Case: Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54 ; (2007) 232 CLR 598
Outcome: discussed
respondent contends that a dictum in the judgment of the High Court in Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54 ; (2007) 232 CLR 598 referring to s 218 as a "penal" provision, might on one reading be seen as indicating that that section did not give rise to an obligation enforceable by civil proceedings. Bluebottle concerned the scope of ITAA36 s 255 which made a person who had "control" of money belonging to a non-resident liable to pay "the tax due and payable by the non-resident". Section 255 did not, itself, contain any provision characterising the relevant amounts as "debts" due to the Commonwealth. Rather, the liability was described as one in respect of "tax", defined in subs (4) to include the general interest charge. Making a person liable to pay the "tax" due and payable by the non-resident clearly had significance: for example, ITAA36 ss 175 and 177(1) would apply to make the relevant assessment conclusive as to the amount payable, while TAA ss 14ZZM and 14ZZR would govern the recoverability of that amount pending the outcome of any review or appeal against the assessment. The Commissioner argued as the Court understood it that, if not given a relatively broad construction, s 255 would have "little or no work to do" different from that done by s 218. The Court considered that s 255 did have additional work to do, even on a narrower view than that urged by the Commissioner. The Court at [93] articulated the different effects of the two provisions: First, s 255 is directed to a more limited class of tax liabilities than those with which s 218 deals. Section 255 concerns only tax which is or will become due from a non-resident; s 218 is not so limited. Secondly, and perhaps more importantly, s 255 makes the controller of moneys liable for the tax payable by the non-resident (to the extent of the amount that was, or should have been, retained); s 218 is a penal provision and does not permit the Commissioner to recover any of the tax due from the person to whom the notice is given. These differences suffice to distinguish between the two provisions and give each a separate operation in the 1936 Act. (Emphasis added) The references to "tax payable" and "tax due" are significant. I apprehend the Court here was saying no more than that under s 218 the third party was, unlike s 255, not liable to pay the "tax payable". Section 255(1)(c) rendered the "controller" of monies of a non-resident personally liable for the tax payable on behalf of the non-resident. Section 218, by contrast, created a new obligation for payment to the Commissioner of "money due, accruing or (which) may become due" by a person to a taxpayer, albeit the payment of that money by the person to the Commissioner was to be credited against the taxpayer's liability to tax. However, it did not in terms enable the Commissioner to recover from the other person the tax due by the taxpayer. The provisions to which I have referred in the ITAA36 concerning assessments of tax have no immediate application in respect of s 218. This, in my view, is how the distinction between ss 218 and 255 referred to in Bluebottle should be understood. I would expect that had the Court meant that s 218 provided no capacity for the Commissioner to sue for recovery of amounts the subject of a notice other than through criminal proceedings, it would have referred to earlier High Court authority on the subject such as Clyne and particularly the principle explained in Mallinson . Indeed Clyne was applied in Bluebottle in dealing with another issue and Mallinson was also referred to but not on this point. I do not regard Bluebottle as overruling the principle articulated in Mallinson. Bluebottle therefore does not stand in the way of a conclusion that the ITAA36 s 218 permitted the Commissioner to sue in debt for the amount required to be paid pursuant to a notice. Other authority supports this conclusion. It also supports the same conclusion in respect of TAA s 260-5. There is therefore nothing to displace the ordinary rule that, where a statute creates an obligation to pay money, an action in debt will lie to enforce the obligation. The Commissioner, in my opinion, may sue in debt to recover an amount that is required to be paid by a notice under s 260-5, when the time for payment of that amount as specified in s 260-5(5) has arrived. Monies alleged owed by respondent to Mr and Mrs Barnes The loan accounts of Mr and Mrs Barnes with the respondent, at the material dates of 30 June and 22 June respectively, according to the records of the respondent were as follows at least prior to the application of a journal entry in each case amounting to $309,609.31. I will refer to the journal entries later: Mr Barnes' loan account with respondent as at 30 June 2007 (rounded) 1. Balance as at 30 June 2006 $1,035,444 2. Add: Capital introduced 2006/2007 (A/C 50101) 75,491 3. Less: Drawings to 30/06/2007 up to $309,609.31 entry (running balance up to last drawings entry) (A/C 50103) (1,334,810) 4. Less: Drawings, Income Tax up to 30/06/2007 (A/C 50105) (11,892) 5. Balance as at 30/06/2007 before $309,609.31 entry No 1 + No 2 - No 3 - No 4 ($235,767)