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The Hogan Dilemma - How can you go with a DPO? Print E-mail


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 The subject matter of this article has become topical again as a result of recent publicity surrounding the service of a Departure Prohibition Order (“DPO”) on Paul Hogan. I make no attempt in this article to examine the rights and wrongs of that decision on the part of the Australian Taxation Office (“the ATO”). 

Apart from anything else, all I know of the facts of the case has been gleaned from the media reports associated therewith.  With the greatest respect to the Australian media, they are not notorious for detailed and accurate reporting in matters of this nature. 

In any event, most of the true facts associated with the issue of the DPO to Mr Hogan and the subsequent decision to revoke the DPO would only be known to Mr Hogan and his advisors and the ATO officers who were intimately involved in both decisions and who are constrained by secrecy provisions from offering public comment.

I was involved in a relatively recent case involving an appeal from a decision by the ATO to issue a DPO.1

A number of principles emerge from that case which are likely to have relevance for the determination of future appeals in that connection.  There also remains the possibility of judicial review of decisions to issue DPOs and decisions to refuse to revoke DPOs.

RELEVANT STATUTORY PROVISIONS

Part IVA of the Taxation Administration Act 1953 (“the TAA 53”) deals with departure from Australia of certain tax debtors, and contains four divisions.

Division 1 deals with interpretation and relevantly provides:

“14Q(1)    [Definitions] In this Part, unless the contrary intention appears:

“Departure authorisation certificate” means a certificate under subsection 14U(1);

“Departure prohibition order” means an order under subsection 14S(1);

14Q(2)    [Departure for foreign country] A reference in this Part to the departure of a person from Australia for a foreign country is a reference to the departure of the person from Australia for a foreign country, whether or not the person intends to return to Australia”.

Division 2 deals with prohibition and authorisation of departure of certain tax debtors.  Section 14R provides that a person in respect of whom a DPO is in force, and who knows that such an order is in force in respect of him or her, shall not depart from Australia for a foreign country.  The penalty for a breach of s 14R(1) is 50 penalty units or imprisonment for twelve months or both2.

Section 14S deals with DPO’s and provides:

“Departure prohibition orders

(1) Where:

(a) a person is subject to a tax liability; and 

(b) the Commissioner believes on reasonable grounds that it is desirable to do so for the purpose of ensuring that the person does not depart from Australia for a foreign country without:

(i) wholly discharging the tax liability; or

(ii) making arrangements satisfactory to the Commissioner for the tax liability to be wholly discharged;

the Commissioner may, by order in accordance with the prescribed form, prohibit the departure of the person from Australia for a foreign country.

(2) Subject to subsection (3), a departure prohibition order remains in force unless and until revoked under section 14T or set aside by a court.

(3) A departure prohibition order made in respect of a person shall be taken, by virtue of this subsection, not to be in force in respect of the person during any period during which an order is in force under the Migration Act 1958 for the deportation of the person.

(4) Where a departure prohibition order is made in respect of a person, the Commissioner shall forthwith:

(a) cause the person to be informed, as prescribed, of the making of the order; and

(b) subject to subsection (5), cause a copy of the order, and such information as the Commissioner considers is likely to facilitate the identification of the person, to be given to:

(i) the Secretary to the Immigration Department; and

(ii) such other persons as the Commissioner considers appropriate, being persons prescribed, or included in a class of persons prescribed, for the purposes of this paragraph.

(5) Where a departure prohibition order is made in respect of a person whom the Commissioner is satisfied is an Australian citizen, the Commissioner shall not cause a copy of the order, or any information likely to facilitate the identification of the person, to be given to the Secretary to the Immigration Department unless the Commissioner is of the opinion that it is desirable to do so”. (emphasis added)

Section 14T deals with revocation and variation of departure prohibition orders and provides:

“Revocation and variation of departure prohibition orders

(1) Where a departure prohibition order is in force in respect of a person and:

(a) the tax liabilities to which the person is subject have been wholly discharged and the Commissioner is satisfied that it is likely that the tax liabilities to which the person may become subject in respect of, or arising out of, matters that have occurred will be:

(i) wholly discharged; or

(ii)  completely irrecoverable; or

(b) the Commissioner is satisfied that the tax liabilities to which the person is subject are completely irrecoverable;

the Commissioner shall, on application being made to the Commissioner by the person to do so or on the Commissioner's own motion, revoke the departure prohibition order.

(2) Where a departure prohibition order is in force in respect of a person, the Commissioner may, in the Commissioner's discretion and on application being made to the Commissioner to do so or on the Commissioner's own motion, revoke or vary the departure prohibition order.

(3) A reference in paragraph (1)(a) to tax liabilities having been wholly discharged includes a reference to arrangements satisfactory to the Commissioner having been made for those tax liabilities to be wholly discharged and a reference in that paragraph to the Commissioner being satisfied that it is likely that tax liabilities to which a person may become subject will be wholly discharged includes a reference to the Commissioner being satisfied that it is likely that arrangements satisfactory to the Commissioner will be made for those tax liabilities to be wholly discharged.

(4) As soon as practicable after a departure prohibition order made in respect of a person is revoked or varied under this section, the Commissioner shall:

(a) cause to be served, as prescribed, on the person; and

(b) cause to be given to each person to whom a copy of the departure prohibition order was given;

notification of the revocation or variation of the departure prohibition order.

(5) As soon as practicable after a decision is made under subsection (1) or (2) refusing to revoke a departure prohibition order made in respect of a person, the Commissioner shall cause to be served, as prescribed, on the person notification of the decision”.

Section 14U deals with departure authorisation certificates and provides:

“Departure authorisation certificates

(1) Where, on application made by a person in respect of whom a departure prohibition order is in force:

(a) the Commissioner is satisfied:

(i) that, if a departure authorization certificate is issued in respect of the person, it is likely that:

(A) the person will depart from Australia and will return to Australia within such period as the Commissioner considers to be appropriate in relation to the person; and

(B) circumstances of the kind referred to in paragraph 14T(1)(a) will come into existence within such period as the Commissioner considers to be appropriate in relation to the person; and

(ii) that it is not necessary or desirable for the person to give security under subsection (2) for the person's return to Australia; or

(b) in a case where the Commissioner is not satisfied with respect to the matters referred to in paragraph (a):

(i) the person has given security under subsection (2) to the satisfaction of the Commissioner for the person's return to Australia; or

(ii) if the person is unable to give such security, the Commissioner is satisfied that:

(A) a departure authorization certificate should be issued in respect of the person on humanitarian grounds; or

(B) a refusal to issue a departure authorization certificate in respect of the person would be detrimental to the interests of Australia;

the Commissioner shall issue a certificate authorizing the person to depart from Australia for a foreign country on or before the seventh day after a day (being a day later than, but not more than 7 days later than, the day on which the certificate is issued) specified in the certificate.

(2) For the purposes of this section:

(a) a person may give security, by bond, deposit or any other means, for the person's return to Australia by such day as is agreed between the person and the Commissioner;

(b) the Commissioner may, in the Commissioner's discretion and on application by the person or on the Commissioner's own motion, substitute a later day for the day so agreed (including a day substituted by virtue of a previous application of this paragraph); and

(c) the Commissioner may refuse to substitute such a later day unless the person:

(i) increases, to the satisfaction of the Commissioner, the value of the security given by the person under this subsection; or

(ii) gives a further security, to the satisfaction of the Commissioner, by bond, deposit or any other means, for the person's return to Australia by that later day.

(3) As soon as practicable after a departure authorization certificate is issued in respect of a person, the Commissioner shall:

(a) cause a copy of the departure authorization certificate to be served, as prescribed, on the person; and

(b) cause a copy of the departure authorization certificate to be given to each person to whom a copy of the departure prohibition order made in respect of the person was given.

(4) As soon as practicable after a decision is made under subsection (1) refusing to issue a departure authorization certificate in respect of a person or a decision is made under subsection (2) refusing to substitute a later day in relation to the return of a person to Australia, the Commissioner shall cause to be served, as prescribed, on the person notification of the decision”.

Division 3 deals with appeals from and review of decisions of the Commissioner.  Section 14V provides:

“Appeals to courts against making of departure prohibition orders

(1) A person aggrieved by the making of a departure prohibition order may appeal to the Federal Court of Australia or the Supreme Court of a State or Territory against the making of the departure prohibition order.

(2) This section has effect:

(a) subject to chapter III of the Constitution; and

(b) notwithstanding anything contained in section 9 of the Administrative Decisions (Judicial Review) Act 1977”.

Section 14W provides:

“Jurisdiction of courts

(1) The jurisdiction of a court under section 14V shall be exercised by a single Judge or Justice.

(2) An appeal lies to the Federal Court of Australia from a judgment or order of the Supreme Court of a State or Territory exercising jurisdiction under section 14V.

(3) An appeal lies to the High Court, with special leave of the High Court, from a judgment or order referred to in subsection (2).

(4) Except as provided in subsection (2) or (3), no appeal lies from a judgment or order referred to in subsection (2)”.

Section 14X deals with orders which the Court can make on an appeal under s 14V and relevantly provides:

“Orders of court on appeal

A court hearing an appeal under section 14V against the making of a departure prohibition order may, in its discretion:

(a) make an order setting aside the departure prohibition order; or

(b) dismiss the appeal”.

Section 14Y gives a right of review in the Administrative Appeals Tribunal of decisions of the Commissioner made under ss 14T or 14U3.

Division 4 deals with enforcement of DPOs.

PRINCIPLES WHICH EMERGE FROM THE CASES

The Pattenden Decision

Facts

Logan J made the following findings of fact:

“[69] Pattenden was born in the United Kingdom in 1948.  He turned 60 earlier this year.  He left the United Kingdom many years ago.  Within the last five years he has returned there to visit an elderly mother and a sibling.  Overwhelmingly now though, his ties of friendship, assets, remaining business interests and retirement lie in the Antipodes and in Vanuatu not the United Kingdom.

[70] ACBF Funeral Plans was, prior to 2004, an administration company known as ACBF Administration and Sales Service Pty Ltd.  From 2004, it commenced trading as a provider of funeral benefit plans, particularly for members of aboriginal communities throughout Australia.  Its taxable income in respect of the income years 2004-2006 were as follows:

  • 2004 - Nil
  • 2005 - $36,665
  • 2006 - $260,155

[71] Mr Duly, a chartered accountant, has been Mr Pattenden’s accountant and the accountant for the companies associated with him, the ACBF Group of Companies in particular, since 1994.  He explained that, in the first year of ACBF Funeral Plans operation as a provider of funeral plan benefits, its taxable income of nil was referable to substantial set up costs and the application of losses.  He also voiced the opinion that, in his experience, the taxable income amounts returned by ACBF Funeral Plans were consistent with a company in its early years of operation.

[72] Further, it seems that ACBF Funeral Plans and other companies in the ACBF Group substantially decreased their trading activities in 2004 as a result of proceedings taken by the Australian Securities and Investment Commission (‘ASIC’) concerning whether a funeral expense policy was a financial product to which the Corporations Act 2001 (Cth) applied.  Since then, the ACBF Group has developed what Mr Pattenden described as an ‘ongoing dialogue with ASIC and other government bodies as part of their ongoing compliance programmes’.  Mr Pattenden has little involvement in this other than to give the present directors the benefit of his background knowledge.

[73] It is hardly necessary to state that it is no part of the Court’s task on this appeal to make any assessment of whether there was any merit in the issue raised by ASIC.  The companies in the ACBF Group apparently continue to trade in Australia and in Vanuatu.

[74] Since 2003 Mr Duly has been dealing with the ATO on behalf of Mr Pattenden and the ACBF Group of Companies in relation to enquires which later led to the audit.  Based on that involvement, his evidence was that the scaling back of the activities of the ACBF Group of Companies during the course of the proceedings by ASIC was known to the ATO and Mr Sivasubramaniam, in particular.

[75] Crown Insurance has an Australian tax file number which was issued to it on 7 March 2008.  There was no evidence either before the Commissioner or otherwise introduced on the appeal which would suggest that Crown Insurance made supplies which would require it to be registered for the purposes of the A New Tax System (Goods and Services Tax) Act 1999 (Cth).

[76] Mr Pattenden sold an interest in the ACBF Group of Companies to a Mr Mark Conry in 2001 for $1M.  In November 2004, Mr Pattenden bought out Mr Conry’s interest for $1,350,000.  Mr Pattenden funded the reacquisition of the interests he had sold to Mr Conry by borrowing and via his receipt of an eligible termination payment (ETP) from his superannuation fund.  The amount of the ETP was $784,102 of which $664,879 was deemed to be an excessive component for taxation purposes.  This attracted income tax at a higher rate.  In the result, Mr Pattenden came to pay assessed Australian income tax in the 2005 income year in the amount of $252,654.02.

[77] As a result of his acquisition of the interest sold to Mr Conry, Mr Pattenden came to hold and still holds the whole of the legal and beneficial interest in the shares issued in the ACBF Group of Companies.  He is no longer actively involved in the day to day operations of the companies in the group.  He now describes himself as retired.

[78] The racehorses to which Mr Sivasubramaniam refers in his submission of 11 April 2008 were sold by Mr Pattenden at the end of June 2004. They were sold at a loss.

[79] As to ‘luxury’ (An ATO description) residential units at Runaway Bay, Mr Pattenden continues to own one of two units which he previously held.  The other unit was sold with all proceeds being used to repay indebtedness to a bank.  Mr Pattenden did not advise those interviewing him from the ATO on 18 May 2007 (who did not include Mr Sivasubramaniam) that he had sold both of the ‘luxury’ units.  Insofar as there is a note to this effect on an ATO file the note is in error.  It may be that the error has its origin in a reference to the two units being for sale which, it appears, at one stage they were.

[80] So far as the controversy concerning pay as you go (PAYG) withholding in 2001 is concerned, Mr Duly’s firm made what he acknowledges to be an error in the preparation of Mr Pattenden’s income tax return.  An Australian Business Number was incorrectly specified.  In fact all PAYG withholdings had been correctly paid and accounted for.  The typographical error was not detected at the time by Mr Duly, nor, for that matter, by Mr Pattenden when he came to sign the taxation return.  The fact of this typographical error and of the due   making of payment was fully explained by Mr Duly in a letter which his firm sent to the Australian Taxation Office on 7 May 2008.

[81] The delays perceived by the ATO in the lodgement of objections by Mr Pattenden to the amended income tax assessments are readily explicable by the lags which can attend the preparation, delivery and return of briefs to counsel for settling of such documents following the receipt of instructions from a client.  I am quite satisfied that Mr Pattenden took all necessary steps within his control to lodge as soon as possible objections to the amended assessments which issued in January 2008. 

[82] The bank accounts said not to have been disclosed by Mr Pattenden to the ATO were held with the Commonwealth Bank’s Beaudesert, Queensland Branch.  There is in fact reference to these accounts in the response which Mr Pattenden gave to a questionnaire sent to him by the ATO via Mr Duly’s firm.  It is there stated that an amount of $500,000, being part of the sale of equity in the ACBF Group of Companies in 2001, was ‘rolled’ into superannuation.  Such a transaction is evident in the July 2001 [sic] for the superannuation account at the Commonwealth Bank.

[83] Mr Duly assisted in the preparation of the answers but those answers were given by Mr Pattenden.  It is fair to say that the references in the answers to the bank accounts in question were elliptically put.  I did not understand either Mr Duly or Mr Pattenden to maintain that there could not have been a more full answer. 

[84] Mr Handley-Jones, manager of the Oxenford Branch of the Bank of Queensland has dealt with Mr Pattenden and the ACBF Group of Companies on behalf of the Bank since 1997.  He has found Mr Pattenden to be thoroughly reliable in all of his dealings with that bank.  He trusts the man.  Mr Jones does not consider Mr Pattenden to be a flight risk.  In his experience, accounts of which Mr Pattenden has control have been operated in their usual course with their being nothing extraordinary about them which would suggest to him as a banker that Mr Pattenden was trying to move assets from Australia.  Mr Jones was not required to attend for cross-examination on his affidavit.

[85] Mr Pattenden holds a Vanuatu residence permit.  It was issued to him  in 2003.  The permit has a life of five years.  It is renewable thereafter for a further five year period.  There was no evidence before me that Mr Pattenden did not intend to seek renewal of the permit whenever it expired this year.  I propose to proceed on the basis that he has and is likely to continue to have an ability to reside Vanuatu if he chooses.

[86] Mr Pattenden has access to a residence in Vanuatu.  He also has a residence in New Zealand which he is renovating and to the remaining ‘luxury’ unit at Runaway Bay.  The evidence was that, apart from attending as necessary to affairs in relation to companies incorporated there, Mr Pattenden has a particular recreational interest in game fishing which attracts him to Vanuatu.  The evidence also was that he has found Vanuatu’s climate trying.  He intends to base himself in retirement in New Zealand.  That is why he has acquired and is renovating the residence there.

[87] Mr Pattenden regularly travels into and from Australia.  By the time when the DPO was made (and for that matter now) he was tending to spend less time in Vanuatu than hitherto and more time in New Zealand.

[88] It is not for me to judge in this case whether or not Mr Pattenden is a resident of Australia for the purposes of our taxation laws.  What I do accept is that, since at least 2003, he has sought to be in Australia for less than half of any given income year.

[89] Mr Pattenden offered the following explanation, which I accept, of  overseas remittances which had occurred prior to the making of the DPO and which had been noted by Austrac (an agency of the Australian government which tracks inflows and outflows of funds):

(a) payments of approximately $A3500 per month for the period July 2000 to December 2001 were made on behalf of his daughter to an account in the United Kingdom from one of Mr Pattenden’s personal accounts;

(b) a payment of $A200,000 to Crown Corporate Services in Vanuatu on 29 April 2002 represented the amount of a bond required under Vanuatu law to obtain the necessary licences to operate an insurance business;

(c) a payment of $A254,072 into an account in Australia is a payment by Crown Management Services;

(d) a payment of $A388,691 on 8 June 2004 was made from one of Mr Pattenden’s personal accounts in Australia to his account in Vanuatu.

[90] As to the obtaining of licences to operate an insurance business in Vanuatu and the related payment of a bond, Mr Pattenden explained that the ACBF Group of Companies had hitherto been able to obtain reinsurance in Australia from another insurer, National Mutual.  When it did not prove possible to obtain renewed reinsurance from that source Mr Pattenden initially investigated the possibility of establishing a reinsurer for the group in Australia but found that the capital (a bond of $A5,000.00 was required) and regulatory requirements for this did not make it feasible.  On the other hand, investigation showed that setting up a reinsurer in Vanuatu was feasible (a bond of $A200,000), which then led to the securing of licenses and the payment of the bond.  Crown Insurance, incorporated and based in Vanuatu, became the underwriter for the ACBF Group of Companies.

[91] One consequence of the links which came to exist between the Australian companies in the ACBF Group of Companies and companies in Vanuatu was and is, as Mr Alchin explained in evidence, that inflows and outflows of funds have been occurring in the ordinary course of insurance business ever since 2003”.


Settled Principles

His Honour held that the following propositions emerge from the decision of the Full Federal Court in Poletti v Commissioner of Taxation,4 in relation to this type of appeal:5

(a) the appeal is not a hearing de novo, which means that there is no retrial of all the issues and what the Commissioner considered and did in making the DPO decision is not (ir)relevant (sic) (at 160);

(b) neither is an appeal against the making of a DPO confined to a question of law in the way in which is an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (at 160);

(c) nor is the appeal one confined to administrative law error grounds in a way in which would be a challenge under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (at 160);

(d) administrative law error grounds or a question of law may nonetheless permissibly be advanced on an appeal which, to this extent, overlaps with a judicial review proceeding (at 160);

(e) it is for an appellant to make good the challenge; no onus of proof lies on the Commissioner (at 160-161);

(f) the documentary material before the Commissioner at the time when the decision was made should be produced by him to the Court (at 161);

(g) other material then in existence, be it on the Commissioner’s files or otherwise, is relevant and can be produced to the Court to enable the Court to decide whether the belief of the Commissioner was held on reasonable grounds (at 162);

(h) material which comes to light after the making of the DPO decision and which did not exist at that time is of doubtful relevance (at 162).

His Honour accepted, following Poletti, that there were three principal questions to be resolved on the appeal:

(a) Whether the person is subject to a tax liability?;

(b) Whether the Commissioner held the belief of which s 14S(1)(b) speaks?; and

(c) Whether reasonable grounds existed for the formation by the Commission of the requisite belief?

His Honour rejected a submission on behalf of the Appellant that there were two stages to an appeal under s 14V 6.

Findings by Logan J

His Honour accepted Pattenden was subject to a tax liability but found there was a discrepancy between the office minute and the DPO issued on 21 May 2008 by the delegate of the Commissioner.7  His Honour rejected as “unattractive8 a submission on behalf of the Commissioner that, in a relative sense, the discrepancies were “minor” because, “notwithstanding that the nature of the power to make a DPO admits of the application of the Carltona principle, it nonetheless remains a power that entails a serious intrusion on a person’s freedom of movement”.

There was therefore every reason to expect that the “non-procedural aspects of the decision” will be made only by the authorised officer and the decision to insert a different taxation liability was that of an unauthorised subordinate.  His Honour held that inserting the additional taxation liability and the further payments was not a “procedural step”.  Neither was the affixing of the facsimile of the Deputy Commissioner’s signature to a DPO in that form9. His Honour considered the additional entries were not severable10

His Honour rejected a submission that the use of the words “I support your recommendation to seek a DPO” evidenced an endorsement of an approval decision made by an unauthorised subordinate as opposed to evidencing the making of a decision in terms of the subordinate’s recommendation11.

His Honour was critical of the fact it took over a month after deciding a DPO should be made before the DPO was issued and observed that the delay was not explained in evidence.  His Honour considered the word “forthwith” in s 14S(4) meant “as soon as reasonably practicable”.  He was not satisfied that had occurred in this case12.

His Honour concluded:

“The purported DPO of 21 May 2008 did not reflect the decision made by Mr Benson on behalf the delegate.  It reflected the decision of persons not authorised to make a DPO in the name of Ms Vivian.  Even if for no other reason, it should be set aside”.13

As to the requisite belief, whilst his Honour concluded “it is by no means impossible to see how it was open for the requisite belief to be held on reasonable grounds not just subjectively but objectively”, his Honour found that, on the evidence before the Court as to the position at the time that DPO was made, the factors to which he had adverted did not warrant a conclusion that reasonable grounds for the requisite belief existed14 because there had been a material change to the “taxation liability,” as set out in the schedule to the DPO, from that which was the subject of advice to Mr Benson. For that alternative reason also the DPO was set aside.

His Honour rejected the submission of the Appellant that the existence of an undetermined objection was a relevant consideration which the Commissioner was bound to take into account in the exercise of his discretion whether or not to issue a DPO, and that the Court should also take that matter into account in the exercise its discretion whether or not to grant relief on appeal.  His Honour also rejected the submission that the Commissioner was bound to take into account the Commissioner’s Receivables Policy and that any omission so to do gave rise to an administrative law error15.

In reaching his findings, his Honour stated, “as it happens, I have answered two of the three questions described in Poletti’s case favourably to Mr Pattenden.  I did not understand the Commissioner to submit that, if so, I retained a discretion to preserve the DPO”.16  In fact, submissions were made on behalf of the Commissioner that, even if one or more of the questions posed in Poletti’s case were answered favourably to Pattenden, in the exercise of its discretion, the Court could take into account facts which had arisen after the decision to make the DPO which were relevant to the exercise of the discretion whether or not to grant relief and decline to grant relief where that evidence led to a conclusion the DPO should not be set aside, notwithstanding defects in the making of the DPO.

In that regard, his Honour was referred to admissions made by Pattenden, in his evidence, that, although returns had been lodged on behalf of Crown Insurance for each of the years ended 30 June 2003, 2004, 2005 and 2006 and the tax assessed on the deemed assessment arising by lodgment of those returns had been paid,17 Mr Pattenden had instructed his solicitors to lodge objections against those deemed assessments with a view to recovering the monies paid, and did not believe that either he personally, or Crown Insurance, had any taxation liability with respect to any of the years in question, and that he had no intention of paying any tax with respect to any of those years.  His Honour did not refer to these submissions in his reasons.

Is the Decision in Pattenden correct?

In my respectful opinion the decision of Logan J that the language of s 14S of the TAA 53 does not compel a conclusion that a DPO may only be made after consideration of the total taxation liability, however arising, of an individual is correct.  No intention which would displace the interpretative rule found in s 23(b) of the Acts Interpretation Act 1901 (Cth) (“the Interpretation Act”) that “words in the singular number include plural and words in the plural number include the singular” is evident.

Further, his Honour correctly observed that s 14S contemplates the making of a decision to issue a DPO by the Commissioner or a delegate who has formed the belief, on reasonable grounds, that it is desirable that a person, subject to a particular tax liability, not depart Australia without “wholly discharging” that tax liability; or making arrangements satisfactory to the Commissioner for that tax liability to be “wholly discharged”.  The value judgment entailed in the decision is necessarily referable to “wholly discharging” or making satisfactory arrangements for “wholly discharging” the taxation liability in respect of which the decision is made.

These were the considerations which led his Honour to the conclusion that it would be a “usurpation” of the authority vested in Mr Benson to make a DPO for Mr Benson's unauthorised subordinate to presume to insert into what purported to be a DPO, made by or on behalf of Mr Benson, a tax liability that was different to that in respect of which the authorised officer had made his decision on behalf of the Delegate18.

His Honour accepted that it was proper for an authorised person, having made a decision to issue a DPO, to consign to a subordinate “consequential, wholly procedural, clerical or ministerial” tasks such as the affixing of a facsimile signature of the Deputy Commissioner to the DPO, or communication to Pattenden of the making of the DPO.  However, his Honour held the changes made to the taxation liability set out in the schedule to the DPO from the amounts referred to in the office minute were not “wholly procedural, clerical or ministerial” changes, but more properly characterised as “non-procedural changes”, i.e. changes of a substantive nature.  

His Honour’s decision in relation to this aspect of the matter is open to some question for the following reasons:

(a) There will inevitably be differences between the amount specified in office minutes submitted to authorised officers for the purposes of the making of a DPO and the amounts included in the schedule to a DPO by reason of the potential inclusion of general interest charge in the calculations, and by reason of payments being received, credits being allowed and, on occasion, further assessments issuing.  His Honour accepted, for example, that the amount set out in the DPO would inevitably be different to the amount referred to in submissions to an authorised delegate or to a delegate’s authorised officer because the general interest charge would result in the amount of the debt changing on a daily basis;

(b) The authorised delegate, or the authorised officer, in making a DPO under s 14S(1), is recognising that a person has a taxation liability, and forming a belief, which must be formed on reasonable grounds, that it is desirable for the purpose of ensuring that that person does not depart from Australia for a foreign country without wholly discharging the tax liability, or making arrangements satisfactory to Commissioner for the tax liability to be wholly discharged, to issue a DPO in the prescribed form, prohibiting the departure of that person from Australia for a foreign country;

(c) Provided that a taxation liability exists at the time of the making of the decision pursuant to s 14S(1), and that taxation liability has not been “wholly discharged,” and no satisfactory arrangements have been made for that tax liability to be wholly discharged, the relevant decision-maker has authority, pursuant to s 14S(1), to issue a DPO in the prescribed form;

(d) The fact there might be some discrepancies or differences between the amount of the tax liability existing at the precise moment when the decision is made, and at the time when the DPO was issued would not, in and of itself, result in the DPO being invalidated by reason of that discrepancy,19 provided the discrepancies or differences between the amounts specified in the office minute requesting the making of a DPO, and the amount set out in the schedule to the DPO, are not sufficiently substantial to be likely to result in a different decision being reached by the authorised officer.

Reasonable Grounds at the Time to make the DPO was Made

Logan J preferred the approach exemplified in George v Rockett20.  Logan J held that whether reasonable grounds existed for the holding of the requisite belief was “an objectively determined postulate”21.

In George, the High Court stated the relevant law as follows:

“When a statute prescribes that there must be "reasonable grounds" for a state of mind - including suspicion and belief - it requires the existence of facts which are sufficient to induce that state of mind in a reasonable person. … That requirement opens many administrative decisions to judicial review and precludes the arbitrary exercise of many statutory powers: see, for example, Attorney-General v. Reynolds [1980] AC 637. Therefore it must appear to the issuing justice, not merely to the person seeking the search warrant that reasonable grounds for the relevant suspicion and belief exist”.22

A similar approach was adopted in Ruddock & Ors v Taylor23, where the High Court held that what constituted reasonable grounds for suspicion had to be judged against what was known or reasonably capable of being known at the relevant time.

A different approach was adopted by the High Court in McKinnon v Secretary Department of Treasury24 in relation to the proper construction of s 58(5) of the Freedom of Information Act 1982 (Cth).  Hayne J held that the Tribunal's task on such an application was to decide whether the conclusion expressed in the Minister's certificate can be supported by logical arguments that, taken together, are reasonably open to be adopted and that, if adopted, would support the conclusion expressed in the certificate.  Callinan and Heydon JJ held that if one reasonable ground exists to support a claim of contrary to the public interest, even though there may be reasonable grounds the other way, the conclusiveness will be beyond review25.

In a joint dissenting opinion, the Chief Justice and Kirby J26  said:

“[10] . . . The point of the objectivity of such a test, when it is necessary to consider whether a primary decision-maker had reasonable grounds for a given state of mind, is that the question is not whether the primary decision-maker thinks he or she has reasonable grounds27.

[11]  To decide whether it was reasonably open to a decision-maker, on the evidence, to make a judgment such as a decision whether a person was (or was not) negligent, or whether the known facts are sufficient to induce in a reasonable personal a suspicion or belief that someone is guilty of a crime, or whether there are reasonable grounds for a claim that a course of action (such as disclosure of a document) would be contrary to public interest, involves an evaluation of the known facts, circumstances and considerations which may bear rationally upon the issue in question.  A judgment as to whether information or argument bears rationally upon a question is also a familiar exercise.  It is usually discussed by Courts under the rubric of relevance.  If a piece of information, or opinion, or an argument, can have no rational bearing upon a question to decision, it is irrelevant, and must be left out of further consideration. Otherwise, being relevant, just decision-making requires that it be taken into account.

[12] Where a claim, or an argument, or a conclusion or some other state of mind (such a suspicion, or belief, or satisfaction) involves an interplay of observation (of objective facts and circumstances), opinion, and judgment (which may involve an evaluation of matters such as reasonableness of conduct, or of the public interest), the question whether they are reasonable grounds that such a claim, or argument, or state of mind requires a consideration of all relevant matters and an assessment of the reasonableness of the claim, or argument, or state of mind having regard to all relevant considerations. . . ”.

Under the TAA, the Commissioner is required to form the relevant belief referred to in s 14S(1)(b) “on reasonable grounds”.  The “reasonable grounds” which will be relevant to the formation of the relevant belief are not stated anywhere in Part IVA, and the Commissioner is given a wide discretion to decide what factual material available to him ought to be regarded as relevant and what weight should be given to each relevant fact28.  The matters which would be relevant must be ascertained having regard to the proper construction of the relevant section, in the context of the part of the TAA in which it appears, and having regard to the subject-matter, scope and purpose of the relevant provision29.

The Court does not have the power, on an appeal, to exercise the discretion reposed in the Commissioner in s 14S(1) of the TAA30.  The Court may, on an appeal, in the exercise of its discretion, make an order setting aside the DPO, or dismiss the appeal31.  The grounds upon which the Court might set aside the DPO are not stated in Part IVA but would include where the Applicant was able to demonstrate, by admissible evidence, that insufficient grounds in fact existed to enliven a valid exercise of the discretion referred to in s 14S(1)(b) of the TAA.  In other words, no decision-maker, properly instructing themselves as to the relevant facts in existence at the time the decision was made, and properly instructing themselves as to the law, could have made the decision which is the subject of the appeal.

Such a review has some similarity to the task confronting an Applicant in demonstrating unreasonableness, in the Wednesbury sense32.  In Minister for Immigration v Eshetu33, Gummow J said34:

“[137]  …where the criterion of which the authority is required to be satisfied turns upon factual matters upon which reasonable minds could reasonably differ, it will be very difficult to show that no reasonable decision-maker could have arrived at the decision in question. It may be otherwise if the evidence which establishes or denies, or, with other matters, goes to establish or to deny, that the necessary criterion has been met was all one way”.

The evidence in Pattenden was not all one way.  Whilst a number of factual errors had been made in the office minute, no individual error was critical in accordance with the validity of the decision ultimately made, and the question was whether there was enough uncontroversial factual material to justify the formation of the relevant belief “on reasonable grounds”.  His Honour held that there was not and that, viewed objectively, the facts which existed at the date of the decision did not “warrant a conclusion that reasonable grounds for the requisite belief then existed”.35

His Honour did not deal with the question of whether there was any residual discretion to refuse relief under s 14X of the TAA 53.  There would not, in practice, be many occasions, if any, where the court would not set aside a DPO when the court had concluded that reasonable grounds did not exist for the requisite belief, in my view.36

Judicial Review Grounds

In Kirk v Industrial Relations Commission of New South Wales; Kirk Group Holdings Pty Ltd v WorkCover Authority of New South Wales (Inspector Childs)37 (“the Kirk case”), the High Court gave consideration to its earlier decision in Craig v South Australia38.

In Kirk39 the plurality observed that it was neither necessary nor possible to attempt to mark the metes and bounds of jurisdictional error.  However, their Honours referred to the collection of authorities prepared by Professor Aronson in “Jurisdictional Error Without the Tears”40.  According to Professor Aronsen the following categories of jurisdictional error have been recognised:

(a) Mistaken assertion or denial of the very existence of jurisdiction;

(b) A misapprehension or disregard of the nature or limits of the decision-maker’s functions or powers;

(c) Acting wholly or partly outside the general area of the decision-maker’s jurisdiction, by entertaining issues or making the types of decisions or orders which are forbidden under any circumstances;

(d) Acting on a mistaken assumption or opinion as to the existence of a certain event, occurrence or fact … or other requirement, when the Act makes the validity of the decision-maker’s acts contingent on the actual or objective existence of those things, rather than on the decision-maker’s objective opinion;

(e) Disregarding a relevant consideration which the Act required to be considered or paying regard to an irrelevant consideration which the Act required not to be considered, in circumstances where the Act’s requirements constitute pre-conditions to the validity of the decision-maker’s act or decision …;

(f) Misconstruing the decision-maker’s Act … in such a way as to misconceive the nature of the function being performed or the extent of the decision-maker’s powers;

(g) Acting in bad faith;

(h) A breach of natural justice.

At [72], the plurality considered a number of propositions which emerged from their earlier decision in Craig

First, in Craig the Court stated,41 as a general description of what is jurisdictional error by an inferior court, that an inferior court falls into jurisdictional error “if it mistakenly asserts or denies the existence of jurisdiction or if it misapprehends or disregards the nature or limits of its functions or powers in a case where it correctly recognises that jurisdiction does exist”

Second, the Court pointed out42 that jurisdictional error “is at its most obvious where the inferior court purports to act wholly or partly outside the general area of its jurisdiction in the sense of entertaining a matter or making a decision or order of a kind which wholly or partly lies outside the theoretical limits of its functions and powers”

Third, the Court amplified43 what was said about an inferior court acting beyond jurisdiction by entertaining a matter outside the limits of the inferior court’s functions or powers by giving three examples:

(a) The absence of a jurisdictional fact;

(b) Disregard of a matter that the relevant statute requires be taken to account as a condition of jurisdiction (or the converse case of taking account of a matter required to be ignored); and

(c) Misconstruction of the relevant statute thereby misconceiving the nature of the function which the inferior court is performing or the extent of its powers in the circumstances of the particular case.

The line between jurisdictional error and mere error in the exercise of jurisdiction may be particularly difficult to discern in some cases.44

At [73], in Kirk the plurality said:

“As this case demonstrates, it is important to recognise that the reasoning in Craig that has just been summarised is not to be seen as providing a rigid taxonomy of jurisdictional error.  The three examples given in further explanation of the ambit of jurisdictional error by an inferior court are just that – examples.  They are not to be taken as marking the boundaries of the relevant field.  So much is apparent from the reference in Craig to the difficulties that are encountered in cases of the kind described in the third example.”

Indeed, there has been a further recent development in relation to the scope of jurisdictional error.  In Minister for Immigration and Citizenship v SZMDS45 the High Court dealt with the development and scope of “illogicality” and “irrationality” as a separate ground of review for jurisdictional error in relation to the reasons for decision of an administrative decision-maker.  Usually this arises in circumstances where a public officer must be “satisfied” of some fact or circumstance. 

The High Court has observed, on a number of occasions, with reference to s 75(v) of the Constitution in relation to jurisdictional error, that where a statutory power is conferred the legislature is taken to intend that the discretion is to be exercised reasonably and justly.46

At [130] in the joint judgment of Justices Crennan and Bell their Honours said:

“In the context of the Tribunal’s decision here, ‘illogicality’ or ‘irrationality’ sufficient to give rise to jurisdictional error must mean the decision to which the Tribunal came, in relation to the state of satisfaction required under s 65, is one at which no rational or logical decision-maker could arrive on the same evidence.  In other words, accepting for the sake of argument, that an allegation if illogicality or irrationality provides some distinct basis for seeking judicial review of the decision as to a jurisdictional fact, it is nevertheless an allegation of the same order as a complaint that a decision is ‘clearly unjust’ or ‘arbitrary’ or ‘capricious’ or ‘unreasonable’ in the sense that the state of satisfaction mandated by the statute imports a requirement that the opinion as to the state of satisfaction must be one that could be formed by a reasonable person.  The same applies in the case of an opinion that a mandated state of satisfaction has not been reached.  Not every lapse in logic will give rise to jurisdictional error.  A court should be slow, although not unwilling, to interfere in an appropriate case.”47

AVENUES OF REVIEW   

In summary, the avenues of review available are as follows:

(a) Decision to issue DPO – appeal to Federal Court of Australia or Supreme Court of a State or Territory pursuant to s 14V TAA 53; application for relief under Administrative Decisions (Judicial Review) Act 1977 (Cth) (“ADJR Act”); application for relief under s 39B Judiciary Act 1903 (Cth) (“JA”).  The court hearing the appeal may, in its discretion, make an order setting aside the DPO or dismiss the appeal.  There is a further right of appeal to the Full Court of the Federal Court and, by special leave, to the High Court;48

(b) Decision to refuse to revoke and decision to vary or not vary DPO.  Review by the Administrative Appeals Tribunal (“AAT”) on the merits49. Possibly application for relief under ADJR Act and/or JA but court would probably exercise its discretion to dismiss because merits review is available in the AAT;

(c) Decision to refuse to issue Departure Authorisation Certificate under s 14U.  Review on the merits in the AAT under s 14Y. Possibly application for relief under ADJR Act and/or JA but court would probably exercise its discretion to dismiss because merits review is available in the AAT.

Alternative-Judicial Review

The right to seek judicial review of all of the abovementioned decisions is subject to the limitations which arise upon tender of a duly certified notice of assessment or amended assessment, having regard to ss 175 and 177 of the Income Tax Assessment Act 1936 (“the ITAA 36”).50

As the Full Court of the Federal Court observed in Poletti51:

“The person against whom a departure prohibition order is made, has available to him, as an alternative avenue of review, an application under the ADJR Act to this Court to review the Commissioner’s decision which led to the order being made.  The ‘right of appeal’ under s 14V to the court and to State and Territory Supreme Courts against the making of the order by the Commissioner under s 14S is different from a right to apply under the ADJR Act for review by this court of the decision which led to the order, especially as the latter expressly has been preserved by the Parliament.”

GROUNDS OF REVIEW

In Pattenden Logan J said52:

“Administrative law error grounds or a question of law may nonetheless permissibly be advanced on an appeal which, to this extent, overlaps with a judicial review proceeding.”

There is no particular reason why a person seeking to review a decision of the Commissioner to issue a DPO should not proceed by way of an appeal under s 14V of the TAA 53 and, in the alternative, an ADJR application and an application for review under s 39B of the Judiciary Act 1903 (Cth) (“the JA”).

The available grounds of review appear to be quite broad and may now include an argument that the decision to issue the DPO is vitiated by the illogicality and/or irrationality of the reasons of the decision-maker.  Although not every lapse in logic will give rise to jurisdictional error, there are some cases where this ground might well succeed.

CONCLUDING REMARKS

Not surprisingly, the Commissioner rarely issues DPOs in my experience.  It is a fairly draconian power and one which should be exercised with an appropriate degree of caution and consideration for the likely effects which the issue of a DPO will have on the recipient thereof. 

Similar powers do exist in other circumstances. For example, Supreme Courts have a power to issue, on application of a creditor, an order restraining the departure of an absconding debtor in certain circumstances.53  The movements of bankrupts can also be restrained under various provisions of the Bankruptcy Act 1966 (Cth).

Notwithstanding those powers, the power of a public official to issue an order restraining the departure from Australia of a tax debtor, who may well dispute their indebtedness and not have had the opportunity to test the correctness of the Commissioner’s assessment through the objection and appeal procedure referred to in Part IVC of the TAA 53, might fairly be regarded as an exceptional power, the exercise of which should be, and is, the subject of appropriate judicial oversight. 

Taxation officers who have overstepped the mark have been the subject of stringent judicial criticism.  In Pattenden a further attempt was made by the ATO to restrain Mr Pattenden’s departure after the decision and reasons of Logan J had been handed down.  His Honour indicated that contempt proceedings against the officers in question would have been in order if that DPO had not been revoked prior to the matter coming back on before him.

In some ways it is a pity that Mr Hogan did not see fit to challenge the Commissioner’s decision to issue the DPO by way of one of the several mechanisms referred to herein.  So doing might well have advanced the jurisprudence in this area.  It is, however, entirely understandable that he preferred to reach an accommodation with the ATO that allowed him to depart without the inevitable delay associated with an appeal and/or judicial review proceedings. 

Having said that, in my experience, the courts are prepared to deal with these matters most expeditiously, if the circumstances warrant it.54

Peter Bickford

Footnotes

  1. See Pattenden v Commissioner of Taxation (Cth) (2008) 175 FCR 1.
  2. Section 14R(1) does not apply if the departure is authorised by departure authorisation certificate which can be issued pursuant to s 14U (see s 14R(2)).
  3. See s 14Y(1) TAA53.
  4. (1994) 52 FCR 154.
  5. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [8].
  6. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [10] – [12].
  7. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [13]-[14].
  8. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [51].
  9. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [52].
  10. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [55].
  11. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [31] – [32].
  12. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [38].
  13. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [56].
  14. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [108] – [109].
  15. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [114] – [118].
  16. Pattenden v Commissioner of Taxation (2008) 175 FCR 1 at [112].
  17. Albeit after the making of the DPO.
  18. His Honour made it clear that he was referring only to primary or additional tax liabilities which are fixed, not to general interest charges which necessarily accrued from day to day; see reasons [49].
  19. This seems to have been accepted by his Honour at [48] of his reasons.
  20. (1990) 170 CLR 104 at 112 in relation to this question.
  21. See Polletti’s case at p 161.
  22. George at 112.
  23. (2005) 222 CLR 612.
  24. (2006) 228 CLR 423.
  25. Gleeson CJ and Kirby J gave a joint dissenting opinion.
  26. McKinnon at [10] and [11].
  27. See Bradley v The Commonwealth (1973) 128 CLR 557, at 574-575; Nakkuda Ali v MF De S Jaryaratne [1951] AC 66; Inland Revenue Commissioners v Rossminster Ltd [1980] AC 952.
  28. Minister for Aboriginal Affairs v Peko-Wallsend Pty Ltd (1986) 162 CLR 24, at 39-41, per    Mason J.
  29. Peko-Wallsend (supra).
  30. See ss 14V(2)(a)-14X TAA; and Chapter III of the Constitution.
  31. See s 14X TAA.
  32. See Associated Provincial Picture Houses v Wednesbury Corporation [1948] 1 KB 223.
  33. (1999) 197 CLR 611.
  34. At [137].
  35. See Pattenden at [108].
  36. See Pattenden at [115].
  37. (2009) 239 CLR 531.
  38.  (1995) 184 CLR 163 at 176 to 180, [66] to [70] in the judgment of the plurality.
  39. At [71].
  40. Groves and Lee, Editors, Australian Administrative Law: Fundamentals, Principles and Doctrines, (2007) 330 at 335 to 336.
  41. (1995) 184 CLR 163, at 177.
  42. (1995) 184 CLR 163, at 177.
  43. (1995) 184 CLR 163, at 177 to 178.
  44. See Craig, at 178, and the cases referred to therein.
  45. (2010) 84 ALJR 369. 
  46. See Minister for Immigration and Citizenship v SZIAI (2009) 83 ALJR 1123, at 1127 [15] and fn16; Kruger v The Commonwealth (1997) 190 CLR 1, at [36], per Brennan CJ; [2010] 84 ALJR 369 per Crennan and Bell JJ. 
  47. Gummow ACJ and Kiefel J gave a separate joint dissenting judgment.  Their Honours analysed jurisdictional error, at [16] to [31], and the importance of proper reasons, at [32] to [36]. 
  48. See s 14W. 
  49. See s 14Y TAA 53. 
  50. See Commissioner of Taxation v Futuris Corporation Limited (2008) 237 CLR 146. 
  51. Supra at p 160;  see also observations of Logan J in Pattenden at [8]. 
  52. At [8(d)] of his Honour’s Reasons. 
  53. See, e.g., Rule 935 Uniform Civil Procedure Rules 1999 (Qld);  the modern equivalent of the old writ of capias ad respondendum
  54. See, e.g., Poletti where the Delegate of the Deputy Commissioner of Taxation issued the DPO on 10 August 1994;  the appellant appealed against the making of the order; the appeal was heard by Beazley J and dismissed; and the appellant appealed to the Full Court which was convened to hear the appeal on 16 August 1994 and handed down its decision on 8 September 1994.


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