Income Tax Assessment Act 1936 ss 206, 207.

Administrative Decisions (Judicial Review) Act 1977 ss 11, 13

ARM Constructions Pty Ltd v Deputy Commissioner of Taxation (1968) 10 FCR 197; 65 ALR 343

The appellant pay one half of the respondent's costs of the appeal.

Either party have liberty to apply to the Court by notice of motion, within 14 days, to vary order (2) above.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

In this appeal I have had the benefit of reading the draft judgment prepared by Jenkinson J. I agree with his Honour that the appeal should be dismissed for the reasons he has given.

2. I only wish to add, for myself, that I regard as quite unsatisfactory the reasons for decision, supplied by the respondent to the appellant/applicant in this case, pursuant to s 13(1) of the Administrative Decisions (Judicial Review) Act 1977.

3. The requirements of the section are clear enough, and have been stated a number of times by this Court; see ARM Constructions Pty Ltd v Deputy Commissioner of Taxation (1986) 10 FCR 197 at 204-5; 65 ALR 343 at 349-350; and cases there cited. At the page first cited, Burchett J said,

unnecessarily obfuscated by a restatement of

the decisions themselves under the heading

which purports to refer to the findings on

material questions of fact. The findings on

questions of fact are only found incorporated

in the reasons for decision. There is no

reference at all to the evidence or other

material on which any finding was based, but

only a purported list of all the documents

which were before the decision-maker".

4. The statement of reasons in the present case were signed just over two years after Burchett J's judgment was published; yet all the criticisms he made could be applied, in substance, to the present case.

5. The "findings on material questions of fact" consisted of:

(a) a list of the grounds stated by the taxpayer in

seeking favourable decisions - with no indication as to whether those assertions were accepted or rejected by the decision-maker, and

(b) and (c) - a restatement of the decisions themselves.

6. The "evidence or other material on which the findings were based" were stated as:

(d) the applicant's letter of request, and

(e) the published guidelines followed by the

decision-maker.

These were quite acceptable as far as they went, but the important communications referred to in Jenkinson J's judgment were omitted.

7. If the assertions of grounds contained in the applicant's letter of request were accepted by the respondent (which could perhaps be inferred from their recital under the heading "findings on material questions of fact"), then they sit uneasily with findings that the taxpayer had not clearly demonstrated an inability to pay tax as it fell due. If those assertions were not accepted, the respondent should have said so.

8. In my view, the deficiencies in the statement of reasons have played a considerable part in leading the applicant and his advisers to the belief that he had reasonable grounds of appeal to this Court. I would express the Court's disapproval of obscure and unhelpful s 13 statements by ordering that the appellant pay only one half of the respondent's costs. Since this question of costs was not argued before us, I would reserve the right of either party to move the Court by notice, within 14 days, to vary the proposed order.

Appeal against the dismissal of applications for orders of review in respect of three administrative decisions of the respondent, who was at material times the Deputy Commissioner of Taxation for Victoria.

2. The appellant's solicitors sought, by a letter dated 19 February 1988, an exercise by the Commissioner of Taxation of the power conferred on him by s.206 of the Income Tax Assessment Act 1936 to extend the time for payment of income tax payable by the appellant, and an exercise by the Commissioner of the power conferred on him by s.206(1A) of that Act to remit additional tax payable by the appellant. By a letter dated 10 March 1988 the respondent informed the solicitors that neither request was granted and stated what were said to be the reasons for the rejection of the requests. The decisions to reject those two requests are two of the three decisions in respect of which an order of review was sought. In response to a letter which both parties have treated as notifying requests of the kind for which s.13(1) of the Administrative Decisions (Judicial Review) Act 1977 makes provision, the respondent furnished a document, signed with the respondent's name and dated 19 April 1988, in these terms:

"I refer to your letter of 19 February 1988.

You asked for a statement of reasons under

section 13 of the AD(JR) Act 1977 in relation

to the decisions:

a. not to grant the taxpayer an

extension of time to pay his

outstanding taxes in respect of the

year ended 30 June 1978 to 30 June

1986; and

b. not to grant a remission of

penalties.

The findings on material questions of fact

were the following:

a. The grounds stated by the taxpayer

as warranting an extension of time

for payment and a remission of

penalties were that:

i the funds would have been

available if the amended

assessment had issued in

October of 1985 rather than

November of 1986;

ii the taxpayer has borrowed

$1,400,000 from his bankers to

keep his business afloat;

iii the taxpayer's business has

incurred a trading loss of

$1,587,658 for the 1987

financial year;

iv if the taxpayer was made

bankrupt his business could be

ruined and his employees

retrenched;

v the taxpayer will not have any

further debit assessments as he

has carry forward losses; and

vi his business has an excess of

liabilities over assets.

b. The circumstances did not warrant

the granting of an extension of time

for payment of outstanding taxes

pursuant to sub-section 206(1) of

the Income Tax Assessment Act (The

Act).

c. The circumstances did not warrant a

remission of tax under sub-section

207(1A) of the Act.

The evidence or other material on which the

findings were based were:

d. letter dated 19 February 1988 from a

taxpayer requesting that an

extension of time be and a remission

of penalties be granted.

e. the guidelines laid down by the

Commissioner of Taxation as set out

in Taxation Rulings No. 2091.

The reasons for the decision not to grant an

extension of time pursuant to section 206 of

the Act were:

f. the taxpayer in his request for an

extension of time furnished

insufficient evidence to demonstrate

that he would be unable to pay his

tax liabilities if an extension of

time was not granted or that the

likely effect on the taxpayer's

business of the required payment of

tax would endanger or curtail the

taxpayer's business;

g. It is one of the responsibilities of

the Commissioner to collect

outstanding taxes within the

financial year which the tax

liabilities falls due. The taxpayer

has made no payments since May of

1987 and does not propose to make

any payments until February of 1989.

The reasons for the decision not to grant

remission of tax pursuant to sub-section

207(1A) of the Act are:

h. with the exception of natural

disasters all applications for

extension of time are in any event

subject to additional tax and it was

considered that the circumstances in

this matter did not warrant the

granting of a remission of

penalties.

i. the taxpayer did not clearly

demonstrate an inability to pay the

tax as and when it fell due; and

j. there were no special circumstances

which warrant remission of

additional tax pursuant to

sub-section 207(1A) of the Act."

3. On the hearing of the application before Sweeney J. counsel for the respondent tendered evidence by affidavit of a number of written communications which had passed, before the decisions notified by the letter dated 10 March 1988 had been made, between agents of the appellant (solicitors and accountants) and the respondent. Counsel for the appellant did not object to reception in evidence of those written communications, which counsel for the parties and Sweeney J. treated as part of the material upon which the respondent's three decisions were made. Counsel for the respondent tendered also evidence by affidavit of a number of oral requests by the respondent's officers that particular information concerning the appellant's financial affairs be furnished to the respondent by the appellant's agents, and evidence of the failure of those agents to comply with the requests. These requests the evidence showed to have been made before receipt of the letter dated 19 February 1988. Counsel for the appellant objected to that evidence. Sweeney J. admitted the evidence. It was a ground of the appeal that his Honour had erred in admitting the evidence. It was a further ground of the appeal that his Honour had erred in treating the facts which the evidence tended to prove as facts to which the respondent had given consideration in making the two decisions in respect of which the respondent had furnished the written statement pursuant to s.13(2) of the Administrative Decisions (Judicial Review) Act 1977. Mr. Searle of counsel for the appellant submitted to this Court on the appeal that, in a case in which such a statement is furnished by the person who made the decision, the Court is required, in determining an application for an order of review in respect of that decision, to treat that statement as conclusively establishing what were "the findings on material questions of fact" which that person made, and as conclusively establishing what "the evidence or other material" was "on which those findings were based", and as conclusively establishing what "the reasons for the decision" were. In this case that evidence and material were specified, in the respondent's statement pursuant to s.13(2), as the appellant's solicitors' letter dated 19 February 1988 and certain "guidelines" set out in a document published by the Commissioner of Taxation. Therefore, according to Mr. Searle's submission, the oral requests for further information and the appellant's failure to comply with the requests could not be taken into consideration by the Court as matter on which the respondent had based any of the findings of fact made by him in reaching either of the two decisions. (The written communications, to which objection had not been taken, were said to have been incorporated, by express or implied reference, in the letter dated 19 February 1988.)

4. No statement had been furnished by the respondent in pursuance of s.13(2) in respect of the third decision, for no such a statement had been requested. The third decision was stated in the originating application to be a decision to "enter judgment against the Applicant in the Supreme Court of Victoria on 23 March 1988". On that date judgment in default of defence was entered in each of two actions by the respondent for income tax and additional tax payable by the appellant. The three applications for orders of review had been instituted by filing the one originating application and were heard together by Sweeney J. Even if the evidence of oral requests for further information and the appellant's failure to comply with the requests were inadmissible, for the reasons advanced by Mr. Searle, in relation to two of the decisions, acceptance of those submissions would not lead to a conclusion that the evidence was inadmissible in relation to the third decision.

5. I do not consider that the evidence was inadmissible in relation to either of the decisions for which a statement of reasons had been furnished. The first step in the argument advanced by Mr. Searle against reception of the evidence may be accepted : that ss. 13 and 11(3) of the Administrative Decisions (Judicial Review) Act 1977 manifest a legislative intention that decisions to which s.13 applies should be explained, on request, by the person who made the decision, so that a person aggrieved by the decision may have an opportunity of deciding, before making an application for an order of review in respect of the decision, whether the explanation of the decision discloses a ground upon which an order of review may be sought. The next step in Mr. Searle's argument is that the admission of evidence, on behalf of the person who made the decision, on the hearing of an application for an order of review, to supplement or vary or contradict the explanation of the decision furnished under s.13 would frustrate the legislative intention that the question whether grounds of review are disclosed by the reasons for the decision should be determinable, before application is brought, by reference to the statement for which s.13 makes provision. It may be conceded that the postulated intention would on some occasions be frustrated by the admission of evidence of that kind. Mr. Searle's argument concludes that the Administrative Decisions (Judicial Review) Act 1977 is inconsistent with admission of such evidence. But there is in my opinion no sufficient indication in that Act of a legislative intention to deny the Court a means of ascertaining facts, relevant to the discharge of the functions which the Act confers on the Court, which is ordinarily available to a Court engaged in the supervision of administrative action. The Act evinces, in my opinion, no intention that the policy which may be discerned in the provisions of ss. 11(3) and 13 should override or displace established curial modes of ascertaining what the reasons for administrative action were. Sub-section 11(6), which explicitly confers on an applicant for an order of review a right to rely on a ground not specified in the originating application, perhaps suggests inter alia a legislative recognition that not every statement furnished in pursuance of s.13 will tell the whole truth about the reasons for the decision.

6. The omission of matter from a statement furnished in pursuance of s.13 is a circumstance from which inferences relevant to the determination of an application for an order of review may in a particular case be drawn. In ARM Constructions Pty. Ltd. v. Deputy Commissioner of Taxation (1986) 65 ALR 343 at 350-351 Burchett J. gave examples of such inferences. And such an omission, of matter which it is found on the hearing of the application for an order of review was considered by the person who made the decision, may attract a penalty in costs. But in my opinion the omission of such matter from the statement furnished in pursuance of s.13 may be supplied by evidence on the hearing of the application for an order of review.

7. It was an alternative ground of appeal that, if the evidence were admissible, the appellant did not have the opportunity to cross-examine the witnesses by whom it had been given, nor the opportunity to adduce contradictory evidence. When specifying the evidence to which he objected on the hearing of the application Mr. Searle had added : "Naturally the applicant would have to have affidavit material from Mr. Gowland, his own accountant, from Mr. Davis, my instructing solicitor, as to what actually occurred in those conversations to be in issue". The two persons named were those to whom the requests for further information had been sworn to have been made. The transcript then records the following:

"HIS HONOUR: My disposition, Mr Searle, is to

think that I should admit these passages and

leave counsel to argue the question as to what

use should be made of them. I do not see that

it is practicable to describe them as

inadmissible, but I am not giving judgment on

what effect they have on the case. Do you

want to add anything more?

MR SEARLE: Sir, I would accept your Honour's

ruling, and in particular the basis on which

the applicant will ultimately be contesting.

HIS HONOUR: I will hear you in due course on

the merits. Do not go into the merits now.

MR SEARLE: No, sir.

HIS HONOUR: Very well, I will admit those

portions of the document, the affidavit of Mr

Brazzale, except the ones which we have

identified as not pressed. Now is there any

other debate on admissibility?

MR NORTH: Not by me.

HIS HONOUR: I guessed that, Mr North.

MR SEARLE: Your Honour's ruling - - -

HIS HONOUR; I have dealt with Mr Brazzale's

affidavit, and I am saying those passages that

are pressed are admissible and I will hear

counsel in due course as to what effect they

should have. Do you have any other objection

to admissibility?

MR SEARLE: No, sir.

HIS HONOUR; That disposes of that.

MR NORTH; Is it a convenient course now for

me to turn once again to the grounds and take

your Honour to the material?

HIS HONOUR: Have you completed now the

evidence on which you propose to rely?

MR NORTH: I have, yes.

HIS HONOUR: You can address me now at large,

Mr North."

When Mr. North had completed his submissions the learned judge heard submissions by Mr. Searle, who did not further refer to the question whether evidence on his client's behalf would be adduced concerning the matters which had been the subject of his Honour's ruling as to admissibility. No request was made by Mr. Searle that he cross-examine any of the deponents by whose affidavits that evidence was adduced. In those circumstances no basis for the ground of appeal is in my opinion shown.

8. It was a further ground of appeal, added by leave on the hearing of the appeal, that the learned judge erred in failing to hold that natural justice required that the respondent should have brought to the appellant's attention the circumstance that each of his three decisions was likely to turn on his belief that the appellant had furnished insufficient material to demonstrate the appellant's inability to pay the income tax as and when it fell due, so that the appellant might have the opportunity to dispel that belief.

9. Once it is accepted, as the learned judge did accept, without any error of law, that before the letter dated 19 February 1988 was sent to the respondent several oral requests for further information about the appellant's financial position had been made by the respondent's officers of the appellant's agents in connection with applications by the appellant for extension of time for payment of the income tax and that no satisfactory response had been made to those requests, the basis of this ground in my opinion disappears. It is true that no such a request was made after receipt of the letter dated 19 February 1988, and that no such an intimation as the ground of appeal specifies was given after that letter was received by the respondent. But the evidence justified the finding that the appellant had had ample notice of the respondent's concern about the full facts of the appellant's financial position and about the appellant's capacity to pay the tax.

10. There was no other ground of the appeal. In my opinion the appeal should be dismissed.

11. I agree in the orders concerning costs proposed by Woodward J., for the reasons which his Honour has given.

I too have had the advantage of reading in draft the reasons of Jenkinson J.

2. For those reasons, I agree that the appeal should be dismissed and, for the reasons expressed by Woodward J, agree that the appellant should pay one half of the respondent's costs.