Case: Deputy Commissioner of Taxation of the Commonwealth of Australia v Richard Walter Pty Limited [1995] HCA 23 ; (1995) 183 CLR 168
Outcome: cited
Webb v Commissioner of Taxation (No 2 ) [1993] FCA 612 ; (1993) 47 FCR 394 at 400 Hill J said: '... the giving to the taxpayer of a notice which stipulates the taxable income and the tax payable referable to that taxable income in the year (a positive figure) will be a notice of assessment attracting the provisions of the objection and appeals procedure and s 177.' His Honour then continued at 400-401 by saying: 'My view is consistent with the decision of Hunt J in Deputy Commissioner of Taxation (Cth) v Clyne (1982) 60 FLR 45 and that of Enderby J in Commonwealth v Opiel (1986) 86 ATC 5 ,013. The former case is not greatly different from the present. In that case Mr Clyne, who had received a notice of assessment showing a credit for provisional tax, sought to argue that the giving of that credit constituted an admission by the Commissioner that payment had been made for that amount or that a claim was no longer made in respect of that amount, or alternatively that the provisions of s 177 rendered there conclusive evidence that the amount was no longer claimed by the Commissioner. This somewhat audacious argument was rejected by Hunt J who regarded the particulars of assessment referred to in s 177 of the Act as constituting merely the two ingredients taxable income and the tax assessed with respect to that taxable income. The other material on the notice, including the credit, were, his Honour thought, particulars of the notice but not particulars of the assessment. The decision of Hunt J was followed by Enderby J in Opiel in holding that details of a refund stated in the assessment to be due to a taxpayer did not attract the conclusive evidentiary protection of s 177.' See also Deputy Commissioner of Taxation of the Commonwealth of Australia v Richard Walter Pty Limited [1995] HCA 23 ; (1995) 183 CLR 168 ('Richard Walter'). In Richard Walter , Mason CJ took the view that the relevant provisions of the 1936 Act did no more than require the making of an assessment, due compliance with the statutory provisions not being essential to the validity of the assessment (at 187). His Honour said at 187 188: 'The central element of the legislative regime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax.' Mason CJ said of s 175 of the 1936 Act at 187: 'That provision is of critical importance because it indicates that compliance with any of the provisions of the Act is not essential to validity.' Earlier at 186 his Honour said: 'The effect of s 177(1) ... is to condition the exercise of jurisdiction upon production of the notice of assessment or a copy of it so that it is treated as valid, otherwise than in Pt IVC proceedings.' (footnote omitted) At 187 His Honour said: 'Viewed in the light of s 175, s 177(1) is a provision which gives effect to the substantive expression of intention in the earlier section. The reference to "due making" of the assessment in s 177(1) reflects the content of s 175.' Mason CJ observed at 187 that the paramount purpose of the 1936 Act was to ascertain the liability of taxpayers to tax and that the Act, with that object in view, set up a legislative regime whereby the Commissioner assessed the taxpayer to tax, the taxpayer being liable to pay the amount stated in the notice of assessment, subject to a reference to the Administrative Appeals Tribunals or an appeal under Part IVC to the Federal Court. His Honour said at 187: 'In such an appeal, it is for the taxpayer to show that the assessment is excessive.' (See also per Gyles J in Syngenta Crop Protection Pty Ltd (ACN 002 933 717) v Commissioner of Taxation [2005] FCA 1646 ; (2005) 61 ATR 186 at [12] ). In Richard Walter , Mason CJ found that the first limb of s 177(1) of the 1936 Act was effective to preclude a challenge by a taxpayer, in proceedings in the Federal Court under s 39B of the Judiciary Act 1903 (Cth), to the validity of an assessment where the Commissioner had included the same amounts in the taxable income of more than one taxpayer. His Honour said at 188: 'Section 177 gives effect to the substantive provisions of the Act, in particular s 175, the effect of which is to ensure that the validity of an assessment does not depend upon compliance with any of the particular provisions of the [1936] Act or considerations of purpose. On this view, s 177(1) is consistent with the Hickman principle.' In Richard Walter Brennan J, as his Honour then was, observed at 199: 'The jurisdiction of the Federal Court on appeal from, or of the Administrative Appeals Tribunal on review of, a decision on an objection extends to every issue which affects the amounts ultimately included in the taxable income or tax liability of a taxpayer. If any of these issues be resolved in favour of the taxpayer, an amendment of the assessment so as to reduce the taxable income or the tax liability of the taxpayer must follow. The width of that jurisdiction and the evident purpose of the Act to channel all issues as to the true tax liability of the taxpayer into the objection, review and appeal procedures found the clearest implication that exceptions to the broadest literal application of s 175 must be narrowly confined and a corresponding operation must be attributed to s 177(1).' (Footnotes omitted) It is immaterial to the validity of the power to assess one taxpayer to tax that the Commissioner believes it possible that another taxpayer is liable to tax in respect of the same particular income. If uncertainty as to the taxpayer liable were to sterilise the Commissioner's power to make an assessment or if the power could be exercised only when the Commissioner is satisfied on the balance of probabilities that one taxpayer, rather than another, is liable, the uncertainties which are the inevitable companions of complex commercial transactions would substantially erode the Commissioner's ability to recover tax and would, contrary to the intent of s 177(1) of the 1936 Act, open the way to litigating liability to tax outside the objection, review and appeal procedures (per Brennan J in Richard Walter at 201) . The fact that a tax liability remains outstanding against two taxpayers pending the ascertainment of the taxpayer truly liable is no bar to the exercise of the power to assess both to tax in respect of the same income. As Dixon J, as his Honour then was, observed in Richardson v Federal Commissioner of Taxation [1932] HCA 67 ; (1932) 48 CLR 192 at 207 when upholding the validity of an assessment to tax against a second person while the first person's assessment remained on foot and unamended 'it was not unnatural that [the Commissioner] should delay relieving one of two persons whom he considered culpable until the liability of the other was established'. The co-existence of tax liabilities in two or more taxpayers in respect of the same income is, as Dixon J observed at 207, attended with difficulty. Sometimes the difficulty will be removed by the objection, review and appeal procedures where the taxpayer will establish the facts in order to establish that the assessment is excessive (per Brennan J in Richard Walter at 201). The raising of concurrent assessments of two or more taxpayers to tax in respect of the same item of income has not hitherto been regarded as beyond the powers of the Commissioner. The appropriateness of alternative assessment to tax of two taxpayers in respect of the same item of income was recognised in a dictum of the High Court in Moorebank at 67. The courts, if not the Commissioner, can diminish the difficulty of concurrent assessments by ensuring that there is no double recovery of tax (per Brennan J in Richard Walter at 201-202). The co-existence of tax liabilities arising from concurrent assessments is entirely consistent with the operation of s 177(1). If the Commissioner employs s 177(1) in a proceeding to recover tax from taxpayer A, the liability of that taxpayer cannot be avoided by pointing to an outstanding assessment against taxpayer B. Section 177(1) operates as between the Commissioner and the taxpayer served with the notice of assessment in a proceeding between them and the notice of assessment issued to another taxpayer does not qualify or affect the operation of s 177(1) (per Brennan J in Richard Walter at 202). Application of the principles to this case The applicant's claim against the fourth respondent in this case was founded upon eight separate notices, copies of which were annexures 'A'. 'B', 'C', 'D', 'E', 'F', 'G' and 'H' to the affidavit of Aris Zafiriou sworn 6 October 2009. They were: (a) Notice of Amended Assessment for the year ending 30 June 2006 issued 6 May 2009 and directed to Webtel Management Super Fund; (b) Notice of Amended Assessment for the year ending 30 June 2007 issued 6 May 2009 and directed to Webtel Management Super Fund; (c) Notice of Assessment for the year ending 30 June 2008 issued 6 May 2009 and directed to Webtel Management Super Fund; (d) Notice of Assessment and liability to pay penalty issued 19 May 2009 to Webtel Management Super Fund in respect of the 2006 and 2007 income years; (e) Notice of Assessment and liability to pay penalty issued 27 May 2009 to Webtel Management Super Fund in respect of the 2008 income year; (f) Notice of Amended Assessment for the year ending 30 June 2006 issued 20 August 2009 and directed to Webtel Management Super Fund; (g) Notice of Amended Assessment for the year ending 30 June 2007 issued 28 August 2009 and directed to Webtel Management Super Fund; and (h) Notice of Amended Assessment for the year ended 30 June 2008 issued 1 September 2009 and directed to the Webtel Management Super Fund. On 5 October 2009 a Deputy Commissioner of Taxation of the Commonwealth of Australia issued a certificate under s 255-45 of Schedule 1 to the Administration Act certifying that notice of the several assessments were or were taken to have been served on the fourth respondent as trustee for Webtel Management Super Fund under a taxation law and that as at 5 October 2009 the sum of $25,561,078.93 was a debt due and payable to the Commonwealth by the fourth respondent as trustee for Webtel Management Super Fund in relation to the tax related liability referred to in the certificate. A further certificate under s 255-45 of Schedule 1 to the Administration Act was issued by a Deputy Commissioner of Taxation of the Commonwealth of Australia on 24 November 2009 certifying that notice of the several assessments were or were taken to have been served on the fourth respondent as trustee for Webtel Management Super Fund under a taxation law and that as at 22 November 2009, the sum of $25,909,612.54 was a debt due and payable to the Commonwealth by the fourth respondent as trustee for Webtel Management Super Fund in relation to the tax related liability referred to in the certificate. Exhibits NM1 and NM2 on the hearing of the applicant's Amended Notice of Motion filed 6 October 2009 were a letter to the first respondent headed 'Audit of your tax affairs' dated 24 April 2009 and a letter to the fourth respondent dated 11 May 2009 headed 'Audit of MGG Capital Pty Ltd as trustee for Webtel Management Super Fund' respectively. When considered with 'APPENDIX C SUMMARY OF NET TRUST INCOME' to the letter to the first respondent and 'APPENDIX A SUMMARY OF TAXABLE INCOME OF THE WEBTEL MANAGEMENT SUPER FUND' to the letter to the fourth respondent, it became apparent that in each case the same figures appeared under the heading 'IRON INVESTMENTS LTD/IFTC BROKING SERVICE FOR PHILLIP GRIMALDI (Share Trader)' and 'IRON INVESTMENTS LTD/IFTC BROKING SERVICE FOR IRON INVESTMENTS (Share Trader)'. The final line in the Appendix C and the final comparable line in the Appendix A indicated that the Commissioner asserted that 'NET INCOME OF TRUST' was, in respect of the year ended 30 June 2006, $1,419,705.73, in respect of the year ended 30 June 2007, $8,565,126.08 and in respect of the year ended 30 June 2008, $32,001,831.97 (shown as $32,001,831.53 in the Appendix A).