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VINCE MORABITO AND STEPHEN BARKOCZY[*]
[This article explores the scope of para (e) of Schedule 1 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) which, inter alia, removes from the scope of this Act a number of decisions of the Commissioner of Taxation relating to income tax assessments. The article evaluates the leading judicial pronouncements on this provision and examines the concept of an income tax assessment. The crucial question of whether para (e) should be repealed and some of the issues which would be raised by such a repeal are also explored.]
The limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind. It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator. Its role is to set limits on the exercise of that discretion, and a decision made within those boundaries cannot be impugned.[1] Section 75(v) of the Constitution confers upon the High Court original jurisdiction in all matters ‘in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth’. Furthermore, by virtue of s75(iii) of the Constitution, the High Court has original jurisdiction in all matters in which the Commonwealth, or a person suing or being sued on behalf of the Commonwealth, is a party. Pursuant to this latter jurisdiction, ‘proceedings could be commenced in the High Court seeking a declaration in respect of Commonwealth administrative action’[2]
Section 39B of the Judiciary Act 1903 (Cth) confers upon the Federal Court jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against Commonwealth officers. This provision has a narrower ambit than s75(v) of the Constitution as it does not apply to certain categories of Commonwealth officers such as judges of the Family Court and of the Industrial Relations Court.
Section 5(1) of the ADJR Act confers upon any person who is ‘aggrieved’[3] by a decision to which the ADJR Act applies the right to apply to the Federal Court for an order of judicial review in respect of the decision in question.[4] The grounds pursuant to which an application for judicial review of a decision may be lodged under the ADJR Act[5] include violation of the rules of natural justice (s5(1)(a)); failure to comply with the procedures that the law required the decision-maker to observe when making the decision in question (s5(1)(b)); lack of jurisdiction (s5(1)(c)) and/or statutory authority (s5(1)(d)) to make the decision; improper exercise of power;[6] error of law (s5(1)(f)); fraud (s5(1)(g)); no evidence to justify the making of the decision;[7] and, finally, the general ground that ‘the decision was otherwise contrary to law’.[8]
The ability of a person who seeks to challenge a given administrative decision to avail himself/herself of the regime created pursuant to the ADJR Act will depend on compliance with the crucial concept of ‘a decision to which the [ADJR] Act applies’. This concept is defined in s5(1) as a decision of an administrative character[9] made10 (proposed or required to be made) under an enactment,[11] other than a decision by the Governor-General[12] or a decision included in any of the classes of decisions set out in Schedule 1 of the ADJR Act. The need for there to be a ‘decision’ is the requirement which has created the most severe problems for those wishing to seek judicial review pursuant to the ADJR Act as a result of the decision of the High Court in Australian Broadcasting Tribunal v Bond.[13] In Bond the following definition of the term ‘decision’, for the purposes of the ADJR Act, was furnished by Mason CJ:
a reviewable ‘decision’ is one for which provision is made by or under a statute. That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue or fact falling for consideration.[14]
This definition should be contrasted with the one formulated by the Full Federal Court in Lamb v Moss:[15]
there is no limitation, implied or otherwise, which restricts the class of decisions which may be reviewed to decisions which finally determine rights or obligation or which may be said to have an ultimate and operative effect. Such a conclusion is, in our opinion, in accordance with the plain legislative intention revealed by the words of the Act.[16]
Paragraph (e) of Schedule 1 removes from the purview of the ADJR Act the following classes of decisions: decisions making, or forming part of the process of making, or leading up to the making of, assessments or calculations of tax, charge or duty, or decisions disallowing objections to assessments or calculations of tax, charge or duty, or decisions amending, or refusing to amend, assessments or calculations of tax, charge or duty, under any of the following Acts:
...Income Tax Assessment Act 1936
Income Tax Assessment Act 199717
Other classes of tax-related decisions are taken out of the crucial concept of decisions to which the ADJR Act applies by paras (ea),[18] (f),[19] of Schedule 1. Section 19(1) provides that ‘regulations may declare a class or classes of decisions to be decisions that are not subject to judicial review’ under the ADJR Act.[22]
The aims of this article are to:
The decisions specified in para (e) may conveniently be divided into the following three categories:
Before considering these categories of decisions, three essential issues, which are of direct relevance to each of these categories, need to be canvassed. The first issue is whether para (e) only prevents direct reviews of the decisions it lists or whether it also extends to indirect reviews; that is to say, is the Federal Court prevented from reviewing, under the ADJR Act, the decisions specified in para (e) where these decisions are challenged only for the purpose of challenging the validity of other decisions which do not fall within para (e)?[24]
The second issue concerns the meaning of the term ‘tax’ for the purposes of para (e). The third issue relates to the scope of the term ‘assessment’. For the purposes of para (e), does the term ‘assessment’ have a fixed meaning which is applied to all tax decisions challenged pursuant to the ADJR Act regardless of the particular Act pursuant to which the challenged decisions have been made? Or, instead, does para (e) simply adopt the different meanings which have been given to this term by each of the Acts specified in para (e)?
The ability of the Federal Court to review, under the ADJR Act, decisions specified in para (e) where such review is sought as part of a challenge to the legality of decisions not falling within para (e) was considered by Fox J in Huston v DFC of T.[25] In this case, the Commissioner of Taxation (‘the Commissioner’) issued notices under s218 of the Income Tax Assessment Act 1936 (Cth) (‘the ITAA 1936’)[26] to various organisations and to the taxpayers’ solicitors. The notices were based on a number of default assessments issued beforehand to the taxpayers. The taxpayers challenged the validity of the s218 notices on the basis that they were issued pursuant to assessments which were not issued bona fide because they were arrived at for the dominant purpose of issuing the s218 notices without any attempt to compute the taxation liability but with the intention of immediately freezing the taxpayer’s assets. Fox J indicated that the taxpayers should have attacked separately the decision to issue the s218 notices instead of relying solely on the proposition that the notices were invalid because of the defects that tainted the issue of the assessments. This observation was based on his Honour’s earlier conclusion that whilst ‘the making of the assessments is not entirely irrelevant ... plainly any review of them or any application of the [ADJR] Act to them is precluded’.[27]
This finding was vigorously criticised by Enright who indicated that ‘both the literal and liberal approach favour confining Schedule 1 so that it excludes those decisions only from a direct application for review’.[28] In his view, a literal reading of Schedule 1 shows ‘that it excludes the decisions it contains from an application for review – there is no stricture therefore on incidental consideration of them’.[29] With respect, it is submitted that Enright’s reasoning is not persuasive. Section 3(1) makes it clear that any decision included in Schedule 1 is not a decision to which the ADJR Act applies. Given that the Federal Court has no jurisdiction, under the ADJR Act, in relation to decisions to which the ADJR Act does not apply,[30] it is difficult to see why the sole fact that a decision to which the ADJR Act does not apply is challenged indirectly rather than directly, should somehow magically result in the Federal Court being vested with the power to review, under the ADJR Act, such a decision.
Furthermore, the application of Enright’s construction of para (e) would generate the anomalous scenario of the same type of decision, specified in para (e), being reviewable under the ADJR Act in relation to taxpayer A but not in relation to taxpayer B simply because taxpayer A, contrary to taxpayer B, has challenged the para (e) decision as part of a challenge to the validity of a non-para (e) decision.[31] The problem would be particularly acute in relation to ‘decision making assessments’. Given that many tax decisions are dependent on the issue of an assessment,[32] the para (e) restriction on judicial review of ‘decisions making assessments’ could easily be bypassed by seeking a review, under the ADJR Act, of the decision that was made following the issue of an assessment and, as part of this review, challenging the validity of the assessment itself.[33]
The scope of the term ‘tax’ for the purposes of para (e) has been considered in Clyne v DFC of T[34] and in Coco v DFC of T.[35] In the former case, the taxpayer sought review under the ADJR Act of the Commissioner’s estimate of the taxpayer’s taxable income in respect of the year ended 30 June 1986 for the purposes of calculating the liability for provisional tax.[36] According to Jackson J, the Commissioner’s estimate could be described as ‘a step forming part of the process of making, or leading up to the making of, a calculation of an amount payable under’ the ITAA 1936.[37] His Honour then canvassed the question of whether provisional tax constitutes a tax for the purposes of para (e). He referred to the definition of this term that has been enunciated by the High Court[38] in the context of s51(ii) of the Commonwealth Constitution, the so-called ‘taxation power’.[39]
After conceding that a provisional tax could be regarded as exhibiting the features that the High Court has identified as making up a tax under the Constitution, Jackson J indicated that the question that had to be considered was whether the Commissioner’s decision was sufficiently connected with the calculation of ‘tax under [the] Income Tax Assessment Act 1936’.[40] What his Honour was adverting to was that the ambit of the concept of ‘tax’ required to be ascertained through an examination of the particular statute pursuant to which the challenged decision was made. This line of reasoning is consistent with, and indeed dictated by, the Court’s approach to the determination of the ambit of the concept of an ‘assessment’ discussed below.
His Honour held that a distinction must be drawn between income tax payable under the ITAA 1936 on the one hand and the provisions made under the ITAA 1936 for payment of that income tax on the other. The requirement that the income tax calculated in accordance with other provisions of the ITAA 1936 be paid provisionally in advance clearly fell within the latter category. Consequently, the decision of the Commissioner concerning the liability to pay provisional tax could not be regarded as a decision making or forming part of the process of making or leading up to the making of a calculation of tax under the ITAA 1936. Therefore, the decision was not one to which para (e) applied.
Jackson J’s reasoning was relied upon by Spender J in Coco v DFC of T[41] to hold that the calculation of pay-as-you-earn (‘PAYE’) instalments[42] does not constitute the calculation of tax or the assessment of tax under the ITAA 1936. Therefore, the Commissioner’s decision to refuse the taxpayer’s application to vary PAYE deductions did not fall within the exclusion contained in para (e).[43]
The scope of the concept of ‘assessment’ for the purposes of para (e) was considered in Domaine Finance Pty Ltd v FC of T[44] by Fisher J. The taxpayer sought a review of the failure of the Commissioner to decide to issue to the taxpayer two certificates pursuant to s128H of the ITAA 1936[45] in respect of certain loans made to the taxpayer. The Commissioner argued that the term ‘assessment’ covered every step in the collection of income tax which was the ultimate purpose of the ITAA 1936 and, therefore, its meaning should not be limited to the technical sense prescribed in the ITAA 1936. In more general terms, the Commissioner’s proposition was that the term ‘assessment’, as used in para (e), had a wide meaning which applied to all the Acts referred to in para (e), regardless of the meaning conferred on this term by each of these Acts.[46] This submission was rejected by Fisher J. His Honour placed emphasis on the words of para (e) to reach the conclusion that:
para (e) directs attention to the decisions or procedures, frequently quite different, which each Act prescribes for the purpose of assessing or collecting tax or duty. It follows that in this matter a decision which is excluded from review is any decision ‘relating’ (to use a neutral word) to the assessment of tax in the sense or manner which the [ITAA 1936] Act uses or prescribes to achieve that end. It is thus necessary to look to the [ITAA 1936] Act for the purpose of determining what is meant by ‘assessment’, and ascertaining what process it provides for making or leading up to the making of assessments.[47]
It is submitted that Fisher J’s conclusion is correct. The ADJR Act does not define the term ‘assessment’ and there is nothing in para (e) or in other provisions of the ADJR Act to suggest that Parliament intended to introduce a new concept of ‘assessment’ for the purposes of the ADJR Act.[48] The vastly different types of taxes that are levied pursuant to the numerous Acts listed in para (e)[49] demonstrate the practical impossibility of attaching a single meaning to the term ‘assessment’ that is suitable for each of these Acts. Acceptance of the Commissioner’s proposition would, in some circumstances, lead to the anomalous scenario of a given decision, made pursuant to the ITAA 1936, being regarded as part of the assessment-making process for the purposes of the ADJR Act but not for the purposes of the ITAA 1936 itself. Not surprisingly, the Commissioner’s proposition as to the meaning of ‘assessment’ has not been embraced by the Federal Court in subsequent cases as the Court has generally proceeded, often without any discussion of this issue, on the basis that a decision which forms part of the process of making an assessment under the ITAA 1936 also falls within the para (e) exclusion.[50] In light of this state of affairs, a review of the concept of an income tax assessment is required.
Section 995–1 of the Income Tax Assessment Act 1997 (‘the ITAA 1997’) provides that the term ‘assessment’ has the same meaning given by s6(1) of the ITAA 1936. s6(1) contemplates a number of different kinds of assessments. Of most practical importance is the para (a)(i) part of the s6(1) definition relating to what might be termed ‘ordinary assessments’.[51] According to this paragraph, ‘the ascertainment of the amount of taxable income ... and of the tax payable on that taxable income’ constitutes an assessment. Paragraph (a)(i) operates in conjunction with s166 of the ITAA 1936 which imposes on the Commissioner the duty to ‘make an assessment of the amount of taxable income of any taxpayer, and of the tax payable thereon’.[52] Once an assessment has been made, it must be served on the taxpayer[53] as soon as convenient.[54] Thus, an assessment is a process involving an act or operation of ascertainment by the Commissioner[55] which is only completed once service has been effected.
There have been several instances in which the Courts have had cause to examine the nature of an assessment. One of the earliest pronouncements on the topic is found in FC of T v S Hoffnung & Co Ltd.[56] Hoffnung is famous for the proposition that a ‘tentative assessment’, ie one that does not create a definitive liability, is not a valid assessment. Thus, in Hoffnung a notice headed ‘Tentative – War-time Profits Tax – Assessment’ which purportedly assessed the taxpayer to war time profits tax was held not to constitute a valid assessment. This was because the notice did not take into account any ‘excess profits duty’ paid in the United Kingdom[57] which the Commissioner indicated ‘remained to be adjusted’. In the course of his judgment, Isaacs J indicated that an assessment must be ‘definite and certain ... as opposed to provisional’[58] and that this ‘assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less’.[59] His Honour went on to say that ‘[i]n short, it ascertains a precise indebtedness of the taxpayer to the Crown.’[60]
The principle in Hoffnung has been applied in several cases dealing with the meaning of ‘assessment’ under the ITAA 1936 and has now become wellentrenched. [61] Much of the common law has evolved out of disputes concerning the time limits associated with the power to amend an assessment.[62] A leading illustration of this is found in Batagol v FC of T.[63] In Batagol, tax officers had originally concluded that, for the 1952 to 1954 income years, the taxpayer had no taxable income. Notes to this effect had been made on the taxpayer’s files by relevant officers and, accordingly, no notices were issued for these years. The Commissioner subsequently determined that the taxpayer was not entitled to certain deductions previously claimed which had been carried forward as tax losses during the relevant years and therefore assessed the taxpayer in relation to these years in June 1955. The taxpayer unsuccessfully argued that the June 1955 assessments had been issued outside what was then the relevant time limit for amending assessments.
The High Court found that the Commissioner had the power to issue the June 1955 assessments as no previous assessments had issued to the taxpayer. In so concluding, the Court indicated that the notes on the taxpayer’s files did not constitute ‘assessments’. Furthermore, the Court found that a ‘refund advice’ issued in respect of the 1954 year together with a cheque for tax collected during that year did not constitute an assessment as it merely explained why the tax deducted during the year was being refunded. In a frequently referred to passage, Kitto J explained:
The word ‘assessment’ is defined in s6 to mean ... the ascertainment of the amount of taxable income and of the tax payable thereon ... No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice or, (if no date is specified), on the thirtieth day after the service of the notice: s204. Thus and thus only, there is brought about an ‘ascertainment’ of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: see s177) to be the result flowing from the application of the Act in the particular case.[64]
Batagol had been viewed by some as authority for the proposition that a ‘nil assessment’ (ie, an ‘assessment’ which specifies that no tax is payable)[65] does not constitute a valid assessment.[66] This view finds support in the Supreme Court of Victoria’s decision in DFC of T v Sheehan[67] in which Tadgell J rejected the argument that a notice which showed taxable income below the tax-free threshold resulting in no tax payable constituted an assessment. His Honour placed reliance on a passage from Kitto J’s judgment in Batagol[68] to hold that ‘the imposition of a liability is a necessary feature of an assessment’ and that a ‘nil assessment’ was an ‘impossibility’.[69]
It appears, however, that Tadgell J had misconstrued Batagol on this point. This has come to light as a result of the recent decision in FC of T v Ryan.[70] In Ryan, a ‘refund notice’ which had the words ‘details of your assessment’ printed on it and which indicated that the taxpayer’s taxable income was ‘nil’ and that no tax was payable was held to nevertheless constitute a valid assessment. The Full Federal Court ruled that Batagol decided that an assessment is made only after taxable income and the tax payable thereon has been ascertained and service has been effected. It did not decide that an assessment can only be made where a positive amount of tax is assessed to be due and payable. The Full Court found that an assessment indicating that no tax is payable ‘fixes’ and thereby renders certain the taxpayer’s liability to the Commissioner for the purposes of the Act just as much as an ‘assessment’ that a positive amount of tax is payable.
The Full Court endorsed the conclusions and reasoning of Spender who had handed down the decision which had been appealed. Spender J had found that to require the ascertainment of the tax payable to be a positive number was an ‘impermissible gloss’ on the definition of ‘assessment’.[71] His Honour distinguished the notice in the case before him from that in Batagol and rejected the Sheehan interpretation of that case. In particular, his Honour indicated that he considered that Tadgell J had taken Kitto J’s comments out of context and emphasised that when speaking of a ‘nil assessment’ as being an ‘impossibility’, Kitto J was merely referring to the Commissioner’s submission in that case rather than to any principle of law.
It has been submitted that from a policy perspective, the view in Ryan is preferable to that in Sheehan.[72] One reason for this is that the Federal Court’s view is consistent with Hill J’s observations in Webb v DFC of T (No 2).[73] His Honour stated:
In my view, at least in the case where the assessment is made under s166 (of the Act), a notice will be a notice of assessment provided it states the taxable income as determined by the Commissioner and the amount of tax which is calculated as levied upon that taxable income. If a credit operates to reduce the tax actually payable by the taxpayer so that either no amount is payable or the taxpayer is entitled to a refund and the notice refers to this on its face, the notice will nevertheless be a notice of assessment.[74]
Support for the Ryan approach can also be found in Pagone’s[75] criticisms of the result achieved in Sheehan. Pagone submits that where a taxpayer makes a loss in a particular year which may be carried forward in subsequent years, the quantum of the loss should be a matter open to the ordinary objection and appeal procedures at the time it is disallowed. Such a result would flow from the Ryan interpretation of an assessment but not from the Sheehan interpretation.
The principle from Hoffnung that an assessment must definitely fix a taxpayer’s tax liability needs to also be considered in the context of ‘inconsistent assessments’.[76] It has been established that assessments may issue against more than one taxpayer in relation to the same income in respect of the same income year[77] and that more than one assessment may issue under different sections of the Act against the same taxpayer.[78] However, it is clear that where more than one ‘assessment’ is made in respect of the same taxpayer in relation to the same income year, such as occurred recently in FC of T v Stokes,[79] there is no valid assessment. It is important to note that the three ‘assessments’ issued to the taxpayer in Stokes were found to be signed at the same time and also served on the taxpayer at the same time. Moreover, none of the assessments were treated as amended assessments of earlier assessments, but rather were viewed as contemporaneous ‘alternative’ assessments which meant that the taxpayer’s liability for the year had not been definitely fixed.[80]
It is clear that the concept of decisions leading up to the making of assessments is broader than the preceding concept of decisions forming part of the process of making assessments which, in turn, has a broader reach than the category of decisions making assessments. This feature of para (e) and the requirement which is common to each of these three categories were adverted to by the Full Federal Court in DFC of T v Clarke and Kann:[81]
The decisions which are excluded from review by para (e) of the Schedule are decisions making assessments, decisions forming part of the process of making assessments, and decisions leading up to the making of assessments. Each category provides for some extension of the former, but the overall effect is to emphasise the essential need for a connection between the decision and an assessment.[82]
(i) Decisions Dealing with the Assessment or Calculation of Liability to Tax
It has been indicated that ‘the Federal Court has taken a fairly restrictive view of the scope of para (e)’.[83] An illustration of the Court’s narrow interpretation of para (e) is furnished by the distinction which the Court has consistently drawn between a decision affecting liability to tax on the one hand and a decision which deals with the calculation or assessment of that liability on the other. Only the latter category is caught by para (e).[84] This distinction was explained in the following terms by the Full Federal Court:
The primary judge rightly explained the necessity of having in mind the distinction between provisions in a taxing statute which prescribe the circumstances in which liability to tax can arise and those in which the amount of tax is calculated or assessed in a particular case. One example is to be found in the Income Tax Assessment Act, which prescribes the circumstances in which liability to income tax can arise in its various provisions defining assessable income and those specifying allowable deductions for the purpose of arriving at the taxpayer’s taxable income. The Income Tax Assessment Act also contains provisions dealing with the calculation or assessment of income tax, being provisions which provide for the lodging of income tax returns, the making of assessments including default assessments, the service of notices of assessment, objections to assessments, the disallowance of objections, and the lodging of appeals.[85]
This distinction has been relied upon by taxpayers to successfully argue that the following decisions do not fall within para (e):
(ii) Distinction Between the Commissioner’s Assessment Function and His Administrative Function
Another major reason for the fairly narrow ambit of the first three categories of decisions set out in para (e) is the distinction which has been drawn by the Federal Court between the Commissioner’s assessment function and his administrative function.[91] A clear illustration of what this distinction entails, for the purposes of para (e), is provided by Intervest Corporation Pty Ltd v FC of T.[92] In that case, the Commissioner refused a request under s105AA of the ITAA 1936 for a further period during which dividends might be paid, for the purpose of making a sufficient distribution for the purposes of the now repealed Div 7. The application had been made after the Commissioner had assessed the taxpayer to additional tax under Div 7. Smithers J expressed the view that:
It is in his administrative function that he may or may not sanction the taking of steps by a taxpayer which, if taken by him, may produce a state of facts by reference to which an amended assessment may be made which might differ from that upon which the assessment already made was made. When he approaches the task of making an assessment with reference to the facts before him and makes the necessary calculations for that purpose he is exercising his assessment function.[93]
His Honour applied these principles to the decision in question to reach the conclusion that para (e) ‘does not cover a decision not being part of the process of assessment and which relates only to the question whether a taxpayer shall be permitted to carry out transactions which may reduce the amount of income upon which he is liable to pay tax’.[94] The Commissioner’s decisions to grant or withhold an extension of time under s47(2B)(b) of the ITAA 1936[95] or for the lodgment of a tax return[96] are examples of decisions that are made by the Commissioner in the course of discharging his administrative functions which are divorced from his assessment functions. Similar conclusions have been reached by the Federal Court in relation to the Commissioner's decisions to issue notices under s264 of the ITAA 1936[97] and to grant or refuse to grant an extension of time to comply with these notices;[98] and to remit or not to remit additional tax under s226(3) of the ITAA 1936.[99]
(iii) Decisions Leading up to the Making of Assessments or Calculations of Tax
The adverse impact of para (e) on taxpayers seeking judicial review under the ADJR Act has also been curtailed by the narrow formulation of the scope of the concept of decisions leading up to the making of an assessment or a calculation of tax. As was indicated earlier, this category of decisions is potentially the widest of the three categories of decisions that have been discussed so far.[100] The definitions of this concept which have been consistently applied by the Federal Court are those uttered by Ellicott J in Tooheys Ltd v Minister for Business and Consumer Affairs and by Bowen CJ, Lockhart and Fitzgerald JJ in Clarke and Kann, respectively:
The words ‘leading up to the making’ are intended to point to decisions which have to be made, or in the circumstances, it is appropriate to make, before the actual process of assessment or calculation can begin.[101] However, a decision does not lead to the making of an assessment merely because it precedes the making of an assessment or because its purpose is to enable or facilitate the making of any assessment which may be made. A decision is not a decision leading up to the making of an assessment unless the making of an assessment has followed or will follow from the decision.[102]
The need to establish that an assessment has been made or will be made, pursuant to the second definition outlined above, has created an additional hurdle for the Commissioner. This point is vividly illustrated by the Full Federal Court judgment in Balnaves v DFC of T.[103] It was there held that a decision to grant or withhold an extension of time for the lodgment of a taxation return could not properly be described as a decision leading up to the making of an assessment even though in most cases such a decision will be followed by an assessment. This was because the Court was not satisfied that the decision under challenge would necessarily be followed by the making of an assessment.
(iv) The Commissioner’s Successful Employment of Para (e)
But the Commissioner has not always been unsuccessful in relying on para (e).[104] Two significant instances of the Commissioner being able to rely successfully on the first three categories of decisions listed in para (e) are the cases of Bennett Honda Pty Ltd v DFC of T[105] and Independent Holdings Ltd v DFC of T.[106] In Bennett Honda, the applicant sought judicial review of the Commissioner’s decision that certain commercial arrangements involving the applicant were such as would bring into operation s4(2) of the Sales Tax Assessment Act (No 7) 1930 (Cth). This provision empowers the Commissioner to increase the sale value of goods where imported goods are sold by a person other than the importer and the vendor and purchaser are not dealing with each other at arm’s length in relation to the transaction.
Morling J upheld the Commissioner’s objection to the competency of the application on the basis of para (e):
A decision as to the value of goods is an essential part of the process of making an assessment or calculation of tax. The decision as to the value of goods is a decision which leads up to, and is a necessary prerequisite of, the calculation of duty payable. This being so, I think there is no escape from the conclusion that the decision is a decision making, or forming part of the processes of making, or leading up to the making of, an assessment or calculation of tax or duty. It is thus a decision within para (e) of Schedule 1 and hence is not reviewable under the Judicial Review Act.[107]
Another instance of the Commissioner’s successful use of para (e) is Independent Holdings Ltd.[108] The applicant sought review of the Commissioner’s decisions, recorded in a letter to the applicant, that he would:
either issue or raise assessments or amended assessments of income tax against the applicant with respect to the income of Associated Grocers Co-operative Ltd (‘AGC’) for the years of income 1983–1989 (inclusive), or issue or raise assessments or amended assessments of income tax against AGC relating to the income of AGC for the years of income 1983-1989 inclusive. AGC was a cooperative registered under the Co-operatives Act (SA) 1983 as amended, (‘the Cooperatives Act’) but was dissolved on 30 May 1989.[109]
The principal submission of the applicant was that the Commissioner could not rely on s60(3) of the Co-operatives Act to issue an assessment to the applicant in respect of income derived by AGC. Spender J held that the decision which the applicant sought to restrain the Commissioner from making was an assessment within the definition of that term in the ITAA 1936 and hence fell within para (e).[110] This conclusion is entirely consistent with Fisher J’s ruling in Domaine Finance[111] that, in relation to income tax decisions, the term ‘assessment’, for the purposes of para (e), has the same meaning which the ITAA 1936 attaches to this term.
This part of para (e) was reviewed in Szajntop v Gerber.[112] The applicant sought review of, inter alia, the decision of the Administrative Appeals Tribunal (‘the AAT’) in respect of the applicant’s three applications for review. The applicant brought the applications in the AAT in order to review three decisions of the Commissioner (‘the objection decisions’) disallowing three objections to assessments of income tax made by him under the ITAA 1936. The AAT affirmed the Commissioner’s objection decisions. The para (e) issue that was raised before Hill J of the Federal Court was whether the decision of the AAT fell within the phrase ‘decisions disallowing objections to assessments’. His Honour held that the AAT’s decision did not fall within para (e):
Where, as in the present case, the Tribunal acts to affirm the decision under review, the Tribunal does not itself make a decision to disallow an objection to an assessment. That decision has already been made by the Commissioner, and is the subject of the review before the Tribunal. It may be that in a case where the Tribunal sets aside the Commissioner’s decision and itself acts to disallow in part the taxpayer’s objection, that the decision falls within paragraph (e); it is unnecessary to decide that question. It is sufficient to say that no torture of language can bring about the conclusion that in the present case the Tribunal made a decision to disallow the applicant’s objections against her assessments.[113]
The judicial discussion of this part of para (e) is limited to the following passage from the judgment of Beaumont J in Constable Holdings Pty Ltd v FC of T:[114]
... no decision to amend or to refuse to amend an assessment was involved here. All that the respondent was then considering was the request for extension of time. No doubt, various consequences might flow from the exercise of the discretion vested in the respondent in that behalf. But no question whether an amendment of the assessment would be made arose at that stage. That question may never arise.[115]
The decision in question involved the Commissioner’s refusal of a request for extension of time for dissolution of a company under s47(2B)(b) of the ITAA 1936.[116]
(i) Decisions Leading up to the Making of Amended Assessments
It is now appropriate to consider a controversial issue concerning amendments of assessments, namely, whether a decision which can properly be described as a decision leading up to the making of an amended assessment falls within the scope of para (e). This question was considered by Smithers J in Intervest.[117] He observed that:
... a decision leading up to the making of an amended assessment is not a decision within the scope of clause (e) of the First Schedule to the ADJR Act. In so far as that clause refers to decisions which lead up to assessments or calculations of tax, they are decisions ‘leading up to the making of assessments or calculations of tax’ and not ‘decisions amending or refusing to amend assessments or calculations of tax’.[118]
This line of reasoning has been criticised by the Administrative Review Council (‘the ARC’) which has pointed out that Smithers J’s analysis in Intervest:
is a questionable reading of paragraph (e) ... Section 173 of the Income Tax Assessment Act provides that, except as otherwise provided, every amended assessment shall be an assessment for all the purposes of that Act. In the Council’s view, it is difficult to argue that, in paragraph (e) of Schedule 1 to the AD(JR) Act, the expression ‘decisions ... leading up to the making of assessments ... under the ... Income Tax Assessment Act’ do not encompass decisions leading up to the making of amended assessments.[119]
The ARC’s assessment above has, in turn, been attacked by Carbone who prefers Smithers J’s analysis. Carbone bases this preference on two grounds. The first ground is that s173 treats an amended assessment as an assessment only for the purposes of the ITAA 1936. Consequently, it does not have this effect in relation to the operation of the ADJR Act. The second ground is that the omission of the words ‘decisions leading up to the making of an amended assessment’ in para (e) suggests that Parliament intended the exclusion of this category of decisions from the purview of para (e).[120]
With respect, it is posited that the analysis of the ARC is more persuasive than that of Smithers J and Carbone. As has been explained in an earlier section of this article, the Federal Court has generally taken the view that if a decision, which has been challenged under the ADJR Act, was made pursuant to the ITAA 1936, then the Court will look to the meaning which the ITAA 1936 has given to the term ‘assessment’ in order to determine whether the decision under challenge falls within the exclusion found in para (e). Consequently, if the ITAA 1936 treats an amended assessment as an assessment, then the same scenario should apply in relation to para (e).
The fact that the words ‘leading up to’ are included only with respect to original assessments and not with respect to amended assessments does not support Carbone’s proposition. In fact, it must be remembered that, first at para (e) applies to a wide range of statutes and not simply the ITAA 1936 and the ITAA 1997 and that, secondly, it was always envisaged that this list would be varied on a regular basis,[121] as has in fact occurred.[122] Consequently, in drafting para (e) Parliament was required to act on the premise that, at any particular point in time, some of the Acts listed by para (e) would not confer on amended assessments the status of original assessments.[123] When the analysis articulated in the preceding paragraph is taken into account, it becomes clear that the option chosen by the Commonwealth Parliament was that decisions leading up to the making of amended assessments would be caught by para (e), through the phrase ‘leading up to the making of assessments’, only where they were made pursuant to those Acts mentioned in para (e) which treat amended assessments as original assessments.
The analysis above has indicated that para (e) has been interpreted narrowly largely as a result of the rulings of the Federal Court that decisions affecting liability to tax and decisions made by the Commissioner in the course of discharging his administrative functions are not caught by para (e). The adverse impact of para (e) on aggrieved taxpayers has also been restricted as a result of: (a) the narrow meaning attached to the phrase ‘decisions leading up to the making of assessments’; (b) the judicial finding in Intervest that decisions leading up to the making of amended assessments do not fall within para (e); and (c) the doctrine that a tentative assessment is not an assessment under the ITAA 1936 and, hence, under para (e).
The reasonably narrow restriction which para (e) has placed on the ability of aggrieved taxpayers to seek access to the Federal Court under the ADJR Act is rather surprising when one considers, in the first place, the very wide manner in which para (e) has been drafted[124] and, in the second place, the fact that Parliament envisaged that para (e) would ensure the exclusion of ‘judicial review where provision exists for taxation or duty decisions to be reviewed on their merits’.[125] Perhaps, the Federal Court’s narrow interpretation of para (e) may be explained as simply an illustration of what some commentators regard as a general problem of lack of judicial restraint in relation to administrative decisions.[126] This perceived problem has led to calls for the development of an Australian doctrine of deference to administrative judgment:
A powerful consideration in support of a theory of deference is that Australia has a comprehensive system of administrative law which, in addition to judicial review, establishes other independent mechanisms for controlling administrative decision-making. These include merit review by specialist tribunals and investigation of administrative error by the Ombudsman and anti-discrimination agencies. Given that setting, the task of maintaining the integrity and legality of administrative decision-making does not rest entirely on the judicial shoulder .... And yet it is hard to find in judicial review jurisprudence acknowledgment of the role and existence of other review bodies and the way in which their functions complement that of the court.[127]
In the tax arena, the thesis above should be contrasted with the following vigorous analysis of Hill J of the Federal Court:
... the most important role of the judiciary is to stand between the State and the citizen. It must always be remembered that the Commissioner of Taxation is ultimately the State. The Income Tax legislation may impose trust in the Commissioner to perform his tasks properly and impartially as he generally does, but his actions must not be immune from review. The inescapable fact that taxation is the cornerstone of our society must not be allowed to stand as a justification for arbitrary acts, bullying or the erosion of civil rights in the name of exaction of taxes. If the courts will not or do not accept the challenge then the need for a legislated Bill of taxpayer’s Rights ... becomes most urgent.[128] A more likely explanation for the narrow interpretation of para (e) is, perhaps, to be found in the recognition, on the part of Federal Court judges, of three matters: the futility of delineating a wide ambit for para (e) given that most of the decisions covered by para (e) may be reviewed by the Federal Court itself pursuant to s39B of the Judiciary Act 1903 (Cth);[129] the unpersuasive nature of the philosophy underpinning para (e);[130] and the benefits which the ADJR Act was intended to secure.[131]
The fact that the instances where para (e) ‘... has been held to apply are few and far between’[132] does not remove the need to ask, or indeed diminish the importance of asking, whether para (e) should be retained. For one thing, para (e) has never been reviewed by the Full High Court[133] and Australian Broadcasting Tribunal v Bond[134] is a vivid illustration of the real possibility that the High Court might formulate an interpretation of para (e) which is far less favourable to aggrieved taxpayers than that which has so far been adopted by the Federal Court.[135] As was indicated in Pt I above in Bond[136] the Full High Court formulated a definition of the term ‘decision’, for the purposes of the ADJR Act, which essentially overturned the broad definition of this term which had been enunciated by the Full Federal Court in Lamb v Moss.[137] But, in the final analysis, the judicial approach to the interpretation of para (e) can have little relevance to an inquiry as to cogency of the philosophy underlying para (e). The essential starting point of such an inquiry is an analysis of the reports produced, in 1971 and in 1973, by the Commonwealth Administrative Review Committee (‘the Kerr Committee’) and by the Committee of Review of Prerogative Writ Procedures (‘the Ellicott Committee’), respectively, as the provisions of the ADJR Act are based on the recommendations found in these two reports.
In October 1968, this Committee was established to consider, among other things,[138] the jurisdiction to be given to a new Commonwealth Superior Court to review administrative decisions; the procedures whereby review is to be obtained; and the substantive grounds for review. Whilst the Kerr Committee was not the first Australian law reform body to consider reform in the administrative law arena,[139] it ‘was the first to look at administrative law as a whole and to seek to create a coherent and comprehensive system of law’.[140] The major faults identified by the Kerr Committee were summarised by it as follows:
It is generally accepted that this complex pattern of rules as to appropriate courts, principles and remedies is both unwieldy and unnecessary. The pattern is not fully understood by most lawyers; the layman tends to find the technicalities not merely incomprehensible but quite absurd. A case can be lost or won on the basis of choice of remedy and the non-lawyer can never appreciate why this should be so. The basic fault of the entire structure is, however, that review cannot as a general rule, in the absence of special statutory provisions, be obtained ‘on the merits’ – and this is usually what the aggrieved citizen is seeking.[141]
Following the report of the Kerr Committee, the Ellicott Committee was formed to, among other things, identify the deficiencies in the procedures available for the judicial review of administrative decisions; to propose improved procedures for judicial review; and to consider the recommendations of the Kerr Committee.[149]
The Ellicott Committee endorsed the crucial conclusion of the Kerr Committee that ‘the present law relating to the judicial review of Commonwealth administrative decisions is deficient and in need of reform and simplification and that remedial legislation should be introduced’.[150] It also agreed that some discretions exercised by Ministers should not be the subject of a regime of judicial review because of their policy content.[151] Examples of this category provided by the Ellicott Committee included decisions relating to defence, national security, relations with other countries, criminal investigations, the administration of justice and the public service.[152] The Ellicott Committee also drew attention to the need:
...to consider whether there are some decisions of public servants, authorities and tribunals which, because of their nature, should be excluded from judicial review. For instance, it might be desirable that decisions relating to employment ... might be excluded.[153]
Finally, the Committee made the following significant observation:[154] In relation to some statutory discretions, provision is already made for judicial review before the courts, for example, under the taxation law. We think it is desirable that where this is the case the court exercising the jurisdiction for general judicial review should have power to decline to exercise its jurisdiction.155
Following, and acting pursuant to, the reports prepared by the Kerr Committee and the Ellicott Committee, the ADJR Bill 1977 was introduced in the Commonwealth Parliament in April 1977 by the then Attorney-General, Ellicott QC.[156] In his Second Reading Speech Ellicott indicated that the law relating to the review by the Courts of administrative decisions was:
clearly in need of reform – indeed, it could be said to be medieval – and simplification and to be put into statutory form. What the present Bill seeks to do is to establish a single simple form of proceeding in the Federal Court of Australia for judicial review of Commonwealth administrative actions as an alternative to the present cumbersome and technical procedures for review by way of prerogative writ, or the present actions for a declaration or injunction.[157]
After highlighting the major powers and functions of the AAT and the Commonwealth Ombudsman, two of the measures which had also been implemented by the Commonwealth pursuant to the report of the Kerr Committee,[158] Ellicott placed great emphasis on the fact that the recently established Federal Court[159] would be concerned only with the lawfulness of the decision under review and not with its ‘merits’.[160] This distinction provided the key to an understanding of the interaction between the three major components of this new regime:
It will thus be seen that the 3 avenues of review, appeal on the merits to the Administrative Appeals Tribunal, investigation by the Commonwealth Ombudsman, and judicial review by the Federal Court of Australia, provide different approaches to the remedying of grievances about Commonwealth administrative action. Each has its own place in a comprehensive scheme for the redress of grievances.[161]
The ADJR Bill 1977 contained cl 10 which is identical to the current s10 of the ADJR Act. The two crucial components of this provision for present purposes are ss10(1)(a) and 10(2)(b)(ii). The former provision makes it clear that the rights to seek applications for review under the ADJR Act:
are in addition to, and not in derogation of, any other rights ... to seek a review, whether by the Court, by another court, or by another tribunal, authority or person, of that decision, conduct or failure.
Section 10(2)(b)(ii) provides that the Federal Court may, in its discretion, refuse to grant an application for review lodged under the ADJR Act where adequate provision is made by a law other than the ADJR Act for review[162] by the Federal Court, by another Court, or by another tribunal, authority or person.[163] The Explanatory Memorandum to the ADJR Bill 1977 explains that the purpose of this provision is:
to discourage resort to the Federal Court of Australia under the Bill where other adequate remedies are available. Thus, for example, if an order for review were sought in the Court in respect of a decision of the Commissioner of Taxation in an income tax matter, the Court could decline to exercise jurisdiction on the ground that adequate remedies are available by way of appeal under the Income Tax Assessment Act.[164]
Another important provision of the ADJR Act, which was introduced by the ADJR Bill 1977, is s9 which removes from State Courts supervisory jurisdiction over decisions to which the ADJR Act applies as well as any other decision given, or any order made, by an officer of the Commonwealth.[165] The practical problems that would be generated by the operation of s9 were accurately predicted by Griffiths in 1978:
a person aggrieved by a Commonwealth administrative decision over which the Federal Court has no jurisdiction is compelled to resort to the High Court’s original jurisdiction if he wishes to have the decision judicially reviewed. As the Kerr and Ellicott Committees both recognised, this course of action will rarely be feasible since it would involve aggrieved persons in the expenses and complexities of High Court litigation, which bear little relation to the real nature of their grievance. Since the High Court’s original jurisdiction will sometimes provide aggrieved persons with their only judicial remedy concerning Commonwealth administrative action, the inescapable consequence of this lacuna created by s9 of the Act is that aggrieved persons will be denied a judicial remedy because of the impracticability of bringing High Court proceedings; if such proceedings are taken, the High Court’s jurisdiction may become overburdened, a situation which was sought to be avoided by the establishment of the Federal Court.[166]
As it is explained below, the problems generated by s9 necessitated the enactment of ss39B and 44(2A) of the Judiciary Act 1903 (Cth). The ADJR Bill 1977 did not specify what classes of decisions, if any, were to be removed from the concept of decisions to which the ADJR Act applies. This task was entrusted to the ARC. The ARC’s study of the problem is found in its first report, entitled Administrative Decisions (Judicial Review) Act 1977 – Exclusions under s19 (‘the ADJR Exclusions Report’).
The analysis above of the reports prepared by the Kerr and Ellicott Committees and of the ADJR Bill 1977 enables us to draw a number of major conclusions which impinge directly on the crucial question of whether the insertion of para (e) was justified:
The ARC recommended the exclusion from the concept of decisions to which the ADJR Act applies of ‘the making of assessments and decisions affecting assessments for income, estate, gift and sales taxes’.[171] In making this recommendation the ARC, unfortunately, placed reliance on the line of reasoning which was considered and rejected in paras 3 and 4 above. In fact, the ARC indicated that:
there is a long established and well developed system of judicial review of taxation decisions, involving State and Territory Supreme Courts (although not with respect to sales tax) the Federal Court (with respect to Income tax only) and ultimately the High Court, in the appellate structure. These courts have power to substitute their assessment for that of the Commissioner, which is not a power available to the Federal Court under the Act.[172]
Under the existing law, tax becomes payable immediately upon the issue of the assessment and the obligation to pay is not deferred pending appeal. Accordingly, there could be strong incentive to challenge the validity of the assessment under the Act, thereby circumventing the existing appellate processes and possibly deferring payment of tax.[173]
In addition to being inconsistent with the principles embodied in s10 of the ADJR Act, the reasoning of the ARC may also be criticised as displaying an unacceptable lack of confidence in the ability of the Federal Court to identify and deal with totally unmeritorious applications for judicial review which have been lodged for the dominant purpose of delaying payment of tax.[174] If it is felt that the existing powers of the Federal Court are not adequate to deal with this problem, the problem should be tackled directly and not through the elimination of the right to seek judicial review of any decision which might, potentially, lead to abuse of the ADJR Act regime.
Despite these fundamental flaws, the Commonwealth Parliament adopted this recommendation of the ARC through the inclusion of para (e) in the new Schedule 1 that was inserted by the Administrative Decisions (Judicial Review) Amendment Bill 1980.[175] The Explanatory Memorandum to this Bill explains that the purpose of para (e) was to leave decisions affecting the assessment or calculation of taxation:
subject only to the ordinary procedures for review or appeal provided in the relevant legislation under which the tax or duty is assessed or calculated, and to prevent these procedures being short-circuited by application to the Federal Court for judicial review.[176]
Similar reasoning was relied upon by the Parliament to exclude, through para (f) of Schedule 1, from the ambit of the ADJR Act decisions of the Taxation Boards of Review.[177] This class of decisions had not been the subject of recommendations by the ARC.[178]
Before considering whether post-1980 developments have provided alternative, and more persuasive, arguments in support of para (e), it is significant to note that the policy goal of para (e), of denying taxpayers access to judicial review under the ADJR Act where alternative remedies are available, has not been attained, in practice. In fact, taxpayers have, on occasions, been able to persuade the Federal Court that the decisions which they sought to challenge under the ADJR Act were not caught by para (e) in circumstances where such decisions could also be challenged under other review regimes set up under taxation legislation.[179] The following comments of the Full Federal Court are representative of the judicial approach to the relevance of the purpose of para (e) to its interpretation:
Sec 10(2)(b)(ii) of the Judicial Review Act contemplates that there will be cases in which decisions are reviewable both under that Act and under other legislation. Even if there were an alternative remedy open to the appellant (which there is not) that circumstance could not lead to the result that the decision which is the subject of the present application should be treated as falling within para (e) if the words of that paragraph are not apt to apply to it.[180]
Conversely, as a result of para (e), some taxpayers who did not have access to alternative remedies, were denied access to review under the ADJR Act.[181]
The inability to seek judicial review in State Courts in relation to decisions which fell outside the scope of the ADJR Act led to the concern that the High Court would be ‘flooded’ with applications for prerogative writs in relation to administrative decisions. This concern resulted in the enactment of ss39B and 44(2A) of the Judiciary Act 1903 (Cth).[182] which came into operation in June 1984,[184] enables the High Court to remit to the Federal Court matters originally commenced in the High Court pursuant to s75(iii) of the Constitution.[185] As was indicated in Pt I above, s39B, which came into operation in December 1983,[186] confers upon the Federal Court jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against Commonwealth officers. For present purposes, the significant aspect of s39B is that it is not affected by the restrictions on judicial review found in Schedule 1 of the ADJR Act.[187] Consequently, the decisions listed in para (e) might be reviewed by the Federal Court itself where the legal proceedings are initiated pursuant to s39B.[188] This state of affairs renders the task of those who ‘defend’ para (e) extremely difficult.[189] As was aptly pointed but by Enright:
There is a great anomaly in Schedule 1 excluding decisions from review because most or perhaps all of these decisions are reviewable at common law. Moreover following the enactment of s39B of the Judiciary Act 1903 the Federal Court now has jurisdiction to entertain applications for judicial review at common law. Hence Schedule 1 does not deny review or deny the Federal Court power to review the decisions in it. It merely denies an applicant for review the benefit of the substantive and procedural reforms made by the Judicial Review Act.[190]
It is, therefore, not surprising that many taxpayers have sought relief simultaneously under both the ADJR Act and s39B[191] so as to avoid the possibility of being prevented by para (e) from challenging before the Federal Court the validity of decisions which have some connection with the assessment-making process. s39B was one of the factors that led the ARC to conclude in 1989, eleven years after it recommended the enactment of para (e), that para (e), and indeed most of the provisions in Schedule 1, should be repealed.[192]
Another post-1980 development which the ARC placed reliance upon in order to justify the total abandonment of the recommendation it put forward in 1978, was the major change effected to the appeal system governing the review on the merits of tax decisions as a result of the replacement of the Taxation Boards of Review with the AAT:[193]
So far as income tax is concerned, s187 of the Income Tax Assessment Act provides that a taxpayer dissatisfied with the Commissioner’s decision on an objection may, within 60 days after service of the notice of the decision, request the Commissioner to refer the decision to either the Administrative Appeals Tribunal or the Federal Court ...
When paragraph (e) of Schedule 1 came into force, the appeal route was either to a Taxation Board of Review or to a State Supreme Court. Any appeal from a decision of a State Supreme Court lay to the Federal Court. Paragraph (e) was aimed at ensuring that taxpayers were unable to short circuit the established appeal route by getting their cases into the Federal Court without going through the antecedent step of having the cases referred either to a Board or to a State Supreme Court. However, with the changes to taxation appeal arrangements which came into force in recent years, this particular justification for paragraph (e) has ceased to have force.[194]
Since the ARC made this observation there has, of course, been another major change as a result of the enactment of Pt IVC of the Taxation Administration Act 1953 (Cth). Part IVC contains the objection, review and appeal procedures that are to be followed by a taxpayer dissatisfied with a taxation decision made under a Commonwealth tax Act.[195] However, this development does not, in any way, diminish the cogency of the ARC’s analysis, set out above, as ‘there is almost no difference in the substance of the appeal and review provisions as they appear in Pt IVC and how they appeared in the Income Tax Assessment Act 1936 (Cth) and in other Commonwealth tax statutes’.[196]
The Commonwealth Parliament’s response to the major developments, explained above, which have taken place since the enactment of the ADJR Act evinces some incoherence on its part. On the one hand, it failed to respond to the ARC’s crucial recommendation in 1989 that para (e) be repealed.[197] This lack of action presumably indicates that Parliament regards as still valid the original philosophy supporting para (e) that the availability of a comprehensive appeals system, in the tax arena, justifies the removal of the right to seek relief under the ADJR Act. And yet when the Commonwealth Parliament was offered the opportunity to implement this philosophy, when it inserted a new para (ga) in Schedule 1, it failed to take it.[198] When the Taxation Laws Amendment Bill (No 3) 1991 (Cth), which inserted the new Pt IVC of the Taxation Administration Act 1953 (Cth), was introduced in Parliament, it contained a provision which inserted a new para (ga) into Schedule 1 of the ADJR Act. This provision removed from the concept of decisions to which the ADJR Act applies ‘decisions under s14ZY of the Taxation Administration Act 1953’.[199] The effect of this new para (ga) would have been:
[It will] exclude from the ambit of the ADJR Act all those decisions by the Commissioner which may be challenged through the new Pt IVC procedures. This means that decisions by the Commissioner on objections against ‘taxation decisions’ which are within the Pt IVC system cannot be challenged under the ADJR Act. (A ‘taxation decision’ ... will be more than just an assessment; it means any assessment, determination, notice or decision made or issued by the Commissioner under any taxing Act which specifically provides that a person affected by the decision may object under Pt IVC of the TAA.).[200]
Whilst this proposed para (ga) would have reduced the decisions which taxpayers could challenge under the ADJR Act,[201] it would have been entirely consistent with the philosophy behind para (e) as it would have attained that which para (e) itself has not been able to achieve, namely, the exclusion from the ambit of the ADJR Act of decisions which may be challenged under the comprehensive appeals system created in relation to decisions made under Commonwealth taxation Acts. However, the Commonwealth Parliament amended the proposed para (ga), before it was enacted, so as to maintain the status quo. This amended version of para (ga), which is still in operation, provides that the concept of decisions to which the ADJR Act applies does not encompass ‘decisions under s14ZY of the Taxation Administration Act 1953 disallowing objections to assessments or calculations of tax, charge or duty’.[202] The amendment was explained as follows:
[Paragraph (ga)] sought to ensure that objection decisions now made under various taxation laws would, when made under the Principal Act, get the same treatment under the ADJR Act as they do now. It has been pointed out that it is possible, in respect of a limited range of objection decisions, that a person may currently have a right to dual avenues of review – that is, under the relevant taxation laws and under the ADJR Act. The proposed amendment to paragraph (ga) will ensure the continuation of any right to dual avenues of review that may now exist in respect of objection decisions that do not relate to assessments or calculations of any tax, charge or duty.[203]
The repeal of para (e) would have the effect of restoring, in the tax arena, the ADJR Act as the main vehicle for the judicial review of administrative decisions. This outcome would ensure the attainment of the following desirable goals:
A less obvious, but equally significant, benefit which may flow from the repeal of para (e) is that it may prompt the Commonwealth Parliament to deal with the failure of the ADJR Act to provide any guidance as to the proper relationship between the regime established pursuant to that Act and other legislative regimes.[205] As was indicated in Part III above, s10 of the ADJR Act recognises that these various regimes are intended to operate side by side but provides no guidance as to how the problem of overlapping remedies is to be dealt with as it simply confers upon the Federal Court an unregulated discretion to refuse an application for review where an adequate alternative remedy exists.
Should there ‘be a ‘first instance’ right to seek review by the Court under the ADJR Act, notwithstanding the availability of alternative remedies’?[206] Or does the existence of an adequate alternative remedy mean that the right to seek access to the Federal Court under the ADJR Act should be dependent upon the ability of the applicant to establish, to the satisfaction of the Court, the existence of exceptional circumstances?[207] The tension between these two general approaches to the interaction between the ADJR Act and the other components of the administrative law regime is reflected in the judicial pronouncements concerning the circumstances in which it is appropriate to exercise the discretion vested in the Court by s10(2)(b)(ii).[208]
The clearest example of the judicial endorsement of the first theory formulated above, which may diminish the circumstances in which the s10(2)(b)(ii) discretion will be exercised, is provided by the judgment of Toohey J in Kelly v Coats.[209] He indicated that ‘the onus is on those seeking to persuade the court that it should not exercise the jurisdiction conferred upon it by the legislature’.[210] At the same time, the following judicial observations tend to indicate support for the alternative theory that judicial review should only be a last resort measure:
This court is too busy and its processes too costly for it generally to be appropriate for an applicant to come to the court where there is an informal and expeditious administrative tribunal established to resolve the dispute.[211] We ... express the view that in many, (perhaps most) circumstances, the Court’s proper response to an application of this particular sort [where the decision was made pursuant to an Act which provided its own method of review] should not be to embark upon a full hearing, but rather to exercise the discretion under s10(2)(b)(ii) adversely to the applicant.[212]
If the repeal of para (e), proposed in this article, does force Parliament to consider this issue, the outcome of this exercise will, hopefully, be of a more satisfactory nature than the measures contained in the Administrative Decisions (Judicial Review) Amendment Bill 1987 (Cth) (‘the 1987 Bill’).[213] The 1987 Bill would have amended s10(2)(b)(ii) by requiring the Federal Court to refuse applications under the ADJR Act where the applicant had an alternative right to seek review unless the applicant satisfied the Court that the interests of justice required that it should not refuse to grant the application.[214] The purpose of this provision was to create a ‘rebuttable presumption that the jurisdiction of the Court may not be invoked’[215] where alternative remedies are available.
The de facto leave requirement[216] that the 1987 Bill would have introduced, if enacted, was strongly criticised by the ARC[217] and the Senate Standing Committee on Legal and Constitutional Affairs (‘the Senate Committee’).[218] This rejection was based on a number of persuasive arguments including the fact that it would discourage the bringing of legitimate applications for review; that it would create further delays of the kind which it was designed to avoid; and that it was an inherently discriminatory measure since it would not necessarily deter individuals or companies with vast resources who intend to use judicial review proceedings for strategic purposes.[219]
More satisfactory approaches to this question, than the one proposed by the Commonwealth Parliament in 1987, which are more in line with the principle formulated in s10(1)(a), were proposed by both the ARC and the Senate Committee. The ARC was of the view that the mere existence of alternative remedies should not automatically prevent access to the Federal Court pursuant to the ADJR Act. Consequently, it recommended the addition of the requirement that the ‘Federal Court must also be satisfied in all the circumstances of the case that it would be reasonable, or would have been reasonable, for the applicant to seek review’.[220] The Senate Committee recommended:
[T]he legislative formulation of the position as described in Kelly v Coats. That is to say, with the onus placed upon the respondent to (a) raise the issue of alternative remedies; and (b) satisfy the Court that it should exercise its discretion to refuse to grant an application for review.[221]
In the Senate Committee’s view, such an amendment would provide the Court with the means to dismiss summarily unmeritorious applications without discouraging the bringing of legitimate applications.[222]
The removal of para (e) would prompt taxpayers to rely on s4 of the ADJR Act when seeking judicial review of income tax assessments. s4 provides that the ADJR Act ‘has effect notwithstanding anything contained in any enactment in force at the commencement’ of the ADJR Act.[223] Reliance on s4 by taxpayers, wishing to challenge pursuant to the ADJR Act the validity of income tax assessments, would result from the need to avoid the adverse impact of ss175 and 177 of the ITAA 1936. The former section provides that the validity of an assessment is not be affected by reason that any of the provisions of the ITAA 1936 have not been complied with. s177, whose origins can be traced back to s35(1) of the Income Tax Assessment Act 1915 (Cth),[224] is in the following terms:
The production of a notice of assessment, or of a document under the hand of the Commissioner ... purporting to be a copy of a notice of assessment, shall be conclusive evidence of the due making of the assessment and, except in proceedings under Part IVC of the Taxation Administration Act 1953 on a review or appeal relating to the assessment, that the amount and all the particulars of the assessment are correct.
The effect of these sections on the ability of the Federal Court to review, pursuant to s39B of the Judiciary Act, income tax assessments has been recently considered by the Full High Court in DFC T v Richard Walter Pty Ltd.[225] A review of this difficult case is beyond the scope of this article.[226] But for present purposes it is sufficient to note that Mason CJ,[227] Deane and Gaudron JJ229 indicated that, as a result of ss175 and 177, a challenge to the validity of an income tax assessment, pursuant to s39B, will, generally, not be successful as long as the income tax assessment under challenge complied with the Hickman principle, namely, that it was made in good faith, that it related to the subject matter of the ITAA 1936, and that it was reasonably capable of reference to the Commissioner’s powers.[230] The Hickman principle was formulated by Dixon J (as he then was) in R v Hickman; Ex parte Fox and Clinton[231] in delineating the precise boundaries of the restrictions which the so-called privative clauses may legitimately place on the ability of Courts to review particular administrative decisions.[232] As was pointed out by the NSW Law Reform Commission, ‘‘privative clauses’ take a variety of forms such as a provision that ‘the decision’ or ‘the determination’ of the public authority shall be final, or shall not be called in question in any court, or shall not be subject to control by the prerogative writs’.[233]
It is interesting to note that s177 was not amongst the eight Commonwealth statutory provisions identified by the ARC, in 1978, as privative clauses, whose operation in relation to applications for review under the ADJR Act, would be abrogated by s4.[234] This omission cannot be explained on the basis that s4 would have had no role to play in relation to s177 as a result of the exclusion by para (e) of decisions making assessments from the concept of decisions to which the ADJR Act applies. This is because, as was subsequently pointed out by some commentators,[235] five of the eight privative clauses identified by the ARC purported to protect from judicial review decisions that were not caught by the ADJR Act, in any event, by virtue of various paragraphs of Schedule 1.[236] The Explanatory Memorandum to the ADJR Bill 1977 explains that the purpose of s4 is to ‘override the so-called privative clauses in existing legislation, which might otherwise have the effect of excluding the jurisdiction to be given to the Federal Court of Australia under this Bill’.[237] The inclusion of s4 can be traced back to a desire on the part of the Kerr Committee[238] to see in the ADJR Act a provision similar to s11(1) of the Tribunal and Inquiries Act 1958 (UK), which provided that:
As respects England and Wales or Northern Ireland, any provision in an Act passed before the commencement of this Act that any order or determination shall not be called into question in any court, or any provision in such an Act which by similar words excludes any of the powers of the High Court, shall not have effect so as to prevent the removal of the proceedings into the High Court by order of certiorari or to prejudice the powers of the High Court to make orders of mandamus ....
It is immediately apparent that the intention behind both s11 and its Australian counterpart, of removing the restrictions on judicial review that may be placed by privative clauses, is more effectively conveyed by s11 than by s4 as a result of the more detailed and specific manner in which the former provision was drafted. On the other hand, the application in Richard Walter of the Hickman principle to ss175 and 177, together with a recognition of the policy behind s4,[239] may result in a judicial finding that s4 has swept away any restrictions placed on the ability of the Federal Court to review income tax assessments under the ADJR Act.
The chances of such a judicial finding would be enhanced if the Court accepted the proposition that the general language employed in s4 indicates that it was intended to have a broad operation, beyond privative clauses, with the result that ‘all provisions of the [ADJR] Act may be held to override those of other earlier enactments where the two provisions are incapable of being read consistently with each other’.[240] In fact, a reasonable argument can be put forward to the effect that ss175 and 177 are inconsistent with s5(1) of the ADJR Act, as the former provisions restrict the operation of the legal grounds, set out in s5(1), pursuant to which the Court may review the lawfulness of decisions to which the ADJR Act applies.
The abrogation of the operation of sections 175 and 177, in relation to the judicial review of income tax assessments under the ADJR Act by virtue of s4, would be likely to generate the desirable effect of forcing the Commonwealth Parliament to examine the crucial issues of whether the arguments which have traditionally been formulated to justify ss175 and 177 are still valid and, if so, whether they are more persuasive than the arguments in favour of unrestricted judicial review of assessments pursuant to review regimes other than Pt IVC.[241]
The narrow judicial formulation of the scope of para (e) has been:
welcomed, as it is often far from certain whether the vast array of decisions made by the Commissioner will be followed by an assessment. The confinement of the [para e] exclusion will mean that a greater variety and number of the Commissioner’s decisions will be subject to judicial scrutiny prior to the issue of an assessment. It also leaves open a greater scope for taxpayers to challenge decisions of the Commissioner without the spectre of a tax liability hovering over them, and the associated penalties which automatically accrue from this.[242]
The judicial reluctance to confer on para (e) a broad operation can also be supported from a policy or conceptual perspective. In fact, the enactment of para (e) was not justified to begin with, as the policy behind para (e) is irreconcilable with an essential feature of the ‘new administrative law’, namely, that judicial review under the ADJR Act is intended to complement review on the merits available under other legislative regimes. The indefensible nature of the rationale behind para (e) has been exacerbated as a result of the ability of the Federal Court to review, under s39B of the Judiciary Act, most if not all of the decisions currently excluded from the ADJR Act by para (e). Consequently, the proposition that para (e) ought to be repealed has been put forward by the authors.
Finally, attention has been drawn to the fact that the repeal of para (e) may have the desirable effect of prompting the Commonwealth Parliament (a) to provide Courts with some meaningful guidance as to the preferred approach to the problem of overlapping remedies; and (b) to re-assess whether the almost total protection, which is currently conferred, by ss175 and 177 of the ITAA 1936, on income tax assessments in challenges to their validity, under review regimes other than Pt IVC of the Taxation Administration Act 1953, is still appropriate.
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URL: http://www.austlii.edu.au/au/journals/SydLawRw/1999/2.html