Anglo American Investments Pty Ltd v Deputy Commissioner of Taxation

1. [1]

   McCOLL JA: I agree with Payne JA’s reasons and the orders his Honour proposes.

2. [2]

   MEAGHER JA: I agree with Payne JA.

3. [3]

   PAYNE JA: The present case involves an application for leave to appeal by Anglo American Investments Pty Ltd (Anglo American). This is the first of a series of cases in which taxation assessments were raised against related entities of Anglo American, the second to sixth applicants. It was agreed between the parties that Anglo American’s proceedings would act as a “test case” so far as recovery of those taxation debts was concerned.

4. [4]

   On 14 July 2016, the primary judge made orders striking out the defence in this case, awarding judgment for the plaintiff, the Deputy Commissioner of Taxation.

5. [5]

   The application for leave to appeal was listed as a concurrent hearing with the appeal, if leave was granted. On 5 December 2016, this Court heard argument on the application for leave to appeal from the parties limited to the question of jurisdiction and whether what was described as a defence of “collateral” attack was available to the applicant in these proceedings.

6. [6]

   The question in the present case is whether, in taxation debt recovery proceedings being conducted in a State court where a notice of assessment has been admitted into evidence, it is open to a defendant to resist judgment for the sum identified in the notice of assessment on the basis of a defence filed which asserts “conscious maladministration”, but does not seek any relief treating the assessment as a nullity.

7. [7]

   Submissions were exchanged between the parties after the hearing on this question as follows:

   1. (1)

      On 6 December 2016, the applicant filed its submissions;

   2. (2)

      On 14 December 2016, the respondent filed its response;

   3. (3)

      On 16 December 2016 the applicant filed a reply.

Background facts

1. [8]

   Officers of the Commissioner of Taxation, the respondent, conducted an investigation with regard to the tax affairs of the applicant, and sought and obtained certain information from the taxation authorities in the Cayman Islands. The position of the applicant is that those acts of employees of the respondent were unlawful, done in bad faith, and constituted “conscious maladministration” as that term was described in Federal Commissioner of Taxation v Futuris Corporation Ltd (2008) 237 CLR 146; [2008] HCA 32.

2. [9]

   The information obtained has been used by the Commissioner of Taxation in a number of cases. The history of that use is set out in Hua Wang Bank Berhad v Commissioner of Taxation [2014] FCA 1392 by Perram J (a case under Part IVC of the Taxation Administration Act 1953 (Cth) (TAA) where the same documents as are in dispute in the present case were successfully tendered by the Commissioner) and by the Full Federal Court in Gould v Deputy Commissioner of Taxation [2017] FCAFC 1. It is to be noted that in Hua Wang Bank the taxpayer’s unsuccessful appeal in the High Court did not complain about the tender of the presently relevant documents in that Part IVC case.

3. [10]

   A challenge to the taxation assessments under s 39B of the Judiciary Act 1903 (Cth) based on a pleading of “conscious maladministration” was made in Gould. According to Logan J in the Full Court at [14] in Gould, the pleading of conscious maladministration in Anglo American’s case is “materially indistinguishable” from the pleading in Gould. It is to be noted, however, that the taxpayer in Gould filed a cross-claim and the content of the defence was treated as being incorporated in the judicial review challenge contained in the cross-claim: see Deputy Commissioner of Taxation v Leaver [2015] FCA 1454 at [3]. The taxpayer’s challenge in Gould was rejected by Pagone J (in the decision reported as Leaver referred to above) and by the Full Federal Court. Whilst Gould was decided on a pleading basis, Robertson J (with whom Gilmour J agreed, contra Logan J) said at [77]:

4. [11]

   In any proceedings which examine the merits of the applicant’s claim of “conscious maladministration” close consideration would need to be given to the connection between the conclusions in Denlay v Commissioner of Taxation [2011] FCAFC 63 and Gould and the issues in this case.

5. [12]

   In the present case, the respondent issued notices of assessment to Anglo American (and the second to sixth applicants). The applicant did not commence review or appeal proceedings relating to the assessments under Part IVC of the TAA in either the Administrative Appeals Tribunal or the Federal Court as it was entitled to do. Nor did it commence proceedings seeking relief under s 75(v) of the Constitution or s 39B of the Judiciary Act as it was also entitled to do.

6. [13]

   The respondent subsequently commenced debt recovery proceedings in the Common Law Division of the Supreme Court by statement of claim filed on 19 May 2015. The assessments in relation to Anglo American were tendered in the proceedings before the primary judge. Having done so the respondent relied upon s 175 of the Income Tax Assessment Act 1936 (Cth) (the 1936 Act), which provides as follows:

7. [14]

   The respondent further relied on s 350-10(1) in Sch 1 of the TAA, which deals with identical subject matter as the previous s 177 of the 1936 Act. That provision is in a table format that covers a large number of situations, the relevant portions of which can be extracted as follows:

8. [15]

   In its amended defence filed on 1 March 2016, Anglo American resisted the debt recovery claim of the respondent. That defence was based upon a denial that the assessments in question are valid because of the alleged “conscious maladministration” of officers of the respondent in obtaining and using documents from the Cayman Islands (under a Tax Information Exchange Agreement between Australia and the Cayman Islands) in making the assessments. The production of documents by the Cayman Islands authorities to the Commissioner was subsequently held to be unlawful under the law of the Cayman Islands by Quin J in the Grand Court of the Cayman Islands on 13 December 2013. That decision was affirmed by the Court of Appeal of the Grand Court of the Cayman Islands on 24 April 2015.

9. [16]

   The terms of Anglo American’s defence in the present proceedings set out the relevant history of the document request and pleaded as material facts the decisions of the Cayman Islands courts referred to immediately above. The defence concluded as follows:

10. [17]

    The defence then identified seven separate income tax assessments for the years 2001, 2002, 2004, 2005, 2007, 2008 and 2009 and eight separate notices of assessment of a shortfall penalty for the years 2001-2004, 2006 (times two), 2007 and 2009, and pleaded that each were “invalid and of no force and effect” by reason of the matters pleaded above.

11. [18]

    Importantly for present purposes, Anglo American did not file a cross-claim or commence separate judicial review proceedings and has not sought any orders in the proceedings to give effect to the claim sought to be advanced in the defence that each of the assessments referred to above was a nullity.

12. [19]

    The primary judge struck out the defence on the basis that binding authority of the Full Federal Court in Denlay v Commissioner of Taxation [2011] FCAFC 63 established that the contentions of Anglo American, taken at their highest, could not establish “conscious maladmintration” or contempt of court: [2016] NSWSC 975 at [73]-[74].

Relevant statutory provisions

1. [20]

   Before addressing the arguments advanced by the parties the relevant statutory provisions need to be identified.

2. [21]

   Section 38 of the Judiciary Act 1903 (Cth) provides:

3. [22]

   Section 39(2) of the Judiciary Act provides, relevantly:

4. [23]

   Section 39B of the Judiciary Act provides, relevantly, as follows:

5. [24]

   Section 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987 (Cth) provides:

6. [25]

   Section 6 of the Jurisdiction of Courts (Cross-vesting) Act provides:

7. [26]

   Section 9 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (ADJR Act) provides:

8. [27]

   Schedule 1 to the ADJR Act provides, relevantly:

Submissions of Anglo American

1. [28]

   Mr John Hyde Page, who appeared for Anglo American with Mr T Bagley, initially submitted that this Court had jurisdiction to determine the defence of conscious maladministration by reason of s 255-1 of Schedule 1 of the TAA. He accepted that the defence in the proceedings below did not seek constitutional relief under s 75(v) of the Constitution, any of the relief available under s 39B of the Judiciary Act, or any other relief.

2. [29]

   It was submitted that it was open to Anglo American to simply raise the question of “conscious maladministration” in its defence in the recovery proceedings rather than seek any order directed to the Commissioner of Taxation quashing the assessments or restraining the Commissioner from acting on them.

3. [30]

   It was also submitted that the course adopted in these proceedings was open following the decision of the High Court in Futuris and by reason of an earlier decision of the High Court in F J Bloemen Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 360. It was submitted that F J Bloemen was authority for the proposition that this Court had jurisdiction to make a declaration that the assessments were a nullity.

4. [31]

   In subsequent written submissions, Mr Hyde Page contended that this Court had jurisdiction to entertain the present collateral challenge under s 39(2) of the Judiciary Act. Whilst the applicant accepted that the Court had no jurisdiction to make an order of prohibition or mandamus (by reason of ss 38 and 39(2) of the Judiciary Act), it was submitted that the Court had jurisdiction to make an order for certiorari, grant an injunction or make a declaration.

5. [32]

   It was contended that although no such order was sought by the applicant, the fact that such an order could have been sought gave this Court jurisdiction to determine that the Commissioner had engaged in “conscious maladministration” and to treat the assessments as a nullity, although they had not otherwise been set aside. The relevant analogy relied upon was the undoubted authority of a State court to set aside a warrant by way of collateral challenge in a criminal case: Ousley v R (1997) 192 CLR 69.

6. [33]

   It was said that the decision of Deputy Commissioner of Taxation v Worn (1993) 25 ATR 152 per Hayne J was authority for the proposition that a State court was granted jurisdiction under s 39(2) of the Judiciary Act to grant an injunction preventing the Commissioner from proceeding to recover judgement on an assessment where conscious maladministration was shown.

7. [34]

   It was also said that a relevant analogy was provided by Attorney-General v Breckler (1999) 197 CLR 83 at [36] where it was held that, in the absence of legislative prescription to the contrary, a challenge to the validity of an administrative act was permissible where the validity of that act was incidental to the issues in a proceeding:

8. [35]

   Anglo American accepted that a collateral challenge cannot be brought if the possibility of such a challenge is effectively excluded by a conclusive evidence provision, but submitted that Futuris made that conclusion untenable here.

9. [36]

   Finally, it was submitted that “if it is necessary for the applicants to apply for a formal order regarding the validity of the tax assessments, the applicants would file a cross-claim seeking declaratory relief and possibly certiorari, but not mandamus or prohibition”.

10. [37]

    The Commissioner submitted that the present proceedings were “recovery proceedings” as that term was described by the High Court in Futuris and that upon the tender of the notices of assessment before the primary judge by the Commissioner, the combined effect of s 175 of the 1936 Act and s 350-10(1) in Sch 1 of the TAA was that the assessments were conclusive evidence of the validity of the assessments and the applicant’s defence must fail.

11. [38]

    It was next submitted that s 9 of the ADJR Act excluded from the jurisdiction of State courts the remedies suggested by the applicants of certiorari and declaration in relation to the validity of the making of income tax assessments.

12. [39]

    In any event, the Commissioner submitted that neither certiorari nor declaratory relief had been sought by Anglo American. If Anglo American had sought either remedy it was submitted that the Court would have jurisdiction to consider granting those remedies by reason of s 4 of the Jurisdiction of Courts (Cross-vesting) Act, which provided a grant of jurisdiction to State courts of the Federal Court’s s 39B jurisdiction, but that the matter would then be a “special federal matter” which must be transferred to the Federal Court in accordance with s 6 of the Jurisdiction of Courts (Cross-vesting) Act unless the Supreme Court was satisfied that “special reasons” existed for the matter to be determined in the Supreme Court.

Consideration: the jurisdiction of this Court in taxation debt recovery proceedings

1. [40]

   Before examining the submissions of the parties in detail, the issue should be framed properly. Section 177(1) of the 1936 Act provided that a notice of assessment was conclusive evidence that the assessment was properly made and, except in proceedings under Part IVC of the TAA, that the amounts and particulars of the assessment are correct. Section 177 has since been replaced by s 350-10(1) of Schedule 1 to the TAA. There is no issue that s 350-10(1) has an identical effect to s 177.

2. [41]

   The scope of the former s 177(1) was considered by the High Court in Futuris. The plurality (Gummow, Hayne, Heydon and Crennan JJ) said (citations omitted):

3. [42]

   The question in Futuris, as these passages make clear, was the effect of ss 175 and 177 of the 1936 Act (and thus s 350-10(1) of Schedule 1 to the TAA) in, on the one hand “recovery proceedings” and on the other “an application for judicial review under s 75(v) of the Constitution or s 39B of the Judiciary Act.”

4. [43]

   The principle that emerges from the passages referred to above is that s 177 (and thus s 350-10(1)) applies according to its terms as “conclusive evidence” in recovery proceedings.

5. [44]

   Where, as in the present case, a notice of assessment is admitted in evidence in recovery proceedings, it will conclusively be established that the assessment was “properly made” and “except in proceedings under Part IVC of this Act on a review or appeal relating to the assessment… the amounts and particulars of the assessment… are correct”.

6. [45]

   This is to be contrasted with the operation of s 350-10(1) on a notice of assessment tendered in “judicial review proceedings”. “Judicial review proceedings”, in the context in which the High Court was using that term in Futuris, are proceedings in which constitutional relief under s 75(v) or relief of the kind permitted by s 39B of the Judiciary Act is sought. So much is clear from the discussion of the plurality in Futuris at [4], [47]-[48] and [66].

7. [46]

   The question in the present case is whether, in taxation debt recovery proceedings being conducted in a State court where a notice of assessment has been admitted into evidence, it is open to a defendant to resist judgment for the sum identified in the notice of assessment on the basis of a defence filed which asserts “conscious maladministration”, but does not seek any relief treating the assessment as a nullity.

8. [47]

   That question was squarely addressed by Futuris. The present proceedings are “recovery proceedings” as that term was being used by the High Court in Futuris. The assessments in the present case were admitted in evidence. This Court is bound to conclude that it was thus conclusively established that the assessment was “properly made” and “the amounts and particulars of the assessment… are correct”.

9. [48]

   The present proceedings were not framed as “judicial review proceedings” of the kind described in Futuris in which the tender of the notices of assessment did not have that effect and the question before the Court was whether the assessments were the product of “conscious maladministration”: cf Futuris at [66].

10. [49]

    I do not accept that, following Futuris, F J Bloemen is authority for the proposition that this Court has jurisdiction to make a declaration in debt recovery proceedings that the assessments were a nullity, and then proceed to treat them as such in those proceedings. That conclusion would be inconsistent with the essential distinction the High Court was drawing in Futuris between the effect of s 177 in “recovery proceedings” on the one hand and “judicial review proceedings” on the other.

11. [50]

    Even assuming that in describing an application for “judicial review” as being one under s 75(v) of the Constitution or s 39B of the Judiciary Act, the plurality at [66] were not intending to describe the full extent of permissible “judicial review” proceedings and intended to leave open the prospect that there were other means to engage the jurisdiction to conduct a “judicial review”, at the very least in order to treat the notice of assessment as a nullity in the present case, the applicant needed to seek some order having that effect from a court of competent jurisdiction. I will address below the jurisdiction of this Court to make such an order were one to be sought by Anglo American . For present purposes, however, it is in my view clearly laid down in Futuris that unless “judicial review” proceedings are successfully conducted, a court in “recovery proceedings” must give full effect to the conclusive evidence provision in s 350-10(1).

12. [51]

    The appeals to the principles of collateral review in Ousley are not to the point. The Listening Devices Act 1969 (Vic) warrants the subject of that case were not protected by a conclusive evidence provision of the type here engaged. Nor was there a separate and specific administrative and judicial review and appeal system designed to address the correctness of the warrants as exists in Part IVC of the TAA.

13. [52]

    So far as Anglo American’s submission based on Breckler is concerned, s 350-10(1) provides a “legislative prescription to the contrary” of the kind identified in that case. The effect of Futuris is that a collateral challenge cannot be brought in recovery proceedings.

14. [53]

    Anglo American submitted in writing that “it may be accepted that, in a tax recovery proceeding, (emphasis added) a large number of collateral challenges to the validity of tax assessments are excluded by ss 175 and 177 (now s 350-10). A type of collateral challenge that is not so excluded is a collateral challenge where it is alleged that the officers of the respondent have perpetrated a deliberate illegality in bad faith in the course of making assessment”.

15. [54]

    That submission must be rejected. In a tax recovery proceeding, this Court is bound by Futuris to conclude that the conclusive evidence provision in s 350-10(1) of the TAA should be given full effect and that the assessment was “properly made” and “the amounts and particulars of the assessment… are correct”.

16. [55]

    Finally on this issue, mention must be made of a submission made by Senior Counsel then appearing for Anglo American before the primary judge and repeated in this Court by Mr Hyde Page that “if required” Anglo American would file a cross-claim seeking relief under s 39B (or s 39(2)) of the Judiciary Act. Despite this submission being advanced orally and in writing, no application was made to file a cross-claim. Counsel for Anglo American on this application for leave to appeal did however submit that this Court should grant leave to appeal and remit the matter to the primary judge to permit such a cross-claim to be filed.

17. [56]

    It is not a matter of the Court indicating to the parties what course they should take but, rather, as here, the Court proceeding on the basis of the issues presented by the parties for determination. These proceedings were framed as, and remain, proceedings for the recovery of tax as so described in Futuris.

18. [57]

    There is no occasion to grant leave and set aside the decision of the primary judge to permit a cross-claim (of an indeterminate nature) to be filed by Anglo American.

19. [58]

    Further, Anglo American still has available to it Part IVC proceedings and proceedings under s 75(v) and s 39B, subject to obvious time limit and discretionary problems which would attend the grant of any relief. The applicant ultimately accepted that there would be no issue estoppel or Anshun estoppel arising in the present case. That concession was correctly made for at least two reasons. First, the present is an interlocutory proceeding. The doctrine of issue estoppel does not apply to interlocutory proceedings. Secondly, the High Court in Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332; [1990] HCA 8 held that Anshun estoppel does not apply to a failure to pursue a cross-claim.

20. [59]

    Senior Counsel for the Commissioner, Mr McGovern SC, who appeared with Dr Jacques, accepted the possibility that where, after summary judgment had been obtained in recovery proceedings, new facts having come to light, a s 39B challenge to an assessment may be successfully conducted. Whether this case is capable of meeting that description is not a matter which needs be determined.

The remaining issues on this application for leave to appeal

1. [60]

   Although the conclusion I have reached about what Futuris requires in the present case is sufficient to determine this application for leave to appeal, it is appropriate that I say a little more about the remaining issues of jurisdiction which were addressed by the parties.

2. [61]

   Section 39(2) of the Judiciary Act invests federal jurisdiction in the several courts of the States “in all matters in which the High Court has original jurisdiction …except as provided in s 38”.

3. [62]

   Section 38(e) of the Judiciary Act provides that the jurisdiction of the High Court “shall be exclusive of the jurisdiction of the several Courts of the States in …(e) matters in which a writ of mandamus or prohibition is sought against an officer of the Commonwealth or a federal court.”

4. [63]

   Thus, the Supreme Court does not have jurisdiction in matters in which a writ of mandamus or prohibition is sought against an officer of the Commonwealth, of whom the Commissioner is one.

5. [64]

   It will be recalled that no order of this kind was sought by the applicant.

6. [65]

   Assuming that a State court nonetheless would have jurisdiction under s 39(2) of the Judiciary Act to grant certiorari or make a declaration in taxation debt recovery proceedings, such jurisdiction is affected by s 9(1) of the ADJR Act (which is set out at [26]-[27] above) in relation to decisions making, or forming part of the process of making, or leading up to the making of, income tax assessments. In particular it provides:

7. [66]

   A “decision to which this section applies” is defined in s 9(2) of the ADJR Act to include “a decision of an administrative character that is included in any of the classes of decisions set out in Schedule 1”. Schedule 1 includes, at item (e), all decisions involved in making assessments of tax under, inter alia, the 1936 Act.

8. [67]

   “Review” is defined in s 9(2) of the ADJR Act as follows:

9. [68]

   Section 9(1) of the ADJR Act was addressed by the Full Federal Court (Wilcox, Tamberlin and Sackville JJ) in Papazoglou v Republic of the Philippines (1997) 74 FCR 108 as follows:

10. [69]

    That s 9(1) of the ADJR Act affects the jurisdiction of this Court otherwise available under s 39(2) was recognised by Basten JA in ML v Australian Securities and Investments Commissioner and Another [2013] NSWCA 109; (2013) 300 ALR 764; 93 ACSR 23 at [5],[12]-[13]. This was because that later inconsistent provision should be taken to be an implied amendment of the earlier provision. His Honour said:

11. [70]

    I agree with Basten JA. Nothing in the subsequent decision of this Court in Hopkins v Governor General of Australia [2013] NSWCA 365 at [26] which pointed out that the Cross-vesting Act (addressed below) was not relied upon in ML affects this conclusion.

12. [71]

    Gray J in P1 v Australian Crime Commissioner [2012] SASC 229; 274 FLR 50 at [55] expressed a different view. He said that “judicial review forms part of the core Constitutional function of the Supreme Court and should not be removed by implication”. For the reasons given by Basten JA I disagree. There is a further textual indication contained in the Judiciary Act itself tending against the view expressed by Gray J.

13. [72]

    A later section of the Judiciary Act, s 39B(1F), recognises that s 9 of the ADJR Act otherwise has the effect of removing jurisdiction given by that Act from the Supreme Court of a State or Territory. That section (a saving provision) provides:

14. [73]

    In written submissions in reply the applicant placed great reliance upon the decision of Hayne J in Deputy Commissioner of Taxation v Worn, where his Honour dealt with a recovery case in which the respondent had counterclaimed for an injunction restraining the Commissioner from taking further action to collect the tax which was due. Hayne J held that the State Court had jurisdiction to entertain the application for an injunction under s 39(2) of the Judiciary Act. The decision preceded Futuris. In addition, his Honour’s attention was not drawn to s 9 of the ADJR Act and the case contains no mention of the provision. It is distinguishable for those reasons.

15. [74]

    Section 9(1) of the ADJR Act has the effect that a State court has no jurisdiction under s 39(2) of the Judiciary Act to grant certiorari or make a declaration in relation to the making of a taxation assessment under the 1936 Act.

16. [75]

    This Court does, however, have jurisdiction to grant the remedies available to the Federal Court under s 39B by reason of s 4 of the Jurisdiction of Courts (Cross-vesting) Act 1987. As explained by this Court in Hopkins at [24] the Cross-vesting Act grant of jurisdiction prevails over the restriction of jurisdiction in s 9 of the ADJR Act.

17. [76]

    This Court does not otherwise have jurisdiction to grant relief in the nature of certiorari or a declaration in relation to the making of a tax assessment under the 1936 Act. Proceedings of that kind, had they been commenced by Anglo American, would be a “special federal matter” (as one which is within the original jurisdiction of the Federal Court by virtue of s 39B of the Judiciary Act) and the provisions of s 6 of the Jurisdiction of Courts (Cross-vesting) Act would need to be complied with.

18. [77]

    It is unnecessary to say any more about how such an application may be treated in a case like the present (assuming a separate proceeding or a cross-claim seeking the relief suggested by the applicant were to be filed).

Conclusion and orders

1. [78]

   These proceedings are not “judicial review” proceedings of the kind contemplated by the High Court in Futuris. These were taxation debt recovery proceedings being conducted in a State court. The amended defence that was filed in these proceedings was bound to fail, because a claim of conscious maladministration can have no reasonable prospect of succeeding in debt recovery proceedings where no application for judicial review is made and notices of assessment have been admitted in evidence. That is the import of Futuris at [64]-[67], cited above.

2. [79]

   Leave to appeal should be refused. I propose the following orders:

   1. (1)

      application for leave to appeal refused;

   2. (2)

      the applicant pay the respondents costs as agreed or assessed.