Datt, Kalmen; Woellner, Robin --- "The Pintarich Saga: Technical and Ethical Issues" [2021] JCULawRw 6; (2021) 27 James Cook University Law Review 87

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The Pintarich Saga: Technical and Ethical Issues^[1]#

Kalmen Datt^[1] and Adjunct Professor Robin Woellner^[1]

Abstract

While the technical aspects of the question whether a ‘decision’ made by a computer algorithm can be a ‘decision’ for legal purposes is the focal point of attention of the decision in Pintarich, the case also raises important issues on whether the ATO actions in that case were fair or appropriate.

Both issues are critically evaluated in this paper. The authors conclude that the technical decision is open to criticism and the ethical issues raised by it are of concern.

I Introduction

The Australian Taxation Office (‘ATO’) is the Federal Government department charged with the effective administration of the Australian taxation system and collecting the correct amount of tax from taxpayers.

This is a crucial role, because income and other taxation generates the bulk of the funding which supports Federal government programs and it is therefore critical that the ATO can operate efficiently and effectively to collect the tax owing. Accordingly, the ATO is given extremely wide powers to investigate taxpayers’ conduct and to collect tax and penalties owing.

However, even with these powers, the ATO’s ability to function effectively depends in large measure on the ongoing support and voluntary co-operation of taxpayers and currently, most tax in Australia is paid voluntarily,^[1] based largely on the trust which the public has in the taxation system and its administration. Without this fragile element of trust, the system would break down – as Campbell has pointed out, ‘if taxpayers and advisers lose their trust in the ATO, this could undermine the integrity of the whole system’.^[2]

If the ATO is to enjoy the continued support of taxpayers, it must therefore operate – and be seen to operate – fairly and appropriately and avoid overreach in the exercise of its powers.

It is therefore somewhat worrying to find that, in discussing the outcome of Pintarich v Deputy Commissioner of Taxation,^[3] it was the view of ATO Deputy Commissioner Robert Ravenello^[4] and then Second Commissioner Neil Oleson^[5] that the result in that case was a ‘bad look’ for the ATO.

Accordingly, this article analyses the decision in Pintarich in order to determine both the technical issue of whether the ATO letter of 8 December 2014, which formed the central focus of that case, reflected the outward manifestation of a decision made by an ATO officer for the purposes of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (AD(JR)A), and also whether the ATO’s actions – viewed objectively – were fair and reasonable (ie whether the ATO should have acted as it did).

II Setting the Context – the Facts in Pintarich

In Pintarich, the ATO was involved in a dispute with Joseph Pintarich in relation to Pintarich’s taxation affairs, with the ATO seeking to recover $1,156,787.72 from him, comprising primary income tax of $821,762.75 and the balance being the General Interest Charge (GIC).

To settle the dispute, the accountant representing Pintarich (Mr Smith) wrote to the ATO on 24 November 2014, requesting full remission of the GIC component of the debt. There were discussions in early December 2014 between the taxpayer (Pintarich), his tax agent (Smith) and the ATO officer (Celantano), with the parties giving different versions of these discussions.

Pintarich’s version was that Celantano had said that:

... if you make sure you can pay it by February 2015 ... it will all be over and done with

to which Pintarich replied:

... put it in writing so I can take it to the bank.

The ATO’s version (as recorded in Celantano’s contemporaneous file notes) was that he had said to the taxpayer and his agent separately over the phone words to the effect that:

We require the primary tax of $821,762.75 [to be] paid in full whilst we consider the remission of general interest charge currently $344,216.13.^[6]

The ATO officer recorded that he had subsequently^[7] keyed information into an ATO computer template ‘bulk issue letter’, and internal ATO processes had then automatically generated the letter which was subsequently sent out to the taxpayer on 8 December 2014.^[8] The letter was intended to reflect Mr Celantano’s understanding of what had been agreed between himself and the taxpayer and his accountant (Mr Smith).

The letter was unsigned but contained the (first) Deputy Commissioner’s name and details in a ‘signature block’^[9] and was headed ‘Payment arrangement for your Income Tax Account debt’. The letter stated, inter alia, that the ATO:

agree to accept a lump sum payment of $839,115.43 on or before 30 January 2015.

This payout figure is inclusive of an estimated general interest charge (GIC) amount calculated to 30 January 2015.

In the subsequent decision of the Full Court of the Federal Court, Kerr J (dissenting on the technical issue) noted that:

As the primary judge recorded, Mr Celantano gave evidence about what he had done to cause the letter of 8 December 2014 to have been issued. His evidence was that he had inputted data into a number of fields [in the template] and the letter had then been generated and sent out from another place. He said that he had not seen the letter at the time it was created [because ...] the terms of the letter were “extracted from a template bulk issue letter” (transcript p 51 lines 38-39) and that there were ‘hundreds of template letters around’ (transcript p 53 lines 28-29) He gave evidence that the interest component in the letter ‘shouldn’t have been in there’ and that he didn’t expect it to be there or know it was there (transcript p 58 lines 20-25) He said that, in this respect, there was a ‘misalignment’ between the conversations that took place and the purpose of the letter (transcript p 59 lines 14-20).^[10]

Unfortunately, there appears to be no evidence in the judgments as to precisely what data was actually entered by Celantano into the template, or what the content of the template letter was prior to the input of this data.^[11]

However, because of the ATO computerised system then in operation, Celantano was not able to proofread the letter^[12] before its dispatch by another part of the ATO. As noted above, Celantano stated that he had not intended to include the wording contained in the first two paragraphs of the letter of 8 December 2014, and as a result, that wording did ‘not accord with the conversations he had had with the taxpayer and Mr Smith’^[13] and that at the time of drafting the December letter, he had not decided to remit the GIC.^[14] So far as appears from the judgments, the ATO never provided a clear explanation of how the misleading wording came to be inserted in the December letter.

Quite apart from any technical issues as to whether there had been a computer-generated ‘decision’, these facts raise serious questions about the ATO systems and processes in operation at the time. A system where a computer can issue a document apparently recording a decision made by the ATO without any human intervention to monitor the process and remedy any errors that may be contained in that document reflects a worrying devolution of power by the ATO to the computer and raises the question of whether there are similar problems still in the ATO system^[15] – which would be an obvious cause for concern.

In any event, Pintarich used the ATO letter to obtain a loan of $839,115.43 from the ANZ Bank, and in turn used that borrowed money to pay the amount specified in the December letter to the ATO on 30 January 2015.

In the meantime, the ATO had sent Pintarich a series of statements of Running Account Balances on 11 December 2014, 7 and 14 January, and 5 February 2015, with each statement showing an increasing GIC debt.

These Running Account Balance (‘RAB’) statements^[16] led to further correspondence from the tax agent to Celantano on 23 February (after the amount reflected in the ATO letter of 8 December 2014 had been paid), which stated:

Can you please advise on the letter we received [on 8 December] which stated a different figure. The reality is my client has absolutely no capacity to borrow any further funds and the ANZ bank were only willing to allow Mr Pintarich to borrow further funds of [sic] the back of the letter received from the ATO.

The matter was escalated to a (second) Deputy Commissioner, who replied to Smith’s letter some three months later on 15 May 2015, indicating that Pintarich’s request for remission had been denied and that payment in full of the outstanding GIC (then $344,604.90) was required within 14 days.^[17] The Deputy Commissioner’s August 2015 letter also stated, inter alia, that:

the letter issued by the Deputy Commissioner of Taxation ... dated 8 December 2014... was issued in error. The outstanding amount ... in the letter did not include the entire amount of GIC which had accrued... up to and including 8 December 2014.

Discussions continued, and as suggested by the ATO, the tax agent duly lodged a further request for remission of the GIC on 16 October 2015. The (first) Deputy Commissioner replied some seven months later on 13 May 2016, advising the taxpayer that only partial remission of a small amount of the GIC owing would be granted, stating that:

You were erroneously advised [in the 8 December letter] that the sum of $839,115.43 would satisfy the outstanding debt and was a ‘payout figure’. This lead [sic] to you borrowing funds to pay the tax amounts within two months. Although the ‘payout figure' may be construed as misleading, a Notice for Income Tax and Running Account Balance issued on 11 December 2014... advised of accruing GIC amounts, with the total debt of $1,666,902. This would have been an indication to you that the GIC component had not been satisfied and was still outstanding.

Smith’s conduct on behalf of Pintarich in seeking a review in 2015 of the ATO decision not to remit GIC might seem puzzling, having regard to fact that Smith claimed that Pintarich did not owe any more GIC after the payment in January 2015. Indeed, Andrew Mills, then a Second Commissioner in the ATO, seemed to suggest in a subsequent article^[18] that the taxpayer’s conduct was evidence that he was acting mala fides,^[19] though this finds little support in the judgments.

It is suggested that there may be simpler and more innocent interpretations of the taxpayer’s conduct. From the taxpayer’s perspective, the Running Account Balances mentioned in the ATO correspondence prior to 30 January 2015 might simply have represented a provisional liability that would only crystallize if the agreed ‘payout’ amount were not paid by the agreed date.^[20] Alternatively, the discussions and applications by Smith to the ATO seeking to waive the GIC post 30 January 2015 may have been an attempt to avoid litigation and the costs of court proceedings to enforce the letter of 8 December 2014. It is notable the ATO did not raise any issues of estoppel or waiver regarding this conduct by the taxpayer. Again, perhaps it simply reflected the position put by Smith on 8 September 2015, when he sent a letter to the ATO advising that Pintarich proposed to accept the ATO’s offer to permit Pintarich to apply (again) for remission of the GIC, but stating that:

By accepting your offer to proceed with a further submission for remission, Mr Pintarich should not be taken as agreeing that the amount of GIC is owing, for he remains of the view that he owes nothing further to the Australian Taxation Office.

The following factors would seem to support the approach taken by the taxpayer:

• an application was made to the ANZ Bank for a loan in the amount specified in and supported by the letter of 8 December 2014 which appeared to state that the amount reflected in the letter would bring to an end all disputes then existing between the taxpayer and the ATO;

• the knowledge of all parties (based on the discussions between the taxpayer, his agent and the tax officer) that Pintarich was unable to raise additional monies beyond the amount sought in the ATO’s December letter, and demands for more would result in bankruptcy;

• Pintarich made payment to the ATO of the amount specified in the letter of 8 December 2014;

• the disavowal by the ATO of any reliance on the doctrine of ‘mistake’ as discussed in section A of Part V below; and

• the subsequent query by Smith, after receipt of the 5 February 2015 ATO statement which sought payment of a significantly larger mount in GIC beyond that specified in the 8 December 2014 letter.

Ultimately, Pintarich took action in the Federal Court under the Administrative Decisions (Judicial Review) Act 1977 (Cth), alleging that because the ATO had already made a ‘decision’ in its letter of 8 December 2014 to accept the payment of $839,115.43 in full discharge of all primary tax and GIC owing, the subsequent purported ‘decision’ of the (first) Deputy Commissioner on 13 May 2016 only partly remitting GIC was of no effect.

The ATO successfully argued that the letter of 8 December 2014 had been issued ‘in error’ and that there had been no ‘decision’ made on 8 December 2014 because the ATO officer had not engaged in the necessary mental process of deliberation, assessment or analysis, so that the decision of 13 May 2016 not to remit GIC was the only operative decision.

However, the facts would seem to support a view that Celantano did ‘engage’ his mind in reaching a decision not to remit the GIC. Having reached this decision, he then took overt action to communicate this decision by causing the letter of 8 December to be issued. The fact that the letter did not accurately reflect the decision reached by Celantano cannot be laid at the door of the taxpayer. This issue and the possibility of the Commissioner being estopped from disputing the terms of the agreement reflected in the letter of 8 December 2014 are discussed in Part V below.

III A Preliminary Issue – Rejection of New Grounds of Appeal

During the hearing before the Full Court, the court asked Pintarich’s counsel if they proposed to mount alternative formulations of their argument based on contract or estoppel.

It is surprising that the taxpayer did not seek to rely on these additional grounds in the initial hearing before Tracey J,^[21] but in any event, Pintarich’s counsel sought leave to introduce and argue these additional grounds on appeal.

The ATO opposed the introduction of the new grounds.^[22] The Court accepted the ATO’s submissions and unanimously refused leave to argue the additional grounds.^[23] While the decision was undoubtedly correct on the facts, it does raise issues about the appropriateness of the actions of the ATO as a model litigant.

IV The ATO’s Obligations as a Model Litigant

It seems reasonably clear that the Full Court would have (correctly, it is submitted) rejected the new grounds of appeal in any event^[24]. However, because the ATO as a Federal government entity is required to act as a ‘Model Litigant’, there are obligations imposed on it by Appendix B to the Legal Services Directions 2017,^[25] beyond those required of normal litigants.^[26]

Under the Legal Services Directions 2017, the ATO, as a model litigant, is entitled to act firmly and properly to protect its interests and to take all legitimate steps to pursue claims and test or defend claims made against it.^[27] However, it is important to note that on the other hand, as a model litigant, the ATO ‘has no private or self-interest of its own, separate from the public interest it is constitutionally bound to serve’.^[28] Accordingly, a model litigant has no interest in ‘winning’ per se – its obligation is rather to ensure that the correct decision is reached, and it should therefore take a balanced approach to issues arising during litigation.

More specifically, in conducting litigation the ATO is required to act honestly, fairly and promptly,^[29] in accordance with the highest professional standards,^[30] which may require more than ‘merely’ acting honestly and in accordance with the law and court rules.^[31]

These obligations also include dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation^[32] and endeavouring to avoid, prevent and limit the scope of legal proceedings wherever possible.^[33]

Of particular relevance to Pintarich, a model litigant must not rely on technical defences unless the Commonwealth’s or the agency’s interests would be prejudiced by the failure to comply with a particular requirement.^[34]

Given the obligation on a model litigant not (generally) to rely on technical defences, would it have been more appropriate in Pintarich for the ATO, in pursuit of the correct legal outcome (rather than a ‘win’) – perhaps on the basis of an appropriate costs order and an adjournment – to have supported the introduction of the new grounds in order to ensure that all relevant issues were dealt with and the correct result reached. Alternatively, should the ATO have remained mute, leaving the decision entirely to the Federal Court – which, it seems clear, would have reached the same conclusion without the ATO’s contribution?^[35]

The ATO is closely conversant with the model litigant obligations^[36], and generally seems to comply with them.

However, as the Inspector-General of Taxation (IGT) has indicated,^[37] issues do arise from time to time.^[38] Indeed, some time ago, the IGT suggested that the ATO sometimes used litigation as ‘a means of validating its interpretation of legislation and ensuring that taxpayers comply with its view of the law, rather than as a means of clarifying the meaning of the law, so that community perceptions that, at times, the ATO has a ‘win at all costs’ approach to litigation are justified’.^[39]

One possible explanation for such approaches is that in the heat of battle, ATO officers (and their representatives) may sometimes forget that, as an agency of the federal government, the ATO’s role is not to ‘win’ (least of all to win at all costs).

Whatever the reason, by opposing Pintarich’s application to argue the additional grounds of appeal, the ATO potentially exposed itself to a criticism that it sought to prevent all relevant issues being considered.

V Could Pintarich Have Succeeded in Estoppel or Contract?

It seems unfortunate that the taxpayer did not raise either promissory or equitable estoppel (or contract) in the initial appeal – particularly as Kerr J, though agreeing with the majority to refuse leave to amend, noted obiter that he was:

satisfied that the new grounds sought to be advanced on behalf of the taxpayer are not without potential merit.^[40]

In relation to possible claims based on contract or estoppel, it is worth noting that in considering whether to permit Pintarich to add new grounds of appeal, the majority in the Full Court did not dismiss the possible application of an estoppel or contractual ground out of hand (as might be expected if they had seen these grounds as totally devoid of any merit), but instead noted that:

had the contract ground been raised at first instance, the issues are likely to have included whether a contract had been formed and the interpretation of the terms of any contract... [While] had the estoppel ground been raised at first instance, the issues are likely to have included whether the taxpayer suffered any detriment because of reliance on any representation.^[41]

While only passing observations, these comments may suggest that the majority also saw these grounds as at least potentially arguable. These defences are considered more fully in the next section.

A Missed Opportunities?

It is not known why the ATO specifically disavowed reliance on a defence of mistake. As Kerr J noted at [27]:

The Deputy Commissioner did not seek to uphold the later remission decision on the basis that his delegate Mr Celantano had made a mistake on or about 8 December 2014 such that what had the appearance of a decision was merely a purported decision invalid for jurisdictional error, and as such entitled to be treated by the Deputy Commissioner as having been in law no decision at all. Cases such as Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; 209 CLR 597 have established that such a premise in some circumstances may entitle a tribunal or decision maker to treat their earlier purported decision as a nullity such that the decision can be lawfully remade.

On the ATO version of the facts, a defence of mistake seems to be arguable.

It is perhaps also surprising that the ATO did not plead a defence of non-est factum^[42] in relation to the December letter. However, being an experienced litigant, it is assumed the ATO had good reason not to rely on such defences.

The conduct of the taxpayer in not relying on claims in contract or estoppel at first instance is, however, equally surprising, as on a proper view of the facts, it seems a claim in contract or estoppel were at the very least arguable.

Even on Celantano’s version of the facts it seems that:

1. He required the primary tax to be paid while he, Celantano, considered the remission of the GIC.

2. The most natural interpretation of the terms of the ATO letter of 8 December was that they constituted an offer to limit the ATO’s claim in respect of tax and GIC to $839,115.43 provided this sum was paid on or before 30 January 2015.

3. Celantano initially wanted payment only of the primary tax before considering remission of GIC, but the figure of $839,115.43 set out in the 8 December letter was an amount greater than the primary tax debt of $821,762.75.

4. The letter of 8 December constituted an offer by the ATO to finalise the issues between the parties on payment of the required amount.

5. Celantano intended Pintarich to act in terms of the letter, albeit it was in different terms to those which he intended.

6. The offer was accepted and Pintarich provided consideration by paying to the ATO the amount set out in the December letter. Even if it were argued that there was no consideration because the payment was of an existing liability, it is arguable that it was to the benefit of both parties to agree to a reduction of the total liability claimed by the ATO. This could constitute ‘sufficient consideration’ under the ‘practical benefit’ test as it was set out in Williams v Roffey Bros & Nicholls (Contractors) Ltd^[43] and adopted, in Australia, in Musumect^[44] and subsequent cases. As is noted below in the discussion on estoppel, in agreeing to accept a lesser amount than its original claim of $1,156,787.72 the ATO received a ‘practical benefit’ in that it avoided prolonging the dispute while, at the same time, ensuring that it received the principal tax amount plus some GIC (as opposed to Pintarich being declared bankrupt and the ATO receiving little or nothing^[45]). That is, the ATO converted a legal claim for money that may not have been paid into one where payment was assured, and this had commercial value for the ATO. The ATO had no discretion (based on the terms of the letter) to later claim a different amount. See for example, the judgment of Gummow and Hayne JJ in Le^[46] where in a minority judgment as to the result, their Honours observed that

When used elsewhere in the general law, the term insufficient consideration’ imports a notion of tangible benefit or advantage conferred by the promisor upon the promisee, as in the case of a forbearance to sue [Crears v Hunter [1887] UKLawRpKQB 142; (1887) 19 QBD 341; Combe v Combe [1952] EWCA Civ 7; [1951] 2 KB 215], a bona fide compromise of a disputed claim [Wigan v Edwards (1973) 47 ALJR 585], or the conferral of some other form of practical benefit [Musumeci v Winadell Pty Ltd (1994) 34 NSWLR 723]. In these cases, the ‘threshold of legal recognition’ regarding the consideration turns on the existence of such a real benefit [cf Carter and Harland, Contract Law in Australia, 4^th ed (2002), p 112 [323]].^[47]

Accordingly, it can reasonably be argued that there was an offer, an acceptance of the offer, consideration, and an intention by both parties to be bound. On this view, payment of the required amount by the due date could be seen to have established a contract between the parties and performance in terms of that contract on that date.

If a court were disinclined to find a contract had been concluded, Pintarich could, in the alternative, have mounted a credible argument for relief based on an estoppel, on the basis that:

• On receipt of the letter of 8 December 2014 Pintarich expected that if he acted as required by that letter the ATO would be bound by its terms and would not be free to withdraw from the terms of the relationship created by him acting in terms of the letter;

• In addressing the letter to Pintarich the ATO induced him to adopt the assumption or expectation that if he acted as specified this would liquidate his liability to the ATO in respect of primary tax and GIC;

• Pintarich acted in terms of that letter by obtaining a loan from the ANZ to facilitate payment to the ATO. In doing so he incurred a debt to the ANZ in the sum of $839,115.43 instead of taking other steps available to him such as the possibility of declaring bankruptcy;

• The ATO intended him to act in terms of the letter;

• In acting in terms of the letter Pintarich would suffer detriment if the ATO did not accept the monies referred to in the letter as payment in full; and

• The ATO failed to act to avoid that detriment by refusing to accept the payment made by Pintarich in terms of the letter as payment in full of his liability to the ATO.

Based on the above analysis, the ATO was obliged to act in such a way as to avoid any loss or damage Pintarich might suffer because he acted in reliance on the terms of the December letter. It can reasonably be concluded that the refusal of the ATO to accept the payment made pursuant to the letter of 8 December 2014 as full payment of the taxpayer’s debt constituted unconscionable conduct. As Brennan J noted in Waltons Stores:

The unconscionable conduct which it is the object of equity to prevent is the failure of a party, who has induced the adoption of the assumption or expectation and who knew or intended that it would be relied on, to fulfil the assumption or expectation or otherwise to avoid the detriment which that failure would occasion. The object of the equity is not to compel the party bound to fulfil the assumption or expectation; it is to avoid the detriment which, if the assumption or expectation goes unfulfilled, will be suffered by the party who has been induced to act or to abstain from acting thereon.^[48]

It could therefore be reasonably claimed that the necessary elements of an estoppel could be established. As the taxpayer acted in terms of the December letter, a court could seek to avoid the detriment which would otherwise be suffered by the taxpayer if the ATO were not bound by the terms of its letter.

The majority in Pintarich view would also seem to support a claim of estoppel, because while finding there was no ‘decision’ made on 8 December 2014, the majority observed that there was ‘some force’ in the taxpayer’s argument that the December 2014 letter was misleading, because:

in our opinion, the natural reading of the letter, in the context in which it was written, is that the Deputy Commissioner agreed to accept the payment of the lump sum amount on or before 30 January 2015 in full discharge of the taxpayer’s primary tax and GIC liabilities.^[49]

In their Honours’ view, this construction was supported by several aspects of the letter, which indicated that the ATO statement of account covered both primary tax and GIC, namely:

1. the heading of the December letter which was: ‘payment arrangements for your Income Tax Account debt’ (emphasis added) linked the letter to the ATO statement of account dated 10 November 2014 (headed ‘Income Tax Account’);

2. the reference in the first sentence of the letter to the taxpayer’s recent promise to pay his ‘outstanding account’ which created a similar link;

3. the second sentence of the letter ‘We agree to accept a lump sum payment of $839,115.43 on or by 30 January 2015’ which suggested that, if the taxpayer paid the lump sum by the date referred to in the letter, this would fully discharge the debt identified in the statement of account. This was further supported by the lump sum being described as a ‘payout figure’; and

4. the statement in the first sentence of the second paragraph that the payout figure was ‘inclusive of an estimated general interest charge (GIC) amount calculated to 30 January 2015’ suggesting that the payout figure covered all GIC up to 30 January 2015. (emphasis in original)

Overall, therefore, the majority noted that on their ‘natural’ reading of the ATO December 2014 letter, ‘it would follow that the [December ATO] letter communicated that a decision had been made to remit all GIC payable by the taxpayer save for the relatively small amount of GIC included in the lump sum payment amount referred to in the letter provided the taxpayer paid the lump sum on or before the specified date’.^[50]

These comments support the view that the December letter, at best, inadvertently misled Pintarich as to its meaning, and Pintarich then acted on the apparent meaning of the letter to his detriment.

VI The Decision at First Instance in Pintarich^[51] – Technical and Fairness Issues

At first instance, Tracey J found for the ATO, holding that the ATO letter of 8 December 2014 did not constitute a ‘decision’ by the ATO (through Celantano).^[52]

In relation to the issue of whether the ATO’s actions were fair and reasonable, his Honour’s view was that only a ‘strained’ reading of the 8 December 2014 letter would support Pintarich’s contention that the letter recorded a decision that payment of $839,115.43 would settle Pintarich’s entire liability for tax and GIC.^[53]

His Honour felt that, a ‘more natural reading of the text, when understood against the background of the previous week’s exchanges’ was that the $839,115.43 figure was made up of the primary tax debt together with an estimate of GIC accruing between 8 December 2014 and the payment date of 30 January 2015.

His Honour felt that this interpretation was supported by the interest charges recorded in the statements of account issued to Mr Pintarich on 7 and 14 January 2015, which did not specifically mention interest which had accumulated prior to 8 December 2014.^[54]

On the other hand, His Honour:

1. Indicated that he was ‘not unmindful’ of the (second) Deputy Commissioner’s statements in the ATO’s letter of 18 August 2015 that the December 2014 letter had been ‘issued in error.’ The learned judge noted that the Deputy Commissioner in the August 2015 letter stated that the amount of $839,115.43 did not include the entire amount of GIC which had accrued on the entire amount of outstanding debt up to and including 8 December 2014.^[55] Tracey J saw these comments by the Deputy Commissioner as ‘an implicit recognition’ by the ATO that the language used in the 8 December 2014 letter might be open to the construction contended for by Pintarich.’^[56]

2. Considered that this recognition was also implicit in Mr Celantano’s acknowledgment that the terms of the 8 December 2014 letter did not reflect the outcome of his discussions with Messrs Pintarich and Smith.

3. Found a ‘more explicit acknowledgement’ of this interpretation in the ATO’s letter of 13 May 2016, where the first Deputy Commissioner stated that the ‘payout figure’ in the 8 December 2014 letter ‘may be construed as misleading’.

Nevertheless, Tracey J felt that these facts did not evidence the making of a decision to remit all accumulated GIC^[57] because, as noted above, such a ‘decision’ would have required the ATO officer to undertake a process of deliberation, assessment or analysis with a view to deciding whether or not to grant the application for waiver of the GIC, and that had not occurred. He noted that:

The 8 December 2014 letter ... final draft was not reviewed by Mr Celantano before it was despatched and did not employ language that he might, in retrospect, have preferred to use to record the agreement. The letter was not and did not purport to be the communication of a decision relating to the GIC waiver application.^[58]

By contrast, all three judges in the Full Federal Court interpreted the December 2014 letter as stating that, if the amount nominated in that letter was paid by 30 January 2015, this would liquidate Pintarich’s entire liability for tax and GIC.

VII The Full Federal Court Decision in Pintarich

Pintarich appealed to the Full Federal Court^[59] against Tracey J’s judgment on the technical ‘decision’ issue. The Full Court split 2-1 in favour of the ATO, the majority comprising Moshinsky and Derrington JJ, with Kerr J dissenting.

A The View of the Majority

The majority upheld Tracey J’s decision on the technical issue, taking the view that there was no decision made on 8 December 2014 because (relying largely on Semunigus v Minister for Immigration and Multicultural Affairs^[60]) the ATO officer had not undertaken the essential ‘mental process’ of considering whether or not to remit the GIC.^[61] They were of the view that making a ‘decision’ for relevant purposes must involve both reaching a conclusion on a matter because the decision-maker had engaged in a mental process of analysis and then translating that conclusion into a decision by an overt act of such character as, in the circumstances, gives finality to the conclusion.

For example, in Guss, Greenwood J, delivering one of the majority judgments, indicated that to constitute a decision for the purposes of the AD(JR)A:

First, there must be a determination, a resolution, a position taken, a judgment made by a decision-maker. Secondly, that determination must be the emanation of a consideration by the decision-maker or structural organs of an organisation charged with making a determination, of a matter of substance that necessarily involves some feature of deliberation, assessment or analysis that, in the ordinary course, would comprehend those facets of decision-making behaviour described at [71].^[62]

While applying the decisions in Semunigus and Guss which both confirmed that a decision requires both a mental element and an overt manifestation of the decision taken, the majority in Pintarich distinguished on its facts the earlier decision in Polo which, inter alia, had held that:

The decision in Semunigus has not been considered to preclude the conclusion that a decision-maker has made a decision implicitly, by his or her conduct, without necessarily undertaking any process of mental engagement.^[63]

In Polo, the shire council had received two applications for permits to conduct beach polo tournaments at the same time and at the same place, so that the grant of either application necessarily meant the rejection of the other. In these circumstances, the court concluded that acceptance of one application implicitly involved rejection of the other, even in the absence of mental engagement by the decision-maker.^[64]

The facts and ratio in Polo are quite different to Pintarich and it is submitted that the majority in Pintarich were correct to distinguish it.

The majority in Pintarich therefore held that under the AD(JR)A, both a physical and a mental element were necessary for a ‘decision’ to have been made. Accordingly, since on their view Celantano did not turn his mind to that part of the letter which referred to unpaid interest, he did not reach a conclusion in relation to this issue, so that the necessary mental element was missing, and the letter therefore did not constitute a decision binding on the Commissioner in relation to GIC.^[65]

This aspect is critically considered further below.

However, it seems arguable that there had been a process of deliberation, assessment and/or analysis on the part of Mr Celantano with a view to deciding whether to grant Mr Pintarich’s application for waiver of the GIC.^[66] On the basis of Celantano’s version, he did consider the question of remitting the GIC, determined not to remit it pending further consideration of the issues, had advised Pintarich and Smith that the income tax had to be paid ‘whilst we consider the remission’ of the General Interest Charge and intended his letter of 8 December 2014 to reflect the decision reached by him (that is, that he had undertaken the requisite mental process of deliberation, assessment or analysis and intended the letter of 8 December 2014 to be the outward manifestation of that decision.

That Celantano was mistaken as to the letter’s content is not something that can be blamed on the taxpayer, though unfortunately, this appears to be the effect of the majority judgment. As suggested above, Pintarich and Smith were entitled to infer that Celantano had, between their meetings and discussions and December 8, reconsidered the issue and had determined to remit most of the GIC (see section A of Part V above).

It should be noted that the majority in Pintarich effectively split the December 2014 ATO letter into two parts, holding that one part was binding but the balance was not. As Kerr J noted at [67]:

There is a high degree of artificiality in advancing the proposition that some parts of his letter should be disregarded as not a decision when the Deputy Commissioner does not dispute that the balance of his letter of 8 December 2014 manifested his decision with respect to the payment arrangement Mr Celantano, on his behalf, had agreed to.

It is therefore submitted that it is reasonable to infer from the facts that Celantano did in fact apply his mind to the question of the remission of GIC but the computer used language in the letter addressed to the taxpayer inconsistent with his intentions.

B The Dissent by Kerr J

Kerr J dissented on the technical question of whether the 8 December ATO letter evidenced the making of a ‘decision’ on that date but agreed with the majority that the December letter was misleading.

1 The technical issue

In the course of his dissent on the technical question, Kerr J made a number of significant observations.

He agreed with the majority that, generally, a decision requires a mental element (as well as an outward manifestation) as described in Semunigus, but stated, obiter, that there can be circumstances in which a person makes a decision without any explicit mental engagement, as for example had occurred in Polo.^[67]

In his Honour’s view, the December ATO letter was therefore no less a decision even though the decision, as reflected in the letter, was not the one that Celantano had intended.^[68]

Significantly, Kerr J held that the necessary mental element was satisfied when the authorised ATO officer undertook a consideration of the issues and manifested the outcome of his mental process by inputting data into the computer with a view to his decision being conveyed to the taxpayer.

It is submitted that Kerr J’s minority view in Pintarich on the technical issue is to be preferred, inter alia, because:

• Celantano stated that he gave consideration to the liability of the taxpayer in respect of capital and interest;

• in discussion with the taxpayer and Smith, Celantano had insisted on payment of the original tax debt pending a later decision on the remission of the GIC;

• he intended the letter of 14 December 2014 to reflect this decision;

• the amount to be paid in terms of the letter of 8 December 2014 was inclusive of the primary tax in an amount of $821,762.75 plus some GIC - though not as GIC much as was reflected in the running account balance statement discussed at the meeting between Celantano, the taxpayer and Smith on 5 December 2014; and

• the preferable interpretation of the letter of 8 December was that payment of the amount reflected in the letter by the specified date would liquidate all the taxpayer’s obligations to the ATO inclusive of the GIC (as stated above this was also the view of the majority).

Against this background, Kerr J observed (correctly it is submitted):

It would undermine fundamental principles of administrative law if a decision-maker could renounce as ‘not a decision’ (and not even a purported decision) something he or she has manifested by an overt act taking the form of a decision simply by asserting there was a distinction between their mental processes and the expression of those mental processes in the overt act. There is no requirement that to be a decision the overt manifestation of the decision must align with the subjective intention of, or the conclusion intended by, the decision-maker. It does not cease to be a decision for such a reason.^[69]

It is submitted that Kerr J was also correct when he noted that there is an accelerating use of artificial intelligence (AI) in communicating decisions (including the issue of assessments) and suggested that there needs to be a specific consideration of each aspect of a decision by the ‘decision-maker’. The decision-maker should in all cases be either the relevant ATO officer dealing with a matter or, in the case of a fully automated decision, the computer itself. However, if the computer is to make the decision, it must be legislatively authorised to do so. While Australia has legislated to validate automated decisions in other fields (see, for example, ss 495A and 495B of the Migration Act 1958 (Cth) and s 101B of the National Heath Act 1953 (Cth), it has not, to date, done so in relation to taxation.

2 The ethical and fairness issues raised in Kerr J’s dissent

While disagreeing with the majority on the technical issue, Kerr J shared the majority’s conclusion that the ATO’s December letter was misleading^[70] because:

the first Deputy Commissioner’s letter, in the context in which it was written ... [indicated] that the Deputy Commissioner had agreed to accept payment of the lump sum amount on or before 30 January 2015 in full discharge of the taxpayer’s primary tax and GIC liabilities as in the statement of account issued to the taxpayer by the first Deputy Commissioner on 10 November 2014.^[71]

Perhaps the most telling observations on the fair/reasonableness implications were those made by Kerr J in relation to the involvement of the third party ANZ Bank.

His Honour noted^[72] that although the matter had not been addressed in the proceedings, ‘the unfairness that the majority refers to may not necessarily be confined to [Pintarich]’, because it appeared that the innocent third-party ANZ bank had lent the funds to Mr Pintarich in a commercial transaction based on the ATO letter of 8 December 2014 which appeared to state the full extent of his liability. If so, Kerr J observed:

the consequences of treating the Deputy Commissioner’s letter as of no account may be that the bank lent money which otherwise it would not have. The effect of the decision that the majority affirms in this instance may be to permit the Deputy Commissioner to put the ATO’s interests above that of a third party ...^[73]

That is, the interests of the ATO, which had created the problem by sending the misleading letter, would be prioritised over those of the innocent ANZ Bank, which had made a commercial decision to lend money based on the (misleading) ATO letter and which might be unable to recover some or all of the funds it had lent to Pintarich.

It is not insignificant in this context that the bank, an arms-length commercial third party – with an incentive to limit its exposure – apparently also interpreted the ATO December letter as indicating that payment of the amount set out in that letter by 30 January 2015 would absolve Pintarich of all liabilities in relation to income tax and GIC. It is also significant that the ATO had apparently been advised that whatever monies were to be paid to the ATO had to be borrowed from the taxpayer’s bankers, that there was insufficient security for a loan of the total amount of tax and GIC claimed by the ATO,^[74] and that, if Pintarich was required to pay both tax and GIC, he would have to declare bankruptcy. This suggests that:

• both the ATO and the taxpayer knew he could not pay both nor could he raise funds to do so; and

• it is reasonable to infer that when Pintarich approached the ANZ Bank, he believed that payment of the $839,115.43 would satisfy all his debts to the ATO;

• it would have been strange for Pintarich to go to the trouble of borrowing the $839,115.43 if he knew that the ATO had made no decision on the issue of the GIC and that he would be unable to borrow additional funds to pay any GIC which might be later sought by the ATO?

VIII Special Leave Refused by the High Court

In October 2018, the High Court refused Pintarich special leave to appeal, on the basis that the appeal had insufficient prospects of success.^[75]

That was unfortunate, because had it allowed the application, the High Court would have had the opportunity to provide important early guidance on the question of computer-generated documents – an issue of significance and growing legal and practical importance which is very likely to arise in future.

The High Court’s refusal of special leave meant that the decision of the majority of the Full Federal Court that the ATO letter of 8 December did not constitute a ‘decision’ for relevant purposes will remain the law unless or until the High Court revisits the issue at some future time.

However, for present purposes, it is important to note that the High Court’s decision was based on analysis of legal doctrine and did not consider fairness or ethical issues.

IX The ATO’s Decision Impact Statement

In 2019 the ATO^[76] released a Decision Impact Statement which set out its interpretation of the Pintarich decision and its implications.^[77]

In that Statement, the ATO rejected the view that, perhaps, it ‘got things wrong’ in Pintarich in terms of fairness. It is unfortunate that it took this approach, as mistakes are inevitable, particularly in a complex mass-decision making context such as taxation,^[78] and especially when new technology is involved.

Certainly, the ATO is required to collect the ‘correct’ amount of tax – but at the same time it must seek to ensure that the result is fair to both the ATO and the taxpayer.

The power of remission given to the Commissioner by s 8AAG (specifically in relation to the GIC penalty) and s 298-20 (in relation to penalties generally) of the Taxation Administration Act 1953 (Cth) provide a clear indication that there are circumstances where recovering less than the absolute amount of tax and penalties owing is appropriate.

Had the ATO acknowledged that it had – inadvertently and unintentionally – caused the confusion and misled the taxpayer (and the ANZ Bank), and that, in the unusual circumstances, the GIC should be remitted in full, this could have resolved the matter more equitably and speedily.

In relation to fairness, it is significant that in its various responses to Pintarich, the ATO had conceded that the letter of 8 December 2014 had been issued by the ATO in error.

It is also important to note that the ATO conceded that the taxpayer had been given information in relation to the ‘payout figure’ which ‘may be construed as misleading’, a view shared by each of the judges in the Full Court.^[79] Even the ATO appears to concede this.^[80]

As Kerr J observed:^[81]

the taxpayer had requested that Mr Celantano put the terms of his decision in writing so that he could borrow money from his bank on the strength of it. His bank, as the taxpayer did, proceeded on the strength of the representations in the letter he was sent that that payment would satisfy his full liability.

The majority also referred to the letter sent by the taxpayer’s representative to the ATO stating that ‘the ANZ Bank had only been willing to lend the $839,000 to Mr Pintarich on the basis of the ATO’s December letter,^[82] and it seems that the ANZ Bank would not have lent Pintarich sufficient funds to pay both tax and the GIC claimed by the ATO.

Whatever the legal position, the above elements seemed to make a compelling case for the ATO to remit the full GIC on moral grounds. The problems were created (inadvertently) by the actions of the ATO staff member (apparently because of the flawed ATO software), and an appropriate response arguably could have been for the ATO to acknowledge that it had inadvertently mishandled the Pintarich matter,^[83] and that it should ‘not make the taxpayer suffer’ for ATO mistakes.^[84]

The ATO seemed unwilling to do this and continued to press for payment of the balance of the GIC.

It seems that the ATO took such an inflexible approach because it believed that Pintarich and Smith were aware that the interpretation they were putting forward was not the intended meaning of the December letter.^[85] However, there is little, if any, support for this position in the court judgments.

Significantly, the decision in Pintarich may impact adversely on the reputation of the ATO. That the Commissioner can cause a letter to be addressed to a taxpayer setting out the terms of an alleged agreement and then contend that he is not bound by its contents means that taxpayers (and their advisers) may possibly no longer be able to rely unquestioningly on communications between themselves and the ATO without some means of corroborating the terms of the ATO communication (which may often not be possible or practical). This, in turn, may erode the benefits from the significant resources expended by the ATO in building a relationship of trust with taxpayers.^[86]

Thus, it has been suggested that:

• public trust and confidence in government decision making ‘will be undermined if public officials are able to retract ‘decisions’ communicated in computer-generated correspondence, and if individuals are therefore unable to rely on this correspondence ...’^[87]; and

• Taxpayers ‘want to know that they can rely on the wording of the correspondence that’s issued to them by the ATO, especially in circumstances where the ATO is relying more and more on automated processes.’^[88]

Given that reliance on automation by the ATO and other government bodies is likely to increase exponentially in frequency and scope in the future (contrary to the assumption of the majority in Pintarich),^[89] and given the poor experience to date with systems such as OCI Robodebt,^[90] these comments merit serious consideration.

At the very least, the decision in Pintarich and the ATO’s approach will create a measure of uncertainty among advisers and sophisticated taxpayers, who may have a nagging doubt in future about whether correspondence coming from the ATO can be taken at face value, and whether the ATO author had considered the relevant issue and intended the correspondence to issue in the form in which it appeared.^[91]

This is an unsatisfactory situation – taxpayers and advisers should not have to puzzle over the ‘true meaning’ and reliability of ATO correspondence and try to determine whether the ATO has followed all proper procedures in reaching an apparent ‘decision’.^[92]

X Conclusion

In terms of the position taken by the various judges who considered the technical question of whether the ATO had made a ‘decision’ through its actions and letter of 8 December 2014, it is submitted with respect that the judgment of Kerr J is to be preferred, for the reasons discussed above.

In relation to the question of whether the ATO’s actions were fair or reasonable, there is no doubt that the ATO at times faces a difficult task in managing the taxation system to ensure that all taxpayers pay their correct amount of tax.

However, the ATO is given extremely broad powers and the benefit of strong onus of proof provisions to enable it to carry out this task. These powers and provisions give the ATO a significant advantage over taxpayers, and the ATO therefore needs to be scrupulous to ensure that its actions do not at times create the impression that it is using its broad powers unfairly.

In relation to the ‘fairness’ question of whether the ATO should have acted in the way it did in Pintarich, it is suggested that there is a strong argument for the view that its actions in Pintarich were not fair or reasonable (and certainly not ideal), given that all judges in the case regarded the ATO letter as misleading, and that both Pintarich and the independent ANZ Bank relied upon the same interpretation of the letter as the basis for acting to their actual (or, in the case of the ANZ Bank, its potential) detriment.

In this context, the Pintarich case is an important decision, because whatever the technicalities, the case creates a ‘bad look’ for the ATO,^[93] and it is hard to disagree with Prof Deutsch’s conclusion that Pintarich is a case which probably should never have been run.^[94]

XI The Implications from Pintarich

The ATO has a proud record, and its staff generally have a strong commitment to the ATO’s ethos, role and success.

However, it is essential that the ATO as a public body, a ‘moral exemplar’ and model litigant with no ‘personal’ stake in the outcome of cases, always upholds the highest standards of fairness in relation to all taxpayers. The health and integrity of the taxation system depends on this.

The ATO must therefore seek to avoid a recurrence of the situation in Pintarich, as such situations open the ATO to arguments, rightly or wrongly, that they reflect an unfortunate – and perhaps unconscious –ATO focus on ‘winning’ at all costs which can at times override the ethical imperatives of a situation.

It is easy to pontificate on such matters from the sideline, but difficult ‘in the heat of battle’ to always observe the highest standards.

Nevertheless, at the very least, the ATO must be careful to avoid any perception that it is acting unfairly or unreasonably.^[95] Public and professional support, and the taxpayer trust on which the ATO depends to enable it to function effectively, is fragile, and can be lost by the accumulation of issues which individually may be relatively minor.

Judged by these standards it seems reasonable to agree with commentators and ATO officers that the Pintarich saga does not show the ATO in a good light. It is indeed a ‘bad look’.

---

^# Parts of the Paper draw on materials from an earlier article, &#82[1]It is a bad look’ [2020] eJlTaxR 23; (2020) 18(2) eJournal of Tax Research, 508.

^&#6[1] HonorarySenior Lecturer, UNSW.

^&#6[1] Adjunct Professor, College of Business, Law and Governance, James Cook University and the School of Taxation & Business Law, Australian School of Business, UNSW.

^[1] See for example ATO, ‘ATO reveals almost 90% of income tax paid by small business is paid voluntarily’, (27 August 2019), available at: https://www.ato.gov.au/Media-centre/Media-releases/ATO-reveals-almost-90--of-income-tax-paid-by-small-business-is-paid-voluntarily/, viewed 22 February 2020.

^[2] Sam Campbell, ‘A Claytons decision denied high court special leave’, (22 October 2018), Sladen Learning, /news/2018/10/22/sladen-pintarich-a-claytons-decision-denied-high-court-special-leave. See also (albeit in a different context) Prof RW Parsons, ‘Income taxation – an institution in decay’, (1986) 3(3) Australian Tax Forum 233, 258 [also Monash University Law Review (1986) vol 12 No. 3, 77].

^[3] [2018] FCAFC 79 – special leave to appeal to the High Court refused: Pintarich v Deputy Commissioner of Taxation [2018] HCASL 322. See generally Tim Brookes and Mitchell Bazzana, ‘Automated correspondence not necessarily a decision which can be relied on’ (2018) https:/www.ashurst.com/en/news-and-insights/legal-updates/automated-correspondence-not-necessarily-a-decision-which-can-be-relied-on/.

^[4] Mr Ravanello, in response to a question by Senator Abetz in the Senate Economics Legislation Committee Estimates, 24 October 2018, Official Committee Hansard, p.105. See also Sam Campbell, ‘Automated ATO ‘decision’ letter generates uncertainty after High Court bid fails in Pintarich’, available at: https\\legalwiseseminars.com.au/automated-ato-decision-letter-generates-uncertainty-after-high-court-bid-fails-in-pintarich, 1 November 2018, 3.

^[5] Quoted in Anna Huggins, ‘Automated Processes and Administrative Law: The Case of Pintarich’, Auspublaw, 14 November 2018, 6; see also Nassim Khadem, ‘ATO executive admits letter automation error ‘a bad look’’, https://www.abc.net.au/news/2018-10-24/ato-admits-automation-error-at-senate-estimates/10423830, 24 October 2018.

^[6] Quoted by Tracey J at first instance: Pintarich v Deputy Commissioner of Taxation [2017] FCA 944, [12], point (h). Celantano’s notes also recorded that ‘Joe offered to pay the primary tax in full before Christmas or in early January at the latest ...” It seemed to be clear that the ATO officer was aware that the taxpayer claimed to be unable to pay the combined outstanding amounts of both tax and GIC – in the course of their phone conversation on 4 or 5 December 2014, Pintarich allegedly said to the ATO officer (inter alia): ‘I don’t have any money to pay the tax and interest and I will go broke and have to declare myself bankrupt’.

^[7] Pintarich (n 3) [98].

^[8] There was no suggestion that the letter had been sent by mistake – see Kerr J (dissenting on other issues) at [27]-[28]. The ATO in its Decision Impact Statement issued on 4 April 2019 indicated that the ATO had used that template to send out 82,217 letters in that income year.

^[9] Although the letter was unsigned, reg 45(2) of the former Income Tax Regulations 1976 (Cth) (then in force) provided that, ‘A document bearing the name (however produced) of a person who is, or was at any time, the Commissioner, a Second Commissioner, a Deputy Commissioner or a delegate of the Commissioner in the place of the person’s signature is taken to have been duly signed by the person, unless it is proved that the document was issued without authority ...’ (see also former reg 45(3), (4)).

^[10] Pintarich (n 3) [19] (Kerr J).

^[11] Ibid [62] (Kerr J, dissenting).

^[12] The ATO advised in its Decision Impact Statement on Pintarich (issued 4 April 2019) that: ‘The letter was prepared by a process under which the ATO officer entered specific variables relevant to the agreed payment arrangement – however the system generated letter did not allow the officer to customise either the text or the GIC calculation, nor otherwise view or alter the letter before it issued’: ATO Decision Impact Statement – Pintarich v Deputy Commissioner of Taxation: ATO DIS issued 4 April 2019 (TAD 41 of 2017 H3/2018).

^[13] Pintarich (n 3) [18], 101].

^[14] Celantano stated that he had believed he could not remit the GIC anyway as he thought (wrongly) that his authority to remit was limited to $75,000. It seems that Pintarich and Smith were not aware of this misunderstanding on Celantano’s part: Pintarich (n 3), [50].

^[15] The ATO indicated that in light of the issues revealed by the Pintarich litigation, ‘as part of an ongoing continuous improvement process, and to reduce the likelihood of similar issues arising in the future, the ATO has removed the unclear language in the specific template used in this matter, and replaced it with language that is more appropriate for all circumstances when the template is issued. Additionally, the ATO has reviewed its procedures and communication to staff in relation to the entering of payment arrangements to ensure appropriate letters are used. In the longer term, the ATO will undertake a complete review of all payment plan letters with a view to expanding the range of scenarios incorporated in its automatically generated letters:’ Decision Impact Statement issued 4 April 2019.

^[16] The ATO relied on these statements of GIC account (quoted in the majority judgment at [116]) as, in the ATO’s eyes, the RABs ‘... advised of accruing GIC amounts with a total debt of $1,166,902.00. This would have been an indication to you that the GIC component had not been satisfied and was still outstanding’. However, the taxpayer and advisers may have thought that any increase in GIC was covered by the ‘payout figure’ to be paid on 30 January 2015 – particularly as the ATO letter stated that, ‘This payout figure [$839,115.43] is inclusive of an estimated .... (GIC) amount calculated to 30 January 2015’, suggesting perhaps that the ATO had in fact decided to remit most of the GIC. Certainly, Kerr J, [17] indicated that he proceeded ‘on the basis that there was nothing that should have put the taxpayer on notice that no such decision had been made’.

^[17] A remission of the relatively small amount of GIC which had accrued from January 2 to 29 March 2015 was granted because of the ‘delay in responding to [the taxpayer’s] request’ (Pintarich (n 3) [108] (the majority).

^[18] In response to an article by Prof Robert Deutsch, ‘Pintarich – a case that should never have been run’, TaxVine 40 (19 October 2019); see also Prof Robin Woellner, “It is a bad look” [2020] eJlTaxR 23; (2020) 18(2) eJournal of Tax Research 508; and Andrew Mills, letter of 9 November 2018 to The Taxation Institute, commenting on Prof Deutsch’s article.

^[19] That is, that Pintarich was aware of the ‘true’ intent of the December 2014 letter. The ATO also seemed to suggest that the fact that Smith did not respond to the ATO Statement of Account of 5 February until 23 February generated a similar inference; however, there could be many possible reasons, and the delay was comparatively short.

^[20] As already noted above, Smith did respond on 23 February to the running balance of account statement sent on 5 February 2015, after the payment referred to in the December 2014 letter was made.

^[21] No explanation was given for the decision not to rely on these additional grounds at first instance.

^[22] The ATO’s submissions and the reasons for rejecting the application are outlined in the judgment of the majority: Pintarich (n 3) [155]-[163].

^[23] Ibid [158]-[164] (Moshinsky and Derrington JJ); Kerr J agreeing at [78]. The Full Court noted that the principles governing when a party can raise new grounds are ‘well established’; see Moshinsky and Derrington JJ [158]-[162], citing Coulton v Holcombe [1986] HCA 33; (1986) 162 CLR 1 at 7-8; O’Brien v Komesaroff [1982] HCA 33; (1982) 150 CLR 310 (Mason, Murphy, Aickin, Wilson and Brennan JJ). Pintarich was cited on this issue in Zreika v Royal [2019] FCAFC 82, [82] (Besanko, Farrell and O’Callaghan JJ). In the specific context of Pintarich the majority stated at [162] that ‘the submissions of the Deputy Commissioner should be accepted. Had the proposed new grounds been raised in the proceedings at first instance, it is likely that pleadings would have been required and that the pre-trial processes would have been materially different. Further, we cannot exclude the possibility that the Deputy Commissioner would have led additional evidence or that he would have conducted cross-examination of witnesses differently’.

^[24] See, for example, Pintarich (n 3) [162] (Moshinsky and Derrington JJ).

^[25] See for example PS LA 2009/9 [13]-[14]; the Rule of Law Institute of Australia, ‘The Model Litigant Rules: Key Facts and Issues’, available at: www.ruleoflaw.org.au; Eugene Whealahan, ‘Model Litigant Obligations: What are They and How are They Enforced?’, Federal Court of Australia, Ethics Seminar Series (5 March 2016), available at: https://www.fedcourt.gov.au/digital-law-library/seminars/ethics-seminar-series/20160315-eugene-whealahan, accessed 22 February 2020; Clayton Utz, ‘The state as model litigant: reading between the Guidelines’ Amy Granger and Dan Trindade, available at https://www.claytonutz.com/knowledge/2016/july/the-state-as-a-model-litigant-reading-between-the-guidelines (accessed 23 February 2020; see also such cases as, among many others, Morley v ASIC [2010] NSWCA 331; (2010) 247 FLR 140; Comaz (Aust) Pty Ltd v Commissioner of State Revenue [2015] VSC 294; (2015) 101 ATR 339 (Croft J).

^[26] See for example the Inspector General of Taxation, Chapter 5 ‘Model Litigant Obligation’; Zac Chami, ‘The Obligation To Act As A Model Litigant’, (2010) No.64 AIAL Forum, 47, available at: http://classic.austlii.edu.au/au/journals/AIAdminLawF/2010/28.pdf (accessed 1 March 2020); Nassim Khadem, ‘Government .agencies are no model act inquiry told’, The Sydney Morning Herald online (June 1 3, 2018), available at: https://www.smh.com.au/business/the-economy/government -agencies-are-no-model-act-inquiry-told-20180517-p4zy8.html (accessed 22 February 2020).

^[27] Legal Services Directions 2017, Note 3.

^[28] Robin Woellner, ‘Is the ATO a law unto itself?’ paper presented at the 2007 ALTA Conference (2007 Refereed Conference Papers), available at: https://researchonline.jcu.edu.au/3046/1/3046_Woellner_2007.pdf (accessed 28 February 2020)

^[29] Legal Services Directions 2017, clause 2(a).

^[30] Ibid Note 2.

^[31] Ibid Note 3.

^[32] Ibid clause 1(a). While things naturally take time to complete in an organisation as large as the ATO, there were significant delays in the ATO responding to Pintarich’s submissions - though there were mitigating circumstances.

^[33] Ibid clause 1(d). Could the ATO as suggested by Senator Abetz (Senate Economics Hearing, (n 64) have recognised that it had inadvertently misled Pintarich, and remitted the GIC at the outset?

^[34] Ibid clause 1(g).

^[35] Kerr J suggested that the new grounds were ‘not without potential merit’: Pintarich (n 3) [78] (Kerr J). Compare Moshinsky and Derrington JJ [160] – Kerr J agreeing at [78]. Presumably, if the Full Court had allowed the additional grounds to be argued, any resulting problems caused to the ATO could have been dealt with by an adjournment and/or other orders.

^[36] ATO, ‘Our obligations as a model litigant’: (25 October 2018), available at https://www.gov.au/General/Dispute-or-object-to-an-ATO-decision/Model-litigant (viewed 23 February 2020); ATO ‘Litigation – our policies’, available at: https://www.ato.gov.au/General/Dispute-or-object-to-an-ATO-decision/In-detail/Avoiding-and-resolving-disputes/Litigation/Litigation-our-policies/, accessed 22 February 2020; and the ATO submission (February 2018) to the Inquiry into Judiciary Amendment (Commonwealth Model Litigant Obligations) Bill 2017, at [14].

^[37] IGT, Review into the Taxpayers’ Charter and Taxpayer Protections, December 2016 [5.70]-[5.71] – see also [5.73]. See also Review of Tax Office Management of Part IVC litigation 28 April 2006 [4.23‒4.33].

^[38] Woellner (n 18), 28; see also Adele Ferguson, ‘Urgent reform need for wayward Tax Office’, The Sydney Morning Herald, (April 13, 2018); available at: https://www.smh.com.au/business/consumer-affairs/urgent-reform-needed-for-wayward-tax-office-20180413-p4z9ip.html, accessed 8 March 2020; Robert Gottliebsen, ‘Unfair ATO a dangerous threat to innovation’, The Australian, October 9, 2017, available at: http://www.cosba.com.au/2017/10/unfair-ato-a-dangerous-threat-to-innovation/, accessed 8 March 2020.

^[39] IGT (n 37).

^[40] Pintarich (n 3) [78] (Kerr J).

^[41] Ibid [162] (Moshinsky and Derrington JJ).

^[42] See for example Gallie v Lee [1971] AC 1004; Petelin v Cullen [1975] HCA 24; (1975) 132 CLR 355.

^[43] Williams v Roffey Bros & Nicholls (Contractors) Ltd [1991] 1 QB 1.

^[44] Musumect v Winadell Pty Ltd (1994) 34 NSWLR 723.

^[45] See for example Hill v Forteng Pty Ltd (2019) 138 ACSR 344.

^[46] DPP (Vic) v Le [2007] HCA 52; (2007) 232 CLR 562.

^[47] Ibid [43] – as cited by all members of the court in Hill v Forteng Pty Ltd (2019) 138 ACSR 344.

^[48] Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387, 423.

^[49] Pintarich (n 3) [137]-[139], [153] (Moshinsky and Derrington JJ).

^[50] Ibid, [140].

^[51] Pintarich (n 6).

^[52] Ibid [45] (Tracey J).

^[53] Ibid [47] (Tracey J).

^[54] Whereas the statement of account for 14 January, for example, referred to an amount of $2,198.15 which had accumulated between 2 and 8 January 2015: Pintarich (n 6) [47] (Tracey J). However, his Honour conceded that it was ’conceivable’ that Pintarich and his advisers had understood Celantano to be referring to Pintarich’s total liability, which included the GIC owing [14].

^[55] Pintarich (n 6) [48] (Tracey J).

^[56] Ibid.

^[57] Ibid [48], [56] (Tracey J).

^[58] Ibid [56]-[57] (Tracey J).

^[59] Pintarich (n 3).

^[60] [2000] FCA 240; (2000) 96 FCR 533 The statement by Finn J at first instance [1999] FCA 422 at [19] was accepted by the Full Court (Spender, Higgins and Madgwick JJ) and cited with approval in, among others, Minister for Immigration and Citizenship v SZQOY [2012] FCAFC 131; (2012) 206 FCR 25 [29] (Full Court: Buchanan J, [25]-[29]; Logan J [33] and Barker J [50] agreeing generally); He v Minister for Immigration and Border Protection [2017] FCAFC 206; (2017) 255 FCR 41 [79] (Siopis, Kerr and Rangiah JJ); Dunstan v Higham [2016] ACTCA 20; (2016) 310 FLR 58 [71]-[74] (Murrell CJ, Penfold and Rangiah JJ). However, Bromwich J in Grass v Slattery [2018] FCA 1719; (2018) 162 ALD 276 [199]-[200] noted that Semunigus may not be applicable in all circumstances, and the majority of the Full Federal Court in Pintarich (n 3) [143] conceded that ‘the issue considered in Semunigus was different from the issue’ that arose in Pintarich. Nevertheless, the majority considered at [143] that the statement by Finn J [at first instance in in Semunigus] did ‘accurately capture the elements that are generally involved in the making of a decision’.

^[61] Pintarich (n 3) [140] (Moshinsky and Derrington JJ). Contrast the view in Deputy Commissioner of Taxation v Armstrong Scalisi Holdings Pty Ltd [2019] NSWSC 129, [154] ‒ albeit in relation to a different situation ‒ where Ward CJ in Equity at [154] (referring to Pintarich) stated that: ‘The question of the validity of the notice is to be addressed by reference to the content of the notice rather than the subjective state of mind of the person who issued or received it. Subject to any contrary indication ... the content of a notice is ordinarily to be assessed by reference to what it would convey to a reasonable reader in the recipient’s position’.

^[62] Guss v Deputy Commissioner of Taxation [2006] FCAFC 88; (2006) 152 FCR 88 [75] (Greenwood J).

^[63] Polo Enterprises Australia Pty Ltd v Shire of Broome [2015] WASCA 201; (2015) 49 WAR 134 [78] (Martin CJ).

^[64] Polo (n 63) [1]-[9] (Martin CJ) – see Pintarich (n 3) [48].

^[65] Ibid [145].

^[66] Compare Pintarich (n 6) [56] (Tracey J).

^[67] Polo (n 63) [78].

^[68] Ibid [54]-[67].

^[69] Pintarich (n 3) [55].

^[70] Ibid [30] – noting at [32] that it was ‘common ground’ among all the judges in the Full Court that Tracey J had ‘erred as to the correct construction’ of the ATO December letter.

^[71] Ibid.

^[72] Ibid [77] (Kerr J).

^[73] Ibid.

^[74] See Pintarich (n 3) [106].

^[75] 2018 HCSLA 322 (Gageler and Keane JJ).

^[76] The DIS was issued on 4^th April 2019.

^[77] See further Woellner (n 18).

^[78] The ATO acknowledged in the DIS that the particular template used in Pintarich was used 82,217 times in the 12 months to October 2018, and that ’... In those circumstances, there will be some instances where a communication from the ATO might not have been as clear as it could be. The template used by the ATO officer in [Pintarich] is an example of such a communication which could have been more clearly expressed’.

^[79] Pintarich (n 3) [116] (Kerr J); [137]-[140] (Moshinsky and Derrington JJ).

^[80] See the comments by the majority in Pintarich (n 3) [116]) Tracey J at first instance also conceded that it was “conceivable” that Pintarich and Smith may have interpreted the letter in this way.

^[81] Pintarich (n 3) [66] (Kerr J).

^[82] Ibid [106] (Moshinsky and Derrington JJ).

^[83] Huggins (n 5).

^[84] Ibid; cf Campbell, (n 2); Khadem (n 5).

^[85] Dabner observed, among other things, that: ’Senior ATO officials have made informal observations to the effect that there were extenuating circumstances in the case that did not support the taxpayer’s claim to rely on the letter as he must have known it was incorrect and even proceeded on that basis in some of his engagements with the ATO. The problem is that if these additional facts are correct they were never alluded to in the judgements and so we’re left with a precedent that has a broad application’ (References omitted) [Justin Dabner, Tax Law and Technology in Australia, (Paper presented to the second annual research meeting on Japanese and Australian legal studies. ‘Regulating an Uncertain Future: Robotics, AI and the Digital Economy in Japan and Australia’ Ritsumeikan University, Osaka, Japan, February 6, 2019). It seems reasonable to assume that if the ATO had relied on these points in presenting its case, there would have been some reference to this in the judgments.

^[86] This concern is exacerbated as the ATO apparently used the same template as in Pintarich 82,217 times in the 12 months to October 2018: ATO Decision Impact Statement.

^[87] Huggins (n 5) argued that the Pintarich decision also ‘highlights the impact of unreviewable errors in automated processes on public trust and confidence in government decision making and the challenge of using administrative law to scrutinise such processes’. See to the same effect Keith Swan,quoted by Nassim Khadem, in ‘Tax office computer says yes, Federal Court says no’, available at: https://www.abc.net.au/news/2018-10-05/tax-office-computer-says -yes-federal-court-says -no/10341548, 3, accessed 23 February 2020. Prof Robert Deutsch, also quoted in Nassim Khadem.

^[88] Keith Swan (n 87). See also Prof Robert Deutsch (n 87), 92.

^[89] Huggins (n 5).

^[90] As several have commented, there are many potential sources of error in automated systems, including not only a Pintarich-like situation, but also, for example, the inherent difficulty in coding complex legal principles and rules with precise accuracy. See for example the discussion in Simon Elvery, ‘How algorithms make important government decisions ‒ and how that affects you’ ABC News, (updated 21 July 2017) , available at: https://www.abc.net.au/news/2017-07-21/algorithms-can-make-decisions-on-behalf-of-federal-ministers/8704858; Hong Cheng, Makoto, ‘Towards a Digital Government – Reflections on Automated Decision-making and the Principles of Administrative Justice’, [2019] 31 Singapore Academy of Law Journal 875, 880-2; Huggins (n 5); Ng, Yee-Fui and O’Sullivan, Maria, ’Deliberation and Automation ‒ When is a Decision a "decision?’ (2019) 26 Australian Journal of Administrative Law 2123.

^[91] Selwyn Black, quoted in Khadem (n 87) 1.

^[92] Sam Campbell (n 2).

^[93] Prof Bob Deutsch, “Pintarich – a case that should never have been run!” (2018) – available at: https://insights.taxinstitute.com.au/2018/10/pintarich-case-that-should-never have.html, (Accessed 2 March 2020.

^[94] Ibid. Technically, Pintarich initiated the AD(JR)A action.

^[95] As must inevitably happen from time to time in such a large organisation dealing in such a complex area.