SUPREME COURT OF THE AUSTRALIAN CAPITAL TERRITORY

Case Title: Canberra Cleaners Pty Ltd v Commissioner for ACT Revenue (No. 2)

Citation: [2017] ACTSC 303

Hearing Date: 11 September 2017

Decision Date: 17 October 2017

Before: McWilliam AsJ

Decision: See [115]

Catchwords: TAXATION AND REVENUE – garnishee notices – whether notices issued in respect of non-taxpayer ought be set aside – whether denial of procedural fairness

Legislation Cited: Administrative Decisions (Judicial Review) Act 1989 (ACT) s 5Income Tax Assessment Act 1936 (Cth) ss 254, 255Corporations Act 2001 (Cth) ss 9, 153, 601BDPayroll Tax Act 2011 (ACT) ss 7, 9, 67, 69, 70, 74, 79, 80, 81, 87C, 87E, sch 3Taxation Administration Act 1999 (ACT) ss 15, 16, 36, 51, 54, 134

Cases Cited: Allen Properties (Qld) Pty Ltd v Encino Holding Pty Ltd (1985) 10 ACLR 104Kioa v West (1985) 159 CLR 550Attorney-General (NSW) v Quin (1990) 170 CLR 1B & M Quality Constructions Pty Ltd v W G Brady Pty Ltd (1994) 116 FLR 218Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598Can Barz Pty Ltd v Commissioner of State Revenue [2016] QSC 59; [2017] 1 Qd R 222Scott (as trustee of Mewcastle Superannuation Fund) v Commissioner of State Revenue [2016] QSC 132; 103 ATR 411Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1Commissioner of Taxation v Australian Building Systems Pty Limited [2015] HCA 48; 257 CLR 544Edelsten v Wilcox (1988) 83 ALR 99Ex parte Ashby; Re Egg and I (Farm) Pty Ltd (1971) 2 PSR 969General Electronics International Pty Ltd v Deputy Federal Commission of Taxation (1996) 96 ATC 5036Isabella Shop Fitout & Design Pty Ltd v Tan Republic Pty Ltd [2014] NSWCA 192Lis-Con Concrete Constructions Pty Ltd v Commissioner of State Revenue [2011] QSC 363; 85 ATR 769Queensland Maintenance Services Pty Ltd v Commissioner of Taxation [2011] FCA 1443; 207 FCR 405Transtar Linehaul Pty Limited v Deputy Commissioner of Taxation [2011] FCA 856; 196 FCR 271Walker v Secretary, Department of Social Security (No 2) (1997) 75 FCR 493

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Parties: Canberra Cleaners Pty Ltd (ACN 142 575 095) (First Plaintiff)

Phillip Arcidiacono Trading as Rose Cleaning Service (ABN 28 057 543 242) (Second Plaintiff)

Rose Cleaning Asset Service Pty Limited (ACN 607 365 506) (Third Plaintiff)

Commissioner for ACT Revenue (Defendant)

Representation: CounselM Ashurst SC with A Russoniello (Plaintiffs)

P Walker SC with WDB Buckland (Defendant)

SolicitorsMcEvoy Legal (Plaintiffs)

ACT Government Solicitor (Defendant)

File Number: SC 51 of 2017

McWilliam AsJ:

1. These are judicial review proceedings commenced on 23 February 2017, pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1989 (ACT). The plaintiffs seek to set aside six garnishee notices issued by the defendant (Commissioner) on the basis that they were issued beyond power.

2. The genesis for the proceedings is a Notice of Reassessment and Assessment issued to Rose Cleaning Services on 29 November 2016, signed by Ms Evelyn McCarthy as delegate of the Commissioner (Assessment Notice).

3. The Assessment Notice determined a payroll tax debt amounting to $4,612,887.59, which included interest ($592,783.60) and penalty tax ($1,904,259.79).

4. Following the issue of the Assessment Notice, on 10 February, 13 February and 28 March 2017, the defendant issued 21 statutory notices (garnishee notices) to debtors of the plaintiffs, pursuant to s 54 of the Taxation Administration Act 1999 (ACT) (the Act). The garnishee notices essentially required that money payable to the plaintiffs (among a list of companies) instead be remitted to the Commissioner, in satisfaction of the said payroll tax debt.

5. The case as ultimately put by the plaintiffs is set out in the further amended originating application (Application), filed in Court by consent on 11 September 2017, when the matter was also heard. Further written submissions were provided by the parties at the invitation of the Court on 15 September 2017.

6. The Commissioner withdrew and reissued a number of the garnishee notices. A garnishee notice issued to the Commonwealth Bank of Australia (Bank) on 10 February 2017 has been withdrawn and was not reissued, but remains the subject of challenge. The Bank has paid money in compliance with the notice and accordingly, there remains utility to the plaintiffs in challenging its validity in these proceedings.

7. The remaining five disputed garnishee notices were all issued on 28 March 2017 to Calvary Health Care ACT Limited (ACN 105 304 989), the ACT Education Directorate,

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Lennock Motors Pty Limited (ACN 149 847 601), Canberra Grammar School (ACN 684 026 062), and Active Leisure Centre (ACN 508 132 455).

The issue for determination

8. Of the various grounds of challenge raised in the Application, the parties agreed that one was appropriate for determination by way of a preliminary point, as it was a relatively short legal argument and was potentially decisive of the entire proceedings. The argument proceeded before the Court on that single issue.

9. The issue is set out in ground 1(c) of the Application. The plaintiffs contend the garnishee notices were beyond power because they were ‘issued to debtors in respect of a mix of taxpayers and non-taxpayers at the same time’, or because they were issued in respect of ‘one or more non-taxpayers.’

10. The respective positions of the parties may be briefly summarised. The plaintiffs say that at the time the disputed garnishee notices were issued, the third plaintiff, Rose Cleaning Asset Service Pty Limited (ACN 607 365 506) (RCAS), was not the relevant ‘tax-payer’. This is because the Assessment Notice had excluded it from the ‘group’ of companies liable to pay the taxation debt the subject of the Assessment Notice.

11. The plaintiffs submit that as RCAS had not been included in the Assessment Notice, a garnishee notice could not be issued to debtors of RCAS, seeking to recover the monies specified in the Assessment Notice. The plaintiffs rely on Commissioner of Taxation v Australian Building Systems Pty Limited [2015] HCA 48; 257 CLR 544 (Commissioner v ABS) at [25]-[26], [58] and [134]; Edelsten v Wilcox (1988) 83 ALR 99 at 113; and Can Barz Pty Ltd v Commissioner of State Revenue [2016] QSC 59; [2017] 1 Qd R 222 at [8], [39]-[40].

12. Further, any garnishee notice that did include RCAS among the debt of other tax-payers (being the members of the ‘group’ as determined by the Commissioner in the Assessment Notice) was invalid.

13. Alternatively, the Assessment Notice had specifically determined the ‘group’ liable for the $4,612,887.59 debt. To then issue garnishee notices to debtors of the plaintiffs without notifying them, and in particular RCAS, of the change in the Commissioner’s position (by a notice of assessment including it as part of the relevant group or other notification) was to fail to afford RCAS procedural fairness.

14. For either or both reasons, the plaintiffs contend the garnishee notices ought be quashed (or set aside).

15. The Commissioner accepts that RCAS was not liable to pay the tax debt specified in the Assessment Notice when it was issued. However, the Commissioner contends that this does not invalidate a garnishee notice later issued in respect of RCAS, seeking to recover the debt specified in the Assessment Notice.

16. The Commissioner relies on the grouping provisions in the Payroll Tax Act 2011 (ACT) (PT Act), arguing that whether or not a company is part of a ‘group’ does not depend upon any decision or assessment by the Commissioner. The statute operates of its own force, so that notwithstanding the Assessment Notice, which failed to include RCAS as part of the group, that company remained part of the group liable to pay the debt when the garnishee notices were issued, by virtue of s 81 of the PT Act.

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17. In relation to the question of procedural fairness, the Commissioner submits that no notice of assessment was required to be issued to RCAS before the Commissioner became entitled to issue garnishee notices to debtors of RCAS, or in respect of a debt owed by it.

18. In the event the Court finds the garnishee notices were invalid in respect of RCAS, the Commissioner contends that the validity of the same notices in respect of the other members of the group is unaffected.

Summary of findings

19. I have concluded that:

(a) Applying the reasoning of Commissioner v ABS, the statutory framework implicitly links the issuing of a garnishee notice to a notice of assessment.

(b) Although the statutory framework expressly permits a garnishee notice to be issued without notice to the taxpayer, in the circumstances of this case, a notice of assessment was issued, and was based on a specified ‘group’ (with reasons given for that finding).

(c) Any change to the Commissioner’s position was required to be notified to the parties affected, and in particular RCAS.

(d) In issuing a garnishee notice founded on the Assessment Notice but in respect of a group differently constituted, the plaintiffs were denied procedural fairness.

20. I have further found that because of the nature of the error, and having regard to the statutory framework, the garnishee notices were unable to remain operative as against different parties. Accordingly, it is appropriate to make declarations as to invalidity.

Relevant Legislation

21. A proper understanding of the statutory scheme assists with the resolution of both the power to issue a garnishee notice and the content of procedural fairness.

The Taxation Administration Act 1999 (ACT)

22. The empowering provision is s 54, located in Part 7 of the Act, concerning the collection of tax. It is relevantly as follows (emphasis added):

54 Collection of tax from third parties (1) The commissioner may require any of the following people instead of the

taxpayer to pay tax that is payable but remains unpaid:

(a) a person from whom any money is due or accruing or may become due to the taxpayer;

…

(2) The commissioner’s requirement must be made by written notice to the person concerned (the debtor).

(3) A copy of the notice must be given to the taxpayer. (4) If the money due to the taxpayer is payable in instalments, the commissioner

may specify in the notice an amount to be paid by the debtor to the commissioner out of each instalment.

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(5) If, apart from this subsection, money is not due or repayable on demand to the taxpayer unless a condition is fulfilled, for this section the money is taken to be respectively due or payable on demand even if the condition has not been fulfilled.

(6) The amount of money required to be paid to the commissioner is—

(a) if the amount of money … due … to be paid does not exceed the amount payable by the taxpayer to the commissioner—all the money; or

(b) if the amount of money exceeds the amount so payable— sufficient money to pay the amount so payable.

(7) The money must be paid to the commissioner—

(a) on receipt of the notice; or

(b) when the money is held by the debtor and becomes due to the taxpayer; or

(c) after the period (if any) that may be specified by the commissioner; whichever is the later.

(8) A debtor subject to a requirement of the commissioner under this section must comply with the requirement. Maximum penalty: 50 penalty units.

(9) If a debtor is convicted of an offence against subsection (8) in relation to the refusal or failure of the debtor to pay an amount to the commissioner in accordance with a notice, the court may, in addition to imposing a penalty on the debtor, order the debtor to pay to the commissioner an additional amount not exceeding the firstmentioned amount.

(10) A debtor who makes a payment in accordance with this section is taken to be acting under the authority of the taxpayer and of all other people concerned and is indemnified by this section in relation to the payment.

(11) If, after a person is given a notice under this section by the commissioner, the whole or a part of the amount is paid by another person, the commissioner must promptly notify the person to whom the notice is given of the payment and the notice is taken to be amended accordingly.

(12) In this section:

tax includes—

(a) a judgment debt or costs in relation to tax; and

(b) a fine or costs imposed by a court in relation to a tax offence; and

(c) an amount ordered by a court to be paid to the commissioner by a person convicted of a tax offence.

23. The emphasised parts of s 54 are considered below. It is convenient to note briefly here that:

(a) The requirement placed on the debtor is to pay ‘tax’ that is ‘payable’, but ‘remains unpaid’; and

(b) Under s 54(10), the debtor is deemed to have the authority of the taxpayer and of all other people concerned; and

(c) It is an offence to fail to comply with the section.

24. Further, the garnishee notice must be given to the taxpayer. The section envisages that the taxpayer will be informed of the garnishee notice at the same time as the debtor. It says nothing about whether the taxpayer is first entitled to know the amount of tax for which the taxpayer is liable. This is relevant to the issue of procedural fairness.

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25. Section 54 of the Act must be considered in the context of the Act. As to determining when tax is ‘payable’, s 51 of the Act provides:

Subject to this Act, tax is due and payable –

(a) In accordance with the relevant tax law; or

(b) If that law makes no provision in relation to the time for payment – on the last day when the return or other document in relation to the tax is required to be lodged under that law.

26. It will be seen that the payment of penalty tax falls within s 51(a), while the payment of payroll tax falls within s 51(b) of the Act.

27. Part 3 of the Act (containing ss 7-18) concerns the assessment of tax liability informs whether a notice of assessment is required before s 54 of the Act may be utilised. Section 9 permits the Commissioner to make one or more reassessments of a tax liability of a taxpayer.

28. Section 15 of the Act creates a mandatory obligation in respect of interest and penalty tax:

15 Inclusion of interest and penalty tax in notice of assessmentA notice of assessment of a taxpayer’s tax liability issued following a tax default by

the taxpayer must specify any interest and penalty tax that are payable, or will become payable by the taxpayer under part 5 in relation to the default.

29. Section 36 of the Act was not referred to in argument, but to my mind, it is significant in contributing to the proper construction of the words ‘tax that is payable’ in s 54 of the Act. It is a ‘relevant tax law’ under s 51(a) of the Act. Section 36 provides:

Penalty tax must be paid by a taxpayer within the period, of not less than 14 days, specified in a notice of assessment of the tax liability of the taxpayer.

30. A notice of assessment is thus an express precursor to penalty tax becoming ‘payable’.

Provisions relevant to validity of Assessment Notice

31. Section 16 of the Act is relevant to the consequences of any finding of error and the relief to be granted if error is found. It provides:

16 Validity of assessment The validity of an assessment is not affected only because a provision of a tax law

has not been complied with.

32. There is no similar provision in respect of the issue of a garnishee notice in the Act (although that is understandable, given the offence created by ss 54(8) and 54(9) of the Act).

33. Section 16 is supported by s 134(1) of the Act, which provides:

(1) Production of a notice of assessment, or of a document signed by the commissioner purporting to be a comply of a notice of assessment, is conclusive evidence–

(a) of the due making of the assessment; and

(b) that the amount and all particulars of the assessment are correct, except in an objection or appeal proceeding where it is prima facie evidence only.

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The Payroll Tax Act 2011

34. Sections 7 and 9 of the PT Act give context to the operation of s 51 of the Act. They are as follows:

7 Who is liable for payroll tax?The employer by whom taxable wages are paid or payable is liable to pay payroll

tax on the wages.

9 When must payroll tax be paid?(1) A person who is liable to pay payroll tax on taxable wages must pay the tax –

(a) within 7 days after the end of the month in which the wages were paid or payable, other than June; and

(b) within 21 days after the end of June in relation to taxable wages paid or payable in June.

…

35. As to who is liable for payroll tax, the grouping provisions of Part 5 of the PT Act are relevant. Section 69 of the PT Act provides:

69 Make up of groupsA group is made up of all the people or bodies forming a group that is not part of a

larger group.

36. Section 67 defines ‘group’ as follows:

group means a group under this part, but does not include any member of the group in relation to whom a determination under division 5.4 (Groups – miscellaneous) is in force

37. Division 5.2 of the PT Act then lists a number of circumstances where a ‘group’ is considered to arise under the Act. Section 70 provides:

70 Groups of corporationsCorporations make up a group if they are related bodies corporate.

38. The term ‘related bodies corporate’ is defined in s 67 of the PT Act by reference to s 9 of the Corporations Act 2001 (Cth) (Corporations Act). Sections 71-73 of the PT Act relevantly provide:

71 Groups arising from the use of common employees(1) If 1 or more employees of an employer perform duties in connection with 1 or

more businesses carried on by the employer and 1 or more other people, the employer and each of the other people make up a group.

…

72 Groups of commonly controlled businesses(1) If a person or set of people has a controlling interest in each of 2 businesses,

the people who carry on the businesses make up a group

…

73 Groups arising from tracing of interests in corporations(1) An entity and a corporation form part of a group if the entity has a controlling

interest in the corporation

…

39. It is unnecessary on the facts of the present case to set out the detail of the above provisions. It can be seen that each one is a separate statutory test for when a person

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or entity is part of a group. In the context of considering the Payroll Tax Act 1971 (Qld), Bond J stated in Scott (as trustee of Mewcastle Superannuation Fund) v Commissioner of State Revenue [2016] QSC 132; 103 ATR 411 at [17]:

The grouping provisions operate of their own force and, accordingly, do not require a decision by the Commissioner before they operate. Nevertheless the practice of the Commissioner is to notify group members if the view is taken that they form part of a group for the purposes of the Act. …Such a notice then gives the group members the opportunity to make an application for an exclusion order pursuant to s 74 of the [Payroll Tax Act 1971 (Qld)].

40. The same may be said of the PT Act. Here, s 79 of the PT Act creates the ability to exclude a person from a group:

79 Exclusion of people from groups(1) The commissioner may determine that a person who would, but for the

determination, be a member of a group is not a member of the group.

(2) The commissioner may make a determination only if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the commissioner considers relevant, that a business carried on by the person is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of the group.

…

41. By a combination of s 87C and Schedule 3 to the PT Act, a decision under s 79(1) is a reviewable decision, which means that it may be reviewed by application to the ACT Civil and Administrative Tribunal, pursuant to s 87E of the PT Act.

42. Absent of any exclusion determination under s 79 of the PT Act, under s 81 of the PT Act all members of the group are jointly and severally liable to pay the amount to the Commissioner, including any interest and penalty tax payable.

43. Section 80 of the PT Act is also part of the statutory framework material to the procedural fairness issue. It permits either the members of a group or the Commissioner to designate a member of the group to be the ‘designated group employer.’ Sub-sections 80(4) and 80(5) are as follows (emphasis added):

(4) If the members of a group do not designate a member as the designated group employer within 7 days after the end of the month in which the group is established, the commissioner may (but is not obliged to) designate a member of the group as the designated group employer.

(5) The designated group employer of a group stops being the designated group employer on the earlier of the following days:

(a) the first day of a return period when there is a change in the membership of the group;

(b) the first day of a return period when the members of the group revoke the designation.

Evidence in these proceedings

44. The nature of the proceedings before the Court governs the evidence able to be led. The focus of judicial review is on errors of process, rather than errors of substance. As Burchett J explained in Walker v Secretary, Department of Social Security (No 2) (1997) 75 FCR 493 (Walker) at 499:

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Judicial review is not concerned with the making of the decision afresh upon material available at the hearing, but with the legal basis of the original decision, with legal questions which it raises, and with the legal sufficiency of the steps that led to its making. As Lord Brightman said pithily in Chief Constable of the North Wales Police v Evans [1982] 1 WLR 1155 at 1173:

Judicial review is concerned, not with the decision, but with the decision-making process.

45. This uncontroversial principal has been set out because both parties sought to put evidence before the Court establishing that RCAS either was, or was not, a member of the group that was the ‘taxpayer’ in respect of which the garnishee notices were issued. I refused to allow such evidence on the limited issue before the Court, because I did not see that it was for the Court to make such a finding of fact in judicial review proceedings.

46. Whether RCAS met any of the statutory tests is a question of the underlying merit of the administrative action, not the lawfulness of the process. As such that issue is for the repository of the relevant power alone: Attorney-General (NSW) v Quin (1990) 170 CLR 1 per Brennan J at 36.

47. The PT Act has a framework for the Commissioner determining to exclude group members, complete with review mechanisms. Further, as seen in s 79 above, the Commissioner may determine to exclude a person only upon satisfaction of particular matters. It is thus the Commissioner who should be determining the facts relevant to whether a person or entity comprises part of the group.

48. It was asserted during the hearing, without any specific development of the argument, that whether or not a person was a member of a group was a jurisdictional fact. The fact that the statutory regime provides for grouping ‘of its own force’ does not make the fact jurisdictional in the sense of forming a precondition to the exercise of the power to issue a garnishee notice, which is the decision under review here.

49. Different questions may arise in a review of an application to exclude a person or if there was a challenge to the Assessment Notice, but that is not the issue before the Court.

50. Section 134 of the Act, set out above, also dictated exclusion of the evidence. The particulars of the Assessment Notice included the ‘group’. It is conclusive evidence until the Assessment Notice is set aside through the framework provided by the Act. It is not for the Court to go behind the Assessment Notice and find as a matter of fact on any of the statutory tests provided for by the PT Act that RCAS was also part of the group.

The Assessment Notice

51. Part of the Assessment Notice reads:

The following assessment (includes reassessment) has been issued to Rose Cleaning Service pursuant to section 14 of the [Act]. The reasons for this assessment are as follows.

Rose Cleaning Service is a member of a group for payroll tax purposes with the businesses identified in Schedule 1 (attached).

Rose Cleaning Service and its group members employed and paid taxable wages that exceed the ACT payroll tax threshold.

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Rose Cleaning Services and members of the group failed to register, lodge returns and pay the correct amount of ACT payroll tax during the financial years 2009-10 through to and including 2015-16.

The Commissioner has designated Rose Cleaning Service as the group’s designated group employer under section 80(4) of the [PT Act] and approved Rose Cleaning Service as joint return lodger (one return on behalf of all members of the group) under section 87(3) of the PT Act.

A tax default (failure to pay the correct amount of tax) has occurred.

52. The Assessment Notice then sets out the group’s liability for payroll tax over the period 1 July 2009 to 30 June 2016, with the total figure including interest and penalty tax amounting to $4,612,887.59 as stated above.

53. Schedule 1 referred to in the Assessment Notice contains a list of 21 companies. It is not necessary to set any other than the first four listed companies:

1. Canberra Cleaners Pty Ltd (formerly known as Rose Cleaning Group) (ACN 142 575 095)

2. Phillip Arcidiacono trading as Rose Cleaning Service (ABN 28 057 543 242)

3. Rose Cleaning Service Aust Pty Ltd ATF Rose Cleaning Service Aust Trust (ACN 602 897 405)

4. RCS Australia Pty Ltd ATF Rose Cleaning Service Trust (ACN 611 682 850)

54. RCAS was not included as part of the group in Schedule 1.

55. Part B of Schedule 1 sets out reasons for the delegate’s decision on the ‘group’. In summary, the reasons refer to the grouping provisions contained in div 5 of the PT Act, discussed above. The delegate then deals with the circumstances leading to the delegate’s conclusion as to which entities formed part of the group, including that there are common employees, and that Mr Arcidiacono and Mrs Sue Price (Arcidiacono) had controlling interests in the businesses and common control, including through discretionary trusts. These circumstances reflect the provisions in div 5.2 of the PT Act, to which reference has earlier been made.

56. The reasons then referred to the subsuming provision of the PT Act, s 74(1), which is not set out above but states that if a person is a member of two or more groups, the members of all the groups together make up a group. The delegate then states at [14] of Schedule 1 (emphasis added):

A number of the businesses outlined above are members of 2 or more smaller groups which are subsumed into a larger payroll tax group (identified at Part A).

57. There are two other features of the Assessment Notice that should be noted. The first is that it includes an internal review notice, informing the recipient of the Assessment Notice of their rights for internal review. It was common ground that RCAS did not receive the Assessment Notice. It did not receive any internal review notice and was not liable to pay the debt under the Assessment Notice. That is relevant to the procedural fairness issue.

58. The second is that the Assessment Notice expressly states that ‘the investigation of the Rose Cleaning Service and its related and associated businesses has not concluded; it is ongoing.’ That is relevant to the Commissioner’s subsequent altered position that a further entity ought be included in the group.

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The garnishee notices

59. On 10 February 2017, the defendant wrote to the Bank. It contained the following relevant extract:

Please find enclosed a statutory notice (the Notice) issued under Section 54 of the Taxation Administration Act 1999 (the Act).

Pursuant to the Notice, you are required to pay the Commissioner for ACT Revenue any money you are required to pay, hold, or may subsequently pay and hold/or, on account of:

Phillip Arcidiacono trading as Rose Cleaning Service (ABN 28 057 543 242)

Canberra Cleaners Pty Ltd (formerly Rose Cleaning Group Pty Ltd) (ACN 142 575 095)

Rose Cleaning Asset Services Pty Ltd (ACN 607 365 506)

RCS Australia Pty Ltd ATF Rose Cleaning Services Trust (ACN 611 682 850)

…

until the sum of $4,612,887.59 is paid in full.

…

Please note that Section 54(8) of the Act provides that it is an offence, punishable on conviction by a fine not exceeding $37,500, not to comply with a Notice under section 54 of the Act.

60. The attached statutory notice under s 54 of the Act referred to the same entities and included the statement (emphasis added):

As a debtor of the entities, you are required to pay the Commissioner for ACT Revenue:

1. $4,612,887.59 being an amount of tax and/or interest payable by the entities; OR

2. The amount/s owed to, or held on behalf of, the entities, whichever is the lesser.

61. The garnishee notices issued on 28 March 2017 were in similar but not identical terms. They again included the following entities, but in the case of RCAS, the ACN was different (emphasis added):

1. Phillip Arcidiacono T/as Rose Cleaning Service (ABN 38 658 499 243)

2. Canberra Cleaners Pty Ltd (formerly Rose Cleaning Group Pty Ltd) (ACN 142 575 095)

3. Rose Cleaning Asset Services Pty Ltd (ACN 611 682 850)

4. RCS Australia Pty Ltd ATF Rose Cleaning Services trust (ACN 611 682 850)

…

62. It can be seen from this extract that the ACN appears to have been the same as the entity following it in the list. The consequences of this are discussed below.

63. The amounts required to be paid by the debtors who received the garnishee notices issued on 28 March 2017 were specific amounts payable per month, rather than the total amount of the taxation debt as had been previously specified in the notice to the Bank.

64. The contents of the garnishee notices are also noticeable for what they did not include, namely any reference to how the figure claimed was calculated. For example, no

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debtor of the plaintiffs (nor any person reading the notice) would be aware that the debt ‘payable’ by the entities included interest and penalty tax.

Subsequent notice of assessment issued to RCAS

65. On 4 September 2017, after these proceedings were commenced and after the plaintiff’s submissions in-chief had been filed, the defendant issued a Notice of Assessment to RCAS only. The notice stated, inter alia:

…

From 30 July 2015, and through to the present day, Rose Cleaning Asset Services Pty Ltd is grouped with the businesses contained in Schedule 1 of the assessment and reassessment notice pursuant to section 71 of the Payroll Tax Act (common employees).

Rose Cleaning Service was provided 28 days from the date of the assessment (26 December 2016) to pay the total assessed amount ($4,612,887.59). I advise Rose Cleaning Service failed to pay the assessed amount within the afforded 28 Days.

…

66. It was not argued that the assessment notice of 4 September 2017 had retrospective effect on the validity of any garnishee notice. However, its existence is material to the Court’s discretion as to the appropriate relief that might be granted.

Consideration

The notice of assessment was a precondition to the garnishee notices

67. Dealing first with whether a notice of assessment was a pre-requisite to the issue of the garnishee notices, the statutory framework above makes it plain that an assessment was necessary. The main reason for that conclusion is because the amount stipulated in the garnishee notices included penalty tax as part of the ‘tax payable’.

68. By virtue of the combined operation of ss 15, 36 and 51 of the Act, interest and penalty tax (or the liability to pay it) must be set out in a notice of assessment and penalty tax is not payable unless and until a notice of assessment has been issued, and at least 14 days have passed.

69. Thus, absent a notice of assessment, a garnishee notice referable to tax that is payable but remains unpaid could not be issued for any amount that included penalty tax and interest. I consider that those provisions decisively favour the plaintiffs’ construction of the Act.

70. The High Court decision of Commissioner v ABS also supports such a construction of s 54 of the Act. The case did not concern payroll tax or grouping. It concerned the obligation of a liquidator to retain amounts ‘sufficient to pay the tax which is or will become due’ in s 254(1)(d) of the Income Tax Assessment Act 1936 (Cth) (1936 Act).

71. The effect of the reasoning of the majority, which I consider is applicable here, is that although the provisions of the 1936 Act did not expressly link the obligation to retain tax to the issue of a prior assessment (see French CJ and Kiefel J, as her Honour then was, at [17]), the words ‘the tax which is or will become due’ must be read as referring to an ascertained sum.

72. Their Honours found at [30] that the term ‘tax which is or will become due’ should be understood to mean tax which has been assessed and is or will become payable, and

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this was consistent with the established interpretation of the word ‘due’. French CJ and Kiefel J went on to find that the statutory obligation under consideration required for its operation certainty as to the amount of the tax due: Commissioner v ABS at [41].

73. In doing so, their Honours expressly considered and followed the reasoning of Bluebottle UK Ltd v Deputy Commissioner of Taxation [2007] HCA 54; 232 CLR 598 (Bluebottle): Commissioner v ABS at [25]-[26], [42]-[43]. The Bluebottle decision concerned a different factual situation again, dealing with the retention obligation imposed on a publicly listed company to retain tax ‘which is or will become due’ by a non-resident, pursuant to s 255(1)(b) of the same statute: see Commissioner v ABS at [18]-[27].

74. At [79] of the Bluebottle decision, cited in Commissioner v ABS at [25], the High Court stated (emphasis in original):

Until the tax payable by the non-resident has been assessed it is not possible to say more than that there may be tax due by the non-resident. It is not possible to say that tax is due or that tax will become due.

75. Gageler J agreed with French CJ and Kiefel J, stating (among a number of reasons given by his Honour) at [58]-[60] (emphasis added):

[58] I am nevertheless persuaded that the respondents’ argument is to be preferred. The better view is that the retention obligation in s 254, like the retention obligation in s 255, is limited to retaining money after an assessment has been made.

[59] First, it fits with the structure of s 254 in giving the retention obligation an operation sequential to the performance of the assessment obligation. The content of the retention obligation is fixed by the assessment made in consequence of performance of the assessment obligation. The retention obligation then conforms to the taxation liability. …

[60] Second, it produces certainty as to the total amount which the agent or trustee is authorised and required to retain in performance of the retention obligation. The total amount is fixed by the assessment. …

76. As with Commissioner v ABS and the Bluebottle decision, there is no express link between a notice of assessment and the issue of a garnishee notice, but because s 54 of the Act requires for its operation certainty of the amount, the reference to the ‘tax that is payable but remains unpaid’ must also be a reference to an ascertained sum.

77. Plainly, different words were under consideration in Commissioner v ABS and the Bluebottle decision. The provisions in those two cases referred to ‘tax which is due’. However, while tax that is due may not yet be payable (see Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 at 16), tax that is ‘payable’ is also tax that is due. Whether the words are ‘due’ or ‘payable’ is therefore immaterial to the reasoning, which is directed to what will produce certainty of the tax amount.

78. In the present case, certainty is not achieved by the Commissioner simply stating an amount in a notice issued under s 54 of the Act, because the notice is directly referable to ‘tax that is payable but remains unpaid’. Given the grouping provisions and the inclusion of penalty and interest, which may be remitted (pursuant to ss 32-34 of the Act), a notice of assessment is the means under the Act by which certainty is achieved as to what amount is not only payable, but remains unpaid.

79. The Commissioner argued that payroll tax is self-reporting and due (and payable) without a notice of assessment. It may be accepted that payroll tax is self-reporting and payable in accordance with s 9 of the PT Act, but that does not advance the

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argument as to the construction of s 54 of the Act, because the task is broader. It requires the ascertainment not just of the payroll tax reported by a group, but of the ‘tax that is payable but remains unpaid’. Again, such ‘tax’ can (and did) include amounts other than payroll tax, namely interest and penalty tax.

80. If a garnishee notice were issued without any notice of assessment, the taxpayer would have no understanding of how the unpaid amount specified in the notice was calculated (including the amount of joint taxable wages across a specified group), whether interest or penalty tax had been remitted, and how interest had been calculated. There could be no ascertained sum.

81. For reasons of certainty then, in addition to the clear statutory requirements in the case of penalty tax and interest, a notice of assessment is required before a garnishee notice may be issued.

82. The Assessment Notice was not issued in respect of the third plaintiff, and the plaintiff was not required to pay the sum specified in it. That is consistent with the third plaintiff not having any right of review of the Assessment Notice, because it was expressly not part of the group as set out by the Commissioner.

83. Accordingly, the power to issue the garnishee notice in respect of the third plaintiff was not enlivened. As the six notices all referred to the third plaintiff, they were beyond power, at least to the extent that they referred to the third plaintiff.

Incorrect information contained in garnishee notices

84. The five extant garnishee notices identified RCAS by reference to what both parties agreed was the incorrect Australian Company Number (ACN).

85. Further, the second plaintiff may also have an incorrect Australian Business Number (ABN) stated on the same five garnishee notices. The notices refer to ABN 38 658 499 243. However, the Application refers to what appears to be the same person by reference to a different ABN, namely ABN 28 057 543 242.

86. This was a matter of some concern, particularly with regard to RCAS, where the dispute was over its exclusion from the Assessment Notice but inclusion in the garnishee notice. On one view, if RCAS was not included in the garnishee notice, the notices may have been validly issued.

87. The importance of an ACN and ABN as identifying corporate entities is seen in ss 153 and 601BD of the Corporations Act. In Isabella Shop Fitout & Design Pty Ltd v Tan Republic Pty Ltd [2014] NSWCA 192, the Court of Appeal stated (albeit only in passing) at [29] there was merit in an argument that a company should be identified by its ACN and ABN.

88. It has been held that courts should not be overly-critical when dealing with situations where a company is misnamed and may disregard trivial mis-descriptions of company names: In Ex parte Ashby; Re Egg and I (Farm) Pty Ltd (1971) 2 PSR 969 (Ex parte Ashby).

89. However, in B & M Quality Constructions Pty Ltd v W G Brady Pty Ltd (1994) 116 FLR 218 Young J (as his Honour then was) referred to Ex parte Ashby and stated that since that time, the Corporations Law has been amended to include provision that each company should have an Australian Company Number, which would avoid the problem of identity.

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90. In Queensland Maintenance Services Pty Ltd v Commissioner of Taxation [2011] FCA 1443; 207 FCR 405 Collier J considered a similar notice issued under different taxation legislation and stated at [84] that the absence of an ACN or ABN identifying a corporation as the relevant taxpayer in such a notice may in some circumstances mean that the notice was invalid.

91. This gave rise to the invitation to file further submissions as to the consequences of the error.

92. The plaintiffs submitted that the error was trifling in identifying RCAS and may be disregarded: Allen Properties (Qld) Pty Ltd v Encino Holding Pty Ltd (1985) 10 ACLR 104. The Commissioner agreed with the sentiment, if not the language used by the plaintiffs.

93. Accordingly, although the confusion created by misdescription of the orthodox means of identifying corporate entities was to my mind a matter of substance potentially affecting the validity or otherwise of a garnishee notice, there is no issue between the parties for the Court to determine.

Procedural Fairness

94. The content of procedural fairness is to be determined by reference to the statutory framework adapted to the circumstances of the case: Kioa v West (1985) 159 CLR 550 at 584-585.

95. As set out above, the statutory framework (and s 54(3) of the Act in particular) expressly does not require the Commissioner to give any prior warning that a garnishee notice may issue or any prior opportunity to be heard in relation to whether a garnishee notice might issue. I accept the Commissioner’s submission that such a requirement could put at risk the effectiveness of the remedy afforded by s 54 of the Act: see Walker at 508, following General Electronics International Pty Ltd v Deputy Federal Commission of Taxation (1996) 96 ATC 5036 at 5045. See also Transtar Linehaul Pty Limited v Deputy Commissioner of Taxation [2011] FCA 856; 196 FCR 271 at [134]-[137] and the cases there cited; Lis-Con Concrete Constructions Pty Ltd v Commissioner of State Revenue [2011] QSC 363; 85 ATR 769 at [7].

96. However, the issue from a procedural fairness perspective does not relate to the bare right of the Commissioner to issue a garnishee notice; rather, it relates to the effect of the Commissioner’s finding in the Assessment Notice as to the group. The operation of ss 16 and 134 of the Act meant that the ‘group’ set out by the Commissioner in the Schedule is taken to be correct.

97. The Commissioner expressly stated in the Assessment Notice that the investigation was not yet concluded and the Act does not prevent the Commissioner from taking a different view of which persons comprise a group. However, if the Commissioner intended to proceed on the basis of a different set of facts from that which it had previously communicated to the parties in a manner deemed to be conclusive under the Act, then it was incumbent upon the Commissioner to inform the affected parties of that position.

98. This is because there are statutory consequences for the change in position, one example being the operation of s 80(5) of the PT Act: Rose Cleaning Service (designated by the Commissioner in the Assessment Notice, set out above) was no

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longer the group’s designated group employer once the membership of the group changed.

99. It is no answer for the Commissioner to say that the membership of the group had not in fact changed because of the provisions of the PT Act having operation of their own force, and further that RCAS had also been liable for the debts pursuant to s 81 of the PT Act. The Commissioner had communicated a materially different position to those listed in Schedule 1 to the Assessment Notice, and had not communicated any position to RCAS, including any exposure of that entity to interest and penalty tax, at all.

100. The plaintiffs were each entitled to proceed on the basis that there was no exposure to garnishee notices being issued to debtors or potential debtors of RCAS in respect of the debt that was the subject of the Assessment Notice.

101. Having considered the statutory framework and the conduct of the Commissioner, procedural fairness in the circumstances of this case required that a revised notice of assessment be issued.

102. The issuing of a revised notice of assessment (or notice of reassessment) would have enlivened the right of RCAS to object to it being included, or alerted RCAS or any other member of the group (including the first and second plaintiffs) to a potential need to apply for an exclusion, with the accompanying rights of review.

103. In the events that transpired, the first RCAS knew of its joint and several liability for a tax debt of more than $4 million including interest and penalty tax (let alone how such sum had been calculated) was when it received the garnishee notice.

104. The failure of the Commissioner to take the step of issuing a reassessment notice before issuing the garnishee notices meant that in this case, procedural fairness under the Act was not afforded to the plaintiffs.

105. Such an error is a separate reason for determining that the garnishee notices were issued beyond power.

Relief

106. In the event the Commissioner’s construction of the Act was not accepted, the Commissioner’s alternative argument was for the continuing operation of the garnishee notices in respect of the other entities, because they were included as the group in the Assessment Notice that had been issued. As I have found that the first and second plaintiffs have also been denied procedural fairness, the garnishee notices that are extant ought be set aside in their entirety.

107. However, if the extent of the procedural fairness finding is subsequently found to be in error, I have given consideration to whether it is possible to preserve any part of the garnishee notices.

108. The fact that the Act is silent on preserving the validity of garnishee notices has already been noted in the context of setting out the statutory framework above. As required by Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 389, attention has been given to the language of the statute, its subject matter and objects, and the consequences for the parties of holding void acts done in breach.

109. The language of s 54 of the Act is significant, in that it creates an offence for failure to comply. It is an onerous provision for third parties. The section therefore requires both

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certainty of the amount that is payable but remains unpaid, and certainty of the identity of the parties.

110. The consequences for the Commissioner are essentially delay in recovery of a substantial sum. A notice of assessment to the third plaintiff has already been issued, as set out above. Even if that had not occurred, the issue of garnishee notices to the same debtors removing the error identified would appear to be a relatively straightforward task, given that it has already been done once earlier this year.

111. Given the serious consequences of the statutory provision for debtors, the contents of the garnishee notices in rolling up the amounts and the parties, and the ability of the Commissioner to rectify the error, I do not see any warrant for limiting the relief to a partial declaration of invalidity.

112. There was some discussion during the hearing as to what consequences would follow for any money that had been paid under the garnishee notices. The plaintiffs accepted that the money paid by the debtors is not returned to the plaintiffs. Rather, it is a matter between the Commissioner and the debtors, who are not parties to these proceedings.

113. A notice of assessment has now been served on the third plaintiff, and the debt is due to the Commissioner under it. The Court is not appraised of the present state of affairs in terms of moneys owing or recovered. It remains a matter for the Commissioner to abide the orders of the Court and to determine how it will proceed in terms of further recovery, including whether any moneys already collected may create a set off against further notices issued under s 54 of the Act. For these reasons, I do not consider it necessary to make any order as to a refund.

114. As to the question of costs, this appears to be a case where the exercise of the Court’s discretion ought follow the usual order that costs follow the event.

Orders

115. The Court makes the following declarations and orders:

1. Declare that the notices issued pursuant to s 54 of the Taxation Administration Act 1999 (ACT) on 10 February 2017 to the Commonwealth Bank of Australia and on 28 March 2017 to Calvary Health Care ACT limited (ACN 105 304 989), the ACT Education Directorate, Lennock Motors Pty Limited (ACN 149 847 601), Canberra Grammar School (ACN 684 026 062), and Active Leisure Centre (ACN 508 132 455) (Notices) are invalid.

2. Order that the said Notices be set aside.

3. Order that the defendant is to pay the plaintiffs’ costs.

I certify that the preceding one hundred and fifteen [115] numbered paragraphs are a true copy of the Reasons for Judgment of her Honour Associate Justice McWilliam.

Associate:

Date:

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