Commissioner of State Revenue(Appellant) v ACN 005 057 349 Pty Ltd

• Jurisdiction: Australia Federal only
• Judge: Kiefel,Keane JJ.,Bell,Gordon JJ.,Gageler J.
• Judgment Date: 08 February 2017
• Neutral Citation: [2017] HCA 6
• Docket Number: M88/2016 & M89/2016
• Court: High Court
• Date: 08 February 2017

[2017] HCA 6

HIGH COURT OF AUSTRALIA

Kiefel, Bell, Gageler, Keane AND Gordon JJ

M88/2016 & M89/2016

Commissioner of State Revenue

Appellant

and

ACN 005 057 349 Pty Ltd

Respondent

Representation

R M Niall QC, Solicitor-General for the State of Victoria with C G Button and N A Kotros for the appellant (instructed by Solicitor for the Commissioner of State Revenue)

N J Young QC with T M Grace and C van Proctor for the respondent (instructed by Daniel Allison & Associates)

Land Tax Act 1958 (Vic), ss 19, 90AA, 92A.

Taxation — Land tax — Where land tax assessments were paid — Where Commissioner did not amend assessments after error detected — Whether Commissioner under duty compellable by mandamus to amend and refund excess land tax — Whether Commissioner's refusal to amend amounted to conscious maladministration — Whether amended assessment had effect that excess tax was never land tax — Whether proceedings were barred under Land Tax Act 1958 (Vic).

Words and phrases — ‘amended assessment’, ‘charged, levied and collected’, ‘completeness and accuracy’, ‘conscious maladministration’, ‘land tax’, ‘tax paid under, or purportedly paid under’.

ORDER

Matter No M88/2016

• 1. Appeal allowed.

• 2. Set aside pars 2 to 7 of the order of the Court of Appeal of the Supreme Court of Victoria made on 8 December 2015, and in their place order that the appeal to that Court is dismissed with costs.

• 3. The amended assessments issued by the appellant in compliance with par 3(a) of the order of the Court of Appeal of 8 December 2015 be set aside.

• 4. The respondent repay to the appellant $1,248,753.38, together with interest pursuant to s 58 of the Supreme Court Act 1986 (Vic) on and from the date of payment of that amount by the appellant to the respondent.

• 5. The respondent pay the appellant's costs of the appeal to this Court.

Matter No M89/2016

• 1. Appeal allowed.

• 2. Set aside pars 2 to 5 of the order of the Court of Appeal of the Supreme Court of Victoria made on 8 December 2015, and in their place order that the appeal to that Court is dismissed with costs.

• 3. The respondent pay the appellant's costs of the appeal to this Court.

1 Kiefel AND Keane JJ. We agree that the appeals should be allowed for the reasons given by Bell and Gordon JJ. There are two aspects of the decision of the Court of Appeal upon which we wish to add some further observations.

Conscious maladministration

2 The Court of Appeal concluded 1 that the Commissioner:

‘refused to perform his duty [under s 19] without good reason or justification; in the circumstances of the case he has acted with conscious maladministration.’

3 Even if, as the Court of Appeal concluded, the Commissioner erred in his understanding of the effect of s 90AA of the Land Tax Act 1958 (Vic) (‘the Land Tax Act’) upon the proper exercise of the discretion conferred on him by s 19, that misunderstanding, without more, did not justify the Court of Appeal's view that there had been a conscious maladministration of the Land Tax Act by the Commissioner.

4 There was no suggestion, nor any factual basis for a suggestion, that the Commissioner acted otherwise than in good faith in the exercise of his powers. It needs to be borne in mind, in this regard, that the respondent only became aware of the duplication error when it was drawn to its attention by the Commissioner; and that the Commissioner made refunds of tax incorrectly collected to the extent consistent with his view of the limits of the statutory appropriation of moneys for that purpose from the public funds of the State.

5 There was no reason to regard the Commissioner's refusal to exercise his discretion under s 19 in the respondent's favour as other than the conscientious exercise of his powers in good faith. It should not have been characterised as conscious maladministration. To apply that description to the Commissioner's conduct is unfair to the Commissioner. And to apply the concept of conscious maladministration to an honest mistake would drain it of its content 2. In any event, as it happens, the Commissioner was not mistaken in his understanding of the considerations bearing upon the exercise of the discretion conferred on him by s 19.

The scope of s 19

6 The Court of Appeal concluded that the Commissioner was obliged to ‘exercise the power under s 19 to amend and to give effect to the amendments by making a refund.’ 3

7 In this regard, the Court of Appeal erred in failing to appreciate, as the primary judge rightly held 4, that the statutory regime of objections 5 and appeals 6 set out in the Land Tax Act, together with the process for claiming a refund set out in s 90AA, manifests an unmistakable legislative intention that the only scope for the Commissioner to refund money overpaid under an assessment is afforded by s 90AA(2) and (3) of the Land Tax Act. Section 92A is express confirmation of this legislative intention.

8 The expenditure of the public funds of the State of Victoria is not within the province of the judiciary; it is within the exclusive control of the legislature 7. The Court of Appeal failed to appreciate that the scope of the Commissioner's authority to make a refund was both provided by, and at the same time confined to, s 90AA(6) of the Land Tax Act. The absence of any other statutory authority to make a refund from public funds meant that a refund to the respondent would have been unlawful 8.

9 While it may be said of s 19 that it functioned ‘as a mechanism to ensure the integrity of the system of tax collection under the [Land Tax Act], namely,

that the Commissioner collects the correct amount of tax’ 9, that mechanism could operate only within the context of the Land Tax Act considered as a whole. In that context, the effluxion of a fixed period of time required that the prospect of recovering tax incorrectly collected must be brought to an end. The legislation thus gives effect to a policy choice to secure the certainty of the revenue after a reasonable opportunity to dispute the propriety of an exaction had been afforded to the taxpayer. That policy choice was lawfully available to the legislature.

10 The circumstance that the duplication error was an obvious error in the assessment process – once it was discovered – does not give rise to an occasion to limit the effect of the legislature's choice. Provisions such as s 90AA, which impose a time limit upon the recovery of tax incorrectly assessed, are familiar and readily intelligible legislative measures designed to protect the revenue. There is no good reason to strain against the ordinary and natural meaning of the language of s 90AA as giving effect to the policy choice made by the legislature. That policy choice is plainly intended to be effective even in cases where it is clear that the assessments which led to the claimed overpayments were excessive.

11 Accordingly, the circumstance that the Commissioner knew at the time of exercising the discretion conferred by s 19 that his earlier assessments were excessive was not a sufficient basis for him to disregard the terms of s 90AA. Neither the Commissioner, nor a court, is at liberty to disregard the express provisions of s 90AA and s 92A, and the absence of statutory authority to make a payment of a refund out of public funds.

12 Given that recovery by the respondent of excess land tax would have been contrary to s 90AA, and that the payment of a refund by the Commissioner was not otherwise authorised by any statutory provision permitting the Commissioner to expend public funds for that purpose, the Commissioner was right to recognise that his want of authority lawfully to make a refund from the public funds of the State was a sufficient reason to conclude that there was no utility in amending his earlier assessments.

13 Bell AND Gordon JJ. The respondent in each appeal, an owner of two adjoining properties (‘the taxpayer’), was assessed for land tax under the Land Tax Act 1958 (Vic) (‘the LTA’) 10. Each assessment for the years 1990 to 2002, with which these appeals are concerned, listed those two adjoining properties at the relevant date: one described as ‘2 Ottawa Rd, Toorak, 3142’ and the other as ‘65 Albany Rd, Toorak, 3142’ 11. Each assessment was paid. In December 2007, the adjoining properties were transferred to a related company, Streetriver Pty Ltd. Streetriver was assessed for land tax for the years 2008 to 2011.

14 On 23 March 2012, a senior revenue officer of the appellant, the Commissioner of State Revenue (‘the Commissioner’), informed Streetriver that an error had been detected in the 2008 to 2011 assessments. The error was that the valuation that was applied for land tax purposes to 2 Ottawa Road encompassed both 2 Ottawa Road and 65 Albany Road. The property listed in the 2008 to 2011 assessments as ‘65 Albany Rd, Toorak, 3142’ had been the subject of land tax twice – it was a ‘duplicate property’. The Commissioner issued a refund cheque in favour of Streetriver for excess land tax paid for the years 2008 to 2011.

15 The taxpayer subsequently formed the view that the 1990 to 2002 assessments, issued to it before it transferred the properties to Streetriver, contained the same duplication error. The taxpayer sought to lodge objections to those assessments under s 24A of the LTA. By that time, the time limit for making those objections under the LTA had expired. The Commissioner refused to consider the objections. The taxpayer requested that the Commissioner issue amended assessments for those years pursuant to s 19 of the LTA. That request was refused by the Commissioner. A delegate of the Commissioner wrote to the taxpayer on 15 August 2013 in the following terms:

‘The decision of the Commissioner is not to make any amendment to the assessments.

The discretion conferred by section 19 must be exercised...