This case tangentially involved the vexed issue of the ability of the Commissioner of Taxation to compromise taxation liabilities despite the absence of any express power to do so. Ultimately, there was no need for the court to determine the point because the taxpayer had agreed to pay the full amount of the taxation liability such that all that had occurred was that the Commissioner had entered into an agreement to facilitate the payment of the taxation liability. He had not compromised that liability in any way. In cases of this nature a difficulty might arise because, by the compromise of a taxation liability, the Commissioner is effectively waiving the obligation imposed by the legislature on a taxpayer. The tensions in that are obvious. There are very few authorities on this point and what there are arise at first instance on the question of costs when the issue is raised as to whether the Commissioner acted reasonably in not accepting a settlement offer. Of those cases which do exist on point, none, before this, have undertaken any detailed analysis of issues involved. Indeed, many of the decisions have rested on the obiter of a single judge of the Federal Court whose comments on this point were not attended by authority or reasoning. That said, the Courts have recognised the obvious practicality of recognising the Commissioner’s power to compromise taxation liabilities as part of the general powers of the administration of the taxation legislation and that, without such a power, the legislation may be administratively unworkable. Naturally, both of those matters are relevant to the discerning of the legislative intent contained in the Commissioner’s powers.
In this matter the issue arose in a most interesting manner. The Commissioner sued the defendants upon a guarantee and indemnity in relation to the tax-related liabilities of Croft Steel Pty Ltd. At the relevant time the company had a liability in excess of $2m and a deed of agreement was entered into whereby the company agreed to pay the tax debt by a series of instalments and the defendants agreed to guarantee the payment of the same. For his part, the Commissioner agreed not to pursue further steps in the recovery of the tax debt. The company eventually defaulted in payment of the instalments and the Commissioner issued the present proceedings against the guarantors.
The defendants raised two main arguments in defence of the summary judgment application brought by the Commissioner:
- First, that the Commissioner did not have power to enter into the contract for repayment of the tax debt or the guarantee comprised in the deed;
- Second, that the person who entered into the deed on the part of the Commissioner did not have appropriate delegation to do so.
The defendants submitted that the power of the Commissioner in s 3A of the Taxation Administration Act, which provides, “The Commissioner has the general administration of this Act” was insufficient to confer a power to settle proceedings. Section 3AA of the same Act was important as it gave effect to Sch 1 which provided, inter alia, that the objects of Pt 4-15 of the Act was to “ensure that unpaid amounts of tax-related liabilities and other related amounts are collected or recovered in a timely manner”. Specific power was given to the commission in sub-division 255-B to the effect that the Commissioner was entitled to defer the time at which an amount of a tax related liability is or would become due and payable and a specific power was given to allow a taxpayer to pay by instalments.
In relation to the power to enter into the compromise agreement the Commissioner relied upon a number of first instance authorities which suggested that the general power of administration was wide enough for the purposes of empowering the Commissioner to compromise a taxation liability. The defendants asserted that the power was not so wide and that the other provisions permitting the Commissioner to ameliorate the obligation to pay the tax debts indicated that the alleged general power was not so wide. In effect the defendants called into aid the maxims expressio unius est exclusio alterius or expressum facit cessare tacitum.
In dealing with this question, Jackson J also noted the obverse situation where an individual asserts that the Executive might contract out of a statute or be estopped from relying upon a statute. His Honour noted a number of well-established cases which have held that an estoppel cannot run against a statute, especially where the statute imposes charges. Other cases are those which provide that a person charged with a statutory duty is not entitled to contract out of the performance of the duty. However, as his Honour noted, the situation in the case before him was different to other such cases because the contract in question was concerned to effect the collection of the actual taxation amount due:
“ The particular point of interest in the present case is that there can be a difficulty about the application of private law principles of contract law or estoppel in answer to the recovery of a sum due under a statute, particularly a taxing statute. But the present case differs from those cases, because the contract relied upon by the plaintiff is not alleged to operate in a way that would contradict the liability of a person under the taxing statute for an amount provided by the statute.” (emphasis added)
His Honour concluded:
“ In my view, in a similar way, s 3A is wide enough to empower the plaintiff to enter into a contract of compromise over a tax-related liability with the taxpayer and with a third party to pay the tax-related liability. This is consistent with not only the cases relied on by the plaintiff referred to previously, but also with general principles as to governmental contracting power of the Commonwealth.”
In reaching this conclusion his Honour held that the specific powers of the Commissioner in the TAA in relation to affording time to pay did not have the consequence that the general power ought to be construed narrowly.
The second question considered by Jackson J was whether or not there had been any appropriate delegation to the relevant officer to empower that officer to enter into the agreement as the relevant delegations did not delegate the powers contained in s 3A of the TAA. Whilst his Honour considered that there may have been some force in that submission, it did not matter as it was clear that the Commissioner of Taxation had ratified the contract of guarantee and indemnity by the time that the present application was brought.