of Taxation [2011] FCAFC 129; 196 FCR 549 at [63]. I have referred at [6] above to the relevant paragraphs in Futuris. I agree that the existence of the Pt IVC proceedings would normally mean that no declaratory relief should be made in relation to the Amended Assessments. In the present case, it remains open to the applicant to demonstrate in his Pt IVC proceedings that the Amended Assessments were "excessive": s 14ZZK(b)(i) of the Taxation Administration Act. It is in those proceedings Mr Pratten should agitate, for example, whether fraud or evasion was made out: see McAndrew v Federal Commissioner of Taxation [1956] HCA 62; 98 CLR 263 at 271, approved in Federal Commissioner of Taxation v Dalco [1990] HCA 3; 168 CLR 614 at 621-622. Although it may not be in every case that relief should be refused under s 39B in respect of a challenge to the validity of an assessment, Futuris establishes that relief should be refused at least where Pt IVC provides a remedy. Even if Mr Pratten had established one or more than one of the grounds of review on which he relied, I would have refused, in the exercise of the Court's discretion, to grant relief under s 39B.

Rulings on evidence 51 Mr Pratten sought to tender transcript, pages 1587 and 1588, taken from his first criminal trial. The relevant parts, both of which were to be found on page 1587, were in the cross-examination of Mr Barns on 22 May 2012 and were, first, as to Mr Barns' recollection of his evidence given the previous day as to his understanding of whether Mr Pratten remained silent in relation to the audit process and whether that was because he was exercising his right not to incriminate himself, and whether the ATO withdrew a s 264 notice it had previously issued to Mr Pratten. The Commissioner submitted that neither exchange had any probative value and, therefore, the transcript excerpts should not be received into evidence. 52 As to the first excerpt, I would exclude it under s 135 of the Evidence Act 1995 (Cth) as what Mr Barns' evidence was on the previous day of the criminal trial is already in evidence in the present proceedings. As to the second excerpt, the part of the transcript dealing with the withdrawal of the s 264 notice, I would also exclude it under s 135 of the Evidence Act. The form of the question, and therefore the answer, was unclear and cannot qualify the contemporaneous documentary record as to the circumstances in which the s 264 notice was withdrawn.

Conclusion 53 For these reasons the applicant's claims fail. The originating application will be dismissed, with costs. Those costs include the costs of the final hearing on 13 October 2015, the costs of the interlocutory hearing on 16 September 2015, and the costs of the directions hearings on 13 May 2015, 27 May 2015, 24 June 2015, 6 August 2015, 16 September 2015 and 23 September 2015. I see no reason to except from those orders the Commissioner's application for summary judgment as it was overtaken by events in light of the early final hearing date. I certify that the preceding fifty-three (53) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.

Treasury Legislation Amendment (Repeal Day) Act 2015(Cth)

Income Tax Assessment Act 1936(Cth)ss 166, 167, 175, 177, 264

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