The NSW Court of Appeal has unanimously dismissed a taxpayer’s application for leave to appeal the decision in the Commissioner’s favour in his debt recovery case: DCT v Anglo American Investments Pty Ltd & Ors [2016] NSWSC 975 (note the other 5 applicants, in this first instance case, set out below).
In those cases, the taxpayers had unsuccessfully argued that the assessments issued to it for the 2001 to 2009 income tax years (inclusive), which gave rise to the debt, were invalid because of alleged “conscious maladministration” by the officers of the Commissioner in obtaining and using documents from the Cayman Islands for the purpose of raising the assessments.
The element of ‘conscious maladministration’, that the taxpayers relied on, was that the Commissioner obtained, and deliberately used, documents obtained in breach of the Cayman Island law (these documents were obtained through the right channels, being a Tax Information Exchange Agreement, but the supply of this information 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).
By way of background, the Commissioner has used the information referred above 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 (a case about the substantive tax liability under Part IVC of the Taxation Administration Act 1953 (Cth)). This information was also successfully tendered in a case parallel with these collection proceedings; Vanda Gould v Deputy Commissioner of Taxation [2017] FCAFC 1, where the taxpayer awaits leave to appeal in the High Court. The admissibility of this evidence was established in the No. 7 Hua Wang Bank case: [2013] FCA 1020, but this admissibility issue didn’t make it through to Hua Wang Bank’s unsuccessful High Court appeal on the substantive tax issue (by which time the case was known by the name of another of the Applicants: Bywater [2016] HCA 45).
Returning to ‘conscious maladministration’ – this has special significance, for debt recovery actions. This is because tendering a Notice of Assessment is treated as conclusive evidence that an assessment is valid and its particulars are correct (s175 and the former s177(1) of the Income Tax Assessment Act 1936 or ‘ITAA36’, the latter having been replaced by s350-10(1) of the Taxation Administration Act 1953, Schedule 1 or ‘TAA1’). However, those hoping to find edifying commentary on the significance of this illegality be disappointed.
Rather, the case is revolves around whether a State Court, concerned with collection proceedings, has jurisdiction to hear a matter involving allegations of ‘conscious maladministration’ of a Commonwealth Officer, under Commonwealth legislation, to raise Federal revenue. This involved a detailed consideration of the bases for challenging an administrative decision of a Federal Officer, which included: under s 75(v) of the Constitution or s38, 39, s39B and s40 of the Judiciary Act. These provisions allow judicial review of such decisions based on the old ‘prerogative writs’ of mandamus, prohibition, injunction and also for orders of certiorari and a declaration.
State Courts have jurisdiction to access the same judicial review remedies under s 4 of the Jurisdiction of Courts (Cross-vesting) Act. Section 9 of the Administrative Decisions (Judicial Review) Act 1977 however, creates “special federal matters” that can’t be heard by State Courts without ‘special reasons’ under s 6 of the Cross-vesting Act.
In the end, the question of jurisdiction came down to the fact that the taxpayer defendant had not initiated judicial review proceedings to challenge the validity of the assessment, on the grounds that the use of the illegally obtained material was ‘conscious maladministration’. Such action might well have been open to the taxpayers, had they taken it, but in a collection matter, it was beyond the jurisdiction of the Court to consider it.
For those interested in this jurisdiction law, it’s a good read.
As a post-script, it appears that these companies might be more from the ‘Vanda Gould’ stable of clients (he is the man behind the Hua Wang Bank case mentioned above).
(Anglo American Investments Pty Ltd v DCT [2017] NSWCA 17, Court of Appeal NSW Supreme Court, McColl, Meagher and Payne JJA, 15 February 2017.)
[FJM] [LTN 30, 16/2/17]
First instance decision – multiple parties: (1) Deputy Commissioner of Taxation v Anglo American Investments Pty Ltd; (2) Deputy Commissioner of Taxation v Golden Investments Pty Limited; (3) Deputy Commissioner of Taxation v Melbourne Insurance Co Pty Ltd; (4) Deputy Commissioner of Taxation v Morning Star Fiduciaries Pty Limited; (5) Deputy Commissioner of Taxation v Education Corporation of Australia Pty Limited; (6) Deputy Commissioner of Taxation v Malackey Holdings Pty Limited trading as Malackey Trust (14 July 2016).