Case: Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23 ; (1995) 183 CLR 168
Outcome: discussed
In Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23 ; (1995) 183 CLR 168 (" Richard Walter "), in substance the Commissioner made two determinations under s 177F on the same day in respect of the same tax benefit: one that the amount be included in the assessable income of Richard Walter Pty Ltd ("the taxpayer"); and the other that it be included in the assessable income of Morlea Professional Services Pty Ltd ("Morlea"). The taxpayer appealed to this Court against the disallowance of its objection. 123 The Deputy Commissioner sued to recover the unpaid tax in the Supreme Court of New South Wales. The taxpayer sought in this Court an injunction under s 39B of the Judiciary Act 1903 (Cth) ("the Judiciary Act ") restraining him from proceeding with that action. In the s 39B proceeding, the Deputy Commissioner moved for dismissal on the ground that upon production of the notice of the assessment, s 177(1) of the ITAA had the effect that this Court lacked jurisdiction to grant relief under s 39B. The Commissioner's motion was removed to the High Court. 124 In the High Court, upon a stated case, there was reserved for consideration by the Full Court the question raised by the motion. 137 The primary Judge, RD Nicholson, held ( Sleight v Commissioner of Taxation (2003) 53 ATR 667 at (697)) that the making of a s 177F determination was "part of the process of making the assessment ... and not liable to challenge in this proceeding save in respect of matters going to substantive liability: Richard Walter at CLR 178, 203". His Honour held that it followed that any deficiency was validated by s 175. For this last proposition, his Honour referred to Richard Walter at 182, 187-8, 193-5, 196-7, 198-9, 209-211, 222-3 and 240-2. Finally, his Honour noted that no argument had been made that the case fell within "the conditions delineated in R v Hickman ". 139 Hill J, whose eminence in this field is beyond question, delivered the leading judgment. His Honour held that a taxpayer cannot challenge a determination under s 177F on the ground that the Commissioner had erred in the making of the determination, for example, by failing to take into account a relevant consideration. His Honour was clear in his view that ss 175 and 177(1) produced this result. He referred to George at 207 (see [49] above) and Richard Walter at 184 (Mason CJ) (see [128] above). Of the latter passage, Hill J stated (at 237): "In other words, it is not open to a taxpayer to challenge an assessment under Pt IVA by showing some error in the making of that determination." His Honour found support in the fact that in Richard Walter their Honours held that the question in every case was whether there was a tax benefit obtained in connection with a Pt IVA scheme susceptible to cancellation by the Commissioner. Hill J added (at 238): "The question whether the Commissioner's discretion [sic decision] as to whether there was a scheme to which Part IVA applied miscarried is thus not an issue in an appeal. Rather the issue will be, relevant to the present appeal, whether, the determination having been made, there was a scheme to which the provisions of Part IVA applied and if so, whether there was a tax benefit obtained in connection with that scheme. These will be matters of fact and the burden will lie on the taxpayer to show that objectively there was no scheme in connection with which the taxpayer obtained a tax benefit. If the taxpayer satisfies that burden he or she will have shown the assessment was excessive. That will not be shown by the taxpayer demonstrating that the person who made the determination in some way erred in making it so that the discretion conferred upon the Commissioner miscarried." 142 With respect, however, their Honours appear to have found the result to be more clearly dictated by the authorities, and, in particular, by Richard Walter , than I have found it to be. It is not clear to me why the passage from the judgment of Mason CJ in Richard Walter at 184 (set out in [128] above) establishes that in an appeal it is not open to the taxpayer to challenge the making of a determination on judicial review grounds. Moreover, there is no reference to the passage from the judgment of Mason CJ at 187-8 (also set out at [128] above) (the primary Judge, RD Nicholson J, did refer to that passage, but did not discuss it). There is no reference, either, to Gummow J's answer to the second separate question in Jackson (see [104] [106] above) or, admittedly less relevantly, to WA Capital (see [107] [114] above). 143 Hill J also said (at 237) that Richard Walter was consistent with what the High Court said in Peabody at 382 (the passage set out at [119] above). I respectfully agree that that passage in Peabody does favour the view that the only basis on which a determination by the Commissioner under s 177F (and, it would follow, determinations by him under s 136AD) could be challenged, even in an appeal, is the non-fulfilment of the statutorily specified conditions precedent to the enlivening of the discretion (and, I suggest, the Hickman principle). 152 I am concerned with an appeal under Pt IVC of the TAA, that is to say, a proceeding in which production of the Commissioner's notice of assessment is not conclusive evidence as to the amount or particulars of the assessment, yet is conclusive as to the due making of the assessment in other respects. Cases such as FJ Bloemen and Richard Walter are distinguishable on their facts as not being in the nature of appeals. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.