AUSTRALIAN TAXPAYER RIGHTS TO MONETARY COMPENSATION
FOR LOSS CAUSED BY AUSTRALIAN TAXATION OFFICE
OPERATIONAL ACTS OR OMISSIONS
Giovanni Bevacqua LL.B. (Hons.), University of Melbourne, 1997 B.Com, University of Melbourne, 1997
Submitted in fulfilment of the requirements of the degree of Doctor of Philosophy
1 November 2010
Australian School of Taxation (ATAX) Faculty of Law University of New South Wales
ORIGINALITY STATEMENT
I hereby declare that this submission is my own work and to the best of my knowledge it contains no materials previously published or written by another person, or substantial proportions of material which have been accepted for the award of any other degree or diploma at UNSW or any other educational institution, except where due acknowledgment is made in the thesis. Any contribution made to the research by others, with whom I have worked at UNSW or elsewhere, is explicitly acknowledged in the thesis. I also declare that the intellectual content of this thesis is the product of my own work, except to the extent that assistance from others in the project‟s design and conception or in style, presentation and linguistic expression is acknowledged.
...... Giovanni Bevacqua
1 November 2010
2
ACKNOWLEDGEMENTS
I am indebted in the preparation of this thesis to my supervisors, Professor Prue Vines and Professor Michael Walpole whose patience and generosity with their time, as well as their academic experience, have been invaluable to me.
I also offer my thanks to all of those who supported me in any respect during the completion of the project. I am especially grateful for the unconditional support and encouragement of my wife Suzanne.
Giovanni Bevacqua
3
ABSTRACT
This thesis examines the adequacy and effectiveness of the avenues of relief available to Australian taxpayers aggrieved by an Australian Taxation Office („ATO‟) operational act or omission where monetary compensation is the desired remedy.
The exclusive focus in this thesis on those legal rights triggered in cases of operational act or omission causing taxpayer loss is novel. Similarly, none of the existing literature specifically examines the ability of existing taxpayer remedies to provide monetary compensation to taxpayers aggrieved by an ATO operational act or omission. This thesis explains the importance of filling this void in the existing literature and examining taxpayer rights with these two factual parameters specifically and exclusively in mind.
The central contention is that the existing avenues of compensatory relief are both ineffective and inadequate. The results of the assessment in this thesis of the effectiveness and adequacy of each of the existing avenues of compensatory relief available to Australian taxpayers aggrieved by an ATO operational act or omission confirm this contention. The results show that judges presently determine taxpayer claims in a manner that is not consistent, predictable or built upon a solid foundation of precedent and legislative direction. Instead, untested public policy concerns are determinative.
Accordingly, this thesis considers law reform alternatives to correct these deficiencies. Ultimately, this thesis recommends the enactment of a limited, no-fault statutory damages remedy for Australian taxpayers seeking monetary compensation for loss caused by an ATO operational act or omission. A model no-fault statutory damages remedy is constructed and presented.
4
TABLE OF CONTENTS
CHAPTER 1 - INTRODUCTION ...... 9
PART I - INTRODUCTION AND CENTRAL HYPOTHESIS ...... 9
PART II - RESEARCH METHOD ...... 13
PART III - LIMITS AND ASSUMPTIONS ...... 18
PART IV - CHAPTER OUTLINE ...... 21
CHAPTER 2 - THE DUAL FACTUAL PARAMETERS: DEFINITION AND JUSTIFICATION ...... 23
PART I - THE „OPERATIONAL‟ PARAMETER ...... 23 A - Definitional Challenges...... 23 B - Justifications for Imposing the „Operational‟ Parameter ...... 30
PART II - THE „MONETARY COMPENSATION‟ PARAMETER ...... 54 A - Definitional Clarifications ...... 54 B - Justifications for Imposing the „Monetary Compensation‟ Parameter ...... 57
CHAPTER 3 - TORTIOUS REMEDIES AVAILABLE TO AUSTRALIAN TAXPAYERS
AGGRIEVED BY ATO OPERATIONAL ACT OR OMISSION ...... 67
PART I - INTRODUCTION ...... 67
PART II - NEGLIGENCE ...... 72 A - Introduction ...... 72 B - The Commissioner‟s Partial Immunity from Suit ...... 74 C - The Relevance of the Policy/Operational Dichotomy ...... 82 D - The Salient Features Approach Applied ...... 94 E - Conclusions ...... 106
PART III - MISFEASANCE IN PUBLIC OFFICE ...... 108 A - Introduction ...... 108 B - Misfeasance and the Dual Parameters: Preliminary Observations ...... 109 C - Detailed Examination of the Elements of the Tort ...... 115
PART IV - BREACH OF STATUTORY DUTY ...... 125
PART V - THE INNOMINATE TORT - BEAUDESERT SHIRE COUNCIL V SMITH ...... 132
PART VI - CONCLUSIONS ...... 139
5
CHAPTER 4 - NON-TORTIOUS COMPENSATORY REMEDIES AVAILABLE TO
AUSTRALIAN TAXPAYERS AGGRIEVED BY ATO OPERATIONAL ACT OR OMISSION ...... 141
PART I - INTRODUCTION ...... 141
PART II - EQUITABLE AVENUES OF RELIEF ...... 144 A - Introduction ...... 144 B - Estoppel ...... 146 C - Restitutionary Relief ...... 163 D - Conclusions ...... 172
PART III - ADMINISTRATIVE LAW REMEDIES ...... 173
PART IV - INFORMAL AVENUES OF RELIEF ...... 180 A - Introduction ...... 180 B - Taxpayers‟ Charter ...... 181 C - Commonwealth Ombudsman ...... 186 D - ATO Internal Complaints and Act of Grace Payments ...... 189 E - Conclusions ...... 192
PART V - OTHER AVENUES OF RELIEF ...... 194 A - Introduction ...... 194 B - Breach of Contract ...... 194 C - Trade Practices Act 1974 (Cth) ...... 198 D - Privacy ...... 206
PART VI - CONCLUSIONS ...... 209
CHAPTER 5 - EXISTING AUSTRALIAN TAXPAYER RIGHTS TO COMPENSATION FOR
ATO OPERATIONAL ACT OR OMISSION ASSESSED: THE PRIMA FACIE CASE FOR
REFORM...... 210
PART I - INTRODUCTION ...... 210
PART II - EFFECTIVENESS OF EXISTING AUSTRALIAN TAXPAYER
COMPENSATORY AVENUES OF RELIEF FOR ATO OPERATIONAL ACT OR
OMISSION 212 A - Scope of Application...... 216 B - Mental Element Requirement Barriers to Success ...... 220 C - Public Policy Barriers to Success ...... 221 D - Reliability ...... 224 E - Actual or Perceived Bias ...... 226
6
F - Track Record ...... 228
PART III - ADEQUACY OF EXISTING AUSTRALIAN TAXPAYER COMPENSATORY
REMEDIES FOR ATO OPERATIONAL ACT OR OMISSION ...... 232 A - Toward an Objective Measure of „Adequacy‟ ...... 232 B - Adequacy Assessed: Unsubstantiated Favoured Treatment ...... 238 C - Adequacy Assessed: Complexity ...... 249
PART IV - ENHANCING EFFECTIVENESS AND ADEQUACY: THE POLICY
CHALLENGES TO REFORM ASSESSED ...... 256 A - Motivational Impacts...... 256 B - Justiciability Concerns: Separation of Powers and Institutional Competence . 265 C - Existence of Alternative Remedies ...... 270 D - Protecting the Revenue: Floodgates/Indeterminacy Concerns ...... 272
PART V - CONCLUSIONS...... 282
CHAPTER 6 - REFORM: THE CASE FOR AN AUSTRALIAN NO-FAULT STATUTORY
DAMAGES REMEDY ...... 283
PART I - INTRODUCTION ...... 283
PART II - THE NATURE OF AN AUSTRALIAN DAMAGES REMEDY FOR ATO ACT
OR OMISSION CAUSING TAXPAYER LOSS: THE INSTITUTIONAL SOURCE
DILEMMA 285 A - Rejection of a Non-Binding Reform Solution ...... 285 B - Judicial or Legislative Law Reform: The General Debate ...... 288 C - Judicial or Legislative Law Reform: Public Body Liability Law Reform ...... 292 D - Judicial or Legislative Law Reform: Tax-Specific Law Reform ...... 295
PART III - THE NATURE OF AN AUSTRALIAN DAMAGES REMEDY FOR ATO
OPERATIONAL ACT OR OMISSION CAUSING TAXPAYER LOSS: THE BASIS OF
LIABILITY TO PAY DAMAGES ...... 304 A - A Private Law or Administrative Law Solution?...... 304 B - The Case for a „Fresh Start‟ Alternative ...... 312 C - The Case for a „No-Fault‟ Scheme ...... 314
PART IV - CONCLUSIONS ...... 320
7
CHAPTER 7 - REFORM: THE SUBSTANTIVE CONTENT OF AN AUSTRALIAN
STATUTORY DAMAGES REMEDY ...... 322
PART I - INTRODUCTION ...... 322
PART II - A STATUTORY DAMAGES REMEDY AGAINST THE REVENUE: THE
UNITED STATES APPROACH ...... 324
PART III - LEARNING FROM THE UNITED STATES EXPERIENCE: FORMULATING
AN AUSTRALIAN STATUTORY DAMAGES REMEDY FOR ATO OPERATIONAL
ACT OR OMISSION CAUSING TAXPAYER LOSS ...... 340 A – Defining the Operational Constraint ...... 340 B - Limiting Recoverable Damages ...... 350 C - Immunity for Individual Tax Officers ...... 356 D - Interaction with Existing Avenues of Relief ...... 358 E - Mitigation of Losses and Costs Sanctions ...... 361 F - Limitation Periods and Appeal Rights ...... 364
PART IV - THE AUSTRALIAN STATUTORY DAMAGES REMEDY PRESENTED ...... 366
CHAPTER 8 - CONCLUSION ...... 372
BIBLIOGRAPHY…...... 377
PART I - ARTICLES & BOOKS ...... 377
PART II - CASE LAW ...... 410
PART III - LEGISLATION ...... 420
PART IV - PAPERS, THESES & REPORTS ...... 422
PART V - OTHER SOURCES ...... 425
8
CHAPTER 1 - INTRODUCTION
PART I - INTRODUCTION AND CENTRAL HYPOTHESIS
This thesis examines the effectiveness and adequacy of the avenues of relief available to Australian taxpayers aggrieved by an Australian Taxation Office („ATO‟)1 operational act or omission and who desire monetary compensation. It demonstrates that the current avenues of relief available to taxpayers in this situation are individually ineffective and collectively inadequate. It recommends the enactment of a completely novel no-fault statutory damages remedy to correct this ineffectiveness and inadequacy. That remedy is constructed and presented as the ultimate conclusion of this thesis. There is nothing like it presently in existence in the common law world.
In reaching this ultimate conclusion, significant space is devoted in this thesis to considering avenues of relief typically overlooked in taxpayer rights studies. Tortious or equitable claims, for instance, rarely rate a mention in examinations of Australian taxpayer rights.2 However, private law avenues of relief occupy significant space in this thesis. Provided a relevant avenue of relief is capable of providing a monetary compensation remedy in cases of ATO operational malfunction, it falls squarely within the ambit of this study. Not only, therefore, is there novelty in the recommended no-fault statutory remedy - much of the ground covered to arrive at the justification for it is also new territory.
As for the justification itself, this turns on the findings of individual ineffectiveness and collective inadequacy of the existing avenues of relief for taxpayers aggrieved by an ATO operational act or omission who seek monetary
1 In this study the acronym „ATO‟ is used interchangeably with the terms „Australian Taxation Office‟, „Commissioner of Taxation‟, and „Commissioner‟. 2 Exceptions are Robert Baxt, „Taxpayers‟ Bill of Rights‟ (1993) 22 Australian Tax Review 161; Duncan Bentley, „The Taxpayers‟ Charter: More than a Mission Statement‟ (1995-1996) 4 Taxation in Australia Red Edition 259; and Cameron Rider, „Estoppel of the Revenue: A Review of Recent Developments‟ (1994) 23 Australian Tax Review 135.
9 compensation. In this thesis, to determine „effectiveness‟ each cause of action potentially able to assist a taxpayer is assessed to determine if, when and how it might apply. Specifically six separate characteristics of each cause of action are chosen to determine effectiveness.3 These are:
(1) Scope of application; (2) Mental element requirements; (3) Public policy hurdles; (4) Reliability; (5) Neutrality; and (6) Track record of success.
The bigger challenge is assessing the collective „adequacy‟ of the array of existing avenues of relief available to Australian taxpayers. It is this assessment which suggests a need for making a judgment about the extent to which taxpayer private law rights to sue the ATO for compensation should impinge on ATO public law tax administration powers and measuring how far short of this ideal the existing mix of remedies falls. However, no such judgment is made in this thesis.
This is because measures of adequacy based upon such comparisons are inherently unsatisfactory.4 They are necessarily coloured by the proponent‟s views as to the role of tax collection in our society. Those who see taxation as a necessary evil will undoubtedly favour a system skewed in favour of taxpayer protection against interference by State tax collectors. Conversely, those who see the role of taxation as being predominantly one of wealth redistribution to the socially disadvantaged and funding of worthy social programs may more strongly favour tax authority imposition upon taxpayer private law rights.5
3 Part II of Chapter 5 comprehensively discusses each of these factors, and the reason for choosing each as a measure of effectiveness. 4 For reasons fully expounded in Part III of Chapter 5. 5 For a detailed exploration of the intricacies and difficulties in defining the proper limits of State power to impose generally upon taxpayers see the comprehensive treatment by Bentley in Duncan Bentley, Taxpayers‟ Rights: Theory, Origin and Implementation (2007).
10
Furthermore, there is the ever-present problem that such attitudes are not static. As Bentley has noted „[e]ssentially taxation can be seen as a barometer of the developing balance between State and individual rights.‟6 (emphasis added) As this balance continues to develop, any such measure of adequacy of taxpayer rights and available avenues of relief will necessarily be subject to revision and challenge over time. The pursuit of such measures is, therefore, not only unavoidably value-laden - it is also a moving feast.
For these reasons, this thesis adopts two alternative indicators of inadequacy, neither of which stem from any direct comparison between the status quo and some subjectively „ideal‟ balance between taxpayer rights and tax authority interests. These indicators are:
(1) The absence of any clear and coherent judicial statement or specific legislative measure to explain the apparent favoured judicial treatment of the Commissioner of Taxation in the application of various common law and equitable principles and approaches; and (2) The complexity and consequent uncertainty created by the current application of the array of taxpayer avenues of relief in taxpayer compensatory claims arising from ATO operational act or omission.7
This approach to determining adequacy reflects the fact that this thesis is not concerned with making a case for any extension of taxpayer rights to more frequent and/or larger awards of compensation per se. Rather, the case is simply that reform in the form of a no-fault statutory damages remedy is required to correct the ineffectiveness and inadequacy evident from the current approach to applying existing taxpayer avenues of relief in cases of ATO operational act or
6 Ibid, 15. 7 Part III of Chapter 5 fully explains these indicators.
11 omission causing compensable taxpayer loss. The concern is, therefore, with legal process and principle - not taxpayer claim outcomes.
12
PART II - RESEARCH METHOD
As already observed, part of the novelty of this study is that it largely takes legal literature from outside the tax sphere and applies that material in a tax context. It is essentially doctrinal legal research aimed at an audience of tax scholars. These tax scholars may be from legal, accounting or economics backgrounds. Accordingly, it is appropriate to briefly explain the doctrinal legal research methodology applied in this thesis which may be familiar ground for legal academics but unfamiliar to tax scholars from other backgrounds.8
The Pearce Committee defines doctrinal legal research as;
…research which provides a systematic exposition of the rules governing a particular legal category, analyses the relationship between rules, explains areas of difficulty and, perhaps, predicts future developments.9
More recently, McKerchar has described doctrinal legal research as:
…typically based on the “black letter” (or literal) analysis of formal legal rules and principles. It tends to rely on a distinctly deductive form of legal reasoning and on the researcher‟s ability to develop arguments and provide reasonings that are based on the law (which includes case law).10
8 Salter and Mason suggest that although there is resistance to methodological discussion in legal dissertations, it is entirely appropriate that research methodology is explicitly justified in legal dissertations. See Michael Salter and Julie Mason, Writing Law Dissertations: An Introduction and Guide to the Conduct of Legal Research (2007), 31. 9 See Dennis Pearce, Enid Campbell, and Don Harding, Australian Law Schools: A Discipline Assessment for The Commonwealth Tertiary Education Commission: A Summary, (1987), 6. It is one of three basic forms of legal research methodology identified by that Committee - doctrinal analysis, reform-oriented research and theoretical research. In other countries a fourth has been added - „fundamental research‟ which has been described as „research designed to secure a deeper understanding of law as a social phenomenon, including research on the historical, philosophical, linguistic, economic, social or political implications of law.‟ See Social Sciences and Humanities Research Council of Canada, Report to the Social Sciences and Humanities Research Council of Canada by the Consultative Group on Research and Education in Law (1983), 66. 10 Margaret McKerchar, Design and Conduct of Research in Tax, Law and Accounting (2010), 115.
13
The adoption of such an approach is evident in a number of central elements of this thesis, especially those Chapters which deal with the existing Australian legal remedies available to taxpayers.11 These parts of the thesis almost exclusively aim to explain judicial interpretations and applications of the various public and private law remedies in cases involving claims against the ATO. Insofar as this constitutes a „systematic exposition‟ of the existing avenues of relief this part of the thesis clearly falls squarely within the Pearce Committee definition of doctrinal legal research.
However, doctrinal analysis, both as a methodological tool and a theoretical framework, is broad enough to encapsulate those parts of this thesis that are directed at examining the adequacy and effectiveness of the existing legal remedies and extrapolating from that examination proposals for law reform. While these elements of this thesis at first glance suggest a reform-oriented research12 focus, the methodology used in this study remains best described as an exclusively doctrinal approach. To fully appreciate why this is so, a fuller understanding of the essence and breadth of doctrinal legal analysis is required. A good starting point is Posner‟s explanation of doctrinal legal analysis:
It [doctrinal analysis] involves the careful reading and comparison of appellate opinions with a view to identifying ambiguities, exposing inconsistencies among cases and lines of cases, developing distinctions, reconciling holdings, and otherwise exercising the characteristic skills of legal analysis…They [practitioners] consider not only whether an opinion is clear, well reasoned, and consistent with the precedents, the statutes, and the Constitution, but also whether it is right in the sense that it is consistent with certain premises about justice and administrative practicality.13
11 Chapters 3 and 4, in particular, are centred on just such issues. 12 Purely reformist research remains viewed, somewhat conservatively perhaps, as the exclusive domain of law reform bodies. For further discussion, see Terry Hutchinson, Researching and Writing in Law (2002), 9-10. 13 Richard Posner, „The Present Situation in Legal Scholarship‟ (1981) 90 The Yale Law Journal 1113, 1113-1114.
14
This underlying concern with various aspects of justice clearly opens the door to law reform considerations and assessments of adequacy and effectiveness of existing legal principles and judicial approaches.
Posner goes on to explain some of the distinguishing characteristics of doctrinal legal research which are also useful for clarifying the methodological parameters of this thesis. For instance, Posner makes it clear that doctrinal legal research theses such as this one are not encumbered by dilemmas that typically occupy significant space in social science research studies. These include the qualitative/quantitative dichotomy and the associated methodological issues associated with various tools for collecting, measuring and analysing quantitative and/or qualitative data:
...[D]octrinal analysts necessarily go outside the logic of the opinion or the series of opinions that they are examining - but they don‟t go far. They use their study of cases, their experience as lawyers, their shared moral and political values of their society to evaluate the practicality and justice, as distinct from the clarity and consistency, of existing or proposed legal rules. But they do not use the theories or methods of the social sciences or of philosophy.14
Further, it is implicit in Posner‟s explanation of doctrinal research that a wide range of moral and political values and undercurrents are equally capable of accommodation in a doctrinal legal research study. Writers such as Ziegler adopt a similar view on the breadth of the doctrinal research paradigm. Ziegler goes further to concede that no singular doctrinal legal research paradigm exists.15 All of this points to a fluid and broad approach to legal research which is readily capable of encompassing studies such as this one which extend to considering law reform possibilities.
14 Ibid, 1114. 15 See Peter Ziegler, „A General Theory of Law as a Paradigm for Legal Research‟ (1988) 51 Modern Law Review 569. Ziegler goes on to assert, at 592, that „…a concerted emphasis by legal academics to develop a paradigm - a general theory - within the law is essential if substantive scientific progress is to be achieved, and the discipline is to survive in the long run.‟
15
It is, however, possible to identify in this thesis a number of characteristics commonly associated with the dominant paradigm for doctrinal legal research. For instance, one aspect of the dominant paradigm for doctrinal legal research has been described as „the tracing of common law precedent and legislative interpretation and change.‟16 This lies at the heart of doctrinal analysis and certainly also lies at the heart of those parts of this study which examine the existing taxpayer compensatory remedies potentially applicable in cases of ATO operational act or omission.
Positivistic tendencies have also been identified as central strands of the doctrinal legal analysis research paradigm. Hutchinson has noted that „[p]ositivism, with its view of the law as being “what is” rather than what “could be” or “should be” also forms part of the paradigm.‟17 McKerchar affirms that „[t]he methodology of doctrinal legal research is appropriate where the aim of the research is to determine the meaning of a particular legal provision in accordance with the philosophy of legal positivism.‟18 This study clearly displays some positivistic tendencies. Again, this is particularly evident in those parts of this study which examine the existing taxpayer compensatory remedies potentially applicable in cases of ATO operational act or omission. Those parts of this study are clearly directed at determining „what is‟ the law in relation to operational acts or omissions of the ATO.
However, the positivistic acknowledgment that there is no necessary connection between law and morality19 also fits well with the approach in this thesis to
16 Hutchinson, above n 12, 12. 17 Ibid. 18 Ibid, 115. See further, Margaret McKerchar, „Philosophical Paradigms, Inquiry Strategies and Knowledge Claims: Applying the Principles of Research Design and Conduct to Taxation‟ (2008) 6 eJournal of Tax Research 5
16 assessing adequacy and the reform recommendations which flow from the results of that assessment. It will be recalled from the preceding introduction that a key aim of the assessments of adequacy and effectiveness of existing remedies in this thesis and the reform recommendations that flow from those assessments is to avoid entrenching moralistic value judgments aimed at advancing the case for greater taxpayer rights per se. Insofar as this reflects a detachment from moral principle this approach to making the case for law reform in this thesis sits comfortably within a positivistic framework.
Non-Positivism‟ (2009) 22 Ratio Juris 311 and Jules Coleman, „Beyond Inclusive Legal Positivism‟ (2009) 22 Ratio Juris 359.
17
PART III - LIMITS AND ASSUMPTIONS
A number of key limits and assumptions derive from the chosen dual operational act or omission and monetary compensation factual parameters of this thesis. The subsequent Chapters deal comprehensively with each of the specific limitations and assumptions as they are encountered.20 However, there are a number of generic limits and assumptions that are worthy of acknowledgement and introduction from the outset.
The first of these is that, the factual parameters imposed clearly operate to restrict the scope of this thesis. For example, cases in which the desire is for a remedy other than monetary compensation are outside the scope of this thesis. Similarly excluded are non-operational ATO loss-causing activities. Accordingly, this thesis directs attention toward ATO processes rather than tax results, to decision- implementation rather than decision-making and to ATO mechanical or administrative functions rather than exercises of legislative power or discretion by the Commissioner.21
There is nothing written which adopts both an operational and compensatory focus in the context of Australian taxpayer rights. Studies of taxpayer legal rights generally take one of a limited number of paths. Commonly, studies centre on identifying and discussing the range of rights generally available to Australian taxpayers and which might apply in an unfettered array of factual circumstances. These studies frequently make comparisons with one or more international jurisdictions.22 Adopting a factually constrained starting point is, therefore, a novel approach.
20 This commences with the definitional limitations and assumptions associated with the dual parameters of this study explored in Chapter 2. 21 Chapter 2 thoroughly explores the significant definitional complexities of drawing these sorts of distinctions. It also addresses the reasons why drawing such distinctions is a worthy pursuit in a study of taxpayer rights. 22 Notable examples include Duncan Bentley (ed), Taxpayers‟ Rights: An International Perspective (1998); Michael Walpole, „Taxpayer Rights and Remedies - Australia, New Zealand
18
This does not, however, imply a complete absence of any substantial body of research and law to fall back upon. On the contrary, the real challenge is the difficulty of relating and applying to the tax context a substantial body of non-tax literature. For instance, while drawing a distinction between operational and policy activities has a long and well-documented history in tort law,23 drawing such a distinction in the taxpayer rights context is undoubtedly novel. It requires making a number of assumptions and predictions.
There is also, however, the challenge of some complete gaps in the literature. There is, for example, a lack of empirical data to point with any precision to incidences of ATO operational act or omission causing taxpayer loss.24 This fact is an inescapable limitation of this study. There is a similar vacuum insofar as case law is concerned. For instance, there is no negligence claim against the Commissioner which has proceeded to a full hearing and judicial determination.25 Accordingly, a number of assumptions and extrapolations from non-tax cases are required in order to assess the prospect of a successful negligence claim against the Commissioner.
Public policy issues also pose a significant challenge and permeate throughout this study. They have been a significant influence on the development of the existing law. They are, therefore, relevant to assessments of the legal avenues of relief available to Australian taxpayers. They are a significant underlying consideration in any conclusions drawn from analysis of the „adequacy‟ and „effectiveness‟ of existing taxpayer avenues of relief, however those terms are
and China‟ in Second World Tax Conference (2001)‟; and Adrian Sawyer, „A Comparison of New Zealand Taxpayers‟ Rights with Selected Civil Law and Common Law Countries - Have New Zealand Taxpayers been “Short-Changed”?‟ (1999) 32 Vanderbilt Journal of Transnational Law 1345. 23 Chapter 2 explores this history at length. 24 Chapter 2 canvasses this issue and the possible reasons for this state of affairs in the context of discussing the justification of „need‟ for a study centred on operational act or omission causing taxpayer loss. 25 This fact is discussed at length in Chapter 3.
19 defined. They are important considerations in formulating any law reform recommendations.
And yet, remarkably few of the relevant policy considerations have been tested through any dedicated study.26 Further, in most cases they appear to „elude the ordinary rules of evidence.‟27 Because of this lack of empirical corroboration and evidentiary testing, certainty of any of the conclusions of this study concerning policy-infused issues is impossible. This is simply a reflection of the unsatisfactory state of the law and the literature in this field rather than a deficiency in this study. In some respects it makes this study more important - as a tool for expressly highlighting these limitations.
26 As discussed specifically in Part IV of Chapter 5. 27 Paul Craig and Duncan Fairgrieve, „Barrett, Negligence and Discretionary Powers‟ [1999] Public Law 626, 635.
20
PART IV - CHAPTER OUTLINE
Chapter 2 deals with the fundamental task of identifying the justifications for carrying out this research and, in particular, the justifications for imposing the stated dual factual focus. Chapter 2 specifically addresses the following questions: What is an „operational‟ act or omission? Why is the focus on operational acts or omissions a useful one? Equally importantly, why choose to focus on monetary compensation?
Chapters 3 and 4 address the question of what are the available Australian legal avenues of relief and how and when they apply. Specifically, Chapter 3 assesses the tortious remedies currently available to Australian taxpayers in cases of ATO operational act or omission causing taxpayer loss. A substantial part of Chapter 3 analyses negligence principles and how they might apply to a claim involving allegations of ATO operational act or omission. It also examines the torts of misfeasance in public office, breach of statutory duty and the innominate tort established in Beaudesert Shire Council v Smith28 through this same lens.
Chapter 4 takes a similar approach to Chapter 3, except that this Chapter is dedicated exclusively to non-tortious remedies. This broad scope naturally extends to public law, equitable, statutory and administrative remedies. In the equitable context, the discussion centres mainly on the equitable doctrine of promissory estoppel. However, analysis also extends to the doctrine of unjust enrichment. In the public law context, judicial review of administrative action is examined, albeit briefly, given the current bar on monetary compensation awards in successful judicial review actions. Statutory avenues of relief including claims alleging breaches of the Privacy Act 1988 (Cth) or Trade Practices Act 1974 (Cth) are also examined. Similarly, Chapter 4 also studies common law contract claims and less formal avenues of relief such as the Commonwealth Ombudsman, ATO Internal Complaints and the Taxpayers‟ Charter.
28 (1966) 120 CLR 145.
21
Chapter 5 addresses the question of whether a new cause of action or reformulation of one or more existing avenues of relief is required to provide effective and adequate compensatory relief to taxpayers aggrieved by an ATO operational act or omission. In affirmatively answering this question, this Chapter brings together the conclusions from the analysis of the existing tortious and non- tortious causes of action in Chapters 3 and 4 respectively. „Effectiveness‟ of each of the individual existing avenues of relief is assessed. The collective „adequacy‟ of the existing avenues of relief is also determined in this Chapter. The key public policy concerns which might impede any reform efforts are also critically examined.
Chapters 6 and 7 examine what form should any new or reformulated cause of action should take. Chapter 6 deals with this issue at a high level of generality through first addressing the question of the most appropriate institutional source for any new/revised avenue of relief. Second, consideration extends to whether enhancement of taxpayer avenues of relief should be in the nature of strengthened or clarified common law rights, or administrative law rights. More fundamentally, this Chapter asks whether liability should be imposed on a fault or no-fault basis. The ultimate recommendation is for the enactment of a limited no-fault statutory damages remedy.
Chapter 7 turns to the specific content of an Australian no-fault statutory damages remedy against the Commissioner of Taxation. The Chapter examines the recent United States experience in enacting a limited fault-based statutory damages remedy. It also addresses the challenges identified through this examination and the drafting challenges unique to the Australian context. Finally, Chapter 7 presents and explains a model Australian statutory damages remedy.
Chapter 8 draws together the conclusions of this thesis. It also highlights the contribution of the findings and recommendations of this thesis to the Australian taxpayer rights debate.
22
CHAPTER 2 - THE DUAL FACTUAL PARAMETERS: DEFINITION AND JUSTIFICATION
PART I - THE „OPERATIONAL‟ PARAMETER
A - Definitional Challenges
It must be noted from the outset that this thesis focuses on operational acts or omissions of the ATO, irrespective of whether those acts or omissions are accompanied by fault on the part of any ATO officer or any particular mental state such as carelessness, recklessness or bad faith. The term is certainly broad enough to capture any ATO act or omission accompanied by fault or any such mental element. However the term as applied in this study is equally capable of capturing innocent or inadvertent acts or omissions.
Despite this potentially massive breadth, this study adopts no all-inclusive definition of „operational‟ activity. Instead, a number of indicators are accepted as useful definitional guides. One such indicator is where an activity is more concerned with process than result. Another is where the activity is concerned more with implementation than decision-making. A further indicator is where the activity is an administrative function rather than the exercise of a legislative power or discretion. The approach of Baker to operational activity, that „[t]he word itself seems to imply something that is mechanical in nature...rather than discretionary‟29 is also useful in some cases. Each, however, falls short of a useful all-encompassing definition because they all belie the practical complexity of the concept.
The main definitional complexity arises in that in many cases it will not be possible to draw a „bright-line‟ distinction between „process‟ and „result‟, between „decision‟ and „implementation‟ or between „discretion‟ and „administration.‟ In the context of defining government „administrative‟ activity (a term
29 D Baker, „Maladministration and the Law of Torts‟ (1986) 10 Adelaide Law Review 207, 219.
23 interchangeable in this study with the term „operational, just as it is in much of the literature), Spann has made the following observations:
It was once common to draw a neat distinction between policy and administration, or between political decisions about government policy, and the administrative task of implementing those policies… However, if we look at what public servants actually do, the distinction between policy and administration becomes blurred. First, senior public servants are often concerned with policy formulation…Secondly, implementing policies often involves wide discretion, and many of the decisions involved in turning general policies into something concrete and specific are certainly not neutral or value-free. 30
Parker, also writing in the administrative law context identifies seven different meanings of the term „policy‟ and a further seven different meanings of the term „administration‟ pointing out that:
The most naïve kind of view is that “policy” and “administration” are two distinct kinds of activity, and that each can, and should in governmental operations, be assigned to a different class of persons - neither of which should interfere or even participate in the other function.31
Although the administrative law commentary is instructive, undoubtedly the most intensive scrutiny of the term and its complexities has arisen in the context of consideration of tortious claims involving statutory authorities. In negligence claims involving statutory authorities, the issue has been addressed as part of discussion of what has been described as the „policy/operational‟ dichotomy. The dichotomy is an attempt to demarcate the boundary between liability in negligence and immunity from suit where negligence of a public authority such as the ATO is alleged.32 More specifically, the dichotomy addresses questions of judicial
30 Richard Spann, Government Administration in Australia (1979), 17-18. 31 Robert Parker, „Policy and Administration‟ in Richard Spann and Geoffrey Curnow (eds), Public Policy and Administration in Australia: A Reader (1975) 144, 145. 32 Part II of Chapter 3 explores at length the issue of immunity from suit in negligence.
24 competency and separation of powers concerns which might arise in cases where private law rights are asserted against public bodies such as the ATO.
The policy/operational dichotomy was first expressly enunciated in Commonwealth courts33 by the UK House of Lords in Anns v Merton London Borough Council34 („Anns‟). In that case, Lord Wilberforce (echoing some of the concerns noted by Spann and Parker reproduced above) described the distinction as follows:
Most, indeed probably all, statutes relating to public authorities or public bodies, contain in them a large area of policy. The courts call this “discretion” meaning that the decision is one for the authority or body to make, and not for the courts. Many statutes also prescribe or at least presuppose the practical execution of policy decisions; a convenient description of this is to say that in addition to the area of policy or discretion, there is an operational area. Although this distinction between the policy area and the operational area is convenient, and illuminating, it is probably a distinction of degree; many “operational” powers or duties have in them some element of “discretion.”35
33 The original source is usually credited as the case law concerning a similar test contained in the United States Federal Tort Claims Act of 1948, 28 USC Pt IV Ch 171 (1948), most notably Dalehite v United States 346 US 15 (1953); Indian Towing Co v United States 350 US 61 (1955); and, more recently, United States v Gaubert 499 US 315 (1991). Hink & Schutter have extensively detailed the relevance of the policy/operational distinction in respect of the Federal Tort Claims Act and how it has been applied in the case law. On the former, they note: „Section 421 of the Federal Tort Claims Act sets out a number of classes of claims as to which the United States does not waive its immunity. The most important of these is a non-waiver of claims “based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the Government…” Clearly the intention was retention of immunity for high level policy decisions, analogous to the “Act of State” doctrine adopted in European countries.‟ Heinz Hink and David Schutter, „Some Thoughts on American Law of Government Tort Liability‟ (1965-1966) 29 Rutgers Law Journal 710, 721-722. 34 [1977] 2 All ER 492. Although, as Bailey and Bowman point out, prior to the Anns decision, Lord Diplock in Dorset Yacht Co. Ltd v Home Office [1970] AC 1004 clearly had in mind drawing a line between statutorily authorised damage and damage caused by negligent exercise of statutory power. For a detailed discussion see Stephen Bailey and Michael Bowman, „The Policy- Operational Dichotomy - Cuckoo in the Nest‟ (1986) 45 Cambridge Law Journal 430, 431-436. 35 Ibid, 501.
25
In Australia, Mason J in Sutherland Shire Council v Heyman36 („Sutherland‟) subsequently explained the distinction between policy and operational acts in the following terms:
The distinction between policy and operational factors is not easy to formulate, but the dividing line between them will be observed if we recognise that a public authority is under no duty of care in relation to decisions which involve or are dictated to by financial, economic, social or political factors or constraints…But it may be otherwise when the courts are called upon to apply a standard of care to action or inaction that is merely the product of administrative direction, expert or professional opinion, technical standards or general standards of reasonableness.37
Applied in the taxation context, questions involving allegations that the Commissioner of Taxation has made an error in interpreting the tax law would generally fall within the exercise of the Commissioner‟s policy or discretionary powers. In contrast, an example of an operational failure would be if the Commissioner makes a decision to allow a taxpayer‟s deduction claim, but due to a purely administrative oversight such as a typographical or computer error, communicates the opposite position to the taxpayer.38
In such a situation there is arguably no challenge to the Commissioner‟s power to exercise his discretion to interpret the tax law howsoever he considers appropriate within the scope of his statutory mandate. The only challenge is to the faulty implementation of that exercise of discretion. The application of the distinction in these circumstances is enlightening as clearly no challenge to any policy-making powers is posed in this case. Accordingly, any judicial fears of undue judicial intervention in the legislative or executive sphere in enforcing the aggrieved taxpayer‟s private law rights in such a case are more readily allayed.
36 (1985) 157 CLR 424. 37 Ibid, 469. 38 This situation is referred to throughout this study as the „mis-communicated deduction decision‟ example.
26
However, determining whether an act is operational or administrative in nature is often more complex.39 The obvious problem with the policy/operational distinction is that any act, even one that is fundamentally operational or administrative in nature, may expressly or implicitly involve the exercise of some degree of discretionary power. Lord Wilberforce concedes as much from the outset in his judgment in Anns. It is also evident in the comments of the administrative law commentators such as Spann. Here lies the complexity.
Lord Slynn expresses the dilemma in Barrett v Enfield London Borough Council40 who observed that „even knocking a nail into a piece of wood involves the exercise of some choice or discretion and yet there may be a duty of care in the way it is done.‟41 Lord Slynn‟s reference to „knocking in a nail‟ is derived from the United States case of Ham v Los Angeles County42 in which it was noted that:
It would be difficult to conceive of any official act, no matter how directly ministerial that did not admit of some discretion in the manner of its performance, even if it involved only the driving of a nail.43
Commentators in other jurisdictions in which the distinction has been judicially applied also note the problem. Canadian commentators, Cohen and Smith have expressed the problem this way:
This distinction…fails to recognise that all decisions of bureaucrats are both policy decisions (insofar as they establish objectives, standards and criteria to be taken into account by inferior bureaucrats), and operational decisions insofar as
39 Although, perhaps not as often as might appear from the cases which have examined the issue. Naturally, it is only the most difficult cases which reach the appellate courts. It is also only those cases in which the parties have the financial resources to judicially pursue the matter. 40 [2001] 2 AC 550. 41 Ibid, 571. 42 46 Cal App 148 (1920). 43 Ibid, 162.
27
they are made in the context of achieving and implementing other, prior superior policy decisions.44
A simple example in the taxation context can readily illustrate Lord Slynn‟s concerns and those of academic commentators like Cohen and Smith. Assume an ATO employee gives incorrect taxation advice to a taxpayer. Can the giving of this incorrect taxation advice confidently be said to be an exercise of discretionary power or a simple administrative function? To answer the question would require a complex and detailed inquiry into the decision-making processes and internal workings of the ATO.
A relevant issue would be an assessment of the role and level of authority of the employee. The lower the level of authority of the employee the more likely it will be that the advice given is administrative in nature. Conversely, it would be expected that a very high ranking officer would be concerned almost entirely with high level policy or discretionary decision-making.
However, classification of the offending officer alone would not be conclusive.45 There also needs to be consideration of whether the advice is wrong but consistent with ATO guidelines or rulings. The giving of the advice in these circumstances is likely to be characterised as the exercise of a policy-making or discretionary power. This is because a challenge to the decision in such a case would be tantamount to a direct challenge to the exercise of policy-making power in arriving at the erroneous ruling or guideline. Alternatively, if the advice is wrong and inconsistent with any internal or public guideline issued by the ATO, it is possible to mount a stronger argument that this is a characteristically administrative or operational error. This would be analogous to the „mis-
44 David Cohen and Joseph Smith, „Entitlement and the Body Politic: Rethinking Negligence in Public Law‟ (1986) 64 Canadian Bar Review 1, 26. The distinction was applied by the Canadian Supreme Court in Kamloops v Neilsen [1984] 2 SCR 2. 45 As hinted at in the comments of Parker reproduced above at n 31. United States commentators have also made the point, observing that the status of the relevant officer should not be a „controlling factor‟ in the application of the test. See Osborne Reynolds, „The Discretionary Function Exceptions of the Federal Torts Claims Act‟ (1968) 57 Georgetown Law Journal 81, 130-131.
28 communicated deduction decision‟ situation noted above. In this instance, the policy-making power was exercised when the relevant ruling or guideline was drafted. The error resulted purely from faulty implementation of that policy decision.
Also relevant, however, would be questions of whether the error arose as a result of „financial, economic, social or political factors or constraints.‟46 It is these factors or constraints which render attempts to devise neat, comprehensive lists of ATO operational activities or all-encompassing definitions impossible. This is because any of these factors or constraints might transform an otherwise apparently administrative act into a clear exercise of policy-making power. This might be the case if, for example, a mis-communicated deduction decision was due to a deliberate policy of directing resources and senior staff away from the provision of taxation advice to taxpayers and into other activities due to internal, high-level budgetary decisions or a drastic cut in government funding to the ATO.47
It is unsurprising, therefore, that there is no guidance in the existing literature in the form of specific listings or categorisations of the responsibilities of any Australian public body as operational or otherwise. Likewise, this study makes no such attempt. As noted above, however, it remains the case that factors such as the absence of discretion, characteristically procedural matters, activities that are aimed at implementing decisions, activities of low level employees and mechanical, repetitive tasks are all useful indicators of operational activity. These remain the best guides to the meaning of the term, but are no substitute for case- by-case assessment.
46 This is a return to the terminology of Mason J in Sutherland Shire Council v Heyman, above n 36. 47 Budgetary constraints are clearly a concern for the Commissioner. For example, in the Commissioner‟s overview of his 2007/2008 Annual Report the Commissioner observed: „These positive outcomes took place in a challenging year, given the difficult stage we are at in our transformational change program, the need to implement a range of new legislative measures following the transition to a new government, higher overall workloads and budget constraints including an increased efficiency dividend.‟ Australian Taxation Office, Commissioner of Taxation, Annual Report 2007-08 (2008), 1.
29
Chapters 3 and 4 explore specific definitional challenges raised by the operational constraint in the context of determining how the operational constraint might affect the applicability of each of the existing causes of action examined in those Chapters. In turn, in Chapter 5, assessments of the effectiveness of these existing causes of action will, in part, be determined through an assessment of their ability to deal with operational acts or omissions causing taxpayer loss. In addition, in Chapter 7, substantial space is dedicated to defining an operational constraint for the purposes of drafting of an Australian statutory damages remedy. For the purposes of this Chapter, however, a more fundamental question associated with the operational constraint of this study remains. This is the question of why, in any event, a study of taxpayer rights should be constrained by analysis of taxpayer rights only in cases of operational act or omission causing taxpayer loss. There are four distinct answers to this question. Each of these is elaborated below.
B - Justifications for Imposing the „Operational‟ Parameter
1 Operationality - A Widely Used Distinction The first justification for imposing the operational act or omission constraint in this study is that determining whether an activity is „operational‟ is of material relevance to the determination of many private law claims involving statutory authorities such as the ATO. This is because the distinction between „operational‟ and discretionary or policy functions represents a much more fundamental legal friction which is a relevant consideration whenever private law proceedings are brought against a statutory authority such as the ATO. This is the friction between public and private law encapsulated in the concept of „justiciability.‟
A justiciable matter is one which is considered capable of judicial determination. At a simplistic level any matter is theoretically capable of judicial determination. However, justiciability incorporates a number of interrelated strands which preclude the possibility of judicial intervention in some cases where there is an assertion of private law rights against the exercise of public law duties and powers of public bodies such as the ATO.
30
Some cases cannot be judicially determined (ie are „non-justiciable‟) because they are cases which courts are „ill-equipped and ill-suited to assess.‟48 This argument is sometimes expressed in terms of lack of „judicial competency‟ or „institutional competence.‟49 Competency-based justiciability concerns are raised in a range of matters including those which give rise to political issues or bring into question high level policy decisions. It also includes those matters which are considered unsuited to the adversarial judicial system and its rules of evidence and procedure. Such cases raise multi-faceted interests and diverse public policy concerns. In these cases it would be difficult or impossible for the court to collect and hear evidence from all stakeholders and make a decision which takes into account their diverse interests and concerns. Such matters are often described as „polycentric.‟50 Again, it is typically political or high level policy decisions, as distinct from operational or administrative functions, which display polycentric characteristics.51
Doyle, considering the role of the distinction in tort, confirms the view that the role of the policy/operational distinction is really one of determining judicial competency:
48 Craig and Fairgrieve, above n 27, 632. 49 For a good discussion of institutional competence concerns as they relate to the concept of justiciability see Chris Finn, „The Justiciability of Administrative Decisions: A Redundant Concept?‟ (2002) 30 Federal Law Review 239. 50 United States commentator Lon Fuller vividly describes polycentric matters by analogy with a spider‟s web, noting that: „This is a “polycentric situation” because it is “many centred” - each crossing of the strands is a distinct centre for distributing tensions.‟ See Lon Fuller, „The Forms and Limits of Adjudication‟ (1978) 92 Harvard Law Review 353, 395. Cane describes a polycentric matter as one which requires „account to be taken of a large number of interlocking and interacting interests and considerations.‟ See Peter Cane, An Introduction to Administrative Law (1986), 150. 51 See, for example, the judgment of Bowen CJ in Minister for Arts Heritage and Environment v Peko-Walsend (1987) 15 FCR 274 in which a disputed decision as to the Heritage listing of part of Kakadu National Park was described, at 278-279, as follows: „the whole subject matter of the decision involved complex policy questions relating to the environment, the rights of Aborigines, mining and the impact on Australia‟s economic position of allowing or not allowing mining as well as matters affecting private interests...It appears to me that the subject-matter of the decision in conjunction with its relationship to the terms of the Convention placed the decision beyond review by the Court...The matter appears to my mind to lie in the political arena.‟
31
To put it a little differently, we are not merely trying to determine whether the issue involves “financial, economic, social or political factors or constraints”, but whether the involvement of such matters produces the result that the issue is one which a court is not competent to review through the medium of a duty of care...52
In Rowling v Takaro Properties Ltd53 Lord Keith of Kinkel noted that the policy/operational distinction developed to address „...the need to exclude altogether those cases in which the decision under attack is of such a kind that a question whether it has been made negligently is unsuitable for judicial resolution, of which notable examples are discretionary decisions on the allocation of scarce resources or the distribution of risks.‟54
Craig has also confirmed the link between the policy/operational dichotomy and justiciability on judicial competency grounds. Craig asserts that when a court feels that the allegation of negligence is unsuited to judicial resolution it will apply the label „planning decision‟ to express that conclusion.55 Accordingly, the policy/operational distinction can aid in delineating, on judicial competency grounds, between cases in which judicial determination of private law interests involving public bodies is permissible and those cases in which it is not.
Also underpinning the justiciability doctrine is a desire to ensure an appropriate separation of powers between the legislature, the executive and the judiciary is maintained and respected. Central to the doctrine of separation of powers is the principle that „one branch of government should not interfere with the exercise of functions of either of the other two branches.‟56 This concern is the reason why
52 John Doyle, „The Liability of Public Authorities‟ (1994) 2 Tort Law Review 189, 197. 53 [1988] 1 All ER 163. 54 Ibid, 501. A number of writers have heralded this as the correct approach. See for example, John Doyle and Jonathon Redwood, „The Common Law Liability of Public Authorities: The Interface between Public and Private Law‟ (1999) 7 Tort Law Review 30, 44-45 where the authors note: „The Privy Council came closest to the correct approach in Rowling v Takaro Properties Ltd in recognising that the central issue is one of justiciability and the suitability of certain decisions to judicial review.‟ 55 Paul Craig, Administrative Law (1983), 535. 56 Margaret Allars, Introduction to Australian Administrative Law (1990), 35.
32 certain subjects are considered inherently unsuitable for judicial revisitation or intrusion. A prime example is executive decisions concerning national security.57 More pertinently, though, this concern clearly forms a strong basis for classifying as non-justiciable those matters which are largely political or which involve high level policy decisions. Again, therefore, the utility of distinguishing between policy and operational activities for determining justiciability on separation of powers grounds is clearly discernible.
Buckley has elaborated on the relevance of the policy/operational distinction to concerns with justiciability on separation of powers grounds in the following terms:
If a discretion is conferred, especially if it involves the allocation of substantial resources, attempts by the courts to use the machinery of the law of negligence to second-guess the decisions arrived at would constitute, at best, an inappropriate use of that machinery for a purpose to which it is ill-suited and, at worst, an undue interference with the democratic process. But those objections do not have the same force if a specific act of carelessness is committed in the actual carrying out of an agreed course of action, when all the relevant policy and resource allocation decisions have been taken.58
Hayne J in Crimmins v Stevedoring Committee59 in acknowledging that „quasi- legislative‟ functions should be immune from private law tortious suit recently affirmed the link between the public/private law friction encapsulated in separation of powers concerns and the policy/operational distinction:
Put at its most general and abstract level, the fundamental reason for not imposing a duty in negligence in relation to the quasi-legislative functions of a public body is that the function is one that must have a public rather than a
57 Wilcox J noted in his judgment in Minister for Arts Heritage and Environment v Peko-Walsend, above n 51, at 304 that the relevance of a decision to questions of national security would render a matter „inappropriate‟ for judicial review. 58 Richard Buckley, „Negligence in the Public Sphere: Is Clarity Possible?‟ (2000) 51 Northern Ireland Legal Quarterly 25, 41. 59 (1999) 200 CLR 1.
33
private or individual focus. To impose a private law duty will (or at least will often) distort that focus. This kind of distinction might be said to find reflection in the dichotomy that has been drawn between the operational and the policy decisions or functions of public bodies.60
All of the preceding commentary has arisen in the context of consideration of claims of negligence against statutory authorities. However, the relevance of the justiciability issue and the strongly associated distinction between operational and discretionary acts is not confined to tortious actions. The justiciability concern is also relevant in cases seeking to invoke the doctrine of equitable estoppel against statutory authorities such as the ATO.61 In equitable estoppel cases, the justiciability concern manifests itself as the „non-fetter‟ principle. This principle has been described by Allars as the principle „that government should not be shackled in exercising its power to make decisions in the public interest in the future.‟62 More specifically in the estoppel context this translates into a principle known as the Southend-on-Sea principle „that an estoppel may not be raised to prevent the performance of a statutory duty or to hinder the exercise of a statutory discretion.‟63
The relevance of the policy/operational distinction has come to the fore as a qualification to the Southend-on-Sea principle and has been applied in a number of cases. The most notable example is Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic.64 In that case, Gummow J stated:
60 Ibid, 101. 61 Part II(B) of Chapter 4 discusses at length the principles of estoppel in cases involving statutory authorities. The writer has examined the relevance of justiciability in tax cases in which the taxpayer sought to estop the Commissioner. See John Bevacqua, „The Plaintiff-Proof Barrier: The Justiciability of Activities of the Commissioner of Taxation in Tortious and Equitable Estoppel Taxpayer Claims‟ (2008) 1 Journal of the Australasian Law Teachers Association 365
34
The planning or policy level of decision making wherein statutory discretions are exercised has, in my view a different character or quality to what one might call the operational decisions which implement decisions made in exercise of that policy…where a public authority makes representations in the course of implementation of a decision arrived at by the exercise of its discretion, then usually there will not be an objection to the application of a private law doctrine of promissory estoppel.65
Justiciability of private law claims aside, the relevance of distinguishing operational functions from those that are discretionary in nature also extends to public law cases where judicial review is sought and the reviewability of a decision of a public authority is at issue.66 Brodie, for instance, has suggested that the policy/operational distinction may be utilised in some judicial review cases in conjunction with the concept of ultra vires to assist in delineating between „impeachable and unimpeachable discretion.‟67
Hayne J also discusses the issue, in the context of explaining the Wednesbury68 unreasonableness test, in his judgment in Brodie v Singleton Shire Council.69 His Honour notes:
In public law, decisions may be examined for error of law, but statute apart, there is no review of the merits of decisions made by such bodies. The closest the courts come to such a review is what is usually called Wednesbury unreasonableness, where the test is whether the decision is so unreasonable that no reasonable decision-maker could have made it. What the Wednesbury test reflects is that the courts are not well placed to review decisions made by such
65 Above n 64, 215. These comments are reproduced and expanded below at n 433. It is probable, given His Honour‟s shift away from application of the policy/operational dichotomy in cases such as Crimmins v Stevedoring Committee, above n 59, that Gummow J would today be more equivocal in his support for applying the distinction in estoppel claims too. 66 Part III of Chapter 4 discusses the principles of judicial review where the ATO is concerned. 67 Douglas Brodie, „Public Authorities and the Duty of Care‟ (1996) Juridical Review 127, 133. 68 The Wednesbury unreasonableness test referred to by His Honour is derived from Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223. 69 (2001) 206 CLR 512.
35
bodies when, as is often the case, the decisions are made in light of conflicting pressures including political and financial pressures.70
While his Honour does not take the step explicitly, the terminology used by His Honour to delineate between reviewable and non-reviewable decisions is similar to terminology used in tort cases to explain the policy/operational distinction. Noteworthy, for instance, is the similarity between the Hayne J reference to „political and financial pressures‟ and the „financial, social, economic or political factors or constraints‟ referred to by Mason J in Sutherland.71 Again, therefore, even in some cases of judicial review, distinguishing between policy and operational activities may be of assistance.
The overall picture that emerges is that justiciability is a central concern for courts considering a range of private law claims involving statutory authorities such as the ATO. The more „operational‟ in nature the complained of activity, the more likely it is that the issue of justiciability will be resolved in favour of the party bringing the action. Further, where questions as to the reviewability of a decision are raised in an application for judicial review, again the distinction between policy and operational activities may be instructive. Accordingly, on this basis of widespread use of the distinction between policy and operational activities to address justiciability and reviewability concerns whenever a case involves a statutory authority such as the ATO, there is a strong justification for using „operationality‟ as a relevant parameter in this study.
2 Operationality - A Useful Distinction The second reason for using „operational‟ act or omission as a pivotal parameter of this study is that, despite the difficulties inherent in defining operational acts or omissions, and distinguishing those from „discretionary‟ or „policy‟ functions, many of the criticisms of the policy/operational dichotomy which have been raised by a range of judicial and academic commentators do not stand up when
70 Ibid, 628. 71 Above n 36.
36 subjected to close scrutiny. Accordingly, the distinction has not only historically been widely used, but, despite its apparent definitional difficulties, it is also useful.
The main concern with categorising complained of acts as operational or discretionary (already identified in the preceding discussion of the definition of the concept itself) is the difficulty in neatly categorising policy decisions and separating them from discretionary decisions. It is largely because of this uncertainty in determining where the line between policy and operational acts should properly be drawn72 that judicial and academic thought, both in Australia and overseas, has gradually (albeit far from uniformly)73 swung against support for the retention of the distinction. This is especially true in the tort law context.74
Although the difficulties of the distinction are undoubtedly exacerbated in the minds of analysts by virtue of the fact that appellate courts will usually be dealing with the more problematic cases, the fact that the distinction is not certain in some cases is irrefutable. However some uncertainty is not of itself a sufficient basis for denying the value of a legal principle, nor is the fact that difficult borderline cases might arise from time to time. As Gleeson J has extra-judicially observed,
72 Note that there are other challenges to the utility of the distinction, some of which are discussed below. For a good discussion of these challenges see Cohen and Smith, above n 44, 26-27 and Jane Convery, „Public or Private? Duty of Care in a Statutory Framework: Stovin v Wise in the House of Lords‟ (1997) 60 Modern Law Review 559. 73 Notable judicial proponents include Mason J and Gibbs J in Sutherland Shire Council v Heyman, above n 36, where their Honours used the words „logical and convenient‟ to describe the distinction. Kirby J in Pyrenees Shire Council v Day (1998) 192 CLR 375 also gave qualified support noting that although the distinction is „far from perfect‟ it has „some validity‟. There was also High Court support from Gaudron J in Crimmins v Stevedoring Industry Finance Committee, above n 59. Academic writings viewing the distinction favourably include Buckley, above n 58; Susan Kneebone, Tort Liability of Public Authorities (1998); Harry Woolf, Protection of the Public - A New Challenge (1990), 60; and Reynolds, above n 45. 74 The avalanche of academic writings critical of the distinction include Dawn Oliver, „Anns v London Borough of Merton Reconsidered‟ (1980) 33 Current Legal Problems 270, 275; John Smillie, „Liability of Public Authorities for Negligence‟ (1985) 23 University Of Western Ontario Law Review 213, 216-217; Stephen Todd, „The Negligence Liability of Public Authorities: Divergence in the Common Law‟ (1986) 102 Law Quarterly Review 370, 398-402; Cohen and Smith, above n 44, 26-27; Stephen Bailey and Michael Bowman, above n 34; Kevin Woodall, „Private Law Liability of Public Authorities for Negligent Inspection and Regulation‟ (1992) 37 MacGill Law Journal 83, 90-95; and Allars, above n 62, 55-56.
37
„[t]wilight does not invalidate the distinction between night and day.‟75 This is especially true when no more satisfactory principle has emerged.76
As one United States commentator has pointed out:
[T]he terms “planning” and “operational” are indefinite; the problem of drawing a line remains. But all interpretations involve drawing distinctions. The present situation is aided by terms which have a considerable history of application. They have been used, with varying degrees of consciousness... “Planning” has come to mean the formulation of basic policies and the designations of long-range goals that are considered politically desirable. “Operational” encompasses routine activity and implementation, such as choosing a particular building material. It is true that formulation is mixed with implementation and application in government workings, but separation and classification are not impossible.77
Fairgrieve also rebuts the uncertainty argument, concentrating on the fact that some degree of uncertainty is unavoidable. He points to the justiciability underpinning of the policy/operational distinction as the basis for the unavoidable uncertainty in applying the test, given the lack of any „acceptable bright-line method of delimiting justiciable and non-justiciable issues.‟78
In effect, Fairgrieve sees a role for the policy/operational distinction as just one among a number of tools to assist in determining the justiciability issue in claims involving statutory authorities. Fairgrieve makes the further point that, in turn, justiciability should be seen as „one of a number of analytical tools to be used by the courts in both determining the existence and extent of a duty of care owed by public authorities and assessing whether a breach has occurred.‟79
75 Murray Gleeson, „Judicial Legitimacy‟ (2000) 20 Australian Bar Review 4, 11. 76 As noted by Buckley, above n 58, 41. 77 Reynolds, above n 45, 129. 78 Duncan Fairgrieve, State Liability in Tort: A Comparative Law Study (2003), 62. 79 Ibid, 62-63.
38
Many critics have ignored this fact that the policy operational distinction, and the justiciability dilemma which it represents, is but one of a number of tools used to determine liability. Buckley points this out, arguing that this misconception has led in large part to the perception that the distinction has been discredited. Buckley notes that „this perception seems to have been based, at least in part, on the fallacious assumption that the distinction purported to be a comprehensive statement of the conditions required for the imposition of negligence liability upon public authorities.‟80
If we accept that the question of whether a complained of activity is „operational‟ is just one of the tools that will help resolve the question of liability of a statutory authority, then both the uncertainty challenge and most of the other arguments raised against this tool lose much of their force. For example, consider the two challenges raised by Convery, referring to adverse judicial observations about the policy/operational dichotomy raised in the English case of Stovin v Wise.81 First Convery argues that the imposition of liability at an operational level may, nonetheless, result in the fettering of genuine discretionary choices in the future.82 Second, Convery asserts that even in cases of clearly purely operational activity an application of the policy/operational distinction should not automatically result in liability. Guidance should first be gleaned from the relevant statutory background to determine statutory intent as to the imposition of civil liability in such cases.83
The logic of both of these concerns is sound. But the fact remains that the distinction was never intended to be applied exclusively. It was simply intended as one of a number of considerations which might be relevant to the question of
80 Above n 58, 43. 81 [1996] AC 923. This case involved a motorcycle collision with a motor car due to the view of the intersection being obscured by an earth bank on railway land next to the roadway. The highway authority was aware of the earth bank and, the plaintiff alleged, had been negligent in failing to remove it. In deciding in favour of the highway authority Lord Hoffman (with Lords Goff and Jauncey concurring) was highly critical of the adequacy of the policy/operational distinction as a tool for determining whether a duty of care should be imposed on a public authority. 82 Convery, above n 72, 563. 83 Ibid, 567-568.
39 imposition of liability on a statutory authority, including the danger of fettering future discretion of that authority and the relevant statutory context. In fact, in Anns, the first stage of the Court‟s analysis was detailed consideration by Lord Wilberforce of the statutory setting - the Public Health Act 1936 (UK).84 His Lordship also considered (albeit briefly) the question of proximity85 and public policy arguments around adverse motivational effects of finding the existence of a duty of care.86
The Convery arguments also ignore the significant judicial and academic debate as to whether the distinction should be applied, at least in tortious cases, in determining the question of whether a duty of care arises or the subsequent question of whether there has been a breach of any duty.87 If, for example, the distinction were to be applied at the breach stage, the usual negligence questions in cases involving public authorities, including public policy questions of potential fettering of future discretion and questions of statutory intent can be resolved in determining whether a relevant duty of care arises before the policy/operational distinction is even raised. This would unquestionably allow opportunity for the concerns raised by Convery to be adequately addressed, even if not considered as part of the policy/operational assessment.
However, even if the views of the critics were to be accepted without qualification, the difficulty of devising some alternative approach which resolves the problems raised remains. To date this has proved an intractable problem. For example, Davies in his article discussing one of the leading recent Australian negligence cases concerning statutory authority liability, Crimmins v Stevedoring Industry Finance Committee,88 („Crimmins‟) identifies one of the dangers of using an alternative test to take the place of the policy/operational dichotomy. Davies notes:
84 See the discussion by Lord Wilberforce in Anns, above n 34, especially at 499-502. 85 Ibid, 500. 86 Ibid, 501. 87 For excellent exposition of the arguments see Keith Stanton et al, Statutory Torts (2003), 84-85. 88 Above n 59.
40
[T]he majority appears to take the view that the standard of care required of a statutory body that has failed to act positively in exercising statutory powers is that of the reasonable authority with the powers and resources of that body. If that is right, trial courts will be required to consider what would have been reasonable budgetary and resource priorities at the time the statutory body made its decision. That would amount to more intrusive scrutiny of the decision-making processes of statutory bodies than the classical policy/operational distinction supposes.89
The Davies interpretation of the Crimmins approach hints at a more fundamental concern with doing away with the policy/operational formulation. This concern is that to do so would shift the emphasis away from the problem of justiciability. The result might be more frequent incursions by the judiciary into areas that should legitimately be the domain of the legislature. Fairgrieve has explicitly explained and questioned this concern:
It has been contended that the policy-operational distinction is unnecessary, in the sense that the concepts of duty of care and breach can take account of the need to temper judicial intervention in negligence actions against public authorities. If this is merely expressing a preference for the use of justiciability rather than the policy-operational distinction, then this is not problematic… However, if this argument is in truth more fundamental and represents an attempt to expunge notions of justiciability as well from this area of the law, then it is submitted that problems will be encountered.90
Even if abandonment of the policy/operational distinction does not extend to abandonment of all concern with justiciability, (and there is certainly no evidence of any such abandonment in Crimmins) the reality remains that, in the absence of such a guiding principle, the decisions in cases involving statutory authorities will
89 Martin Davies, „Common Law Liability of Statutory Authorities: Crimmins v Stevedoring Industry Finance Committee‟ (2000) 8 Torts Law Journal 1, 11-12. The Crimmins approach is discussed specifically in Part II of Chapter 3. 90 Fairgrieve, above n 78, 61. This view is consistent with most of the commentary, although notable exceptions are Canadian commentators Cohen and Smith who make a number of cogent arguments as to why normal negligence principles are not appropriate for determining negligence claims involving statutory authorities. See Cohen and Smith, above n 44, especially at 5-6.
41 necessarily be heavily founded upon a broad range of public policy concerns.91 Smillie sees this as a positive development, describing existing tests such as the policy/operational dichotomy as „unhelpful‟ and „used to express conclusions based on largely unarticulated and often intuitive value judgments which reflect differential weighting and balancing of competing moral claims and broad social welfare goals.‟92
It is submitted, though, that the better view is that expressed by Stephen J in Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad”93 in which His Honour notes that „[t]o apply generalised policy considerations directly, in each case, instead of formulating principles from policy and applying those principles, derived from policy, to the case in hand, is, in my view, to invite uncertainty and judicial diversity.‟94 The policy/operational distinction remains the best principle available for use in the manner advocated by Stephen J.
3 Operationality - Useful in Taxpayer Rights Reform The third justification for the imposition of an operational function parameter in this study is that an operational focus is well-suited to a study of this type which extends to consideration of possible reform of existing taxpayer rights. The starting point for this contention is an understanding of the traditionally accepted approach to categorisation of taxpayer rights in Australia, its shortcomings when
91 These public policy reasons are discussed at length in Part II of Chapter 3 and Part IV of Chapter 5. 92 John Smillie, „The Foundation of the Duty of Care in Negligence‟ (1989) 15 Monash University Law Review 302, 302. These views are echoed in Norman Katter, Duty of Care in Australia (1999), 3, and also by Mullany in Nicholas Mullany, „Proximity, Policy and Procrastination‟ (1992) 9 Australian Bar Review 80, 83 where the author notes that „judges should openly express the true premise of their decisions and, if recovery is considered to be undeserved, in the light of greater moral, social, economic, administrative or philosophical public perceptions, then these reasons and not others inherently uncertain in nature should be expressed as the true foundation for denial of recovery.‟ 93 (1976) 136 CLR 529. 94 Ibid, 567. The uncertainty and confusion created by recent High Court determinations such as Crimmins, above n 59, which is discussed in detail in Chapter 3 in the context of examination of the current state of the law of negligence in Australia and the ramifications for taxpayers aggrieved by ATO administrative act or omission, lend weight to the Stephen J point of view. As noted in that discussion, prominent commentators such as Stapleton, Stanton and Cane have all expressed similar concerns. For further discussion see Part II of Chapter 3.
42 applied to studies concerned with reform of taxpayer rights and how the operational focus in this study helps to overcome those shortcomings.
Arguably the leading Australian taxpayer rights scholar is Bentley. Bentley classifies Australian taxpayer rights as first and second order legal rights and first, second and third order administrative rights. Bentley‟s definition of each of these categories is as follows:
The first order of legal rights tends to focus on the process of law-making …These rights are similar to many human rights provisions in that they constrain the operation of the executive and legislature… [T]he second order of legal rights is concerned with the individual procedures and specific processes within the law. Elements of the second order of legal rights can also be enforced administratively. Accordingly, this can also be called the first order of administrative rights, depending on the means of enforcement…The second order of administrative rights is concerned with detailed process that would not normally be legislated…Rights of this kind would be difficult to legislate and are better served by administrative implementation and enforcement…The third order of administrative rights are rights that can only be aspired to and can only be judged subjectively.95
The Bentley approach has been generally accepted in the Australasian taxpayer rights literature. Proponents include Sawyer96 and Wheelright.97
The Bentley model is appropriate if confined to identification of the nature of the existing legal rights of Australian taxpayers. However, this study is only partially concerned with existing taxpayer rights. The concern with existing rights arises in testing whether, and the extent to which, existing causes of action are capable of providing Australian taxpayers with monetary compensation in cases of ATO
95 Duncan Bentley, „Formulating a Taxpayers‟ Charter of Rights: Setting the Ground Rules‟ (1996) 25 Australian Tax Review 97, 102. 96 See Sawyer, above n 22, 1362-1364. 97 Karen Wheelright, „Taxpayers‟ Rights in Australia‟ In Duncan Bentley (ed), Taxpayers‟ Rights: An International Perspective (1998), 57.
43 operational act or omission. However, this study also aims to consider and formulate a remedy which might be capable of more adequately and effectively serving the needs of Australian taxpayers in these circumstances. It is this extension of this study to considerations of taxpayer normative rights that renders the Bentley formulation of limited use. More pertinently, it provides further justification for the employment of an operational constraint in its place.
One of the specific reasons why the Bentley categorisation is of limited use in this study is that it is not suited to viewing the category of rights as open. Specifically, Bentley applies his categorisation to answering the question - „what rights are protected?‟98 It logically follows that if there is no enforcement of a right then, according to the Bentley categorisation, it is either a „third order administrative right‟ or it is not a „right‟ at all. There is little scope for recognition of normative rights of taxpayers - those rights which are not presently recognised but should exist.
This characteristic is clearly problematic in this study which in part aims to answer the question of how taxpayer rights could be more adequately and effectively protected and then recommend a statutory approach for doing so. This exercise necessarily involves some acceptance that a taxpayer might have normative rights which are not presently adequately or effectively recognised and enforced.99 And for such a focus to be possible, the categories of taxpayer rights must be viewed as open.
This danger of viewing the category of rights as closed in studies of this type has been discussed by Doyle in the context of addressing another (generic) categorisation of rights as „common law‟ rights:
98 Duncan Bentley, „Taxpayers‟ Rights: Current Trends and Themes from an International Perspective‟ in Chris Evans and Abe Greenbaum (eds), Tax Administration: Facing the Challenges of the Future (1998) 357, 358-359. 99 As noted from the outset, this thesis does not seek to agitate for increased rights to compensation per se. The preoccupation is with process more so than outcomes. This procedural focus is, however, no less an indicator of a concern in that part of the thesis with taxpayer normative rights - albeit rights broadly associated with procedural rather than substantive justice.
44
We are so accustomed to speaking of common law rights that it hardly occurs to us to question the terminology. No doubt it reflects the fact that the rights or interests or values which we identify in this way are located in the common law … However the terminology also carries the implication, due to attitudes to and beliefs about the common law, that the rights simply exist as a kind of closed class, and have always been there waiting to be uncovered. For this reason the terminology tends to divert our attention from the important issue of what common law rights we need and should have…100
Concentrating on a broad factual scenario such as instances of operational malfunction overcomes the problem of viewing taxpayer rights as a closed class. It facilitates an answer to both questions of what rights are protected and what rights should be protected.101 In other words, normative102 and existing rights are equally capable of being accommodated.103 It focuses on what rights are protected through its relevance to a range of existing tortious, equitable and administrative law avenues of relief as already discussed.104 It assists in resolving the question of what improvements in the existing array of remedies should be made to better
100 John Doyle, „Common Law Rights and Democratic Rights‟ in Paul Finn (ed), Essays on Torts (1989) vol 1, 144, 155-156. These comments are cited with approval by Zines in Leslie Zines, „Constitutionally Protected Individual Rights‟ in Paul Finn (ed), Essays on Law and Government (1996) vol 2, 136, 154-155. 101 Of course, viewing the class of rights as open can in some cases cause its own problems. For example, difficulties arise when a court seeks to replace a previous judicial interpretation with a new (essentially normative) interpretation of those same rights, declaring the previous interpretation as invalid ex tunc. See, for instance, R v Governor of Brockhill Prison: Ex parte Evans [2000] 4 All ER 15. In that case, although the law as it had previously been determined by the Courts was correctly applied by the defendant to calculate the correct release date of a prisoner, the House of Lords ruled that correctly calculated, the release date should have been approximately two months earlier. Accordingly, the plaintiff‟s liberty had been unlawfully deprived during that period. For a detailed discussion of the ramifications of this case see, Richard Tur, „Time and Law‟ (2002) 22 Oxford Journal of Legal Studies 463. 102 Raz suggests that „[t]he law is a type of institutional normative system‟ in Joseph Raz, „Legal Rights‟ (1984) 4 Oxford Journal of Legal Studies 1, 2. 103 Although this needs to be done with care to avoid erosion of legislative authority. For instance, Shiemann LJ, pertinently referring to tax laws, has judicially highlighted the need to accept the legislature‟s interpretation of existing rights as valid, even if not yet tested against any normative rights measure of correctness: „Society cannot function if all legislation has first to be tested in court for legality. In practice, money will have been spent, taxes collected, businesses and properties bought and sold, and people arrested and perhaps imprisoned on the basis that what appears to be the law is the law.‟ Perry v Hall [1997] QB 924, 951. 104 And as more fully explored in Chapters 3 and 4.
45 cater for the aggrieved taxpayer without being constrained in this assessment by closed categories of existing avenues of relief.
The reason why this is possible is that an operational focus enables attention first to be drawn to characterising the wrong committed (and consequent taxpayer right infringed). Only then does attention turn to whether a remedy exists to rectify that infringement of rights. Essentially it is a „rights first‟ approach. In contrast, the Bentley categorisation of rights effectively determines whether there has been an infringement of taxpayer rights and the nature of the infringed right by determining the nature of the existing legal or administrative method of enforcement of breaches of that right - in effect, it is a „remedy first‟ approach.
Consequently, an operational focus allows for a more nuanced approach which recognises that behaviour which offends taxpayer rights is frequently capable of both legal and administrative sanction. Bentley expressly acknowledges this fact through recognising the overlap between second order legal rights and first order administrative rights.105 In such cases, looking at the remedy or method of enforcement of that remedy will do little to identify the nature of the right infringed.
A further related basis for preferring an operational focus for dealing with taxpayer rights issues in the context of this study is that the traditional classifications of rights such as the Bentley model also do not sit comfortably with causes of action founded in tort, such as negligence. The reason for this is that the legally enforceable nature of the negligence remedy says little about the types of infringements of taxpayer rights which might be protected by this legal remedy. In fact, as already noted, the more administrative in nature the complained of activity the more likely it is that the remedy might be applied. Ironically, many of the activities which Bentley would relegate to second and third order administrative rights are exactly the types of activities (notionally, at least) capable of legal enforcement through application of tortious principles.
105 As noted in the extract reproduced above at n 95.
46
The correctness of this assertion is evident if we consider, for example, the Bentley definition of second order administrative rights which adopts the „implementation‟ terminology so frequently employed in the context of the policy/operational distinction:
Second order administrative rights tend to deal with the detail of the administrative process. They are concerned with the manner of the implementation of the specific processes and procedures that the ATO uses to administer the tax system, collect revenue and enforce proper payment.106
Although Bentley is silent on the issue, such processes and procedures are clearly suitable for potential legal enforcement through tortious avenues of relief such as the tort of negligence, as discussed at length in Part II of Chapter 3.
Finally, and also related to the foregoing arguments, a focus on operational activities allows for more practically useful conclusions to be drawn in relation to the nature and extent of rights actually enjoyed by Australian Taxpayers – beyond rights they might only notionally be afforded. For example, as the discussion in Part II of Chapter 3 discloses, it is undeniable that Australian taxpayers are entitled to bring a negligence claim against the Commissioner of Taxation in appropriate circumstances. This says nothing about whether the „right‟ to claim negligence against the Commissioner is of any practical utility or merely an illusory „right.‟ On close analysis, the latter seems more likely to be correct.107 The emphasis on specific factual scenarios facilitated by the operational focus of this study allows for such close analysis.
4 Operationality - The Need for a Study of ATO Operational Activity The fourth justification for the imposition of the operational constraint in this study centres upon the hitherto ignored question of whether there is a
106 Bentley, above n 95, 109. 107 This is the conclusion of the author in John Bevacqua, „A Detailed Assessment of the Potential for a Successful Negligence Claim against the Commissioner of Taxation.‟ (2008) 37 Australian Tax Review 241.
47 demonstrable need for a study with this focus. The answer to this question is yes. There are a number of bases for this assertion.
Foremost, operational failures are clearly a continuing issue for the Commissioner. Commonwealth Ombudsman annual reports continue to highlight examples of administrative malfunction and/or work aimed at investigating and addressing perceived ATO administrative deficiencies or avenues for improvement.
The Commonwealth Ombudsman spends much of his time in his capacity as Taxation Ombudsman investigating instances of loss-causing ATO operational activity. For example, in the year to 31 December 2007, a quarter of all complaints related to lodgement and processing of tax forms alone.108 In 2008, the figure rose to 27 percent.109 Lodgement and processing have a distinctly operational flavour. Preceding Annual Reports confirm the operational nature of many of the complaints dealt with by the Commonwealth Ombudsman. In his 2005 annual report the Commonwealth Ombudsman points from the outset to the continuing problem of operational or administrative errors, pointing to continuing complaints about clarity, timeliness and accuracy.110 Clarity, accuracy and timeliness all point to underlying operational concerns. These issues are highlighted again in the Commonwealth Ombudsman‟s 2006 annual report as continuing dominant problems.111 The 2006 report refers to these problems as „administrative irritants‟112 confirming their operational flavour.
The Commonwealth Ombudsman also highlights a number of representative case studies where it is clear that the errors complained of were of an operational nature affecting large numbers of taxpayers. For example:
108 See Office of the Commonwealth Ombudsman, Taxation Ombudsman Activities 2007 (2008), 2. 109 See Office of the Commonwealth Ombudsman, Taxation Ombudsman Activities 2008 (2009), 8. 110 Office of the Commonwealth Ombudsman, Activities 2005 (2006), 3. 111 Office of the Commonwealth Ombudsman, Activities 2006 (2007), 2. 112 Ibid, 12.
48
Ms J received a letter from the ATO that was for another taxpayer but had been mistakenly addressed to her.….Our inquiries disclosed that the ATO was already aware of the issue - some 4,000 taxpayers were affected by a faulty mail-out.113
A further example is provided by the anecdote of Ms L:
Ms L complained about the ATO‟s decision to impose interest following late payment of a superannuation surcharge liability. Ms L claimed she had received three notices on the same day relating to her superannuation surcharge…
In the course of our inquiries, the ATO advised that it is normal practice for multiple letters to be issued at the same time. We questioned the ATO whether it was good practice to issue multiple letters to taxpayers containing contradictory information…
The ATO … agreed to review its procedures and systems to ensure that, where possible, notices are issued in a logical sequence to avoid confusing taxpayers.114
Second, the operational standards of the Commissioner are also clearly a concern of the government. For example, the Office of the Inspector-General of Taxation was established in 2003 with a view to examining systemic operational concerns. Section 7 of the Inspector General of Taxation Act 2003 (Cth) makes it clear that the primary role of the Inspector is „administrative matters‟ including ATO „processes‟ for administering the tax laws. This operational focus is also evident in the Explanatory Memorandum accompanying the Inspector General of Taxation Act 2003 (Cth). The Memorandum notes that intended to be excluded from the Inspector‟s jurisdiction are questions of „content‟ of tax laws and interpretation of „substantive tax laws.‟ This is consistent with a desire to exclude policy or discretionary matters and confine the Inspector to examination of characteristically operational functions.
113 Ibid. 114 Above n 110, 15.
49
Third, there appear to be good theoretical reasons for the ATO and governmental concern to monitor and improve the operational performance of the Commissioner. The main reason for such a concerted effort is the accepted link between high operational service delivery standards and trust and confidence in the tax system. The Commissioner, in his foreword to the Taxpayers‟ Charter, which contains, in part, self-imposed ATO operational service standard expectations, observes that:
We want to manage the tax system in a way that builds community confidence. To do this, we need to have a relationship with the community based on mutual trust and respect.115
In turn, trust and confidence is viewed as an important factor in encouraging taxpayer voluntary compliance. The link between trust and confidence in tax administration systems and taxpayer voluntary compliance has been investigated in Australia.116 The conclusion is that a clear link exists, on the basis that „[i]f individuals perceive an authority to be acting fairly and neutrally, and they feel treated with respect and dignity, they will be more willing to trust that authority and will voluntarily obey and defer to its decision and rules.‟117 Similar results have been found in overseas studies.118
Fourth, while Commonwealth Ombudsman statistics119 and the ATO‟s own assessment of its performance against its own service standard benchmarks120
115 Michael D‟Ascenzo, Commissioners Foreward - Taxpayers‟ Charter (2009), Australian Taxation Office,
50 indicate continuing improvement in operational performance, it cannot be doubted that administrative failure will from time to time continue to arise. The ATO in the 2008-09 financial year dealt with over 12.5 million phone calls, almost 4 million items of correspondence, 16.5 million tax returns and 18 million activity statements.121 Undoubtedly, a significant number of operational failures will arise in any organisation which deals with such a large number of transactions annually. It is also highly probable that some of these failures will result in quantifiable losses being sustained by the taxpayer. The relevance of volume dealt with by the ATO to the prospect of operational act or omission causing taxpayer loss has been hinted at by the Commonwealth Ombudsman:
Our experience across Australian Government departments suggests the ATO is no better or worse than many agencies when it comes to record-keeping. However, the volume of ATO transactions - internal and external - only adds to the difficulties that poor record keeping otherwise creates…122
Although not noted by the Commonwealth Ombudsman, this volume and the contact of the ATO with a large proportion of the Australian population with some regularity clearly also lend weight to the especial importance of ensuring that the operational standards of the ATO are closely scrutinised and any failures effectively and adequately remedied.
Notwithstanding, it must be conceded that no accurate publicly available empirical data on the scale or scope of ATO operational acts or omissions causing
120 See Australian Taxation Office, Our Service Standards (2009)
51
taxpayer loss is available.123 However this fact does not diminish the case based upon need for an operational constraint in a study of Australian taxpayer rights. There are a number of reasons why this is the case. First, insofar as relatively minor complaints are concerned, these are typically dealt with by the Commonwealth Ombudsman who does not publish details of specific cases. Many such complaints are also resolved informally through recourse to ATO Internal Complaints procedures. Similarly, there is no publicly available data detailing the nature of such complaints. Accordingly, there could be a significant volume of operational activity resulting in taxpayer loss and consequent complaint, despite the absence of publicly available data.
Further, though, measuring need through incidences of complaints on the public record may be a flawed methodology in any event. This is because, first, if the existing avenues of relief are incapable of adequately providing taxpayers aggrieved by operational act or omission with compensatory remedies, then it is unlikely that these grievances will be ventilated in a public forum such as a court case. If the situation insofar as existing avenues of relief are concerned is perceived as being hopeless for either party, then claims purely on the basis of operational act or omission causing taxpayer loss will either be settled out of court or may not be pursued at all. The findings in Chapter 5, insofar as the adequacy and effectiveness of the existing array of taxpayer avenues of relief is concerned, strongly suggest this could be the case.
In addition, it is more than likely that in an environment of deficient legal remedies, obvious cases of significant malfunction will be pursued under other heads of relief that do not directly address the administrative failing. This would particularly be the case where the administrative act or omission complained of can be related to a substantive challenge by a taxpayer to the amount of taxable
123 While the Commissioner publishes Service Benchmarks (see Australian Taxation Office, Our Service Standards (2009), above n 120) and performance outcomes against those benchmarks in his Annual Reports, (see for example Commissioner of Taxation Annual Report 2007-08 (2008), 26-28) the data gives no insight into the quantum of administrative failures or the ramifications of those failures for aggrieved taxpayers.
52 income assessed by the ATO as payable by that taxpayer. The continuing High Court challenges to the Commissioner‟s processes of tax assessment are indicative of a continuing concern with operational processes of the Commissioner.124
Unfortunately, there has been no published empirical work in Australia to determine the precise extent to which operational concerns are raised in Australian tax cases. In contrast, a recent New Zealand study found that the vast majority of tax cases in that country (121 of 148 High Court cases from 2005 to 2008) involved procedural rather than substantive tax liability issues.125 During the same period 5 of the 14 tax cases before the Australian High Court dealt with procedural rather than substantive issues. While it is not appropriate to directly compare the New Zealand and Australian figures as the New Zealand High Court does not sit at the top of the New Zealand court hierarchy, it is clear that procedural concerns comprise a substantial proportion of the tax case workload of the Australian High Court. Accordingly, on this basis too, a study of Australian taxpayer rights with an operational focus is a worthwhile exercise.
124 These cases often seek to challenge the validity of a Notice of Assessment issued by the Commissioner on the basis of flawed procedures and often centre on clearly operational acts or omissions. For instance, the multiple inconsistent assessments issued in Winter v DCT (1987) 19 ATR 244 and FCT v Stokes (1996) 34 ATR 478 and the assessments issued in the wrong name in FCT v Prestige Motors Pty Ltd (1994) 28 ATR 336. The most recent example is Commissioner of Taxation v Futuris Corporation Ltd (2008) 247 ALR 605 which involved allegations of double- counting in a Notice of Assessment issued to the taxpayer. 125 See Mark Keating, „New Zealand‟s Tax Dispute Procedure - Time for a Change‟ (2008) 14 New Zealand Journal of Taxation Law and Policy 425.
53
PART II - THE „MONETARY COMPENSATION‟ PARAMETER
As noted from the outset, this study has dual factual parameters. The second parameter is the focus on monetary compensation. Similar to the absence of taxpayer rights literature centred on operational activities, there has also been no focus in the taxpayer rights literature on the rights of aggrieved taxpayers to monetary compensation from the ATO. Also like the operational constraint, the monetary compensation focus requires definitional clarification and raises justification challenges.
A - Definitional Clarifications
The focus in this study is on purely compensatory damages.126 Cane has defined compensatory damages in the following terms:
Compensatory damages respond to and in some sense make up for injury, harm damage, loss and so on, suffered by one person as a result of conduct (whether act or omission) of another…The aim of … these types of damages is to shift financial resources from the payer to the payee, or, in other words, to enrich the payee financially at the expense of the payer.127
The Cane formulation reflects the principle of restitutio in integrum (restoration to original condition) applied by the courts in many cases in calculating compensatory damages. As explained by Lord Blackburn in Livingstone v Rawyards Coal Co128 compensation should be „that sum of money which will put the party who has been injured in the same position as he would have been if he
126 This study draws no distinction between „compensation‟ and „damages.‟ Accordingly, the terms are used interchangeably. Cane, however, briefly points out the distinction that is sometimes drawn between „damages‟, which is often viewed as a strictly private law concept, and „compensation‟, which is often viewed as the exclusive domain of public law. See Peter Cane, „Damages in Public Law‟ (1999) 9 Otago Law Review 489, 491-492. 127 Ibid, 491. 128 (1880) 5 App Cas 25.
54 had not sustained the wrong for which he is now getting his compensation or reparation.‟129
Punitive or exemplary damages130 were distinguished from compensatory damages by Brennan J in XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd.131 His Honour observed:
As an award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights and to deter him from committing like conduct again, the considerations that enter into the assessment of exemplary damages are quite different from the considerations that govern the assessment of compensatory damages.132
This study also excludes punitive damages. The reason is that punitive damages by definition are intended to punish the wrongdoer to an extent beyond the loss suffered by the victim of the offensive behaviour.133 This study is concerned only with taxpayer recovery of losses suffered due to an ATO operational act or omission, not with ensuring the ATO is punished for an act or omission. The primary focus is on taxpayer losses, whether or not accompanied by ATO moral culpability.
129 Ibid, 39. 130 Usually referred to as „exemplary‟ damages in Australia. For a good discussion of the Australian position in relation to exemplary damages see Harold Luntz and Michael Tilbury, „Punitive Damages in Australian Law‟ (1994) 17 Loyola of Los Angeles International and Comparative Law Review 769. 131 (1985) 155 CLR 448. 132 Ibid, 471. The retributory goals of punitive damages have also been described as „utterly incompatible‟ with compensatory goals. See Christopher Schroeder, „Causation and Moral Responsibility‟ in David Owen (ed), Philosophical Foundations of Tort Law (1995) 347, 351. 133 A similar definition was accepted in Australia in Lamb v Cotogno (1987) 164 CLR 1, 8. There has, although, been some suggestion in the United States that punitive damages are properly characterised as compensatory. The suggestion is that due to the inadequacy of usual compensatory damages awards, punitive damages allow recovery of the entire legal costs of the proceedings and for the plaintiff‟s emotional harm. Accordingly, punitive damages are an attempt by courts to provide „compensation‟ by other means. For a good discussion of this viewpoint see Joan Schmit, S Travis Pritchett and Paige Fields, „Punitive Damages: Punishment or Further Compensation?‟ (1988) 55 Journal of Risk and Insurance 453.
55
Nominal damages are also inappropriate for consideration in this thesis. The aim of nominal damages is „to mark that some wrong has been done by the payer to the payee or that some right of the payee has been interfered with by the payer.‟134 Accordingly, such damages are commonly awarded where a clear wrong has been committed, although no quantifiable monetary loss has been suffered. The problem with extending this study to cases where nominal damages might be relevant is that many of the public policy reasons which could be raised to preclude liability in cases involving the ATO would have almost insuperable force in such cases.
For example, a good argument could be raised to the effect that an extension of liability to such cases would open the floodgates to litigious taxpayers and see the Commissioner involved in a large and possibly indeterminate number of claims.135 This involvement would be expensive and time consuming. It is foreseeable that scarce resources would be directed to defending such claims at the expense of allocation of resources to the proper administration of the tax system.136
A final clarification is that no distinction is made in this study between „compensation‟ and „restitution.‟137 There is undoubtedly a distinction which could be made:
Compensation is not the same as restitution. It is one thing to restore the object itself to its proper owner. That is what we…call „restitution.‟ It is quite another thing to compensate the person for its loss.138
134 Cane, above n 126, 491. 135 For a detailed discussion of the floodgates/indeterminacy public policy issue see Part II of Chapter 3. 136 This argument is often referred to as a „chill factor‟ argument. For further discussion of the „chill factor‟ issue, see Part II of Chapters 3 and 4 respectively. 137 Restitutionary avenues of relief such as the doctrine of unjust enrichment are, accordingly, examined in Part II(C) of Chapter 4. 138 Robert Goodin, „Theories of Compensation‟ (1989) 9 Oxford Journal of Legal Studies 56, 59.
56
The reason for not labouring the distinction here is that foreseeable taxpayer ATO-caused losses with which this thesis is concerned are likely to be economic losses. When the object sought to be restored is a quantifiable economic loss, the compensatory effect of any damages award will be no different (although the quantum recovered might well be) whether that restoration is pursuant to a restitutionary order or a compensatory order.
B - Justifications for Imposing the „Monetary Compensation‟ Parameter
The intent here is to indicate the reasons why the imposition of a monetary compensation parameter is a sound and logical decision in this study. It is not necessary, however, to make the case for the desirability of any increase in frequency or quantum of compensatory payments from the ATO to taxpayers. As noted in Chapter 1, this thesis is not concerned with making any case for increased incidence or quantum of awards of monetary compensation per se. Any such increase resulting from its recommendations is merely incidental to its primary objectives. It is conceded, however, that some of the arguments below, especially those justifications extolling the general virtues of compensatory awards, imply that increased incidences of such awards should not be feared. They may even have a number of desirable consequences. Each of these arguments is examined in turn below from the perspective of their role as a potential justification for the compensatory focus in this study:
1 Compensation as the Primary Legal Response to Loss Compensation centres on providing recovery for loss. It is the primary tool used in our legal system to respond to and remedy measurable loss. Accordingly, if a taxpayer suffers loss as a result of an ATO operational act or omission in circumstances which call for the application of a remedy, „the remedy given ought, prima facie, to be that which responds to loss, namely compensatory damages.‟139
139 Cane, above n 126, 492. Miller and Sarat express the argument more generally, observing that „where there are grievances there ought to be claims…‟ See Richard Miller and Austin Sarat,
57
If taxpayers are to be denied compensatory relief for ATO caused losses, the reasons for any such denial should be fully explained and understood. If there are arguments to be made that the tax function is special and should be completely excepted from any general compensatory response to loss, it is equally important that these arguments be expressed and understood. The same is true if it is proposed to extend the Commissioner‟s monetary liability to taxpayers for ATO loss-causing activities. Put simply, whenever the concern is with activities that cause loss, as it is in this study, there should be a commensurate focus on determining and understanding the availability of compensatory relief.
2 Compensation and Taxpayer Trust and Confidence The operation of compensation as a signalling mechanism for the boundaries of acceptable tax administration behaviour can be valuable for maintaining the legitimacy of our system of tax administration. The Commissioner has on numerous occasions stressed the importance of developing a relationship of trust and confidence between tax administrators and taxpayers.140 The link between such trust and confidence and taxpayer compliance has been recognised.141 A monetary remedy sends an unambiguous signal of disapproval of a tax administration activity. This signal potentially plays an important role in taxpayers having confidence that the system of tax administration will operate within reasonable boundaries.
Declaratory relief is unlikely to have such a direct positive impact on taxpayer trust and confidence. It is conceded that declaratory forms of relief also flag and signal disapproval of the infringement of a taxpayer right. However, this does not necessarily translate into a substantively more favourable result for the plaintiff taxpayer. An adverse Order in judicial review proceedings, for instance, may not require the Commissioner to change his initial decision. The Commissioner may
„Grievances, Claims, and Disputes: Assessing the Adversary Culture‟ (1980-81) 15 Law Society Review 525, 561. 140 See, for example, the comments of the Commissioner reproduced above at n 115. 141 Part IV of Chapter 5 discusses the studies which have examined this link.
58 simply be required to employ decision-making processes which do not infringe the taxpayer‟s declared administrative law rights in reaching that decision.142 Where loss has been suffered, such a victory „might well be regarded as a pyrrhic victory‟143 for the affected taxpayer. This characteristic dulls the potential confidence-building effect of administrative law remedies. On the contrary, an exclusive focus on such procedural remedies to the exclusion of substantive relief may be „corrosive of the public‟s fragile trust in government.‟144 A system of public law with such a focus has been described as „a skeletonised system.‟145
Another way of expressing this argument is that compensatory remedies have the greatest potential to strengthen the legitimacy146 and acceptability of the tax collection function of the Commissioner in the eyes of the public. The converse is also true. An absence of adequate or effective compensatory avenues for relief might contribute „to feelings of frustration and alienation which breed adversity between individuals and institutions.‟147 If this argument holds true, the availability of compensatory relief may help to avoid „overtly adversarial relations‟148 between taxpayers and the ATO. This adds to the case for a taxpayer rights study centred on examining the availability of monetary compensation.
Unfortunately, the absence of any empirical study to test the likely confidence- building effect of the availability of compensatory relief makes solid conclusions
142 Part III of Chapter 4 discusses the general lack of availability of substantive relief in administrative law judicial review proceedings. 143 Jeremy McBride, „Damages as a Remedy for Unlawful Administrative Action‟ (1979) 38 Cambridge Law Journal 323. Roots describes the difference between compensatory remedies and administrative law remedies in terms of „bite‟ with the former having a distinctively worse „bite‟ than the latter. See Lachlan Roots, „A Tort of Maladministration: Government Stuff-Ups‟ (1993) 18 Alternative Law Journal 67, 71. 144 Christopher Forsyth, „Wednesbury Protection of Substantive Legitimate Expectations‟ [1997] Public Law 375, 384. 145 Bernard Schwartz, An Introduction To American Administrative Law (1962), 218. These comments are expanded and further discussed below at n 845. 146 Goodin discusses at length the general role compensation can play in the legitimisation of various government activities. See Goodin, above n 138. 147 Ibid. 148 Miller and Sarat, above n 139, 565. Some might argue the opposite. However, this argument loses much of its force in the face of clear, narrowly confined compensatory avenues of relief. The incentives for taxpayers to adopt an adversarial posture in these circumstances are greatly reduced.
59 difficult.149 However, the contribution of this study to ensuring a robust understanding and public knowledge of the availability of taxpayer compensatory relief at least aids in ensuring that any potential relationship-building effects are maximised.
3 Compensation and Justiciability There is a further important and related point of distinction between monetary awards and administrative law or other declaratory relief which also aids in making the case for a focus on monetary compensation. The distinction is that, while monetary compensation awards can act as a „powerful incentive to improve service‟150 they are not, strictly speaking, directive in the sense of imposing changes in decisions or behaviour on the Commissioner. The relevance of this distinction is best appreciated with an example utilising the facts in David Jones Finance & Investments Pty Ltd v FCT151 („David Jones‟). In that case, the Commissioner resiled from his usual practice of allowing inter-corporate dividend rebates, contrary to a decision of the High Court in FCT v Patcorp Investments Ltd.152 The taxpayer unsuccessfully argued that this was unfair and constituted an abuse of process by the Commissioner.
Despite the apparent unfairness to the taxpayer, the Court‟s decision is understandable. For the court to have directed the Commissioner to revert to his previous practice would have been tantamount to restricting the Commissioner‟s legislatively sanctioned discretion in applying the tax laws. The Court would have faced the criticism of having overstepped its role and infringed the principles of justiciability and the underlying doctrine of separation of powers. Accordingly, it is understandable that the Court left the taxpayer with no remedy.
149 This fact is discussed further in Part IV of Chapter 5 in the context of examining the public policy ramifications of any possible reform to enhance the effectiveness and adequacy of existing legal options for taxpayers aggrieved by an ATO operational act or omission. 150 Office of the Commonwealth Ombudsman, Commonwealth of Australia, To Compensate or Not to Compensate? Own Motion Investigation of Commonwealth Arrangements for Providing Financial Redress for Maladministration (1999), 11. 151 (1991) 21 ATR 1506. 152 (1976) 6 ATR 420.
60
However, if the option of an award of damages was open to the Court in David Jones, the result could have been very different.153 An award of damages in such a case could not be seen as an unconstitutional substitution of the Court‟s decision for that of the Commissioner. It would, however, place a „price‟ on the Commissioner changing his long-standing practices where such changes would unfairly cause loss to taxpayers.154 While the public expectation that a tax authority should be free to change its position in the public interest is respected, an award of damages recognises that the public may be best placed to bear the losses flowing from that freedom, rather than adversely affected individual taxpayers.155 This simple example illustrates the relative lack of intrusiveness of a damages remedy on the system of tax administration when compared to a declaratory response.
Cane has put the argument in a different way. Cane asserts that compensation awards are more consistent with the separation of powers underpinnings of the doctrine of justiciability in that governments and statutory bodies can be left with the resource allocation decisions required to be made to cater for compensatory awards. This is arguably preferable, from a separation of powers point of view, to courts relieving government and statutory authorities of this responsibility through denying the availability of compensatory relief in favour of other forms of relief with less direct resource implications.156
These types of arguments add to the case that the current judicial and legislative attitude to the availability of compensatory relief should at least be fully
153 Part III of Chapter 4 explains the inability of courts to make awards of damages in administrative law judicial review proceedings. 154 The „pricing‟ argument is discussed by Fordham as part of his comprehensive argument in favour of a damages remedy in administrative law. See Michael Fordham, „Reparation for Maladministration: Public Law‟s Final Frontier‟ (2003) 8 Judicial Review 104. The Fordham argument is discussed further in Part III of Chapter 6. 155 The utilitarian argument is that levying everyone to compensate for losses suffered by particular individuals increases the total good. Cohen discusses this argument at length. See David Cohen, „Suing the State‟ (1990) 40 University of Toronto Law Journal 630, 644-645. 156 See Cane, above n 126, especially at 496. Ganz proffers a similar argument in observing that „questions of policy and resource allocation…should be decided by the administrative authority to whom discretion has been delegated…‟ rather than by judges. See Gabriele Ganz, „Compensation for Negligent Administrative Action‟ [1973] Public Law 84, 98.
61 understood and justified. The focus on monetary compensation in this study facilitates this process.
4 Compensation and Resource Allocation In a field such as tax, imposition of liability on the ATO is especially significant in that the effects might extend to causing a „leakage of revenue‟157 to be collected for a range of other government initiatives. The effects may not be confined to the ATO - instead they may be „externalised.‟158 This fact suggests that resource implications are especially significant in any consideration that might see the liability of the ATO to taxpayers modified. Reform proposals centred on monetary liability are best suited to consideration of these resource implications.
The reason is relatively straightforward. Any adverse finding against the Commissioner, compensatory or otherwise, is likely to have resource implications. However, with awards of compensation these resource implications are explicit. The relationship between liability and resourcing is a direct one. As Cane has observed, „the more extensive governmental damages liability becomes, the more significant its implications for public spending.‟159 In contrast, other forms of relief such as declaratory relief may also have significant resource implications but these may be less explicit and direct. Decision-making changes prompted by an adverse finding are not a costless exercise. However, these costs may not be fully appreciated or quantifiable for some time, if at all.
The relative directness and immediacy of the impact on governmental resources of compensation awards has many benefits. Government budgets can more quickly and accurately be adjusted to take into account the effect on the public purse of increased ATO monetary liability. Similarly, the Commissioner can more accurately make resource allocation and budgeting decisions. Legislative responses to adverse findings, such as those which are feared will expose the ATO
157 Judith Freedman, „Tax, Crime and Human Rights‟ (2002) 6 British Tax Review 445. 158 For discussion of this possibility see Cohen, above n 155, 647. 159 Cane, above n 126, 491.
62 to large and indeterminate future monetary liability, can also be made more quickly and confidently. These are further reasons why a study considering ATO liability reform is sensibly centred on monetary liability.
5 Compensation and Customer Service Even setting aside the inherent characteristics of compensatory awards, there are a number of additional reasons why a focus on monetary compensation is justified in this study. The first such justification relates to the relationship between the maintenance of high customer service standards and the availability of compensation when those standards are not met. The starting point for this argument is an appreciation that there is an increasing public concern with ensuring monetary compensation for victims of faulty administration by public bodies such as the ATO. In the own motion investigation by the Commonwealth Ombudsman in 1999 of Commonwealth arrangements for providing financial redress for maladministration it was noted that:
Customer expectations that agencies will compensate them for mistakes appear to be rising, with some agencies noting increasing requests for compensation from their customers in recent years.160
Such observations are suggestive of a continuing need to consider citizen rights to monetary compensation from public authorities such as the ATO.
According to the Commonwealth Ombudsman, this trend reflects a shift to „a more commercial and customer-focused attitude toward service failures compared with the traditional government approach of protecting the revenue base.‟161 In the tax context, it is easy to find confirmation of this „commercial and customer focused‟ attitude. The Taxpayers‟ Charter is a prime example. The
160 Commonwealth Ombudsman, above n 150, 30. Milakovich asserts that „[c]itizen expectations about the quality of service provided by public organisations are likely to rise even higher in the future.‟ Michael Milakovich, „Balancing Customer Service, Empowerment, and Performance with Citizenship, Responsiveness and Political Accountability‟ (2003) 4(1) International Public Management Review 61, 62. 161 Above n 150, 7.
63
Commissioner‟s foreword to that document (which has already been mentioned) points, for example, to a desire for „open, transparent and accountable‟162 dealings with the community. Tellingly, the document also refers to specific ATO publications concerned with setting out the circumstances and processes involved in raising a claim for monetary compensation against the Commissioner.163
Similarly the ATO has shown an increasing concern with responsiveness benchmarks which strongly indicate a commercial and customer focused attitude.164 Further, according to its website, the ATO currently has close to 50 consultative forums with taxpayers, professionals and other stakeholders.165 This is also a strong indicator of the perceived importance of adopting a commercial and customer focused approach.
More generally, ATO officers, as members of the Australian Public Service are required to act in accordance with Australian Public Service values and standards of conduct. These are set out in the Public Service Act 1999 (Cth), Public Service Regulations 1999 (Cth) and the Australian Public Service Code of Conduct. These too, emphasise the need to deliver service fairly, effectively, and to focus on results and managing performance.166 The Commonwealth Scheme for Detriment caused by Defective Administration („CDDA‟ Scheme) administered by the Minister for Revenue also operates to specifically provide an avenue for compensatory relief where service standards fall short of public expectations.167
162 Above n 115. 163 These publications are Australian Taxation Office, Claiming Compensation, NAT 11668 (2009)
64
Again the relationship between the availability of compensatory relief and a commercial and customer focus in public service is readily evident.
The reason for the link between the availability of compensatory relief and a commercial and customer focused approach has been identified by the Commonwealth Ombudsman. It is simple and compelling:
We believe compensation is an important aspect of customer relations. In an era when agencies are subject to resource constraints, risk management approaches have become an integral part of sensible cost-effective management. There is greater acceptance that a small proportion of errors will occur from time to time and agencies are expected to plan for this. It is too costly to introduce the checks and balances required to guarantee getting it right all the time…It follows that when errors do occur and members of the public are adversely affected by poor administration, the administrative “culture” should promote a willingness to redress the situation in an appropriate way…Best practice in this regard involves a willingness to maintain good customer relations by…recognising that this may include paying some form of compensation on occasions.168
In light of these facts, it is useful to specifically examine the availability of compensation. The results can be used as an indicator of the extent to which the ATO can truly claim to operate in a customer and service oriented manner. To adapt the wording of the Commonwealth Ombudsman, such a focus allows examination of both the administrative and legal „culture‟ to determine „willingness to maintain good customer relations.‟
6 Compensation and Operational Activity A monetary compensation focus also complements the operational activity focus of this study. The reason for this is that operational acts or omissions, by definition, do not involve questions of substantive tax liability or questions of ATO policy decisions, powers or discretions. Non-monetary remedies such as
168 Above n 150, 29-30.
65 declaratory or injunctive relief would most commonly be sought in cases involving substantive tax questions and/or exercises of the Commissioner‟s powers or discretions to determine those substantive tax questions. In contrast, cases involving purely operational failures can more commonly be expected to give rise to a claim for monetary compensation.169 Weight is accorded to this argument by the concern by the Commonwealth Ombudsman (whose jurisdiction consists largely of investigation of operational failures) with effective compensation measures for aggrieved taxpayers. For example, from as early as 1980, the Commonwealth Ombudsman saw a need to work with the Commissioner of Taxation to develop „the fundamental principle of compensation in the case of defective administration.‟170
A further theoretical link between the availability of compensation and operationality also exists. As already discussed, the policy/operational distinction has been applied in various legal contexts to distinguish between unimpeachable exercises of legislative power or discretion from those activities which are justiciable. In the vast majority of cases, these arguments have been raised in private law cases involving claims for monetary compensation.
In effect, therefore, principles and rules for determining justiciability such as the policy/operational distinction have been developed largely in response to, and in the context of, determining claims for compensation from public authorities such as the ATO. It seems wholly appropriate, therefore, that a study with a factual parameter so intimately linked to the concept of justiciability should also focus on the availability of compensatory relief.
169 Except perhaps on the rare occasion where an operational error brings about a failure to meet legitimately raised expectations and estoppel is claimed. For a discussion of the potential for this situation to arise see the discussion of promissory estoppel in Part II(B) of Chapter 3. 170 Above n 108, 10.
66
CHAPTER 3 - TORTIOUS REMEDIES AVAILABLE TO AUSTRALIAN TAXPAYERS
AGGRIEVED BY ATO OPERATIONAL ACT OR OMISSION
PART I - INTRODUCTION
A logical starting point for an assessment of the existing avenues of relief available to Australian taxpayers aggrieved by an ATO operational act or omission and seeking monetary compensation is an examination of the available tortious remedies. This is because a primary goal of tort is the provision of monetary compensation. Further, the most common form of judicial enforcement of the goals of tort is through awards of monetary compensation.
Luntz, a leading Australian authority on the law of tort, citing United States writer William Prosser confirms a primary focus of tort as being the provision of compensation, observing that:
The law of torts is concerned with the compensation of losses suffered by private individuals in their legally protected interests, through conduct of others which is regarded as socially unreasonable.171
While the reference to „socially unreasonable‟ conduct hints at broader goals than merely compensation, the provision of compensation is clearly a central concern.
Writers such as Abel also point to tort having a substantial compensatory focus. Abel describes the evolution of the law of tort, and the increasing emphasis on compensation over time:
171 Harold Luntz and David Hambly, Torts - Cases and Commentary (3rd ed, 1992), 83. Luntz goes on to qualify the definition of tort pointing out the complexities of defining „tort‟ with any practical precision. Honore applies a similar definition - see Tony Honore, „The Morality of Tort Law - Questions and Answers‟ in Owen (ed), above n 132, 73. For a good historical summary of the challenges and debate on the question of the proper definition of tort see Frederick Cooke, „A Proposed New Definition of Tort‟ (1898) 12(5) Harvard Law Review 335.
67
As the focus of tort law has shifted from intentional wrongs among intimates to unintentional injuries among strangers, its moral tone has changed as well… nineteenth-century judges consciously adopted a highly moralistic rhetoric, allowing victims to recover only if they were free from fault and those they sued were morally culpable. In the last hundred years, these moral judgments have been subordinated to an equally explicit concern with compensation.172
Despite the increasing shift in focus of tort law toward provision of compensation, it is conceded that there remains a concern in tort law with other, non- compensatory, objectives. These include justice, fairness, deterrence and retribution.173 In fact, it has been suggested that we are now seeing „a return to the old nineteenth century justifications of tort law - that it is concerned with appeasement, justice and fairness and that its aims may not be only compensatory but also preventative and deterrent.‟174 These philosophical aims are often organised under the two broad headings of corrective justice and distributive justice.175 However, Kneebone has observed that „it is clear that the main practical objective of tort law is to compensate a victim of a tort.‟176
172 Richard Abel, „A Critique of Torts‟ (1990) 37 UCLA Law Review 785, 788. Similar views have been expressed by Harlow, who observes that the expansive trend of tort law in recent years has been „motored by a concern for compensation…[J]udges throughout the common law world have in recent years leant by and large towards compensation as tort law‟s primary objective.‟ Carol Harlow, State Liability (2004) 14. 173 Celebrated mid-20th Century writers such as Glanville Williams are among those who share this view. Williams points out that while the immediate object of the tort action is to compensate the plaintiff at the expense of the tortfeasor, compensation per se is only one of what he sees as four possible bases for an action for damages in tort. Williams identifies these four bases as „appeasement, justice, deterrence and compensation.‟ See Glanville Williams, „The Aims of the Law of Tort‟ (1951) 4 Current Legal Problems 137, 138. 174 Edward Veitch and David Miers, „Assault on the Law of Tort‟ (1975) 38(2) Modern Law Review 139, 142. 175 For discussion of the meaning of, and the relationship between, corrective justice and distributive justice see James Gordley, „Tort Law in the Aristotelian Tradition‟ in David Owen (ed), Philosophical Foundations of Tort Law (1995) 131. See also Peter Benson, „The Basis of Corrective Justice and its Relation to Distributive Justice‟ (1992) 77 Iowa Law Review 625. 176 Kneebone, above n 73, 38. Some authors go so far as to question whether any role beyond compensation is worth pursuing at all, except in cases involving intentional torts. For example, Harris notes „…in its role of regulating conduct and deterring carelessness, tort law, while a useful instrument against intentional wrong-doing, is a weak one against other forms of anti-social behaviour…The question must therefore be faced whether the regulatory role of tort is worth preserving, except for intentionally-caused harm.‟ See Donald Harris, „Can the Law of Torts Fulfil its Aims?‟ (1990) 14 New Zealand Universities Law Review 114, 122.
68
While issue could be taken with Kneebone on this point, it is clear that the usual practical expression of the objectives of tort is through the provision of monetary compensation. It is this expression of the philosophical goals of tort through awards of monetary compensation in most cases of breach of tortious duty that makes the examination of tort in this Chapter so important to this study.
The examination begins with consideration of the tort of negligence in Part II. Negligence is significant to this study for a number of reasons. The first was already alluded to in Chapter 2 - namely, that it is in the context of judicial consideration of negligence claims and associated academic commentary that much of the discussion of the policy/operational distinction has arisen.
Second, negligence is the most logical avenue for aggrieved taxpayers seeking a tortious remedy to pursue in most cases of operational malfunction. This is because there is no subjective mental element to the commission of the tort as in the intentional torts such as misfeasance in public office. Accordingly, it is the tortious remedy perhaps most readily applicable to subjectively inadvertent operational acts or omissions causing taxpayer loss.
Further, unlike claims alleging a breach of statutory duty, there is also no need in a negligence action involving a statutory authority to engage in the difficult task of statutory interpretation to demonstrate the existence of a statutory duty and a legislative intent to create civil law rights where that statutory duty is breached.177
Third, the focus of this tort is more squarely on compensation than is the case with deliberate torts such as misfeasance in public office. The latter display more directly the nineteenth century judicial preoccupation with moral culpability described in the extract from Abel‟s critique of tort reproduced above.
177 Although, as discussed in Part II(D) below, clearly the legislative context is one of the relevant salient factors to be examined in determining questions of tortious duty in negligence cases involving public authorities.
69
For these reasons, much of the space in this Chapter is dedicated to discussion of the potential applicability of negligence in cases of ATO operational act or omission causing compensable taxpayer loss. However, this Chapter will also look at less commonly employed tortious avenues of relief such as misfeasance in public office, breach of statutory duty, and the innominate tort established in Beaudesert Shire Council v Smith178 („Beaudesert‟). Each of these can be dealt with far more summarily than negligence.
In the case of misfeasance in public office - which is the subject of Part III - the analysis will show that a purely inadvertent administrative failure would be insufficient grounds upon which to base a claim. As already noted, misfeasance in public office is a form of intentional tort. Accordingly, the plaintiff is required to prove either the defendant‟s malicious intent to cause harm to the plaintiff or the defendant‟s subjective knowledge of lack of statutory power and the likely resultant harm to the plaintiff from acting in excess of power.179 This is a severe limitation on the tort‟s potential applicability in cases of ATO operational act or omission causing taxpayer loss.
Similarly, breach of statutory duty deserves the limited treatment afforded it in Part IV. Primarily this is because in cases of operational act or omission causing taxpayer loss this cause of action will be inapplicable in all but those cases where negligence would be arguable in any event. Further, to prove a breach of statutory duty requires a close judicial search for legislative intent to establish the existence of the requisite statutory duty and right to a civil law remedy in damages for breach of that statutory duty. The case law examined in Part IV of this Chapter suggests that such a duty is unlikely to be implied in Australian tax legislation.
178 Above n 28. 179 This is the formulation of Smith J in Farrington v Thomason [1959] VR 289, as discussed in detail in Part III(C) of this Chapter.
70
The final part of the Chapter deals with the innominate tort established in Beaudesert.180 This tort has been almost entirely expressly overruled in Australia, although one small exception remains. Notwithstanding, it warrants mention in this study due to its relationship with the torts of misfeasance in public office, negligence and breach of statutory duty and the insights it provides into the scope of those torts in Australia.
180 Above n 28.
71
PART II - NEGLIGENCE
A - Introduction
There has never been a successful negligence claim against the Commissioner of Taxation in Australia. There are very limited reported cases in which negligence has been asserted. In none of these cases have the allegations been pursued to a full trial. In cases where the allegation has been judicially considered, the comments of Grove J in Harris v Deputy Commissioner of Taxation181 („Harris‟) are typical of the full extent of the treatment. In that case His Honour stated:
There is no basis upon which to conclude that there is a tort liability in the Australian Taxation Office or its named officers towards a taxpayer arising out of the lawful exercise of functions under the Income Tax Assessment Act.182
The academic commentary consists of similarly brief motherhood statements. Typical of the treatment of the issue by commentators are the observations of Bentley who implicitly concedes the existence of a remedy in negligence against the Commissioner without elaboration:
Where the ATO is found by the courts to be negligent, there is also the possible remedy of damages. The ATO often pre-empts such legal claims, where negligence and subsequent financial loss to the taxpayer are clear from the facts, and pays compensation.183
Baxt is the only Australian author who has been prepared to speculate that negligence principles could potentially be applied against the Commissioner on the basis of some judicial authority:
181 (2001) 47 ATR 406. 182 Ibid, 408. 183 Bentley, above n 2, 261.
72
It is possible that a taxpayer could successfully seek damages from the Commissioner alleging negligence in the conduct of his activities. Hill J in Unilan Holdings Pty Ltd v Kerin, although he struck out the plaintiff‟s statement of claim in so far as it relied on alleged misleading and deceptive conduct on the part of a Minister of the Crown under s52 of the Trade Practices Act, held that an action based on negligence would nevertheless still lie against the Minister…On the basis of this approach, if the Commissioner was negligent in dealing with a particular taxpayer, a claim based in negligence may well lie against the Commissioner. One suspects that such a claim would be difficult to sustain, although the door has been opened and this avenue could be used in an appropriate case.184
Unfortunately, Baxt does not expand upon this argument. Tantalisingly, a small number of subsequent writers such as Rider have cited Baxt with approval on the negligence point. However, they also do not take up the opportunity to explore the merits of the Baxt arguments further.185
Accordingly, there is little guidance in the existing literature as to whether or in what circumstances an ATO operational act or omission might give rise to a duty of care sufficient to support a successful negligence claim. In this absence of academic or judicial guidance, the analysis of the applicability of the tort of negligence in cases of ATO administrative act or omission in this Chapter will consist of an examination of the core tortious principles applicable in cases involving public authorities generally. The analysis will then shift to application of those principles in the tax context. The discussion is divided into three parts.
The first of these parts - in (B) below - deals with the challenge in seeking to bring an action in negligence against the Commissioner posed by the substantial scope of immunity from suit the Commissioner enjoys. The scope of this immunity reflects, in part, those immunities which the Commissioner enjoys in common
184 Baxt, above n 2, 166. The author has recently reached a similar conclusion. See Bevacqua, above n 107. 185 See Rider, above n 2, 149.
73 with all instrumentalities of the Crown. However, there is some evidence that the Commissioner‟s immunity from suit in negligence extends even further. This apparent extension of ATO immunity is also examined. There are a number of public policy concerns which underpin this immunity from tortious suit. Much of the analysis centres on these public policy concerns.186
In (C) below, the various judicial attempts to develop principles and general rules to define the proper boundaries of this public authority partial immunity from suit are canvassed. The emphasis is on highlighting the ramifications of these various judicial developments for taxpayers seeking recompense for ATO operational act or omission causing taxpayer loss. In this context, the discussion revisits the policy/operational dichotomy introduced in Chapter 2 and its relevance to the various principles and rules for assessing the existence of a duty of care in cases involving public authorities such as the ATO.
In (D) below the development of the current „salient features‟ approach to dealing with novel negligence actions is examined. Again the aim is to identify the likely ramifications of the application of this approach for taxpayers seeking monetary compensation for a loss-causing operational act or omission.
B - The Commissioner‟s Partial Immunity from Suit
All statutory authorities enjoy some degree of immunity from tortious suit. This originally stemmed from the immunity historically enjoyed by the Crown and reflected in the medieval English legal maxim that „the King could do no wrong.‟187 From this historical stance, a view developed that the Crown could not be held tortiously liable. In large part this was because it was thought contrary to
186 No attempt is made in this Chapter to address the validity or otherwise of these various policy concerns. However, Chapter 5 takes up this challenge in the context of discussing the policy ramifications of any reform initiatives to address ineffectiveness and inadequacy of existing compensatory remedies. 187 Often cited in its Latin form - Rex non potest peccare. For a good discussion of the history of this maxim see Herbert Broom, A Selection of Legal Maxims (3rd ed, 1852), 76-80.
74 the basic principles of sovereignty that the Crown could be indicted in the Crown‟s own courts.
Today, formal Crown immunity no longer exists in Australia by virtue of section 64 of the Judiciary Act 1903 (Cth)188 and State and Territory Crown Proceedings Acts189 which generally provide that in any suit in which the Crown is a party, the rights of the parties will, as nearly as possible be the same as in any case between private individuals. Today, therefore, courts start with the basic principle of endeavouring to treat statutory authorities the same as private individuals.190
Judges have, however, devised various principles and approaches such as the policy/operational dichotomy to assist in determining appropriate limits of Crown liability to ensure the efficient exercise of public functions.191 These principles and approaches are the source of any immunity from suit enjoyed by authorities such as the Commissioner of Taxation today. It is a partial immunity which is a product of pragmatic concerns rather than any historical Crown privilege.
188 Reproduced in full in (C) below. 189 Crown Proceedings Act 1988 (NSW), s 5; Crown Proceedings Act 1980 (Qld), s 9; Crown Proceedings Act 1958 (Vic), s 25; Crown Proceedings Act 1992 (SA), s 5; Crown Proceedings Act 1993 (Tas), s 5; Crown Proceedings Act 1992 (ACT), s 5; Crown Proceedings Act 1993 (NT), s 5; and Crown Suits Act 1947 (WA), s 5(1). 190 See Bradley Selway, „The Source and Nature of the Liability in Tort of Australian Government‟ (2002) 10 Tort Law Review 14 for a good discussion of the development and application of the concept of sovereign immunity in Australia. Selway notes, at 18, that „…the accepted wisdom was that the Crown itself was not liable in tort at common law either directly or vicariously. Although the accepted wisdom was based upon an historical misunderstanding of the maxim and (insofar as vicarious liability was concerned) a misapplication of the master tort theory, nevertheless the result was clear: the maxim “The King can do no wrong” meant that the Crown could not commit a tort and could not be vicariously liable for the torts of its employees.‟ For a further interesting and detailed discussion, albeit in the United States context, see Note, „Separation of Powers and the Discretionary Function Exception: Political Question in Tort Litigation Against the Government‟ (1971) 51 Iowa Law Review 930. 191 Bradley Selway, ibid, cites, in addition to the policy/operational dichotomy, the doctrines of general and special reliance associated with the concept of proximity and modern day factors considered in negligence cases involving statutory authorities such as the degree of control exercised by one party over another, vulnerability, indeterminacy of potential claimants, and the likely effect of a finding of a duty of care upon other legal principles and upon the broader community as examples of principles and approaches developed to ensure some continued protection from liability for statutory authorities.
75
A range of interrelated public policy concerns underlie this pragmatic preoccupation with the efficient exercise of public functions - and principles such as the policy/operational dichotomy devised in response to it. The majority of these stem from one or more of five core underlying public policy issues.192 An appreciation of these core policy concerns from the outset is central to any assessment of the challenges in bringing any negligence claim against the Commissioner of Taxation.193
The first of these core policy issues is often described as the „chill factor‟ or „over- deterrence‟ argument. The argument is that in the face of extensive potential liability, a public authority might implement procedures aimed at avoiding liability. In so doing, scarce resources are directed away from the core responsibilities of the relevant authority.194 In the tax context, an example might be cutbacks to the provision of higher risk but, nonetheless, valuable and important services such as providing tax advice or information to taxpayers.
192 There are a host of public policy questions stemming from these five core concerns which might be raised in any prospective claim, depending on the factual matrix involved. For example, Stapleton has identified twenty-five policy factors that she considers to be „countervailing to the recognition of a duty‟ of which thirteen are potentially of some direct relevance in the taxation context. For a comprehensive and detailed analysis of these see Jane Stapleton, „Duty of Care Factors: A Selection from Judicial Menus‟ in Peter Cane and Jane Stapleton (eds), The Law of Obligation: Essays in Celebration of John Fleming (1998). Kirby J identifies a similar list of eleven separate policy factors in Pyrenees Shire Council v Day, above n 73, 423-427. For discussion of these see Bryan Horrigan (ed), Government Law and Policy: Commercial Aspects (1998), 324. 193 Although, as the discussion in (D) below illustrates, their relevance is not confined to the question of outright immunity from suit. 194 The literature on this issue is voluminous and varied in its degree of support for this concern as a valid factor for determining exposure to liability of a public authority. See, for example, Reynolds, above n 45, 121-123; Craig and Fairgrieve, above n 27, 635; Note, „Separation of Powers and the Discretionary Function Exception: Political Question in Tort Litigation Against the Government‟ (1971) 51 Iowa Law Review 930, 970-971; Kneebone, above n 73, 393; Stanton et al, above n 87, 57; Woolf, above n 73, 60; Cornelius Peck, „The Federal Tort Claims Act: A Proposed Construction of the Discretionary Function Exception‟ (1956) 31 Washington Law Review 207, 223; and Donal Nolan, „Suing the State: Governmental Liability in Comparative Perspective‟ (2004) 67 Modern Law Review 844, 859-860. There is substantial discussion of the issue in the context of consideration of extension of estoppel principles to cases involving the Commissioner of Taxation. For a detailed rebuttal of the „chill factor‟ argument in the estoppel context see Dean Knight, Estoppel (Principles?) in Public Law: The Substantive Protection of Legitimate Expectations, (D Phil Thesis, University of British Columbia, 2004), 45 and the report by Soren Schonberg, Legitimate Expectations in Administrative Law (2000).
76
It is probable that the more operational in nature the alleged negligent activity, the less likely it is that an over-kill argument will hold sway. Woolf alludes to the reason this is so:
While I appreciate fully the dangers of administrators becoming over-cautious if they are exposed to actions for damages, I would expect over-caution to manifest itself more in the policy area than in the operational area.195
It is understandable that the public would be more concerned with their public authorities being overly restrained in the exercise of their statutorily endowed discretions than with restraint imposed on the exercise of largely administrative functions. This is because in the case of the latter, any over-caution may well manifest itself in the form of more careful and efficient administrative practices.196 Accordingly, a claim arising out of an ATO operational or administrative act or omission is likely to encounter fewer difficulties in countering any chill-factor argument. However, challenge on this basis cannot be ruled out.
A second core public policy justification for some public authority immunity from tortious suit is the argument that unfettered liability would have an undue economic impact on the public purse. The argument is simple and compelling. As one author has put it, „[t]here is obviously a strong public interest in keeping the government solvent so that it may continue to defend and improve our society.‟197 This is often alternatively expressed as the „floodgates‟ or „indeterminate liability‟ argument. In the tax context, with the direct and central involvement of the Commissioner in the collection of Commonwealth revenue, indeterminate claims
195 Woolf, above n 73, 60. 196 A recent study by Creyke & McMillan into the bureaucratic impact of adverse judicial review proceeding outcomes (discussed in further detail in Part III of Chapter 5) suggests that adverse judicial results may be viewed as a positive and valuable incident. See Robin Creyke and John McMillan, „The Operation of Judicial Review in Australia‟ in Mark Hertogh and Simon Halliday (eds), Judicial Review and Bureaucratic Impact - International and Interdisciplinary Perspectives (2004). 197 Reynolds, above n 45, 122 -123.
77 against the Commissioner would directly impact on the solvency of the government and not just the ATO.198
Again, though, this argument is likely to be a far greater obstacle for a party questioning potential policy or discretionary acts in a negligence action against the Commissioner. In the case of policy or discretionary acts it can be argued that private law rules, such as rules of reasonable foreseeability and causation, are insufficient limits on liability given the distinctly public nature of the acts in question. Accordingly, extra protections are needed to prevent the risk of indeterminate liability.
In contrast, where the sole concern is administrative activity, it is reasonable to argue that the Commissioner‟s liability should be the same as a private individual. Administrative activities are unlikely to display distinctly public characteristics distinguishing them from the administrative activities of a private body or individual. Arguably, therefore, private law rules are sufficient protection against an authority such as the ATO having to answer for indeterminate consequences of its operational activities - just as they suffice for a private body or individual engaged in equivalent activities.
Further, there is an argument that if some certainty can be achieved as to where the boundary for tortious liability lies by confining liability to claims involving clearly administrative activities, then the ATO can factor this into internal processes and budgetary allocations. Positive improvements to the functioning of the ATO might even result. As one author has noted, „[i]n some cases, compensation may encourage government to be even more efficient and responsible.‟199 Certainly, concepts such as „efficiency‟ are more appropriately
198 In particular, this concern is a central consideration in cases involving claims for pure economic loss. This concern is discussed further in this context in (D) below. 199 Note, above n 194, 972. Kneebone has expressed the basis for this argument more fully: „The premises of such an approach are that tort liability does not impose unattainable standards of conduct upon a public authority or unduly increase the economic burden on the public. It must be accepted that over a period of time the distribution of costs amongst the public will be balanced by
78 applied to the carrying out of operational functions than to governmental policy- making. Most policy-making would be expected to take into account a broader range of community concerns than merely economic efficiency.
Third, there are concerns to ensure judges and courts only assess those claims which the court system is competent to assess and which would not involve the judiciary in legislative or executive second-guessing. These arguments are often described as „separation of powers‟200 or „institutional competence‟201 concerns. As noted in Chapter 2, they are often also captured under the label of justiciability.202
Claims involving judicial scrutiny of high level ATO decisions and/or which would effectively result in a reduced tax liability for the plaintiff taxpayer are particularly prone to the raising of separation of powers and institutional competence concerns. However, they are lesser concerns in cases involving only operational acts or omissions. As noted in Chapter 2, this reasoning is the historical underpinning of the policy/operational dichotomy.
The availability of alternative remedies is a fourth core policy consideration. In the taxation context, consideration of alternative remedies involves consideration
the benefit in terms of awareness of responsibilities on the part of public authorities and increased efficiency.‟ Kneebone, above n 73, 45-46. 200 Doyle, in his collaboration with Redwood, explains the separation of powers justiciability argument in the negligence context: „Public authorities make decisions in the broad public interest. This involves balancing competing claims about what is for the collective good. To perform this function public authorities are entrusted with statutory powers, usually expressed in wide discretionary terms. If the courts were to interfere with this delicate balancing of competing claims they would be intruding into the executive‟s domain.‟ See Doyle and Redwood, above n 54, 34. 201 Doyle has also elaborated on the „institutional competence‟ argument: „[T]he courts cannot assess, in terms of the reasonable man, the multitude of factors which require to be weighed in making certain types of decisions under statutes. Civil procedure is not suited to placing the relevant material before the court, and a decision could involve the court in adopting or rejecting policies in a manner which is beyond its ability...‟ See Doyle, above n 100, 232. See also Reynolds, above n 45, 121-123. 202 Institutional competence and separation of powers concerns are often described as strands of the concept of justiciability. For a good discussion of the various strands of the concept of justiciability see Finn, above n 49.
79 of the scope of availability of administrative law judicial review,203 damages awarded through investigation by the Commonwealth Ombudsman,204 or through direct reference to ATO Internal Complaints.205 The potential applicability of schemes such as the „Scheme for Detriment caused by Defective Administration‟ („CDDA Scheme‟)206 is also relevant.
While the effectiveness of many of these avenues of relief might be seriously questioned (as the discussion in Chapter 4 reveals), many prospective negligence actions against the Commissioner could be pursued by way of one or more of these alternatives. Accordingly, plaintiffs with this option may justifiably
203 The arguments supporting an absence of availability of damages as a remedy in administrative law might also be raised in support of denial of a tortious cause of action where a damages remedy is sought. As discussed in Part III of Chapter 4, the lack of availability of damages as a remedy both under the Administrative Decisions (Judicial Review) Act 1977 (Cth) and s 22 of the Federal Court of Australia Act 1976 (Cth) was confirmed in Park Oh Ho v Minister for Immigration and Ethnic Affairs (1988) 81 ALR 288; Conyngham v Minister for Immigration and Ethnic Affairs (1986) 68 ALR 441; Pearce v Button (1986) 8 FCR 408; and O‟Neil v Wratten (1986) 65 ALR 451. 204 Noteworthy are the extra-judicial comments of Sir Anthony Mason in relation to the observance of Commonwealth Ombudsman recommendations, particularly where a monetary payment to the aggrieved party is recommended: „Although the Ombudsman appears to have become a permanent feature of the Federal landscape, he has stated that there is an unwillingness on the part of some Federal agencies to implement his recommendations, notably for the payment of ex gratia compensation.‟ Sir Anthony Mason, „Administrative Review: The Experience of the First Twelve Years‟ (1988-1989) 18 Federal Law Review 122, 123. Also noteworthy in the taxation context are the observations of Bentley in relation to the effectiveness of the Commonwealth Ombudsman‟s ultimate sanction of publicising non-compliance with his recommendations: „There is a perception among taxpayers that bad publicity would seldom in fact prevent any revenue organisation from exercising its powers to the fullest extent possible when it felt it was in the right, whatever the rights of the taxpayers involved.‟ See Duncan Bentley, „A Taxpayers Charter: Opportunity or Token Gesture‟ (1995) 12 Australian Tax Forum 1, 21. 205 There are a number of avenues for compensation available through reference to ATO Internal Complaints. Wheelright summarises these in the following terms: „Compensation for serious “maladministration” may be available to taxpayers through the ATO in cases of extraordinary delays, misleading advice and other more serious problems. The Audit Act 1901 (Cth) permits “act of grace” payments or the waiver of tax liability in circumstances where a taxpayer is affected financially by maladministration on the part of the ATO. An act of grace payment or waiver will not be supported by the ATO where it would have the effect of overriding a specific statutory provision. The interest on overpayments legislation specifically provides compensation for ATO objection determination delays. The same applies to delays in referring disputed matters to the AAT or to court.‟ See Wheelright, above n 97, 69. See further the discussion in Part IV of Chapter 4. 206 This scheme is not unique to the ATO - it is an Australian government scheme administered by the Minister for Revenue. For a detailed discussion of the CDDA Scheme, see Department of Finance and Deregulation, Commonwealth of Australia, Finance Circular No 2006/05 (2006) issued to all agencies under the Financial Management and Accountability Act 1997 (Cth) by the Department of Finance and Administration. For further discussion of the scheme see Part IV of Chapter 4.
80 encounter judicial resistance on the basis that appropriate alternatives to a tortious claim are available. This may be especially likely in small claims which do not raise significant legal issues or systemic concerns about the performance of the Commissioner.
Fifth, there is the policy question of statutory intent and statutory context. In tax, this translates to a concern with assessing whether and to what extent a tortious duty of care to taxpayers is compatible with the public duties and powers of the Commissioner set out in tax and tax administration legislation. It is the judicial approach to determining this public policy issue which has provided an apparent extended scope of immunity from tortious suit for the Commissioner of Taxation.
This extended immunity is evident in the judicial observations of Grove J in Harris207 noted in the introduction of this Chapter to the effect that „[t]here is no basis upon which to conclude that there is a tort liability in the Australian Taxation Office or its named officers towards a taxpayer arising out of the lawful exercise of functions under the Income Tax Assessment Act.‟208 Such statements strongly suggest the existence of a broad, sweeping immunity from suit in negligence based on an interpretation of the Income Tax Assessment Act 1936 (Cth) („ITAA36‟) that implicitly accepts that, provided the Commissioner is acting intra vires, he can do so negligently without threat of tortious suit.209
Essentially, the Grove J approach indicates an extreme judicial deference to an un- stated legislative intent in our taxation laws to preclude the existence of a tortious duty of care to taxpayers. Such a degree of deference would render non-justiciable almost all allegations of tortious liability against the Commissioner of Taxation,
207 Above n 181. 208 Ibid, 408. 209 Grove J makes no reference to authority or explanation to support such an approach. However, the Grove J approach is broadly consistent with the approach taken in cases involving allegations of tortious breach of statutory duty against the Commissioner of Taxation such as Lucas v O‟Reilly (1979) 79 ATC 4081. Breach of statutory duty was also separately unsuccessfully pleaded by the taxpayer in Harris v Deputy Commissioner of Taxation, above n 181. See Part IV of this Chapter for detailed discussion of the tort of breach of statutory duty and the Lucas case.
81 including those cases involving purely operational failure.210 Accordingly, if the treatment of this policy issue persists, it may ultimately prove the greatest hurdle for a taxpayer seeking to sue the Commissioner in negligence. However, the operational nature of the complained of activity may provide a glimmer of hope for a taxpayer claiming negligence against the Commissioner.
C - The Relevance of the Policy/Operational Dichotomy
Despite the public policy concerns which underpin the immunity from tortious suit of public bodies such as the ATO, courts are faced with the concurrent imperative of ensuring that, to the fullest extent possible, they treat public authorities as closely as possible to private individuals in legal proceedings. This concern is reflected in the Judiciary Act 1903 (Cth). Section 64 states:
In any suit to which the Commonwealth or a State is a party, the rights of the parties shall as nearly as possible be the same, and judgment may be given and costs awarded on either side, as in a suit between subject and subject.
This legislative provision reflects the equality principle.211 Dicey described the principle (pertinently including tax officials in his description) in the following terms:
[E]very official, from the Prime Minister down to a constable or collector of taxes, is under the same responsibility for every act done without legal justification as any other citizen.212
210 Except for perhaps those cases involving „intentional‟ torts such as misfeasance in public office where any breach of duty is carried out with a deliberate malicious intent. For a discussion of the role of malicious intent in establishing this tort see Robert Evans, „Damages for Unlawful Administrative Action: The Remedy for Misfeasance in Public Office‟ (1982) 31 International and Comparative Law Quarterly 640; Gerald Fridman, „Malice in the Law of Torts‟ (1958) 21(5) The Modern Law Review 484; Sarah Hannett, „Misfeasance in Public Office: The Principles‟ (2005) 10 Judicial Review 227; and Robert Sadler, „Liability for Misfeasance in Public Office‟ (1992) 14 Sydney Law Review 137. Part III discusses further the role of malicious intent in misfeasance actions. 211 We will return to the equality principle again in the context of our discussion of misfeasance in public office in Part III of this Chapter. For reasons explained in Part III, misfeasance in public office is viewed as an express exception to the equality principle.
82
Devising guiding principles and tests to achieve this fine balance between providing necessary protection from suit for government instrumentalities such as the ATO and preserving equality under the law has proven to be a difficult and contentious task. As Sir Anthony Mason has pointed out:
As the circumstances and responsibilities of public authorities differ from the situation of the citizen, complete equality is not possible. Here lies the problem. We have had difficulty in formulating principles which accurately take account of the factors peculiar to the particular responsibilities and the decision-making processes of public authorities in the context of deciding whether they are liable in negligence.213
Arguably, the most significant tool or principle devised to address the challenge described by Sir Anthony Mason has been the „policy/operational‟ dichotomy. This dichotomy is of obvious direct relevance to this study given the operational parameter discussed in Chapter 2. As already noted in Chapter 2, the policy/operational dichotomy was first expressly enunciated in Commonwealth courts by the UK House of Lords in Anns v Merton London Borough Council.214 The Anns approach employs the policy/operational dichotomy in conjunction with a „two stage‟ approach to determining the existence or otherwise of a duty of care. Allars describes the first stage of this approach in the following terms:
First, there must be a sufficient relationship of proximity or neighbourhood between the wrongdoer and the plaintiff “such that in the reasonable
212 Albert Dicey, The Law of the Constitution (1885), 178. For an interesting call for modernisation of the Diceyan equality principle see Harlow, above n 171, 22-24. Harlow argues for revision of the Diceyan view, with its foundation in personal liability as between individual public servants and citizens, on the basis that the role of the State has „evolved‟ over time. Today the concern is with institutional liability as distinct from personal liability of individual public servants. Accordingly, the corrective justice underpinning of the Diceyan view breaks down and can be characterised as „distinctly old fashioned.‟ 213 Sir Anthony Mason, „Negligence and the Liability of Public Authorities‟ (1998) 2 Edinburgh Law Review 3, 4-5. 214 Above n 34.
83
contemplation of the former, carelessness on his part may be likely to cause damage to the latter – in which case a prima facie duty of care arises.”215
Deane J in Sutherland Shire Council v Heyman216 describes the second stage of the analysis as follows:
The second stage is that one must ask whether “there are any considerations which ought to negative, or to reduce or limit the scope of [any such prima facie] duty or the class of person to whom it is owed or the damages to which a breach of it may give rise.”217
Applying the Anns approach218 it is at the second stage that it would be determined whether the ATO should enjoy immunity from suit, notwithstanding the existence of a prima facie duty of care applying the normal rules of reasonable foreseeability and proximity in accordance with the first stage of the test.219 Accordingly, in effect, the Anns approach only requires a deviation from the normal principles of negligence (and hence, the equality principle) in the second stage of the analysis.
At this second stage, the extent to which the complained of activity can be characterised as operational would be determinative. Applying Anns, any negligence in carrying out any policy and discretionary activity warrants an exception to the equality principle and is immune from suit. Negligence in carrying out operational activities warrants no such exception. These activities must be carried out in a manner consistent with the existence of a duty of care. In Chapter 2, the „miscommunicated deduction decision‟ example was used to
215 Allars, above n 62, 54 citing Lord Wilberforce in Anns, above n 34, 498. 216 Above n 36. 217 Ibid, 506, citing Lord Wilberforce in Anns, above n 34, 498. 218 As discussed further below, the Anns approach has never been accepted in Australia, although the policy/operational distinction referred to in that case was taken up in Sutherland Shire Council v Heyman, above n 36. 219 Allars, above n 62.
84 illustrate a simple application of the dichotomy in the taxation context.220 This is an example of operational negligence consisting of faulty implementation of a decision made in exercise of discretionary power.
In Chapter 2, the inherent complexity of clearly delineating policy from operational tasks was also pointed out. This complexity was illustrated with the generic example of the provision of incorrect taxation advice to a taxpayer by an ATO employee. At least four complex considerations were identified as relevant in such a case to determine whether the matter was operational or discretionary. These were the role and level of authority of the employee, whether the erroneous advice was consistent or inconsistent with ATO Rulings or internal guidelines and the relevance of any „financial, economic, social or political factors or constraints‟221 which would take a seemingly administrative act into the immune discretionary or policy-making power realm.
Even with simple generic examples such as these it is readily apparent why a negligence action against the Commissioner might be complex to formulate and the likely outcome of such an action difficult to predict in some cases of ATO operational act or omission. This is so, even applying the Anns approach.
However, the law of negligence has continued to evolve since the adoption of the policy/operational dichotomy in Anns. Arguably, the task of demonstrating the existence of a duty of care in cases of ATO operational failure is now even more complex and unpredictable. This fact is readily demonstrated through a brief
220 It will be recalled that this example comprised a situation in which the Commissioner makes a decision that a taxpayer‟s deduction claim is allowable at law, but due to a purely administrative oversight such as a typographical or computer error, the ATO communicates the opposite position to the taxpayer. 221 It will be recalled that this is the terminology employed by Mason J in Sutherland Shire Council v Heyman, above n 36, at 469, to differentiate between policy and operational acts. The Mason approach differs from the Anns approach in that Mason J clearly immunises from suit activities of a political nature. His Honour does not, however, equate „policy‟ decisions with „discretionary‟ decisions as was the case in Anns. He sees discretion in the exercise of operational factors as being quite capable of sustaining a duty of care. His Honour notes, at 469, „…it is possible that a duty of care may exist in relation to discretionary considerations which stand outside the policy category in the division between policy factors on the one hand and operational factors on the other…‟
85 outline of the development of the law from the Anns approach through to the present-day „salient features‟ approach.
In Sutherland Shire Council v Heyman222 the Australian High Court did not accept the Anns two stage approach. Instead, a „proximity-based‟ approach to determining liability of statutory authorities was preferred.223 Deane J describes the central consideration of this approach in the following terms:
The requirement of proximity…involves the notion of nearness or closeness and embraces physical proximity (in the sense of space and time) between the person or property of the defendant, circumstantial proximity such as an overriding relationship of employer and employee or of a professional man and his client and what may (perhaps loosely) be referred to as causal proximity in the sense of the closeness or directness of the causal connexion or relationship between the particular act or course of conduct and the loss or injury sustained.224
This approach has been referred to by Vines as a „proximity-as-principle‟ approach. This means that the Sutherland approach „uses proximity as an underlying conceptual determinant of whether the relationship between the parties is such that it is legitimate to make one party legally responsible to the other.‟225 In this way, the emphasis is, first, on assessing the intrinsic nature of the relationship, rather than on attempting to categorise the relationship into an existing relationship category. Accordingly, in a case involving an allegation of operational negligence against the Commissioner of Taxation, the operational nature of the complained of activity is likely to simply be treated as one of a number of factors going to questions of the intrinsic nature of the relationship between taxpayer and tax authority.
222 Above n 36. 223 Although Brennan J never accepted the test. 224 Ibid, 497-498. 225 Prue Vines, „The Needle in the Haystack: Principle in the Duty of Care in Negligence‟ (2000) 23(2) University of New South Wales Law Journal 35, 38.
86
The issue would also remain relevant however, for assessing any power imbalance between the parties. A power imbalance might indicate a sufficiently proximate relationship of general or specific reliance giving rise to a duty of care.226 As Deane J points out, the requirements of proximity will vary between different categories of case. Typical relevant factors in the tax context might include any responsibility assumed by the Commissioner, reliance by the plaintiff taxpayer on the Commissioner and any special vulnerability of the plaintiff taxpayer to the Commissioner‟s operational action.227 The discussion of the application of the proximity-as-principle approach in cases involving pure economic loss in (D) below elaborates how the operational nature of the activity might be relevant to a consideration of each of these factors.228 It is seen in that analysis that the factors relevant to determining proximity may be assisted in some cases by the operational nature of the complained of activity. In other cases the operational nature of the activity may be a hindrance to the establishment of a sufficiently proximate relationship to found a duty of care. This reality stems from the fact that, in essence, the operational nature of the relevant activity will comprise just one of a number of relevant considerations in the proximity equation.
While the proximity approach employed in Sutherland differs from the Anns approach, it is still, in essence, a principle-based approach in which there is an assessment of the facts of the case to determine whether they fit within the basic uniform principles underlying the requirements for finding the existence of a duty of care. This is as distinct from trying to fit the case within an existing category of cases and specific rules applied in those cases.
226 Mason J refers to the terminology of „special‟ and „general‟ reliance in His Honour‟s judgment in Sutherland noting that: „It is positive conduct on the part of the defendant or the plaintiff acting to his detriment which gives rise to specific, as distinct from general, reliance or dependence.‟ Sutherland, above n 36, 463. 227 The search for plaintiff vulnerability coupled with plaintiff reliance on the knowledge of the defendant is particularly relevant in cases involving allegations of negligent omissions to exercise statutory powers resulting in claims of pure economic loss. Sutherland was just such a case, as was Anns. 228 These factors continue to be important for assessing the question of duty of care in negligence to the present day.
87
In contrast, in the common law world, one of the first indicators of a shift away from general classification approaches such as the Anns approach and the proximity-as-principle approach in Sutherland was the decision of the House of Lords in Caparo Industries v Dickman.229 As Hogg notes:
…Caparo Industries v Dickman in 1990 signalled the end of the general theory approach to determining the existence of a duty of care in a negligence action. In its place, the House of Lords expressed preference for the traditional categorisation approach. Now, instead of seeking and applying a single, general principle to determine the existence of a duty of care in all circumstances, the existence of the relevant duty of care is settled by means of categorisation of decided cases.230
The Caparo approach is a „three-stage‟ approach. The first stage looks at issues of reasonable foreseeability. The second stage looks for the existence of a proximate relationship between plaintiff and defendant.231 The third stage looks at the issue of whether it is just and reasonable to impose a duty of care. While Caparo was not a case involving a public authority,232 a similar categorisation approach was applied in the public authority context in Rowling v Takaro Properties.233 In that case the Privy Council considered that the question of whether a complained of
229 [1990] 2 AC 605. 230 Karen Hogg, „Negligence and Economic Loss in England, Australia, Canada and New Zealand‟ (1994) 43 The International Comparative Law Quarterly 116, 117. 231 Vines refers to this approach as an example of „rule-based‟ proximity. Vines, above n 225. In contrast to the „proximity-as-principle‟ approach employed by Mason J in Sutherland, above n 36, this approach looks to established rules of proximity applied in similar categories of case and applies those rules rather than looking first to the nature of the relationship of the parties and determining whether confirming a proximate relationship between the parties would be consistent with the characteristics of that relationship. 232 However, it has been applied in Australian cases involving statutory authorities. Most notably it was applied by Kirby J in Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431 and Pyrenees Shire Council v Day, above n 73. 233 Above n 53. In this case, the Privy Council observed, at 172: „One of the considerations underlying certain recent decisions of the House of Lords…is the fear that a too literal application of the well-known observation of Lord Wilberforce in Anns v Merton London Borough Council, [1978] AC 728 at pp 751-752, may be productive of a failure to have regard to, and analyse and weigh, all the relevant considerations in considering whether it is appropriate that a duty of care should be imposed. Their Lordships consider that question to be of an intensely pragmatic character, well suited for gradual development but requiring most careful analysis.‟
88 activity was discretionary or operational in nature would be relevant to the threshold question of whether the matter would be properly viewed as justiciable.
Sopinka describes the approach after the decisions in Caparo and Takaro, and the relevance of whether the complained of activity is operational or discretionary to the question of whether a duty of care exists as follows:
The policy/operational distinction is applied to exclude some cases in limine. At this stage, there is no examination of negligence or reasonableness. The only question is whether the impugned action involved allocation of resources or risks in a way which required the actor to balance and weigh competing interests. Whether the decision was reasonable is irrelevant at this stage. If not excluded by this analysis then the court must move on to consider proximity, in addition to foreseeability of damage, on the basis of a pragmatic test guided by what is just and reasonable having due regard to established categories in which a duty has been found to exist.234
However, in Sullivan v Moody235 („Sullivan‟), the High Court unanimously rejected the Caparo approach.236 The main concern was with the third stage of the Caparo test and the possibility that its application might reduce the question of liability „to a discretionary judgment based upon a sense of what is fair, and just and reasonable as an outcome in the particular case.‟237 Proximity was also categorically rejected as a useful guiding principle in that case.238
234 John Sopinka, „The Liability of Public Authorities: Drawing the Line‟ (1993) 1 Tort Law Review 123, 145. 235 (2001) 207 CLR 562. 236 Ibid, 579. Discontent with the approach had earlier been flagged in Perre v Apand Pty Ltd (1999) 198 CLR 180 per Gleeson CJ at 193-194, per McHugh J at 210-212 and per Hayne J at 302. 237 Ibid. 238 Ibid, 577-578. The principle had already lost the favour of numerous judges. For examples see Hawkins v Clayton (1988) 164 CLR 539, 555-556 per Brennan J; Hill v Van Erp (1997) 188 CLR 159, 210 per McHugh J; and Crimmins v Stevedoring Industry Finance Committee, above n 59, 96-97 per Hayne J.
89
The current state of the law in the wake of these rejections was commented upon in Perre v Apand:239
…[S]ince the fall of proximity, the court has not made any authoritative statement as to what is to be the correct approach for determining the duty of care question. Perhaps none is possible. At all events, the differing views of the members of this court in the present case suggest that the search for a unifying element may be a long one.240
In fact, it has been suggested that this approach has effectively returned the Australian position to that set out in Donoghue v Stevenson241 and a fundamental concern with reasonable foreseeability. As Priestley JA observed in Avenhouse v Hornsby Shire Council:242
Consideration of all the cases of authority to date leads me to the view that the position in Australia…has returned to…what it was immediately after the decision in Donoghue v Stevenson; that is, that the courts make decisions by first asking the question “is the relationship between plaintiff and defendant in the instant case so close that a duty arose?” and then answering “yes” or “no” in light of the court‟s own experience-based judgment.243
In order to answer the fundamental question posed by Priestley JA, courts will now turn to the „salient features‟ of each case. The approach is not a completely new legal innovation. In 1976 in Caltex Oil (Australia) Pty Ltd v The Dredge „Willemstad‟244 Stephen J isolated a number of „salient features‟ which combined to constitute a sufficiently close relationship to give rise to a duty of care.245 However, neither in the Stephen J judgment, nor in the recent authorities has there
239 (1999) 198 CLR 180. For a good summary of the current state of the law see also the discussion in the judgment of Ipp JA in the New South Wales Court of Appeal decision in Amaca Pty Ltd v New South Wales (2004) Australian Torts Reports 81-749. 240 Ibid, 210 per McHugh J. 241 [1932] AC 562. 242 (1998) 44 NSWLR 1. 243 Ibid, 8. 244 Above n 93. 245 Ibid, 576-577.
90 been a comprehensive listing of „salient features.‟ This is because, as observed by the High Court in Sullivan, these features cannot be comprehensively listed. They will vary from case to case:
Different classes of case give rise to different problems in determining the existence and nature or scope, of a duty of care. Sometimes the problems may be bound up with the harm suffered by the plaintiff…Sometimes they may arise because the defendant is the repository of a statutory power or discretion. Sometimes they may reflect the difficulty of confining the class of persons to whom a duty may be owed within reasonable limits. Sometimes they may concern the need to preserve the coherence of other legal principles, or of a statutory scheme which governs certain conduct or relationships…Conversely, conduct and relationships may have been held not to give rise to a duty of care, and the reasons for that holding may provide an important guide to the solution of the problem in a new case.246
This does not mean that judicial guidance is impossible. A number of principles which form part of the current approach are alluded to in Sullivan. First, in Sullivan, a principle known as the „compatibility principle‟ was established. The compatibility principle demands that „[a] duty of the kind alleged should not be found if that duty would not be compatible with other duties which the respondents owed.‟247 In effect, for the imposition of a duty of care upon a statutory authority there must be no incompatibility between the public authority‟s statutory powers and duties on the one hand, and its common law duties on the other.248
There also remains a role for incrementalism. Incrementalism was first broached by Brennan J in Sutherland249 in the following terms:
246 Sullivan, above n 235, 579-580. 247 Ibid, 581. A similar principle was applied by the Privy Council to deny recovery to the plaintiff in Yuen Kun Yeu v Attorney General (Hong Kong) [1988] AC 175. 248 Mark Aronson, „Government Liability in Negligence‟ (2008) 32 Melbourne University Law Review 44, 51. 249 Above n 216. This abandonment of the search for uniform principle is, perhaps, an acknowledgement of the correctness of views such as that expressed by Stapleton that „[t]here is
91
It is preferable, in my view, that the law should develop novel categories of negligence incrementally and by analogy with established categories, rather than by a massive extension of a prima facie duty of care restrained only by indefinable considerations which ought to negative, or to reduce or limit the scope of duty or the class of persons to whom it is owed.250
However, as observed by Gummow J in Perre v Apand,251 the incrementalist approach of analogising with existing categories of cases will not be determinative in most cases resolved by applying the „salient features‟ approach:
…[T]he making of a new precedent will not be determined merely by seeking the comfort of an earlier decision of which the case at bar may be seen as an incremental development, with an analogy to an established category.252
In all of this, what is the remaining role (if any) of the policy/operational distinction? Crimmins v Stevedoring Industry Finance Committee253 has been credited with largely doing away with the policy/operational dichotomy. However, the dissenting judges in that case clearly see a continuing role. Of the majority, while Gummow J makes no express reference to the distinction, His Honour does deny the existence of a duty of care on the basis that the imposition of such a duty would challenge the exercise of „quasi-legislative‟ power.254 This approach is arguably akin to an application of the policy/operational distinction.
Hayne J confirms this, acknowledging that „a quasi-legislative function can be seen as lying at or near the centre of policy factors if policy or operational
no “test” for the duty of care. There can be no “duty test” given what it is that judges do under the cloak of this analytical label. Indeed, the underlying nature of judicial reasoning here is distorted when any case is seen as laying down a “test” for duty.‟ See Stapleton, above n 192. 250 Above n 216, 481. For similar views see also Caparo Industries Plc v Dickman, above n 229, 618 per Lord Bridge; X (Minors) v Bedfordshire County Council [1995] 2 AC 633, 751 per Lord Browne-Wilkinson; and Barrett v Enfield London Borough Council [2001] 2 AC 550, per Lord Slynn of Hadley. 251 Above n 239. 252 Ibid, 253. 253 (1999) 200 CLR 1. 254 Ibid, 62.
92 functions are to be distinguished.‟255 Similarly, McHugh J in delivering the leading judgment in Crimmins applies a six stage test for imposition of liability, the fifth step of which closely resembles application of the policy/operational distinction. His Honour describes stage 5 of his six stage test in the following terms - „Would such a duty impose liability with respect to the defendant‟s exercise of “core policy-making” or “quasi-legislative” functions? If yes, then there is no duty.‟256
Clearly, therefore, the more operational in nature the complained of activity, the less likely it is that the plaintiff will fall at this hurdle in demonstrating the existence of a relevant duty of care. This is because the public authority is more likely to be seen to be doing something analogous to a private function when carrying out operational tasks. Accordingly, there has not been a complete abandonment of the distinction in negligence actions involving statutory authorities. It is clear, though, that the policy/operational dichotomy is now no longer the only determinant (if it ever was) of whether a public authority will be found to owe a duty of care in negligence to a plaintiff. There does remain, however, ample scope for the operational nature of the complained of activity to operate as one of the ‟salient features‟ utilised by a court to determine the issue.
255 Above n 59, 101. His Honour does not, however, apply the distinction in the case, noting that the distinction „may not always be useful.‟ In support of this view, His Honour cites Pyrenees Shire Council v Day, above n 73, at 393 per Gaudron J; United States v Gaubert, above n 33; and Just v British Columbia (1989) 2 SCR 1228. 256 Above n 253, 24-25. The six stage test in its entirety is described as follows: „In my opinion, therefore, in a novel case where a plaintiff alleges that a statutory authority owed him or her a common law duty of care and breached that duty by failing to exercise a statutory power, the issue of duty should be determined by the following questions: 1. Was it reasonably foreseeable that a failure of the defendant, including a failure to exercise its statutory powers, would result in injury to the plaintiff or his or her interests? If no, then there is no duty. 2. By reason of the defendant‟s statutory or assumed obligations or control, did the defendant have the power to protect a specific class including the plaintiff (rather than the public at large) from a risk of harm? If no, then there is no duty. 3. Was the plaintiff or were the plaintiff‟s interests vulnerable in the sense that the plaintiff could not reasonably be expected to adequately safeguard himself or herself or those interests from harm? If no, then there is no duty. 4. Did the defendant know, or ought the defendant to have known, of the risk of harm to the specific class including the plaintiff if it did not exercise its powers? If no, then there is no duty. 5. Would such a duty impose liability with respect to the defendant‟s exercise of “core policy-making” or “quasi-legislative” functions? If yes, then there is no duty. 6. Are there any other supervening reasons in policy to deny the existence of a duty of care (for example, the imposition of a duty is inconsistent with the statutory scheme, or the case is concerned with pure economic loss and the application of principles in that field deny the existence of a duty)? If yes, then there is no duty.‟
93
There is also a continuing unresolved debate as to whether such concerns should be dealt with at the duty or breach stages of the analysis. In Brodie v Singleton Shire Council257 the majority signalled a shift of political and resource allocation concerns (central to the policy/operational dichotomy determinations) to the breach stage of the analysis.258 Hayne J in his dissenting judgment in that case points to a number of practical concerns of such a shift.259 Whichever view ultimately prevails, the relevance of the issues will not be extinguished by such a shift.
It remains the case, though, that confirmation of the continuing potential relevance of the policy/operational dichotomy falls short of a complete answer to the question of how the salient features approach might be applied to determine a negligence claim arising from an ATO operational act or omission causing taxpayer loss. Attention now turns to this more specific question.
D - The Salient Features Approach Applied
As discussed in (C) above, an application of the „salient features‟ approach is not a simple formulaic exercise. The fundamental concern with reasonable foreseeability, the potential relevance of the compatibility principle and the scope for an incrementalist approach might all have a bearing on the outcome of a compensatory claim by a taxpayer against the Commissioner arising from an operational act or omission.
For starters, an incrementalist approach to determining the „salient features‟ of a negligence case against the Commissioner of Taxation poses an obvious problem
257 Above n 69. 258 See the judgment of Gaudron, McHugh and Gummow JJ, ibid, 577-578. 259 Ibid, 627-630. His Honour points to concerns such as a resulting possible shift to favour plaintiffs over public authority defendants, inconsistency with public law deference to public authority decision-makers reflected in principles such as the Wednesbury unreasonableness test, and that it might involve courts in political rather than legal considerations. Aronson challenges these concerns and makes a good case for the shift from duty to breach. See Aronson, above n 248.
94 given the almost complete novelty of such an action. A strict formalistic incremental approach260 would most probably result in such an action being dismissed out-of-hand because, as Kirby J has pointed out in Pyrenees Shire Council v Day261 such a strict approach would have the effect that „…confronted with a suggested new category, lawyers in their offices and courts in Australia would have no instruction for their task of reasoning by analogy from past categories. It would then be all too easy to declare that those categories are closed…‟262
McHugh J in Crimmins declares a preference for a more flexible brand of incrementalism, calling for an examination of precedent cases „to reveal their bases in principle and policy‟263 rather than simply looking for factual similarities. However, even applying this more flexible brand of incrementalism, the task for lawyers advising their clients and courts considering any potential negligence claim against the Commissioner will still be an onerous one. The primary challenge is the question of which category of cases would need to be considered in assessing whether a duty of care should be imposed against the Commissioner.
Given that it is difficult to conceive of a probable case where substantial physical loss is alleged, the starting point would most likely be those cases comprising claims for pure economic loss. Similarly, it is likely that any economic loss claimed will be sought to be attributed to an alleged negligent misstatement by an ATO officer. However, hypothetical categorisation beyond these very general terms would be largely speculative. The issue would turn on the specific nature of the alleged negligent operational activity and the precise factual matrix surrounding it.
260 There are numerous „brands‟ of the incremental approach. As Vines has pointed out in relation to these various approaches - „although they might all be called incrementalist, there is no agreement on a framework which would assist with predictability. The incrementalism itself is fragmented.‟ See Vines, above n 225, 56. 261 Above n 73. 262 Ibid, 416. 263 Above n 59, 32.
95
Even if the analysis is confined to the probable fact scenario of an alleged negligent representation by the Commissioner resulting in the economic loss of the plaintiff, there is an array of obstacles that would need to be surmounted by the plaintiff to succeed. The majority in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979264 („San Sebastian‟) outline the central problems with determining reasonable foreseeability that arise in such cases:
There is a special problem in defining the circumstances in which a duty of care arises in the context of statements. One facet of the problem is that it is more difficult to apply the standard of reasonable foreseeability to the consequences which flow from the making of a statement, than it is to apply that standard to the consequences which flow from acts. This is because damage flows, not immediately from the defendant‟s act in making the statement, but from the plaintiff‟s reliance on the statement and his action or inaction which produces consequential loss. A second facet of the problem arises from the propensity of negligent statements to generate loss which is purely economic. The recovery of economic loss has traditionally excited an apprehension that the application of the standard of reasonable foreseeability may allow recovery of economic loss of such magnitude and in such circumstances as to provoke doubts about the justice of imposing liability for it on the defendant.265
The two facets of the problem the majority identify in San Sebastian were in the past commonly tackled through the use by the courts of the concept of proximity. As noted in (C) above, proximity is a concept which has been subjected to a number of definitions and reinterpretations over the years and which has ultimately been rejected by the High Court.266 However, the concerns at the core of the proximity consideration are likely to remain relevant. Questions of the nature of the relationship between plaintiff and defendant such as the assumption
264 (1986) 162 CLR 340. 265 Ibid, 353. 266 To the extent that Lord Bridge was prompted to comment in his judgment in Caparo Industries Plc v Dickman, above n 229, at 618, that „concepts of proximity and fairness…are not susceptible of any such precise definition as would be necessary to give them utility as practical tests but amount in effect to little more than convenient labels…‟
96 of responsibility by the defendant, coupled with reliance on the defendant by the plaintiff are likely to be extremely important salient features in a tax case.
The case of Hedley Byrne and Co Ltd v Heller and Partners Ltd267 („Hedley Byrne‟) is credited with breaking down some of the traditional reluctance to extend liability to cases of negligent misrepresentation resulting in pure economic loss. The Court applied the concept of proximity to limit the scope of a duty of care to situations when:
…in a sphere in which a person is so placed that others could reasonably rely upon his judgment or his skill or upon his ability to make careful inquiry, a person takes it upon himself to give information or advice to, or allows his information or advice to be passed on to, another person who, as he knows or should know, will place reliance upon it…268
In other words, as observed by the House of Lords in Yuen Kun Yeu v Attorney General of Hong Kong,269 to recover for pure economic loss in cases involving negligent misstatement, „there has to be an assumption of responsibility to the particular person...and reliance...by that person.270 It is likely that a court applying the salient features approach will similarly be concerned with questions of reliance, albeit undisguised by proximity labels.
The Commissioner is unlikely, however, to succeed in arguing for a modified and more lenient interpretation of the San Sebastian and Hedley Byrne approaches to questions of reliance. The argument for a concessionary approach in cases involving allegations of negligence against the Crown was rejected in a case concerning an allegation of negligent misrepresentation against a Commonwealth
267 [1964] AC 465. 268 Ibid, 503. 269 Above n 247. This case concerned an ultimately unsuccessful action by deposit-holders of a failed deposit-taking company alleging negligence against the Hong Kong Commissioner of Deposit-Taking Companies for allowing the registration of the company as a deposit-taking company. For similar reasoning, see also Caparo v Dickman, above n 229. 270 Ibid, 182.
97
Minister - Unilan Holdings Pty Ltd v Kerin271 („Unilan Holdings‟). It will be recalled from the introduction of this Part that Baxt referred to this case as evidence of the possibility of a future negligence claim against the Commissioner.
Further, and more specifically, there is also no special protection for statutory authorities against a relationship of reliance arising where the claim is purely a claim for economic loss. The case of Shaddock & Associates Pty Ltd v City of Parramatta272 („Shaddock‟) is authority for this stance.273 In that case a local council was held liable for economic loss resulting from the plaintiff‟s reliance on an incorrect certificate issued by the Council regarding proposed road widening proposals affecting the plaintiff‟s land. Liability arose even though the Council was under no statutory duty to provide that information.
There is, however, no specific judicial guidance on how the rules relating to reliance set down in San Sebastian and Hedley Byrne might apply in a pure economic loss case involving an alleged negligent misrepresentation by the Commissioner of Taxation. The matter has not been judicially tested. However, some general presumptions are possible. For example, applying the San Sebastian rules in the taxation context, a special relationship of reliance will undoubtedly be easier to infer in cases where the taxpayer has made a specific formal approach to the Commissioner for assistance.274 An example might be where the taxpayer has sought a Private Ruling from the Commissioner. Factually, this would mirror the situation in Shaddock where the plaintiff made a formal application to the defendant council for the relevant certificate.
271 (1993) 44 FCR 481. 272 (1981) 150 CLR 225. 273 The Court in Shaddock made reference to the English authority of Ministry of Housing and Local Government v Sharp (1970) 2 QB 223 in support of its stance. Subsequent support for the Shaddock stance is evident in Mid Density Development Pty Ltd v Rockdale Municipal Council (1992) 39 FCR 579. 274 A request for information or assistance is not essential for success, but it was noted in Mutual Life & Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556 at 571-572 that a finding of negligence in cases of volunteered information will be rare.
98
The real problem in the tax context, however, are the clear legislative provisions dealing with the binding nature of Public Rulings, Private Rulings and Oral Rulings which preclude the possibility of recovery in such a case outside of the defined statutory boundaries.275 This would certainly be the case if the approach to these provisions set out in Bellinz Pty Ltd v Commissioner of Taxation276 („Bellinz‟) is adopted:
[I]n our view the scheme of Pt IVAAA leaves no room for the operation of any doctrine of estoppel or the reintroduction of that doctrine through administrative law remedy. The public ruling operates as if it is the statutory basis upon which tax is to be levied. No question arises as to whether it is or is not relied upon.277
Although the comments are limited to the availability of administrative law relief, identical reasoning could readily be applied to exclude tortious relief.
Where information is provided informally to the public at large, proximity-like questions of reliance and vulnerability would be even more difficult to satisfy. In such cases courts are unlikely to hold that a special relationship of reliance exists. This is largely due to the desire to avoid both the „chill factor‟ concerns that might arise if liability was extended to such circumstances as well as the second facet of the problem outlined in San Sebastian - namely, the concern to ensure that „liability in an indeterminate amount for an indeterminate time to an indeterminate class‟278 is avoided. This is the „indeterminate liability‟ or „floodgates‟ issue,
275 The current system following the enactment of the Taxation Laws Amendment (Improvements to Self Assessment) Act (No 2) 2005 (Cth) is explained by the Commissioner in two recent Rulings: TR 2006/10 in relation to Public Rulings and TR 2006/11 in relation to Private Rulings. Law Administration Practice Statement PS LA 2001/4 also details the different forms of advice the ATO provides and the extent to which the various forms of advice are binding. The new statutory provisions are contained in Divisions 357-361 of the Taxation Administration Act 1953 (Cth) („TAA‟). 276 (1998) 39 ATR 198. In this case the taxpayer unsuccessfully argued that the deviation of the Commissioner in a Private Ruling from approaches to the question of deductibility of depreciation expenses as expressed in subsequent Public Rulings issued by the Commissioner after the introduction of a system of binding Public Rulings in Part IVAAA of the TAA was unfair. 277 Ibid, 211. 278 This is the oft-quoted summary of the indeterminacy issue by United States judge, Cardozo J, in Ultramares Corp v Touche 255 NY 170 (1931), 179.
99 flagged in (B) above as a significant public policy concern underlying public authority immunity from tortious suit.
It is highly likely that a judge faced with a negligence claim against the Commissioner will be keenly alert to ensure that the outcome of such a claim does not inadvertently lumber the Commissioner with a volley of claims. No judge would wish to see the Commissioner caught up in endless expensive and time- consuming litigation that might come at the expense of allocation of scarce resources to the proper administration of the tax system. It is clear, therefore, that questions of reasonable foresight will be infused with a number of the public policy considerations raised above in the context of the discussion of the question of prima facie immunity from suit.
If this is correct, then what further specific guidance is there for prospective plaintiffs whose claims against the Commissioner are centred on purely economic loss? Legg‟s guidelines to plaintiffs proposing to bring novel actions involving purely economic loss may provide some answer to this question. Legg identifies four main issues to be considered by prospective plaintiffs. Three of these would be directly relevant to a claim against the Commissioner of Taxation. These are questions of „avoidance of indeterminate liability‟, „vulnerability of the plaintiff / control by the defendant‟, and „the defendant‟s actual or constructive knowledge of the risk of loss to an individual or class.‟279 All these may be „salient features.‟
With regard to the indeterminate liability question, the key issues would be the extent to which the prospective claim might give rise to an argument of indeterminacy of claims, either in relation to the number or quantum of claims
279 See Michael Legg, „Negligent Acts and Pure Economic Loss in the High Court‟ (2000) 12 Insurance Law Journal 1. The fourth issue identified by Legg is „the legitimate pursuit of commercial advantage‟ which is clearly of most relevance in cases involving private commercial individuals contracting with each other and is unlikely to be relevant in cases involving public authorities. Jane Stapleton, „Duty of Care and Economic Loss: A Wider Agenda‟ (1991) 107 Law Quarterly Review 249, sets out similar guidelines (at 295-296) except that she introduces additional public policy concerns such as the inadequacy of alternative means of protection and considerations of whether or not the problem is more appropriately dealt with by Parliamentary action.
100 that might arise if the plaintiff taxpayer were to succeed. The crux of the issue would be whether the class of potential claimants is readily identifiable and their likely losses readily quantifiable. So, for example, (as noted above) were it not for the provisions of Division 359 of the Taxation Administration Act 1953 (Cth) („TAA‟), the victim of a negligently erroneous Private Ruling would stand a much greater prospect of success on this ground than a person suffering loss as a result of an ATO error in administering a mass computerised mail-out to taxpayers.
If, for example, the ATO lost the entire unencrypted child benefit database in the mail - as occurred in the United Kingdom in 2007, resulting in a massive loss of personal records by HM Revenue and Customs280 - indeterminacy concerns may well prevent availability of relief in negligence.281 Conversely, a claim over the loss of just one identified taxpayer‟s records would be less likely to fail due to indeterminacy objections. This is so, even though the Commissioner‟s error was arguably a far less significant failure to meet the standards the public would expect of a reasonably competent revenue authority. Therefore, on indeterminacy grounds alone, systemic operational malfunctions are less likely to be remedied than one-off failures.
As for vulnerability of the plaintiff / control by the defendant, the key question would be the extent to which the plaintiff could have protected himself or herself from the allegedly negligent conduct of the defendant. This salient feature might be expected to weigh heavily against a plaintiff who alleges very significant losses have resulted from his or her reliance on negligent advice from the ATO. It is clear that in these circumstances, the court could be expected to legitimately ask the plaintiff this question: „If your potential loss was likely to be so great if this advice was incorrect, why didn‟t you avail yourself of expert private sector tax advice to confirm the true position?‟
280 Over 25 million records were lost in this way. 281 Of course, this would not necessarily leave taxpayers without relief. Such a scenario would clearly be a breach of the privacy obligations of the Commissioner in accordance with the Privacy Act 1988 (Cth). Secrecy provisions contained in ss 3 and 16 of the Income Tax Assessment Act 1936 (Cth) („ITAA36‟) also bind the ATO.
101
Obviously, the plaintiff with greater financial resources and business expertise at his or her disposal will face a tougher test on this ground. Ironically, these are precisely the probable characteristics of the types of plaintiffs most likely to attempt a negligence claim against the Commissioner. Accordingly, this factor is likely to operate as a significant practical blow to the prospects of a successful claim ever arising. This will be true irrespective of whether the complained of act or omission is of an operational or policy nature.
The restriction posed may be even more significant in tax cases than in other contexts. For example, the tax situation can readily be contrasted with the situation of the plaintiff in Shaddock. In that case it was the established (albeit not statutorily required) practice for the Council to include road widening proposal information on certificates of the type requested by the plaintiff. In addition, in that case, erroneous information as to the road widening proposal was also provided to the solicitor of the plaintiff via a direct telephone inquiry. In those circumstances the vulnerability of the plaintiff due to the reliance of the plaintiff on the Council was reasonable and should have been readily apparent to the Council. In tax, s 361-5 of Schedule 1 of the TAA provides a limited concession on interest otherwise payable where there is reliance in good faith on erroneous non-ruling advice or general administrative practice. No other taxpayer rights or remedies are conceded in these circumstances. Such a statutory hurdle was not faced by the plaintiff in Shaddock.
In the non-binding Ruling context, a court would be likely to require a commitment tantamount to a contractual relationship between the parties for a vulnerability/control relationship to be held to exist. An example of such a commitment in a case in which the plaintiff won arose in the case of Cox v Deputy Federal Commissioner of Land Tax (Tas).282 That case concerned a settlement of certain land tax liabilities of the taxpayer through an agreement between the Commissioner and the taxpayer. The Commissioner subsequently sought to re-
282 (1914) 17 CLR 450.
102 open the land tax assessments. Griffith CJ denied the request of the Commissioner to re-open the assessments saying:
That matter was in actual litigation between the parties in the manner prescribed by the Act. While that litigation was pending an agreement was come to by which the respondent submitted to the appellants‟ claim, paid their costs and paid the amount claimed from him. Under those circumstances it seems to me impossible to re-open the matter. Although it is not, strictly speaking, res judicata, the compromise followed by payment operates as an executed agreement for valuable consideration.283
This case is special in that it is a case where the Commissioner clearly and unambiguously sought to bind himself to a particular taxpayer outside of a binding Ruling context. Further, holding the Commissioner to that commitment would not constitute a „substantial departure from statutory obligations.‟284 Such a situation, however, would be exceedingly rare, especially in case of operational rather than discretionary act or omission.285
There is, perhaps, another range of circumstances in which a non-binding negligent representation outside of a quasi-contractual situation might satisfy the reliance requirement. Legg hints at these in his third issue for advisers and their clients to bear in mind in addressing the reliance problem. This is the issue of whether it is possible to demonstrate ATO actual or constructive knowledge of the risk that loss might result from the alleged negligent activity.
There are strong hints in this requirement that something more than simply innocent negligence would be required to establish a claim. In the tax context, some evidence would be required of either; (1) unconscionability such as that
283 Ibid, 455. 284 Rider, above n 2, 137. 285 Similar findings arose in Precision Polls Pty Ltd v FCT (1992) 92 ATC 4549; and Queensland Trustees v Fowles (1910) 12 CLR 111. For a detailed exposition of these cases see Cameron Rider, ibid.
103
which underlies estoppel claims;286 (2) dishonesty or malice as in misfeasance in public office;287 or (3) the recognised „bad faith‟ or „improper purpose‟ exceptions to the ITAA36 s 177 preclusion of assessments from judicial review.288 On this interpretation, this factor would, therefore, operate to deny relief to victims of purely inadvertent operational act or omission.
With all of this in mind, insofar as a case of negligent misrepresentation by the Commissioner causing purely economic loss is concerned, only a very narrow avenue of potential relief remains. Factually, a case with any real prospects would ideally involve a representation tantamount to a contractual commitment. The form of that representation should not be a Public Ruling, a Private Ruling or an Oral Ruling, otherwise Divisions 358-360 respectively of the TAA will most likely be viewed as a comprehensive scheme for regulating the rights of the taxpayer to the preclusion of tortious relief. In order to demonstrate a relationship of reliance and vulnerability, ideally the claimant should be a taxpayer with minimal financial resources and tax knowledge. In other words, the taxpayer should be in a position of particular disadvantage relative to the Commissioner. The making of the misrepresentation in demonstrable circumstances amounting to unconscionability or bad faith would be ideal for aiding the prospects of the aggrieved taxpayer.
Instances of operational act or omission causing taxpayer loss in precisely these circumstances are likely to be extremely infrequent. Even if such a case were to
286 The aim of estoppel is to discourage unconscionable behaviour. Thomson points out that „the basic purpose of private law estoppel is to prevent a person from unconscionably departing from a representation upon which another party has relied, where departure from this representation would cause detriment to the second party.‟ See J Thomson, „Estoppel by Representation in Administrative Law‟ (1998) 26 Federal Law Review 83, 89-90. This is consistent with judicial comments such as those of Brennan J in Waltons Stores (Interstate) Ltd v Maher (1990) 170 CLR 394, 419, to the effect that „[t]he element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity…‟ See also the discussion of the requirement of „unconscientious conduct‟ by Deane J in Commonwealth of Australia v Verwayen (1990) 170 CLR 394. These authorities are discussed in detail in Part II of Chapter 4. 287 Discussed further in Part III of this Chapter. 288 Most recently discussed by the High Court in Futuris, above n 124. See the comments on the availability of judicial review of tax assessments reproduced below at n 938.
104 arise, the Sullivan289 compatibility principle is likely to be a significant further hurdle. Certainly, the reasoning in cases such as Lucas v O‟Reilly290 („Lucas‟) and the discussion by Young CL in that case of the duties owed by the Commissioner in the context of the plaintiff‟s allegations of a breach of statutory duty is discouraging. In that case, His Honour observed:
If the cause of action relied upon by the plaintiff is based upon a breach of statutory duty, the plaintiff must show…that the statute creating the duty confers upon him a right of action in respect of any breach…However, it is, I think, clear that the defendant owes the plaintiff no such duty. The duty of the Commissioner is owed to the Crown.291
Applying this reasoning that the Commissioner‟s duties are owed to the Crown, a conclusion that the imposition of a duty of care in negligence could readily give rise to inconsistent obligations is a rational one. There are echoes of this reasoning in the comments of Grove J in Harris292 in disposing of the taxpayer‟s negligence claim against the Commissioner. The Grove J assertions that tortious liability can not be imposed on the lawful carrying out of the Commissioner‟s functions under the ITAA36 are not expressed in terms of the compatibility principle, but the parallels are clear.293
There is also evidence of a similar approach being applied in non-tortious private law actions. Consider, for example, the comments of Hill J in AGC (Investments) Ltd v FCT294 - an estoppel case - that „[t]he Income Tax Assessment Act imposes obligations on the Commissioner and creates public rights and duties, which the
289 Sullivan v Moody, above n 235. 290 Above n 209. 291 Ibid, 4085. 292 Above n 181. 293 The judgment in Harris, above n 181, and the High Court judgment in Sullivan v Moody, above n 235, were both handed down in the same year. However, the Harris judgment predated the High Court judgment by a few months. One wonders whether the Grove J comments would have been framed in terms of the compatibility principle had the judgment been handed down after the High Court pronouncement in Sullivan v Moody. 294 (1991) 91 ATC 4180.
105 application of the doctrine of estoppel would thwart.‟295 It would not be a far stride for similar reasoning to be applied in a negligence case to determine that imposing a common law duty of care would be incompatible with the public duties of the Commissioner.
E - Conclusions
It is apparent that taxpayers aggrieved by an ATO operational act or omission have the option of bringing a negligence action against the Commissioner. This is consistent with the limited commentary and judicial consideration of the issue. It is also clear that such an action is well-suited to a taxpayer seeking monetary compensation. This is consistent with the practical compensatory expression of the goals of the tort. Further, it is clear that such an action will not be determined without some modification to the normal rules of negligence to accommodate the statutory nature of the ATO. This is true, irrespective of which approach a court adopts to determine the question of whether a duty of care arises.
What is also evident is that the more operational in nature the alleged negligence the more likely it is that the plaintiff will succeed. This is the case irrespective of which approach courts adopt to determine the claim. For example, in the unlikely event that the Anns approach is favoured, the issue would be central to determining whether a duty of care exists.
If, instead, the „proximity-as-principle‟ approach in Sutherland is applied, again the issue would be relevant - to answering the question of whether there is a sufficiently proximate relationship to give rise to a duty of care. Generally, an operational activity would be a positive contributor to the calculus of whether a sufficiently proximate relationship for sustaining a duty of care exists.
Alternatively, applying the Caparo and Takaro approaches, again the question of whether the complained of activity is operational will be assessed, albeit as an
295 Ibid, 4195. Part II of Chapter 4 discusses the case further as part of an analysis of estoppel cases.
106 unmasked question of justiciability of the matter. Again, the more operational in nature the complained of activity, the less likely it is that justiciability concerns militating against imposing a duty of care would be raised.
Even adopting the more recent salient features approach by McHugh J in Crimmins, the operational nature of the activity will be one of the 6 factors considered in determining whether a duty of care exists. If the approach signalled by the majority in Brodie ultimately prevails, the relevance of the operational nature of the activity will be part of the breach stage of the analysis, but its relevance is unlikely to be diminished by such a shift.
The examination in this Chapter also shows that various public policy constraints might be encountered in any one of the approaches open to the courts. However, again, the more operational in nature the complained of activity the more likely it is that many of these public policy concerns will be assuaged and a duty of care found to exist.
Nevertheless, the substantial uncertainty of the current „salient factors‟ approach allied with the Sullivan296 compatibility principle and the difficulty of categorising a truly novel claim such as a claim against the Commissioner in Taxation make it impossible for a taxpayer plaintiff to proceed with an action confident of success. This is so, even in cases of indisputably operational ATO acts or omissions causing taxpayer loss. It is, therefore, difficult to see the practical utility of an aggrieved taxpayer pursuing a negligence claim. Consequently, it is also difficult to foresee any opportunity for judicial clarification of the issue in the absence of legislative intervention.
296 Above n 235.
107
PART III - MISFEASANCE IN PUBLIC OFFICE
A - Introduction
Misfeasance in public office is an intentional tort which has been described in the following terms:
The tort of misfeasance in public office permits an individual to recover for the loss or damage suffered consequent upon administrative action taken by the holder of public office, if the officer acted maliciously or knew that the action was beyond power and was likely to harm the plaintiff.297
The tort has its foundation in preventing abuses of office. The examination of misfeasance in public office in this Part begins with a discussion of the relevance of this abuse of office grounding to the scope of application of the tort in cases of ATO operational act or omission causing taxpayer loss.
Attention then turns to a more detailed examination of the elements of the tort. Deane J, in the leading Australian misfeasance case, Northern Territory v Mengel298 sets these out in the following terms:
(i) an invalid or unauthorised act; (ii) done maliciously; (iii) by a public officer; (iv) in the purported discharge of his or her public duties; (v) which causes loss or harm to the plaintiff.299
In particular, the question of what constitutes the necessary malicious or deliberate intent to sustain an allegation of misfeasance against a public official is addressed. Again, this examination is carried out with a view to determining how the tort might apply to cases of operational act or omission causing compensable taxpayer loss.
297 Rosalie Balkin and Jim Davies, Law of Torts (2nd ed, 1996), 727. 298 (1995) 185 CLR 307. 299 Ibid, 370.
108
B - Misfeasance and the Dual Parameters: Preliminary Observations
Misfeasance in public office is a „well established‟300 tort with a long history in Australia and in other common law jurisdictions including the United Kingdom and New Zealand.301 While the tort does indeed have a long history, it is a history peppered with lengthy periods of judicial favour and disfavour. For instance, Dench, writing about the status of the tort in the United Kingdom in 1983, points out that:
It is probable…that by the middle of last century the tort was well established. Thereafter, however, it appears to have fallen into disuse…Not until the latter half of this century was the tort revived in earnest.302
Fairgrieve makes similar comments, also observing that in England the tort appears to presently be „experiencing something of a renaissance…‟303
There has been a similar revival of interest in the tort in Australia. Evans asserts that „[t]he explanation for the revival of interest in this form of liability is that it is directly concerned with providing a remedy for unlawful administrative action by way of an award of damages.‟304 The relevant implication in this statement, given the monetary compensation parameters of this study, is that the tort is clearly well suited to potentially providing plaintiffs with a monetary damages remedy. 305
300 Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ in Northern Territory v Mengel, above n 298, 345 citing Dunlop v Woollahra Municipal Council (1982) AC 158, 172. 301 The history of the tort is briefly described by Lord Steyn in the leading UK case of Three Rivers District Council v Bank of England [2000] 3 All ER 1. Also, Evans traces the basic cause of action underlying the modern day tort of misfeasance in public office in the UK as far back as 1364. See Evans, above n 210. 302 Simon Dench, „The Tort of Misfeasance in Public Office‟ (1980-1983) 4 Auckland University Law Review 183, 187. 303 Duncan Fairgrieve, „Damages Claims Against Public Bodies: The Role of Misfeasance in Public Office‟ (2007) 12 Judicial Review 169, 169. 304 Evans, above n 210, 640. 305 Further, though, it has also been noted that the tort is equally well-suited to providing exemplary damages. This is due to the „social intolerability‟ of malicious or willful abuses of office which the tort is aimed at addressing. This concern is broadly equivalent to the criminal law
109
Another pertinent preliminary observation is that misfeasance is a public tort and a deliberate deviation from the equality principle discussed in Part II(C) of this Chapter in the context of discussion of the tort of negligence.306 The tort can not apply to private individuals and is only applicable to public officers. Expressing this idea in the context of the equality principle, Sadler points out that the tort of misfeasance:
…is the only exception to the principle that, generally speaking, a public officer is not liable in tort unless the act complained of would, if done by a private individual, be actionable. It is the only tort having its roots and applications within public law alone. It cannot apply in private law; the defendant must be a public officer and the misfeasance complained of must occur whilst the public officer is purporting to exercise the powers of his or her office.307
Accordingly, theoretically at least, because of its express confinement to dealing with cases involving public officials the tort should be well suited to dealing with cases concerning public officials such as the Commissioner of Taxation. However, as the analysis that follows reveals, the restrictive nature of the core elements of the tort and, in particular, the requirement of subjective intent to injure the plaintiff, negates much of this potential.
Putting this fact aside for the time being, it is useful to examine further the concept of public office. Implicit in the concept of „public office‟ that underpins the characterisation of the tort as an exception to the equality principle, is the fact
concern to punish wrongdoers. The focus in this study, however, as noted in Chapter 2, and in the introduction to this Chapter, extends only to the capacity of avenues of relief to provide aggrieved taxpayers with compensatory damages. Hence, the retributive potential of the tort is of no consequence in assessing the ability of this tort to provide aggrieved taxpayers with a damages remedy for ATO operational act or omission. For further discussion, see Sadler, above n 210, 139. For judicial consideration of the circumstances in which exemplary damages might be applicable see Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118. 306 It will be recalled that the equality principle is the idea that, as much as possible, public authorities should be subject to the same legal principles and potential legal liabilities as private citizens. See the discussion in Part II(A) of this Chapter. 307 Sadler, above n 210, 138-139.
110 that the tort is a personal one. It is applicable only to „public officers.‟ This is relevant as a preliminary matter in this study given that the concern here is to determine when the ATO at an organisational level might be found liable in damages for operational act or omission. This is distinct from the question of when an ATO employee might be found personally liable. Evans explains the complexities raised by the personal nature of the tort in Australian law:
In Australia the issue is an important one. At common law the Crown is not vicariously liable for the torts of a public officer committed whilst exercising a common law or statutory power vested in that officer personally. The continued existence of the independent discretion in Australia means that for torts falling within the rule personal liability alone exists.308
Evans concedes that the employer would normally be expected to stand behind the relevant officer accused of the misfeasance, even where no vicarious liability exists. This appears to hold true where the ATO is concerned. In Re Young v Commissioner of Taxation309 the Commissioner agreed to indemnify the officer against whom the allegations of misfeasance were made. Nevertheless, some uncertainty remains.
The issue of what constitutes „public office‟ is also relevant to the operational constraint of this study. This is due to the fact that public employment is not of itself indicative of public office.310 Public office requires characteristics of a relationship of trust or confidence with the public.311 No single clear test exists to resolve this issue, but as one commentator has noted, [i]n each case the courts will
308 Evans, above n 210, 644-645. 309 [2008] AATA 115. 310 This is consistent with the views expressed in Tampion v Anderson [1973] VR 715 at 720 per Smith, Pape and Crockett JJ in which their Honours stated: „Employment with the Crown is not necessarily a public office for this purpose. The office must be one the holder of which owes duties to members of the public as to how the office shall be exercised.‟ For a brief discussion of Tampion in this context see Hugh Tomlinson and Richard Clayton, „Damages from Public Authorities: Misfeasance in Public Office‟ (1986) 130 Solicitors‟ Journal 363, 363. See also Ex Parte Kearney (1917) 17 SR(NSW) 578. 311 See Evans, above n 210, and Sadler, above n 210, at 143 in which the latter refers to the strict requirement of duties tantamount to fiduciary duties being owed to the public.
111 need to consider such issues as the role of the officer, his or her tenure, powers, and duties, and the significance of his or her decision making authority.312 The relevance here is that employees low on the public service ladder are more likely to carry out operational activities. The ramification is that these employees might not be considered to be acting in „public office‟ at all. Consequently, the tort may not be applicable to some ATO operational failures on this ground.
In the context of local councils, it has been contended that the term would not cover public servants who carry out manual tasks.313 Applying this reasoning to the ATO it could be held that officers responsible for similarly low level operational tasks (for example, data entry) are not occupying „public office.‟ Hence, these lowly employees might not be capable of being defendants in a misfeasance action.
Even overcoming the threshold issue of public office, the challenge for a taxpayer aggrieved by operational act or omission seeking to demonstrate a misfeasance in public office lies in proving that the relevant official has abused that public office. Proving an abuse of office is fundamental to a viable claim because, as noted above, the tort centres on seeking to avoid abuses of office. This is a very different emphasis from other torts such as negligence or the tort of breach of statutory duty.314 In Northern Territory v Mengel315 („Mengel‟), Brennan J confirms abuse of office as the central concern of the tort. His Honour notes that „[i]t is concerned with conduct which is properly to be characterised as an abuse of office and with the results of that conduct.‟316
Accordingly, while the requirement is specifically examined in (C) below, it is
312 Sadler, above n 210, 144. 313 See the discussion of Dunlop v Woollahra Municipal Council, above n 300, in Evans, above n 210, 646. 314 For a good discussion and comparison of the principles of misfeasance in public office with the principles of negligence see Stephen Todd, „Liability in Tort of Public Bodies‟ in Allen Linden and Nicholas Mullany (eds), Torts Tomorrow - A Tribute to John Fleming (1998). See also Geoffrey McCarthy, „Mengel: A Limited Remedy in Damages for Wrongful Administrative Action‟ (1996) 4 Australian Journal of Administrative Law 5. 315 Above n 300. 316 Ibid, 358.
112 clear that in order to establish a cause of action for misfeasance, the plaintiff is required to prove that there has been more than simply an inadvertent or negligent error. This is an obvious significant limit on application of the tort in cases of ATO operational act or omission. This is because a purely administrative failure can only be the subject of an action in misfeasance where that failure arises as a result of deliberate design. This would occur far less frequently than an innocent or negligent oversight.
Dench poses a hypothesis which even further reduces the potential utility of the tort. Dench suggests that the scope of the tort is limited to cases of discretionary (ie policy) error. He uses terminology often used in the United States to describe operational functions by referring to these as „ministerial‟ functions to make his point.317 Dench asserts:
At the outset, a distinction must be drawn between the breach of a discretionary duty, and the breach of a ministerial duty. Only the former concerns the tort of misfeasance, the basis of which, it will be argued, is malice. The latter, for which an official is strictly liable, is the forerunner of the modern tort of breach of a statutory duty.318
Although the distinction drawn by Dench has received no Australian judicial attention, his approach appeals to logic. This is because where there is a breach of an operational statutory duty there will be sufficient evidence to found a case for a clear breach of statutory duty.319 It would be redundant in these circumstances to search further for malice in order to establish a misfeasance in public office. In contrast, in the context of a discretionary statutory power, by definition no statutory duty as such exists.320 Consequently, no breach of statutory duty action is sustainable and the search for an abuse of power will be necessary for the plaintiff
317 Many United States tort commentators use this terminology in the context of discussion of the United States Torts Claims Act. See, for example, Lewis Jaffe, „Suits Against Governments and Officers: Damage Actions‟ (1963) 77 Harvard Law Review 209; and Note, above n 194. 318 Dench, above n 302. 319 As explained in the discussion of breach of statutory duty in Part IV of this Chapter. 320 As the analysis of the tort of breach of statutory duty in Part IV of this Chapter confirms.
113 to establish a case.321
Even rejecting the Dench hypothesis and accepting the possibility of some practical scope of application of the tort of misfeasance in cases involving a pure operational malfunction, the evidentiary burden on the aggrieved taxpayer to prove the necessary abuse of office is onerous. Hannett‟s views are typical of those expressed among commentators on this point:
Misfeasance appears, at first blush, to provide a potential remedy for claimants excluded from negligence or breach of statutory duty actions against public authorities. However, the difficulty of proving intention (and, in particular, of establishing subjective recklessness) makes the tort difficult to establish.322
The effectiveness in assisting plaintiffs investigating a public officer‟s decision- making motivations of investigative avenues such as the Commonwealth Ombudsman and Freedom of Information legislation is relevant to assessing the strength of this argument. It is possible to take some heart from the observations of Sadler about these investigative avenues:
Recent administrative law developments such as the Ombudsman and Freedom of Information legislation and, in certain cases, a statutory right to reasoned decisions, nowadays make access to those facts behind the subject decisions relatively less difficult. Public administrators are now, more than ever, accountable to the public. “Malicious” conduct is more likely to be exposed.323
Furthermore, operational matters are far more likely to be capable of sustaining a Freedom of Information application or more readily capable of comprehensive Ombudsman investigation where no question of governmental sensitivity to
321 It is noteworthy that Dench is writing from the perspective of the New Zealand legal system. The question in the Australian context is whether the Australian tort of breach of statutory duty is sufficiently developed such that the search for abuse of office will be unnecessary in cases of purely operational act or omission causing taxpayer loss in breach of a statutory duty. Part IV of this Chapter addresses the issue of the availability and applicability of breach of statutory duty in cases of purely operational act or omission causing taxpayer loss. 322 Hannett, above n 210, 231. 323 Sadler, above n 210, 162.
114 disclosure is easily justified. Obviously, legitimate resistance of enquiries into policy-level workings of a statutory authority such as the ATO is far more likely.
C - Detailed Examination of the Elements of the Tort
To this point the analysis of misfeasance has been generalised and centered on showing the relevance of the basic characteristics of the tort to the dual factual parameters of this study. While the requirement of public office has been dealt with in the context of this discussion, two remaining requirements have not yet been addressed. These are the requirements of a statutorily invalid or unauthorized act, and the requirement of malice. These are the core concerns of this Part.
In relation to the requirement of an invalid or unauthorised act, the majority in Mengel leave the matter unresolved. The issue is discussed in the context of consideration in that case of the innominate tort established in Beaudesert Shire Council v Smith.324 In this context, the majority in Mengel contend that the „unlawfulness‟ requirement of that tort is only satisfied in cases where there is evidence of more than simply that the acts complained of are unauthorised in the sense of being ultra vires. There must be evidence that they are actually positively statutorily prohibited.325 If this is the standard to also be applied in misfeasance cases, it follows that only an ATO operational activity positively statutorily prohibited is capable of forming the basis for a successful misfeasance action by an affected taxpayer. This is likely to be a rare occurrence.326 The alternative is that the broader test for an „unauthorised act‟ expressed by Brennan J in Mengel is applied. Brennan J explains this test as follows:
324 Above n 178. Part V of this chapter examines the tort established in this case in its own right. 325 See the discussion by the majority comprising Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ in that case, above n 298, 336-337. Their Honours cite as authority for this narrow stance (in addition to Beaudesert), Dunlop v Woollahra Municipal Council, above n 300, 170-171; and Copyright Agency Ltd v Haines (1982) 1 NSWLR 182, 195 per McClelland J. 326 An example might be where a particular form is statutorily prescribed for use by the ATO and an administrative oversight results in use of a different form and consequent taxpayer loss.
115
[T]he purported exercise of power must be invalid, either because there is no power to be exercised, or because a purported exercise of the power has miscarried by reason of some matter which warrants judicial review and a setting aside of the administrative action…However a purported exercise of power is not necessarily wrongful because it is ultra vires…Something further is required to render wrongful an act done in purported exercise of power when the act is ultra vires.327
His Honour goes on to explain that for an ultra vires act to be capable of sustaining an action for misfeasance in public office, the perpetrator must act with the necessary deliberate mental intent. It is this necessary mental element of the tort that stands to significantly restrict the utility of the tort for taxpayers aggrieved by an ATO operational act or omission.
The mental element of the tort has been summarised in the following terms:
It is clear that for the purposes of this tort the mental element is satisfied by either evidence of malice or knowledge of the absence of power (including reckless indifference as to the extent of power but not constructive knowledge of the absence of power).328
In other words, it is not enough to solely demonstrate an excess of power.329 In addition, the plaintiff must prove that the defendant either acted maliciously or had knowledge of the absence of power and that it would probably cause harm to the plaintiff.
327 Above n 298, 356. 328 Tina Cockburn, „Personal Liability of Government Officers in Tort and Equity‟ in Horrigan, above n 192, 350-351. 329 Writers such as Evans contend that absence of power should be enough. Evans justifies this view: „The law looks to the act and the harm following from it. No inquiry is made into the mental state of the defendant either objectively or subjectively. What makes the conduct wrongful in these cases is that it is based on invalidity. This is consonant with the principle that ignorance of the law provides no defence. The severity of this proposition is not beyond criticism. However, the defence of ignorance based on honesty and good faith should be less applicable in the case of public officials, who should be expected to know the law under which they operate.‟ Evans, above n 210, 649.
116
Knowledge of absence of power and malice have long been accepted as two separate limbs of the tort.330 As Smith J noted in Farrington v Thomason:331
Some of the authorities seem to assume that in order to establish a cause of action for misfeasance in a public office, it is, or may be necessary to show that the officer acted maliciously in the sense of having an intention to injure…it appears to me, however, that this is not so, and that it is sufficient to show that he acted with knowledge that what he did was an abuse of his office.332
Kneebone explains the evidentiary distinction between knowledge of absence of power and malice:
Whereas a “malicious exercise of power” requires direct evidence of lack of good faith and improper purposes, a “knowingly invalid” act is established by subjective evidence that the defendant knew that the act was based upon an invalid decision or was for an improper purpose.333
The requirement of malicious intent is open to a number of different interpretations. For instance, Dench describes malice in the following terms:
Popularly, the term conveys a sense of ill-will. Thus, spite, or a desire for revenge is readily termed malicious. This may be termed express malice. Legally, however, the term is broader. In particular, it is broad enough to include the act of an official in exercising a power which he knows he does not possess. It is in this sense, as well as the narrower sense, that the term malice has been used in the tort of misfeasance.334
330 Although in some of the literature they are viewed simply as two types of malice, the former being referred to as „untargeted‟ malice and the latter as „targeted‟ malice. For instance, this is the approach taken in the leading UK misfeasance case, Three Rivers District Council v Bank of England, above n 301. 331 Above n 179. 332 Ibid, 292. 333 Susan Kneebone, „Misfeasance in a Public Office after Mengel‟s Case: A “Special Tort” no More‟ (1996) 4 Tort Law Review 111, 128. 334 Dench, above n 302, 193.
117
In contrast, Fridman groups the various interpretations of the term under four main headings: (1) spite or ill-will; (2) any improper motive; (3) the intent to do a wrongful act; and (4) the intent to inflict injury without just cause or excuse.335
Despite the various characterisations, it is clear that lack of honesty is a clear and sufficient indicator of malicious intent. This is because of the view that dishonesty goes to the heart of the concept of an abuse of office. Brennan J expressly notes the link between abuse of office and honesty in Mengel, observing that „[i]t is the absence of an honest attempt to perform the functions of the office that constitutes the abuse of office.‟336 This is in contrast to both negligence actions and breaches of statutory duty. Hannett confirms this contrast:
Misfeasance can be distinguished from other torts invoked against public authorities such as negligence and breach of statutory duty. Misfeasance can be differentiated from both by its requirements of deliberateness and dishonesty, actual or constructive.337 (emphasis added)
In the taxation context, the challenge of proving dishonesty is likely to be a difficult one, particularly if there is any accuracy in the comments of Peter Haggstrom, Special Tax Adviser to the Commonwealth Ombudsman, on the attitude of the courts to ATO staff:
The courts have traditionally operated on the assumption that ATO staff will act honestly in their work and hence the hurdle for proving that the ATO has acted improperly is generally fairly high.338
The comments of Hill, Dowsett and Hely JJ in Kordan Pty Ltd v Federal Commissioner of Taxation339 reflect the Haggstrom point of view:
335 Fridman, above n 210. 336 Above n 298, 357. 337 Hannett, above n 210. 338 Peter Haggstrom, „A Critical Review of Tax Administration in Australia From an Ombudsman‟s Office Perspective‟ in Abe Greenbaum and Chris Evans (eds), Tax Administration - Facing the Challenges of the Future (1998) 263, 267. 339 (2000) 46 ATR 191.
118
The allegation that the Commissioner, or those exercising his powers by delegation, acted other than in good faith in assessing a taxpayer to income tax is a serious allegation and not one lightly to be made. It is, thus, not particularly surprising that allegations directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful. Indeed one would hope that this was and would continue to be the case.340
Neither Haggstrom nor Hill, Dowsett and Hely JJ go so far as to suggest a presumption by our courts of ATO staff honesty. However, in most cases, the dishonesty requirement will pose a significant practical limitation on the tort as a suitable compensatory remedy for taxpayers aggrieved by an ATO operational act or omission. It is the limb of the tort dealing with knowledge of lack of power (or „untargeted malice‟ if that label is preferred), though, that has been the subject of most of the judicial and academic consideration. The difficulties which this element of the tort poses are easily illustrated with reference to the decision in Lucas v O‟Reilly.341
In Lucas, the taxpayer alleged that the Commissioner threatened to issue a Notice of Assessment knowing that it was not lawfully authorised and for a purpose foreign to the purpose for which the power to assess was granted. Young CJ held that this constituted a cause of action founded in misfeasance in public office even though not expressed in those terms in the plaintiff‟s Statement of Claim. His Honour further held that a sufficiently arguable case on this basis could be mounted and refused the application of the Commissioner to strike out the Plaintiff‟s Statement of Claim. There was no allegation of an administrative failing in this case, but it clearly opens the door to misfeasance claims against the Commissioner.342
340 Ibid, 193. The High Court recently discussed these comments favourably in Commissioner of Taxation v Futuris Corporation Limited, above n 124. 341 Above n 209. 342 The High Court recently confirmed the potential availability of a misfeasance remedy against the Commissioner of Taxation in Commissioner of Taxation v Futuris Corporation Ltd, above n
119
Unfortunately, the case did not proceed to a full hearing. Had the misfeasance claim in Lucas proceeded, however, the plaintiff would ultimately have failed. This is because knowledge of excess of power alone will not be sufficient to support a claim unless the activity is in some way directed at causing harm to the plaintiff. The pleadings of the plaintiff as reproduced in the judgment of Young J reveal nothing beyond excess of power.
Recklessness has been accepted as a sufficient mental state for sustaining a misfeasance claim in Australia, New Zealand and the United Kingdom. Lord Steyn confirmed this in the leading UK misfeasance case, Three Rivers District Council v Bank of England (No 3) („Three Rivers‟).343 In Three Rivers, Clarke J, in the hearing of the matter at first instance, lucidly explained the reason for the inclusion of recklessness as a sufficient basis for satisfying the mental element of the tort as being the implication of dishonest intent:
The reason why recklessness was regarded as sufficient by all members of the High Court in Mengel is perhaps most clearly seen in the judgment of Brennan J. It is that misfeasance consists in the purported exercise of a power otherwise than in an honest attempt to perform the relevant duty. It is that lack of honesty which makes the act an abuse of power. 344
Undoubtedly, Clarke J had in mind the following comments by Brennan J in Mengel where His Honour stated:
Misfeasance in public office consists of a purported exercise of some power or authority by a public officer otherwise than in an honest attempt to perform the
124, 618 insofar as challenges to Notices of Assessment issued by the Commissioner of Taxation are concerned. 343 Above n 301. Lord Steyn notes, at 9: „The Australian High Court and the Court of Appeal of New Zealand have ruled that recklessness is sufficient: Northern Territory v. Mengel (1995) 185 CLR 307; Garrett v. Attorney-General [1997] 2 NZLR 332; Rawlinson v. Rice [1997] 2 NZLR 651.‟ 344 [1996] 3 All ER 58, 581. These views were accepted as correct by the House of Lords on appeal.
120
functions of his or her office whereby loss is caused to a plaintiff. Malice, knowledge and reckless indifference are states of mind that stamp on a purported but invalid exercise of power the character of abuse of or misfeasance in public office. If the impugned conduct then causes injury, the cause of action is complete.345
This extension of the tort to cases of recklessness gives rise to the only practical hope of the tort being applicable in all but the rarest cases of ATO operational act or omission causing taxpayer loss. The requirement, though, is still highly restrictive because of the search for subjectively measured intent. The prospects of using the tort in a case of ATO operational failure would have been vastly improved had the Court accepted the argument in Mengel that constructive knowledge should also suffice to establish the mental element of the tort. This argument was rejected. In large part this is due to the fact that imposing this objective standard would be tantamount to imposing a negligence-like test of reasonable foreseeability of harm, thus rendering the tort redundant. The court reasoned:
In this country governments and public officers are liable in negligence according to the same general principles that apply to individuals. And, in that context, the argument that misfeasance in public office should be reformulated to cover the case of a public officer who ought to know of his or her lack of power can be disposed of shortly. So far as unintentional harm is concerned, the proposed reformulation … serves no useful purpose if there is a duty of care to avoid the risk in question and is anomalous if there is not. And it serves no purpose if the public officer is actuated by an intention to harm the plaintiff for that constitutes misfeasance in public office whether or not the officer knows that he or she lacks authority.346
345 Above n 298, 327. 346 Ibid, 348. Similar observations are made in the commentary on the case by Hiley and Lindsay in Graham Hiley and Alan Lindsay, „Tort Liability Clarified: Northern Territory of Australia v Mengel‟ (1994) 18 University of Queensland Law Journal 334, 338 where the authors note: „The rejection of a constructive knowledge element seems to be based upon the assumption that constructive knowledge more appropriately belongs to a negligence action (ie an action based upon a duty of care to ascertain the extent of one‟s powers)…‟
121
Dench also notes that to bestow the cause of action with a foundation of constructive knowledge would be tantamount to making the breach of the relevant statute an offence of strict liability. Such a construction may run contrary to legislative intent.347 The fact that the tort is a personal tort (noted in Part II(B) above) might also have had some bearing on the restrictive approach to imputing knowledge on the part of the defendant in misfeasance cases. For example, the majority in Mengel, in their discussion of the policy arguments militating against the extension of the tort, note:
So far as policy is concerned, it is to be borne in mind that, although the tort is the tort of a public officer, he or she is liable personally and, unless there is de facto authority, there will ordinarily only be personal liability.348
Irrespective of the basis for the restrictive approach to the mental element of the tort, it is abundantly clear that even the case of a deliberate ATO administrative failing outside of the Commissioner‟s statutory powers would not necessarily suffice for success in a misfeasance action. It would only be sufficient if accompanied by a demonstrable abuse of power constituted by „reckless indifference or deliberate blindness to that invalidity or lack of power.‟349 Accordingly, the tort will have no potential applicability in the vast majority of cases of ATO operational act or omission causing taxpayer loss.
Even in those limited cases in which the aggrieved taxpayer might be able to establish the requisite state of mind and excess of power in the context of an operational act or omission by an ATO officer, there is still a prospect that a compensatory remedy might not be available. To succeed, the taxpayer must
347 See Dench, above n 302, 198. See also Kneebone, above n 333, 119. Kneebone also contends that the rejection of the constructive knowledge argument was tantamount to the rejection by the High Court of the argument that a negligent state of mind would satisfy the malicious intent test. The Kneebone view is certainly consistent with the views expressed by the High Court in Mengel, above n 298, 347-348. 348 Above n 298, 347. 349 Northern Territory v Mengel, above n 298, per Deane J at 371.
122 demonstrate intended directly caused damage resulting from the complained of activity. Hiley and Lindsay elaborate on the problem in the following terms:
The High Court has declined to identify a remedy for cases where a defendant, without any right or authority, causes damage to a plaintiff which damage is the inevitable consequence of the defendant‟s intentional conduct but where the damage is indirectly caused…Accordingly, a plaintiff, if unable to prove direct and intended damage, or breach of a (causally) relevant duty of care, will probably fail to recover…350
The overall picture that emerges is that the tort is unlikely to be of great utility to a taxpayer aggrieved by an ATO operational act or omission and seeking monetary compensation. Even if the underpinnings of the tort do not either specifically or practically preclude the possibility of bringing such a claim, the necessary deliberate mental intent will be absent in most cases and difficult or impossible to prove in many of the remaining cases. This has proven the greatest stumbling block for most of the taxpayers who to date have attempted to raise a misfeasance argument against the Commissioner.351
Even in those cases where these substantial challenges are capable of being met, there is a need to surpass the hurdles of causation and remoteness of damages. Nevertheless, conceivably, misfeasance in public office might constitute a viable alternative for some taxpayer victims of ATO operational act or omission seeking monetary compensation. The door has been left open for such a claim to be
350 Hiley and Lindsay, above n 346, 341. Although commenting on the UK position, Andenas and Fairgrieve raise a related counter argument, pointing out that in that jurisdiction the tort has been more readily extended to cases seeking damages for pure economic loss than has been the case in negligence actions. Accordingly, they argue, where pure economic loss is at issue, it may be worth considering misfeasance in public office as a viable alternative avenue for recovery if the other elements of the tort are evident. See Mads Andenas and Duncan Fairgrieve, „Misfeasance in Public Office, Governmental Liability and European Influences‟ (2002) 51 International and Comparative Law Quarterly 757, 777. A similar argument is raised by the authors, at 776-777, in relation to the less restrictive approach taken to the question of proximity in some misfeasance cases in the UK than in other tort cases in that jurisdiction. 351 In no Australian case has the taxpayer proved the requisite mental element. Notable failed attempts include Henderson v Deputy Commissioner of Taxation [2005] FCA 1806; Engler v Commissioner of Taxation (No 3) [2003] FCA 1571; Gates v Commissioner of Taxation [2006] FCA 739; and Madden v Madden & Ors (1996) 136 ALR 98.
123 brought by cases such as Lucas and, more recently, the High Court decision in Commissioner of Taxation v Futuris Corporation Ltd.352 It was observed in Futuris that s 175 of the ITAA36 would not protect the Commissioner from a challenge to a Notice of Assessment on the basis of an ATO officer having committed a misfeasance in public office.353 This pronouncement, however, does not change the principles applied in misfeasance cases. Accordingly, it does little to advance the practical prospects of taxpayer victims of inadvertent ATO operational act or omission who are contemplating bringing a misfeasance claim.
352 Above n 124. 353 Section 175 of the ITAA36 provides that an assessment in not invalid merely because the Commissioner has not complied with any provision of the ITAA36.
124
PART IV - BREACH OF STATUTORY DUTY
Stanton aptly summarises the history of the tort of breach of statutory duty:
The history of the modern tort of breach of statutory duty can be traced back to 1285 when the second Statute of Westminster provided a remedy in the form of an action on the case to those damaged by the neglect of statutory duties. The immediate historical importance of this was negligible. There is no sign of the tort having established itself until the eighteenth century. This can almost certainly be explained by the fact that few statutes were passed in the intervening years which purported to confer benefit on individuals.354
Theoretically, at least, the tort should be a popular cause of action for taxpayers seeking compensation for loss caused by an ATO operational act or omission. First, „it dispenses with any need to establish a duty of care and, depending on the wording of the statute, the need to prove negligent conduct.‟355 Therefore, a mere innocent operational failure would be sufficient to trigger a potential cause of action. Second, the tort is capable of providing a monetary compensation remedy, although the extent and nature of compensation available may be regulated by the relevant breached legislative instrument. On the face of it, therefore, there is a real possibility of the tort applying in cases of ATO operational act or omission where monetary compensation is sought. However, an examination of the elements of the tort reveals the significant challenges facing a taxpayer in bringing such a claim.
Luntz summarises the elements of the cause of action as follows:
354 Stanton et al, above n 87, 17. There is, however, some conjecture as to whether it actually exists as a separate tort. Some argue that a breach of statutory duty is simply „statutory negligence.‟ See, for example, the lengthy discussion in Colin Phegan, „Breach of Statutory Duty as a Remedy Against Public Authorities‟ (1974) 8 University of Queensland Law Journal 158. Phegan notes at 158 that: „The most fundamental challenge to the enunciation of a separate cause of action founded on breach of statutory duty is the suggestion that there is no separate cause of action at all.‟ The High Court would appear to have debunked this view on a number of occasions. See, for example, Downs v Williams (1971) 126 CLR 62, 74-75 per Windeyer J. 355 Chris Hilson and W V H Rogers, „X v Bedfordshire County Council: Tort Law and Statutory Function - Probably not End of the Story‟ (1995) 3 Torts Law Journal 1, 2.
125
[T]he plaintiff must prove the right to the performance of the statutory duty in question is enforceable by an action in tort; that the duty is imposed on the defendant; that the plaintiff is a person protected by the statutory duty; that the harm suffered by the plaintiff is within the class of risks at which the legislation is directed; that the defendant was in breach of the duty; and that the breach caused the harm for which the plaintiff seeks damages.356
The first three of these elements pose a taxpayer plaintiff the greatest difficulties.
These boil down to the challenge of demonstrating that the relevant statute imposes on the defendant a statutory duty toward the plaintiff. It is noteworthy that the search is for a duty in the legislation, as distinct from any search for a power or discretion to act or refrain from acting in a particular way.357 The challenge of disentangling duty from discretion is similar to the difficulty of drawing the policy/operational distinction. As Cane observes:
Although a statutory function may be called a “duty” by the statute, the content of that duty may not be expressed in a sufficiently detailed way such that in every situation in which the duty falls to be performed the authority under the duty will know, just by reading the statute, what it must do. If this is so, the authority will have to make some decision or choice about what to do in exercise of its duty…In other words…authorities have a duty coupled with a discretion.358
Even where the duty/power distinction is easy to draw, the fact remains that where an operational failure stems from a discretionary power rather than a statutory duty, relief is likely to be denied. The only tortious option left to the plaintiff would be to bring a negligence claim.359 There would appear to be little incentive
356 Luntz and Hambly, above n 171, 587. Sir Anthony Mason has extra-judicially affirmed a similar listing of the elements of the tort. See Mason, above n 213, 7. 357 For further discussion see Stanton et al, above n 87, 19. 358 Peter Cane, Tort Law and Economic Interests (2nd ed, 1996), 246. 359 However, if the policy/operational distinction is persuasive, this may mean that the plaintiff might also be denied a remedy in negligence. The plaintiff in this instance may be left with no
126 for the plaintiff to bring a claim alleging breach of statutory duty in these circumstances.
Following this logic through, however, the rationality of choosing to bring a claim alleging breach of statutory duty in a case of ATO operational act or omission causing taxpayer loss is questionable. This is because if a statute imposes a duty to act in a particular operational fashion, a failure to do so is clearly prima facie grounds for a negligence claim. The obvious question is why the plaintiff would embark on the complicated search for statutory intent to bring a claim for breach of statutory duty where negligence is capable of providing the same remedy without any such inquiry.
The only possible explanation is that breach of statutory duty, unlike negligence or misfeasance in public office, does not require any inquiry into the question of fault or intent. In essence, a breach of statutory duty is a tort of strict liability.360 One suspects that in practical terms though, where the plaintiff can demonstrate the breach of a clear statutory duty, the hurdle of demonstrating a breach of a duty of care for establishing a claim in negligence would not be difficult to make out.
All of this aside, the question remains whether Australian tax legislation imposes any tortious duties on the Commissioner at all. The answer is a clear no if the case law to date is any guide. Grove J in disposing of a claim of breach of statutory duty against the Commissioner of Taxation in Harris v Deputy Commissioner of Taxation361 set out the particular challenge facing Australian taxpayers:
An action for breach of statutory duty is not available to all persons suffering special damage consequent upon a breach of public duty. What must be shown is
remedy. See the discussion of the issue in the context of the application of the policy/operational distinction in Part II of this Chapter. 360 It will be recalled from the discussion of misfeasance in public office in Part III of this Chapter that one of the bases for rejection of constructive knowledge as a sufficient basis for a misfeasance claim is due to the fear of turning the tort into a strict liability tort. The un-stated concern is that in so doing the tort would significantly impinge on the tort of breach of statutory duty due to it too being a tort of strict liability. 361 Above n 181.
127
that the duty was owed to the injured party at least in the sense that the duty was created for the benefit of a class of person less extensive than the general public of which the injured party was a member.362
His Honour did not speculate upon the existence of such a duty in disposing of the taxpayer‟s breach of statutory duty argument. However, earlier in his judgment, His Honour observed, in disposing of the taxpayer‟s closely related negligence claim, that „[t]here is no basis upon which to conclude that there is a tort liability in the ATO or its named officers towards a taxpayer arising out of the lawful exercise of functions under the ITAA 1936.‟363 On this reasoning, had the breach of statutory duty argument proceeded to trial in this case, the taxpayer would surely have failed.
In Lucas v O‟Reilly364 Young CJ dealt with a similar argument by a taxpayer alleging, among a number of causes of action, a breach of statutory duty by the Commissioner in respect of a foreshadowed (and, the taxpayer argued, erroneous) Notice of Assessment of his tax liability. Young CJ found that it would be unlikely that a duty of care to the plaintiff taxpayer would be implied in the Income Tax Assessment Act 1936. His Honour stated:
If the cause of action relied upon by the plaintiff is based upon a breach of statutory duty, the plaintiff must show not only that the duty which is alleged to have been or to be about to be broken is a duty owed to him but also that the statute creating the duty confers upon him a right of action in respect of any breach…However, it is, I think, clear that the defendant owes the plaintiff no such duty. The duty of the Commissioner is owed to the Crown.365
According to the Young CJ reasoning, the Income Tax Assessment Act 1936 (Cth) does not impose on the Commissioner any duty to particular individual taxpayers or classes of taxpayers. In fact, the duties of the Commissioner are owed
362 Ibid, 409-410. 363 Ibid, 409. 364 Above n 209. 365 Ibid, 4085.
128 exclusively to the Crown, at least insofar as the issue of Notices of Assessment is concerned. Accepting this view, a successful action by a taxpayer for breach of statutory duty by the Commissioner is all but conclusively precluded in the majority of cases. This is true, irrespective of whether or not the claim arises out of ATO operational failure.
A further problem exists for Australian taxpayers seeking to bring a breach of statutory duty claim against the Commissioner. This problem stems from the fact that many of the likely factual circumstances surrounding a potential taxpayer claim have already been dealt with in tax legislation in some way. As a general rule, the existence of a tortious duty in the legislation will be denied where an alternative remedy is already provided for in the legislation.366 Therefore, if, for example, a taxpayer were to bring a claim arising out of an operational act or omission related to a general administrative practice of the Commissioner, the taxpayer would most probably fail. This is because s 361-5 of Schedule 1 of the Taxation Administration Act 1953 (Cth) sets out the limited circumstances in which such administrative practices can be relied upon. It also sets out the remedies which apply for ATO divergence from those practices and procedures in those circumstances.367
Accordingly, in order to succeed in a breach of statutory duty claim, the taxpayer‟s case would need to fall within one of two exceptions to the general rule regarding the existence of alternative remedies. Sir Anthony Mason has extra- judicially summarised these two exceptions:
The first is the principle … that the intention to create a cause of action will be implied where the statute is enacted for the benefit of a particular class. The
366 This principle derives from the oft-quoted comments of Lord Tenterden in Doe dem. Murray, Lord Bishop of Rochester v Bridges (1831) B. & Ad. 847: „[W]here an Act creates an obligation and enforces the performance in a specified manner, we take it to be a general rule that performance cannot be enforced in any other manner. If an obligation is created, but no mode of enforcing its performance is ordained, the common law may, in general, find a mode suited to the particular nature of the case.‟ 367 The remedies set out in the section extend only to remission of certain interest charges for which the taxpayer might otherwise have been liable.
129
second is where the statute creates a public right and a particular member of the public suffers particular, direct and substantial damage different from that common to the rest of the public.368
As for the second exception, it is difficult to foresee specific factual circumstances which might fall within that exception.369 However, this exception does not yet appear to have been authoritatively tested in Australian courts.
The likelihood of a taxpayer claim being construed as falling within the first exception is also slim. This is particularly so given the reasoning of Young CJ in Lucas v O‟Reilly in confining the duties of the Commissioner to the Crown. It is not, however, possible to be conclusive as the law on this point has been described as „unacceptably vague.‟370 The unpredictability of the traditional process of legislative interpretation by judges in breach of statutory duty cases is the cause of the vagaries. The interpretation process is aptly described by the following extract from Dixon J‟s judgment in O‟Connor v S P Bray Ltd:371
[A]n intention to give, or not to give, a private right has more often than not been ascribed to the legislature as a result of presumptions or by reference to matters governing the policy of the provision rather than the meaning of the instrument. Sometimes it almost appears that a complexion is given to the statute upon very general considerations without either the authority of any general rule of law or the application of any definite rule of construction.372
It is not enough, however, for the plaintiff to prove existence of a statutory duty - that duty must be owed specifically to the plaintiff or a particular class to which
368 Mason, above n 213, 8-9. These two exceptions were those formulated by Lord Diplock in Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173. 369 Perhaps factual circumstances surrounding a Private Ruling sought from the ATO by a particular taxpayer containing erroneous information due to an administrative error might be capable of giving rise to substantial direct damage different to that suffered by the public at large. However, as noted in considering this hypothetical scenario in the discussion of proximity principles of negligence in Part II(C), it is highly unlikely that such an operational error with these ramifications would result from a considered ATO opinion such as a Private Ruling. 370 Stanton et al, above n 87, 34. 371 (1937) 56 CLR 464. 372 Ibid, 478.
130 the plaintiff belongs. The existence of a general public duty is not enough.373 Unfortunately, it is likely that tax legislation will be construed as being for the public benefit generally rather than for the benefit of a special class, even though some might benefit more than others from a particular provision.374 This is consistent with a judicial approach to the tort which has been described by Kneebone as fostering a clear „protective attitude‟ toward public authorities. 375
There is nothing in the preceding analysis to indicate that a taxpayer seeking to bring an action against the Commissioner for breach of statutory duty, whether affected by an operational act or omission or otherwise, would be favoured with an abandonment or relaxation of this protective attitude. The utility of the tort for aggrieved taxpayers seeking a compensatory remedy is, therefore, likely to be very limited indeed.
373 As noted by Lord Jauncey in R v Deputy Governor of Parkhurst Prison; Ex parte Hague (1992) 1 AC 58. 374 This was the approach generally taken in X(Minors) v Bedfordshire County Council, above n 250, in which it was observed that social welfare legislation will generally be treated as being for the benefit of society in general, even though it might provide particular protection for certain individuals. 375 Kneebone, above n 73, 166-167. Kneebone elaborates: „This protective attitude is manifested by the process of inferring an intention to confer a private right of action. Factors which the courts rely upon to indicate whether the action for breach of statutory duty will lie include the presence of an alternative remedy, the specificity of the language used to confer a statutory duty, the “absoluteness” of the duty conferred and whether to confer a private right of action would be to impose too onerous a standard upon the defendant. All these factors indicate a policy of restricting liability under the tort of breach of statutory duty.‟
131
PART V - THE INNOMINATE TORT - BEAUDESERT SHIRE COUNCIL V SMITH
The examination of the available tortious avenues of relief in this Chapter cannot be concluded without mention of the innominate376 cause of action established in Beaudesert Shire Council v Smith377 („Beaudesert‟). The principle in Beaudesert is as follows:
Independently of trespass, negligence or nuisance but by an action for damages upon the case, a person who suffers harm or loss as the inevitable consequence of the unlawful, intentional and positive acts of another is entitled to recover damages from that other.378
From this description the three core concepts underlying the tort are evident. These are the requirements that: (1) the complained of act is „unlawful‟; (2) that it is „intentional‟; and (3) that the harm caused is an „inevitable consequence‟ of the complained of act.
The unlawfulness requirement has been described as „the most controversial element of the test.‟379 Unlawfulness has been restrictively defined as „some positive act forbidden by law.‟380 This is as distinct from mere invalidity because unauthorised, although not expressly or implicitly outlawed. This is in contrast to misfeasance in public office, in which an „unauthorised act‟ is all that is required.381
376 This tort is often referred to as the tort of the „Action on the Case‟ although it has been noted by Dworkin that „[t]he principle was not really derived from the old form of action - the Action on the Case - nor did any of the older decisions cited by the court support it as formulated; instead the High Court was attempting to lay down an entirely new principle.‟ Gerald Dworkin, „Intentionally Causing Economic Loss - Beaudesert Shire Council v Smith Revisited‟ (1974) 1 Monash University Law Review 4. 377 Above n 28. 378 Ibid, 156. 379 Hiley and Lindsay, above n 346, 334. 380 Beaudesert Shire Council v Smith, above n 28, 152. See also Hull v Canterbury Municipal Council [1974] 1 NSWLR 300, 311; Dunlop v Woollahra Municipal Council, above n 300; and Kitano v The Commonwealth (1973) 129 CLR 176. 381 As discussed in Part III of this Chapter, accompanied by the sufficient malicious intent, an ultra vires act is capable of satisfying the unauthorised act requirement of that tort. See the comments of
132
Dworkin and Harari perhaps best describe the meaning of unlawfulness for the purposes of the tort:
…[T]he High Court appreciated the difficulties that would arise from holding that for the purposes of the new action on the case any intentional breach of a statute inevitably causing damage to the plaintiff was “unlawful.” This would conflict with established principles governing the action for breach of statutory duty. It would destroy the whole foundation of that action and lead to results which are obviously unacceptable…The meaning of “unlawful” was, therefore, restricted by the Court so as to exclude an act which has no other taint than that of being in contravention of a statute.382
What is less clear is whether the definition of unlawfulness allows recovery where unlawfulness for the purposes of breach of statutory duty cannot be demonstrated. Stanton asserts that „[a]lthough the issue has yet to be faced directly by an appellate court, the signs are that judicial sentiment is moving in the direction of rejecting this possibility.‟383 In contrast, Dworkin contends that „courts have sometimes given a remedy for unlawful breach of a statute where no independent action for breach of statutory duty existed.‟384
„Intentional‟ in the context of this tort merely requires evidence that the act complained of was a voluntary one as Standish asserts:
“Intentional” clearly refers to the nature of the act, i.e. a voluntary act, and as the principle is confined to “acts” it would seem that the word “positive” is redundant even if it was intended to show that omissions were not included.385
Brennan J in Northern Territory v Mengel, above n 298, cited in the discussion of misfeasance in public office in Part III of this Chapter. 382 Gerald Dworkin and Abraham Harari, „The Beaudesert Decision - Raising the Ghost of the Action Upon the Case‟ (1966-1967) 40 Australian Law Journal 296, 347. 383 Stanton et al, above n 87, 272. 384 Dworkin, above n 376, 20. Dworkin cites Williams v Hursey (1959) 103 CLR 30 at 108-109 and 125 as Australian authority for this proposition. 385 M J Standish, „Case Note: Beaudesert Shire Council v Smith‟ (1967-1968) 6 Melbourne University Law Review 225, 226.
133
The majority in Northern Territory v Mengel386 more fully describe the requirement and the concerns with it:
It is the intentional element of the cause of action described in Beaudesert that has given rise to most concern. More precisely, it is that the principle as formulated permits of liability notwithstanding that there is neither negligence nor an intention to inflict harm. So far as intention is concerned, the cause of action does not depend on an intention to harm the plaintiff, but on the doing of an act which is intentional and the inevitable consequence of which is to cause loss to the plaintiff.387
This is in contrast to the tort of misfeasance in public office in which intent requires an inquiry into whether the excess of power is committed with malicious intent in the relevant sense. As Dench notes:
Though related to the tort of misfeasance, it is clearly a separate tort. There is no requirement that the defendant be a public officer, or that he act maliciously.388
While there is also no requirement of malicious intent in the tort of breach of statutory duty, the Beaudesert tort can also be contrasted with the tort of breach of statutory duty. As the majority in Mengel observe:
There is an obvious similarity between the cause of action recognised in Beaudesert and the action for breach of statutory duty which also allows that there may be liability regardless of negligence and regardless of intention to injure. But there is some difficulty in reconciling these causes of action by reason that there is no action for breach of statutory duty unless the legislation confers a
386 Above n 298. 387 Ibid, 341. 388 Dench, above n 302, 196; cf Evans, above n 210, in which the author treats the Beaudesert principle as an example of one of the three „paradigms‟ or „avenues of development‟ of the tort of misfeasance. Evans does concede the possibility that each of the three paradigms he identifies might actually constitute separate heads of liability.
134
right on the injured person to have the duty performed. If no right is conferred, the general rule is that there is no liability in damages.389
The third requirement, that the loss suffered by the plaintiff is an „inevitable consequence‟ of the complained of activity, is also a controversial one. The problem with this requirement has been vividly illustrated by example by Dworkin and Harari. Standish provides a concise summary of the example:
An interesting example, adverted to by Dworkin and Harari, where the Beaudesert principle would allow actions where they have been steadfastly been denied before, is in the field of negligence. It would lead to the amazing conclusion that if A were liable in negligence to B, it would only be for damage that was reasonably foreseeable, whereas if C were damaged as a consequence of that unlawful act of negligence towards B, A would be liable for all the inevitable consequences even though no duty of care may have been owed to C.390
It is largely due to the fact that the tort does not necessarily require any malicious intent or the existence of any duty of care that the tort has been attacked as jurisprudentially unsound.391 The comments by Standish are typical of the academic criticisms:
[T]he question arises as to whether such a principle is well-founded. While development of the action on the case is still possible there are limits within which judicial virtuosity must be confined and it would appear that Their Honours‟ judgment reached beyond them. It is submitted, with respect, that the High Court proceeded on an inadequate survey of the earlier cases and of fundamental notions of tortious liability.392
389 Northern Territory v Mengel above n 298, 343-344. 390 Standish, above n 385, 229. 391 For good examples of this criticism and the strident criticisms of the decision generally see Standish, ibid; Robert Sadler, „Whither Beaudesert Shire Council v. Smith?‟ (1984) 58 Australian Law Journal 38; Dworkin and Harari, above n 382; and Dworkin, above n 376. 392 Standish, ibid, 226-227.
135
The majority in Mengel also attack the tort on this basis and additionally contend that the tort is largely redundant:
The Beaudesert principle allows, at least as a matter of legal theory, that there may be liability notwithstanding that, in the circumstances, the plaintiff is under no duty of care to avoid harm to the plaintiff. And liability does not depend on an intention to harm. There may be cases involving breach of a duty of care which fall within the Beaudesert principle but, to that extent, the principle serves no purpose. And if there is no duty of care, it is anomalous to say the least, to hold a person liable for harm which is not intentional and which he or she is under no duty to avoid.393
Accordingly, the High Court in Mengel overruled the tort in all contexts except in those cases „in which there is liability for harm caused by unlawful acts directed against a plaintiff or the lawful activities in which he or she is engaged.‟394 The meaning of this narrow exception is far from clear, as Hiley and Lindsay point out:
The expression “directed against a plaintiff or the lawful activities in which he or she is engaged” is the additional mental element that creates a cause of action where a defendant acts unlawfully. The boundaries of that mental element are unclear. Certainly, it requires less than the intention to harm.395
If this interpretation is correct there remains a slim possibility that a taxpayer aggrieved by an operational act or omission absolutely prohibited in the relevant tax legislation „directed against the plaintiff or the lawful activities in which he or she is engaged‟ could obtain monetary compensation through a successful action in damages on the case. This might be the case, even in the absence of any deliberately malicious intent on the part of the offending ATO officer (which would mean a failure of the case if pleaded as a misfeasance in public office) and in the absence of any demonstrable intent in the relevant legislation to allow a
393 Above n 298, 343. 394 Ibid, 345. 395 Hiley and Lindsay, above n 346, 335.
136 civil law action in damages (which would preclude a breach of statutory duty remedy).
It would be legitimate to question, however, why such a case, given its operational malfunction founding, would not be pleaded in negligence. Negligence also requires no malicious intent or more onerous examination of legislation in the search for intent to allow a civil remedy.
Perhaps the best indicator of the future remaining scope of the Beaudesert principle in this country is the emerging UK tort of interference with trade or business interests.396 According to the majority in Mengel, this tort applies when there has been „an unlawful act directed at the person injured, although not necessarily done for the purpose of injuring his or her interests.‟397 Hiley and Lindsay interpret this reference as follows:
They stated that the necessary intention to harm exists where „a person knowingly interferes with the enjoyment by another of a positive legal right, whether such knowledge is actual or constructive.‟ If this is a sufficient definition of the element that the unlawful act must be „directed against‟ the plaintiff, it appears to support a wide interpretation of that element. It appears to require only knowledge that a right is being interfered with and not an intention, whether predominant or not, to interfere.398
On the strength of this interpretation, the Beaudesert exception could be applied in cases where the prohibited operational act of the relevant ATO officer is directed at a particular taxpayer‟s interests, although not directed to that taxpayer with any
396 This has been described as one of the „economic torts‟. Stanton describes the economic torts in these terms: „A number of torts are traditionally classified under this heading. These torts, which are concerned with the intentional infliction of economic losses, mark out the boundaries of legitimate trade activities and competition. The torts in question are conspiracy, interference with contracts and (more contentiously) interference with trade or business (which subsumes the tort of intimidation).‟ Stanton et al, above n 87, 271. The innominate tort in Beaudesert has been described as one of the economic torts. See the comments to this effect by the majority in Mengel, above n 298, 342. Although, conversely, Sadler has asserted that „the case was not designed as a stepping stone for the development of a specific economic tort.‟ See Sadler, above n 391, 48. 397Mengel, above n 298, 343. 398 Hiley and Lindsay, above n 346.
137 particular intent to injure his or her interests. This still means, though, that to be applicable in cases of operational act or omission, that act or omission must have been a deliberate one, leaving a fairly narrow scope of application for the tort.
From a practical point of view it would also be difficult to conceive of a situation where such a deliberate unlawful act directed toward an individual‟s interests would not at least be sufficient to constitute reckless indifference as to any damage to the plaintiff that might result. This would bring the complained of activity clearly within the ambit of an action for misfeasance in public office.
A plausible situation might be where the defendant ATO officer is recklessly indifferent to the potential for harm to the taxpayer plaintiff‟s interests resulting from their unlawful act, but does not know that the activity complained about was unlawful as such. In such cases, misfeasance in public office might not be applicable, but the exception in Beaudesert would be satisfied. Of course in these extremely rare cases, provided the breached statute could be interpreted as allowing a civil avenue for recovery, an action for breach of statutory duty might legitimately lie. Again, therefore, the potential utility of this tort for an aggrieved taxpayer is miniscule.
138
PART VI - CONCLUSIONS
The obvious overall conclusion of this Chapter is that none of the tortious avenues of relief examined are likely to be significant aids for taxpayers seeking monetary compensation for ATO operational act or omission. Primarily, this is because most will have potential application only in an extremely limited number of cases of ATO operational act or omission. The innominate Beaudesert tort, for example, is so limited in its possible remaining scope as to be impossibly unlikely to ever be used in a case of ATO operational act or omission.
In the case of misfeasance in public office, it is the requirement of malicious intent which dramatically restricts the potential scope of the tort. Malicious intent is only likely to accompany an operational act or omission in an extremely limited number of cases. Even in those limited cases, proving malicious intent is likely to be exceptionally difficult. This is especially disappointing given that this tort is designed to cater for disputes involving public officials and is well suited to providing compensation for economic losses.
In cases of breach of statutory duty, the prospect of a taxpayer demonstrating that the ATO operational act or omission which caused their losses was committed in breach of a statutory duty to the taxpayer or a specific class to which the taxpayer belongs is slim at best. Apart from the factual unlikelihood of a loss-causing operational act or omission arising in these circumstances, the case law examined in Part IV strongly suggests that tax laws will typically be viewed as creating general public duties, rather than tortious duties to any particular taxpayer or class of taxpayers. This prevailing judicial approach casts significant doubt on a taxpayer breach of statutory duty claim ever succeeding.
This leaves negligence as the only hope for the aggrieved taxpayer seeking a tortious solution. And in the case of negligence there is, at least, no problem with the tort‟s notional capacity to deal with a broad range of deliberate and unintentional loss-causing ATO operational acts or omissions. The big problem, however, is the complex and unsettled state of the law of negligence on questions
139 of public authority duty of care and breach of duty. The analysis in Part II of this Chapter has shown that each of the tests and tools applied by our courts to resolve these issues is likely to raise significant hurdles for any taxpayer brave enough to attempt such a claim against the ATO. The realistic prospects of success are therefore difficult to precisely assess, but almost certainly are very slim.
The ramifications of these conclusions in terms of adequacy and effectiveness of the existing avenues of compensatory relief available to Australian taxpayers aggrieved by an ATO operational act or omission will be examined in detail in Chapter 5. Attention, however, must turn first to the existing array of non-tortious avenues for potential recovery of compensation.
140
CHAPTER 4 - NON-TORTIOUS COMPENSATORY REMEDIES AVAILABLE TO
AUSTRALIAN TAXPAYERS AGGRIEVED BY ATO OPERATIONAL ACT OR OMISSION
PART I - INTRODUCTION
This Chapter brings together all non-tortious causes of action potentially capable of providing Australian taxpayers aggrieved by an ATO operational act or omission with monetary compensation. Therefore, the scope of this Chapter is extremely broad. Consequently, the causes of action addressed have been clustered into four categories. These categories are equitable avenues of relief, administrative law avenues of relief, informal avenues of relief and „other‟ avenues of relief. Each of the subsequent parts of this Chapter deals with one of these four clusters.
Part II examines the equitable avenues of relief potentially available to taxpayers aggrieved by an ATO operational act or omission seeking monetary compensation. In particular, the focus is on two causes of action. These are estoppel and restitutionary relief via the doctrine of unjust enrichment. The analysis reveals that these remedies, while notionally capable of providing taxpayers aggrieved by an ATO operational act or omission with monetary relief, have a very limited scope of application.
Part III deals with formal administrative law avenues for relief. Specifically, this Part deals with judicial review of administrative action in accordance with the Administrative Decisions (Judicial Review) Act 1977 (Cth) („ADJR Act‟) and/or the Judiciary Act 1903 (Cth). As the analysis in Part III shows, there are clear and inflexible limitations on the applicability of these administrative law avenues of relief which preclude the possibility of relief in cases where monetary compensation is sought. Accordingly, administrative law relief is disposed of summarily.
Part IV deals with the „informal‟ avenues of relief available to aggrieved taxpayers. Specifically, the emphasis will be on the Taxpayers‟ Charter
141
(„Charter‟) the Commonwealth Ombudsman and compensation options accessible via ATO Internal Complaints. Each of these avenues of relief is „informal‟ in some respect. In the case of the Taxpayers‟ Charter, there is no legislative force to the commitments and rights contained in the document which results from inclusion in the Charter per se. Any of the rights contained in the Charter that do have legislative backing derive that backing from other legislative instruments, not the Charter itself. The Commonwealth Ombudsman has clear statutory powers but lacks formal „teeth‟ in the sense that the Commonwealth Ombudsman‟s findings constitute recommendations rather than judicially binding determinations. None of the compensation options accessible via ATO Internal Complaints operate according to any system of publicly available binding precedent or formally enforceable remedies.
Part V deals with three potential causes of action that do not fit neatly into any of the preceding categories. These causes of action are important, nonetheless, to ensure that no potentially useful causes of action are overlooked. First is the potential for a remedy where the Commissioner‟s operational act or omission could be construed as a breach of contract. Second is an assessment of the potential applicability of the misleading and deceptive conduct and statutory unconscionability provisions contained in the Trade Practices Act 1974 (Cth). Third is the possibility for recovery of monetary compensation brought about by an ATO operational act or omission in breach of the Information Privacy Principles contained in the Privacy Act 1988 (Cth).
Content aside, while the approach in this Chapter is broadly similar to that adopted in Chapter 3, there are a number of significant differences. The first difference is that, unlike the tortious remedies examined in Chapter 3, the majority of the remedies examined in this Chapter are capable of being examined in light of at least some tax-specific decided case law or legislation. Further, this Chapter contains some avenues of relief, such as the Taxpayers‟ Charter, that exclusively deal with tax disputes. But even where causes of action with broader application are concerned, such as judicial review of administrative action and estoppel, there is a useful body of tax-specific case law that can be drawn upon and is discussed.
142
In this sense, therefore, this Chapter poses one fewer challenge than Chapter 3. However, it remains the case that few of the decided cases deal with the specific combination of an operational act or omission and the desire for monetary compensation. Accordingly, the need for significant hypothesising as to the applicability of the remedies remains.
A second related difference when compared to the examination of the tortious remedies contained in Chapter 3 is that some of the remedies examined in this Chapter categorically fall at one or other of the dual preliminary operational activity and monetary compensation hurdles. For instance, as the analysis in Part III elaborates, monetary compensation cannot be awarded to a successful applicant in administrative law judicial review proceedings. None of the tortious remedies were able to be so conclusively dispensed with.
A further distinction is apparent regarding the less formal avenues of relief dealt with in Part IV. These avenues of relief are capable of meeting both the operational activity and monetary compensation parameters of this study. However, unlike tortious remedies, any monetary payments are typically ex gratia. In rare cases where the payments are accompanied by an acknowledgement of legal liability, such acknowledgement is confined to the particular case or made as part of confidential settlement negotiations. There is no precedential value in, or public access to, such decisions.
Accordingly, these less-formal avenues of relief can hardly be said to give rise to any systematically enforceable rights for taxpayers aggrieved by an ATO operational act or omission and seeking monetary recompense for their resultant losses. That is not so much a concern for this Chapter. It is sufficient for this Chapter merely to demonstrate the possibility of recovery and the circumstances in which recovery might result. However, it is relevant to the questions of existing taxpayer remedy adequacy and effectiveness which Chapter 5 addresses. These remedies will, therefore, be revisited in those Chapters.
143
PART II - EQUITABLE AVENUES OF RELIEF
A - Introduction
This Part examines the equitable avenues of relief potentially available to taxpayers aggrieved by an ATO operational act or omission who seek monetary compensation. As noted above, the particular focus is on estoppel and restitutionary relief via the doctrine of unjust enrichment. In relation to estoppel, the discussion in this Part is limited to equitable estoppel. It should be noted, though, that there are a number of „breeds‟ of estoppel. Lord Denning vividly describes these in his judgment in McIlkenny v Chief Constable of the West Midlands:399
[T]here has been built up over the centuries in our law a big house with many rooms. It is the house called Estoppel. In Coke‟s time it was a small house…But by our time we have so many rooms that we are apt to get confused between them. Estoppel per rem judicatam, issue estoppel, estoppel by deed, estoppel by representation, estoppel by conduct, estoppel by acquiescence, estoppel by election or waiver, estoppel by negligence, promissory estoppel, proprietary estoppel, and goodness knows what else.400
Some of the categories Lord Denning refers to are common law forms of estoppel. The distinction between common law and equitable estoppel is a difficult one.401 It is, however, generally accepted that common law estoppel merely operates as a rule of evidence to establish the existence of some other cause of action such as a breach of contract. In contrast, equitable estoppel operates as a cause of action in
399 [1980] 1 QB 283. 400 Ibid, 317. 401 And one which is clearly beyond the proper scope of this study. See J D Heydon, W M Gummow and R P Austin, Cases and Materials on Equity and Trusts (4 ed, 1993), at 394-397 and the case law referred to therein, for a good discussion which fleshes out many of the complexities of the distinction. Mason CJ discusses the breakdown of the distinction between common law and equitable estoppel in Commonwealth of Australia v Verwayen, above n 286.
144 its own right. Brennan J makes this point in Waltons Stores v Maher.402 It is for this reason that the discussion of estoppel in this Part is confined to equitable estoppel.403
Further to the general focus on equitable estoppel, the emphasis in this Part is specifically on promissory estoppel. There are two reasons for this. First, promissory estoppel has been judicially equated with equitable estoppel.404 Further, and more relevantly, it is the most appropriate „breed‟ of estoppel where the defendant is a public authority such as the ATO and hence, public law concerns are invoked. Knight explains that „[i]t is this breed of estoppel which has driven the doctrine‟s incursion into public law.‟405
Beyond promissory estoppel, the analysis in this Part also extends to an examination of the principles of restitution that might come to the aid of a taxpayer aggrieved by an ATO operational act or omission who seeks monetary compensation. In particular, the concern is with the doctrine of unjust enrichment. The reason unjust enrichment is potentially applicable in the taxation context is because unjust enrichment claims involving public authorities typically involve plaintiffs seeking to recover taxes paid in circumstances in which retention of
402 Above n 286. At 416, Brennan J observes: „Equitable estoppel…does not operate by establishing an assumed state of affairs…an equitable estoppel is a source of legal obligation. It is not enforceable against the party estopped because a cause of action or ground of defence would arise on an assumed state of affairs; it is the source of a legal obligation arising on an actual state of affairs.‟ 403 Common law estoppel will, however, be dealt with in passing in our brief discussion of contractual obligations and associated compensatory remedies that might be applied in the ATO/taxpayer context in Part V of this Chapter. This is because of the possible use of common law estoppel at an evidentiary level to support a taxpayer‟s contention that a contractual obligation is owed by the Commissioner to that taxpayer. The underlying presumption is that voluntary promises cannot be enforced in the absence of consideration. 404 For example, Gummow J in Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic, above n 64, at 108 refers to estoppel by representation as to future facts as “equitable or promissory estoppel”. 405 Knight, above n 194, 7. It is not the only form of estoppel capable of application in the administrative law context however. Gummow J makes this point clearly in Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic, ibid, 108, where His Honour notes - „Conventional estoppel, estoppel by representation (whether as to present facts - “common law estoppel” - or as to the future - “equitable or promissory estoppel”), proprietary estoppel, and issue estoppel are each a genus of the species “estoppel” which may conceivably have a role in administrative law.‟
145 those taxes by the State would constitute an unjust enrichment. The doctrine of unjust enrichment is dealt with in (C) below.
B - Estoppel
The discussion of estoppel in this Part follows the approach taken to the tortious remedies examined in Chapter 3 by beginning with an assessment of its potential applicability in light of the dual parameters of this study. Attention then turns to the ability to estop public authorities generally. The specific challenges raised in seeking to apply the doctrine in the tax context are then examined.
1 Estoppel and the Dual Parameters To appreciate the applicability of the cause of action in cases of operational act or omission causing taxpayer loss it is, first, necessary to understand the basic requirements for making out a promissory estoppel case. The origin of the modern doctrine of promissory estoppel is widely acknowledged as being the judgment of Lord Denning in Central London Property Trust Ltd v High Trees Ltd406 („High Trees‟). In the subsequent case of Combe v Combe407 Lord Denning expressed his formulation of the promissory estoppel action which he applied in High Trees in the following terms:
The principle, as I understand it, is that, where one party has, by his words or conduct, made to the other a promise or assurance which was intended to affect the legal relations between them and to be acted on accordingly, then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to the previous legal relations as if no such promise or assurance had been made by him, but he must accept their legal relations subject to the qualification which he himself has so
406 [1947] 1 KB 130. For a good history of promissory estoppel see Knight, above n 194, 6-9. See also the judgment of Mason CJ and Wilson J in Waltons Stores v Maher, above n 286, for a history of the cause of action stretching back to the English authorities. 407 [1951] 2 KB 215.
146
introduced, even though it is not supported in point of law by any consideration but only by his word.408
In the Australian context, Brennan J set out the requirements for demonstrating a sufficient claim of promissory estoppel in Waltons Stores (Interstate) Ltd v Maher409 („Waltons Stores‟):
In my opinion, to establish an equitable estoppel, it is necessary for a plaintiff to prove that; (1) the plaintiff assumed or expected that a particular legal relationship exists between the plaintiff and the defendant or that a particular legal relationship will exist between them and, in the latter case, that the defendant is not free to withdraw from the expected legal relationship; (2) the defendant has induced the plaintiff to adopt the assumption or expectation; (3) the plaintiff acts or abstains from acting in reliance on the assumption or expectation; (4) the defendant knew or intended him to do so; (5) the plaintiff‟s action or inaction will occasion detriment if the assumption or expectation is not fulfilled; and (6) the defendant has failed to act to avoid that detriment whether by fulfilling the assumption or expectation or otherwise.410
While these formulations differ significantly from each other, one pertinent clue as to the limited scope of application of the cause of action in cases of operational act or omission is evident in both. Lord Denning refers to intention by the offending party to affect the legal relations between the parties. Brennan J in his second requirement of the cause of action refers to some inducement of the plaintiff by the defendant to act in a particular way. In His Honour‟s fourth enumerated requirement Brennan J refers to knowledge or intent on the part of the defendant that the plaintiff would act to his or her detriment in reliance upon the expectation created by the defendant.
These requirements all point to some deliberateness in the actions of the defendant. This is consistent with the aim of the cause of action being to
408 Ibid, 220. 409 Above n 286. 410 Ibid, 428-429.
147 discourage „unconscionable‟ activity.411 The obvious ramification for this study is that an equitable estoppel claim will only be applicable in a limited range of cases of ATO operational act or omission causing taxpayer loss. Specifically, deliberate operational failures would clearly be capable of sustaining a claim. However, inadvertent operational failures would only be capable of sustaining a claim where the ramifications of those failures for the plaintiff taxpayer are known or intended by the offending ATO officer. This is very loosely comparable to the requirement of at least „untargeted malice‟ in the tort of misfeasance in public office examined in Chapter 3.412 Just as most cases of operational act or omission causing taxpayer loss would fall outside the ambit of a cause of action for misfeasance in public office due to the mental element of that tort, it would be expected that the majority of operational acts or omissions unintentionally causing taxpayer loss would, due to the unconscionability requirement, similarly fall outside the ambit of a promissory estoppel claim.
Even casting aside this significant practical limitation, another doubt that would weigh heavily on the mind of the taxpayer plaintiff seeking monetary compensation for ATO operational act or omission and contemplating an equitable estoppel claim would be the capacity of the cause of action to result in monetary compensation being awarded. This is a noteworthy concern because, estoppel, by definition, implies some form of injunctive or declaratory relief. The comments of Lord Denning in Moorgate Mercantile Co Ltd v Twitchings413 on the fundamental nature of estoppel clearly illustrate:
411 Thomson points out that „the basic purpose of private law estoppel is to prevent a person from unconscionably departing from a representation upon which another party has relied, where departure from this representation would cause detriment to the second party.‟ See Thomson, above n 286, 89-90. This is consistent with judicial comments such as those of Brennan J in Waltons Stores, above n 286, at 419, to the effect that „[t]he element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity…‟ See also the discussion of the requirement of „unconscientious conduct‟ by Deane J in Commonwealth of Australia v Verwayen, above n 286. 412 See the discussion in Part III of Chapter 3. Of course, there are differences in the tests of malicious intent and the mental requirement of equitable estoppel - in the latter the search is for unconscionability rather than malice. Part V(C) of this Chapter discusses unconscionability further as part of analysis of the statutory unconscionability provisions in the Trade Practices Act 1974 (Cth). 413 [1976] QB 225.
148
Estoppel … comes to this: when a man, by his words or conduct, has led another to believe in a particular state of affairs, he will not be allowed to go back on it when it would be unjust or inequitable for him to do so.414
However, Brennan J in Waltons Stores clarifies that within the scope of this basic injunctive goal, there is ample opportunity for monetary compensation to be awarded to a plaintiff. His Honour points out that the goal of equitable relief in cases of promissory estoppel 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.‟415 Consequently, His Honour notes the flexibility of remedies that might be awarded to achieve this end:
Sometimes it is necessary to decree that a party‟s expectation be specifically fulfilled by the party bound by the equity; sometimes it is necessary to grant an injunction to restrain the exercise of legal rights either absolutely or on condition; sometimes it is necessary to give an equitable lien on property for the expenditure which a party has made on it:416
While there is no express mention by Brennan J of the availability of compensation as a remedy, monetary recompense for expenditure incurred has been awarded in some estoppel claims.417 It seems clear, therefore, that promissory estoppel is capable of providing a monetary compensation remedy in cases where this is considered the most appropriate remedy to avoid the detriment that the plaintiff would otherwise suffer. Whether a court chooses to do so ultimately depends on the facts of the case. Where the only viable avenue for
414 Ibid, 241. This is consistent with the origin of the word „estoppel‟ as described by Knight, above n 194 at 6, citing Sir Edward Coke in A Commentary upon Littleton (19th ed, 1832): „Over 375 years ago, Sir Edward Coke wrote: “„Estoppe‟, commeth of the French word estoupe, from whence the English word stopped: and it is called an estoppel or conclusion, because a man‟s owne act or acceptance stoppeth or closeth up his mouth to alleage or plead the truth.”‟ 415 Waltons Stores, above n 286, 423. 416 Ibid, 419. 417 For example, Raffaele v Raffaele [1962] WAR 238. See also the cases cited in Heydon, Gummow and Austin, above n 401, 423.
149 avoiding the plaintiff‟s detriment is an award of monetary compensation, there is no prohibition on the court doing so.418
In a tax case involving allegations of estoppel, the sorts of compensable losses that might arise would „include penalties and interest for non-compliance with the law, out of pocket expenses related to aborted transactions, and harm from paying more tax than might otherwise have been the case were it not for the erroneous representation.‟419
Of course it remains the case that in many estoppel actions monetary compensation would not be appropriate or even desired by the plaintiff. Pagone makes this point, highlighting that „[e]ven allowing that there might be cases where compensation would seem appropriate…there would be many instances where that expedient would simply be inadequate.‟420 An example might be where a unique business opportunity has been lost because of the Commissioner‟s operational act or omission.
2 Estoppel and Public Authorities While the dual parameters of this study significantly limit the scope of application of estoppel as a viable avenue of relief for most taxpayer plaintiffs, a further significant hurdle is the fact that the Commissioner of Taxation is a public authority. This is because an estoppel will not usually lie against the State or its
418 The various State Supreme Court Acts give the courts express powers in this regard. For example the Supreme Court Act 1970 (NSW) provides in s 68 - „Where the court has power (a) to grant an injunction against the breach of any covenant, contract or agreement, or against the commission or continuance of any wrongful act; or (b) to order the specific performance of any covenant, contract or agreement, the court may award damages to the party injured either in addition to or in substitution for the injunction or specific performance.‟ This legislation mirrors 19th Century British legislation known as “Lord Cairns‟ Act” (the Chancery Amendment Act 1858). 419 This list is derived from the discussion by Loutzenhiser in Glen Loutzenhiser, „Holding Revenue Canada to its Word: Estoppel in Tax Law‟ (1999) 57 University of Toronto Faculty of Law Review 127, 128. The author considers the issue in the context of the losses that might flow from a failure of a tax authority to comply with a Public Ruling. The Taxation Administration Act 1953 (Cth) deals with the enforceability of Public Rulings in Australia. The enforceability of Public Rulings in Australia is discussed further below - see n 456 and the accompanying discussion. 420 G Tony Pagone, „Estoppel in Public Law: Theory, Fact and Fiction‟ (1984) 7 University of New South Wales Law Journal 267, 278.
150 instrumentalities such as the ATO. The comments of Mason CJ in Attorney General v Quin421 („Quin‟) are typical in confirming this fact. His Honour notes the general principle that the executive „cannot by representation or promise disable itself from, or hinder itself in, performing a statutory duty or exercising a statutory discretion to be performed or exercised in the public interest, by binding itself not to perform the duty or exercise the discretion in a particular way in advance of the actual performance of the duty or exercise of the power.‟422 Gummow J makes similar comments in Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic423 („Kurtovic‟), observing that „[e]stoppel cannot operate to prevent or hinder the performance of a positive statutory duty, or the exercise of a statutory discretion which is intended to be performed or exercised for the benefit of the public or a section of the public.‟424
Thomson explains the basis for this rule as being the view that „the public purpose served by the statute prevails over the private interest of an individual who may have been misled to the extent of relying on a misrepresentation to his or her detriment.‟425 Accordingly, there is a search for legislative intent, similar to the search in breach of statutory duty cases.426 In cases where the parliamentary intent is to create a comprehensive code in the field, then an intention to preclude claims in estoppel will be assumed.427 Similarly, where there is an overwhelming public interest inherent in the enactment, this is taken to override any individual interest which might otherwise be protected at the expense of that public interest through an estoppel claim.428
421 (1990) 170 CLR 1. 422 Ibid, 17. 423 Above n 404. 424 Ibid, 109, citing Halsbury‟s Laws of England - 4th Edition, vol 44, „Statutes‟ [949]. 425 Thomson, above n 411, 83. 426 As discussed in Part IV of Chapter 3. 427 There is Canadian authority for the application of such an approach in an equitable claim alleging unjust enrichment against the Canadian revenue. See n 492 and the corresponding text in Part II(C) below. 428 For a discussion of both of these approaches to interpretation of the relevant statute, see Thomson, above n 411, 89-90.
151
Of course, the public interest and the interests of the individual are not necessarily mutually exclusive. Mason CJ points this out in Quin:429
[A]s the public interest necessarily comprehends an element of justice to the individual, one cannot exclude the possibility that the courts might in some situations grant relief on the basis that a refusal to hold the Executive to a representation by means of estoppel will occasion greater harm to the public interest by causing grave injustice to the individual who acted on the representation than any detriment to that interest that will arise from holding the Executive to its representation and thus narrowing the exercise of the discretion.430
This approach is consistent with the approach Rider advocates specifically in the context of the tax administration function of the Commissioner of Taxation:
To assert that the public duties of the Commissioner under the Income Tax Assessment Act would be thwarted by the application of estoppel doctrine is based on a simplistic assumption that it must always be contrary to the public interest for the Commissioner to be prevented from assessing taxpayers to the full amount of income tax lawfully due, and fails to take into account the countervailing factors which may sometimes arise in the practical administration of taxation statutes…
If the Commissioner, on the basis of a proper understanding of the relevant facts, creates in the taxpayer a legitimate expectation that the Commissioner‟s powers will be exercised in a certain way, and is aware that this expectation has been created, it is hard to see what prejudice to the public interest in the due administration of the tax law will be done if a court restrains the Commissioner from subsequently acting in disregard of his previous conduct towards the taxpayer. On the contrary, in an era when it has come to be accepted that all citizens have a right to procedural fairness in their dealings with the administrative agencies of government, it can only serve the public interest if the
429 Above n 421. 430 Ibid, 18.
152
Commissioner, in the exercise of his administrative powers under the Act, is required to recognise that the legitimate expectations of taxpayers as to the Commissioner‟s conduct ought not be lightly set aside.431
Notwithstanding the calls of commentators such as Rider, and the expansive approach to the question of legislative intent canvassed by Mason CJ, the narrow approach taken in Australian Courts shows no signs of changing. Knight summarises the prevailing view:
Since Kurtovic and Quin, claims based on estoppel and substantive legitimate expectation in Australia have generally been unsuccessful. Although the door was left open for estoppel, the narrow opportunity to do so has not really been taken up. Indeed, some courts have expressed a degree of uncomfortableness with Mason C.J.‟s balancing process contemplated in Quin, reinforcing the conservative attitude taken by the Australian courts.432
Even so, there is a definite possibility that a purely operational claim might be capable of overcoming the restrictive approach of the Australian courts. Gummow J in Kurtovic makes the point expressly:
The planning or policy level of decision-making wherein statutory discretions are exercised has, in my view, a different character or quality to what one might call the operational decisions which implement decisions made in exercise of that policy…Where the public authority makes representations in the course of implementation of a decision arrived at by the exercise of its discretion, then usually there will not be an objection to the application of a private law doctrine of promissory estoppel. It must, however, be recognised that it may be difficult, in a given case, to draw a line between that which involves discretion and that which is merely “operational”.433
431 Rider, above n 2, 151. 432 Knight, above at 194, 55. 433 Kurtovic, above n 64, at 116.
153
His Honour continues by repeating Lord Wilberforce‟s formulation of the policy/operational dichotomy from Anns434 and, in particular, His Lordship‟s comments that the more operational a power or duty, the easier it is to superimpose upon it a common law duty of care. His Honour then concludes that „the same may be said of the super-imposition of the operation of the doctrines of promissory estoppel.‟435
While this raises some hope for a taxpayer aggrieved by an ATO operational act or omission, Thomson proposes that the Gummow approach be further refined in order to be of use. Thomson recommends drawing further distinction between different types of operational activities to determine whether the relevant authority should be estopped. Thomson justifies his view as follows:
The focus on the nature of the power involved in the policy/operation distinction removes attention from the issue of whether the power was conferred for the public‟s benefit, or the administrative body‟s private benefit. Of course, where the exercise of power involves policy considerations, inevitably the power will have been enacted for the public‟s benefit. However, it does not follow that an operational power cannot also have been enacted for the public‟s benefit. For example, a building inspector may be under a duty to enforce building regulations, but may have a discretion as to the enforcement method. Here the enforcement power is “operational”, but it could not be said that it exists for the administrative body‟s private benefit.436
Even accepting the complexities raised by Thomson, the operational nature of the complained of activity may, in some cases, positively assist in determining the possibility of estopping a statutory authority. There is, however, no evidence of such an approach being applied in Australian tax cases. In fact, the tax cases to date indicate that the prospects of a successful estoppel claim against the Commissioner of Taxation are extremely slim.
434 Above n 34. 435 Ibid. 436 Thomson, above n 425, 96.
154
3 Estoppel in the Tax Context In Australia, the traditional position has been bluntly and concisely stated by Kitto J in FCT v Wade437 („Wade‟). In that case, His Honour observed that „[n]o conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act.‟438 More recently, in AGC (Investments) Ltd v FCT439 („AGC‟), Wade J expressed similar views:
[T]here is no room for the doctrine of estoppel operating to preclude the Commissioner from pursuing his statutory duty to assess tax in accordance with law. The Income Tax Assessment Act imposes obligations on the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel would thwart.440
These seemingly unequivocal statements would appear to completely preclude the possibility of a successful promissory estoppel claim against the Commissioner of Taxation. However, the reality probably lies somewhere short of the Kitto and Wade JJ apparent absolute prohibition. Rider, the commentator who has most comprehensively addressed the issue in the Australian context, suggests that the Kitto and Wade JJ statements of principle should properly be confined to the facts of the cases concerned. In relation to Wade, Rider notes:
The much cited observation of Kitto J in Wade was made in the context of a decision holding that a statement by the Commissioner in an amended assessment justifying it on an incorrect ground could not estop him from justifying it on correct grounds in argument in subsequent litigation. The facts of the case therefore provide a less than robust basis for the subsequent elevation of Kitto J‟s remarks to the status of authority for the general exclusion of the doctrine of
437 (1951) 84 CLR 105. 438 Ibid, 117. 439 Above n 294. 440 Ibid, 4195. In relation to this case it was noted in Bellinz v Federal Commissioner of Taxation, above n 276 that: „It was not suggested that the appellants could rely on estoppel, although the administrative law arguments advanced in reality seek to activate a doctrine of estoppel in a different guise.‟
155
estoppel from Australian income tax law. The Commissioner had not sought in any way to bind himself not to assess the taxpayer to any amount other than the correct amount of tax due by law; on the contrary, he had sought to assess the correct amount, albeit that the Commissioner‟s notice of assessment had described the bases for assessing it incorrectly.441
In relation to AGC, Rider again seeks to confine the operation of the case given that it was a case „where the Commissioner had clearly made no attempt to bind himself as against the taxpayer, and where application of estoppel would have represented a substantial departure from statutory obligations.‟442
Rider goes on to identify two cases in which he asserts estoppel principles were applied against the Commissioner. The first of these cases is Cox v Deputy Federal Commissioner of Land Tax (Tas).443 As noted in Part II of Chapter 3, in this case, the Commissioner effectively contractually bound himself to exercise his powers in a particular way in relation to the taxpayer. The case concerned a settlement of certain land tax liabilities of the taxpayer through an agreement between the Commissioner and the taxpayer. The Commissioner subsequently sought to re-open the land tax assessments. Griffith CJ, in denying the Commissioner‟s request to re-open the assessments said:
That matter was in actual litigation between the parties in the manner prescribed by the Act. While that litigation was pending an agreement was come to by which the respondent submitted to the appellants‟ claim, paid their costs and paid the amount claimed from him. Under those circumstances it seems to me impossible to re-open the matter. Although it is not, strictly speaking, res judicata, the
441 Rider, above n 2, 136. The facts of Wade involved the treatment of trading stock by the Commissioner. There was no suggestion of inconsistent treatment of the taxpayer in this case; merely the question of whether the Commissioner could be estopped from relying on an assessment made consistent with the Act, albeit not necessarily made on the correct basis. 442 Ibid, 137. The facts of AGC surrounded a deviation from the Commissioner‟s longstanding practice in relation to the treatment of the taxpayer‟s share sales as capital transactions. 443 Above n 282.
156
compromise followed by payment operates as an executed agreement for valuable consideration.444
It is difficult to foresee a situation in which the Commissioner would contractually bind himself to a particular operational standard or approach.445 The ATO resistance to any suggestion of a legally binding Taxpayers‟ Charter (which deals in large part with operational functions of the ATO), despite strong submissions by a number of stakeholders, is an indicator of the ATO stance.446 Accordingly, if the required threshold is for the creation of obligations tantamount to contractual obligations in order to sustain a claim, estoppel appears to be next to useless for taxpayers aggrieved by an ATO operational act or omission and seeking monetary recompense.
The second case cited by Rider is Queensland Trustees v Fowles.447 In this case too, the Commissioner sought to subsequently renege on a previous settlement agreement.448 Again, a contractual commitment was the basis for the successful claim. The only recent case cited by Rider is Precision Polls Pty Ltd v FCT.449 In that case too, the Commissioner made a clear contractual commitment to the taxpayer and subsequently unsuccessfully sought to resile from that commitment.450
444 Ibid, 455. 445 Part V(B) of this Chapter specifically examines the question of potential contractual liability of the Commissioner toward a taxpayer or group of taxpayers. 446 For a fuller discussion of the characteristics of the Taxpayers‟ Charter, including its lack of legal enforceability, see Part IV(B) of this Chapter. 447 Above n 285. 448 In Queensland Trustees v Fowles, ibid, the agreement involved an estate duty liability of the taxpayer which was agreed to be paid as assessed pending sale of the estate properties with a refund being agreed in the event that the value of the properties realised on sale was lower than the value upon which the paid assessments were based. The Commissioner sought to deny the taxpayer the agreed refund in duty when the shortfall in value of the properties was realised on their sale. The High Court unanimously found for the taxpayer holding the Commissioner to the original arrangement. 449 Above n 285. 450 The agreement involved the payment of certain sales tax by the taxpayer on the proviso that if a High Court challenge by the taxpayer to the Constitutionality of the relevant provision pursuant to which the tax was levied proved successful, the tax paid would be refunded. The taxpayer‟s High Court challenge was successful, but the Commissioner refused to refund the tax paid as agreed.
157
These cases appear similar to the recent approach taken in the United Kingdom where it has been expressly acknowledged that agreements which result in collection of less tax than might strictly be required by the relevant tax legislation are able to be made and enforced against the tax authority. As Lord Scarman notes in IRC v National Federation of Self Employed and Small Businesses Ltd451
[I]n the daily discharge of their duties inspectors are constantly required to balance the duty to collect “every part” of due tax against the duty of good management. This conflict of duties can be resolved only by good managerial decisions, some of which will inevitably mean that not all the tax known to be due will be collected.452
None of the cases discussed above which resulted in a favourable outcome for the taxpayer involved operational acts or omissions. The arrangements between the Commissioner and the relevant taxpayer in each case were clearly deliberate arrangements within the discretionary powers of the ATO. Notwithstanding, there is no reason why such an arrangement sought to be resiled from on the basis of some operational failure could not similarly result in the Commissioner being estopped. If the Gummow J approach to the relevance of the operational nature of the complained of activity in estoppel claims against statutory authorities is adopted, then the taxpayer‟s prospects would be improved in such an instance. Undoubtedly, though, this is a very narrow window of applicability.
Even if the taxpayer‟s claim falls within this narrow window of applicability, the substantial hurdles inherent in making out the specific elements of an estoppel claim remain. A particular challenge will be the difficulty for the taxpayer in demonstrating sufficient and reasonable reliance on the Commissioner‟s representation such that it would be unconscionable for the Commissioner to be permitted to resile from that representation.
451 [1982] AC 617. 452 Ibid, 651.
158
In this respect, putting aside the facts of the specific case, the self assessment environment in Australia might, of itself, be a significant limitation. This is certainly true if Australian courts adopt the long-standing United States approach to the relevance of self assessment in estoppel cases. This approach has been explained in the following terms:
The courts are uniform in holding that the mere fact of the Commissioner‟s acceptance of prior returns without objection creates no estoppel against him. These holdings are often put on the ground that the Commissioner by such act has himself made no representation, but has simply accepted the representation of the taxpayer.453
Even aside from any systematic predisposition against reliance that might be created by a self-assessment environment, the plaintiff taxpayer would face many difficult questions surrounding the reasonableness of the taxpayer‟s reliance on the Commissioner‟s representation. For example, did the taxpayer fully disclose all of the relevant information pertaining to his or her affairs so that it can be truly said that there was complete reliance on the representations of the ATO officer? Even though the taxpayer honestly believed that the representation of the relevant ATO officer bound the Commissioner, honesty is not enough. The relevant question would be whether, viewed objectively, it was reasonable for that belief to be formed. Further, can it be said that the ATO knew that the taxpayer would rely on the representation as a binding representation? Also, could the taxpayer have sought independent advice as to the correctness of the ATO representation? Can it be said that the taxpayer weighed up (or at least had the opportunity to weigh up) the costs and benefits of obtaining a second opinion and chose to take the risk that the representation made to her or him was incorrect? In light of this range of considerations it is easy to see why promissory estoppel is unlikely to assist in all but the rarest of cases of ATO operational act or omission.
453 JHS III, „The Emerging Concept of Tax Estoppel‟ (1954) 3 Virginia Law Review 313, 315.
159
The judgment of Bingham LJ in the English case of R v Board of Inland Revenue, Ex parte MFK Underwriting Agencies Ltd454 illustrates the relevance of such considerations:
It would, in my judgment, be ordinarily necessary for the taxpayer to show that certain conditions had been fulfilled…First it is necessary that the taxpayer should have put all his cards face upwards on the table. This means that he must give full details of the specific transaction on which he seeks the Revenue‟s ruling…It means that the taxpayer must make plain that a fully considered ruling is being sought. It means, I think, that the taxpayer should indicate the use he intends to make of any rulings given…Second, it is necessary that the ruling or statement relied upon should be clear, unambiguous and devoid of relevant qualification.455
In the Australian context, the taxpayer is most likely to satisfactorily answer the questions surrounding reasonable reliance in cases where a formal representation - for example, a representation contained in a binding Private Ruling - has been obtained from the ATO. However, a taxpayer aggrieved by an operational act or omission is unlikely to benefit from this prospect. This is because in such cases, where the considered opinion of the ATO has been sought and obtained, any error in that opinion which is pressed by the Commissioner is far more likely to be the result of the exercise of discretionary or policy powers than a purely operational or administrative oversight.
Where no binding Ruling is involved, a defence could easily be mounted by the Commissioner based on legislative intent. Essentially the argument could run that the statutory provisions dealing with binding Rulings456 indicate a legislative
454 [1990] 1 All ER 91. 455 Ibid, 110. 456 Australian law allows for the Commissioner to give binding Public Rulings, binding written Private Rulings, and binding Oral Rulings. Private Rulings are dealt with in Division 359, Schedule 1 of the Taxation Administration Act 1953 (Cth), and the binding nature of Private Rulings is discussed in TR 2006/11; Oral Rulings are dealt with in Division 360, Schedule 1 of the Taxation Administration Act 1953 (Cth); and Public Rulings are provided for in ss 358-5 and 358- 10 of Schedule 1 of the Taxation Administration Act 1953 (Cth). TR 2006/10 also discusses the binding nature of Public Rulings.
160
intent to clearly define the only circumstances in which the Commissioner should be held to any representations made to a taxpayer. The obvious ramification is that outside of these circumstances, there is a legislative intent that the Commissioner should not be bound by any representation to any individual taxpayer or specific group of taxpayers.
Even if such challenges to a taxpayer claim can be overcome, there remain a number of possible public policy hurdles for the taxpayer plaintiff. Perhaps the most significant of these is the concern with justiciability and underpinning separation of powers concerns. As already noted in Part I of Chapter 2, in equitable estoppel cases, the justiciability concern typically manifests itself as the „non-fetter‟ principle.457 In the estoppel context this translates into a principle known as the Southend-on-Sea principle.458 This principle provides „that an estoppel may not be raised to prevent the performance of a statutory duty or to hinder the exercise of a statutory discretion.‟459
In the tax context, the non-fetter principle argument might be that holding the ATO to a representation, albeit arising out of an operational act or omission, would be tantamount to binding the legislature to the decision of the Commissioner of Taxation, an unelected public servant. This would be a particularly strong argument when the effect of a finding of estoppel would be that the taxpayer would be required to pay an amount of tax which was less than intended by the legislature on a correct application of the tax law.
A second likely public policy argument stems directly from concerns to protect the revenue. Loutzenhiser explains the argument as follows:
457 It will be recalled that this is the principle that „government should not be shackled in exercising its power to make decisions in the public interest in the future.‟ See Allars, above n 62, 86. For further enlightening discussion of the non-fetter principle see Chris Hilson, „Policies, the Non-Fetter Principle and the Principle of Substantive Legitimate Expectations: Between a Rock and a Hard Place?‟ (2006) 11 Judicial Review 289; Chris Hilson, „Judicial Review, Policies and the Fettering of Discretion‟ [2002] Public Law 111; and Pagone, above n 420. 458 As observed in Chapter 2, the Southend-on-Sea principle derives its name from Southend-on- sea Corporation v Hodgson (Wickford) Ltd, above n 63. 459 Allars, above n 62, 86.
161
Another argument against estopping the Crown in the taxation context is the danger that the fiscal revenues of the Crown could be undermined by widespread incorrect representations from careless, ignorant, or irresponsible civil servants.460
A taxpayer facing this argument would need to adopt the stance that justice should be placed above concerns with protection of the revenue.461
The „chill factor‟ argument discussed in the context of consideration of negligence in Part II of Chapter 3 might also raise its head against a taxpayer in any estoppel claim against the Commissioner. The suggestion is that the ATO would simply cease to provide the great deal of free information and general assistance the ATO presently provides to taxpayers if the risk of suit through application of the principles of promissory estoppel was considered high.462
The taxpayer‟s best prospects for challenging such arguments lie in emphasising a few possible countervailing favourable public policy arguments. One such public policy argument is that the extension of estoppel principles to cases of ATO operational act or omission would bring benefits in terms of engendering trust and confidence of taxpayers in the administration of the tax system.463 Knight explains how the application of estoppel principles in appropriate tax cases might bring about this climate of trust and confidence:
460 Loutzenhiser, above n 419, 155. This concern with protection of the revenue is often cited as a policy argument militating against estopping government activity generally. See, for example, Note, „Equitable Estoppel Against the Federal Government‟ (1990) 104 Harvard Law Review 286, 289-290. 461 JHS III, above n 453, favours a similar argument. The author notes, at 330: „It is evident, however, that equitable limitations against the Commissioner are developing, and the result is to be welcomed by all who would place justice above the revenue.‟ 462 For a detailed rebuttal of the „chill factor‟ argument in the estoppel context see Knight, above n 194, 145 and a report by Schonberg, above n 194. Part IV(A) of Chapter 5 examines the arguments raised by Knight and Schonberg. 463 It will be recalled from Chapter 2 that the Commissioner in his preamble to the Taxpayers‟ Charter has pointed out his concern with ensuring a climate of trust and confidence in the tax system is created. The Commissioner has observed in that document that „[w]e want to manage the tax system in a way that builds community confidence. To do this, we need to have a relationship with the community based on mutual trust and respect.‟ See further above n 115.
162
The recognition of legal certainty can also be supported by the principles of good administration and the legitimacy of government. Not only is legal certainty beneficial for individuals, it is also beneficial to public bodies. The recognition of legal certainty can also be justified on the basis that it promotes trust and confidence in public bodies and enhances administrative efficacy. Trust in government benefits public bodies and makes it easier for them to govern. However, citizens will only trust public bodies if they demonstrate that they are reliable.464
This argument may generally be the best defence for the taxpayer embattled by an array of public policy concerns in seeking to estop the Commissioner. Pagone suggests a framing of the argument in the following terms:
[I]t is suggested that the appropriate criterion to decide whether estoppel ought to be allowed should be the proper functioning of public administration. We should not be concerned about whether to allow an estoppel in a particular case would fetter particular public powers but, rather, whether a general rule is more or less conducive to better public administration.465
While this approach has some merit, it is unlikely to hold sway in a tax case. The weight of authority is clearly against the possibility of estopping the Commissioner of Taxation in all but those cases where a commitment has been made which is tantamount to a contractual commitment. This is true even in cases of clear operational failure.
C - Restitutionary Relief
Restitutionary relief is worthy of mention in any discussion of the equitable remedies that might be open to taxpayers aggrieved by an ATO operational act or omission and seeking monetary recompense. According to Virgo, there are three circumstances in which restitution has historically been applied:
464 Knight, above n 194, 84. 465 Pagone, above n 420, 282.
163
Although the matter has been particularly controversial, the accepted view is that these gain-based remedies will be awarded in three different situations: (1) Where the defendant has profited from the commission of a wrong. This could apply to a public authority if it has profited from the commission of a tort or, exceptionally, a breach of contract. (2) Where the defendant has received property in which the claimant has a proprietary interest, the claimant will be able to vindicate that property right. (3) Where the defendant has been unjustly enriched at the claimant‟s expense.466
It is the third of these categories - unjust enrichment - which has the greatest potential in the taxation context. Accordingly, unjust enrichment is the exclusive focus of this Part.
Deane J describes unjust enrichment in the following terms:
[T]he concept of unjust enrichment…constitutes a unifying legal concept which explains why the law recognises, in a variety of distinct categories of case, an obligation on the part of the defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff…467
The reason unjust enrichment is potentially applicable in the taxation context is because unjust enrichment claims involving public authorities typically involve taxpayer attempts to recover taxes paid in circumstances in which the retention of those taxes by the State would constitute an unjust enrichment.468 Given the role of the ATO in administering the collection of a range of government taxes and imposts, restitutionary relief through the doctrine of unjust enrichment in cases involving the ATO would be a logical possibility.
466Graham Virgo, „Restitution from Public Authorities: Past, Present and Future‟ (2006) 11 Judicial Review 370, 370. 467 Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-257. 468 For an excellent detailed discussion of the applicability of restitution claims in cases involving public authorities see chapter 15 of the text by Sharon Erbacher, Australian Restitution Law (2nd ed, 2002).
164
Nevertheless, in the context of this study, the relevance of restitution as a viable potential avenue of relief only extends to those cases where an ATO operational act or omission has resulted in an overpayment of taxes by the taxpayer. Overpayments resulting from an operational act or omission - as distinct from discretionary error - would be rare.469 It would be even rarer for the Commissioner to press such a matter all the way to a court hearing once the offending operational act or omission was identified. Here lies the first and, perhaps, most significant practical limitation on this avenue of relief for taxpayer victims of loss-causing ATO operational acts or omissions.
A further complication is the monetary compensation constraint of this study. The availability of monetary relief is not, of itself, the problem. However, monetary recovery is limited to the extent of the enrichment of the ATO, as distinct from the total compensable loss of the taxpayer.470 This means that the court is concerned with determining whether the plaintiff can recover an amount equal to the wrong-doer‟s enrichment. This may or may not be commensurate with the plaintiff‟s total compensable loss. Compensation is not, therefore, the goal. For example, in the case of erroneously paid tax, the usual restitutionary recovery will be the tax paid, not all consequential losses flowing from the erroneous tax payment. Claims such as claims for interest are likely to be viewed as claims for consequential losses. Interest would not, therefore, be recoverable. The concern is with disgorgement of the Crown gain as distinct from compensation of the taxpayer‟s loss. The heads of damage for which monetary damages would be recoverable would therefore be more limited than in, for example, a negligence claim.
469 A predictable discretionary error in this context might be an error in interpretation of the correct amount of tax payable pursuant to the relevant legislative provision. 470 The focus of the cause of action on enrichment of the defendant as distinct from the loss of the plaintiff was pointed out by Windeyer J in Mason v New South Wales (1959) 102 CLR 108, at 146: „If the defendant be improperly enriched on what legal principle can it claim to retain its ill-gotten gains merely because the plaintiffs have not, it is said, been correspondingly impoverished? The concept of impoverishment as a correlative of enrichment may have some place in fields of continental law. It is foreign to our law.‟
165
Setting aside these significant threshold limitations stemming from the factual parameters of this study, the requisite elements of an unjust enrichment claim raise their own significant challenges for any aggrieved taxpayer. In order to demonstrate unjust enrichment there are four requirements. Virgo outlines these:
(i) Whether the defendant was enriched. This will invariably be satisfied by means of showing that the defendant received money. (ii) Whether this enrichment was at the expense of the claimant, which means that it was obtained directly from the claimant. (iii) Whether this enrichment can be characterised as unjust within one of the recognised grounds of restitution. It is the identification of an appropriate ground of restitution which has proved to be the most controversial aspect of establishing a restitutionary claim against public authorities. (iv) Whether any defences are available to reduce or limit the claim.471
As Virgo notes, the key question is whether a case involving a public authority such as the ATO would be capable of falling within one of the „recognised grounds‟ of restitution. In Australia, these recognised grounds in cases involving statutory authorities are mistake of fact or law, compulsion or extortion by colour of office.472 Australian courts have very narrowly interpreted each of these grounds for restitutionary relief. For example, „compulsion‟ has been construed so as to deny recovery to those who have paid the relevant tax because they were concerned about the application of normal statutory penalties for non-payment.473 Compulsion requires a more direct threat to the taxpayer or the taxpayer‟s property - otherwise the payment will be viewed as a voluntary one.474
471 Above n 466, 370. 472 Usually referred to in its Latin form of colore officii. In the United Kingdom in Woolwich Equitable Building Society v IRC [1993] AC 70 a more general category was established; namely (at 177 per Lord Goff) that „money paid by a citizen to a public authority in the form of taxes or other levies paid pursuant to an ultra vires demand by the authority is prima facie recoverable by the citizen as a right.‟ Australian courts are yet to accept this broad category of relief. 473 See Mason v New South Wales, above n 470. This narrow approach denies the reality that every demand for tax by the State involves an „implied compulsion‟ by virtue of the implication of legislative sanctions that might apply in instances of non-payment. See the discussion in Woolwich Equitable Building Society v IRC, ibid. 474 This is consistent with the Canadian approach described by La Forest J in Air Canada v British Columbia, (1989) 59 DLR (4th) 161 at 199: „What the rule of compulsion seems to require is that
166
The issue was considered in a tax context in Werrin v Commonwealth.475 In that case it was held that payments of sales tax on second hand goods made voluntarily but subsequently held to be outside the scope of the relevant sales tax legislation were not payments made under compulsion. McTiernan J commented: „The plaintiff was at liberty to refuse the demand. But he gave up his right to refuse to pay.‟476
It is difficult to foresee many situations where an erroneous levy of tax from a taxpayer due to a clear operational error or oversight would be accompanied by a direct threat or demand for payment from the taxpayer beyond the usual implied statutory threat contained in the relevant tax legislation. Consequently, this avenue of relief is extremely narrow.
Extortion by colour of office has been described as applicable where „a public officer demands and is paid money he is not entitled to, or more than he is entitled to, for the performance of his public duty.‟477 Payments made in these circumstances are recoverable regardless of whether the recipient exerted any actual compulsion on the payor in order to secure the payment.478 Accordingly, in cases of ATO operational act or omission causing taxpayer loss, the only situation in which this category of unjust enrichment could apply would be in cases where, due to an operational error, the official acted ultra vires in demanding the payment of an otherwise valid tax from the taxpayer. In contrast, in cases of compulsion
there is no practical choice but to pay in the circumstances…[B]efore a payment will be regarded as involuntary there must be some natural or threatened exercise of power possessed by the party receiving it over the person or property of the taxpayer for which he has no immediate relief than to make the payment.‟ This makes it clear that the emphasis is on the behaviour of the payee rather than practical compulsion through lack of a commercial alternative on the part of the payor. 475 (1938) 59 CLR 150. 476 Ibid, 168. 477 Mason v New South Wales, above n 470, 140. In that case, Windeyer J also describes the history of the term „colour of office‟ pointing out at 118, that „the phrase “colour of office” is an old one carrying the stale odour of mediaeval complaints of corruption and abuse of power by officials.‟ See also William Cornish, „Colour of Office: Restitutionary Redress Against Public Authority‟ (1987) 14 Journal of Malaysian and Comparative Law 41. 478 Belinda Wells, „Restitution from the Crown: Private Rights and the Public Interest‟ (1994) 16 Adelaide Law Review 191, 194. See also Bell Bros Pty Ltd v Shire of Serpentine - Jarrahdale (1969) 121 CLR 137.
167
the ultra vires nature of the official‟s demand flows from a statutory provision that is ultra vires in its entirety.479
Extortion by colour of office may be an attractive option where the facts fall short of establishing the necessary malicious intent to sustain a claim of a deliberate tort such as misfeasance in public office.480 An example might be a situation in which constructive knowledge falling short of demonstrable dishonest intent is evident. In most such cases, however, a negligence claim may also be an available (and more attractive) alternative.
Colour of office and compulsion aside, the only remaining viable avenues are mistake of fact and mistake of law. Mistakes of fact have traditionally been viewed as a more appropriate foundation for an unjust enrichment case than mistakes of law. As Brennan J explains:
To admit a mistake of law as a ground for restitution in any case in which a mistake of fact would ground such a remedy would render many payments insecure even in cases where both parties expected the payment to be final: the uncertainty of the law and the overruling of decisions by later cases or on appeal would infect many payments with a provisional quality incompatible with orderly commerce. Moreover, while mistakes of fact are specific to particular relationships, the revealing of a mistake of law in one case could throw into uncertainty the finality of payments made in a great variety of cases.481
It is important to note that when we speak about mistakes in this context we are talking about the mistakes of the taxpayer rather than the tax official. Accordingly, these categorisations bear no relationship to whether or not the cause of action is the result of an ATO operational activity. A taxpayer mistake of
479 The apparent peculiarity of requiring compulsion where a statutory provision is completely invalid, but not requiring actual compulsion in cases of an ultra vires demand under a valid enactment is discussed by Birks in Peter Birks, „Restitution from Public Authorities‟ (1980) 33 Current Legal Problems 191, 196-197. 480 See the discussion of malicious intent in Part III(C) of Chapter 3. 481 David Securities v Commonwealth Bank (1992) 175 CLR 353, 394.
168
fact or of law is an equally plausible outcome of an ATO operational act or omission. The operational nature of the act or omission will be of little direct positive or negative relevance to determining whether the case involves an error of fact or law.
However, following the Brennan J reasoning, an ATO operational act or omission which brings about a taxpayer error of fact as distinct from law would be far more likely to succeed. It is difficult, though, to see why a taxpayer in most cases of an ATO operational act or omission-induced mistake of fact would choose to pursue a restitutionary claim instead of a tortious action. At least in a tortious claim there is the prospect of the taxpayer recovering more than just the erroneously paid tax.
There are also a number of general defences the Commissioner might rely on to defend a taxpayer restitutionary claim. These include voluntary submission to a claim, change of position, estoppel by representation, ministerial receipt, provision of consideration and limitation of actions.482 The potential applicability of these defences turns largely on the specific factual circumstances surrounding the collection of the relevant erroneously paid tax. Most would apply only in exceptional cases. For example, the defence of change of position applies „in exceptional cases where the authority is able to identify a specific extraordinary expense which it incurred on the faith of the receipt of the particular payment of tax by the plaintiff.‟483 Collections of tax by the Commissioner would normally be expected to fall into consolidated revenue rather than directly allocated to a specific fund or purpose. Accordingly, this defence would be inapplicable in most claims against the Commissioner.
Although falling short of formal defences, much more likely to be an issue in most taxpayer claims alleging unjust enrichment by the Commissioner are public policy concerns similar to those already discussed in the context of the tortious remedies examined in Chapter 3 and the preceding discussion of estoppel in this
482 For a comprehensive discussion of these see Erbacher, above n 468, Chapter 18. 483 Ibid, 477.
169
Chapter. This is true, irrespective of which established ground of recovery for unjust enrichment the plaintiff taxpayer pursues.
One of the more pressing of these policy concerns stems from reluctance to allow the extraction of money from State coffers even if that money has been illegally collected.484 As Logan J observed in the United States case of Coleman v Inland Gas Corp:485
[A]ll State governments have been slow indeed to open the doors of their treasuries and allow money to pass therefrom after it has once found lodgment within the governmental vaults. This is as it should be. The State is the sovereign and its affairs must be conducted for the best interest and welfare of the people. That calls for the expenditure of large sums of money for governmental affairs, and such sums of money can be obtained only through taxation. The State should determine the amount which it will spend by the probable income it will receive. When the income is collected it is allocated to different funds. The State uses the funds nearly always during the current year. It has been universally held, unless a contrary conclusion was forced by an ironclad statute, that no taxpayer should have the right to disrupt the government by demanding a refund of his money, whether paid legally or otherwise.486
This policy argument can be broken down into concerns with inefficiency and fiscal chaos. Wells explains these, citing La Forest J in Air Canada v British Columbia.487 The inefficiency concern is that the government would have to raise new taxes to give restitution to other taxpayers as compensation for the flaws of
484 For a detailed (but somewhat dated) discussion of the legal position in Australia in relation to recovery from the revenue in cases of unconstitutional taxes see Clifford Pannam, „The Recovery of Unconstitutional Taxes in Australia and in the United States‟ (1964) 42 Texas Law Review 779. See also Margaret Brock, „Restitution of Invalid Taxes - Principles and Policies‟ (2000) 5 Deakin Law Review 127. 485 21 SW 2d 1030 (1929). 486 Ibid, 1031. However, as discussed below, in the Australian context, Mason CJ in Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51 fell short of endorsing the recognition of a formal defence of disruption to public finances in cases involving restitutionary claims against statutory authorities. 487 Above n 474.
170
old taxes. Fiscal chaos refers to the situation that would result from a successful restitutionary challenge to a longstanding tax.488 To elaborate:
Fiscal chaos is the argument that as a government usually spends the taxes it collects in a year in that particular year. The result of allowing restitution in cases where that tax is subsequently declared invalid would be for a new tax to have to be levied to pay for the losses resulting from the invalid attempted levy through the old tax. In other words the new generation would be paying for the old…489
A defence centred upon arguments of disruption to finances and the possible resultant inefficiency or fiscal chaos has received lukewarm reception in Australia with Mason CJ observing in Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd490 that:
[t]he remedy for any disruption to public finances occasioned by the recovery of money in conformity with the law of restitution lies in the hands of the legislature. It can determine who is to bear the burden of making up any shortfall in public funds.491
However, these statements were obiter statements by His Honour. Accordingly, the question of the extent to which disruption to finances might be raised as a possible defence to a taxpayer claim against the Commissioner remains open.
An additional policy difficulty arises if the view is taken that the relevant tax legislation is intended to be a comprehensive code for dealing with the subject matter, thus precluding the possibility of any private law avenues of relief. There is Canadian authority for such an approach being taken in relation to unjust enrichment claims involving tax legislation.492
488 Above n 478, 201. 489 Keith Mason, „Money Claims by and Against the State‟ in Paul Finn (ed), Essays on Law and Government (1996) vol 2, 104, 122-123. 490 Above n 486. 491 Ibid, 68. 492 Albeit in the context of discussion of the ability to raise an unjust enrichment claim in cases of non-compliance with statutory time frames set out in tax legislation. See British Columbia Ferry
171
The combined effect of these potential public policy limitations, together with the restrictive interpretations of the formal requirements for making out a claim and the practical rarity of an operational act or omission giving rise to an unjust enrichment scenario, is that unjust enrichment is unlikely to be used or useful except in the rarest of factual matrices.
D - Conclusions
It is clear from the preceding analysis of equitable estoppel and unjust enrichment that neither cause of action provides any solid foundation for a successful compensation claim in the majority of ATO operational act or omission cases. The dual factual parameters of monetary compensation and operational activity dramatically limit the already limited potential scope of applicability of these equitable avenues for relief in the tax context.
Also, just as noted in the case of the tortious remedies examined in Chapter 3, there are significant public policy hurdles to jump, even in those already very limited cases in which the technical requirements of the relevant causes of action can be met. These public policy hurdles are bigger in cases involving revenue authorities such as the ATO. Particularly pertinent are the sensitivities of protecting the revenue base of the State.
Accordingly, while the taxpayer adversely affected by an ATO operational act or omission would be foolish to overlook the potential applicability of an equitable action against the Commissioner, it would be equally foolish to fail to appreciate the extremely limited potential for success in any such equitable action.
Corp v MNR [2001] 4 FC 3. See also the discussion of this case by Beninger in Michael Beninger, „Taxpayer Rights: Emerging Legal Techniques‟ (Paper presented at the 52nd Annual Canadian Tax Foundation Conference, Toronto, 24-27 September 2000), [10.8].
172
PART III - ADMINISTRATIVE LAW REMEDIES
As foreshadowed in the introduction to this Chapter, this Part deals with judicial review of administrative action. Specifically, the potential for success for the plaintiff aggrieved by an ATO operational act or omission and seeking monetary compensation through application pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) („ADJR Act‟) and/or the Judiciary Act 1903 (Cth) is examined. This Part will briefly discuss both these possible bases for seeking judicial review of administrative action. However neither will be examined in detail.
The main reason for the apparently cursory treatment has already been foreshadowed in the introduction to this Chapter. Specifically, judicial review of administrative action is one of the few avenues of relief examined in this study that can be categorically ruled out on the basis of the inability in Australia for successful judicial review proceedings to result in substantive relief and, in particular, an award of monetary compensation. The following discussion centres on explaining why.
Decisions are reviewable under the ADJR Act provided they are „of an administrative character, made or proposed to be made, or required to be made … under an enactment‟ or by a Commonwealth authority or an officer of the Commonwealth.493 However, paragraph (e) of Schedule 1 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) excludes from review decisions forming part of the process of making of, leading up to the making of, or refusing to amend, an assessment of tax. The exclusions in paragraph (e) of Schedule 1 have been interpreted as clearly prohibiting review of decisions dealing with the calculation of tax.494
493 Consistent with the definition of „decision to which this Act applies‟ in S 3(1) of the ADJR Act. 494 See the comments of Beaumont J in Constable Holdings Pty Ltd v Federal Commissioner of Taxation (1987) 72 ALR 265, 268-269; Ellicott J in Tooheys Ltd v Minister for Business & Consumer Affairs (1981) 36 ALR 64, 78; and Smithers J in Intervest Corporation Pty Ltd v FCT (1984) 3 FCR 591, 595–6.
173
Section 39B of the Judiciary Act 1903 (Cth) provides the Federal Court of Australia with original jurisdiction in respect of any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth. The Federal Court generally allows applications under both s 39B and the ADJR Act to be made and heard concurrently. In tax proceedings, the s 39B jurisdiction may be preferred given the absence of any express tax-specific limitations on review similar to those contained in paragraph (e) of Schedule 1 of the ADJR Act.
The two avenues for judicial review of administrative decisions differ in scope and approach.495 This is a moot point for the purposes of this study, however, as both are unequivocally incapable of assisting taxpayers aggrieved by an ATO operational act or omission to attain monetary compensation.
The basic problem is the general absence of availability of substantive relief in cases of judicial review. This is based on the view that the doctrine of separation of powers requires the courts to ensure that in judicially reviewing administrative decisions by statutory officers, they do not overstep by substituting their own decision for that of the statutory officer. Sir Anthony Mason enunciates the concern:
…[T]he function of the judiciary is to determine the legality of executive action and that includes determination of any departure from the requirements of natural justice and procedural fairness. But it is no part of the function of the court to substitute its decision for that of the executive when, by law, that decision is vested in the executive.496
In the context of the relevant taxpayer rights commentary, Walpole also makes the point:
495 Allars elaborates on the distinction. See Allars, above n 56, 108. 496 Sir Anthony Mason, „Administrative Law: Form Versus Substance‟ (1995) 6 Australian Institute of Administrative Law Forum 1, 2.
174
The effect of a review of an Administrative Decision by the Federal Court is that the Court will consider the legal correctness of the decision. It will not review the matter on the merits of the case in such a way as to consider whether the decision reached was an appropriate one.497
The disapproval by Australian judges of recent English administrative law cases in which substantive protection of legitimate expectations was permitted498 indicates that a shift toward allowing substantive relief is unlikely to emerge in the foreseeable future. The purely procedural nature of administrative law relief in Australia was confirmed in Re Minister for Immigration & Multicultural & Indigenous Affairs: Ex parte Lam.499 Gummow and McHugh JJ stated in that case:
That remains the position in this Court and nothing in this judgment should be taken as encouragement to disturb it by adoption of recent developments in English law with respect to substantive benefits or outcomes.500
The negative attitude of the Australian Courts toward the availability of substantive relief has been summarised by Busch:
…[T]he courts have … been unsupportive of the view that substantive fairness might constitute a ground of review in its own right. From the Australian perspective, such a principle…necessarily involves the courts in an illegitimate
497 Walpole, above n 22, 24. This is echoed by Bentley, above n 2, 262, where Bentley notes - „Administrative law concepts of natural justice, fairness and reasonableness are mainly procedural and do not extend nearly as broadly as would the lay person‟s understanding of the meaning of the terms.‟ 498 Cases in which substantive expectations have been recognised include R v North East Devon Health Authority; Ex parte Coughlan [2001] QB 213; R v Home Secretary; Ex parte Hindley [2001] 1 AC 410; and cases involving the UK Inland Revenue Commissioner such as R v Inland Revenue Commissioners; Ex parte Preston [1985] AC 835. 499 (2003) 214 CLR 1. 500 Ibid, 21. The approach of Gummow and McHugh JJ is consistent with earlier authority such as Attorney-General (NSW) v Quin, above n 421.
175
process of merits-review and, therefore, offends against the key Constitutional precept of the separation of powers.501
Sir Anthony Mason goes further, stating that „[i]t would require a revolution in Australian judicial thinking to bring about an adoption of the English approach to substantive protection of legitimate expectations.‟502
For the purpose of this study, however, the fundamental problem is not simply the absence of availability of substantive relief. It is the specific absence of relief in the form of monetary compensation. Section 16(1) of the ADJR Act sets out the available remedies in cases of review under that Act:
(1) On an application for an order for review in respect of a decision, the Federal Court or the Federal Magistrates Court may, in its discretion, make all or any of the following orders:
(a) an order quashing or setting aside the decision, or a part of the decision, with effect from the date of the order or from such earlier or later date as the court specifies;
(b) an order referring the matter to which the decision relates to the person who made the decision for further consideration, subject to such directions as the court thinks fit;
(c) an order declaring the rights of the parties in respect of any matter to which the decision relates;
(d) an order directing any of the parties to do, or to refrain from doing, any act or thing the doing, or the refraining from the doing, of which the court considers necessary to do justice between the parties. 503
501 Lisa Busch, „Standards of Review of Administrative Decision-Making and the Role of Deference in Australian Public Law‟ (2006) 11 Judicial Review 363, 368. 502 Sir Anthony Mason, „Procedural Fairness: Its Development and the Continuing Role of Legitimate Expectations‟ (2005) 12 Australian Journal of Administrative Law 103. 503 Sub-sections (2) and (3) of s 16 respectively provide identical remedies in cases of conduct engaged in for the purposes of making a decision, and failure to make a decision or failure to make a decision within the requisite timeframe.
176
While these remedies are „very wide indeed‟504 this breadth has not been interpreted as permitting the Court to award damages in cases of review under any of the grounds set out in the ADJR Act.
There is clear authority that monetary compensation is not available as a remedy for the successful applicant.505 The comments of Sweeney J in Park Oh Ho v Minister of Immigration and Ethnic Affairs506 („Park Oh Ho‟) are typical:
An applicant who merely establishes a ground of review under s 5 of the ADJR Act is not thereby entitled to an award of damages. The remedies of judicial review are those in the nature of certiorari, prohibition, mandamus, injunction and declaration, as s 16 of the ADJR Act makes plain.507
In Park Oh Ho it was also argued that s 22 of the Federal Court of Australia Act 1976 (Cth) might be of sufficient breadth to allow for damages to be validly accommodated as a remedy in appropriate judicial review cases. Section 22 provides:
The Court shall, in every matter before the Court grant, either absolutely or on such terms and conditions as the Court thinks just, all remedies to which any of the parties appears to be entitled in respect of a legal or equitable claim properly brought forward by him or her in the matter, so that, as far as possible, all matters in controversy between the parties may be completely and finally determined and all multiplicity of proceedings concerning any of those matters avoided.
504 Walpole, above n, 22, 31. 505 See, for example, Park Oh Ho v Minister for Immigration and Ethnic Affairs above n 203; Conyngham v Minister for Immigration and Ethnic Affairs, above n 203; Pearce v Button, above n 203; and O‟Neil v Wratten, above n 203. 506 Above n 203. 507 Ibid, 297. Morling J (at 310) and Foster J (at 317) make similar comments in that case. This case was subsequently overruled on other grounds by the High Court, but is still good authority on the question of the availability of damages in cases of judicial review of administrative action.
177
Sweeney J rejected this argument in Park Oh Ho, observing that „[s]ection 22 does not enlarge the provision of substantive law so as to authorise the award of damages in circumstances for which the law does not provide.‟508
Accordingly, the availability of damages as a remedy both in cases pursued under the ADJR Act as well as those pursued under the jurisdiction of the Federal Court set out in s 39B of the Judiciary Act 1903 (Cth) would appear to be precluded. In light of this fact, it is possible to summarily state the position with respect to the availability or otherwise of damages in cases of judicial review of administrative action: „Illegality of administrative action, whether by excess of power or denial of procedural fairness, does not give rise to liability in damages.‟509
In the United Kingdom there is similarly no right to monetary compensation, although the courts there, given their ability to give substantive relief to the plaintiff in cases in which the actions of the relevant public officer can be characterised as an abuse of office, use this ability to encourage ex gratia payments in appropriate cases.510 Steele explains:
English courts have no general power to award damages in respect of loss caused by an administrative act which is unlawful according to public law principles ... It is probably for this reason that the courts have focused on the first, preventative role for compensation. Their aim seems to be to encourage “voluntary” payment of compensation by threatening that, absent such payment, a decision … is more likely to be held to constitute an abuse of power, with substantive protection the
508 Ibid, 297-298. 509 Allars, above n 56, 304. See also Macksville & District Hospital v Mayze (1987) 10 NSWLR 708, 724-725 per Kirby J for a good brief summary of the causes of action that would permit an award of damages in appropriate cases of administrative malfunction by a statutory authority. These include the range of tortious remedies examined in Chapter 3. 510 Abuse of office has been raised in a number of UK tax cases, however even where those arguments have been successful, such as in R v Inland Revenue Commissioners: Ex parte Unilever Plc [1996] BTC 183, the difficulties of tainting the revenue authority with allegations of abuse of office have been highlighted. Simon-Browne LJ in that case noted, at 196: „It is certainly difficult to envisage many situations when, absent a clear breach of a clear representation, a highly reputable and responsible body such as the Revenue will properly be stigmatised as having acted so unfairly as to have abused their powers…‟
178
obvious remedy. The public body will probably prefer to pay compensation rather than risk being bound by its original promise.511
There is, however, no sign of any shift in Australian judicial thinking or any legislative shift that would see a similar approach adopted in Australia.
It is abundantly clear, therefore, that these causes of action are incapable of providing taxpayer victims of ATO act or omission with a remedy of monetary compensation and that this will remain the case for the foreseeable future. It will, however, be relevant to revisit the question of availability of damages in cases of judicial review of administrative action in the context of the critique of the existing array of remedies which is the core concern of Chapter 5.
511 Iain Steele, „Substantive Legitimate Expectations: Striking the Right Balance‟ (2005) 121 Law Quarterly Review 300, 324.
179
PART IV - INFORMAL AVENUES OF RELIEF
A - Introduction
As noted in the introduction to this Chapter, there is no uniformity to the „informality‟ of the various causes of action contained in this Part. What is uniform, however, is the confinement of the mechanisms explored in this Part to those mechanisms capable of, and most directly concerned with, resolving individual disputes. For this reason, in this Part there is no review of the role of officers such as the Inspector-General of Taxation. This is because this statutory officer is concerned with general policing of tax administration. Unlike the Commonwealth Ombudsman, the Inspector-General is not concerned with resolving specific disputes involving individual taxpayers.512 For similar reasons, the Board of Taxation is also outside of the proper scope of this Chapter.513 Insofar as officers such as the Commonwealth Ombudsman are also engaged, as
512 The objective of the Inspector-General of Taxation is described on the Inspector-General website as follows: „The objective of the Inspector-General of Taxation is to improve the administration of the tax laws for the benefit of all taxpayers.‟ Inspector-General of Taxation, Objective (2008)
180 part of their statutory function, in identification and resolution of systemic tax administration issues, these engagements are also not the concern of this Chapter.
The factual parameters of this study also exclude avenues of relief such as applications pursuant to the Freedom of Information Act 1982 (Cth)514 („FOI applications‟). Chapter 3 identified FOI applications as useful for enhancing the practical ability of the taxpayer to gather evidence against the Commissioner. However, FOI falls outside of the proper scope of the analysis in this Chapter as such applications cannot result in direct payments of monetary compensation to the applicant.
This Part explores, in turn, the Taxpayers‟ Charter („Charter‟), the Commonwealth Ombudsman and compensation options accessible via ATO Internal Complaints. Included in this category are payments in accordance with the Scheme for Compensation for Detriment caused by Defective Administration and „act of grace‟ payments.
B - Taxpayers‟ Charter
The Taxpayer‟s Charter consists of a series of booklets released by the ATO in 1997.515 The Charter lists taxpayer rights and obligations and ATO standards of
514 The Freedom of Information Act 1982 (Cth) creates „a legally enforceable right of every person to obtain access to documents of an agency or official documents of Ministers.‟ Allars, above n 56, 147. This comment reflects the objects set out in s 3(1) of the Freedom of Information Act 1982 (Cth): „The object of this Act is to extend as far as possible the right of the Australian community to access to information in the possession of the Government of the Commonwealth by: (a) making available to the public information about the operations of departments and public authorities and, in particular, ensuring that rules and practices affecting members of the public in their dealings with departments and public authorities are readily available to persons affected by those rules and practices; and (b) creating a general right of access to information in documentary form in the possession of Ministers, departments and public authorities, limited only by exceptions and exemptions necessary for the protection of essential public interests and the private and business affairs of persons in respect of whom information is collected and held by departments and public authorities; and (c) creating a right to bring about the amendment of records containing personal information that is incomplete, incorrect, out of date or misleading.‟ 515 The Charter publications are Australian Taxation Office, Taxpayers‟ Charter: What You Need to Know, NAT 2458 (2007)
181 service. The Charter has no legislative force516 so it does not actually create any additional legal rights for taxpayers.517 There was a substantial review of the Charter in 2003. A revised version was introduced in November of that year. Braithwaite describes this development and the content of the Charter:
The Tax Office Charter launched in 1997 covered taxpayer rights, service standards, avenues of redress, and taxation obligations. The commitments that the tax authority made to the public, in relation to formal Tax Office communications and decisions as well as interpersonal encounters, were captured through 12 principles. In 2003, the Charter was reviewed and extended to 13 principles, selecting out as a separate principle, the right to make a complaint (see (k) below). The new Charter also features slightly modified wording and explanations to clarify the meaning of the principles. The 13 principles are: (a) treat you fairly and reasonably; (b) treat you as being honest in your tax affairs unless you act otherwise; (c) offer you professional service and assistance to help you understand and meet your tax obligations; (d) accept you can be represented by a person of your choice and get advice about your tax affairs; (e) respect your
2007; Australian Taxation Office, Treating You Fairly and Reasonably, NAT 2549 (2007)
182
privacy; (f) keep the information we hold about you confidential in accordance with the law; (g) give you access to information we hold about you in accordance with the law; (h) give you advice and information you can rely on; (i) explain to you the decisions we make about your tax affairs; (j) respect your right to a review; (k) respect your right to make a complaint; (l) administer the tax system in a way that minimises your costs of compliance; and (m) be accountable for what we do.518
Kenny, a strong supporter of the Charter, explains the problem resolution approach it envisages.
In the event that a taxpayer believes that their legal rights or the standards outlined in the Charter have not been met, the following remedy is provided: Step 1 tell the tax officer with whom you are dealing. Step 2 talk to that officer‟s manager if you are not satisfied. Step 3 ring the Problem Resolution Service if you are still not satisfied. Also, taxpayers have the right to an independent review from outside the Tax Office, including the right to complain to the Commonwealth Ombudsman.519
In relation to the dual parameters of this study, it is clear, first, that many of the Charter commitments are operational in nature or are readily breached by operational failure. Generally, much of the Charter is directed at setting acceptable administrative standards. As Bentley notes „many secondary administrative rights are found in administrative charters of taxpayer rights.‟520 Certainly the content of the Australian Taxpayers‟ Charter is consistent with the Bentley view.521 As indicated by the preceding description of the Charter by Braithwaite, the Charter contains commitments of fair and reasonable treatment,
518 Valerie Braithwaite, „Are Taxpayers‟ Charters “Seducers” or “Protectors” of Public Interest? Australia‟s Experience‟ (Working Paper No 70, Centre for Tax System Integrity, Australian National University, 2005), 7-8. 519 Paul Kenny, „Taxpayers‟ Charter: The Quiet Achiever‟ (2000) 7 Taxation in Australia 379, 380. 520 Bentley, above n 22, 30. 521 The specific content of parts of the Charter is dealt with as part of the discussion in this Chapter of ATO Internal Complaints in (D) below, breach of contract in Part V(B), and privacy laws in Part V(C).
183 provision of professional service, protection of privacy and confidentiality, access to information and the provision of reliable advice and information. All of these are either operational in nature and/or capable of breach through operational act or omission. In this sense, therefore, the Charter is well suited to dealing with operational acts or omissions.
The second question, however, given the dual parameters of this study, is whether the Charter is capable of providing taxpayers with relief in the form of monetary compensation. Certainly the ATO‟s Charter publications envisage the possibility of awards of compensation for breaches of certain Charter commitments. For example, in relation to the Charter commitment to provide advice or information taxpayers can rely on, the ATO in their publication Taxpayers‟ Charter - Expanded Version highlight the following comment:
If you sustain financial loss or other damage as a result of relying on misleading or incorrect advice or information from us, you may be eligible for compensation or other redress.522
Rights to compensation are also highlighted in the context of the commitment to respect taxpayers‟ rights to reviews of decisions about their tax affairs.523 However the entitlement to compensation for a breach of any of the ATO commitments set out in the Charter is at the discretion of the ATO - there is no right to compensation as such.524 The effectiveness of the remedy depends on the good faith of the ATO in enforcing the Charter as Braithwaite vividly describes:
It is as if the tax authority is saying to taxpayers: „We know you have these rights, but you will not have to demand them, we will act in ways that honour them.‟ Through providing taxpayers with expectations that the Tax Office will be
522 Australian Taxation Office, Taxpayers‟ Charter: Expanded Version, above n 515, 9. 523 Ibid, 11. 524 As noted by Wheelright, above n 97, 69, compensation may be available through the ATO‟s internal dispute resolution mechanisms in cases of serious maladministration such as extraordinary delay or misleading advice - but this possibility remains purely at the discretion of the ATO. This issue is discussed further in (D) below.
184
fair and reasonable, treat taxpayers as honest, respect privacy, honour confidentiality, and be accountable, an agenda is signalled that is proactive in building a cooperative relationship with the public.525
Despite the best intentions of the ATO in administering the Charter, it is apparent from Commonwealth Ombudsman annual reports that in many cases the aggrieved taxpayer does not receive the desired remedy, including in some cases, monetary compensation.526 At best, the aggrieved taxpayer may obtain a concession from the Commissioner that the taxpayer has been treated unjustly or unfairly and that a taxation liability that has been assessed against the taxpayer (or the denial of a deduction or other concession) should be reversed. Such remedies disregard the economic losses that might have been suffered by the taxpayer.
The uncertain prospects for the recovery of monetary compensation are a symptom of the fact noted above that the Charter commitments are not legally enforceable rights merely by virtue of their inclusion in the Charter.527 For the taxpayer aggrieved by an ATO operational act or omission seeking monetary compensation via the Charter, this fact is a major concern. As Bentley points out:
Taxpayers could be forgiven for taking a cynical attitude towards a charter which purports to uphold their rights against the ATO, where the author and interpreter of the charter, and the primary judge as to when breaches have occurred, is the ATO itself.528
Similar concerns were expressed by Carey, commenting before the Charter was implemented:
525 Braithwaite, above n 518, 8. 526 For example, in his 2006 report, above n 111, at 6, the Commonwealth Ombudsman expressly notes the perceived inadequacy of the existing range of remedies: „Many of the people who approach the Ombudsman‟s Office are frustrated that the system is seemingly unable to provide them with the resolution and remedies that they are seeking.‟ 527 There is a significant volume of literature dedicated to calls for formalising and giving statutory force to the commitments to taxpayers contained in the Taxpayers‟ Charter. See, for instance, Simon James, Kristina Murphy and Monica Reinhart, „The Taxpayers‟ Charter: A Case Study in Tax Administration‟ (2004) Journal of Australian Taxation 336 and the extensive list of literature referred to therein. 528 Bentley, above n 204, 23.
185
Without legislative force, the Charter will lack credibility because it becomes simply another ATO brochure - certainly of interest, but of little practical importance…Any who seek reliance on it will likely be met with blank looks from ATO counter staff.529
Much of the literature concerning the Taxpayers‟ Charter (and charters of rights generally) is centred on the effect and desirability of the non-enforceability of the commitments contained in such charters.530 For the purposes of the examination of the Charter in this Chapter the question of desirability of having a legally enforceable Charter is only of incidental concern. Legal enforceability of taxpayer rights to compensation is, however, a key concern that will be addressed in Chapter 5 as part of the assessment contained in that Chapter of the adequacy and effectiveness of existing avenues of relief.
It suffices for the purposes of this Chapter to conclude that the Taxpayers‟ Charter is capable of providing monetary compensation to taxpayers aggrieved by an ATO operational act or omission constituting a breach of one or more of the thirteen ATO commitments contained in the Charter. While the significant proviso that such compensation is payable at the discretion of the ATO itself cannot be over-emphasised, this fact does not completely eliminate the potential utility of this avenue of relief.
C - Commonwealth Ombudsman
Under s 5(1) of the Ombudsman Act 1976 (Cth) the jurisdiction of the Commonwealth Ombudsman extends to investigation of any „action, being action
529 Annamaria Carey, „Taxpayers Charter‟ (1995-1996) 30 Taxation in Australia 543, 544. 530 See, for example, Braithwaite, above n 518; Margaret McClennan, „The Principles and Concepts in the Development of the Taxpayers‟ Charter‟ (2003) 32 Australian Tax Review 22; Simon James, Murphy Kristina and Reinhart Monika, „The Citizens‟ Charter: How might such Initiatives be more Effective?‟ (Working Paper 65, Australian National University, 2005); Nicholas Deakin, „Accentuating the Apostrophe: The Citizen‟s Charter‟ (1994) 15 Policy Studies 48; Gavin Drewry, „Whatever Happened to the Citizen‟s Charter?‟ [2002] Public Law 9; and David Russell, „Brave New World - Dawn Rises on Tax Rights‟ (1994) 29 Taxation in Australia 176.
186
that relates to a matter of administration‟ of a “department”531 or a “prescribed authority.”532 Section 3(1) of the Ombudsman Act defines these terms. The Australian Taxation Office constitutes a „prescribed authority‟ by virtue of the clearly public role which the office of the Commissioner of Taxation fulfils.
The Commonwealth Ombudsman is able to initiate an investigation concerning a department or prescribed authority of his or her own accord, irrespective of whether a complaint has been made.533 In this sense, systematic operational concerns could be investigated without the need for a taxpayer to bring a specific complaint.
Moss explains the role of the Commonwealth Ombudsman in relation to complaints against the ATO:
Investigations by the Taxation Ombudsman are guided by the criteria spelt out in the Ombudsman Act…whether an action of the ATO was contrary to law, unreasonable, unjust, oppressive, improperly discriminatory or based on a mistake of law or fact. The Taxation Ombudsman can also examine whether a legislative provision applied by the ATO, or an administrative practice followed by it, was unreasonable, unjust, oppressive or improperly discriminatory.534
Within this broad ambit, clearly there is substantial potential for operational matters to form the basis for a successful Ombudsman complaint. The real difficulty where the Commonwealth Ombudsman is concerned, though, is the ability of the Commonwealth Ombudsman to ensure payment of monetary compensation to an aggrieved taxpayer. Moss hints at the concern. He notes that
531 „Department‟ is defined as a Department within the meaning of the Public Service Act 1999 (Cth). Section 7 of the Public Service Act excludes from the meaning of that term any body that is a statutory agency. Section 4A of the Taxation Administration Act 1953 (Cth) confirms that the Commissioner of Taxation and his employees are a Statutory Agency for the purposes of the Public Service Act 1999 (Cth). 532 „Prescribed authority‟ is relevantly defined as including a body established for a public purpose by or in accordance with the provisions of an enactment. The Commissioner of Taxation clearly falls within this definition. 533 In accordance with s 5(1)(b) of the Ombudsman Act 1976 (Cth). 534 Moss, above n 512, 8.
187
„[t]he Taxation Ombudsman is limited to making a recommendation as to appropriate corrective action.‟535 In other words, a finding by the Commonwealth Ombudsman that the Commissioner should pay compensation to an aggrieved taxpayer is not enforceable.
Even more concerning are the comments of Sir Anthony Mason in relation to the observance of Commonwealth Ombudsman recommendations, particularly where the recommendation is for a monetary payment to the complainant:
Although the Ombudsman appears to have become a permanent feature of the federal landscape, he has stated that there is an unwillingness on the part of some federal agencies to implement his recommendations, notably for the payment of ex gratia compensation.536
The real sanction for ensuring Commonwealth Ombudsman recommendations are followed is the threat of adverse publicity. Section 16 of the Ombudsman Act 1976 (Cth) entitles the Commonwealth Ombudsman to inform the Prime Minister of the failure of an authority to take action recommended by the Commonwealth Ombudsman within a reasonable time.537 In relation to the effectiveness of this sanction in the taxation context, some thought should be given to the observations of Bentley:
There is a perception among taxpayers that bad publicity would seldom in fact prevent any revenue organisation from exercising its powers to the fullest extent possible when it felt it was in the right, whatever the rights of the taxpayers involved.538
Irrespective of whether this perception accords with reality, the overall conclusions that can be drawn in respect of the availability of monetary
535 Ibid. 536 Mason, above n 204, 123. 537 Further, reports of the Commonwealth Ombudsman are to be tabled before Parliament in accordance with s 19 of the Ombudsman Act 1976 (Cth). 538 Bentley, above n 204, 23.
188 compensation in cases of ATO operational act or omission investigated by the Commonwealth Ombudsman are very similar to the conclusions outlined above about the utility of the Taxpayers‟ Charter. Just as with the Charter, the uncertainty surrounding availability of monetary compensation via Commonwealth Ombudsman complaint limits the utility of this alternative. Commonwealth Ombudsman investigation is no substitute for a remedy which could with some certainty, and in accordance with some known and well defined legal principles and body of precedent, provide the same remedy. This is a proposition taken up and elaborated in Chapters 5 and 6.
D - ATO Internal Complaints and Act of Grace Payments
A survey of the taxpayer compensatory rights landscape would be incomplete without some reference to the government policies and ATO-administered mechanisms for dealing with monetary compensation claims arising from allegations of an ATO operational act or omission. The ATO makes passing reference to these various governmental and internal procedures in the Taxpayers‟ Charter. The Charter booklet Taxpayers‟ Charter - If You‟re Not Satisfied contains the following statement:
If you feel that our actions have directly caused you to suffer a financial loss, contact our toll-free compensation assistance line...There is also information about compensation and when it may be available on our website.539
The ATO has also released two other publications which more elaborately deal with the availability of taxpayer compensation through direct approach to the ATO.540 These specify two general circumstances in which a claim for compensation could be made:
There are two ways we assess claims for compensation. They are:
539 Australian Taxation Office, Taxpayers‟ Charter - If You‟re Not Satisfied, above n 515, 8. 540 These publications are Claiming Compensation, above n 163; and Applying for Compensation, above n 163.
189
compensation for legal liability (for example, negligence), or compensation for detriment caused by defective administration.541
In respect of the former, the ATO identify a number of circumstances in which compensation might be paid.542 These include negligence in the provision of tax advice to taxpayers, claims arising out of contracts with service providers, claims for breaches of privacy or for discriminatory actions or employment-related disputes such as industrial actions.
Where payments are sought for defective administration in circumstances other than circumstances which give rise to legal liability to the taxpayer, the ATO will provide compensation in accordance with the principles of the Scheme for Compensation for Detriment caused by Defective Administration („CDDA Scheme‟). This scheme is not unique to the ATO - it is an Australian Government scheme administered by the Minister for Revenue.543 Under the CDDA Scheme „defective administration‟ is defined as:
a specific and unreasonable lapse in complying with existing administrative procedures an unreasonable failure to institute appropriate administrative procedures an unreasonable failure to give to (or for) a claimant, the proper advice that was within the official‟s power and knowledge to give (or reasonably capable of being obtained by the official to give), or giving advice to (or for) a claimant that was, in all the circumstances, incorrect or ambiguous.544
541 Claiming Compensation, above n 163, 1. 542 The ATO define compensation claims for allegations of legal liability consistent with the Legal Service Directions 2005 issued by the Attorney-General under s 557F of the Judiciary Act 1903 (Cth). See Attorney-General‟s Department, Commonwealth of Australia, Legal Service Directions 2005 (2005). 543 For a detailed discussion of the Scheme, see Department of Finance and Deregulation, Commonwealth of Australia, Finance Circular No 2006/05, above n 206, issued to all agencies under the Financial Management and Accountability Act 1997 (Cth) by the Department of Finance and Administration. 544Finance Circular No 2006/05, above n 206, 14. This is a direct reproduction of the definition as described in paragraph 23 of the CDDA Scheme itself.
190
In the event that cases do not fall under the CDDA Scheme or give rise to relief by virtue of established grounds of legal liability an „act of grace‟ payment can be sought. These are also not internally determined by the ATO, as the ATO publication Claiming Compensation545 explains:
The act of grace power is a unique discretion given to the Minister for Finance and Administration to make payments to people who may have been unintentionally disadvantaged by the effects of Australian Government legislation, actions or omissions and who have no other way to make a claim. The act of grace power should be seen as a remedy that may only be applied in special circumstances to ensure consistency and equity in the impact of Government activities.546
These mechanisms are all capable of application in cases of ATO operational act or omission causing taxpayer loss.
To the extent that a claim alleges formal legal liability, the same limitations on relief that apply in respect of the relevant avenue of formal legal liability alleged (eg negligence principles) would equally apply as a constraint on potential recovery of compensation through the ATO‟s Internal Complaints mechanisms. As already discussed, in cases of ATO operational act or omission these constraints can be significant. However, arguably, the „defective administration‟ and „act of grace‟ avenues of informal relief, which do not turn on demonstrating reasonable prospects of recovery through any formal legal cause of action, provide a useful extension of availability of compensation for taxpayers aggrieved by an ATO operational act or omission.
545 Above n 163. 546 Ibid, 3. The payments are authorised under s 33 of the Financial Management and Accountability Act 1997 (Cth). At page 4, Financial Circular No 2006/05, above n 206, describes the circumstances in which „act of grace‟ payments are payable. Notably, the circumstances under which a payment may be made extend to situations where the claim is a moral claim rather than a legal claim and can extend to cover both economic and non-economic losses sustained.
191
Notwithstanding, these avenues of compensatory relief remain open to the core criticism of potential bias.547 The ATO are at pains to point out that, in assessing any claim, common sense and pragmatism is applied and claims are considered in light of the prospects of the claim succeeding in court, the costs of defending the claim and any governmental prejudice in continuing to defend the claim. If, on this basis the claim is considered valid, the ATO will „endeavour to reach a mutually acceptable settlement so a person doesn‟t have to take court action for compensation.‟548
The ATO do appear to have taken this approach to heart if the data cited by the Commonwealth Ombudsman is credible:
Tax complainants should be especially encouraged to know that between 50 and 66 per cent of all complaints handled by ATO Complaints are either fully or partially upheld in the complainant‟s favour.549
There still, however, remains the potential for a perception of impartiality to be associated with any self-administered or government-administered system for monetary compensation. Chapter 5 explores the implications of this perception for adequacy and effectiveness of the existing avenues for relief in cases of ATO operational act or omission where monetary compensation is sought.
E - Conclusions
Given the broad range of avenues of relief and mechanisms briefly explored in this Part it is difficult to draw many meaningful sweeping conclusions. However,
547 See, for example, the comments of Wheelright in Karen Wheelright, „Taxpayers Rights in Australia‟ (1997) 7 Revenue Law Journal 226, 240-241. 548 Australian Taxation Office, Claiming Compensation, above n 163, 2. This is consistent with the intent of the CDDA Scheme as set out in Financial Circular No 2006/05, above n 206, which specifies, at 11, that „decisions should be taken impartially.‟ The Scheme itself requires (at paragraph 60) that the level of compensation be determined as follows: „offers of compensation to claimants should be calculated on the basis of what is fair and reasonable in the circumstances and in consideration of the fact that the Commonwealth should not take advantage of its relative position of strength in an effort to minimise payment.‟ 549 Office of the Commonwealth Ombudsman, above n 110, 6.
192 this much is clear from the analysis - there is no „informal‟ mechanism or avenue of relief that is capable of providing taxpayers seeking monetary compensation for loss caused by an ATO operational act or omission with a clearly defined and reliable action for a broad range of operational act or omissions. The broad commitments contained in the Taxpayer‟s Charter, Commonwealth Ombudsman determinations and even the relatively prescriptive guidelines under the CDDA Scheme all fall far short of providing the certainty of a legally enforceable formal remedy.
To compound this deficiency, as also noted in the preceding discussion, those informal mechanisms which are internally administered by the ATO or the Minister for Finance will also always suffer from at least the perception of partiality. The informal and discretionary nature of the relief available through an internal ATO complaint or the Taxpayer‟s Charter, including the lack of any publicly available precedents, and clear statutory guidelines for when and how much monetary relief will be available also, arguably, potentially add to the opportunity for bias. Chapter 5 explores the relevance of these characteristics to assessment of the overall adequacy of the causes of action presently available to taxpayers seeking monetary compensation for an ATO operational act or omission.
193
PART V - OTHER AVENUES OF RELIEF
A - Introduction
This Part brings together three remedies which are neither tortious nor equitable in nature. They can also not in any way be considered to be „informal‟ or administrative avenues of relief in any sense similar to those avenues of relief examined in Part IV. The three avenues of relief which fit this description are:
(1) Breach of contract; (2) Misleading and deceptive conduct or unconscionable conduct in breach of the Trade Practices Act 1974 (Cth); and (3) Breaches of the Information Privacy Principles contained in the Privacy Act 1988 (Cth).
There is no unifying characteristic applicable to these three avenues of relief beyond the fact that they do not fit neatly into any of the preceding categorisations in this Chapter and Chapter 3. However, similar to all of the remedies examined in the preceding parts of this Chapter and Chapter 3, each of these potential avenues of relief are significantly limited in their scope of potential application in cases falling within the dual factual parameters of this study. The following examination of these avenues of relief highlights these limitations.
B - Breach of Contract
The dual factual parameters of this study pose few difficulties for a breach of contract action. A breach of contract is just as likely to arise from an operational act or omission as from any other act or omission. Further, an action for breach of contract, if successful, is clearly capable of producing a monetary compensation remedy. Monetary compensation is the usual remedy awarded in breach of contract claims. Damages in contract law are designed to provide compensatory
194 relief by placing the plaintiff in the same position as if no breach had occurred.550 Equitable remedies such as specific performance will usually only be available in a breach of contract claim where monetary damages would be inadequate for restoring the plaintiff to his or her pre-breach position.551
The real challenge in the tax context, however, is establishing a contractual relationship between the Commissioner and the aggrieved taxpayer. There is tax- specific authority to support the principle that in certain circumstances the Commissioner can unwittingly enter into a contractual relationship with a taxpayer. Rider, in his article discussing estoppel against the Commissioner in Australia, cites one such case. The case referred to by Rider is Cox v Deputy Federal Commissioner of Land Tax (Tas)552 („Cox‟). As discussed in Part II(B), this case concerned a settlement of certain land tax liabilities of the taxpayer through an agreement between the Commissioner and the taxpayer. The Commissioner subsequently sought to re-open the land tax assessments. Griffith CJ, denied the Commissioner‟s request to re-open the assessments, characterising the compromise followed by payment by the taxpayer as „an executed agreement for valuable consideration.‟ 553
Similarly, as also flagged in the discussion of estoppel in Part II(B) of this Chapter, there is often a strong correlation between a finding of estoppel and the recognition of contractual obligations between the parties. Brennan J points this out in Waltons Stores v Maher:554
[E]quitable estoppel almost wears the appearance of contract, for the action or inaction of the promisee looks like consideration for the promise on which, as the promisor knew or intended, the promisee would act or abstain from acting…But
550 In Robinson v Harman (1848) 154 ER 363, at 365, Baron Parker made the following oft-quoted statement that in a contract law claim the plaintiff „is, so far as money can do it, to be placed in the same position…as if the contract had been performed.‟ 551 See, for example the observations of Lord Upjohn to this effect in Beswick v Beswick [1968] AC 58, 102. 552 Above n 443. 553 Ibid, 455. 554 Above n 286.
195
there are differences between a contract and an equity created by estoppel. A contractual obligation is created by the agreement of the parties; and equity created by estoppel may be imposed irrespective of any agreement by the party bound. A contractual obligation must be supported by consideration; an equity created by estoppel need not be supported by what is, strictly speaking, consideration. The measure of a contractual obligation depends on the terms of the contract and the circumstances to which it applies; the measure of an equity created by estoppel varies according to what is necessary to prevent detriment resulting from unconscionable conduct…555
While Brennan J points out the differences between an estoppel and a breach of contract, it is clear that in some cases factually similar to an estoppel action, a contractual relationship is demonstrable. In these cases very similar limitations and considerations to those discussed in the context of the discussion of estoppel in Part II(B) of this Chapter are relevant to bringing a breach of contract claim against the Commissioner of Taxation.
However, authorities such as Cox and estoppel-like contractual claims are likely to be of little utility to taxpayers aggrieved by an ATO operational act or omission. It is difficult to envisage a situation where the Commissioner will press a purely operational failure as a valid basis for seeking to resile from a contractual arrangement with any taxpayer, at least once the Commissioner identifies that error. In practical terms, therefore, the likelihood of damages being recoverable for a breach of contract by the Commissioner brought about by an operational act or omission is minimal.
An alternative avenue for recovering from the Commissioner for a breach of contract might arise if there is an implied contractual obligation on the Commissioner in respect of minimum operational standards. There is certainly no such general obligation expressly contained in Australian tax legislation. The comments of Young J made in the context of the allegations of breach of statutory
555 Ibid, 425.
196 duty by the Commissioner in Lucas v O‟Reilly556 discussed in Part IV of Chapter 3 are worth recalling here. His Honour concluded that any duty of the Commissioner of Taxation is owed to the Crown as distinct from any individual taxpayer.557 Such comments are an unequivocal (albeit implicit) rejection of the possibility of the Commissioner owing general contractual obligations to taxpayers.
Notionally, the best prospects for demonstrating that the Commissioner owes taxpayers any general contractual obligations of an operational nature lie in the Taxpayers‟ Charter. As discussed in Part IV(B) above, the Charter contains a number of general service commitments of an operational nature which might readily be construed as contractual commitments.
For such a construction to succeed, however, there is a need to overcome a significant hurdle. This hurdle is that many of the commitments in the Charter are likely to be construed as insufficiently precise to be contractually enforceable. For example, the commitment to treat taxpayers fairly and reasonably commits the ATO to treating taxpayers with „courtesy, consideration and respect‟ and to behave with „integrity and honesty.‟ Such commitments would be virtually impossible to characterise with sufficient certainty to be enforceable in contract.558 These types of commitments are more akin to aspirational goals than binding contractual commitments.
Further, to seek to contractually enforce the Charter would be tantamount to
556 Above n 209. 557 Young CJ observed in that case, ibid, at 4085, that: „If the cause of action relied upon by the plaintiff is based upon a breach of statutory duty, the plaintiff must show...that the statute creating the duty confers upon him a right of action in respect of any breach...However, it is, I think, clear that the defendant owes the plaintiff no such duty. The duty of the Commissioner is owed to the Crown.‟ 558 Similar comments could be applied to other ATO publications dealing in part with the relationship between the ATO and taxpayers. For example, in the recently released Document Making it Easier to Comply 2007-08, guiding principles for dealing with taxpayers are prefaced with vague terms like „as far as possible.‟ Australian Taxation Office, Making it Easier to Comply 2007-08 (2008)
197 seeking to override the express rejection of the suggestion by the Australian Joint Committee of Parliamentary Accounts in 1993 to endow the Charter with binding legislative force.559 It would also be contrary to the general acceptance that the Charter does not create any new legal rights.560 It would be a bold judge indeed who would accept such a construction of the Charter.
All of this confirms the fact that in the absence of a specific contractual arrangement between the ATO and a taxpayer (such as an agreement to settle a tax debt) or a representation for consideration in circumstances capable of sustaining a common law estoppel claim, there is no realistic opportunity to bring a claim for breach of contract against the Commissioner of Taxation. Of course, even within this narrow ambit, it would only be in an even narrower sub-set of cases that a breach brought about by an operational act or omission would be the factual genesis of a breach of contract action.
C - Trade Practices Act 1974 (Cth)
Part V of the Trade Practices Act 1974 (Cth) („TPA‟) contains a number of consumer protection provisions. A breach of these provisions raises the possibility of a successful claim for damages in accordance with s 82 of the TPA. Section 82(1) provides:
82(1) A person who suffers loss or damage by conduct of another person that was done in contravention of a provision of Part IV or V may recover the amount of the loss or damage by action against that other person or against any person involved in the contravention.
559 See Australian Joint Committee of Parliamentary Accounts, above n 516. See also the recommendations contained in OECD, Committee of Fiscal Affairs Working Party, „Taxpayers‟ Rights and Obligations - A Survey of the Legal Situation in OECD Countries‟, above n 516. 560 Numerous writers have confirmed this view. See, for instance, Karen Wheelright, above 97; Sawyer, above n 22; and Bentley, above n 204.
198
The provisions of Division 1 of Part V prohibit a range of unfair practices. It is beyond the scope of this study to examine each of these provisions.561 However, the most broadly potentially relevant are ss 51AA and 52. Section 51AA(1) provides:
51AA(1) A corporation must not, in trade or commerce, engage in conduct that is unconscionable within the meaning of the unwritten law, from time to time, of the States and Territories.562
Section 52 deals with misleading and deceptive conduct. Sub-s 52(1) provides:
52(1) A corporation shall not, in trade or commerce, engage in conduct that is misleading or deceptive or is likely to mislead or deceive.
Before examining the potential relevance of these provisions in cases of ATO operational act or omission causing taxpayer loss, the important threshold issue is whether and to what extent these provisions and their statutory damages remedy563 might be applicable to ATO activities. In this regard, s 2A of the TPA provides some clarification. Section 2A extends the application of the TPA to the Crown in right of the Commonwealth insofar as the Crown or its authorities carry on a business. Sub-section 2A(2) achieves this objective by treating the Crown and its authorities as if they were corporations for the purposes of the TPA.564
561 Division 1 prohibits sixteen separate unfair practices across a broad range of contexts including land transactions, employment matters, credit cards, prizes and other inducements and various forms of advertising. 562 For discussion of the unconscionability provisions in the TPA see Frank Zumbo, „Prohibiting Unconscionable Conduct Within Business Transactions‟ (1998) 72 Australian Law Journal 93; Lynden Griggs, „The Unconscionability Provisions of the Trade Practices Act 1974: Contrasting Judicial Developments‟ (2001) 9 Competition and Consumer Law Journal 241; and James Kakalik et al, An Evaluation of Mediation and Early Neutral Evaluation under the Civil Justice Reform Act (1996). 563 Section 82 of the TPA provides for recovery of damages for breach of these sections. 564 Sub-section 2A(3) does not extend the application of the TPA to render the Crown liable to pecuniary penalties or prosecution, but does not disturb the right to claim damages pursuant to s 82.
199
At first glance, therefore, notionally at least, it is conceivable that the Commissioner of Taxation as an officer of the Crown could be held liable in damages to a taxpayer aggrieved by an operational act or omission which constitutes misleading or deceptive conduct or unconscionable conduct. The question then becomes one of outlining the circumstances in which an ATO operational act or omission might constitute a breach of these provisions of the TPA.
The first major factual limitation is contained in s 2A itself. The limitation is that the provisions of Divisions IV and V of the TPA are only applicable to the Crown and its authorities to the extent that they are involved in „business.‟ While the definition of „business‟ would appear to preclude the potential for the Commissioner of Taxation to be caught by the provisions by implying the need for a profit-making motivation, this is not supported by the legislation. The definition of „business‟ in s 4(1) provides that business includes a business not carried on for profit. This definition was inserted specifically to capture Commonwealth authorities. Accordingly, the fact that the ATO is clearly not an instrumentality engaged in a profit-making enterprise, would not preclude the potential for ss 51AA and 52 to be applied to its operational activities.
However, a similarly potentially limiting restriction is contained in ss 51AA and 52 themselves. These sections only extend to unconscionability and misleading and deceptive conduct respectively which is carried out by a perpetrator engaged in „trade or commerce.‟ Section 4(1) includes a definition of „trade or commerce‟ however the statutory definition does little other than clarify that trade or commerce extends to activities in trade or commerce both inside and outside Australia. Judicial consideration of the term has proven much more enlightening. Deane J in Ku-ring-gai Cooperative Building Society (No 12) Ltd565 gave the term an extremely broad ambit:
565 (1978) 36 FLR 134.
200
The terms “trade” and “commerce” are not terms of art. They are expressions of fact and terms of common knowledge. While the particular instances that may fall within them will depend upon the varying phases of development of trade, commerce and commercial communication, the terms are clearly of the widest import…they are not restricted to dealings or communications which can properly be described as being at arm‟s length in the sense that they are within the open markets or between strangers or have a dominant objective of profit making.566
Notwithstanding, there remains significant uncertainty as to the limits of the term, in particular where a statutory authority such as the Commissioner of Taxation is involved. There are no cases directly considering the meaning of „in trade or commerce‟ in the context of the ATO. However, a leading example of consideration of the term in the context of statutory functions is Unilan Holdings Pty Ltd v Kerin.567 In that case Hill J, struck out the plaintiff‟s Statement of Claim insofar as it contained allegations of breach of s 52 of the TPA by the then Minister for agriculture. The plaintiff alleged that comments made in a speech by the Minister at an international wool industry conference expressing confidence in the retention of the statutory reserve price for wool were made with the intention of or in the knowledge that persons would rely on them and would be induced to retain wool stockpiles to their detriment. The reserve price scheme was subsequently scrapped.
His Honour held:
The giving of a speech to an international wool conference by a Minister of State is not an aspect or element of activities or transactions which, of their nature, bear a trading or commercial character…The giving of a speech is a matter that can be
566 Ibid, 167. 567 Above n 271. It will be recalled that negligence was also alleged in this case. See the discussion in Part II of Chapter 3.
201
said to be in relation to trade or commerce, but not conduct which is actually in trade or commerce.568
Applying this restrictive approach it would be highly likely that the majority of the functions of the Commissioner would be viewed as related to trade or commerce although not in trade or commerce. In other words, it would not be sufficient that the ATO‟s tax administration functions may, in many instances, place it in close consideration of, and proximity with, trading or commercial activities of taxpayers. To constitute conduct in trade or commerce, the ATO‟s conduct itself would need to comprise an active element of those trading or commercial activities.
Hill J in Unilan Holdings does give an example confirming that a statutory authority such as the ATO could be found to have engaged in trade or commerce:
It is obvious that a statutory body could engage in trade or commerce. The treasury might mint coins to be marketed for collection; its sale of those coins would be conduct in trade or commerce. If the Treasurer, acting on behalf of his department, were to make a misleading statement in the course of promoting the sale of the coins, he could be representing the Treasury in its dealings with potential consumers.569
Plainly, this example is far removed from any of the Commissioner‟s typical taxation administration activities. For example, in the field of provision of opinions or information to taxpayers on relevant aspects of tax law, there is a clear statutory framework for the provision of binding Rulings which limits the circumstances in which the Commissioner will be bound by such information or opinions.570 Outside this framework it is still difficult to envisage a situation in which the Commissioner provides such opinions or information in circumstances which are anything more than simply peripherally related to trade or commerce.
568 Ibid, 714. His Honour followed the reasoning of the majority of the High Court in Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594. 569 Ibid, 715. 570 See the discussion at n 456 and the accompanying discussion in Part II(B) of this Chapter.
202
Certainly they would not be provided in anything resembling the context in which private tax professionals provide tax advice to their paying clients.
Of course, even if a similar activity could conceivably form part of the activities of the ATO, the operational parameter of this study makes the possibility of a successful claim against the Commissioner even more remote: To be relevant to this study the misleading or deceptive representation must have been caused by an operational act or omission.
Notwithstanding, a potentially successful action, although only remotely possible, cannot be categorically ruled out. There is nothing in the misleading and deceptive conduct prohibition in s 52 of the TPA that categorically precludes a purely operational activity from being sufficient to constitute misleading or deceptive conduct. For example, there is no requirement of intent to mislead or deceive; the focus is on whether the statement or representation actually conveys a meaning which is false.571 So, an inadvertent operational error or oversight by an ATO officer that leads to making a false representation to a taxpayer could constitute a breach of s 52.
Accordingly, the requirements of deliberate torts such as misfeasance in public office (which hinge on demonstrating malice), and equitable estoppel claims (which hinge on unconscionability), would not need to be met. Silence is also sufficient to constitute a misrepresentation in appropriate cases.572 Further, there is no requirement for the existence of a duty of care573 which is the cause of such difficulty in establishing a negligence action, or the existence of any contractual obligation574 owed by the defendant to the plaintiff. In this respect, provided the correct factual circumstances arise, a claim alleging breach of s 52 by the Commissioner could be relatively straightforward. The problem remains simply
571 Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) ATPR 40-463. 572 This is consistent with s 4(2) of the TPA which provides that engaging in conduct includes „refusing to do an act.‟ 573 Consolidated Bearing Company (SA) Pty Ltd v Molnar Engineering Pty Ltd (1994) ATPR (Digest) 46-122, 53,592. 574 Bentley, above n 5.
203 the extremely narrow scope of potential applicability of the cause of action in cases of ATO operational act or omission causing taxpayer loss.
A final cautionary note for aggrieved taxpayers is the attitude of the Commissioner to the consequences of any misleading information as evidenced by his Taxpayers‟ Charter booklet Taxpayers‟ Charter: Getting Advice From The Tax Office.575 In that publication the Commissioner notes:
If it turns out that our advice or information is incorrect, or it is misleading and you make a mistake as a result, we must still apply the law correctly. For some taxes, this means that we will increase your liability or decrease your entitlement, provided any time limits set by law allow us to.576 (emphasis added)
In that same publication, the Commissioner makes almost identical statements about the consequences of misleading information in Public Rulings577 and administratively binding advice.578 In the face of this attitude, a taxpayer is almost certain to encounter strong resistance to any claim for monetary compensation on the basis of operationally caused misrepresentation, even within the already miniscule scope of potential applicability of s 52 relief.
The unconscionable conduct prohibition contained in s 51AA raises a number of similar difficulties for the plaintiff taxpayer including the substantial „in trade or commerce‟ limitation. Of course, though, the central requirement for a s 51AA case is the requirement of „unconscionability.‟ The section imports the judicial meaning accorded to the term in case law. The relevance of unconscionability as a basis for founding an action in equitable estoppel has already been discussed in Part II(B) of this Chapter. However, the concept has most comprehensively been discussed in the context of contractual claims. The leading authority is
575 Above n 515. 576 Ibid, 8. 577 Ibid, 7. 578 Ibid, 8.
204
Commercial Bank of Australia Ltd v Amadio („Amadio‟).579 In that case Gibbs CJ described unconscionability in the following terms:
A transaction will be unconscientious within the meaning of the relevant equitable principles only if the party seeking to enforce the transaction has taken unfair advantage of his own superior bargaining power or of the position of disadvantage in which the other party was placed.580
Essentially, to demonstrate that a contractual arrangement is unconscionable, there must be an inequality of bargaining power between the parties. The weaker party must have been in a position of special disability relative to the stronger party, the stronger party was aware or should have been aware of the special disability and took unfair advantage of their relative strength. Again, therefore, a substantial restriction on the potential applicability of the provision is that only operational actions taken with the accompanying awareness of special disability of the taxpayer are capable of sustaining a claim. Such a demonstrable awareness is unlikely to accompany most complained of operational activities.
In terms of what constitutes a „special disability‟ the following oft quoted extract from the judgment of Deane J in Amadio demonstrates the potential breadth of applicability of relief from unconscionable conduct:
The adverse circumstances which may constitute a special disability for the purposes of the principles relating to relief against unconscionable dealing may take a wide variety of forms and are not susceptible to being comprehensively catalogued…poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary…‟581
579 (1983) 151 CLR 447. 580 Ibid, 459. In the earlier case of Blomley v Ryan (1956) 99 CLR 362, Kitto J, at 415, described unconscionability as applicable whenever one party to a transaction is at a special disadvantage in dealing with the other party because illness, ignorance, inexperience, impaired facilities, financial need or other circumstance affect his ability to conserve his own interests, and the other party unconscientiously takes advantage of the opportunity this placed in his hands.‟ 581 Above n 579, 474 per Deane J.
205
There is no express requirement that there exists a contractual relationship between the parties for a claim alleging unconscionability in breach of s 51AA to be brought. However, in practical terms, most instances of unconscionability that could be anticipated would concern unconscionable behaviour in contractual arrangements between parties. The key question therefore becomes whether and in which circumstances the Commissioner might owe any contractual obligations to an aggrieved taxpayer. This question has already been answered in Part V(B) of this Chapter. The conclusion there was that there is only an extremely remote prospect of such obligations arising. Consequently, there are similarly remote prospects of a successful unconscionability claim under s 51AA.582
D - Privacy
It is quite conceivable that operational acts or omissions by the ATO could give rise to breaches of confidentiality or a taxpayer‟s privacy. A prominent recent overseas example is the loss in the mail in 2007 by HM Revenue and Customs in the United Kingdom of over 25 million personal records in the form of the entire unencrypted child benefit databases. This is a glaring example of an operational failure giving rise to significant breach of privacy concerns. It is quite possible that such operational malfunctions may give rise to significant compensable losses in some cases. Accordingly, it is appropriate in this study to consider the potential for recovery of compensation from the ATO due to a breach of the ATO‟s Privacy Act 1988 (Cth) obligations.583
The Privacy Act applies to the ATO by virtue of its status as an „agency.‟ An „agency‟ is defined in s 6(1) of the Privacy Act as including any body established
582 A similar conclusion is possible regarding ss 51AB and 51AC. These sections deal with statutory unconscionability in relation to consumer transactions and small business transactions respectively. These provisions broaden the concept of unconscionable behaviour. However the threshold limitations discussed above which severely restrict the ability of a taxpayer to bring a successful claim under s51AA apply with equal force to these sections also. 583 Secrecy provisions also bind the ATO. The tax secrecy provisions contained in ss 3 and 16 of the ITAA36 are not dealt with here as breaches of these provisions are penalised through fines or imprisonment. Monetary compensation claims are not an available avenue of relief.
206 for a public purpose or by or under a Commonwealth enactment and extends to persons holding office or performing duties of an office established by a Commonwealth enactment. Section 16 provides that an agency will „not do an act or engage in a practice, that breaches the Information Privacy Principles.‟
Section 14 of the Privacy Act sets out the eleven Information Privacy Principles. These relate to the collection, storage, access to, use and disclosure of personal information. Similar provisions apply in relation to dealings involving taxpayer tax file number information.584 The Privacy Act also makes separate specific provision in s 28 for the issue and administration by the Commonwealth Privacy Commissioner of guidelines in relation to tax file numbers.
The monetary compensation parameter is also readily capable of being met in cases of breach of privacy brought about by an ATO operational act or omission. There are a number of avenues for the recovery of compensation from the ATO in the event of a breach of privacy. Compensation may be recoverable in accordance with ATO Internal Complaints procedures if the taxpayer can demonstrate a likely breach of privacy laws. Alternatively, the taxpayer may choose to pursue the matter through complaint to the Commonwealth Ombudsman if not satisfied with the Internal Complaints determination of the matter by the ATO. The investigation of the Commonwealth Ombudsman may, in turn, result in a recommendation that the ATO pay compensation to the taxpayer.585
It is also possible to complain to the Commonwealth Privacy Commissioner. The Privacy Commissioner has wide ranging powers to make appropriate determinations in cases where a complaint of breach of privacy succeeds. Section 52 sets out these powers. Among these powers, the Commissioner may make a declaration „that the complainant is entitled to a specific amount by way of
584 Australian Privacy Commissioner, Tax File Number Guidelines 1992 - Annotated Version (2004). 585 The ATO Taxpayers‟ Charter publication, Australian Taxation Office, Taxpayers‟ Charter - Your Privacy and the Confidentiality of Your Tax Affairs, above n 515, identifies, at 10, complaint to the Commonwealth Ombudsman as an appropriate available avenue of relief.
207 compensation for any loss or damage suffered by reason of the act or practice the subject of the complaint.‟586 Sub-section 52(1A) extends the loss or damage recoverable to include injuries to the complainant‟s feelings or humiliation suffered by the complainant.
Accordingly, more than perhaps in any other cause of action examined in this study, a taxpayer aggrieved by an infringement of his or her privacy rights as set out in the Privacy Act enjoys formal and substantial rights to monetary compensation. Of course, privacy concerns are only likely to arise in a limited range of cases of alleged ATO operational act or omission causing taxpayer loss. Notwithstanding, the Privacy Act and mechanisms surrounding its enforcement by the Commonwealth Privacy Commissioner could well serve as a useful model for the formulation of a broader ranging statutory damages remedy for taxpayers aggrieved by an ATO operational act or omission. This issue will be the primary concern of Chapter 7 of this study.
586 Privacy Act 1988 (Cth), sub-s 52(1)(b)(iii).
208
PART VI - CONCLUSIONS
The overwhelmingly apparent conclusion from the analysis of the diverse range of remedies in this Chapter is that across the spectrum of administrative, equitable, informal and other formal non-tortious civil law remedies, there is no single, broad-ranging remedy capable of providing taxpayers aggrieved by an ATO operational act or omission with monetary compensation. The only slight qualification to this generalisation is ATO Internal Complaints mechanisms which are capable of broad-ranging application. However, these internal ATO mechanisms provide far from a reliable or predictable avenue for recovery.
This is not to say that all victims of ATO operational act or omission seeking monetary compensation through non-tortious avenues are left without a satisfactory and reliable avenue for relief. For example, victims of breaches of privacy are covered by a clear formal and enforceable statutory regime capable of being enforced through formal or informal mechanisms ranging from direct complaint to the ATO to investigation by the Privacy Commissioner or Commonwealth Ombudsman. The privacy law regime is capable of providing broadly defined compensatory outcomes in appropriate cases. Unfortunately, the analysis in this Chapter has demonstrated that these pockets of comprehensive protection are few and far between in the landscape of Australian taxpayer rights. In Chapter 5 it is this landscape that is constructed and assessed for adequacy and effectiveness by bringing together the analysis in this Chapter and Chapter 3.
209
CHAPTER 5 - EXISTING AUSTRALIAN TAXPAYER RIGHTS TO COMPENSATION FOR
ATO OPERATIONAL ACT OR OMISSION ASSESSED: THE PRIMA FACIE CASE FOR
REFORM
PART I - INTRODUCTION
Chapters 3 and 4 systematically explored the potential applicability of all the available causes of action for taxpayers seeking monetary compensation for ATO operational act or omission. There are three related core goals of this Chapter in bringing together and building upon the conclusions of this exploration. First, the aim is to distil from the analysis in Chapters 3 and 4 those factors indicating the gaps in the individual „effectiveness‟ of each separate cause of action. Second, the examination will extend to assessing the lack of collective „adequacy‟ of the array of causes of action available to Australian taxpayers. Third, this Chapter identifies and critically assesses the primary public policy challenges relevant to consideration of any reform proposal aimed at correcting any identified inadequacy or ineffectiveness. In this way, the foundations of a prima facie case for reform are laid. These foundations will be built upon in Chapters 6 and 7.
In Part II six criteria are drawn from the analysis in Chapters 3 and 4 to assess the effectiveness of each cause of action - scope of application, difficulty of proving required mental elements, public policy hurdles, reliability, actual or perceived bias and track record of success. Only those causes of action capable of providing a monetary remedy and capable of dealing with operational acts or omission are subjected to this analysis. Accordingly, the assessment excludes judicial review of administrative action, with its inability to provide a monetary remedy, as discussed in Part III of Chapter 4. In this sense, therefore, all of the causes of action examined in this Chapter are potentially capable of providing effective relief to taxpayers. The six chosen criteria taken together create a picture of the extent to which this potential translates into realistic prospects of recovery for taxpayers seeking compensation for ATO operational act or omission.
210
Part III deals specifically with the question of „adequacy.‟ Systemic inadequacies are identified through addressing two related shortcomings which were also flagged in Chapter 1. First, is the extent to which, without express judicial explanation or reference to relevant and sound legal authority, judges treat the Commissioner more favourably when facing claims of monetary compensation for operational act or omission than they do other public authorities. Second, systemic inadequacy is measured through an identification of any complexities and inherent uncertainties in the application of the current array of available avenues of relief.
Part IV proceeds from the starting point of the current array of taxpayer remedies being individually ineffective and collectively inadequate based on the conclusions in Parts II and III. Accordingly, Part IV identifies and addresses the major policy challenges which might impede or influence any proposed reform to enhance or amend the existing array of taxpayer remedies. This discussion necessitates a return to the key public policy arguments. Concerns such as justiciability - which were first raised in Chapter 2 - are revisited. The numerous public policy challenges which were raised in a number of different contexts in the discussion of the various tortious and non-tortious remedies in Chapters 3 and 4 respectively are also considered. In particular, the recurring concerns with questions of separation of powers and judicial competency, indeterminacy and floodgates, existence of alternative avenues of relief and „chill factor‟/over- defensiveness arguments are revisited.
This time, however, the validity of these concerns is challenged to determine any relevance to the case for any law reform proposal to enhance or clarify taxpayer compensatory remedies for ATO operational act or omission. This discussion will clear the way for Chapters 6 and 7. These Chapters tackle the task of the form, scope and substance of any new or reformed avenues of relief to enhance and/or clarify taxpayer rights to monetary compensation in cases of ATO operational act or omission causing taxpayer loss. It is in these Chapters that the prima facie case for reform made in this Chapter will be translated into a specific proposal for an Australian statutory damages remedy.
211
PART II - EFFECTIVENESS OF EXISTING AUSTRALIAN TAXPAYER COMPENSATORY
AVENUES OF RELIEF FOR ATO OPERATIONAL ACT OR OMISSION
As noted in the introduction to this Chapter, effectiveness of the various causes of action examined in Chapters 3 and 4 is dealt with in this study through an assessment of the practical utility of each separate cause of action.
Taken together, in Chapters 3 and 4 twelve separate avenues of relief are identified as capable of providing taxpayers with monetary compensation in at least some cases of ATO operational act or omission causing taxpayer loss. These are:
(1) Negligence; (2) Breach of statutory duty; (3) The innominate Beaudesert tort; (4) Misfeasance in public office; (5) Promissory estoppel; (6) Unjust enrichment; (7) ATO Internal Complaints; (8) Commonwealth Ombudsman investigation; (9) The Taxpayers‟ Charter; (10) Breach of contract; (11) Privacy Act relief; and (12) Trade Practices Act relief.
Accordingly, if potential applicability was the sole measure of effectiveness, all twelve of these avenues for relief would pass the test. They are all notionally capable of providing taxpayers with some form of monetary compensation in appropriate cases of ATO operational act or omission causing taxpayer loss.
However, this confirms simply the abundant number of remedies potentially capable of compensating taxpayers for loss caused by ATO operational activity. This fact says nothing about whether or when any of those remedies will actually
212 produce substantive results in the form of monetary compensation for taxpayers in cases of ATO loss-causing operational act or omission. Accordingly, properly addressing the question of effectiveness of any individual remedy requires a more sophisticated assessment. Such an assessment must centre on some measure of practical utility of each remedy.
The obvious difficulty arises in determining the most relevant indicators of practical usefulness of a cause of action. To address this difficulty, the discussion in this Part is confined to six separate indicators of practical usefulness which are readily distilled from the detailed analysis of the various avenues of relief in Chapters 3 and 4. Like the discussion in those Chapters, these factors all relate to substantive legal elements of each cause of action. Accordingly, there is no direct assessment of generic procedural issues which do not go to the substantive elements of each cause of action such as relative cost and time savings and procedural formalities.587
The chosen factors are:
(1) Scope of application; (2) Mental element requirement barriers to success; (3) Public policy barriers to success; (4) Reliability; (5) Actual or perceived bias; and (6) Track record of success.
587 However, the potential relevance of these procedural factors in explaining the relatively infrequent pursuit of private law relief through the courts in tax cases is speculated upon in the discussion below. It is also further conceded that the informal avenues of relief hold a clear advantage over formal private law causes of action in each of these respects. For example, see The Law Commission, United Kingdom, Administrative Redress: Public Bodies and the Citizen, Consultation Paper No 187 (2008), in which the UK Law Commission note, at [3.10], that court- based systems are at a disadvantage relative to non-court dispute resolution mechanisms due to the characteristically expensive and time consuming nature of court processes. For similar conclusions see also W P Jeffries, „ADR: The Advantages and Disadvantages from a Legal Viewpoint „ (1992) 18 Commonwealth Law Bulletin 763. The Australian Law Reform Commission notes the Australian research on the issue in Adversarial Background Paper 2: Alternative or Assisted Dispute Resolution (1996). For a challenge to the generally accepted views of speed and time savings associated with informal dispute resolution mechanisms see Kakalik et al, above n 562.
213
Table 5.1 below summarises the performance of each avenue of relief measured against these six chosen indicators of practical utility. Shaded cells in the Table indicate a failure of the cause of action named in the relevant row to satisfy the effectiveness measure in the corresponding column.
The following discussion addresses the specific reasons for the selection of the six chosen indicators as measures of practical utility. It also explains the conclusions set out in Table 5.1 as to how the twelve potentially applicable taxpayer remedies perform when measured against each of these indicators. The overall picture generated through measurement of each cause of action against all of the six indicators provides solid guidance as to effectiveness of each cause of action measured by its practical utility.
214
Table 5.1 - Effectiveness of Existing Avenues of Relief
(A) (B) (C) (D) (E) (F) Scope of Mental Element Public Policy Reliability Actual or *Successful Application Requirement Barriers to Perceived Track Barriers to Success Bias Record Success Negligence Broad No Yes High No No
Breach of Narrow Yes – Deliberate Yes High No No Statutory Duty act with knowledge of likely harm Misfeasance in Narrow Yes – Malice Yes High No No public office Innominate Narrow Yes – Intentional Yes High No No Beaudesert Tort act causing inevitable harm Promissory Narrow Yes – Yes High No No Estoppel Unconscionability /Knowledge of reliance Unjust Narrow Yes – for Yes High No No Enrichment payments by compulsion or colour of office No – for payments through mistake of law or fact ATO Internal Broad No No Low Yes N/A Complaints Privacy Act Narrow No No High No N/A
Taxpayers’ Broad No No Low Yes N/A Charter Contract Law Narrow No Yes High No No
Trade Practices Narrow No No High No No Act Commonwealth Broad No No Low No N/A Ombudsman
*In the case of litigious remedies, refers to successful application in a full Australian trial involving a case of ATO operational act or omission in which monetary compensation was awarded to the taxpayer plaintiff.
215
A - Scope of Application
The first chosen indicator of practical utility is scope of application. A cause of action which is inapplicable in the vast majority of cases of ATO operational act or omission due to its extremely narrow or specialised scope can be challenged as largely practically ineffective.588 For example, the Privacy Act 1988 (Cth) is potentially extremely effective for providing monetary compensation to taxpayers aggrieved by an operational act or omission resulting in a breach of a taxpayer‟s privacy rights as defined in that legislation. However, outside of these specific circumstances, the remedy cannot provide any relief for taxpayers. As discussed in Part V(D) of Chapter 4, this is a significant limitation on the scope of potential application of the privacy regime in the Privacy Act in cases of ATO operational act or omission causing taxpayer loss. Accordingly, this avenue of relief can be considered „narrow‟ and, insofar as this indicator is concerned, „ineffective.‟
Column (A) of Table 5.1 categorises all twelve of the notionally applicable causes of action into whether or not each remedy can, similarly, be said to be „broad‟ or „narrow‟ in scope. The outcome is that, like Privacy Act relief, Trade Practices Act relief has been classified as narrow in scope. This is because, as noted in Part V(C) of Chapter 4, to be actionable, the relevant activities must be capable of falling within the ambit of the mischief addressed by the relevant TPA provision - for example, unconscionability or misleading conduct. In addition, the relevant operational malfunction must have occurred as a result of activities carried out by the Commissioner in „trade or commerce.‟ As noted in Part V(C) of Chapter 4, this is a substantial restriction on the potential scope of application of this avenue of relief. In fact, it is reasonable to conclude that the overwhelming majority of
588 Of course it is conceded that this is a simplistic approach in the absence of an assessment of systemic adequacy of the array of remedies available to taxpayers. It is quite conceivable and acceptable to have a system of taxpayer remedies built upon an array of narrow specialised remedies, each dealing quite efficiently and appropriately with a specific mischief. Part III below considers systemic adequacy. ATO operational acts or omissions causing taxpayer loss would be beyond challenge under the TPA by virtue of this „trade or commerce‟ limitation.589
In contrast, as noted in Part II(A) of Chapter 3, a broad range of operational activities causing taxpayer loss could be made the subject of a negligence claim. Unlike Privacy Act relief, the availability of relief in negligence does not specifically depend on the particular type of harm caused by the complained of operational act or omission. Nor does availability of relief specifically depend on whether the relevant act or omission relates to trading or commercial or any other particular type of operational activity. Accordingly, the tort of negligence can be said to be particularly effective in terms of its breadth of application.
However, all of the other tortious remedies are categorised as „narrow‟ in scope in column (A) of Table 5.1. Misfeasance is narrow given the difficulty of establishing the requisite formal mental elements of the tort. It is true that, like the tort of negligence, misfeasance in public office is notionally capable of being raised in a broad range of cases of operational act or omission causing taxpayer loss. However, in contrast to negligence, there is the additional requirement of deliberateness or „malice‟ on the part of the tortfeasor. This is likely to either be absent or virtually impossible to establish in most cases of ATO operational act or omission causing taxpayer loss.590
The innominate Beaudesert tort, having been almost entirely overruled by the High Court,591 is also largely practically ineffective in terms of its narrow scope. It has only an extremely narrow remaining scope of application. In the context of
589 While, as noted in Part V(C) of Chapter 4, the question of the meaning of „trade or commerce‟ has not been tested in the context of a claim against the Commissioner of Taxation, the comments of Hill J in Unilan Holdings Pty Ltd v Kerin, above n 271, serve as a cautionary note on the likely difficulties of characterising executive activity as being „in trade or commerce.‟ It will be recalled that His Honour drew a distinction between activities „in relation to‟ trade or commerce and activities „in‟ trade or commerce. While the former are common where public officers are concerned, the latter are not. 590 As discussed at length in the detailed examination of the elements of the tort in Part III(C) of Chapter 3. 591 Overruled in Northern Territory v Mengel, above n 298, as discussed in Part V of Chapter 3. 217
this study, it could only apply in cases where the operational act or omission causing taxpayer loss is directed against the plaintiff or the lawful activities in which he or she is engaged.592 Accordingly, most ATO operational acts or omissions would not give rise to any possible claim.
Similarly, breach of statutory duty cases require proof of a breach of a statutory obligation. It would only be an extremely limited range of operational acts or omissions causing taxpayer loss which might also constitute such a breach. The difficulties in tax cases are compounded by the judicial denial by Young CJ in Lucas v O‟Reilly593 of the existence of any general statutory duty of care toward taxpayers capable of sustaining an action for breach of statutory duty.
Based on scope of application, equitable remedies similarly provide little practical hope for the aggrieved taxpayer in most cases of loss-causing ATO operational act or omission. For example, equitable estoppel claims would rarely be possible in cases of pure ATO operational activity. There are a number of reasons for this conclusion. First, there is the general principle that estoppel cannot usually be applied to estop the Commissioner.594 Further, the requirement of knowledge of reliance on a representation, which forms the foundation of the unconscionability underpinning of estoppel claims, rules out most cases of unintentional operational error.595 Effectively, only an erroneous representation arising from an operational error recognised and knowingly maintained in the face of a taxpayer‟s reliance on that operationally spawned erroneous representation would be capable of sustaining a claim in estoppel. This feature rules out an estoppel claim in the vast
592 As noted in Northern Territory v Mengel, ibid, 341, as discussed in Part V of Chapter 3. 593 Above n 209. These comments are discussed further in Part III of this Chapter. 594 Reflected in the oft-cited comments of Kitto J in FCT v Wade, above n 437, and Hill J in AGC (Investments) v FCT, above n 294, discussed in Part II(B) of Chapter 4 and further in Part III of this Chapter. 595 The unconscionability underpinning of equitable estoppel was described by Brennan J in Waltons Stores (Interstate) Ltd v Maher, above n 286, at 419: „[t]he element which both attracts the jurisdiction of a court of equity and shapes the remedy to be given is unconscionable conduct on the part of the person bound by the equity…‟ See also the further judicial and academic comment to this effect discussed in Part II(B) of Chapter 4. 218
majority of reasonably foreseeable cases of operational act or omission causing taxpayer loss.
Equitable relief for unjust enrichment also falls at the practical scope of application hurdle. Only overpayments or erroneous payments of tax have been subject to unjust enrichment claims. Even within that restrictive ambit, only those tax payments made in one of four narrow circumstances are capable of attracting restitutionary relief.596 Further, judges have narrowly defined these opportunities for restitutionary relief. For example, as discussed in Part II(B) of Chapter 4, the weight of usual legislative force is not sufficient to demonstrate that the relevant payment was made in circumstances of „compulsion.‟597 In such cases the emphasis is on the conduct of the authority rather than the effect on the taxpayer. Again, therefore, a mere innocent operational malfunction is unlikely to be sufficient to found a restitutionary claim against the Commissioner of Taxation.598
There are similar limits on the scope of potential application of common law contractual relief. As noted in Part V(B) of Chapter 4, it is difficult to conceive of a situation involving usual taxpayer/Commissioner interactions or any legislative instrument or legal principle regulating those interactions which would give rise to contractual obligations. Even where there are contractual obligations, only a small subset of cases of breach could be expected to involve operational acts or omissions.
In contrast, „informal‟ avenues of relief hold much more promise of effectiveness on the basis of breadth of applicability. The „informal‟ avenues of ATO Internal Complaints, the Taxpayers‟ Charter and the Commonwealth Ombudsman are all capable of dealing with a broad array of both unintentional and deliberate ATO operational acts. Therefore, they can be clearly differentiated from statutory Trade
596 As noted in Part II(B) of Chapter 4, these are a taxpayer‟s mistake of law or mistake of fact, and payments made under compulsion or through extortion by colour of office. 597 See Werrin v Commonwealth, above n 475, and the Canadian and UK authorities which have also discussed the issue cited in Part II(C) of Chapter 4. 598 An exception might be where the malfunction arises in the context of an ultra vires activity, as observed and discussed in Part II(B) of Chapter 4. 219
Practices Act and Privacy Act avenues of relief. Further, no intention or particular state of mind on the part of the Commissioner is required. Consequently, the limitations on availability of tortious misfeasance or equitable estoppel relief also do not apply. Nor is any particular tortious or Wednesbury unreasonableness standard of care prescribed. Essentially, the range of operational activities able to be pursued via any of these avenues of relief is subject to few restrictions. These informal avenues of relief stand together with the tort of negligence as effective in terms of being capable of practical application in a broad range of cases of ATO operational act or omission causing taxpayer loss.
B - Mental Element Requirement Barriers to Success
From the preceding categorisation of breadth of scope of application, an important and clear subset of the causes of action identified as narrow in scope is readily discernable. This subset consists of those causes of action which pose difficulties for aggrieved taxpayers because of the requirement of proving a necessary mental element or state of mind beyond mere negligence. The reason why this is an especially significant issue in the context of this study, and worthy of separate identification, is that the vast majority of operational acts or omissions bringing about loss to a taxpayer would be likely to be inadvertent or, at most, reckless. It is difficult to conceive of a situation in which a provable deliberate and/or maliciously motivated operational activity would form the basis of a taxpayer claim.599 Accordingly, the requirement of a mental element beyond negligence constitutes a substantial barrier to proving a taxpayer claim.
Column (B) of Table 5.1 identifies the relevant causes of action with a requisite mental element which would be difficult to satisfy in most cases of operational act or omission causing taxpayer loss. In the tortious sphere, these include misfeasance in public office, with its requirement of actual or constructive
599 This conclusion would be more difficult to draw if this study extended to discretionary or policy decisions which, due to their considered nature, would be expected to typically exhibit elements of deliberateness. 220
malice,600 breach of statutory duty which requires a deliberate act in knowledge of the likely harm to the plaintiff that will result,601 and the innominate Beaudesert tort which requires an act at least directed against the plaintiff or the plaintiff‟s lawful activities.602 In the equitable sphere, estoppel‟s requirement of unconscionability603 is highlighted, as is the unjust enrichment emphasis on the conduct of the Commissioner in making an unjust payment demand of the taxpayer.604
Because of these requisite mental elements, and the consequent difficulties of proving a taxpayer claim which they raise, the effectiveness of each of these remedies for aggrieved taxpayers seeking monetary compensation from the ATO is significantly diluted. It is not simply because most loss-causing ATO operational acts or omissions would arise without any accompanying necessary state of mind of the Commissioner that these mental requirements significantly compromise the effectiveness of these remedies. The real blow to effectiveness is that, even in those cases where the necessary state of mind is allegedly present, the plaintiff taxpayer would be left with a significant evidentiary burden of proving the existence of that state of mind.605
C - Public Policy Barriers to Success
It is clear that the limitations associated with requisite mental elements of most of the private law avenues of relief are significant. However, it would be unsatisfactory to proceed on the basis that the only barriers to proving a cause of action in cases of ATO operational act or omission causing taxpayer loss are those
600 Discussed in Part III(C) of Chapter 3. 601 As discussed in Part IV of Chapter 3. 602 As discussed in Part V of Chapter 3. 603 Discussed in Part II(B) of Chapter 4. 604 As noted above and discussed in Part II(B) of Chapter 4. 605 The comments of Peter Haggstrom, Special Tax Adviser to the Commonwealth Ombudsman, noted in the context of the discussion of the treatment by the courts of allegations of dishonesty or improper purpose against tax officers in Part III(C) of Chapter 3, are especially pertinent to recall in this context: „The courts have traditionally operated on the assumption that ATO staff will act honestly in their work and hence the hurdle for proving that the ATO has acted improperly is generally fairly high.‟ See Haggstrom, above n 338, 267. 221
related to the formal elements of that particular cause of action. As seen in the analysis in Chapters 3 and 4, public policy concerns are a significant additional restriction on the practical scope of a number of otherwise notionally applicable causes of action. Accordingly, column (C) of Table 5.1 expressly identifies public policy concerns as an additional challenge to the effectiveness of the suite of otherwise available avenues of relief.
These concerns are worthy of separate note because they colour the application of the formal elements of the relevant cause of action. They also often act as an additional stand-alone hurdle for a plaintiff. As already noted in Part II of Chapter 3, in the case of negligence, public policy considerations such as floodgates/indeterminate liability concerns, „chill factor‟/over-defensiveness arguments, separation of powers and judicial competency concerns, and the existence of alternative avenues of relief, are relevant to questions of the extent of the scope of the Commissioner‟s immunity from tortious suit. They are also directly relevant in applying the salient features approach to dealing with novel negligence actions.606 This is particularly true in cases involving losses of a purely economic nature, in which indeterminacy concerns are often especially prominent.607
In all tortious contexts, the primacy of policy concerns is evident. For instance, the availability of alternative forms of relief was one of the key reasons why the High Court effectively overruled the innominate tort in Beaudesert Shire Council.608 Specifically, as noted in Part V of Chapter 3, the majority in Northern Territory v Mengel609 pointed out the partial redundancy of the Beaudesert tort due to the existence of the tort of breach of statutory duty, observing that „[t]here
606 See the discussion in Part II(D) of Chapter 3. 607 See, for example, the comments of the majority in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340, at 353 in relation to the central relevance of indeterminacy and floodgates policy concerns in pure economic loss cases. These comments are reproduced and discussed in Part II(C) of Chapter 3. 608 Above n 28. 609 Above n 298. 222
may be cases involving breach of a duty of care which fall within the Beaudesert principle but, to that extent, the principle serves no purpose.‟610
In respect of the availability of the tort of breach of statutory duty in the tax context, the key basis for denial of availability of relief against the Commissioner to date has also been a public policy concern. It will be recalled that in cases such as Lucas v O‟Reilly611 and Harris v Deputy Commissioner of Taxation612 the denial of relief was based upon a desire not to contradict an un-stated legislative intent to confine the duties of the Commissioner to the Crown and, consequently, to deny the general availability of taxpayer tortious relief. There is a clear separation of powers concern underpinning this approach.
This policy-based confinement of the Commissioner‟s duties to the Crown also generally precludes the possibility of an aggrieved taxpayer contending that the Commissioner owes the taxpayer contractual obligations stemming from usual taxpayer/tax authority interactions.613
The analysis in Chapters 3 and 4 has shown that public policy considerations permeate far beyond tortious and common law avenues of relief. For instance, in the case of restitution, there are strong public policy concerns directly related to concerns with protection of the revenue which were noted in the discussion of the remedy in Part II(B) of Chapter 4. In particular, concerns to ensure avoidance of fiscal chaos and inefficiency which might result from too liberal an application of restitutionary relief against the State, whilst not always determinative, are often raised as central concerns.614
610 Ibid, 343. For further discussion see Part V of Chapter 3. 611 Above n 209. 612 Above n 181. 613 As discussed in Part V(B) of Chapter 4. 614 Although, as noted in Part II of Chapter 4, the creation of a defence based on disruption to public finances was rejected by Mason J in Commissioner of State Revenue v Royal Insurance Australia Ltd, above n 486. 223
Similarly, unequivocal public policy concerns have been raised in a number of cases seeking to estop the Commissioner of Taxation, as pointed out in Part II of Chapter 4. These concerns centre on seeking to avoid undue fettering of the legislature to representations of the Commissioner and form part of the substantive basis for the general denial of availability of equitable estoppel relief. These concerns are above and beyond the already significant challenges for a taxpayer plaintiff seeking to establish that the Commissioner has made a representation in circumstances capable of supporting an equitable estoppel claim.
Accordingly, it is clear that the availability of all of the private law avenues of relief is significantly restricted through public policy concerns. In contrast, the informal remedies such as the Commonwealth Ombudsman, Taxpayers‟ Charter, ATO Internal Complaints and ex gratia compensation arrangements are not open to ready challenge on this basis.615 These informal avenues of relief have, to this point, escaped any significant questioning of their effectiveness insofar as practical utility is concerned. These avenues of relief are not, however, beyond challenge.
D - Reliability
A further measure of practical utility of any remedy, which exposes the particular vulnerabilities on this score of the informal avenues of relief, is its reliability. The issue is important because the reliability of a cause of action represents the predictability and consistency of its application and the enforceability of the outcomes of its application. Potential claimants need to be able to independently assess the viability of their potential claim prior to taking action. The issue is broader, therefore, than the question of scope of application which is just one of the factors which will determine the viability of a potential claim. Advisers, as part of the assessment of viability, need to be able to confidently advise their clients as to the likely prospects of success of their claims. They also need to
615 Although, undoubtedly, settlement negotiations by the ATO would involve public policy considerations such as floodgates/indeterminate liability concerns. 224
determine the likely quantum of any successful claim and the procedures which will be followed for determining that quantum.
A reliable cause of action is one in which these assessments can be confidently and accurately made. A reliable cause of action is also one where enforceable sanctions are applicable against a defendant‟s failure to comply with the terms of any order made against them. Each of the twelve causes of action capable of providing taxpayers adversely affected by an ATO operational act or omission with monetary compensation are classified according to this measure of reliability in Column (D) of Table 5.1.
Applying this definition of „reliability‟ the real challenges are to the informal avenues of relief.616 Internal informal mechanisms such as ATO Internal Complaints and the provision of ex gratia compensation are especially vulnerable to challenge on this basis. This is because these internal mechanisms are not applied in accordance with publicly available precedent either as to quantum or liability.617 Further, the award of compensation through these avenues of relief is often not accompanied by any concession of fault or liability which could form the basis for enforceability in the face of non-compliance with a compensation determination.
Relief via Commonwealth Ombudsman investigation or proof of breach of the Taxpayers‟ Charter is similarly unreliable. Neither of these avenues of relief
616 Although formal causes of action such as the tort of negligence can to some extent be considered unreliable insofar as the predictability of any outcome or application of clear legal principle is concerned. In the case of negligence, for example, since the adoption of the salient features approach to determining the existence of a duty of care in novel negligence actions, it has become exceedingly difficult for potential claimants and their advisers to assess the methodology which will be applied to determine their case, let alone the likely outcome. See the discussion in Part II(C) of Chapter 3. 617 At least beyond the general guidelines set out in the Scheme for Compensation for Detriment caused by Defective Administration („CDDA Scheme‟) which, it will be recalled from Part IV(E) of Chapter 4, require a „fair and reasonable‟ approach to be taken and ATO guidelines which require the equally vague application of „common sense and pragmatism‟ to determining claims. See the ATO publication Claiming Compensation, above n 163, discussed at length together with the CDDA Scheme in Part IV(E) of Chapter 4. 225
binds the Commissioner in a formal sense.618 The effectiveness of the Commonwealth Ombudsman, for instance, is limited by the lack of statutory power to impose binding directives on Commonwealth authorities such as the Commissioner.619 In the absence of any power to bind the Commissioner, there is also a question about the extent to which the sanction of tabling in Parliament for non-compliance with a Commonwealth Ombudsman directive constitutes a significant threat in the taxation context.620 This is particularly questionable in cases in which an important legal issue or longstanding administrative practice might be challenged by an aggrieved taxpayer.621 In such cases the Commissioner might well view the adverse ramifications of accepting liability as outweighing the consequences of any adverse report to Parliament flowing from non- compliance with a Commonwealth Ombudsman directive.
Similar criticisms cannot be directed at any formal judicial avenue of relief. Accordingly, in Column (D) of Table 5.1 only the „informal‟ avenues of relief of the Commonwealth Ombudsman, the Taxpayers‟ Charter and ATO Internal Complaints are classified as unreliable remedies. The formal legal remedies are distinctly more effective on this score.
E - Actual or Perceived Bias
The effectiveness of the informal remedies can also be readily challenged on the basis of actual or perceived bias. Bias is a valid measure of effectiveness in the tax
618 While the Commissioner has stated that he intends to treat the Charter as a binding commitment, there is nothing preventing the Commissioner from resiling from this representation at any time. 619 Part II of the Ombudsman Act 1976 (Cth) contains the powers of the Commonwealth Ombudsman and makes no reference to powers to make determinations of a binding nature on a public body. 620 As discussed in Part IV(C) of Chapter 4, section 17 of the Ombudsman Act 1976 (Cth) provides for the ability of the Commonwealth Ombudsman to report to Parliament where recommendations have not been followed by an authority. Section 16 of that Act also provides for the ability of the Commonwealth Ombudsman to report to the Prime Minister any failure of an authority to follow a Commonwealth Ombudsman recommendation. 621 The question of the extent of any deterrent effect of any such sanction was questioned in Part IV(C) of Chapter 4. Bentley has noted skepticism among taxpayers that the Commissioner will always follow Commonwealth Ombudsman directions. See Bentley, above n 204, 21-23. 226
context. This is because any actual or perceived bias in the application of the particular remedy, either by the judiciary or any other authority charged with adjudicating claims, might erode taxpayer confidence in the Commissioner and discourage use of those remedies by taxpayers. For example, to the extent that bias might create perceptions among taxpayers of unfairness, research by Murphy suggests that this could result in an erosion of trust between taxpayer and tax authority. Murphy has noted:
If people believe that an authority is “trying” to be fair and treats its citizens fairly, they trust the motives of that authority and develop a long-term commitment to accepting its decisions…people are influenced by judgments of the neutrality of decision-making procedures. Neutrality includes assessments of honesty, impartiality, and the use of fact, not personal opinions, in decision- making. People generally seek a level playing field in which no one is unfairly advantaged…622
Column (E) of Table 5.1 classifies the notionally applicable remedies according to the actual or perceived bias inherent in the relevant processes. The most obvious questions in this context can be raised against the government and ATO- administered Internal Complaints processes and Taxpayers‟ Charter. As noted in the discussion in Part IV(B) of Chapter 4, irrespective of whether or not there is actual bias in the administration of these problem resolution measures by the ATO, undoubtedly the criticism of perception of potential bias is easily levelled against them.623
622 Kristina Murphy, „The Role of Trust in Nurturing Compliance: A Study of Accused Tax Avoiders‟, above n 116, 190, citing studies by Tyler and Degoey (Tom Tyler and Peter Degoey, „Trust in Organisational Authorities: The Influence of Motivate Attributions on Willingness to Accept Decisions‟ in Roderick Kramer and Tom Tyler (eds), Trust in Organisations: Frontiers of Theory and Research (1996), 331); and Tyler and Lind (Tom Tyler and E Allan Lind, „A Relational Model of Authority in Groups‟ in Mark Zanna (ed), Advances in Experimental Social Psychology (1992) vol 25, 115). 623 The comments of Bentley noted in Part IV(B) of Chapter 3 in respect of the Taxpayers‟ Charter aptly express these concerns: „Taxpayers could be forgiven for taking a cynical attitude towards a charter which purports to uphold their rights against the ATO, where the author and interpreter of the charter, and the primary judge as to when breaches have occurred, is the ATO itself.‟ Bentley, above n 204, 23. 227
Any resulting erosion in confidence among taxpayers experiencing bias or holding a perception of bias would clearly constitute a challenge to the effectiveness of these avenues of relief. In contrast, judicially administered avenues of relief, in which the determination is at least taken out of the hands of the parties themselves are, therefore, far less likely to raise perceptions of systematic bias in favour of either party.624 This is reflected in the categorisation of the causes of action in Column (E) of Table 5.1.
F - Track Record
All of the measures discussed to this point look at practical effectiveness from the point of view of prospective applicability. However, a final important measure of practical utility is the extent to which the relevant remedies have previously been applied in cases of ATO operational act or omission with the aggrieved taxpayer succeeding in winning compensation. It is conceded that there may be many reasons (discussed below) other than lack of effectiveness for the absence of taxpayer success. However, lack of a historical track record of success would clearly be an important consideration for any rational taxpayer considering bringing a claim. Findings in this regard from Chapters 3 and 4 are collected in column (F) of Table 5.1. The results show that none of the private law avenues of relief has resulted in a taxpayer being awarded monetary compensation in a full Australian trial for loss caused by an ATO operational act or omission.625
While this criterion does not allow for direct assessments of non-judicial avenues of relief, the issue does have broader ramifications for the practical application of
624 Although, as the discussion of adequacy in Part III shows, arguably, the restrictive judicial application of many of the private law avenues of relief are suggestive, albeit incidentally, of a pro-Commissioner bias. 625 Non-judicial avenues of relief such as Commonwealth Ombudsman investigation are not directly included in this criteria because beyond vague data contained in Commonwealth Ombudsman reports (eg. it has been noted by the Commonwealth Ombudsman that between 50% and 66% of all complaints handled by ATO Complaints are either fully or partially upheld in the complainant‟s favour - See Office of the Commonwealth Ombudsman, above n 110, 6), little publicly available data exists which provides any insight into the instances of, or bases for, awards of monetary compensation to taxpayers in cases of ATO operational act or omission causing taxpayer loss. 228
the non-judicial avenues of relief. This is because entitlement to compensation will often turn on whether the matter falls within a recognised head of legal liability. For example, the determination of entitlement to monetary compensation direct from the ATO will, except where the CDDA Scheme626 applies, turn on whether the complaint indicates that a „legal liability‟627 exists. Similarly, Commonwealth Ombudsman investigations must also consider the existence or otherwise of a recognised legal liability.628 Accordingly, the general denial of private law relief against the Commissioner has flow on effects on the scope of practical application of the non-judicial avenues of relief.
As noted above, it is conceded that the general absence of successful private law claims by taxpayers against the Commissioner may be explained by reasons other than inherent ineffectiveness of those avenues of relief. However, most of these possible explanations are readily rebuttable. For example, it might be argued that this state of affairs exists because the informal avenues of relief adequately cater for the needs of aggrieved taxpayers. However, given the already discussed flaws of these avenues of relief as to reliability and bias, this is unlikely to be true. Further, Commonwealth Ombudsman reports indicate that taxpayers often turn to the Commonwealth Ombudsman in frustration that they are unable to readily obtain monetary relief through any alternative avenue of relief.629 Accordingly, it is more likely that taxpayers are turning to these informal remedies because of the
626 See the discussion of the applicability of this compensation scheme in Part IV(E) of Chapter 4. 627 The Commissioner defines „legal liability‟ in accordance with the Legal Service Directions 2005 issued under s 557F of the Judiciary Act 1903 (Cth) by the Attorney-General (above n 542). See the discussion in Part IV(E) of Chapter 4. 628 For example, the first criteria noted for possible inclusion in Commonwealth Ombudsman reports in s 15(1) of the Ombudsman Act 1976 (Cth) is an assessment of whether the action of the authority „appears to have been contrary to law.‟ 629 The comments of the Commonwealth Ombudsman discussed in Chapter 2 to the effect that „[m]any of the people who approach the Ombudsman‟s office are frustrated that the system is seemingly unable to provide them with the resolution and remedies that they are seeking‟ certainly indicate that this is, in fact, the case. See Office of the Commonwealth Ombudsman, above n 110, 6. 229
failings of the formal private law avenues of relief, rather than due to a positive preference for informal remedies.630
An alternative argument is that the Commissioner simply does not frequently make operational mistakes which cause compensable taxpayer loss. It is extremely unlikely, given the scale and scope of the Commissioner‟s activities, that this is the case. On the contrary, Commonwealth Ombudsman reports and many of the systemic areas of investigation of the Inspector-General of Taxation indicate that this is not the case.631 In fact, these reports and areas of investigation indicate that operational activities resulting in taxpayer loss occur relatively frequently, despite the best efforts of the Australian Taxation Office.632
Bentley proposes a more likely explanation. He proposes that in cases where, for instance, the Commissioner has been negligent and a potential civil law liability exposure is identified, the Commissioner will endeavour to negotiate with a taxpayer in order to reach an out-of-court settlement of the dispute.633 It is conceded, though, that in the absence of empirical evidence,634 it is impossible to reach any precise quantitative conclusions in this respect. Further, to the extent that this is correct, the private and confidential nature of these out-of-court
630 Of course, the relevance in many cases of formal „legal liability‟ criteria for determining the availability of compensation pursuant to non-judicial avenues of relief such as ATO Internal Complaints processes, as outlined above, makes this argument somewhat circular. 631 The Commonwealth Ombudsman, for example, has taken to describing many characteristically operational failings of the Commissioner as „administrative irritants‟ in his recent annual reports. See, Office of the Commonwealth Ombudsman, above n 111, 12. Further, the role of the Inspector-General of Taxation is confined to questions of tax administration process as distinct from taxation policy. This suggests an acceptance of the existence of systemic operational performance problems and room for improvement in tax administration activities. 632 As discussed in Chapter 2. See the comments of the Commonwealth Ombudsman in his 2007 Annual Report, above n 108, (cited above at n 122) to the effect that the ATO is „no better or worse than any other department‟ but that the sheer volume of dealings creates particular operational difficulties where the ATO is concerned. 633 For example, as noted in Part II(A) of Chapter 3, Bentley asserts, in relation to the Commissioner‟s approach to prospective negligence actions, that „[w]here the ATO is found to be negligent, there is also the possible remedy of damages. The ATO often pre-empts such legal claims, where negligence and subsequent financial loss to the taxpayer are clear from the facts, and pays compensation.‟ See Bentley, above n 2, 261. 634 There are obviously significant practical challenges in seeking to collect any empirical data about claims not ultimately pursued by taxpayers. These challenges might go some way toward explaining the absence of any studies on the issue. 230
settlements is such that the measure of, and criteria for, acceptance of liability by the Commissioner is unknown and is likely to remain unknown. Even though satisfactory practical outcomes might result for some taxpayer plaintiffs, as already observed, this type of uncertainty simply adds to ineffectiveness through the unreliability of settlement outcomes.
The overall outlook for taxpayers who seek monetary compensation for loss due to an ATO operational act or omission that emerges from the preceding assessment of effectiveness of each of the avenues of relief discussed in Chapters 3 and 4 of this study is bleak. The majority of the available avenues of relief, when closely examined, are clearly significantly limited in their practical utility. These limitations are in some cases due to the formal elements of the causes of action themselves. Those causes of action which require proof of a requisite mental element to establish liability are particularly restricted.
In other cases, public policy concerns and restrictive judicial approaches to determining the scope of application of various avenues of relief in tax cases are to blame. The informal avenues of relief also suffer from particular challenges to their effectiveness. These largely relate to the reliability and potential for bias in the application of these mechanisms. The lack of taxpayer courtroom success in obtaining relief in the case of many of the private law avenues of relief both adds to and confirms the case for a conclusion that each of the potentially applicable causes of action is in some way ineffective for taxpayer victims of ATO operational act or omission seeking monetary compensation.
231
PART III - ADEQUACY OF EXISTING AUSTRALIAN TAXPAYER COMPENSATORY
REMEDIES FOR ATO OPERATIONAL ACT OR OMISSION
A - Toward an Objective Measure of „Adequacy‟
It is clear from the preceding analysis that if adequacy of Australian taxpayer rights to monetary compensation for ATO operational act or omission was to be measured by reference to the existence or otherwise of a broadly applicable, reliable and legally-enforceable damages remedy, none of the existing taxpayer remedies would be considered adequate. Presently, Australian taxpayers must engage in the lottery of an array of civil law remedies to determine whether the particular facts of their case incidentally happen to satisfy the requirements of one or more of those remedies.635
However, the absence of a single, broad comprehensive remedy is not, of itself, a sufficient measure of systemic inadequacy. In fact, the absence of such a remedy would be of little concern if the existing array of remedies operated in a complementary fashion to collectively provide a comprehensive safety-net ensuring taxpayer rights to compensation in all cases of taxpayer loss occasioned by an ATO operational act or omission. It is clear, though, that the existing array of narrow private law, statutory and informal remedies available to Australian taxpayers currently do not provide such a safety net.
As the analysis in Part II has shown, in the absence of a special relationship between the Commissioner and taxpayer beyond the usual taxpayer/tax authority interaction and/or some deliberate or malicious sentiment directed to the taxpayer in the commission of the operational act, the likelihood of success for the taxpayer
635 Roots rhetorically questions the adequacy of such a „lottery‟ approach to compensating victims of administrative error: „Is it acceptable that people suffering loss because of wrongful administrative action succeed in damages because they are fortunately able to ground that loss in some existing category of tort, while others, with equal or more significant loss, have no similar redress because there is no tort category available?‟ Roots, above n 143, 67-68. Similar views have been expressed by Campbell. See Enid Campbell, „The Citizen and the State in the Courts‟ in Paul Finn (ed), Essays on Law and Government (1996) vol 2, 1, 15. 232
through pursuing any formal legal avenue of relief is exceedingly slim. This is despite the array of causes of action Australian taxpayers can choose from. It would be easy to conclude on the strength of this finding that the current array of taxpayer remedies is clearly inadequate.
However, it is patently unsatisfactory to conclude that the current system of taxpayer remedies is „inadequate‟ simply because taxpayer rights could, conceivably, be more comprehensively protected from the perspective of the taxpayer. On this measure of adequacy, a system which includes a broad, unlimited private law monetary remedy, imposed against the Commissioner on an absolute liability basis, would be ideal. In all likelihood, the Commissioner could make an equally cogent argument for a more „adequate‟ system which absolves the Commissioner entirely and expressly from any monetary liability for any operational act or omission in carrying out his public law tax collection duties.
Either extreme is undesirable. Freedman notes some of the reasons why:
If government powers are inadequate there is a risk of leakage of revenue and a lack of horizontal equity in relation to law-abiding taxpayers. Excessive powers, however, pose great risks also: a threat to fundamental human rights and the potential loss of co-operation and tolerance of law-abiding taxpayers and their advisers.636
Similarly, Hill J writing extra-judicially points out that:
…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
636 Freedman, above n 157, 445. Freedman was discussing tax in the context of the question of basic human rights in the United Kingdom (in particular, the impact on taxpayer rights of the interaction between the UK tax system and the European Convention on Human Rights). 233
taxation is the cornerstone of 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.637
It follows, therefore, that an „adequate‟ system is one which strikes an appropriate trade-off between the interests of the State in the unfettered collection of tax revenue and the interests of ensuring no undue trampling of civil rights of taxpayers. It is at this point that considered assessments of „adequacy‟ of the current array of taxpayer avenues of relief become complex and potentially value- laden. What exactly is the appropriate trade-off?
McCabe takes the view that we should aspire to some form of equality:
It is submitted that any system of law which countenances the differential treatment of citizens is fundamentally incompatible with the rule of law which mandates equality before the law. The heavy emphasis upon individualism that forms part of our democratic heritage and which manifests itself in the common law should not lightly be set aside in the interests of efficient revenue collection.638
It is easy to appreciate the merits of treating all individual taxpayers equally. However, the question of equality is far more complex when the concern is with equality between a public authority and the private citizens it serves. For instance, should we aspire to equality of outcome, opportunity or treatment, substantive equality or formal equality? Should there be equality only whenever a public authority is acting in a similar way to a private individual? Should we abandon pursuing equality where an authority is carrying out distinctly public functions? If so, how would such a distinction be drawn and implemented? These are just
637 D Graham Hill, „What Do We Expect from Judges in Tax Cases?‟ (1995) 69 Australian Law Journal 992, 1005. 638 Bernard McCabe, „The Investigatory Powers of the Commissioner under the Income Tax Assessment Act and Individual Rights‟ (1993) 3 Revenue Law Journal 1. 234
some of the challenges. In all likelihood, therefore, adopting equality as a measure of adequacy would raise as many questions as it would answer.
Once pursuing equality is recognised as potentially problematic, it is possible to make some strong arguments in favour of pursuing, instead, a bias either in favour of taxpayers or in favour of the Commissioner of Taxation. For example there has been some support for the view that the trade-off between the competing concerns with ensuring the proper functioning of our system of tax administration and the protection of taxpayer rights is presently tipped too far in favour of the Commissioner. McClennan, in citing the Joint Committee of Public Accounts („JCPA‟) recommendations which preceded the establishment of the Taxpayers‟ Charter, recounts the view of that Committee in relation to the contended imbalance between taxpayer rights and ATO accountability:
The ATO is alone responsible for income tax collection; has been given exceptional powers and plays a vitally important role in the efficiency of the Australian economy. This accentuates the importance of establishing an administration which is fair, equitable and sufficiently flexible to manage the individuality of taxpayers…In this report the Committee seeks to introduce balance to the current system which it sees as having grown to ignore the people it serves.639
Conversely, the tax function has frequently been specifically singled out as an area which might be worthy of special protection above and beyond the usual public immunities from suit generally enjoyed by instrumentalities of the Crown. It has been observed, for example, that „[s]ome government functions (taxing, licensing, control and conservation of natural resources) are by their nature believed to be so qualitatively different as to require special protection from liability.‟640 On this view, some bias in favour of the Commissioner of Taxation is
639 McClennan, above n 530, 23, citing the Australian Joint Committee of Public Accounts, above n 516, vii. The Committee also notes, at vii, that the particular challenges of tax administration should not excuse, explain or justify the overwhelming of the individual. 640 Note, above n 194, 970. 235
advisable to at least protect against the imposition of liability, even if that protection does not extend to protection from judicial review per se.
It is easy to appreciate the justifications for the suggestion that governmental functions such as taxing should be subject to special treatment. For example, to allow unfettered judicial scrutiny of every act of the Commissioner of Taxation as the officer primarily responsible for the collection of Commonwealth tax revenue would impose significant contingencies on the viability of vital government initiatives and services funded by that revenue. Book has expressed this as a concern with how „a potentially hostile judiciary or the imposition of additional procedures could put sand in the gears of government machinery.‟641
Further, „fiscal chaos‟ might result from a successful challenge of a longstanding tax practice in a taxpayer claim. This would be similar to the fiscal chaos that might result from the declaration of a longstanding Commonwealth tax as unconstitutional.642 At its extreme, such an uncertain tax administration environment might also be ripe for abuse by vexatious or opportunistic taxpayer litigants. It might also erode taxpayer trust and confidence in the Commissioner and create fewer incentives for voluntary taxpayer compliance.643 The unfettered application of private law principles to the activities of the Commissioner may also discourage the Commissioner from engaging in risky but important tax
641 Leslie Book, „The Collection Due Process Rights: A Misstep or a Step in the Right Direction‟ (2004) 40 Houston Law Review 1145, 1160. 642 The term „fiscal chaos‟ has been most comprehensively examined in the literature and case law concerning restitutionary relief from the State. For good discussion see Mason, above n 489, especially at 122-123; Wells, above n 478, 201; and the discussion by La Forest J in the Canadian case of Air Canada v British Columbia, above n 474. See also Pannam, above n 484; and Brock, above n 484. It has been noted by one commentator though that concerns with fiscal chaos might be best accommodated through appropriate defences rather than through outright denial of relief to the relevant taxpayer. See Mason, above n 489, 123. 643 The research into any link between voluntary compliance behaviour and fairness of treatment is discussed further in Part IV (A) below. There is, however, no direct research into any link between taxpayer compliance behaviour and fairness or perceptions of fairness of remedies available to taxpayers. 236
administration activities such as the dissemination of tax information and provision of taxpayer advice.644
The problem is that there are equally reasonable challenges to most of these contentions. For example, the relationship between taxpayer trust and confidence and the availability of legal avenues of relief against the Commissioner is yet to be directly tested.645 So any argument which presupposes such a link is necessarily tenuous. Similarly, there are only limited and narrow studies which have empirically examined the motivational effects on public servants of the threat of litigation.646 Many of the other public policy arguments in favour of affording the Commissioner a substantial immunity from suit are also open to ready challenge.647 The task of resolving the validity of these arguments and counter-arguments is almost impossible.
For this reason, as flagged in Part I of Chapter 1, this study adopts an alternative measure of adequacy. This measure is not founded upon direct value-judgments as to the appropriate trade-off between taxpayer rights and tax authority interests. Instead, the chosen measure of adequacy of the current array of applicable taxpayer remedies is whether the application of those remedies meets two minimum objective standards.
First, that the Commissioner is either treated no differently to any other public authority in the application of those remedies, or, if he is, that any disparate treatment is fully explained and justified by reference to common law or legislative authority. This criterion recognises that there may be valid policy grounds for treating the Commissioner differently to other public authorities.648 Accordingly, inadequacy can only be confirmed where the reasons for special
644 This argument has been frequently ventilated as a sound basis for rejecting attempts to estop the Commissioner. See the discussion in Part II(B) of Chapter 4. 645 As discussed at length in Part IV below. 646 This issue and this research are also directly addressed in Part IV of this Chapter. 647 See the challenges to these public policy concerns raised in Part IV below. 648 These grounds were first flagged in the discussion of the tort of negligence in Part II of Chapter 3. 237
treatment are not clearly and coherently judicially explained and/or specifically legislatively mandated. This is irrespective of any subjective view as to the appropriate balancing of taxpayer and tax authority interests in compensatory claims arising from instances of ATO operational act or omission.
The second measure is the degree of complexity and inherent uncertainty of application of the existing array of taxpayer avenues for relief in cases of ATO operational act or omission where monetary compensation is sought. In the application of this criterion, the question of adequacy posed is whether the current array of taxpayer avenues of relief are being applied in an unacceptably complex and uncertain manner. Answering this question also does not require any assessment of competing interests between taxpayer and tax authority.
In other words, the concern is not with the outcome in cases of ATO operational failure in which monetary compensation is sought. Instead, the concern is whether there is presently the application of a satisfactory method to determine the legal issues in such cases. This methodological focus applies to both of the chosen measures of systemic adequacy.
The assessment of systemic adequacy against the two chosen measures set out below begins with a re-examination of a number of the strands of case law examined in Chapters 3 and 4. This re-examination reveals that the Commissioner enjoys a more favoured position at law than most other public authorities. Specifically, the examination begins by reiterating the evidence of this more favoured approach and exploring the bases for this more favoured approach. The emphasis then shifts to an assessment of systemic adequacy based upon the complexity generated by the uncertain scope of application of the current array of taxpayer remedies.
B - Adequacy Assessed: Unsubstantiated Favoured Treatment
Arguably the best example of inadequacy measured by favoured treatment of the Commissioner of Taxation in the absence of sufficient explanation or express 238
legal mandate is the judicial approach to tortious avenues of relief in taxpayer claims against the Commissioner of Taxation. A good starting point for proving this assertion are the judicial observations of Grove J in Harris v Deputy Commissioner of Taxation649 („Harris‟) which were flagged in Part II(A) of Chapter 3 to the effect that „[t]here is no basis upon which to conclude that there is a tort liability in the Australian Taxation Office or its named officers towards a taxpayer arising out of the lawful exercise of functions under the Income Tax Assessment Act.‟650
As noted in Part II(B) of Chapter 3, such statements strongly suggest the existence of a broad, sweeping immunity from suit in negligence stemming from an interpretation of the Income Tax Assessment Act 1936 (Cth) that implicitly accepts that the negligent carrying out of intra vires functions by the Commissioner is lawful. This approach, of itself, may be perfectly justified, putting aside any subjective opinions on the proper balancing of competing taxpayer private interests and tax authority public interests.
However the real issue insofar as adequacy is concerned is that Grove J makes no reference to authority or explanation to support such an approach.651 As discussed at length in Part II of Chapter 3, the scope of statutory immunity from suit in tort is generally determined through application of a guiding principle or approach such as the policy/operational dichotomy, tortious proximity or, more recently, through the consideration of various public policy issues as part of the salient features approach to determining novel or difficult tortious actions. There is no evidence of express recourse to any such principle or approach in the judgment of Grove J, aside from a passing acknowledgment of the incremental approach.652
649 Above n 181. 650 Ibid, 408. 651 His Honour does, at 409, state the view that proclamations such as the Taxpayers‟ Charter „with express aims of treating citizens from whom tax is to be levied, fairly and reasonably‟ do not create any private law duties of care toward taxpayers. However, the question of statutory intent is not pursued further by his Honour. 652 His Honour observes, above n 181, at 409, simply that: „In recent times the determination of the existence of a duty of care has been directed to be established by recognition of novel areas of duty on an incremental or case by case basis.‟ 239
However, the Grove J approach is not an aberration. On the contrary, His Honour‟s approach is broadly consistent with the approach taken in cases involving allegations by plaintiff taxpayers of tortious breach of statutory duty by the Commissioner of Taxation.653 It will be recalled from Part IV of Chapter 3 that in Lucas v O‟Reilly654 Young CJ, in comprehensively rejecting the taxpayer‟s submissions, stated:
If the cause of action relied upon by the plaintiff is based upon a breach of statutory duty, the plaintiff must show...that the statute creating the duty confers upon him a right of action in respect of any breach...However, it is, I think, clear that the defendant owes the plaintiff no such duty. The duty of the Commissioner is owed to the Crown.655
According to the Young CJ reasoning, the Commissioner owes no duty to taxpayers whatsoever in his tax assessment function. The duty of the Commissioner is owed exclusively to the Crown. It follows logically from this stance that if no duty of care is owed to taxpayers according to the Commissioner‟s governing legislation then performance of his tax assessment functions negligently must be lawful, provided that there is no question of the Commissioner acting ultra vires. This is precisely the stance taken by Grove J in Harris.656
A further similarity is the fact that Young CJ also deviates from the usual judicial course in considering allegations of breach of statutory duty. His Honour does not engage in any of the usual search for statutory intent to create private law rights to recovery by the plaintiff or the class to which the plaintiff belongs. As discussed in Part IV of Chapter 3, such a search typically underpins determinations of
653 Breach of statutory duty was also separately unsuccessfully pleaded by the taxpayer in Harris v Deputy Commissioner of Taxation, above n 181. 654 Above n 209. 655 Ibid, 4085. 656 The similarities in the two judgments also extend to the lack of elaboration of the bases for the approach applied. 240
whether a claim alleging breach of statutory duty is sustainable against a public authority.657
While the judgments of both Young CJ and Grove J are thin on detail, it is clear that common to both approaches to potential tortious liability of the Commissioner is an extreme judicial deference to an un-stated legislative intent in Australian taxation laws to deny the existence of a duty of care owed by the Commissioner to taxpayers. Such a degree of deference would render non- justiciable almost all allegations of tortious liability in negligence or breach of statutory duty against the Commissioner of Taxation.658
This may or may not, of itself, be unacceptable - such assessments necessarily hinge on challengeable value-judgments as to the proper scope of the Commissioner‟s tortious immunity from suit. However, the greater systemic concern is the fact that the approaches adopted by the judicial officers in these cases differ markedly from the approaches usually applied in cases involving tortious allegations against statutory authorities, without express discussion of the reasons for that deviation. In other words, the concern is with method rather than result.
First, the approaches of Young CJ and Grove J could be read as pre-supposing that a tortious duty cannot co-exist with the statutorily endowed public duties of the Commissioner. The High Court in Sullivan v Moody659 contradicted such a sweeping conclusion, observing that:
657 Central to any case of alleged breach of statutory duty is a search for legislative intent to create a civil cause of action for a breach of the relevant statutory duty. See Mason, above n 213, for discussion of the requirements of the tort of breach of statutory duty in Australia. See also Stanton et al, above n 87; and Phegan, above n 354. The concern is obviously to ensure that no judicial interpretation is applied to the relevant law provision such that it would operate to engage the court in quasi-legislative activity by imputing the existence of a statutory duty not intended by the legislature to accompany the relevant provision. 658 Except for perhaps those cases involving „intentional‟ torts such as misfeasance in public office where any breach of duty is carried out with a deliberate malicious intent. For a discussion of the role of malicious intent in establishing this tort see Part III(C) of Chapter 3. 659 Above n 235. 241
The circumstance that a defendant…is subject to statutory obligations which constrain the manner in which powers or discretions may be exercised, does not of itself rule out the possibility that a duty of care is owed to a plaintiff. 660
The Court went on to point out that it is only where „a suggested duty of care would give rise to inconsistent obligations‟661 that the existence of that duty should be denied. The existence of such authority at least demands some discussion of exactly if and when specific inconsistencies with the public duties of the Commissioner might be created through the imposition of a tortious duty of care.
Second, it is easy to contrast with the generally accepted approach the stances taken by Young CJ and Grove J to imputing the existence or otherwise of a common law duty of care in cases in which the relevant legislation is silent on the issue. Mason J enunciated the preferred approach in Sutherland Shire Council v Heyman:662
The better view has always been that, unless the statute manifests a contrary intention, a public authority which enters upon an exercise of statutory power may place itself in a relationship to members of the public which imports a common law duty to take care.663
660 Ibid, 582. 661 Ibid. This is sometimes referred to as the „incompatibility principle.‟ See also Tame v New South Wales (2002) 211 CLR 317. This was also the approach recommended in the recent review of the law of negligence by a Panel of Eminent Persons. Recommendation 41 of the Final Report of the Panel chaired by Justice David Ipp provides: „A public functionary can be liable for damages for personal injury or death caused by the negligent exercise or non-exercise of a statutory public function only if the provisions and policy of the relevant statute are compatible with the existence of such liability.‟ See Panel of Eminent Persons (Chair: D. Ipp), Commonwealth of Australia, Review of the Law of Negligence: Final Report (2002) 160. 662 Above n 36. 663 Ibid, 459. The observations of the High Court in Sullivan v Moody, above n 235, cited above, essentially comprise a re-statement and refinement of this view. For an academic challenge to this line of reasoning see Davies, above n 89. Davies notes, at 23; „…statutes usually define the body‟s functions, confer powers upon it, create decision-making structures for it, then leave it to the body itself to decide how best to use the powers to perform the functions with the available resources. That being so, it is arguable that the courts should not intervene to impose a common law duty to exercise the body‟s statutory power. If Parliament did not see fit to impose a duty by statute, why should the courts do otherwise? How can a statutory power be the source of a common law liability?‟ 242
There is certainly authority in the taxation context to warrant some discussion of statutory intent regarding to whom the Commissioner owes his duties. For example, it is easy to contrast the observations of Young CJ and Grove J with the views expressed in the tax context in Australia as early as 1926 by Isaacs J in relation to the functions and duties of the Commissioner. His Honour stated in his judgment in Moreau v FCT664 that: „His function is to administer the Act with solicitude for the Public Treasury and with fairness to the taxpayers‟665 (emphasis added).
Such views have been echoed more recently in the United Kingdom by Lord Scarman in Inland Revenue Commissioners v National Federation of Self- Employed and Small Business Ltd.666 His Lordship in that case stated that „modern case law recognises a legal duty owed by the revenue to the general body of the taxpayers to treat taxpayers fairly.‟667 These views have been positively received in a number of Australian tax cases, although not expressly confirmed as correct.668 However, none of these cases were pleaded in tort.669
It is conceded that underlying the judicial stance taken in Harris and Lucas might be the view that the statutory limitations on the availability of various avenues of relief contained in tax legislation can be viewed collectively as indicating a Parliamentary intent to create a comprehensive code in the taxation field - to the exclusion of civil law tortious liability. Section 177 of the ITAA36 is an example of a legislative protection from suit specifically afforded to the Commissioner.670
664 (1926) 39 CLR 65. 665 Ibid, 67. 666 [1982] AC 617. 667 Ibid, 651. 668 See, for example, David Jones Finance and Investment Pty Ltd v Federal Commissioner of Taxation above n 151; Darrell Lea v Commissioner of Taxation (1996) 72 FCR 175; and Bellinz v Federal Commissioner of Taxation, above n 276. 669 These cases considered the extent of the statutory protection from administrative law judicial review afforded to the Commissioner by s 177 of the ITAA36. 670 Section 177(1) provides that where the Commissioner produces a notice of assessment, that assessment will be conclusive evidence of the due making of the assessment and that the amount and details of that assessment are correct. The section does preserve the rights of taxpayers to seek 243
There are numerous other statutory limitations on the availability of various avenues of relief similar to the restriction on judicial review contained in s 177 of the ITAA36.671 Accordingly, an intention to preclude claims in negligence might be assumed even though there is no express statement to that effect in the legislation.672 Of course, a contrary argument could also be made that given the detail of Australian tax legislation, if Parliament intended to preclude the availability of any form of private law relief, they would surely have expressly done so.
The „comprehensive code‟ argument also appears to contradict the views of Mahoney JA in Dorney v Commissioner of Taxation; Simons v Commissioner of Taxation:673
The fortunate history of the tax administration in this country does not, in my opinion, warrant that the court should, as a matter of policy, place the acts of the Commissioner in a position under the law more favourable than other similar
a review or appeal against the assessment using the procedures contained in Part IVC of the Taxation Administration Act 1953 (Cth). 671 For example, as noted in Part III of Chapter 4, decisions are reviewable under s 3(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth) provided they are „of an administrative character, made or proposed to be made, or required to be made … under an enactment‟ or by a Commonwealth authority or an officer of the Commonwealth. However Schedule 1, paragraph (e) exempts from review decisions forming part of the process of making of, leading up to the making of, or refusing to amend, an assessment of tax. For a detailed discussion of the scope and justifiability of the Schedule 1(e) exemptions see Vince Morabito and Stephen Barkoczy, „Restricting the Judicial Review of Income Tax Assessments - The Scope and Purpose of Schedule 1(e) of the Administrative Decisions (Judicial Review) Act 1977 (Cth)‟ (1999) 21 Sydney Law Review 36. A further example can be raised in the context of the system of binding Public and Private Rulings contained in Divisions 357-361 of the Taxation Administration Act 1953 (Cth) which could be construed as establishing a comprehensive approach to dealing with the question of when the Commissioner will be bound to representations made to taxpayers. As noted above at n 275, the current system following the enactment of the Taxation Laws Amendment (Improvements to Self Assessment) Act (No 2) 2005 is explained by the Commissioner in two recent Rulings - TR 2006/10 in relation to Public Rulings and TR 2006/11 in relation to Private Rulings. 672 There is Canadian authority for the application of such an approach in an equitable claim alleging unjust enrichment against the Canadian revenue, albeit in the context of discussion of the ability to raise an unjust enrichment claim in cases of non-compliance with statutory time frames set out in tax legislation. See British Columbia Ferry Corp v MNR, above n 492. See also the discussion of this case by Beninger, above n 492, [10.8]. 673 [1980] 1 NSWLR 404. 244
administrative acts. If they are to be put in such a position, it is for the legislature to decide the extent to which this is to be done and, in my opinion, to state that intention clearly in legislation.674
Even if, despite these challenges, the „comprehensive code‟ argument is to be accepted, it at least warrants express judicial consideration before acceptance. Such consideration might discuss, for example, the argument that such an interpretation of statutory intent might lend to the relevant provisions a meaning that goes beyond any proportionate or appropriate intended purpose of those provisions.675 This thorough debate of the comprehensive code argument is precisely the type of debate needed before drawing any solid conclusion as to the appropriate scope of application of the core tortious avenues of relief in tax cases.
Such criticisms also apply outside the tortious sphere. In equity too, a similarly restrictive stance to the availability of relief has been adopted in tax cases. Unlike negligence which, as noted in Chapter 3, is largely judicially untested against the Commissioner of Taxation, estoppel has been tried with some limited success. However, as noted in Part II(B) of Chapter 4, in most cases alleging estoppel against the Commissioner of Taxation the taxpayer has failed. It will be recalled that the general Australian position regarding the prospect of estopping the Commissioner of Taxation was bluntly and concisely stated by Kitto J in Federal Commissioner of Taxation v Wade.676 His Honour observed that „[n]o conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act.‟677
674 Ibid, 418. To the extent that this view presupposes that the imposition on citizens of tax authority powers should only proceed after debate by Parliamentary representatives, it broadly reflects the „no taxation without representation‟ ideal. This was first coined as a slogan in the lead up to the American Revolutionary War and in response to the passage by the English Parliament of the Stamps Act of 1765. 675 A similar argument was successful in Nationwide News Pty Ltd v Wills (1992) 177 CLR 1. In that case, the High Court held invalid a provision of the Industrial Relations Act 1988 (Cth) which purported to exclude the defences of justification or fair comment being available in instances of criticism of the Industrial Relations Commission. For a detailed discussion see Busch, above n 501, especially at 365-367. 676 Above n 437. 677 Ibid, 117. 245
As also noted in Part II(B) of Chapter 4, similar views, strongly suggestive of the extreme judicial sensitivity to encroaching on statutorily imposed duties of the Commissioner, were reiterated more recently by Hill J in AGC (Investments) Ltd v Federal Commissioner of Taxation:678
[T]here is no room for the doctrine of estoppel operating to preclude the Commissioner from pursuing his statutory duty to assess tax in accordance with law. The Income Tax Assessment Act imposes obligations on the Commissioner and creates public rights and duties, which the application of the doctrine of estoppel would thwart.679
Consequently, the Commissioner has only been estopped in Australia in extraordinary cases in which the Commissioner has sought to resile from an explicit and clear commitment made to an individual taxpayer tantamount to a contractual commitment and raising no questions of limits on exercise of statutory powers or duties.680 These circumstances would be unlikely to arise in most instances of ATO operational act or omission.
The approach in cases such as Wade and AGC indicates a broad rejection of the availability of an estoppel remedy in most tax cases, founded on an unexplored view that the Commissioner owes duties only to the legislature. It is this lack of exploration which again serves as an indicator of the inadequacy of the current judicial approach.
678 Above n 439. 679 Ibid, 4195. In relation to this case it was noted in Bellinz v Federal Commissioner of Taxation, above n 276, that: „It was not suggested that the appellants could rely on estoppel, although the administrative law arguments advanced in reality seek to activate a doctrine of estoppel in a different guise.‟ The incursion of estoppel in administrative law cases often takes the form of the closely related administrative law doctrine of legitimate expectations. For a comprehensive exposition of the relationship between the two causes of action see Knight, above n 194. 680 As noted in Part II(B) of Chapter 4, cases in which the taxpayer has been successful in having estoppel-like responsibilities imposed on the Commissioner of Taxation are: Cox v Deputy Federal Commissioner of Land Tax (Tas), above n 282; Precision Polls Pty Ltd v FCT, above n 285; and Queensland Trustees v Fowles, above n 285. For a detailed exposition of these cases see Rider, above n 2. 246
Certainly in the tax cases there is none of the close and detailed discussion of the nature of the public duties and powers of the Commissioner which is evident where other statutory authorities are involved. For example, in Commonwealth v Verwayen,681 arguably the leading Australian authority on the application of promissory estoppel principles against the Crown, a significant portion of each of the judgments of the members of the High Court is dedicated to a close examination of the statutory intent, meaning and duties created by the relevant section of the Limitation of Actions Act 1958 (Vic).682
While it is possible that such an examination of the relevant provisions of the Income Tax Assessment Acts would result in the conclusion that those provisions are „not for the benefit of any individuals or body of individuals, but for considerations of State‟683 to date no such analysis has been entered into in the relevant tax cases. Further, though, tax provisions are many and varied. To take a uniform and singular approach to determining the public or private nature of any duties created by these provisions is less than satisfactory. This much is implicitly conceded by O‟Loughlin J in David Jones Finance and Investment Pty Ltd v FCT.684 In that case His Honour confined the comments of Kitto J in Moreau v FCT685 in respect of the existence of a duty of fairness to taxpayers to the specific tax provision involved in that particular case.
681 Above n 286. 682 The Commonwealth was seeking to rely on this Act to deny the possibility of the plaintiff bringing his action out of time, contrary to earlier representations not to do so. In contrast to the approach in the tax cases, in that case Mason CJ concluded, at 417, albeit after expressing reservations about holding the Commonwealth to its representations, thereby depriving it of defences which were available to it by statute or the general law, that - „It was not argued that any special rule of estoppel applies to assumptions induced by government, either so as to expand or so as to contract the field of operation of the doctrine.‟ 683 Admiralty Commissioners v Valverda (Owners) (1938) AC 173, 185. This test was cited by Mason CJ in Commonwealth v Verwayen, above n 286, as central to determining whether the relevant statutory provision is capable of being waived (and, consequently, also capable of forming the basis for an estoppel action). 684 Above n 668, 4733. The taxpayer plaintiff in this case also alleged that the Commissioner owed a duty of fairness to the taxpayer and had raised a legitimate expectation in the mind of the taxpayer the resiling from which constituted a breach of that duty of fairness and an abuse of power. 685 Above n 664. 247
In addition, the sweeping approach in cases such as Wade and AGC also clearly differs from the usual approach to application of the „non-fetter‟ principle in estoppel cases against statutory authorities. The typical approach presupposes a weighing up of competing interests where public and private interests might conflict, prior to reaching any conclusion as to the public or private nature of the duties created by a particular statute.686
This sweeping approach also allows little room for the tax cases to be determined through a more sophisticated approach to the question of the public/private duty question such as that proposed by Mason J (as he then was) in Attorney-General v Quin.687 In that case His Honour acknowledged that public interest necessarily comprises an element of justice to the individual.688 This view recognises that public duties and private rights cannot be completely divorced as judges implicitly have done in the promissory estoppel tax cases.
The intentional tort of misfeasance in public office, principles surrounding the availability of restitutionary relief and common law contractual relief are not readily open to challenge on the basis of judicially generated inadequacy in the same manner as the treatment of the torts of negligence and breach of statutory duty and the remedy of equitable estoppel. However, as discussed in Part I of this Chapter, these private law avenues of relief are exceedingly narrow in their scope of potential application in cases of ATO operational act or omission causing taxpayer loss. Accordingly, the relatively more robust judicial approach to these avenues of relief does not go very far in compensating for the current inadequate judicial approach to the application of the primary Australian tortious and
686 Again, the prime example of such an approach is Commonwealth of Australia v Verwayen, above n 286, in which the plaintiff succeeded in estopping the Commissioner from relying on a statutory defence otherwise available to it. The non-fetter approach was also applied by Mason and Dawson JJ in Attorney-General v Quin, above n 421. See also, Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54. 687 Above n 421. 688 Ibid, 18. The comments of His Honour in this regard are reproduced in full in Part II(B) of Chapter 4 (see above n 430). These comments are positively acknowledged by Rider in his leading article on the issue of estoppel of the revenue, „Estoppel of the Revenue: A Review of Recent Developments.‟ Rider, above n 2. 248
equitable avenues of relief. The fact remains that due to this inadequate judicial approach in these primary avenues of relief, the vast majority of cases in which monetary compensation is sought by a taxpayer for an ATO operational act or omission are likely to be unsatisfactorily resolved at private law.
Such criticisms of adequacy of the existing array of taxpayer avenues of relief on the basis of largely unexplained deviation from or modification of well- established legal principles in cases involving the Commissioner of Taxation are more difficult to direct at the causes of action falling outside of the private law sphere. However, the second measure of adequacy, centred on complexity, poses a broader-ranging challenge to the adequacy of the private law and other formal and informal causes of action collectively.
C - Adequacy Assessed: Complexity
The definition of complexity adopted here is the definition proposed by Schuck. Schuck identifies four core elements to legal complexity - density, technicality, differentiation and indeterminacy or uncertainty.689 Complexity defined in this broad way serves as a good measure of adequacy in the tax context. This is because it is generally accepted that simplicity and the certainty which underpins that simplicity are core underlying values of any model of a desirable tax system. For example, Bentley in his survey of the various international attempts to define the basic values underpinning desirable tax systems identifies twelve different such attempts - nine of which include some direct reference to certainty and/or
689 Peter Schuck, „Legal Complexity: Some Causes, Consequences, and Cures‟ (1992) 42 Duke Law Journal 1, 23-24. Insofar as complexity generates uncertainty, the desirability of minimising complexity sits neatly with broader concepts of the Rule of Law. Obviously, to be obeyed the law needs to be capable of being obeyed. Certainty is central to achieving this end. See Joseph Raz, The Authority of Law: Essays on Law and Morality (1979) 212. Weber has also pointed to the importance of certainty to economic activity, observing that „the universal predomination of the market consociation requires…a legal system the functioning of which is calculable in accordance with rational rules.‟ See Guenther Roth and Claus Wittich (eds), Max Weber - Economy and Society (1978) 337. 249
simplicity as desirable traits.690 Generally speaking, academic support for inclusion of complexity as a measure of a good tax system is common.691
Aside from simplicity being generally accepted as a desirable underpinning for a sound tax system, one of the reasons why complexity is a solid basis for a finding of systemic inadequacy is that complexity might have adverse effects on taxpayer voluntary tax compliance. As Schuck points out, whilst acknowledging the absence of empirical research into the issue, „[t]axpayers bewildered by tax law‟s complexity and uncertainty appear more likely to violate it.‟692 In addition, complexity leads to difficulties in accessing and obtaining practical relief through the application of various potentially relevant remedies, rendering taxpayer rights more normative than real.693
With this criterion in mind, complexity is clearly evident in the preceding analysis of the current array of taxpayer rights to monetary compensation for ATO operational act or omission. It stems from the differentiation between the treatment of the Commissioner of Taxation and other authorities in the application of various tortious remedies and equitable estoppel which has already been
690 See Bentley, above n 5, 62-64. The Bentley list includes perhaps the most often cited characterisation of principles of a good tax system; the list of Adam Smith. The Smith list consists of certainty, convenience, economy and equity. See Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations in Robert Heilbroner (ed), The Essential Adam Smith (1986). Bentley confirms, at 67, that „certainty and simplicity are two of the most favoured, yet most elusive, qualities of any tax system.‟ 691 See, for example Robert Cialdini, „Social Motivations to Comply: Norms, Values and Principles‟ in Jeffrey Roth and John Scholz (eds), Taxpayer Compliance: Social Science Perspectives (1989) vol 2, 200; James Eustice, „Tax Complexity and the Tax Practitioner‟ (1989) 45 Tax Law Review 7; and McCabe, above n 638. 692 Schuck, above n 689, 23-24. The link between complexity and loss of taxpayer confidence and creation of the perception of bias has also been pointed out by Cialdini discussing the general complexities of the United States tax system: „The complicated character of the system no doubt leads to errors and inconsistencies among IRS personnel in dealings with the public (or at least to the public‟s perception of such errors and inconsistencies), thereby undermining the perception of competence. The complexity of the system also allows for various “loopholes” that contribute to the view that the system is biased and unfair.‟ See Robert Cialdini, ibid, 216. There is also research that suggests complexity leads to overpayment / over-compliance. This was one of the findings of McKerchar in her 2002 thesis. See Margaret McKerchar, The Impact of Complexity upon Unintentional Non-Compliance for Australian Personal Income Taxpayers (D Phil Thesis, University of New South Wales, 2002). 693 Bentley has made the observation that „there must be an ability to access the right for it to be a real right.‟ See Bentley, above n 5, 16. 250
identified and discussed.694 This means that in the tortious sphere, in particular, taxpayers face two layers of complexity. The first layer is the complexity already inherent in the usual principles and approaches applied to determine tortious claims against public authorities. The second layer is the uncertainty and complexity arising from the fact that a taxpayer cannot confidently expect courts to apply these usual principles in a clear and explicit manner to determine their claim.
In the case of torts such as breach of statutory duty, these dual layers of complexity and uncertainty are readily demonstrable. First, the usual search for legislative intent in cases of breach of statutory duty has almost uniformly been criticised as unsatisfactory by virtue of the complexity and uncertainty it generates:
The courts look to the construction of the statute, relying upon a number of “presumptions” for guidance, but in practice there are so many conflicting presumptions, with variable weightings, that it can be extremely difficult to predict how the courts will respond to a particular statute.695
However, the problem is compounded with a second layer of complexity in the tax context. As discussed above, cases such as Lucas v O‟Reilly696 indicate that these guiding principles are either not followed or not discussed and acknowledged in the tax context to support conclusions in relation to statutory intent in the Income Tax Assessment Acts. The result is considerable complexity through uncertainty and differentiation.
694 McCabe, writing in the context of the differential treatment of the Commissioner as against other authorities as evidenced by the Commissioner‟s investigation and access powers in ss 263 and 264 of the ITAA36, also relates such treatment to „a dangerous failure to comply with the second of Smith‟s maxims, the requirement of certainty.‟ See McCabe, above n 638, 11. 695 Anthony Dugdale and Michael Jones (eds), Clerk and Lindsell on Torts (19th ed, 2006), [9.02]. Similar criticisms have been levelled by Fairgrieve (see Duncan Fairgrieve, above n 78, 40); The UK Law Commission (see The Law Commission, above n 587, [4.73]-[4.74]); and Lord Denning MR in Ex Parte Island Records Ltd [1978] Ch 122, 134-135. See also the comments of Dixon J in O‟Connor v S P Bray Ltd, above n 371, at 478 where His Honour observes that the interpretation of the relevant statute in breach of statutory duty cases is often undertaken „without the authority of any general rule of law or the application of any definite rule of construction.‟ 696 Above n 209. 251
In negligence too, the primary layer of complexity and state of uncertainty created by the current salient features approach to the determination of liability in novel negligence actions is difficult to deny. The comments of McHugh J in Perre v Apand697 indicate the complex and uncertain state of the law:
[S]ince the fall of proximity, the court has not made any authoritative statement as to what is to be the correct approach for determining the duty of care question. Perhaps none is possible. At all events, the differing views of the members of this court in the present case suggest that the search for a unifying element may be a long one.698
Unpredictability in the interpretation of the law of negligence in Australia was noted in a joint communiqué between Commonwealth, State and Territory Ministers and the President of the Australian Local Government Association issued on 30 May 2002 as a factor driving up insurance premiums, contributing to the recent Australian insurance crisis.699 The Ipp Panel formed in response to that crisis reported a strong perception that „[t]he law of negligence as it is applied in the courts is unclear and unpredictable.‟700
Again, though, we have seen that in the tax context Grove J, in dealing with the taxpayer‟s negligence allegations against the Commissioner in Harris v Deputy Commissioner of Taxation701 did not explicitly apply an incremental or salient features approach or any other principled approach. This state of affairs serves to
697 Above n 239. 698 Ibid, 624, as previously cited in Part II(C) of Chapter 3. See also the comments of Hayne J in Brodie v Singleton Shire Council, above n 69, 631: „The hope that an incremental approach will reveal some unifying principle or principles may, therefore, very well prove ill founded. If it does, it will be because the roots which lie beneath the development of this area of the law are so ill defined that they do not enable the growth of sturdy branches, only a mass of little twigs which give no suitable shape to the plant. Those roots can be seen in necessarily diffuse notions of individual responsibility and deterrence. The difficulty is compounded by the fact that, diffuse as these notions are, they must compete with other notions also said to lie beneath this field, such as loss distribution.‟ 699 See Australian Government, The Treasury, „Joint Communiqué: Ministerial Meeting on Public Liability‟ (30 May 2002). 700 Panel of Eminent Persons, (Chair: D. Ipp), above n 661, [1.5]. 701 Above n 181. 252
generate a second layer of complexity through differentiation and through the creation of additional uncertainty for taxpayer plaintiffs considering monetary claims against the Commissioner of Taxation. In such an environment it is not enough for a taxpayer plaintiff to successfully navigate the maze of uncertainties of the salient features approach which all plaintiffs face. They face an additional layer of tax-specific uncertainty and complexity generated through the unorthodox and largely unexplained approach taken in cases such as Harris.
The dual layers of complexity are also evident in the equitable sphere. In promissory estoppel claims against the Commissioner of Taxation there is also an absence of judicial engagement in any considered and express weighing of public and private interests. As also already observed, this weighing of interests is a difficult task in any event. Resolving claims without any explanation of how these conflicting interests are to be reconciled simply creates an additional layer of complexity for a prospective plaintiff through uncertainty and differentiation.
Where estoppel is concerned, uncertainty is an especially good indicator of inadequacy. This is because, as Knight observes, the protection of expectations where public authorities are involved is generally based upon concerns with ensuring legal certainty.702 Accordingly, creation of uncertainty in the application of estoppel principles serves to directly contradict the underlying basis of this avenue of relief.
Complexities such as those evident in the approaches to the primary tortious and equitable remedies also flow through to imbue the informal avenues of relief with complexity. This is because, as noted in Part I of this Chapter, liability to pay compensation pursuant to these avenues of relief commonly rests on determination of the existence of legal liability. In these instances, therefore, the operation of these compensatory mechanisms relies on being able to confidently
702 See Knight, above n 194, 78. Knight links certainty to broader legal concepts of liberty and the Rule of Law. He also points out the link between legal certainty and the promotion of trust and confidence in the administration and the ideal that persons can plan their lives through knowledge of the legal consequences of their actions. 253
identify when legal liability will arise and why. If this is not possible, and the preceding analysis suggests that this will often be the case, then these informal avenues of relief will also be imbued with an uncertain scope.
Discretionary administrative avenues of relief such as those available through complaint to the Commonwealth Ombudsman or ATO Internal Complaints or arising from allegations of breaches of the Taxpayers‟ Charter are also, however, independently capable of criticism on the grounds of complexity. As Schuck observes:
The movement toward administrative rulemaking is intimately connected to the increased resort to administrative discretion as a dominant legal modality, and the exercise of discretion in turn generates more legal complexity…the resulting legal regime is almost certain to become more dense, technical, institutionally differentiated, and indeterminate than if the legislature had simply promulgated a rule itself.703
Schuck is not the only writer critical of the uncertainty created by these types of remedies. For instance, Miller and Sarat refer to the uncertainties which can be resolved where these informal remedies are „institutionalised.‟
By institutionalisation of remedy systems we mean the extent to which there are well-known, regularised, readily available mechanisms, techniques or procedures for dealing with a problem…Where remedies are institutionalised, the probability of successful action can be more accurately assessed and prospective action can be more clearly shaped and considered.704
Overall, therefore, the current taxpayer avenues of compensatory relief available for ATO loss-causing operational acts or omissions taken together form a system rife with complexity created through uncertainty and differential treatment afforded to the Commissioner. This uncertainty, in turn, infects the informal
703 Schuck, above n 689, 10. 704 Miller and Sarat, above n 139, 563. 254
avenues of relief with complexity, which is compounded by the complexity inherent in the fundamentally discretionary nature of these informal avenues of relief in their own right. On this measure of adequacy, therefore, the currently available avenues of compensatory relief for taxpayer victims of ATO operational act or omission are clearly inadequate.
255
PART IV - ENHANCING EFFECTIVENESS AND ADEQUACY: THE POLICY CHALLENGES
TO REFORM ASSESSED
As the preceding analysis demonstrates, on the basis of the measures adopted in this study, the current array of causes of action available for taxpayer victims of ATO operational act or omission seeking monetary compensation are clearly both individually ineffective and collectively inadequate. Ineffectiveness extends to six aspects of practical usefulness spanning from difficulties proving claims to bias, unreliability and lack of any track record of successful outcomes for taxpayers. Further, systemic inadequacy stems from the uncertainty generated in the manner of application of the various potentially applicable avenues of relief. It also stems from the largely unexplained apparent privileged position enjoyed by the Commissioner in defending taxpayer private law claims.
Accordingly, the prima facie case for law reform is a strong one - at least to attempt to correct these identified deficiencies. However, the case for reform may be defeated by the challenges of a number of significant public policy concerns. These have already been the subject of attention in various different contexts in this study. However, they have not yet been subjected to critical scrutiny in this study in order to establish whether any constitute insurmountable objections to any reform proposal in this field. Accordingly, the balance of this Chapter is dedicated to providing this scrutiny of the key public policy challenges. These include policy challenges about possible motivational impacts from reform, justiciability concerns, concerns about the existence of alternative avenues for recovery and floodgates/indeterminacy concerns.
A - Motivational Impacts
The fears surrounding the motivational impacts of any change to the tax authority interests / taxpayer rights balance have been discussed in a range of contexts in this study, including in the discussion in Chapter 3 of the tort of negligence. These concerns have been noted and accepted largely without challenge to this point. However, any reform proposal will likely encounter challenges based upon the 256
effects which such reform might have on the motivations of both the Commissioner and his officers and taxpayers.
With respect to the former, the biggest challenge is likely to be posed in terms of the possible „chill factor‟ or „over-deterrence‟ effect on valuable but risky activities of the Commissioner. It will be recalled that the nub of the „chill factor‟ / over-deterrence argument is that allocation of a high compensatory burden on public authorities may result in a redistribution of resources away from high risk (but potentially socially beneficial activities) and toward lower risk activities. In the context of the ATO the issue is sometimes flagged to warn of the possibility that important high risk activities such as the provision of tax information or advice to taxpayers might be scaled down in favour of lower risk and/or risk aversion activities.705 For instance, in the face of increased risk of liability, the ATO may cease providing even the most basic of information or only provide that information after multiple expensive and time-consuming cross-checking procedures have been followed.
The main challenge to this argument is the general absence of empirical evidence to confirm or challenge the existence and/or extent of any chilling or over- deterrent effect on public authority activities. Certainly there is no empirical evidence which specifically assesses the chill factor/over-defensiveness phenomenon in the tax administration context. In fact, there is very little empirical evidence at all.706
705 The possible chilling effect on the provision of information was acknowledged as a concern by Brennan J in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979, above n 607. His Honour observed, at 372: „To impose a legal duty of care on the unsolicited and voluntary giving of any information and advice on serious or business matters would chill communications which are a valuable source of wisdom and experience for a person contemplating a course of conduct.‟ Brennan J also recognised the chill factor effect in His Honour‟s judgment in Northern Territory v Mengel, above n 298. The argument has recently expressly received attention in the tax context in New Zealand in the judgment of Keane J in Ch‟elle Properties (NZ) Ltd v Commissioner of Inland Revenue [2005] NZHC 190. 706 This fact is lamented by the UK Law Commission in their recent consultation paper on administrative redress for citizens from public bodies. (The Law Commission, United Kingdom, Administrative Redress: Public Bodies and the Citizen, above n 587). Similar criticisms were pointed out by the Committee in their earlier report - See The Law Commission, Public Law Team, United Kingdom, Monetary Remedies in Public Law: A Discussion Paper (2004), [7.10] - 257
There is no uniformity in the results of the limited existing empirical work. The United States study into the allocational impact of the imposition of liability on highway authorities in the early 1970‟s by Cordes and Weisbrod did find evidence of the existence of a „chill factor‟ phenomenon.707 In contrast, a study by O‟Leary into the effect of judicial determinations on activities of the United States Environmental Protection Agency was less conclusive. O‟Leary found that there were both positive and negative motivational effects on the Agency flowing from a number of significant judicial determinations.708 There have been a number of additional studies in the United States in which similarly qualified conclusions are reached.709
In addition to the variability and authority-specific nature of the results of the United States studies, it is questionable whether overseas experience would readily transfer to Australia. Further, arguably, the seemingly contradictory United States results may simply be indicative of the likelihood that different public bodies will respond in different ways to potential chill-effect triggers. Undoubtedly, some public bodies will behave in a more risk-averse fashion than others.
[7.11]. Writers such as Markensinis and Fairgrieve also challenge the validity of such arguments on this basis: See Fairgrieve, above n 78, 130-131; and Basil Markensinis, et al, Tortious Liability of Statutory Bodies: A Comparative and Economic Analysis of Five English Cases (1999), 81-82. 707 Cordes and Weisbrod summarise their conclusions as follows: „Under some circumstances, changes in compensation requirements will induce agencies to change both the level and mix of public output. Tests of these predictions using data on United States highway construction suggest that the presence of compensation requirements can affect the real output decisions of public agencies and not simply the distributional consequences of their decisions.‟ See Joseph Cordes and Burton Weisbrod, „Government Behaviour in Response to Compensation Requirements‟ (1979) 11 Journal of Public Economics 47. 708 See Rosemary O‟Leary, „The Impact of Federal Court Decisions on the Policies and Administration of the US Environmental Protection Agency‟ (1989) 41 Administrative Law Review 549. 709 Other United States studies with similarly qualified conclusions as to whether impact of judicial decisions on public bodies will be positive or negative include the following: Charles Johnson, „Judicial Decisions and Organisational Changes: Some Theoretical and Empirical Notes on State Court Decisions and State Administrative Agencies‟ (1979) 14 Law and Society Review 27; and Bradley Canon, „Studying Bureaucratic Implementation of Judicial Policies in the United States: Conceptual and Methodological Approaches‟ in Mark Hertogh and Simon Halliday (eds), Judicial Review and Bureaucratic Impact: International and Interdisciplinary Perspectives (2004). See also Charles Johnson, „Judicial Decisions and Organisational Change‟ (1979) 11 Administration and Society 27. 258
The most closely relevant study into the issue in the Australian context is the study by McMillan and Creyke into the effects of adverse judicial review determinations on government bodies.710 The findings from that study indicate that in the majority of cases changes in organisational behaviour did result from the adverse judicial determinations. However, aside from a few noted instances, there is no evidence of significant over-defensiveness or chill factor consequences.711 In fact, the study concludes that changes brought about by an adverse judicial review outcome are generally received by affected agencies „as a valuable and instructive incident.‟712
Empirical evidence aside, academic views on whether and to what extent the issue is a legitimate concern, are also varied. Some writers have argued that there is no chilling or over-defensiveness phenomenon, based upon the lack of evidence of any such effects when more stringent duties to compensate have been imposed on public bodies in a number of foreign jurisdictions.713 There is, however, some general academic support for the view that over-defensiveness is a legitimate concern. Craig, for example, cautions against any change in compensatory remedies available to victims of public authority mistakes due to the possibility of resulting chill factor effects.714 Qualified support, particularly among tort law commentators, is not altogether uncommon.715 Most commentators, however,
710 Creyke and McMillan, above n 196, 161. 711 At 178, the authors note a particularly pertinent comment from one agency clearly indicating a view that chill factor effects had resulted from an adverse judicial review outcome: „The court‟s decision made the department super cautious about adhering to process. They adopted a no risk policy which increased the complexity of the statement of reasons process and made the system more expensive. The expectation of intense scrutiny by the courts meant that “a hell of a lot” more time was spent by the department on the process.‟ 712 Ibid, 187. 713 See Daryl Levinson, „Making Government Pay: Markets, Politic and the Allocation of Constitutional Costs‟ (2000) 67 University of Chicago Law Review 345 in the context of the United States experience; See also Markensinis, et al, above n 706, 81-82. 714 See Paul Craig, „Compensation in Public Law‟ (1980) 96 Law Quarterly Review 413, 454-455. See also Harlow, above n 172, 26-27. 715 The tortious academic literature on this issue is voluminous and varied in its degree of support for this concern as a valid factor for determining exposure to liability of a public authority. See, for example, Reynolds, above n 45, 121-123; Craig and Fairgrieve, above n 27, 635; Note, above n 194, 970-971; Kneebone, above n 73, 393; Stanton, et al, above n 87, 57; Woolf, above n 73, 60; Peck, above n 194, 223; and Nolan, above n 194, 859-860. 259
even if broadly supportive of the possibility of some over-deterrent or chill-factor effect, qualify their support in some way.
Levinson proposes one common basis for questioning chill factor concerns. Levinson argues that public authorities respond to political rather than economic ramifications.716 Others challenge chill factor concerns on the basis that the extent and nature of any motivational impact of a particular judicial determination or legislative imposition of liability will depend upon the nature of the wrong to which that judgment or legislation relates.717
There is a further related view that the nature of any reform proposal will largely determine whether it will have a negative motivational effect on the relevant authority. For example, a law reform initiative which would resolve complexity through eliminating uncertainty is likely to have positive motivational effects on a public body. Conversely, reform contributing to complexity or uncertainty is more likely to lead to over-defensiveness or chill-factor effects.
The UK Law Commission discusses this possible link between uncertainty and over-defensiveness:
If the standard of reasonableness or, more generally, the limits of liability are uncertain then it will not be possible to identify with precision the appropriate level of investment in harm-reduction measures. This could lead those who are risk averse to invest heavily in “good” administrative practice to maximise their chances of meeting whatever standard will be applied, to the extent that de facto defensive administration is the result.718
716 Levinson, above n 713. 717 See Peter Schuck, Suing Government (1983). 718 The Law Commission, above n 587, Appendix B [27]. The link between legal clarity and consistency and motivational effects on public bodies has also been acknowledged by Cowan, Halliday and Hunter, writing in the context of consideration of the motivational impact of judicial review decisions on public bodies. See David Cowan, Simon Halliday, and Caroline Hunter, „Adjudicating the Implementation of Homelessness Law: The Promise of Socio-Legal Studies‟ (2006) 21 Housing Studies 381. 260
A different approach again is taken by writers such as Roots. Roots casts doubt on the chill factor phenomenon, suggesting that such policy concerns are weak because they are short term in effect. Roots argues that in the long term any chill factor is outweighed by the improvements in administrative decision-making resulting from imposing liability on pubic authorities within reasonable limits.
While this constitutes a legitimate policy concern because significant problems may be caused to administrative bodies in the short term, the long-term implications are the more important, if justice is ultimately to be done.719
Finally, and particularly pertinent in the context of this study, are the previously- cited observations of Woolf that any over-defensiveness is far more likely to result from reforms affecting discretionary behaviour of authorities rather than those reforms confined to the operational sphere. Woolf observes:
While I appreciate fully the dangers of administrators becoming over-cautious if they are exposed to actions for damages, I would expect over-caution to manifest itself more in the policy area than in the operational area.720
To this point the focus has been on the motivational effects on the Commissioner and his officers of any law reform proposal concerning liability of the Commissioner to taxpayers. However, such reform might also bring about countervailing positive motivational effects on taxpayers. These effects might offset any observable short-term chill factor effect on the motivations of the Commissioner and his officers and lead to long term overall improvements in our tax administration system through fostering voluntary compliance behaviour.
719 Roots, above n 143, 70. Roots goes on to elaborate the argument, commenting (at 71): „Do we deny compensation to the person aggrieved because, in the short term, administrative bodies are likely to be inhibited in their decision-making functions, or do we, accepting the risk of short term disruption and inhibition, focus on the long-term benefits of higher quality administrative action, the reduction of loss caused to individuals, and relief for those aggrieved, in both the short and long term, and allow compensation? Obviously, the latter option is the more equitable and definitely preferable.‟ 720 Woolf, above n 73, 60. 261
It has already been noted on a number of occasions in this study that there is an increasing concern in Australia to ensure voluntary compliance is encouraged through fostering a relationship of trust and confidence between taxpayers and the ATO.721 Internationally, there are similar concerns. As the OECD Centre for Tax Policy and Administration notes, „[t]axpayers who are aware of their rights and expect, and in fact receive, a fair and efficient treatment are more willing to comply.‟722 Research into compliance behaviour is rapidly extending to examination of various aspects of this assertion.723 Typically such studies focus on the positive compliance effects of fostering a relationship of trust and confidence between taxpayer and tax authority.724
Unfortunately, though, just as there are no tax-specific studies into potential chill factor effects, there have also been no empirical studies of any link between taxpayer compliance behaviour and available avenues of relief against the
721 It will be recalled from Part I of Chapter 2 that the Commissioner in his preamble to the Taxpayers‟ Charter has pointed out his concern with ensuring a climate of trust and confidence in the tax system is created. The Commissioner has observed in that document that „[w]e want to manage the tax system in a way that builds community confidence. To do this, we need to have a relationship with the community based on mutual trust and respect.‟ See further above n 115. This is consistent with the developing view that attitudes toward revenue authorities and the „psychological contract‟ between taxpayer and tax authorities are important to determining taxpayer behaviour and taxpayer compliance. For a good discussion see Simon James and Ian Wallschutzky, „The Shape of Future Tax Administration‟ (1995) 49 Bulletin for International Fiscal Documentation 210, 215. The psychological element of compliance behaviour is also examined by a number of other writers including: Vito Tanzi and Parthasarathi Shome, „A Primer on Tax Evasion‟ (1994) 48 Bulletin for International Fiscal Documentation 328; and John Wickerson, „Measuring Taxpayer Compliance: Issues and Challenges facing Tax Administrations‟ (1994) 11 Australian Tax Forum 1. 722 OECD, Centre for Tax Policy and Administration, Principles of Good Tax Administration (Practice Note GAP001, OECD, 2001), 3. 723 See, for example, Robert Mason and Lyle Calvin, „Public Confidence and Admitted Tax Evasion‟ (1984) 37 National Tax Journal 489; Michael Roberts and Peggy Hite, „Progressive Taxation, Fairness and Compliance‟ (1994) 16 Law and Policy 27; Steven Sheffrin and Robert Triest, „Can Brute Deterrence Backfire? Perceptions and Attitudes in Tax Compliance‟ in Joel Slemrod (ed), Who Pays Taxes and Why? Tax Compliance and Enforcement (1992) 193; Josef Falkinger, „Tax Evasion, Consumption of Public Goods and Fairness‟ (1995) 16 Journal of Economic Psychology 63; and Frank Cowell, „Tax Evasion and Inequity‟ (1992) 13 Journal of Economic Psychology 521. 724 For a good Australian example of such a study see Jenny Job and Monika Reinhart, „Trusting the Tax Office: Does Putnam‟s Thesis relate to Tax?‟ (2003) 38 Australian Journal of Social Issues 307. See also Kristina Murphy, „The Role of Trust in Nurturing Compliance: A Study of Accused Tax Avoiders‟, above n 116. There has also been significant international focus on the relationship between trust and compliance behaviour. See, for example, John Scholz, „Trust, Taxes and Compliance‟ in Valerie Braithwaite and Margaret Levi (eds), Trust and Governance (1998), 135. 262
Commissioner where the Commissioner errs. Accordingly, at this time any possible compliance effects of enhanced or clarified taxpayer rights to compensation against the Commissioner must be extrapolated from the general compliance literature. From this literature the indications are that some positive compliance effects might well result from the enhancement of taxpayer rights to compensation in cases of ATO operational act or omission causing taxpayer loss.
For instance, Wenzel in his study of the impact of justice concerns on tax compliance notes the results of numerous studies concluding that „taxpayers are less likely to be compliant with a tax system they consider unjust, unfair, and, thus, illegitimate.‟725 To the extent that taxpayers might perceive unfairness or injustice in the current ineffective and inadequate system of taxpayer rights to compensation for ATO operational act or omission causing taxpayer loss, positive compliance benefits might well flow from law reform correcting that situation.
Similarly, it is possible to extrapolate from studies linking sanctions imposed on taxpayers and the effect on compliance726 and to hypothesise on a possible positive link between greater „sanctions‟ imposed on the Commissioner and the level of taxpayer compliance. It would, however, be a significant leap of faith to assert that the motivations and responses of private taxpayers will be the same as the motivations and responses of a statutory officer such as the Commissioner of Taxation.
The studies which come closest to linking taxpayer remedies against the Commissioner with compliance behaviour (through examining links between procedural justice and perceptions of justice on taxpayer compliance behaviour),
725 Michael Wenzel, „The Impact of Outcome Orientation and Justice Concerns on Tax Compliance: The Role of Taxpayers‟ Identity‟ (2002) 87(4) Journal of Applied Psychology 629, 629. 726 Concluding, somewhat unsurprisingly, that generally harsher sanctions might foster greater taxpayer compliance. The logic of such findings has been noted by Roth, Scholz and Witte - „The hypothesis that more certain or severe legal sanctions will encourage compliance with the law is consistent not only with the economic theories discussed above, but also with exchange theory in sociology.‟ See Jeffrey Roth, John Scholz and Ann Witte (eds), Taxpayer Compliance: An Agenda for Research (1989) vol 1, 91. 263
have been inconclusive. For instance, Murphy refers to the following apparently contradictory findings of an Australian survey by Worsham:
Worsham (1996)…failed to find an increase in tax non-compliance when taxpayers experienced procedural injustice. Using an experimental manipulation, Worsham (1996) found that procedural injustice experienced personally, either by being subject to inconsistency in enforcement or to enforcement attempts brought about by inaccurate information, did not increase the level of tax non-compliance. He did, however, find that procedural injustice experienced indirectly through becoming aware of another‟s unfair treatment did increase self-reported tax non-compliance.727
Book also notes the difficulty in drawing any concrete conclusions from the literature, pointing out the subtleties of tax administration and „the possibility that increasing post-assessment procedural protections may embolden non-compliance or, alternatively, increase compliance through a greater sense of public confidence in the fairness of procedures.‟728
Irrespective of the strength of any findings of such studies, it remains the case that the leading Australian studies of Worsham,729 Murphy730 and Wenzel731 all focus on procedural justice perceptions of non-compliant taxpayers subject to ATO audit or inquiry into their tax affairs. Essentially, crudely put, these are studies
727 Kristina Murphy, „Procedural Justice and Tax Compliance‟, above n 116, 383. The reference to the Worsham study is to the study reported in Ronald Worsham, „The Effect of Tax Authority Behaviour on Taxpayer Compliance: A Procedural Justice Approach‟ (1996) 18 The Journal of the American Taxation Association 19. In that study, at 19, Worsham notes the findings of the study in the following terms: „The results indicate that procedural injustice experienced indirectly through becoming aware of another‟s unfair treatment increased the level of non-compliance. Conversely, procedural injustice experienced personally, either by being subject to inconsistency in enforcement or to enforcement attempts brought about by inaccurate information, did not increase the level of non-compliance. In fact, inconsistent audit rates actually increased the level of compliance.‟ 728 Book, above n 641, 1160. 729 Worsham, above n 727. 730 Murphy, above n 727, 399. 731 Wenzel, above n 725. 264
into the treatment of taxpayer „villains‟ rather than taxpayer „victims.‟ Accordingly, the direct conclusions of such studies may not be readily transferable to the taxpayer rights context where rights are sought to be asserted against the Commissioner.
In light of the preceding analysis, only a few heavily-qualified overall conclusions about the possible motivational effects on taxpayers and the Commissioner of any law reform aimed at correcting any ineffectiveness or inadequacies in the current array of taxpayer compensatory avenues of relief are possible.
One fact which is clear is that there is an absence of direct and unchallenged evidence which could be used to confidently predict positive or negative motivational effects of any reform proposal on either taxpayers or the Commissioner. Consequently, motivational arguments, while worthy of consideration in formulating any specific reform proposal in order to minimise any potential negative motivational effects and emphasise any potential positives, should not be a dominant concern. Certainly, this factor should not be a bar to objective consideration of any reasonable reform proposal. Further, a strong argument can be made that even in the absence of any reform proposal, courts considering tax cases should resist any submission that judicial determination of any claim should turn upon these vague and presently largely empirically unsubstantiated policy concerns.
B - Justiciability Concerns: Separation of Powers and Institutional Competence
In determining the institutional source and content of any reform proposal it will be important to be mindful of adequately addressing Constitutional separation of powers concerns and related institutional competency concerns. This is especially so if the proposed reforms would expand the role of the judiciary in determining claims against the Commissioner either through expansion of court-based remedies or through interpretation of new or revised legislative remedies.
265
It will be recalled from Part I of Chapter 2 that competency concerns stem from the view that some cases can not be judicially determined because they are cases which courts are „ill-equipped and ill-suited to assess.‟732 Similarly, in that Chapter separation of powers concerns were defined as reflecting a desire to ensure an appropriate separation of powers between the legislature, the executive and the judiciary is maintained and respected.733 It is possible to identify a range of circumstances in which taxpayer challenges to tax administration activities of the Commissioner of Taxation through compensatory claims could readily be considered non-justiciable on one or both of these grounds.
For example, judges may well be reluctant to allow a taxpayer to proceed with a damages action against the Commissioner in circumstances that directly or indirectly result in the successful taxpayer paying less tax than would otherwise have been payable on an ordinary reading of the relevant taxation law provisions. There are two main reasons for judicial reluctance in these circumstances. First, the rules of evidence which confine the judicial process may make it impossible for a judge to properly assess the competing public policy ramifications of such a result. Second, and perhaps most compelling, such a result could be viewed as an incursion by the judiciary into the domain of the legislature through creation of an exception to an otherwise legislatively sanctioned taxpayer liability.
Similarly, any compensation determination which would effectively indicate the substitution of a decision of the Commissioner with the decision of a judge could be viewed as an imposition on the Commissioner of a legal burden which might otherwise operate to restrict or modify the Commissioner‟s legislatively sanctioned role. Again, it could be argued that such a determination would pose an indirect judicial challenge to the legislative authority of Parliament. Any successful estoppel claim against the Commissioner resulting in an award of damages would be especially open to challenge on this basis.
732 Craig and Fairgrieve, above n 27, 632. See further the discussion of judicial competency concerns in Part I(B) of Chapter 2, especially at n 48 - n 55. 733 For elaboration see the discussion of separation of powers concerns in Part I(B) of Chapter 2, especially at n 56 - n 60. 266
However, as illustrated by the judicial treatment of taxpayer claims against the Commissioner of Taxation to date, accepted in an unqualified fashion, these concerns can result in an extremely restrictive approach to the availability of private law relief. In Part III of this Chapter such an approach was flagged as a significant cause of inadequacy in the array of existing taxpayer avenues of relief. It follows that any similarly overwhelming concern with separation of powers and judicial competency should be avoided in considering and formulating any reform proposal aimed at correcting this inadequacy. The reasons are twofold - generic doubts surrounding the correctness of zealous pursuit of these concerns and specific doubts about relevance of these concerns to any proposal confined to purely operational ATO activities.
At a generic level, the judicial importance placed on constitutional separation of powers concerns has been criticised.734 It has been pointed out, for instance, that such concerns should be tempered by the reality of the absence of a clear separation of powers in Australia.735 Consequently, arguably the pursuit of preserving an absolute separation of powers is in vain and unnecessary.
Commentators such as Davies have also discussed at length a number of challenges to the doctrine in the Australian context. For example, Davies observes that the concerns with ensuring law-making functions are confined to the legislature due to the greater degree of accountability of the legislature to the people than the judiciary do not reflect the realities of the current Australian political system. This system, Davies argues, is dominated by the parliamentary members of the executive and high-level bureaucrats, diluting accountability.
734 See for example, Finn, above n 49; and Fiona Wheeler, „Judicial Review of Prerogative Power in Australia: Issues and Prospects‟ (1992) 14 Sydney Law Review 432. 735 For example, Allars, above n 56, at 36 notes that: „…in some respects there is no separation of powers in Australia. Legislative and executive power are not clearly separated. Federal Ministers who form the Federal Executive Council and the Cabinet and administer federal government departments are Members of Parliament....Nor is there a true separation of legislative from judicial power. Judges have power to make rules of court, a legislative function….‟ 267
Davies concludes that the separation of powers doctrine „assumes an exaggerated contrast between the accountability of judges and other law-makers. It cannot be denied that many features of modern government render the latter less than directly accountable to the electorate.‟736 The UK Law Commission similarly criticise the doctrine, noting that „constitutional considerations regarding the division of powers between the courts and the executive may be going too far in the direction of stating that the only real control is political and not legal.‟737
Further, the competency-based objections to justiciability of certain matters are similarly questionable if pursued over-zealously.738 For example, in the tax context, almost any case involving the Commissioner of Taxation could at some level be viewed as raising polycentric interests - and, therefore, being unsuitable for judicial consideration.739 Every taxpayer‟s interests as a user of tax-funded government services and infrastructure are affected by the challenge to the revenue posed by a significant individual taxpayer compensatory claim. Further, any question involving a publicly funded office such as that held by the Commissioner of Taxation necessarily raises direct or indirect questions concerning the allocation of scarce public resources. These questions are inherently political. As one administrative law commentator notes:
...the potential scope of an exclusion of „political‟ matters from the purview of the courts is enormous. If all such political „hot potatoes‟ were to be deemed
736 See G L Davies, „The Judiciary - Maintaining the Balance‟ in Paul Finn (ed), Essays on Law and Government (1995) vol 1, 267, 279. 737 The Law Commission, Public Law Team, Monetary Remedies in Public Law: A Discussion Paper above n 706, [2.41]. 738 These doubts over the sustainability of assertions of justiciability founded upon narrow assessments of judicial competency have led one commentator to observe, in the context of discussion of the continued relevance of the concept in judicial review of administrative action that justiciability „is a blunt instrument which fails to have regard in a nuanced way to those characteristics of a particular decision which make it unsuited to judicial review…‟ Peter Bayne, „The Court, the Parliament and the Government - Reflections on the Scope of Judicial Review‟ [1991] 20 Federal Law Review 1, 3; and another to note: „“non justiciability” is a confused amalgam of rationales, none of which bear great weight when closely examined.‟ See Finn, above n 49, 262. 739 For discussion of polycentricity arguments against judicial involvement, see, for example, Fuller, above n 50; John Allison, „The Procedural Reason for Judicial Restraint‟ [1994] Public Law 452; and Bayne, above n 738. Polycentricity was introduced and discussed in Part I(B) of Chapter 2. 268
unsuitable for judicial scrutiny the administrative law casebooks would be slim volumes indeed.740
However, even aside from these generic challenges to separation of powers and institutional competency concerns, the operational constraint of this study means that reform may be possible without the criticism of offence to the doctrine of separation of powers or disregard for institutional competency concerns. This is so, provided any reform proposal is confined to purely operational or administrative activities of the Commissioner.
Cane hints at the relevance of the policy/operational distinction to the force of separation of powers and judicial competency concerns:
So far as policy-making functions are concerned, I think that separation of powers principles, the desirability that the judiciary be independent, and the unelected and politically unaccountable nature of judicial office all demand that on many matters, the judiciary should defer to the legislature and the executive, and in such matters only play a marginal role.741
It follows logically from the Cane view that the more operational in nature the complained of activity the subject of any reform proposal, the more likely it is that a court could be considered competent to address the issue. Judicial assessment of such activities requires a court to assess mechanical processes which are substantially no different to those that courts are called upon to engage in regularly in a range of private law cases involving only private individuals.
In fact, there was lengthy discussion in Part I of Chapter 2 of the fact that the foundation underlying the policy/operational distinction in tort is the view that the distinction represents an appropriate demarcation between justiciable and non-
740 Finn, above n 49, 249. 741 Cane, above n 126, 513-514. 269
justiciable tortious claims.742 Similarly, equitable principles such as the Southend- on-Sea principle have been judicially noted as having greater force when restricted to policy or discretionary spheres of public authority activity.743 It has been judicially observed that the public law test of Wednesbury unreasonableness also reflects the greater sensitivity of judicially imposing upon the discretionary activities of a public authority than imposing upon operational or administrative functions.744
This being the case, the dedication of significant attention to ensuring that any reform proposal is specifically confined to the operational sphere of the activities of the Commissioner of Taxation will go a long way toward ensuring few justifiable challenges to those reforms on separation of powers and/or institutional competency bases.
C - Existence of Alternative Remedies
The existence of alternative remedies has been highlighted as one of the significant public policy bases for the denial of compensatory relief in various private law claims against public authorities.745 However, as the examination in Parts II and III of this Chapter has shown, while there are a range of existing potentially applicable avenues of relief available to Australian taxpayers, this is no guarantee of effectiveness or adequacy of those avenues of relief. As Miller and
742 See the discussion in Part I(B) of Chapter 2 and the academic and judicial sources referred to therein. 743 See the comments of Gummow J in Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic, above n 64, 215 and reproduced above at n 65 (in part) and in full at n 433. 744 As Hayne J has observed in Brodie v Singleton Shire Council, above n 69, 628. These comments are reproduced above at n 70. 745 The UK Law Commission has noted this concern as one of the four main public policy issues militating against the availability of tortious relief against public authorities. See The Law Commission, Public Law Team, United Kingdom, above n 706, [2.40]. For detailed discussion of this concern, see Markensinis et al, above n 706, 46. See also the discussion of this policy objection by Booth and Squires in Cherie Booth and Dan Squires, The Negligence Liability of Public Authorities (2006), [4.55] - [4.73]. It will be recalled that the existence of the availability of alternative tortious avenues of relief was one of the key considerations for the High Court in Northern Territory v Mengel, above n 298, over-ruling the innominate tort established in Beaudesert Shire Council v Smith, above n 28. See the discussion in Part V of Chapter 3. 270
Sarat observe, „just because mechanisms exist does not mean that they are, in fact, attractive to, or useable by, people seeking redress.‟746
Accordingly, the availability of alternative avenues of relief should gain little traction as a valid objection to any reform proposal which aims to enhance and/or clarify taxpayer compensatory avenues of relief by correcting this ineffectiveness and inadequacy. The argument may, however, still have some bearing on framing the scope of any reform proposal.
The scope of any revised or new cause of action needs to be drafted being mindful of existing statutory restrictions on the available avenues of relief such as the restriction on the availability of judicial review in cases involving assessments contained in ss 175 and 177 of the ITAA36 and paragraph 1(e) of Schedule 1 of the Administrative Decisions (Judicial Review) Act 1977 (Cth).747 Certainly, it would seem prudent to ensure that any reform proposal at least directly and specifically addresses the intended interplay between any enhanced or new damages remedy and other existing avenues of relief. In this way any public policy concerns related to the existence of alternative avenues of relief can be largely avoided, irrespective of the merits of these concerns in the taxpayer rights context.
An alternative for similarly by-passing this policy concern would be to adopt in any law reform proposal an approach similar to that contained in the United States
746 Miller and Sarat, above n 139, 564. For similar views see Craig and Fairgrieve, above n 27, 636. 747 The combined operation of ss 175 and 177 of the ITAA36 and Paragraph 1(e) of Schedule 1 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) effectively precludes the availability of judicial review of any case involving an assessment. According to s 175, an assessment in not invalid merely because the Commissioner has not complied with any provision of the ITAA36. Further, as noted above at n 670, s 177(1) provides that where the Commissioner produces a notice of assessment, that assessment will be conclusive evidence of the due making of the assessment and that the amount and details of that assessment are correct. It will be recalled from the discussion in Part III of Chapter 4 that paragraph (e) of Schedule 1 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) excludes from review decisions forming part of the process of making of, leading up to the making of, or refusing to amend, an assessment of tax. The exclusions in paragraph (e) of Schedule 1 have been interpreted as clearly prohibiting review of decisions dealing with the calculation of tax. 271
Taxpayer Bill of Rights. In the statutory damages remedy contained in § 7433 of the United States Taxpayer Bill of Rights748 the need to have foregone the right to pursue other avenues of available relief has been built into the legislation as a condition precedent to the availability of relief through application of the statutory damages remedy. This may well be an appropriate way of addressing the issue in any Australian reform proposal. The United States legislation and the approach to this policy issue contained in it are discussed at length in Chapter 7.
D - Protecting the Revenue: Floodgates/Indeterminacy Concerns
Concerns that any reform might lead to an opening of the floodgates to increased litigation, resulting in a large and indeterminate number and quantum of monetary claims will undoubtedly also be raised in opposition to any proposal to reform the law relating to monetary liability of the Commissioner of Taxation for operational act or omission causing taxpayer loss. This concern was discussed in Chapter 3, where the particular prominence indeterminacy fears would be likely to play in any taxpayer claim for pure economic loss against the Commissioner was noted.749 Assessing the impact of this concern on any reform proposal requires determining three issues.
First, a generic view needs to be taken as to who is best and most appropriately placed to bear losses resulting from public authority operational failures - the affected individual or the State. This is because, obviously, floodgates/indeterminacy concerns are more troubling if the view is taken that the claims on the public purse relate to losses which are more appropriately borne by the affected individuals.
748 First introduced in the Technical and Miscellaneous Revenue Act of 1988 Pub L No 100-647, 102 Stat 3342 (1988). 749 See the discussion in Part II(C) of Chapter 3 - in particular, the centrality to the restrictive judicial approach in claims for pure economic loss of concerns around indeterminate liability which were expressly noted in San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979, above n 607. 272
Second, and related to this concern, a view needs to be formed as to whether and to what extent any general attitude about the appropriate burden on the State for private losses should be altered where the offending authority is a revenue collection authority.
Third is the question of the extent to which any reform proposal can be expected to result in an opening of the floodgates in any event. Naturally, if the floodgates phenomenon is a myth or a reform proposal can be framed so as to eliminate the risk of any potentially increased aggregate liability for the Commissioner, then any reform proposal can be drafted with minimal concerns about potential adverse floodgates/indeterminacy ramifications.
In relation to the first issue, one of the most common challenges to a compensatory remedy being made available against public authorities such as the ATO is the argument that to do so would be to unfairly benefit particular individuals at the expense of society as a whole. This argument presupposes a dichotomy between social benefit and individual gain. Cane has expressed this argument in the following terms:
The more public resources we spend on monetary payments to those made worse off by government programmes to return them to their former position, the fewer resources will be available for the implementation of those programmes. Put crudely, the more we spend on helping losers, the less we will have to spend on creating winners.750
Of course, some judicial challenge to this dichotomous attitude has already been noted in Part II of Chapter 4 in discussing the distinction between public and private benefit in the estoppel context.751 However, even accepting that such a
750 Cane, above n 126, 497. 751 Mason CJ in Attorney-General v Quin, above n 421, at 18, acknowledges that public interest necessarily comprehends an element of justice to the individual: „[A]s the public interest necessarily comprehends an element of justice to the individual, one cannot exclude the possibility that the courts might in some situations grant relief on the basis that a refusal to hold the executive to a representation by means of estoppel will occasion greater harm to the public interest by 273
clear dichotomy exists, and that to take money away from the public purse can unjustifiably prioritise the compensation of particular individuals over the public benefit, the force of the argument is still challenged by most commentators. In fact, a minority take the view that the loss flowing from erroneous public activity is always more equitably borne by society as a whole rather than the wronged individual:
…Government decision making and administrative action is a “public enterprise”, decisions being made about individual members of our community but for the benefit and in the interests of the community as a whole. If loss is occasioned to an individual by a decision made in the public interest, it should be the administration and, more broadly speaking, the community generally, which should bear the costs of that wrongful administrative action.752
Most, however, accept that a balancing exercise is required and that no bright line distinction can be drawn between cases where the State should bear the burden of loss and those cases in which the loss is more appropriately left with the individual. Cohen points out the lack of any satisfactory and unimpeachable conclusion:
Adjusting to administrative action requires that we draw distinction between aspects of individual and collective welfare - no workable liability regime or compensation system, insurance program, or any other adjustment policy can recognise all aspects of human welfare. Our choices of the subset of interests (or „rights‟ if we use rights language and the legal system to develop adjustment policies) must be subject to political debate;753
One compromise which has been suggested is that public benefit at the expense of private individual loss is only justified where the government is acting lawfully
causing grave injustice to the individual who acted on the representation than any detriment to that interest that will arise from holding the executive to its representation and thus narrowing the exercise of the discretion.‟ Rider positively acknowledges these comments in the tax literature - see Rider, above n 2. 752 Roots, above n 635, 71. 753 Cohen, above n 155, 636. 274
and „legitimately.‟ Of course, such qualifications raise their own obvious problems such as just where the line between legitimate and illegitimate behaviour should be drawn. Cane provides a useful example of the distinction applied in the tax context:
For example, it would be self-defeating to compensate “losers” in the tax system, that is, those who pay relatively more tax. On the other hand, it seems only right that if the government demands a tax payment that is not due, it should return the overpayment.754
According to the Cane formulation, losses resulting from an ultra vires act of the Commissioner of Taxation should not lie with the affected individual.
Extrapolating from the Cane formulation, a case could be argued that illegitimacy should extend not only to ultra vires demands from a tax authority, but to intra vires demands rendered illegitimate due to administrative or operational error. By confining the primacy of public interest over private taxpayer rights only to situations involving intra vires activities which have been carried out in an operationally legitimate way, the challenge to reform to taxpayer rights to monetary compensation for loss caused by an ATO operational act or omission loses much of its force.
However, such a formulation taken to its extreme would result in a challenge to the public purse in any instance of ATO operational or administrative failure on the basis of „illegitimacy.‟ This might result in an unsatisfactorily high burden on the public purse. Accordingly, restrictions on access to relief and/or caps on the availability of compensatory relief would be an essential inclusion in any specific law reform proposal built upon such a broad premise.755
754 Cane, above n 126, 497. Of course, the cases in which restitutionary relief for unjust enrichment resulting from erroneously collected taxes has been considered provide for a far more qualified approach to taxpayer relief than Cane suggests as appropriate. See further the discussion of these cases in Part II(B) of Chapter 4. 755 The merits of these types of restrictions are discussed further in Chapter 7. 275
An alternative approach is to confine liability of a public body to those situations in which the losses have arisen as a result of activities characteristically private (as distinct from public) in nature. Cohen has noted the increasing tendency of public bodies and their employees to behave in a manner akin to private firms. Cohen asserts that, as such, they should legitimately be treated no different to a private firm in determining who should bear the loss caused by their actions:
There are strong arguments that the „public interest‟ view of bureaucratic behaviour is simplistic, and that bureaucrats‟ motives include maximising their budgets, their personal job and income security, their power, their professional prestige, and their personal wealth. To the extent that this is true the bureaucracy is acting like a private firm, and should be faced with both the private and social costs of its activities.756
Adopting this approach, any reform proposal aimed at correcting the inadequacies and ineffectiveness identified in this study would need to be confined to regulating ATO activities common to both private and public bodies. Confining any reform to purely operational activities would incidentally achieve this objective. This is because operational activities are far less likely to exhibit peculiarly „public‟ characteristics than discretionary or policy-infused activities.
This brings us to the second concern - whether any special protection of the Commissioner from liability is warranted on indeterminacy/floodgates grounds. It is possible that an affirmative answer to this question underlies the restrictive judicial interpretation of our tax laws to deny the availability of tortious and equitable relief from the Commissioner in cases such as Harris,757 Lucas,758 or Wade759 already discussed at length in Part III of this Chapter. There is, however,
756 Cohen, above n 753, 646. Although Cohen does caution (at 643) against employing such an approach to the extent that such treatment „represents a refusal to recognise the benefit-gaining function of the modern welfare state.‟ 757 Above n 181. 758 Above n 209. 759 Above n 437. 276
nothing express in these judgments to indicate if this was, in fact, a prevalent concern.
Insofar as explicit judicial comment is concerned, there is little support for special protection of the revenue from possible floodgates ramifications, as evidenced by the comments of Mason CJ in Commissioner of State Revenue v Royal Insurance Australia Ltd.760 In that case, His Honour indicated support for the proposition that loss from government error is more fairly borne by the taxpaying public as a whole than by individual victims of revenue authority error.761 Accordingly, His Honour refused to recognise a defence to a restitutionary claim against the Commissioner on grounds of disruption to public finances which might result from allowing the claim.762
However, it is possible to mount a reasonable argument for special protection of the Commissioner from floodgate effects. Such an argument recognises that any challenge to the activities of a revenue authority also indirectly creates vulnerabilities in the funding of the other functions of State and important social initiatives of government. Accordingly, in the taxation context, judges need to not only consider the ramifications for the ATO of imposing liability on the Commissioner, but also readily foreseeable flow-on effects to any of a range of
760 Above n 486. 761 Ibid, 68. For discussion of these observations see Mason, above n 489. His Honour made the comments in the context of considering the disruption to public finances as a possible defence to a restitutionary claim against the revenue. Wilson J has expressed similar views overseas in Air Canada v British Columbia, above n 474 at 169, as did Lord Goff in Woolwich Equitable Building Society v Internal Revenue Commissioners, above n 472, 176. 762 This would appear consistent with the relatively hostile reception accorded to floodgates arguments in other legal contexts. For example, courts tend to be bluntly unsympathetic to floodgates arguments where questions of legal standing are involved. Lockhart J observed in Ogle v O‟Neill and Strickland (1987) 13 FCR 306, 308: „It is an argument without substance and reality. There are real constraints which would discourage people from instituting proceedings whose only interest is strong views or feelings. The burden of costs, including the risk of orders for costs being made against them if they lose, and the power of courts to control their own proceedings, including power to dismiss proceedings or strike out pleadings if they are vexatious, frivolous or an abuse of process are examples of some constraints.‟ See, also Phelps v Western Mining Corporation Limited (1978) 33 FLR 327, 333 per Deane J; Radnedge v Government Insurance Office of New South Wales (1987) 9 NSWLR 235, 244-245 per Kirby P, Dyson v Attorney-General [1911] 1 KB 410, 423 per Farwell LJ; The Colonial Sugar Refining Co. Limited v The Attorney-General for the Commonwealth (1912) 15 CLR 182, per Griffith CJ at 189-191 and Barton J at 202-204. 277
other government activities and initiatives. Any reform proposal, therefore, needs to be framed in a manner cognisant of these possible flow-on effects and which minimises those effects.
This is easier said than done. This is largely due to the general uncertainties and complexities of shifting private losses to governmental bodies and quarantining those losses to the offending authority. As Cohen has noted, „[t]he cost may be borne by another department, a bureaucracy independent from the one whose actions are most directly associated with the injury.‟763
The Cohen argument resonates in the taxation context, because of the responsibility of the Commissioner of Taxation for the collection of the revenues applied across the gamut of government departments and initiatives. A reduced net „take‟ by the ATO by virtue of increased liability to taxpayers could quite easily be absorbed through reducing the financial resources available to one or more of those other departments and/or initiatives rather than being quarantined to the Australian Taxation Office. Such an impact would not only have unintended financial ramifications, but might distort or dilute any corrective justice intent in any awards of compensation against the Commissioner. It may also mean the dilution or loss of any positive motivational effects and service delivery improvements envisaged by a particular reform proposal.
It is difficult to see a way around this problem without the political will to ensure that the intent of any reform is confined to the ATO to the fullest extent possible. Of course, the phenomenon described could equally be in operation in the absence of any reform to the current array of taxpayer avenues of relief. Such consequences might result from any imposition of monetary liability on the Commissioner, even under existing avenues of relief.
763 Cohen, above n 753, 647. 278
In essence, these concerns constitute an argument against imposition of liability on the Commissioner in any circumstances, rather than a challenge to law reform in the field. And no one seriously advocates endowing the Commissioner of Taxation with absolute immunity from monetary liability for all of its wrongs. At least a reform proposal, particularly if legislatively driven and clearly drafted and confined, can directly and openly assess any concerns about these possible loss- shifting consequences of imposing liability on the Commissioner. As alluded to above, Mason J noted in Commissioner of State Revenue v Royal Insurance Australia Ltd,764 that „[t]he remedy for any disruption to public finances…lies in the hands of the legislature. It can determine who is to bear the burden of making up any shortfall in public funds.‟765
This leaves only the third issue flagged above - the objective legitimacy of floodgates/indeterminacy concerns. While only occasionally judicially challenged,766 there is little empirical evidence to support the existence of any significant floodgates effect from changes in public authority liability.767 To the contrary, as noted by the UK Law Commission:
It is…well-known in the socio-legal literature that decisions to litigate are not just influenced by the absence or presence of a monetary remedy. There may be an increase in litigation even when there has been no change in the liability regime. The relationship between a liability regime and the propensity to litigate is by no means straightforward.768
764 Above n 486. 765 Ibid, 68. 766 Although the comments of Stuart-Smith LJ in Capital and Counties plc v Hampshire County Council [1997] QB 1004, at 1043 - 1044, are an exception. See also the Australian authorities challenging the existence of any floodgates effect in the context of extension of legal standing in cases of judicial review cited above at n 762. 767 See, for example, the study by Lee into the effect of a number of adverse judicial determinations on local government authorities in the United States which found little evidence of increase in the volume of litigation. Yong Lee, „Civil Liability of State and Local Government: Myth and Reality‟ (1987) 47 Public Administration Review 160. 768 The Law Commission, United Kingdom, above n 587, 144. 279
The UK Law Commission continue by citing evidence from Germany indicating that despite an extensive State liability regime in that country, and a litigious population, costs associated with negligence claims against the State can be described as „modest.‟769
Despite the absence of Australian empirical studies, the Commonwealth Ombudsman has noted that often litigant desire for an acknowledgement of his or her rights or an apology is a significant driver for seeking redress rather than the sole attraction of monetary compensation.770 Further, the introduction of the Taxpayers‟ Charter in Australia does not appear to have resulted in any recorded sustained increase in litigious activity against the Commissioner.771 Both of these facts lend weight to the UK Law Commission proposition that the relationship between litigious activity and increases in public body liability is less than straightforward. However, it is conceded that such evidence falls far short of unequivocal tax-specific Australian empirical evidence.
Accordingly, it is presently impossible to reliably predict the existence and/or extent of any likely floodgates phenomenon which might result from any Australian tax reform proposal. Similarly, it is not possible to entirely dismiss the floodgates / indeterminate liability threat resulting from any such reform. It follows that any reform proposal needs to be prudently framed so as to minimise prospects of floodgates/indeterminacy consequences. This could be achieved through confining the scope of any new or revised avenue of relief and/or through
769 Ibid. 770 See the Commonwealth Ombudsman‟s own motion investigation of Commonwealth arrangements for providing financial redress for maladministration - Commonwealth Ombudsman, above n 150, 17. 771 While it is conceded that the Charter did not purport to create or alter taxpayer rights against the Commissioner, it endeavoured to clarify existing taxpayer rights and created public interest in the performance of the Commissioner of Taxation. This clarification and exposure might well have been expected to create some spike in litigious activity against the Commissioner, assuming a straightforward existence of floodgates effects in the Australian tax context. In fact, however, Commonwealth Ombudsman figures indicate that after a brief initial spike in complaints there has been a steady and continuing drop in complaint figures against the Commissioner since the introduction of the Taxpayers‟ Charter. The Commonwealth Ombudsman reports the latest figures in his 2008 annual report, above n 109, at 3 and 12. 280
appropriate monetary caps on recovery.772 However, as with the other policy concerns examined in this Part, floodgates/indeterminacy concerns should not be determinative of the overall scope and content of any reform proposal. Nor should such concerns outrightly preclude consideration of reform.
772 The options are fully explored in Chapter 7. 281
PART V - CONCLUSIONS
This Chapter has shown that the current array of compensatory avenues of relief notionally available to Australian taxpayers aggrieved by an ATO operational act or omission fail to meet standards of effectiveness assessed through a number of measures of practical utility. Viewed collectively, they also fail the test of „adequacy‟ adopted in this study - a test not coloured by any subjective preconception as to the appropriate balance of private taxpayer and public tax authority interests. Accordingly, there is a strong case for reform to be explored in the balance of this study.
The core public policy challenges to the case for reform were assessed in Part IV. A clear conclusion is possible from this analysis too, despite - and to some extent because of - the inherent vagaries of many of these public policy concerns. It is abundantly clear that core concerns, particularly surrounding indeterminate liability and motivational impacts of reform lack unequivocal evidentiary support. The result is that these concerns, while they are „not to be idly scoffed at‟773 must be acknowledged as lacking in applied empirical support, backed by qualified academic support at best, and as being largely anecdotally derived. Further, they comprise largely unexplored territory in the taxation context.
Accordingly, these policy concerns do not substantially weaken the case for reform. Instead, this analysis suggests that clear and considered reform is to be preferred to any unstated judicial acceptance of these policy concerns in determining taxpayer private law claims against the ATO. Nonetheless, for abundant caution these concerns should have a bearing on the construction of the specific content of any remedy aimed at addressing the ineffectiveness and inadequacies identified in this Chapter. Again, therefore, public policy concerns cannot be divorced from the task of making a case for a specific statutory damages remedy. This is the task taken up in Chapters 6 and 7.
773 Note, above n 194, 970. 282
CHAPTER 6 – REFORM: THE CASE FOR AN AUSTRALIAN NO-FAULT STATUTORY
DAMAGES REMEDY
PART I - INTRODUCTION
It was established in the preceding Chapter that the existing taxpayer compensatory avenues of relief available to taxpayers adversely affected by an ATO operational act or omission are individually ineffective and collectively inadequate. It was also demonstrated that the major public policy justifications for resisting reform to correct this ineffectiveness and inadequacy should not be treated as an absolute bar to reform.
From this starting point, this Chapter takes up two substantial challenges inherent in formulating and implementing specific law reform to produce a more effective and adequate system of taxpayer legal avenues of relief, judged by the measures of effectiveness and adequacy applied in Chapter 5. These challenges are, to some extent, common to any substantial reform proposal to modify and/or clarify the circumstances in which monetary liability might be imposed on any public authority. However, unique additional public policy dimensions to these challenges are raised where the authority concerned is a revenue authority such as the Commissioner of Taxation. It is these tax-specific dimensions which will inform the discussion in this Chapter and provide the basis for its conclusions.
The first specific challenge this Chapter addresses is determining the preferred institutional source of any new/reformed avenue of monetary relief. The key debate is whether reform should be implemented through judge-driven means, through statutory directive or via further non-binding administrative guidelines akin to the Taxpayers‟ Charter. This is a multi-faceted debate taking in questions such as whether a new or enhanced cause of action should be tax-specific or capable of broader application. The relevance of such considerations to the issue of whether a statutory, administrative or judicial approach to reform is to be preferred is discussed.
283
The second issue considered is the basis upon which any new/reformed damages remedy proposes to impose legal liability.774 Specifically, there are valid concerns to be addressed as to whether any liability of the Commissioner to taxpayers should be determined on a common law tortious basis, administrative law basis or, more fundamentally, on a fault or no-fault basis. All these questions are also addressed - in Part III of this Chapter. The ultimate conclusion of Part III is that the preferable course is a new no-fault statutory damages remedy.
The analysis in this Chapter clears the way for formulation and drafting of the specific elements of a new Australian no-fault statutory damages remedy to more adequately and effectively deal with ATO operational act or omission causing taxpayer loss. This task is tackled in Chapter 7. The distinction between Chapter 7 and this Chapter is that in this Chapter the emphasis is on the form of the reform proposal rather than its specific content.
774 Cane identifies both the institutional source dilemma and the basis of liability to pay damages as two important imperatives to be addressed in formulating an extended damages remedy where public authorities are involved. See Cane, above n 126, 489. 284
PART II - THE NATURE OF AN AUSTRALIAN DAMAGES REMEDY FOR ATO ACT OR
OMISSION CAUSING TAXPAYER LOSS: THE INSTITUTIONAL SOURCE DILEMMA
As flagged above, the initial concern to be addressed in reforming the law to redress the inadequacies and ineffectiveness identified in Chapter 5 is whether reform should proceed via legislative instrument, judicial innovation or development of further, non-binding administrative guidelines, akin to the Taxpayers‟ Charter. This choice is a complex one insofar as the choice between a judicial and legislative solution is concerned. Accordingly, much of this Part is dedicated to elaborating and addressing the debate between judicially-driven reform and legislative reform. This is achieved through considering the merits of the two alternatives; first, at an abstract level; second, as vehicles for public authority liability law reform; and finally, as vehicles for reform specifically targeting the ATO. However, prior to engaging in that debate, the option of a non- binding administrative solution can be relatively easily dismissed.
A - Rejection of a Non-Binding Reform Solution
A binding legal solution is desirable because of the nature of the ineffectiveness and inadequacy identified in Chapter 5.775 It will be recalled from Chapter 5 that existing informal administrative avenues of relief were criticised as ineffective on the basis of actual or perceived bias and unreliability. They were also criticised for contributing to systemic inadequacy due to the complexity and inherent uncertainty generated by their discretionary nature. It is difficult to see, therefore, how implementation of a further non-binding avenue of relief could rectify these specific deficiencies. On the contrary, it would actually create further problems.
775 For a comprehensive general discussion about the desirability of a binding approach to taxpayer rights see Bentley, above n 204. 285
As Bennett has noted in the context of discussing the binding nature of the provisions of the United States Taxpayer Bill of Rights, „[a] real right provides protection. A vaguely worded administrative change invites trouble.‟776
The case may be overstated by Bennett, but there is at least a real risk that a non- binding administrative solution will be ineffectual. McClennan notes the concerns of the Commonwealth Ombudsman to this effect raised in the debate as to whether to endow the Australian Taxpayers‟ Charter with binding legislative force. The concerns were to the effect that a charter „couched in nothing but general and aspirational terms may not be worth the paper it‟s written on.‟777
Ineffectuality is a significant problem given the aims of the reforms called for in this study. This is because these reforms in part aim to provide a clear directive to the judiciary as to the appropriate standards of operational behaviour to be applied in determining taxpayer claims against the Commissioner for compensation. A non-binding administrative reform would have little force as such a tool. Similarly, non-binding administrative guidelines are unlikely to influence the judiciary to correct the systemic inadequacies stemming from the current judicial approach to taxpayer compensatory claims against the Commissioner identified in Chapter 5.
776 Bob Bennett, „The Myth of Taxpayer Rights‟ (1990) 47 Tax Notes 611, 611. Lederman too has lamented the non-binding nature of some of the provisions of the United States Taxpayer Bill of Rights observing that: „TBOR 2000, if enacted, would increase the total number of provisions in the bills of rights to more than 150. However, many of the so-called “rights” are duties (imposed on the IRS) lacking enforcement mechanisms … [A]t some point, multiple, computer generated notices do not provide taxpayer rights, they simply impose burdens on the IRS, and therefore, costs to all taxpayers.‟ See Leandra Lederman, „Of Taxpayer Rights, Wrongs, and a Proposed Remedy‟ (2000) 87 Tax Notes 1133, 1135-1136. 777 McClennan, above n 530, 27, citing Philippa Smith, „Service Charters: The Latest Fad or Last Hope‟ [1997] Administrative Review 28. McClennan has also noted the views of the professional bodies at the time expressing strong support for the Taxpayers‟ Charter having legislative force. Anything less was considered as lacking in credibility and practical importance. See, for instance, the comments of the then President of the Taxation Institute of Australia, David Russell QC, in Russell, above n 530; and the views expressed in Taxation Institute of Australia, „Taxpayers‟ Bill of Rights‟ (1993) 28 Taxation in Australia 50. 286
Bentley has confirmed the limited scope of judicial influence of non-binding administrative directives, again in the context of discussing the Taxpayers‟ Charter:
A purely administrative charter is limited in its scope in that it can only apply to the executive arm of government which administers the tax system. An administrative charter cannot bind either the judiciary in its decision-making role, or the legislature in its formulation of the tax law.778
The comments of Grove J in Harris v DCT779 with respect to the weight to be afforded to the Taxpayers‟ Charter in dismissing the plaintiff‟s negligence claim against the Commissioner in that case are consistent with Bentley‟s propositions. His Honour, in rejecting the argument that the Charter obligations could form the basis for the existence of a tortious duty, notes:
Such a duty is not established by reference to proclamations such as the Taxpayers Charter which express aims of treating citizens from whom tax is to be levied, fairly and reasonably. Even if there was a departure from some standard specified in such a document, it could not vest a private right to recover tort damages in a person affected by the departure.780
This view confirms the stark contrast between non-binding administrative commitments and legislatively prescribed or judicially pronounced duties or powers. The latter are clearly capable of giving rise to tortious duties in some instances.781 Cases involving, for example, the tort of breach of statutory duty, are built upon precisely such allegations.782
778 Bentley, above n 95, 101. 779 Above n 181. 780 Ibid, 409. 781 See the comments of Mason J in Sutherland Shire Council v Heyman, above n 36, at 458, where His Honour observes: „It is now well settled that a public authority may be subject to a common law duty of care when it exercises a statutory power or performs a statutory duty.‟ 782 It will be recalled from the discussion of this tort in Part IV of Chapter 3 that a primary concern in breach of statutory duty cases is the search for any statutory intent to impose private law tortious obligations on a statutory functionary carrying out public law duties and/or exercising powers imposed by the relevant statute. 287
Any future non-binding administrative statement of operational standards to be expected of the Commissioner is likely to encounter similar judicial treatment to that afforded to the Taxpayers‟ Charter by Grove J in Harris. This factor too, then, clearly militates against the pursuit of a non-binding administrative solution. In short, such a solution is likely to be ineffective and inadequate both in its own right and as an influence to sway judicial opinion to correct ineffectiveness and inadequacy in the application of existing remedies.
B - Judicial or Legislative Law Reform: The General Debate
As noted from the outset, the real complexity of the institutional source dilemma stems from the difficulty in choosing between a judicial or legislative path to reform. The complexity of this choice is readily apparent, even at an abstract level. This is because there are a number of well-ventilated general challenges to the desirability of reform of our law both through judicial determination and through legislative instrument. For example, judicially-derived law reform has been labelled as lacking in „democratic legitimacy.‟783 The retrospectivity of judicial decisions784 and the inability of court processes to accommodate broader social considerations and consequences of reform initiatives are also common criticisms. The related constraints of determinations being confined to the specific circumstances of the case at hand785 as well as the general constraints of our
783 Davies, above n 736, 279. The argument is that law-making power should not be conferred upon an unelected, unrepresentative and, consequently, unaccountable body such as the judiciary. Of course the realities of representative democracy, with influences including executive dominance, lobby groups and the role of pre-selection and other party-political issues may render the contrast between legislative and judicial accountability less stark than might be expected. 784 This characteristic has been viewed as potentially contrary to fairness and the Rule of Law. For a good example of discussion of the argument that judicial law-making undermines the Rule of Law, see Trevor Allan, „Legislative Supremacy and the Rule of Law: Democracy and Constitutionalism‟ (1985) 44 Cambridge Law Journal 111. 785 Writers such as McAuslan see practical challenges for courts in this respect given that courts are positioned to view all disputes as disputes between individuals rather than taking into account broader collective ramifications. See Patrick McAuslan, „Administrative Law, Collective Consumption and Judicial Policy‟ (1983) 46 Modern Law Review 1, 11. 288
adversarial system of justice786 are also arguments which have been raised as factors militating against the desirability of judge-driven law reform.787
Sir Anthony Mason aptly summarises these concerns in SGIC v Trigwell and Ors:788
The Courts‟ facilities, techniques and procedures are … not adapted to legislative functions or to law reform activities. The Court does not and cannot carry out investigations or enquiries with a view to ascertaining whether particular common law rules are working well, whether they are adjusted to the needs of the community and whether they command popular assent. Nor can the court call for and examine submissions from groups and individuals who may be vitally interested in the making of changes to the law. In short, the Court cannot and does not engage in the wide ranging enquiries and assessments that are made by governments and law reform agencies as a desirable, if not essential, preliminary to the enactment of legislation by an elected legislator.789
Most of these procedural and policy-based challenges to the effectiveness and desirability of judicial law-making can readily be contrasted with the equally oft- cited criticisms of Parliamentary law-making. In particular, the dominance by the Executive of the Parliamentary law-making agenda is often raised to counter the challenges to judicial law reform effectiveness.790 As Brennan J observed in Dietrich v The Queen:791
786 Critics such as Davies have pointed out that even the requirement to deal with matters in an impartial and unbiased way is, of itself, a constraint which rules out targeted law reform efforts aimed at addressing a particular mischief through introducing an element of partiality or bias reflective of community demands. See Davies, above n 736, 276. 787 See Davies, ibid, 276. For an alternative list of the range of challenges and constraints facing judges in judicial decision-making that render the process an imprecise and largely unsatisfactory foundation for law-making see the comments of Posner in Richard Posner, „The Jurisprudence of Skepticism‟ (1988) 86 Michigan Law Review 827, especially at 872-873. 788 (1979-80) 142 CLR 617. 789 Ibid, 633-634. Undoubtedly, the limited resources available to our judiciary are relevant to the conclusions of Mason J. Spigelman CJ directly referred to the relevance of limited judicial resources to the question of whether a court should attempt to hear certain claims in James Hardie Industries Pty Ltd v Grigor (1998) 45 NSWLR 20, 40-41. 790 For discussion, see Mauro Cappelletti, „The Lawmaking Power of the Judge and its Limits‟ (1981) 8 Monash Law Review 15; and Cheryl Saunders, „Governments, Legislatures and Courts: Striking a Balance‟ in Manfred Ellinghaus, Adrian Bradbrook and Anthony Duggan (eds), The 289
In modern times the function of the courts in developing the common law has been freely acknowledged. The reluctance of the courts in earlier times to acknowledge that function was due in part to the theory that it was the exclusive function of the legislature to keep the law in a serviceable state. But legislatures have disappointed the theorists and the courts have been left with a substantial part of the responsibility for keeping the law in a serviceable state…792
Similarly, political and lobby group pressures and compromises which inform and sometimes delay Parliamentary legislative processes have often been raised to counter the challenges to the effectiveness of judicial law reform and to justify the judicial law-making role. In respect of lobby group influence on the legislative process Kirby J has extra-judicially observed:
The lobby groups are also of obvious importance…If the external lobby is powerful, noisy and determined, it can often have the effect of frightening off Ministers and officials. Often, where there is a lot of noise, the easy thing is to do nothing.793
The relative immunity of the judiciary from political and lobby group influence and pressure is often specifically noted by proponents of judicial involvement in law reform.794 The argument is often put in terms of the legislative law-making
Emergence of Australian Law (1989) 296. Saunders has also subsequently observed the importance of judicial law-making in terms of the concern that „the assumptions of majoritarian democracy have been eroded from both inside and out without the full ramifications of the change being, as yet, fully explored and understood.‟ See Cheryl Saunders, „The Mason Court in Context‟ in C Saunders (ed), Courts of Final Jurisdiction: The Mason Court in Australia (1996) 2, 8. In the United States context too, Stewart and Sunstein have expressed this concern as a weakness in „the link between electoral representation and administrative decision.‟ See Richard Stewart and Cass Sunstein, „Public Programs and Private Rights‟ (1982) 95 Harvard Law Review 1195, 1200. 791 (1992) 177 CLR 292. 792 Ibid, 319. 793 Michael Kirby, „The Politics of Achieving Law Reform‟ (1988) 11 Adelaide Law Review 315, 324. In this article, Justice Kirby also identifies a number of additional inhibitors to the legislative law-making process including the personality of the Attorney-General or other Minister having the relevant portfolio responsibility, the length of time of a supportive Minister in Government and the enthusiasm or resistance of the relevant bureaucracies. 794 However, writers such as Posner have pointed out the political nature of judicial authority, so even this counter-argument is capable of ready qualification and/or rebuttal: Posner has noted: „Decisions are authoritative because they emanate from a politically authorised source rather than 290
process being one of „compromise and expediency‟ in contrast to the considered and consistent judicial law-making process. For example, Sir Anthony Mason has extra-judicially noted:
Judicial reasoning sets great store by the traditions of consistency, coherence and continuity in the orderly development of the law…Legislative decision-making is unconstrained by limitations of this kind. It may extend, and often does, to compromise and expediency.795
To complicate matters, some of these generic characteristics of the two alternative institutional mechanisms for bringing about legal change can be viewed either as positives or negatives, depending on the personal perspective of the commentator. For instance, a frequently cited procedural competency concern with judicial law- making is that „all judgments are, once delivered, exposed to criticism, and possibly overruling, by courts deciding subsequent cases…and all judgments, except those in constitutional cases, may be overridden by legislation.‟796 This same characteristic could equally be touted as a positive by virtue of the flexibility, adaptability and responsiveness to changing social conditions that it facilitates.797
The relative susceptibility to political and community lobbying of each institutional source could similarly be claimed as a positive or negative contributor to law reform effectiveness, depending on the philosophical stance of the commentator to the question of whether such lobbying is, of itself, a positive or negative influence on the development of sound law reform initiatives. At this
because they are agreed to be correct by persons in whom the community reposes an absolute epistemic trust. The political connotations of the word “authoritative” are apt; the word evokes power and submission, not truth and conviction.‟ See Posner, above n 787, 842-843. 795 Sir Anthony Mason, „Legislative and Judicial Law-Making: Can we locate an Identifiable Boundary? (2003) 24 Adelaide Law Review 15, 22. For similar comments see Geoffrey Lindell, „“Judge & Co”: Judicial Law-Making and the Mason Court‟ (1998) 5 Agenda 83, 92-93. 796 Davies, above n 736, 276. 797 Jones has warned that, in contrast to the fluidity of judicially-developed legal principles, statute can lead to certainty and clarity at the price of sufficient flexibility to take into account future development. See Timothy Jones, „Judicial Review and Codification‟ (2000) 20 Legal Studies 517, 533. 291
abstract level, therefore, the institutional source dilemma is impossible to neatly resolve.
C - Judicial or Legislative Law Reform: Public Body Liability Law Reform
Even moving the argument away from the entirely abstract and considering the question of whether legislative or judicial reform is preferable where issues of public body liability to citizens are concerned, there is no consensus. For example, the UK Law Commission, in its recent review of monetary remedies in public law, supports a statutory approach rather than a judicial solution to any perceived inadequacy of compensatory remedies in public law.
The task of defining the proper extent of public bodies‟ monetary liability for acts performed in the public sphere raises issues of fundamental constitutional importance concerning the relationship between citizen and State and the correct balance of public and private interests. Parliament should be involved.798
In Canada, too, there has been law reform body support for statutory involvement in preference to judicially developed reform in this area. The Law Reform Commission of Canada, while acknowledging judicial efforts to deal with the issue on a case by case basis in that country, concluded that;
…it is best to avoid at the outset an overly passive approach that prejudges the direction in which judicial supervision will move. Assuming that matters continue on their present course, there will not be any substantial reassessment of existing privileges until after a long and laborious process. Not only does the time needed for such a process seem at odds with the urgency of reform in this area,
798 The Law Commission, Public Law Team, above n 706, 1. Similar views have also been expressed by Ganz: „Not only in times of emergency but wherever lawful public action causes private hurt it is most desirable that Parliament should, if so advised, lay down not only the extent of compensation but the section of the community which should bear the burden. The common law has not readily available the machinery for this purpose.‟ See Ganz, above n 156, 99. 292
but there is also the danger that it will eventually lead to piecemeal solutions instead of overall reform.799
In contrast, in New Zealand, only limited support for statutory reform was provided by the New Zealand Public and Administrative Law Committee which examined the issue of recovery of damages from public authorities as long ago as 1980.800 The majority view of the Committee was that any extension of public law monetary liability should be left to the courts.801
There has been no singular comprehensive review of the issue in Australia.802 Nevertheless, where law reform and Parliamentary committees have examined various aspects of the question of statutory authority liability to citizens, legislative reform has uniformly been the recommendation.803 Perhaps the most
799 Canada Law Reform Commission, The Legal Status of the Federal Administration, Working Paper No 40 (1985), 59. For a detailed academic discussion of the content of this Commission‟s report see David Cohen, „Thinking About the State: Law Reform and the Crown in Canada‟ (1986) 24 Osgoode Hall Law Journal 379. 800 New Zealand Public and Administrative Law Committee, Damages in Administrative Law, Report No 14 (1980). Read credits this report as being the first official report on the issue in the Commonwealth. See James Read, „Damages in Administrative Law‟ (1988) 14 Commonwealth Law Bulletin 428, 439-440. 801 For further discussion of the findings of the New Zealand Public and Administrative Law Committee see Campbell, above n 635, 18. See also the discussion in James Read, ibid, 440, in which Read summarises various options canvassed and the findings of the New Zealand Public and Administrative Law Committee. 802 Although much has been said in the context of answering the question of whether fundamental rights in this country should be entrenched in a legislative instrument or left to judicial supervision. The majority consensus appears to favour legislative efforts to protect rights through a Charter or Bill of Rights over leaving the question of protection of rights to the judiciary. The comments of Williams are typical: „Any attempt to introduce an Australian Bill of Rights should not be based upon judicial innovation. Instead it should be built upon the commitment and participation of the Australian people and their elected representatives. This means that, at least initially, any Bill of Rights should be in the form of an Act of Parliament.‟ See, George Williams, A Bill of Rights for Australia (2000), 13. For similar views see George Williams, The Case For An Australian Bill Of Rights (2004); Brian Galligan, Rainer Knopff and John Uhr, „Australian Federalism and the Debate over a Bill of Rights‟ (1990) 20 Publius: The Journal of Federalism 53; and Hilary Charlesworth, „The Australian Reluctance About Rights‟ (1993) 31 Osgoode Hall Law Journal 195. Cf, Peter Durack and Ronald Wilson, „Do We Need a New Constitution for the Commonwealth?‟ (1967) 41 Australian Law Journal 231; and Tom Campbell, Jeffrey Goldsworth and Adrienne Stone (eds), Protecting Rights Without a Bill of Rights (2006). 803 See, for example, Law Reform Committee of South Australia, Proceedings By and Against the Crown, Report No 104 (1987); and Reform Commission of New South Wales, Proceedings by and Against the Crown, Report No 24 (1976). It is conceded that these recommendations may have been made in decades in which legislative reform was fashionable. There is no guarantee that this trend will continue in future. 293
relevant example of this preference for statutory treatment of the issue is the review into Crown immunity by the Senate Standing Committee on Legal and Constitutional Affairs in 1992. The Committee recommended statutory clarification and reform of the common law doctrine of the shield of the Crown.804 Similarly, the Justice Ipp chaired Panel of Eminent Persons, in the final report of their review of the law of negligence in 2002, also recommended statutory reform of tortious liability of public authorities.805 The recommendations in this report ultimately resulted in the enactment of the Civil Liability Acts.806
The general - albeit far from uniform - preference for statutory intervention on matters of public body liability to citizens in the reviews referred to above is broadly instructive. However, there are two obvious and critical limitations on the usefulness of these reports insofar as this study is concerned. First, there are no studies which are tax-specific. Second, none of the terms of reference of any of these reviews is confined to the imposition of liability in instances of operational act or omission. Accordingly, any reliable conclusion, positive or negative, about the desirability of a statutory or judicial law reform response is difficult to directly apply to this study, even from this otherwise more directly relevant discourse. Fortunately, a clear conclusion in favour of legislative reform is possible, even leaving the broader debate unresolved. This is possible through examination of the issue from a narrower, tax-specific, perspective.
804 See Senate Standing Committee on Legal and Constitutional Affairs, Commonwealth of Australia, The Doctrine of the Shield of the Crown (1992). 805 Although some issues such as certain aspects of medical practitioner responsibilities to inform patients of medical risks, were recommended to be left to the development of the common law. See Panel of Eminent Persons (Chair: D. Ipp), above n 661, 32-33 and 34-38. 806 See Panel of Eminent Persons (Chair: D. Ipp), ibid. It should be noted, though, that those Acts do not adopt all of the Panel‟s recommendations. For example, it appears that none of the States and Territories adopted recommendations 10 and 16 regarding liability of not for profit organisations. For discussion see Desmond Butler, „A Comparison of the Adoption of the Ipp Report Reforms and Other Personal Injuries Liability Reforms‟ (2005) 13 Torts Law Journal 203. 294
D - Judicial or Legislative Law Reform: Tax-Specific Law Reform
The case for preferring legislative reform over judicially-initiated legal change emerges from the fact that the required reforms should be tax-specific. More precisely, it is advisable to tailor any reform to regulate only the activities of the ATO. There are a number of good reasons why tax-specific reforms are preferable to more general measures in order to achieve the objectives of the reforms contemplated by this study.
The first reason is the fact that the aim is to regulate operational acts or omissions. While there may well be similarities between the ATO and other public authorities at a high policy level of internal decision-making, it is not necessarily so at an operational level. It is easy to illustrate the point through comparing the ATO with, for example, a public rescue authority. The highest level policy decisions of both bodies are likely to involve dealing with many similar strategic resource allocation, budgetary constraint and political pressure concerns. While there may be questions of desirability of doing so, conceivably it would be possible to devise uniform laws addressing how different authorities deal with these similar policy concerns.
However, at the level of interface with the public, the life and death operational activities of a rescue body are clearly worlds away from the financial and economic tax administration activities of the ATO. Further, to apply, for example, the same standard of administrative performance to emergency response time and procedures of a rescue authority as are applied to ATO tax return processing activities or vice versa would be patently inappropriate. Authority-specific reform removes the risk of such inappropriate outcomes. Accordingly, tax authority- specific reform is to be preferred over generic reform when that reform is specifically aimed at an operational level.807
807 Authority-specific reform also has the attraction of avoiding the pitfalls of broad-based remedies which were discussed by the New Zealand Public and Administrative Law Committee in their 1980 report, in the context of dismissing the option of a broad based legislative remedy 295
Accepting the need for tax authority-specific reform, a legislative source for the reform initiative is clearly preferable. Legislative reform can more readily be crafted in the required precise and technically specific way than reform developed through judicial consideration of disputes. The latter is necessarily restricted by the factual constraints of the cases that bring the issue to court.808 It is relatively easy to capture a vast array of operational activities in a few carefully crafted legislative paragraphs. It might take a hundred cases to generate a similarly comprehensive coverage of the subject matter.809 In any event, it is almost inconceivable that judges would develop, for example, tortious or equitable principles aimed at catering specifically for ATO operational activities. Far more likely would be the development of generic principles with broad-based application to a range of public authorities, of the type cautioned against by the New Zealand Public and Administrative Law Committee.810
A second major justification for preferring legislatively-driven reform over judicial reform where revenue authority liability reform proposals of the type envisaged in this study are concerned is the particularly pressing need to avoid creating further complexity in the tax field. The role of the court system and, in
against public authorities in that country. The Committee observed that such broad-based reform initiatives „would fall to be applied by the courts to a bewildering variety of fact situations‟ and, in so doing, might „create as much injustice to defendants as it remedies for plaintiffs.‟ See New Zealand Public and Administrative Law Committee, above n 800, 31. 808 In contrast, Cohen points to a number of important broader issues which department specific legislative reform is capable of accommodating as part of the reform process: „…[A]n examination of the way in which specific departments and programs generate losses and an evaluation of the implications of providing compensation in some or all of these cases…information about the fiscal organisation of the relevant bureaucracy…the existing losses generated by the program or department…the implications of various adjustment policies on individual bureaucratic and institutional behaviour…‟ Cohen, above n 753, 656-657. 809 The concerns of the Canadian Law Reform Commission noted above at n 799 with respect to the „long and laborious‟ process of judicially-driven law reform are consistent with this argument. The New South Wales Law Commission, in explaining their role has also observed that judicial law reform is necessarily „piecemeal‟ and only systematic „over a long period of time.‟ See Law Reform Commission of New South Wales, „Why Law Reform Commissions are Important‟ (2009) Lawlink New South Wales,
particular, the role of judge-made law, in encouraging tax complexity has been highlighted by Eustice. Eustice observes that „[t]he courts are still another powerful force for complexity…judge-made law, while probably a necessary part of our legal system, does add considerably to its complexity and uncertainty.‟811 Similarly, Griffith asserts that the judiciary „is more likely than not to introduce inconsistency and injustice into complex areas of administration.‟812 Tax would clearly qualify as a complex area of administration.
Of course, the Eustice and Griffith views cannot be accepted without challenge.813 There is also widespread recognition of the complexity brought about by legislative tax measures.814 However, what makes the avoidance of complexity a compelling argument for legislative reform in preference to judicially-generated law reform in this particular case is evident from the analysis of the systemic inadequacies in Chapter 5. In Part III of Chapter 5 the complexity and uncertainty generated specifically by the unexplained apparent judicial deviation from well- established general principles when dealing with cases involving the Commissioner of Taxation was identified as a significant measure of inadequacy
811 Eustice, above n 691, 15-16. Eustice does differentiate between the complexity generated by the „strict constructionist‟ judges as against the „spiritualist‟ judges, concluding that the literalist constructionist judges do less damage to the system in terms of generating complexity than the spiritualists who seek out the spirit of the law. However, there is general Australian support for similar views. See, for example, Peter Hogg, Liability of the Crown (2nd ed, 1989), 243. Hogg explains the complexity of public authority liability on the fact that „the courts…have engrafted many exceptions onto the basic rule.‟ This would certainly appear to hold true in the tax context as the analysis in Chapter 5 highlighting deviation from general common law rules in claims against the Commissioner of Taxation has shown. 812 J A G Griffith, „Constitutional and Administrative Law‟ in Peter Archer and Andrew Martin (eds), More Reform Now: A Collection of Essays on Law Reform (1983), 57. 813 In the case of Eustice, in particular, it should be borne in mind that Eustice is writing of the United States tax experience which may not translate neatly to the Australian experience. Factors such as the stricter separation of powers in the United States and the absence of Acts Interpretation Acts in that country are important factors influencing and shaping the role and scope of judicial law-making through the application of the doctrine of precedent in the United States. For a comprehensive discussion of the role and operation of precedent in the United States see Harold Spaeth and Jeffrey Segal, Majority Rule or Minority Will: Adherence to Precedent in the United States Supreme Court (2001). 814 One only needs to point to the substantial legislative efforts and resources directed to statutory simplification through the Tax Law Improvement Project spawned from the 1993 Joint Committee on Public Accounts Report, above n 516. For a good discussion of legislative tax complexity and the efforts made to address the issue both in Australia through the Tax Law Improvement Project and in the United Kingdom see Simon James and Ian Wallschutzky, „Tax Law Improvement in Australia and the UK: The Need for a Strategy for Simplification‟ (1997) 18 Fiscal Studies 445. 297
of the available avenues of taxpayer compensatory relief. As such, if a key motivation for proposing reform is to eliminate this identified pre-existing judicially-generated complexity and uncertainty, it again seems exceedingly unlikely that the judiciary can be relied upon to do so without legislative direction.815
Caution will obviously need to be taken to ensure that elimination of complexity does not come at the expense of flexibility and adaptability that might be relevant to the long term effectiveness and adequacy of the new remedy.816 Flexibility and adaptability thrive more readily in an indeterminate legal environment. As Schuck points out „[i]ndeterminate rules, processes, and institutions are usually open- textured, flexible, multi-factored, and fluid.‟817 In this respect, getting the balance right will undoubtedly turn on the specific drafting of a statutory damages remedy. This task is the subject of Chapter 7. Accordingly, the question of avoidance of complexity will be revisited in that context.
A third factor favouring legislatively-derived reform in this instance is the centrality of public policy concerns in the tax field. Legislative involvement is preferable in order to effectively deal with those policy concerns. As discussed in Part IV of Chapter 5, there are numerous potential public policy ramifications of imposing liability on the Commissioner of Taxation. As also observed in Chapter 5, the extent to which most of these public policy concerns are valid is unclear
815 Particularly if we accept the empirical evidence presented by Davies from a survey of cases decided in 1999 from which he concludes that the High Court of Australia presently produces far fewer decisions with a clear ratio decidendi than the House of Lords or the Supreme Court of the United States (59% versus 80% and 95% respectively). See Davies, above n 89. 816 This is a particular concern in fast-moving fields such as legal regulation of new technologies. In this context, Moses asserts that the flexibility of common law is preferable to legislative development. See Moses, above n 809, especially at 403-405. However, Gaudron and McHugh JJ discuss the difficulties inherent in the judicial process of law making in such fields in Breen v Williams (1996) 186 CLR 71. Their Honours observe, at 115, that: „From time to time it is necessary for the common law courts to reformulate existing legal rules and principles to take account of changing social conditions…But such steps can be taken only when it can be seen that the “new” rule or principle that has been created has been derived logically or analogically from other legal principles, rules and institutions.‟ 817 Schuck, above n 689, 4. However, Schuck goes on to point out the negatives associated with this indeterminacy, asserting that „[t]urning on diverse mixtures of fact and policy, indeterminate rules tend to be costly to apply and their outcomes are often hard to predict.‟ 298
and untested in the taxation context. It is clear, though, that courts have traditionally taken the high ground in relation to some of these concerns in cases involving the Commissioner of Taxation. For example, courts presently continue to base their decisions in private law claims against the Commissioner on an unstated legislative intent in our tax legislation to deny private law relief to taxpayers aggrieved by ATO action or inaction.818 It is difficult to see how any reform in the shape of extended judicial avenues of relief would change this situation without some form of legislative guidance.819
This argument that it is not possible to deal with public policy issues properly without legislative involvement has some overseas judicial support. It has been argued that where there are substantial and difficult policy concerns associated with any proposed extension of monetary liability of a revenue authority, legislative involvement is not only desirable but inevitable. Although commenting on the English legal system, the observations of Sedley LJ in R v Commissioners of Customs and Excise; Ex parte F & I Services Ltd820 seem apt. His Lordship points out in that case that given the immense policy implications of extension of damages liability in the administrative law context, it may well be that „a legal entitlement to them cannot now come into being without legislation.‟821
Even if judicial reform was to be pursued, at a minimum, judges would need to be endowed with a number of new powers in order to adequately address the public
818 The comments to this effect of Grove J in Harris (above n 181) and Young CJ in Lucas (above n 209), discussed in Part III of Chapter 4 will be recalled. This is notwithstanding the correctness of views such as those expressed by Davies that: „…it is now well established that unless the legislature makes unmistakably clear (through the use of unambiguous language) its intention to do so, courts will not construe a statutory provision as modifying or abrogating a fundamental common law principle or right…‟ See Davies, above n 736, 285. 819 As Dworkin has observed, legislative intervention is necessary where „a real problem exists that the common law is demonstrably incapable of dealing with.‟ See Ronald Dworkin, Limits: The Role of the Law in Bioethical Decision Making (1996), 169-170. 820 [2001] EWCA Civ 762. 821 Ibid, 781. His Lordship was discussing the situation in the United Kingdom, where despite the availability of damages as a remedy in some judicial review cases, the judicial application of a damages remedy in the vast majority of judicial review cases raising issues falling short of misfeasance in public office seems unlikely without legislative direction. There are parallels between the comments of Sedley LJ and the comments of Gaudron and McHugh JJ in Breen v Williams reproduced above at n 816. The High Court judges clearly hint at the desirability of some form of legislative guidance for the process of reformulation of existing legal rules by our courts. 299
policy issues. These powers would be required to allow judges to refer policy questions to appropriate forums, possibly outside of the adversarial court environment. Alternatively, there may be a need to adopt new mechanisms or changes to the court process to better deal with policy issues in the courtroom.
Davies points to four possible judicial approaches for dealing with public policy issues:
The first is for the court to refer issues of this nature to its own research facility for investigation and reporting back to the court…A second is for the court to allow persons or representative groups either to intervene (as a party) or to appear as amica curiae in the dispute….A third possibility, not commonly employed in Australia, is for the court to invite one or more of the parties to the dispute to submit what is known in the United States as a “Brandeis Brief”, dealing with the broader social and economic matters relevant to the case; and a fourth is for the court to be given the power to appoint someone to inquire into such questions. No such powers presently exist for this purpose in Australia...822
Empowering and encouraging judges to deal with public policy through such approaches is a clear, albeit unlikely, possibility. However, it seems highly inefficient to deal with public policy concerns on a piecemeal, case-by-case basis. Neither taxpayers nor the Commissioner are likely to benefit from lengthy delays and additional expense associated with the expansion of court proceedings to include investigations of difficult and nebulous public policy considerations. Far preferable would be for there to be examination of these concerns on a once-and- for-all basis as part of the process of formulating an appropriate statutory response to the inadequacies and ineffectiveness of the current array of taxpayer avenues of relief. The courts could then be left with the more judicially familiar task of adjudicating discrete factual and legal disputes between the taxpayer and the Commissioner according to the usual evidentiary rules.823
822 Davies, above n 736, 284. 823 Although, as has been pointed out by the UK Law Reform Commission, courts are not entirely unfamiliar with difficult public policy issues and developing coherent principles for dealing with 300
A final related pertinent policy argument favouring legislative over judicial means to bring about the reforms advocated in this study is that as the resource implications of proposed reforms become larger and more socially significant, there is a greater importance in ensuring the legislature drives that change. As Cane notes:
…[The more extensive governmental damages liability becomes, the more significant its implications for public spending. Since the prime responsibility for public spending rests with the executive and legislative branches, they have an important role to play in deciding the scope of the damages liability of government.824
Given the flow-on resource ramifications for government activity outside of the tax administration function which might result from imposing significant liability on the Commissioner of Taxation, this argument has particular force in the tax context. As noted in part IV of Chapter 5, these knock-on financial and resource implications of imposing liability on revenue authorities such as the Commissioner of Taxation are powerful social policy arguments for resisting change altogether. Accordingly, it is best to address this argument with the sanction of the legislature.
None of this means that there should be complete disregard for the existing legal principles for imposing liability on public authorities in developing the tax- specific reforms called for in this study. It would be a mistake to proceed down such a path, particularly in the tax context. Writers such as Craig warn that department-specific reforms should only proceed after considering the broader impact such reforms might have on the system more generally:
those issues. The Commission observed that „it can be argued that we should put our faith in the courts to develop fair and rational principles. After all, it was the courts that developed the principles of judicial review.‟ See UK Law Commission, Public Law Team, above n 587, 82-83. 824 Cane, above n 126, 491. 301
To concentrate on specific areas within administrative law is justifiable given the differing considerations that can affect areas as diverse as planning and police powers. However the interconnections must not be lost sight of and we are in danger of doing this if reform is carried out on a wholly piecemeal basis without regard to the effects that reform in one area would have on another.825
The concerns raised by Craig are potentially very real in the tax context. Again, the possible wider ramifications on a range of broader governmental initiatives which are funded by the revenue collected by the ATO of imposing liability on the Commissioner of Taxation must be considered.826 Arguably, though, a more direct and comprehensive consideration of these concerns is possible as part of the process of drafting a specific statutory avenue of relief than in the incremental evolution of a department-specific avenue of relief through judicial activism.
______
In light of the numerous arguments in favour of legislative reform, the case for a statutory approach to deal with the particular reforms called for in this study is compelling. However, there can be no suggestion that legislative reform is the perfect solution. General objections to legislative law reform processes827 aside, there is a significant further relevant concern with a statutory approach which should be borne in mind. This is the argument that opting for a statutory remedy might result in judges being reluctant to expand existing avenues of relief in difficult cases. This would offset the effect of any expansion or clarification in the availability of relief to aggrieved plaintiffs which might otherwise result from the legislative change.828 This is a significant concern in proposals for reform of the
825 Paul Craig, „Compensation in Public Law‟ (1980) 96 Law Quarterly Review 413, 454. 826 This possibility was noted in Part IV(D) of Chapter 5. 827 The general challenges to legislative law reform identified in (B) above such as dominance of the executive, susceptibility to lobby group pressure and the general tendency toward compromise and expediency in legislative reform initiatives are all relevant again here. 828 See the discussion and rejection of this argument by Roots, above n 143, 70. Jones also moots the argument and asserts that as a result of judicial decision „a facilitative statute can become a restrictive one.‟ Timothy Jones, „Judicial Review and Codification‟ above n 797, 519. 302
type envisaged in this study which aim to complement and enhance existing avenues of relief rather than replace them.
However, in the field of taxpayer rights to monetary compensation from the ATO the argument is unlikely to stand up to scrutiny. It was observed in Chapter 5 that there is already an extreme reluctance by the judiciary to extend the availability of monetary relief from the Commissioner to taxpayers in all but the rarest of circumstances. Australian courts have largely relied on the potential policy conflict with an un-stated legislative intent in Australian tax legislation to generally deny the availability of monetary relief to taxpayers. Accordingly, the statutory enactment of a monetary remedy, in addition to directly addressing the inadequacy identified in Chapter 5 stemming from this judicial deference to unstated legislative intent, may also serve to embolden judges to extend relief to taxpayers. They could do so knowing the express intent of the legislature.
303
PART III - THE NATURE OF AN AUSTRALIAN DAMAGES REMEDY FOR ATO
OPERATIONAL ACT OR OMISSION CAUSING TAXPAYER LOSS: THE BASIS OF
LIABILITY TO PAY DAMAGES
In Part II it was concluded that a statutory avenue of relief is preferable to judicially developed law reform. However, this still leaves a number of important questions surrounding the nature of the proposed reform unresolved. The first question is whether the proposed statutory damages remedy should incorporate private law or administrative law measures of duties and standards of care, reasonableness and liability. Alternatively, there is the option of a completely new and independent statutory solution, fettered neither by private law or administrative law shortcomings. This raises a related question of whether the cause of action should be available on a fault or no-fault liability basis. All of these questions need to be resolved before attention can shift to the formulation of an appropriate statutory cause of action.
A - A Private Law or Administrative Law Solution?
One of the decisions of primary importance in considering any new statutory damages remedy is whether to adopt administrative or private law standards and principles of liability. There has been much academic discussion of this issue in the context of the best approach to catering for monetary liability of public bodies generally. Much of the debate specifically concerns whether a tortious approach should be preferred over an administrative law approach. Accordingly, consideration of the issue here is predominantly couched in terms of the tort versus administrative law trade-off.829
829 There is no discussion of a restitutionary approach. The main reason for this is because, as discussed in Chapter 2, restitution is not the same as compensation. While the distinction may not be of consequence in many cases involving purely monetary losses, the utility of a compensatory remedy which does not technically aim for full compensation but only for restitution would appear limited. See further the discussion in Part II of Chapter 2 and Part II(C) of Chapter 3 on the distinction between compensation and restitution. 304
There are clearly a number of advantages and drawbacks associated with both options. Similar to the institutional source dilemma considered above, it is difficult to pick a clear winner from any abstract discussion of the merits of the two alternatives, devoid of tax-specific considerations. However such an abstract discussion does serve as a useful starting point. Accordingly, the following discussion begins by examining the general challenges and merits of a tortious approach to public authority monetary liability before turning to the administrative law attractions and shortcomings.
Tortious relief is best capable of providing a private law avenue of relief in an array of operational circumstances. As discussed in Chapter 3, tort is capable of broadest application in instances of operational act or omission causing taxpayer loss and is well-suited for the provision of compensatory relief. Notwithstanding, some are skeptical about the adoption of a tortious approach to the recovery of monetary compensation from public authorities such as the ATO.
Cohen is typical of a number of authors in pointing out the fundamental philosophical challenge to the sustainability of tortious mechanisms for determining public body liability:
The choices we face in responding to government-generated losses represent enormously difficult political choices involving competing claims to public and private resources. Those questions cannot be answered by turning to a system designed to define relations between individuals, and that is precisely what tort law represents.830
Similarly, writing in the English context, Fordham elaborates the objections to a tortious solution, pointing to the deficiencies of each of the three main tortious avenues for relief - negligence, breach of statutory duty and misfeasance in public office. He points to the problem with all of these remedies as being the fact that
830 Cohen, above n 753, 662. 305
tort, according to Fordham, is fundamentally incapable of, and inappropriate for, dealing with faulty administration by a public authority such as the ATO.
The root problem is that all these causes of action are “tort” models where the search for the “wrong” of unlawfulness by the public body is automatically matched by discovery of a correlative “right” on the part of the claimant “victim”. It is, moreover, a “right” in effect to full compensation for foreseeable and causally connected loss and damage. The “tort” approach is therefore an all- or-nothing game. Clumsy bright-line distinctions cannot really provide the sophistication necessary to address the justice of the particular case, against the need to strike a fair balance from the point of view of society‟s resources.831
The arguments Cohen and Fordham raise can be readily disposed of in the context of the concerns of this study. These arguments lose much of their force where the concern is with operational activities rather than political or resource-constrained policy decisions. By definition, the concern in this study is with the regulation of activities which do not raise such decision-making challenges. Confining ourselves to the operational sphere, the sustainable criticisms of a tortious approach relate more to the manner of application of tortious principles by our courts rather than any inherent unsuitability or defect in those tortious principles themselves.
For example, some critics highlight as a source of unsatisfactory legal development the role courts have allowed public policy concerns to play in determining the application of tortious principles in cases involving public authorities. Bagshaw puts a number of propositions to this effect (which would be quite apt to describe the current Australian judicial approach to dealing with tortious claims against the Commissioner of Taxation):
(a) the judiciary has unnecessarily restricted the scope of the tortious liability of public authorities; (b) the reasoning supporting such restrictions has
831 Fordham, above n 154, 105. 306
inappropriately exaggerated the significance of many of the policy concerns that are regularly invoked; (c) the doctrinal explanations of these restrictions are unnecessarily complex and incoherent; and (d) some degree of extension of the scope of tort liability would be more just and wholly consistent with good public policy.832
Bagshaw is not alone in suggesting that lifting judicial restrictions on the application of tortious avenues of relief against public bodies could make a tortious approach appropriate and effective. Gould, for instance, sees a possibility for the enhancement of tortious remedies such as misfeasance in public office as sufficient to correct any deficiency in the compensatory remedies against public authorities. Gould notes:
There are fortunately encouraging signs that the liability of public bodies to compensate people aggrieved by their actions and decisions is becoming increasingly recognised and developed...The major requirement now is to establish the tort of misfeasance in public office in our law, so that the private citizen will not suffer as a result of the peculiar capacity of public bodies to inflict upon him damage which may not necessarily fall within the confines of one of the more established torts. The materials, in the form of precedents in our case- law are there; all that is needed now is their development in order to fill a substantial gap in our administrative law.833
There are also views from the judiciary supportive of a tortious approach. For example, Lord Nicholls in Stovin v Wise834 suggested that a common law remedy would be appropriate for dealing with deficiencies in administrative law for the provision of a compensatory damages remedy for persons aggrieved by defective acts or omissions of public authorities. His Lordship observed in that case that „public law is unable to give an effective remedy if a [person] is injured as a result
832 Roderick Bagshaw, „Monetary Remedies in Public Law - Misdiagnosis and Misprescription‟ (2006) 26 Legal Studies 4, 5. 833 B C Gould, „Damages as a Remedy in Administrative Law‟ (1972) 5 New Zealand Universities Law Review 105, 122. 834 Above n 81. 307
of an authority‟s breach of its public law obligations. A concurrent common law duty is needed to fill the gap.‟835
In Sutherland Shire Council v Heyman,836 although not expressly confirming any deficiencies of administrative law, the appropriateness of a tortious solution in cases involving questions of public authority liability was acknowledged. Mason J in that case observed that there is „…no reason why a public authority should not be subject to a common law duty of care in appropriate circumstances in relation to performing, or failing to perform, its functions…‟837
The clear implication from such comments is that, carefully drafted, a statutory damages remedy which adopts tortious principles and standards of liability could, conceivably, be constructed. However, there remains a further significant practical challenge to a tortious approach to the liability of public bodies which raises doubt as to the desirability of applying a tortious remedy in the tax context. This is the risk of creating a „twin-track‟ approach to public authority liability.
The UK Law Commission notes this risk in their comprehensive 2004 review of monetary remedies of public authorities in the UK:
Parliament could enact legislation designed to widen the ambit of certain existing private law causes of action. Most obviously, Parliament could make a general provision as to when breach of statutory duty is to be actionable in tort, or could specify in individual statutes whether breaches of particular duties contained therein are to be actionable. Other causes of action could also be clarified and extended. Lowering the degree of fault required for misfeasance in public office would be one option. This approach would have the advantage of merely building upon the current law rather than replacing it. However, the additional liability
835 Ibid, 940. 836 Above n 36. 837 Ibid, 457-458. It has long been recognised that tort law has a legitimate place in determining public authority liability where statutory powers are not exercised with reasonable care. See Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202, 220. 308
would presumably be limited to public bodies. The resultant twin-track approach to torts could create problems for the coherence of private law.838
The risk of creating a „twin track‟ approach is a particular concern in the context of the reforms advocated in this study. It will be recalled from Chapter 5 that one of the most strident criticisms of the existing private law avenues of relief in the tax context is that, essentially, Australian judges are already applying a „twin track‟ approach. Courts treat the Commissioner of Taxation differently to other statutory authorities in tortious actions by citizens. It is the alleviation of the complexity and uncertainty created by this type of inconsistency which the reforms advocated in this study, in part, aim to address. Accordingly, the risk of creating a new form of the same disparity of treatment is particularly unattractive.
This „twin track‟ problem is less of an issue if an administrative law approach is adopted. Administrative law is, by definition, aimed at regulating public bodies in the exercise of their public powers and duties. It has no role in the regulation of rights and obligations of private individuals. It is, therefore, notionally well-suited for dealing with the idiosyncrasies of a revenue authority such as the Commissioner of Taxation. Further, administrative law avenues of relief are, arguably, more flexible and better suited to dealing with public law problems than tortious or private law principles. As Fordham observes:
Administrative law does not thrive using “on-off switches”. It never has. It is of their essence that principles of public law are contextual and flexible. The same is true of administrative law remedies. Grounds for judicial review are about something having gone wrong which warrants the Court saying so, to ensure that public authorities act within the law. They are much more like criminal law (where dangerous driving does not need a victim) than tort law (where it does). The range of remedies available where a claimant has been affected, and the human rights focus on “victims”, does not alter these basic truths. When public law comes to consider what is needed by way of an effective and appropriate
838 The Law Commission, United Kingdom, above n 587, 93. 309
response, there are a range of available remedies. They are flexible. They are discretionary. They are made-to-measure.839
Fordham may well be correct. However, the real practical challenge to the suitability of an administrative law solution in the context of the reforms called for in this study lies in the lack of availability of a compensatory remedy for successful litigants.840 The extension of administrative law principles to facilitate awards of monetary compensation is likely to encounter significant resistance. For example, judicial resistance to such a remedy might arise from the fact that the rules for determining administrative law culpability have developed around a supervisory review focus by the courts as distinct from a compensatory focus. Accordingly, there is a risk that the rules relating to administrative law are likely to be modified or more restrictively applied (thus losing their flexibility and „made-to-measure‟ character) if a monetary compensation alternative is made available for breach of those requirements.841
Of course, if such judicial resistance did not eventuate, an administrative law approach to taxpayer compensation for ATO operational act or omission causing taxpayer loss may bring about improvements in our tax administration system. This positive result might arise by virtue of the unambiguous „signal‟ administrative law awards of compensation would send to the Commissioner. Fordham provides an example:
A maturing legal framework, permitting a pecuniary response in an appropriate case could also in some situations be to the benefit of Government. Take, for example, the situation of a “substantive legitimate expectation”, but where it is said to the Court that there is some “overriding public interest” by virtue of which the State should be able to interfere with the expectation. It may very well be that, in such a case, the Court could … reconcile (a) the need to vindicate the
839 Fordham, above n 154, 106. 840 See the discussion in Part III of Chapter 4. 841 Campbell, above n 635, at 20, raises this concern in the context of discussion of the grounds for administrative invalidity developed in the UK and the potential impact of imposing a no-fault liability regime with monetary compensation ramifications. 310
claimant‟s expectation and (b) the public interest in the State defeating it, by ensuring reparation, as the “price” for upholding the state action, whether offered to or exacted by the Court.842
The argument that naturally flows is that by enhancing administrative law avenues of relief through including the availability of damages as a remedy for erroneous administrative decision-making would „ensure that standards of administration are improved, since to reach a valid and unimpeachable decision, a more cautious approach will be adopted.‟843 Of course, there is a fine line between caution and over-caution. This distinction constitutes the nub of chill-factor/over- defensiveness public policy concerns.844
Over-defensiveness arguments are, however, unlikely to hold sway in the debate as to whether administrative law standards and principles should be applied to the reforms called for in this study. A broader jurisprudential argument supporting an administrative law solution could be raised to counter any challenge on over- defensiveness grounds. This is the argument that the incorporation of a damages remedy in the system of judicial review would have the incidental significant benefit of rectifying what is widely criticized as a deficiency in the existing judicial review system. Schwartz succinctly summarises this perceived deficiency:
A system of administrative law which fails to provide the citizen with an action in damages to make him whole…is actually but a skeletonised system. If individuals are to be protected adequately, an action for damages is the necessary complement of the action or review, which results only in the setting aside of improper administrative action.845
842 Fordham, above n 154, 107. 843 Roots, above n 143, 69. Roots raises this argument in the context of arguing for a tort of maladministration. 844 As critically examined in Part IV of Chapter 5. 845 Schwartz, above n 145, 218. For a similar argument see also Roots, above n 635, 68; and Fordham, above n 154. 311
The fact remains, though, that it would take a major shift in judicial thinking to allow the recovery of damages in administrative law proceedings.846 Accordingly, the practical likelihood of an administrative law statutory damages remedy appears extremely slim, despite its potential merits.
The necessary overall conclusion is that, notwithstanding the cogent arguments in favour of both tortious and administrative law approaches to bringing about the reforms advocated in this study, no clear winner of the argument emerges. A third option, however, exists. This option is for the enactment of a completely new statutory damages remedy. Such a remedy would not be founded upon existing public or private law principles or standards of liability. It would be a „fresh start‟ alternative.
B - The Case for a „Fresh Start‟ Alternative
The abandonment of tortious and administrative law standards for imposition of liability upon a public authority such as the ATO in favour of a „fresh start‟ approach is not a new suggestion. Such an approach to dealing with the generic challenges of an adequate damages remedy for victims of public authority error has received some considered academic support. One of the most strident supporters is Roots, who notes that „because of the limitations of existing torts in public law, a new and unique remedy is required.‟847 The U.K. Law Commission as part of their recent review of the compensatory avenues of relief available to English citizens against public authorities, also canvass the merits of such an approach. The Commission notes that:
One option would be for Parliament to set out a legal framework of principles to govern public law liability. This approach would have the benefit of giving the law a fresh start, enabling key principles to be decided and stated explicitly.848
846 See the discussion in Part III of Chapter 4. 847 Roots, above n 635, 70. 848 The Law Commission, United Kingdom, above n 587, [9.8]. 312
The Commission does point out two main concerns with such an approach. The first is the possibility that such an approach could be viewed as too radical a step, especially if deviating too far from established common law or administrative law principles. Second is the complexity of framing such an approach, particularly to cater for the wide array of authorities such a generic remedy would need to regulate.
The nature of the specific reforms envisaged in this study render these two core concerns of the Commission less persuasive. Both concerns are clearly weightier in the context of sweeping proposals aimed at dealing with all public authorities and to regulate all of the activities of those bodies. In contrast, the proposal here is to apply the new remedy only to the Commissioner of Taxation and only to regulate activities of an operational or administrative nature. Any remaining concerns around complexity or radical departures from established avenues of relief are challenges capable of being met in the drafting of the remedy itself. These challenges will be directly addressed in Chapter 7.
There are, however, a number of additional solid reasons for favouring a fresh start statutory remedy. First, a fresh start tax-specific remedy eliminates the criticism discussed above of the creation of a two-tier or „twin track‟ common law or administrative law approach. This is achieved through avoiding the creation of customised tortious or administrative law remedies. In the context of either an administrative law or private law solution, the creation of rules directed solely at one statutory authority might result in a compromise to longstanding general private law or administrative law principles.
Second, the inadequacies and ineffectiveness identified in Chapter 5 which the proposed reforms are aimed at addressing are not confined to tortious, administrative law or any other particular avenue of relief. The identified deficiencies span across a range of formal and informal, private and public law avenues of relief. Accordingly, formulating a new measure moulded to reflect tortious or administrative law measures of culpability would restrict the ability of the new remedy to cross public and private law boundaries in order to 313
comprehensively address the identified deficiencies. Further, adopting a tortious or administrative law approach might also entrench existing inadequacies rather than correct them.
Perhaps most significantly, however, a fresh start alternative would readily accommodate the resolution of the concerns of this study via a no-fault liability regime. This means a regime in which the plaintiff need only show that an operational act or omission has occurred and that this act or omission caused the plaintiff‟s losses. There is no need for the plaintiff to prove that the operational act or omission was wrongful in any other sense. The imposition of such a regime obviously renders measures of fault or liability founded on tortious or administrative law principles or standards of responsibility redundant. It is contended that the enactment of a no-fault scheme, which is not dependent upon demonstrating any measure of culpability on the part of the Commissioner, is the preferred path for dealing with the reforms envisaged in this study. A „fresh start‟ approach is, therefore, especially appropriate.
C - The Case for a „No-Fault‟ Scheme
The main challenges to the adoption of a no-fault or strict liability approach849 (in which recovery hinges simply on demonstrating loss caused by an ATO operational act or omission without the need to demonstrate any additional wrongfulness or ATO culpability in so acting or omitting to act), are the familiar public policy fears around floodgates/indeterminacy concerns and chill-
849 No distinction is drawn in this thesis between the meaning of „strict liability‟ and „no-fault liability‟. Both are here taken to mean simply that liability does not turn on demonstrating the existence of any particular state of mind - engaging in the regulated activity is enough to trigger liability. The distinction between no-fault and strict liability is discussed by Faure. See Michael Faure, Tort Law and Economics (2009). He describes the difference between the two (at 416) as being „a thin line‟ centred on the need to draw a link between the injurer‟s activity and the loss cause to the victim in strict liability systems, whereas no-fault requires no such causal link, with recovery usually coming from the public purse rather than the injurer. These subtle distinctions do not alter the fact that both systems require no evidence of fault or negligence - in this respect they are identical. 314
factor/over-defensiveness effects. Campbell succinctly describes these policy concerns in the context of the no-fault liability debate:
To impose what is, effectively, a strict liability to compensate upon those immediately responsible for invalid action would be to impose on them a liability which many (perhaps most) of them could not discharge. It might also have a chilling effect on the efficient and effective discharge of their official functions…Even if the liability to compensation falls only on the Crown and statutory corporations, the number of potential claimants and the amounts of compensation payable may be very substantial and so substantial as to disrupt or distort budgetary arrangements.850
These concerns are directly addressed in the discussion below. However, it is pertinent to note from the outset that there are also sound reasons for favouring a no-fault scheme. This is especially true in the case of policy concerns about ensuring a proper separation of powers between the judiciary, the executive and the legislature. Ganz observes that „[f]ault liability is an unsatisfactory instrument for allocating losses in this area because it involves the courts substituting their judgment for that of the administrative body.‟851
A no-fault determination avoids this criticism. In the context of this study (in which deference to unstated legislative intent has been identified as a major cause of ineffectiveness of existing private law avenues of compensatory relief) the ability to allay separation of powers and justiciability concerns is especially attractive.
Beyond the possibility of allaying justiciability concerns, commentators like Ganz also point to a number of additional reasons for favouring a no-fault liability scheme for dealing with public authority monetary liability.852 Many of these
850 Campbell, above n 635, 19. 851 Ganz, above n 156, 97-98. 852 For a detailed assessment of these arguments see Peter Cane, Atiyah‟s Accidents, Compensation and the Law (7th ed, 2006), Chapter 7, in which the fault principle in tort is appraised. For a more abbreviated discussion of the merits of a no-fault system of tortious liability see Harold Luntz, 315
additional arguments raised by these commentators also particularly resonate with the subject matter of the reforms contemplated in this study. For example, one of the strongest arguments in favour of imposing monetary liability on public authorities on a no-fault or strict liability basis is that this enables a shift in attention from the conduct of the relevant authority to the effect of the authority‟s activities on the aggrieved citizen and the proper prosecution by the authority of its statutory functions.
Fordham, a strong British proponent of a „no-fault‟ scheme refers to Recommendation No. R(84)15 of the United Kingdom Committee of Ministers (adopted 18 September 1984) on Public Liability which clearly centres on matters other than the conduct of the offending authority. It contains the principle that on a „no-fault‟ reparation basis, „reparation should be ensured if it would be manifestly unjust to allow the injured person alone to bear the damage…‟853 The focus here is clearly on the effect of the offending activity rather than the culpability of the offending authority.854
„Reform of the Law of Negligence: Wrong Questions - Wrong Answers‟ [2002] University of New South Wales Law Journal 49. See also Malcolm Parker, „Reforming the Law of Negligence: Solutions in Search of a Problem‟ (2003) 11 Torts Law Journal 136. The merits of no fault liability in Australia were first comprehensively examined in 1974. See National Committee of Public Inquiry, (Chair: Owen Woodhouse), Commonwealth of Australia, Compensation and Rehabilitation in Australia (1974). The issue was examined even earlier in Tasmania. See Law Reform Committee of Tasmania, Recommendations for the Establishment of a No-Fault System of Compensation for Motor Vehicles Victims (1972). For discussion of these reports see John Keeler, „Report of the National Committee of Inquiry into Compensation and Rehabilitation in Australia‟ (1975) 5 Adelaide Law Review 121. 853 Fordham, above n 154, 106. Fordham also refers (at 106-107) to EU law as a potentially useful starting point: „Of course, domestic Courts have for a while now had to apply “Euro-reparation”. In EU law, there is Francovich state liability, for “sufficiently serious” infringement of a “rule of law ... intended to confer rights on individuals”. Now there are also ECHR “damages” under section 8 of the Human Rights Act 1998. The prescribed approach is contained in section 8(3), which provides: “No award of damages is to be made unless, taking account of all the circumstances of the case, including - (a) any other relief or remedy granted, or order made, in relation to the act in question (by that or any other court), and (b) the consequences of any decision (of that or any other court) in respect of that act, the court is satisfied that the award is necessary to afford just satisfaction to the person in whose favour it is made.”‟ 854 An alternative was put by the Canada Law Reform Commission in their 1985 working paper, above n 799, 76. The Commission proposed that no-fault liability should be imposed after assessing the risk inherent in the complained of activity rather than fault of the offending public authority. 316
The suggestion implicit in such recommendations is that the search for culpability creates inequitable results through emphasising the motives of the offending authority rather than the loss suffered by the defendant. Roots, citing Sadler, points out the apparent inappropriateness of any statutory remedy including a mental element by pointing to the criticisms of misfeasance in public office which have been raised on this basis:
…Sadler, considering the tort of misfeasance in a public office, points out the anomaly that whereas wrongful administrative action involving “conscious abuse” is not tolerated by the law, wrongful administrative action not having that mental element is … indicating that: “The plaintiff‟s loss after all, is no greater because of the defendant‟s motive. His loss is caused by the defendant‟s act, not his motive.”855
A pertinent illustration of the possible absurdity which might result from a fault- based imposition of liability on the Commissioner for operational act or omission causing taxpayer loss can be extrapolated from the recent loss by the United Kingdom HM Revenue and Customs of the entire unencrypted child support database including private information of approximately 25 million individuals.856 A fault-based system might produce a result in which the loss of one person‟s information through reckless or malicious behaviour would be actionable. Alternatively, the loss of an entire database, unless fault can be positively demonstrated, would result in no monetary sanction against the Commissioner. Clearly, though, the latter has far more significant and far reaching consequences for good tax administration practices. Arguably, the need for behavioural and systemic change to avoid recurrence is also far more urgently warranted in such instances.
855 Roots, above n 635, 71. For the comments in their original context see Robert Sadler, „Will Administrative Liability Topple Public Service Pole-Sitters‟ (1987) 61 Law Institute Journal 30, 32-33. 856 As discussed in the context of the tort of negligence in Part II of Chapter 3 and in the context of privacy obligations of the Commissioner in Part V(D) of Chapter 4. 317
An additional concern with fault-based remedies is that the search for culpability significantly complicates legal proceedings and adds to the costs of both parties in seeking to make their case. In particular, the search for culpability might result in the expenditure of excessive amounts of public funds by the Commissioner in obtaining legal advice. The concern has been highlighted as a particular difficulty where any reform proposal contains tortious measures of public body culpability:
Maybe a new tort would cause administrators to obtain legal advice before making decisions, thereby occasioning unnecessary delay in the decision-making processes of administrative bodies. Of all the policy considerations militating against a general right to damages, this is arguably the most persuasive, largely because it is not limited to the short, but persists into the long, term.857
While persuasive, this argument is not conclusive. This is because, as has also been pointed out, „[t]he seeking of legal advice [by administrators] is likely to improve and ensure a higher quality of administrative decision making in the long term.‟858
Notwithstanding, the relative cost-effectiveness and simplicity of a no-fault regime creates a clear advantage over fault-based liability mechanisms. As Miller and Sarat point out:
No-fault remedies…provide, at least in theory, efficient and less costly mechanisms for compensating the injured and, in so doing, restoring social harmony. At the same time, and as a result of the same qualities, they promote claims for redress. They “promote both the clearing up of trouble and its declaration or social emergence.”859
In addition, in the tax context, the search for culpability diverts attention from direct and important considerations about the impact on tax administration
857 Roots, above n 635, 71. 858 Ibid. 859 Miller and Sarat, above n 139, 564-565. 318
practices of imposing monetary liability and the sharing of the burden of any loss resulting from an ATO operational act or omission. For this reason, too, therefore, a no-fault approach is an attractive one.
319
PART IV - CONCLUSIONS
This Chapter has demonstrated that a no-fault statutory damages remedy would be the most appropriate way of addressing the ineffectiveness and inadequacy inherent in the existing avenues of relief available to taxpayers seeking compensation for loss caused by an ATO operational act or omission. It is conceded, though, that this conclusion has been reached without addressing general criticisms of no-fault approaches to statutory authority liability centred on the seemingly intractable public policy concerns around potential adverse motivational effects and indeterminacy/floodgates fears noted in the preceding discussion.
A no-fault statutory damages remedy as advocated in this Chapter would be an easy target for indeterminate liability and chill factor arguments, particularly if the proposal was to impose liability on the Commissioner for all operational acts or omissions causing taxpayer loss - whether reasonable or motivated by recklessness, dishonest intent or some other measure of common law or administrative law culpability. For instance, within such a broad ambit, it could be argued that all operational ATO tax collection activities essentially generate a taxpayer „loss‟ which could be used to support a compensation claim. Without restriction, therefore, the remedy could be used as a basis for going behind an assessment and questioning the operational aspects of the process of assessing the tax liability of a taxpayer.860
While these concerns are valid considerations, they need not detract from the strength of the ultimate reform recommendation made in this Chapter. This is because there are other ways for addressing these concerns in the drafting the no- fault remedy proposed in this Chapter which do not involve imposing some
860 This is precisely the mischief provisions such as s 177 of the Income Tax Assessment Act 1936 (Cth) are aimed at addressing. See the discussion of this provision in Part II of Chapter 3 and Part III of Chapter 5. 320
measure of fault as a limit on the scope of the proposed reforms. There are numerous alternative methods for confining the availability of taxpayer relief which do not turn on the search for culpability. For instance, upper and lower monetary limits can be imposed on the availability of no-fault relief. This is one way of confining the „loss‟ recoverable by a taxpayer in any case. Similarly, relief can also be restricted to „material‟ incidents or losses or confined to losses other than a taxpayer‟s substantive tax liability. In the case of the latter restriction, this would go a long way toward ensuring that the remedy is not used as a de facto tax assessment objection mechanism.
Similarly, cost sanctions for frivolous or vexatious actions or actions taken without any taxpayer loss mitigation attempts can also operate to limit any potential adverse public policy effects. Further, a requirement that a taxpayer plaintiff has exhausted all alternative avenues of relief prior to resorting to the no- fault remedy could also be effective. All of these issues are considered in Chapter 7 in the context of drafting an appropriate statutory remedy. Accordingly, the model statutory damages remedy which will be formulated in Chapter 7 will be one structured around a tightly confined no-fault basis for imposing liability on the ATO for loss caused by an ATO operational act or omission.
321
CHAPTER 7 – REFORM: THE SUBSTANTIVE CONTENT OF AN AUSTRALIAN
STATUTORY DAMAGES REMEDY
PART I - INTRODUCTION
The conclusion in the preceding Chapter was that the most appropriate form of reform of taxpayer compensatory rights in instances of ATO operational act or omission causing taxpayer loss is a new limited no-fault statutory damages remedy. The remaining task is constructing such a remedy. This is the objective of this Chapter.
There are two obvious difficulties to be faced in doing this. First, there is no Australian precedent for a cause of action dealing with compensating citizens for harmful operational acts or omissions of public authorities. Further, there is no tax-specific binding statutory damages remedy of any description. Second, there does not appear to be any statutory remedy aimed at compensating victims of revenue authority operational act or omission in any comparable common law jurisdiction. Accordingly, the remedy formulated and presented in this Chapter is necessarily derived and extrapolated largely from sources further afield.
This is not to say, however, that there exists no useful guidance for the task of formulating the new statutory cause of action. To the contrary, as noted in Part II of Chapter 6, the issue of the provision of statutory damages relief for public authority erroneous activities has been the subject of numerous investigations by various law reform bodies both here and abroad.861 The recommendations of these various bodies have already been referred to in Part II of Chapter 6 insofar as
861 In the Australian context, see the Ipp Report (Panel of Eminent Persons (Chair: David Ipp) Commonwealth of Australia, above n 661); the Senate report into the doctrine of the shield of the Crown (Senate Standing Committee on Legal and Constitutional Affairs, above n 804); The report of the National Committee of Public Inquiry, above n 852; and the report of the Law Reform Committee of Tasmania, above n 852, each of which were referred to in Chapter 6. Overseas reports noted in Chapter 6 included two UK Law Commission reports (UK Law Commission, Public Law Team, above n 706, and The Law Commission, United Kingdom, Public Law Team, above n 587); New Zealand Public and Administrative Law Committee, above n 800; and Canada Law Reform Commission, above n 799. 322
those recommendations were relevant to answering the question of the most appropriate form for any general damages remedy against public bodies. Similarly, reference has already also been made to the substantial associated academic debate which has been generated around the issue of the need for a general damages remedy for public authority failures.862
This same material provides some grounding for a considered formulation of the statutory cause of action proposed in this study. However, tax-specific guidance is lacking in these sources. Accordingly, far more useful guidance is derived from the United States experience with the limited tax-specific statutory damages remedies introduced into the United States Internal Revenue Code of 1986863 („the Code‟) by numerous rounds of Taxpayer Bill of Rights („TBOR‟) legislation. These remedies provide direct examples of the sorts of drafting issues which might need to be addressed in formulating a tax-specific Australian statutory damages remedy.
Accordingly, in Part II, the United States approach is detailed and discussed. In Part III, a proposed Australian statutory damages remedy is constructed and its features explained through comparison to, and contrast with, the United States model. In Part IV, an example of an Australian statutory damages remedy drafted to reflect the features advocated in Part III is presented.
862 In some cases, the reform agenda has been significantly influenced by the views of esteemed commentators. For instance, much of the law reform activity in Canada has been influenced by the background research and discussion of policy arguments by Peter Hogg. For discussion of the role of Hogg see Alberta Law Reform Institute, The Presumption of Crown Immunity, Report No 71 (1994), especially at 59. 863 26 USC (1986). 323
PART II - A STATUTORY DAMAGES REMEDY AGAINST THE REVENUE: THE UNITED
STATES APPROACH
The United States has enacted numerous rounds of TBOR legislation which introduced and have gradually refined a number of statutory damages provisions against the United States Internal Revenue Service („IRS‟).864 This legislation is concerned with a very broad range of issues.865 These include rules relating to requirements that the IRS advise taxpayers of their rights866 and various rules for conducting taxpayer interviews and audits.867 Also included are rules for evaluating the performance of taxpayer personnel868 and rules and procedures for challenging levies on properties and liens.869 The legislation also creates the office of the Taxpayer Advocate.870 However, the particular interest for the purposes of this study is the inclusion in the TBOR legislation of a number of provisions
864 The original Taxpayer Bill of Rights legislation was contained in The Technical and Miscellaneous Revenue Act of 1988, Pub L No 100-647, 102 Stat 3342 (1988) enacted on November 10, 1988. Sub-chapter J of Title VI is sub-titled the Omnibus Taxpayer Bill of Rights („TBOR-1‟). For a discussion of the legislative history of this legislation see Kaplin Jones and Joan Schleef, „Omnibus Taxpayer Bill of Rights: Cure of „Seizure Fever” or Election Year Placebo?‟ (1989) 69 Michigan Bar Journal 480. For a further discussion of the legislative history in the development of this legislation and the first round of amendments to it see Bennett, above n 776. 865 Bennett argues that the TBOR legislation does not, in fact, create new rights but merely provides for an array of different administrative procedures to protect rights that were in effect long before. See Bennett, above n 776. Shaya expresses similar views. See Linda Shaya, „The New Taxpayer‟s Bill of Rights: Panacea or Placebo?‟ (1988) 65 University of Detroit Law Review 445. 866 For example, § 2 of TBOR-1 required the IRS to prepare a comprehensive statement of taxpayer rights within 180 days of enactment of the legislation, with a view to that statement being distributed to all taxpayers with any tax forms sent to them. 867 TBOR-1 § 4 dealt with procedures involving taxpayer interviews including rules relating to the recording of interviews, the preparation of transcripts, the timing and location of interviews and the rights of taxpayers in IRS interviews. TBOR-1 § 15 set out limitations on the conduct of class audits. 868 TBOR-1 § 6 prohibited the evaluation of Internal Revenue Service staff on the basis of sums collected from taxpayers resulting from audits or investigations in which those staff members participated. 869 TBOR-1 § 13 set out procedures for administrative appeals of liens. TBOR-1 § 14 dealt with levies on properties, precluding levies on properties where the expenses of imposing the levies would be greater than the value of the property or the tax liability. 870 The office of the Taxpayer Advocate was introduced in the second tranche of the TBOR legislation in 1996 - Taxpayer Bill of Rights 2 of 1996, Pub L No 104-168, 110 Stat 1452 (1996) („TBOR-2‟). The functions of the Taxpayer Advocate were described in § 110 of that legislation as follows: „(i) assist taxpayers in resolving problems with the Internal Revenue Service; (ii) identify areas in which taxpayers have problems in dealings with the Internal Revenue Service; (iii) to the extent possible, propose changes in the administrative practices of the Internal Revenue Service to mitigate problems identified under clause (ii); and (iv) identify potential legislative changes which may be appropriate to mitigate such problems.‟ 324
specifically aimed at creating taxpayer avenues of compensatory relief from the IRS.
Two such statutory damages provisions were included in the initial tranche of TBOR legislation introduced in 1988 („TBOR-1‟). One of these was the inclusion of a right to sue for damages against the IRS for wrongful failure by the federal government to remove a lien on a taxpayer‟s property.871 Specifically, the legislation amended § 7432 of the Code to include the following: „If any officer or employee of the Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien under § 6325 on property of the taxpayer, such taxpayer may bring a civil action for damages against the United States in a district court of the United States.‟
Second, under TBOR-1 taxpayers were also provided with a right, through the introduction of § 7433 of the Code to sue for damages sustained due to unauthorised tax collection activities. Given that it potentially has a much broader ambit than the wrongful lien activity provisions, it is § 7433 which is of greatest interest in this study. Recovery of damages under this provision of TBOR-1 extended to reckless or intentional disregard by a tax officer of any provision of the Code in connection with the collection of federal tax from a taxpayer.
Numerous limitations, both of a substantive and procedural nature, were imposed by the United States legislature on this right to bring an action in damages against the IRS for unauthorised tax collection activities. Goldstein describes the most significant of these limitations:
[R]ight to bring an action is limited to allegations of reckless or intentional disregard by an IRS employee in connection with the collection of tax and not with respect to the determination of tax. Moreover, the action may only involve the reckless or intentional disregard of the Tax Code and regulations thereunder. Thus, the disregard of any other federal law or regulations would not trigger the
871 For further discussion see Jones and Schleef, above n 864, 486-487. 325
taxpayer‟s right to bring an action under this provision. Total recovery under this provision is limited to $100,000.872
A further protection of the revenue was built into the legislation in the form of a cost penalty for the commencement of proceedings ultimately determined to be frivolous or groundless. In those circumstances, the taxpayer plaintiff would incur an award of damages of up to US$10,000 against them in favour of the IRS.873
A substantially revised second version of the TBOR legislation was passed into law in 1996 („TBOR-2‟).874 With the introduction of TBOR-2, the cap on damages available under § 7433 of the Code for loss caused in cases of reckless or deliberate disregard of the Code in conduct of tax collection activities injurious to a taxpayer was increased from US$100,000 to US$1 million.875 Also, it was considered that there may be circumstances in which it would be inappropriate to require a plaintiff taxpayer to have exhausted all available alternative avenues for administrative relief prior to seeking recovery under § 7433. Accordingly, TBOR- 2 introduced amendments permitting, (whilst not requiring), a court to reduce an award of damages pursuant to § 7433 if the taxpayer had not exhausted all other available administrative remedies prior to turning to § 7433 for relief.876
872 Benson Goldstein, „The Omnibus Taxpayer Bill of Rights Act: An Overview‟ (1989) 34(2) The National Public Accountant 20, 24. For a further detailed discussion of the relevant provisions of TBOR-1 see Abe Greenbaum, „The Taxpayer Bill of Rights 1 and 2: A Charter to be Followed by the Rest of the World or Just Another Attack on the Tax Authority?‟ (1997) 7 Revenue Law Journal 138. 873 Introduced by virtue of an amendment to § 6673. For discussion see Gerald Kafka, „Taxpayer Bill of Rights Expands Civil Safeguards and Civil Remedies‟ (1989) 70 Journal of Taxation 4. Interestingly, though, as pointed out by Greenbaum, this penalty is less than the usual monetary penalty applicable in the United States for the commencement of frivolous or groundless tax proceedings. Sub-section 6673(a)(1)(B) provides that where the taxpayer‟s position in such proceedings is frivolous or groundless, the proceedings were instituted or maintained by the taxpayer primarily for delay or the taxpayer unreasonably failed to pursue available administrative remedies, the Court may require the taxpayer to pay the United States a penalty of up to US$25,000. Sub-section 6673(b)(1) provides an exception to this general rule in cases pursuant to § 7433. Accordingly, argues Greenbaum, the motivational effect may be an encouragement of frivolous actions in the tax context rather than a discouragement. See Greenbaum, above n 872. 874 Taxpayer Bill of Rights 2 of 1996, Pub L No 104-168, 110 Stat 1452 (1996). 875 TBOR-2, Title VIII, § 801(a). 876 TBOR-2, Title VIII, § 802(a). For a good general discussion of the amendments introduced by TBOR-2 see Rita Cavanagh, „The New Protections of the Taxpayers Bill of Rights 2: Useful Changes Across the Board‟ (1996) 85 Journal of Taxation 210, especially at 213. See also Walter Coppinger, „The Taxpayer Bill of Rights‟ (1989) 20(5) Tax Adviser 297, 301. 326
TBOR-2 also introduced two new monetary avenues of relief for United States taxpayers - § 7435877 to deal with unauthorised and intentional disclosures of taxpayer information by a government official, and § 7434878 aimed at addressing the practice of filing fraudulent tax returns by tax officials. Aside from these narrow specific avenues for recovery, no significant expansion of taxpayer rights to monetary compensation from the Internal Revenue Service was included in TBOR-2. Perhaps most notably, recovery under § 7433 of the Code remained limited to reckless or deliberate actions.
A further (and the current) version of the TBOR legislation was introduced in 1998 („TBOR-3‟).879 TBOR-3 made some important changes to taxpayer statutory rights to compensation from the IRS. Most significantly, § 7433 of the Code was expanded by TBOR-3 to include a limited avenue for recovery of monetary compensation for negligent collection activities by the IRS. A cap of US$100,000 on recoverable damages is applied where negligent behaviour is alleged under the
877 For discussion of this section see Patricia Nodoushani and Aurelle Locke, „Taxpayer Bill of Rights 2‟ (1996) Taxes 535, especially at 538 where the authors note: „The Taxpayer Bill of Rights 2 also creates new § 7435: Civil damages for unauthorised enticement of information disclosure. The new statutory provision permits a taxpayer to bring a civil action for damages, within two years, against the United States in a district court if any government official “intentionally compromises” the tax determination or collection from an attorney, CPA, or enrolled agent in exchange for information the taxpayer gave to such person in order to get tax advice. Such a civil action will be the exclusive remedy for recovering damages. Under § 7435, a prevailing taxpayer will be awarded the lesser of $500,000 or the actual, direct economic damages plus costs. The taxpayer‟s liability or any civil or criminal penalties, losses attributable to incarceration or other criminal sanctions are not included in recoverable damages.‟ 878 Sub-section (a) of the new provision provides: „(a) If any person wilfully files a fraudulent information return with respect of payment purported to be made to any other person, such other person may bring a civil action for damages against the person so filing such return.‟ Damages recoverable are limited in sub-section (b) to $5,000 or actual damages and costs (whichever is greater). 879 Internal Revenue Service Restructuring and Reform Act of 1998, Pub L No 105-206, 112 Stat 685 (1998) („TBOR-3‟). A fourth Bill, the Taxpayer Bill of Rights 2000, passed the House of Representatives on April 11 2000, but ultimately was not put to the Senate and was never passed into law. It was cleared from the books at the end of the 106th Congress and never reintroduced. There was nothing in that legislation which proposed to alter § 7433 or introduce any further taxpayer rights to statutory damages. A further similar attempt at reform is contained in the Taxpayer Bill of Rights Act of 2008, HR5716, however this bill has not yet passed Congress. The United States Taxpayer Advocate continues to press for further change - in particular, the introduction of a single comprehensive statement of United States taxpayer rights. See Taxpayer Advocate, Annual Report To Congress (2008) vol 1, 338. 327
amended § 7433. This is in contrast to the US$1 million cap on civil damages recoverable for reckless or intentional behaviour in breach of the section.880
Taxpayers did not uniformly enjoy an enhancement of their rights against the IRS with the introduction of TBOR-3. The requirement of all administrative avenues of relief having been exhausted prior to seeking § 7433 relief was reintroduced with TBOR-3 after having been relaxed in TBOR-2.881
Throughout the legislative evolution of the TBOR legislation there has also remained a requirement that any award in favour of a taxpayer under § 7433 be reduced by the extent to which the loss could have reasonably been mitigated by the aggrieved taxpayer.882 This requirement also remained unchanged with the introduction of TBOR-3. A further limitation is contained in § 7433(d)(3). It provides that a relevant action can only be brought within two years after the date the right of action accrues.883
Section 7433 presently relevantly provides:
Sec. 7433. Civil damages for certain unauthorized collection actions
(a) In general If, in connection with any collection of Federal tax with respect to a taxpayer, any officer or employee of the Internal Revenue Service
880 For discussion, see Abe Greenbaum, „United States Taxpayer Bills of Rights 1, 2 and 3: A Path to the Future or Old Whine in New Bottles?‟ in Duncan Bentley (ed), Taxpayers‟ Rights: An International Perspective (1998) 347. 881 TBOR-3, Title III, Subtitle B, § 3102. For discussion see Abe Greenbaum, ibid, 372. Greenbaum is critical of this change pointing out that: „This change does not advance taxpayer rights, it makes the exercise of rights more restricted, although the change may be justified in terms of efficient administration of dispute resolution mechanisms.‟ As discussed below, this limitation has proven to be a significant barrier for taxpayers seeking recovery of damages under § 7433. 882 Sub-section 7433(d)(2) provides that: „The amount of damages awarded under sub-section (b)(1) shall be reduced by the amount of such damages which could have reasonably been mitigated by the plaintiff. 883 United States Treasury Regulations provide that a right of action accrues at the time when the taxpayer has a reasonable opportunity to discover all essential elements of a possible cause of action. See Treasury Regulations 26 CFR Ch 1 (4-1-06 Edition) § 301.7433-1(g)(2) and § 301.7433-2(g)(2). 328
recklessly or intentionally, or by reason of negligence, disregards any provision of this title, or any regulation promulgated under this title, such taxpayer may bring a civil action for damages against the United States in a district court of the United States. Except as provided in section 7432, such civil action shall be the exclusive remedy for recovering damages resulting from such actions.
(b) Damages In any action brought under subsection (a) … upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 ($100,000, in the case of negligence) or the sum of - (1) actual, direct economic damages sustained by the plaintiff as a proximate result of the reckless or intentional or negligent actions of the officer or employee, and (2) the costs of the action.
(c) Payment authority Claims pursuant to this section shall be payable out of funds appropriated under section 1304 of title 31, United States Code.
(d) Limitations (1) Requirement that administrative remedies be exhausted A judgment for damages shall not be awarded under subsection (b) unless the court determines that the plaintiff has exhausted the administrative remedies available to such plaintiff within the Internal Revenue Service. (2) Mitigation of damages The amount of damages awarded under subsection (b)(1) shall be reduced by the amount of such damages which could have reasonably been mitigated by the plaintiff. (3) Period for bringing action Notwithstanding any other provision of law, an action to enforce liability created under this section may be brought without regard to
329
the amount in controversy and may be brought only within 2 years after the date the right of action accrues.884
While most of the academic commentary gives at least qualified support for the TBOR amendments,885 there have been a number of general criticisms. Most of these concerns are either irrelevant or easily disposed of in the context of an Australian statutory damages remedy of the type called for in this thesis.
An example is the criticism that the TBOR legislation does not, as the name suggests, operate as a comprehensive bringing together and statement of taxpayer rights. Greenbaum, writing in relation to TBOR-1 and TBOR-2, explains the criticism:
As Bills of Rights, TBR1 and TBR2 do not meet the standard of the US Bill of Rights, whose position in the American political iconography was meant to be evoked. The Taxpayer Bills of Rights do not meet the standard of their constitutional namesake, because they are not, in the main, provisions which further the rights of taxpayers. The provisions are a hotch potch of legislative amendments rather than a coherent document formulating a comprehensive framework of rights, which a Bill or Charter of Rights should…neither piece of legislation does what its name purports, provide a comprehensive and coherent structure for the protection of taxpayer rights…886
884 United States Internal Revenue Code of 1986, tit 26, Sub-tit F, ch 76, Sub-ch B, 26 USC § 7433 (1986). There is also a sub-section (e) dealing with actions for damages against the IRS for willful violations of certain bankruptcy provisions. 885 For example, Cavanagh concedes that the legislation provides „expanded safeguards and remedies‟ (Cavanagh, above n 876, 214); Coppinger describes the legislation as „a step in the right direction‟ (Coppinger, above n 876, 305); Kafka notes that the changes would „help level the playing field‟ as between taxpayers and the IRS (Kafka, above n 873, 9); Knight and Knight describe the legislation as providing „welcome relief‟ for United States taxpayers (Lee Knight and Ray Knight, „Dispute Resolution with the IRS and Taxpayer Bill of Rights 2‟ (1997) 13 Akron Tax Journal 27, 80); and Stone describes the legislation as restoring an „equitable balance between taxpayers and the IRS.‟ (Mark Stone, „Taxpayer Bill of Rights 2‟ (1997) 67 The CPA Journal 42, 44). 886 Greenbaum, above n 872, 159-160. Shaya makes similar comments. See Shaya, above n 865, at 448, where the author observes that „the Bill fails to add any substantially new taxpayer protections and merely reiterates and reformulates existing provisions.‟ 330
While Greenbaum would be pleased to see the adoption by Congress of the recent recommendations of the United States Taxpayer Advocate for the enactment of a comprehensive single statement of taxpayer rights,887 his criticism is of limited relevance to the reforms envisaged in this study. These reforms do not claim to aspire to such lofty heights as a complete statement of taxpayer rights.888 The dual operational and monetary compensation parameters of this study alone mean that many taxpayer rights are clearly outside the ambit of the proposed reforms. Further, given the absence of any Constitutional Bill of Rights in Australia, the reference point for the Greenbaum criticisms is lacking in the Australian context.
Another criticism of the TBOR legislation which cannot be directed at the reforms envisaged in this study relates to the nature of the motivations underlying those reforms. Again, Greenbaum outlines these motivations:
The motivation for TBR2 was not the desire to improve the situation of the ordinary taxpayer. Rather it was a means by which Congress could further undermine the IRS and score popularity points with the electorate. The negative attitude towards the IRS which pervaded the House membership was clear and unambiguous in the speeches in the House prior to the vote on TBR2.889
Elsewhere, Greenbaum has also asserted:
It is the assertion of the author that TBR2, and to a lesser degree, TBR1, are less an attempt by the legislators to advance the rights of taxpayers than a means by which politicians improve their stature with their electorate by attacking the IRS.890
887 See Taxpayer Advocate, above n 879, 338. This proposal was incorporated in the Taxpayer Bill of Rights Act of 2008, HR 5716, a bill which has not yet been passed in Congress. 888 For a comprehensive discussion of the case for an Australian Taxpayer Bill of Rights see Taxation Institute of Australia, above n 777. 889 Greenbaum, above n 872, 160. 890 Greenbaum, ibid, 139. 331
There is certainly evidence that the TBOR reforms were, in part, anecdote- driven.891 Numerous horror stories of abuses of tax powers by tax officials to the detriment of taxpayers were raised in the debates leading up to the enactment of the provisions.892 Typical are the experiences of Mrs Lojeski who had her bank account frozen and a lien placed on her property as part of IRS enforcement proceedings against her boyfriend. These actions almost bankrupted Mrs Lojeski.893 The statutory damages remedy for improper behaviour in relation to liens over taxpayer properties contained in § 7432 is clearly directed at averting situations such as that involving Mrs Lojeski.894 The results of this anecdote-driven approach have been criticised by Lederman as merely creating „additional procedures that add costs to all tax controversies without regard to their usefulness in any particular case.‟895
In contrast, the reforms advocated in this study do not stem from any assertion of poor behaviour by tax officials against taxpayers. This study draws no such conclusions. Nor are any „horror stories‟ recounted in support of any
891 Although Goldstein has argued that the reforms were a response to the frustration that tax reform efforts in the mid 1980‟s were directed at substantive provisions and ignored procedural reform, especially from the perspective of the taxpayer. For further discussion of this perception see Goldstein, above n 872, 21. 892 Shaya observes that introduction of the TBOR-1 legislation into Congress was „[p]rompted by thousands of horror stories received from constituents concerning dealings with the IRS…‟ (emphasis in original). See Shaya, above n 865, 445. Shaya recounts a number of the more prominent horror stories disclosed in the Congress hearings prior to the introduction of TBOR-1 in this article. Questionable liens and other property seizure practices feature prominently in these anecdotes. 893 Shirley Lojeski had a lien filed by the IRS (in breach of IRS internal guidelines) against her home and on her bank accounts. The IRS believed that her live-in friend, Thomas Treadway, had transferred proceeds to her to shield those proceeds from the IRS. The assessments against Treadway were subsequently dropped and the lien against the Lojeski property released. This was not before, however, Shirley Lojeski suffered substantial financial hardship due to the effective freezing of her financial assets by the IRS. For further discussion of the Lojeski story see Lederman, above n 776, 1137-1138. The Lojeski story featured in the debates preceding the introduction of the TBOR legislation. Thomas Treadway gave evidence before the Finance Subcommittee on Private Retirement Plans and Oversight of the IRS on 10 April 1987, in which he recounted at length his experiences which he describes as a „nightmare.‟ See Evidence to the Senate Finance Subcommittee on Private Retirement Plans and Oversight of the Internal Revenue Service, United States, 100th Congress, 1st Session, 10 April 1987 (Thomas Treadway). 894 Sub-section 7432(a) provides: „If any officer or employee of the Internal Revenue Service knowingly, or by reason of negligence, fails to release a lien under § 6325 on property of the taxpayer, such taxpayer may bring a civil action for damages against the United States in a district court of the United States.‟ 895 Lederman, above n 776, 1133-1134. 332
conclusions. The „mischief‟ these reforms aim to address was identified in Chapter 5 - it is simply the unacceptably complex and uncertain array of existing remedies and the unexplained, apparently inconsistent, approach of our judiciary to private law compensation claims against the Commissioner. Both have contributed to rendering the currently available avenues of relief largely ineffective and inadequate. At no point has any suggestion of purported abuse of power by the ATO entered into this assessment of adequacy and effectiveness of Australian taxpayer rights to monetary compensation. Consequently, the proposed Australian statutory damages remedy cannot be criticised as being „anecdote-driven.‟
More difficult to dispel as a risk in the formulation of an Australian statutory damages remedy against the revenue are the familiar chill factor arguments which have been raised in the context of concerns with the United States TBOR legislation. It has been asserted that:
[e]xpansion of the scope of civil action against the IRS does more to undermine the operation of the IRS than advance taxpayer rights. If the IRS is constantly concerned about the possibility of law suits resulting from its collection activities, it may refrain from pursuing many legitimate claims. This is detrimental to all of society since the IRS is unable to fulfil its statutory functions.896
However, as noted in Chapter 5 in the discussion of the motivational effects on both taxpayers and revenue authorities which might flow from the imposition of liability on a revenue authority, and in the discussion of the desirability of a no- fault remedy in Chapter 6, it is not necessarily the case that a properly defined and
896 Greenbaum, above n 880, 372. Greenbaum has elsewhere expressly stated his concerns in terms of the „chill factor‟ effect phenomenon. Greenbaum notes, above n 872, at 151: „Although there is a valid argument that a civil action against the IRS should be available in the appropriate circumstances, it should be noted that such an action is not without risks to the operation of the tax system. The availability of a civil action against the IRS is of concern, since the threat of civil action may have a “chilling effect” on the legitimate actions of the IRS and thus diminish its effectiveness.‟ Johnson also raises the argument in the context of discussing the distorted behavioural incentives which might be generated through an extension of taxpayer rights to monetary compensation from the IRS. See Steve Johnson, „A Residual Damages Right Against the IRS: A Cure Worse Than the Disease‟ (2000) 85 Tax Notes 395, 406. 333
limited statutory damages remedy will produce such a result. The United States experience to date, at least if the success rate of taxpayer actions to date against the IRS pursuant to the expanded § 7433 in TBOR-3 is anything to go by, seems to confirm that any chill factor effect is unlikely. The United States National Taxpayer Advocate in the Executive Summary to her 2007 Annual report to Congress notes:
This is the first year that damages for unauthorised collection actions under IRC s7433 have appeared as a Most Litigated Issue…we identified 100 opinions that involved a claim for damages for unauthorised collection action under IRC S7433. The Courts affirmed the IRS position in almost all cases. Taxpayers did not win a single case.897
The requirement of exhaustion of administrative remedies prior to recourse to § 7433 was the stumbling block for most taxpayer plaintiffs in 2007.898 In all of the 83 cases in which the issue was raised, the government prevailed.899 While the success rate improved somewhat in 2008, with 9 taxpayers prevailing in whole or in part in the 78 cases brought in that year, this translates to only a modest 11% success rate.900 It is difficult to see how, in the face of such limited taxpayer success against the IRS, any IRS behavioural changes (positive or negative) might be prompted by the application of the § 7433 remedy in the foreseeable future. Further, any concern that the floodgates might have been thrown open to potential claimants is also not borne out by this data. Data from
897 Taxpayer Advocate, Annual Report to Congress: Executive Summary (2007), 18. However, in four cases, the taxpayer prevailed on at least one procedural issue. Section 7433 does not rate a mention in earlier Taxpayer Advocate annual reports to Congress prior to 2007. 898 This requirement also dominated in 2008, with the Taxpayer Advocate reporting the raising of the issue in 50 of the 78 cases in that year. The government prevailed in 42 of those 50 cases on that point. See Taxpayer Advocate, above n 879, 515. 899 Taxpayer Advocate, Annual Report to Congress (2007) vol 1, 596. Statute of limitations issues were also a problem for some of the unsuccessful taxpayers in 2007. This issue was raised in 9 of the 78 cases in 2008. See Taxpayer Advocate, above n 879, 516. 900 Taxpayer Advocate, ibid, 457. A closer examination reveals split results in 3 of the 9 „successful‟ actions. Of the remaining 6 cases, one pertained to violation of bankruptcy procedures by the IRS, and four others were procedural wins (predominantly on the question of exhaustion of administrative remedies) rather than substantive recoveries of damages. The sole case in which damages were deemed to be recoverable was Olender v United States 100 AFTR 2d (RIA) 6047 (2007). However, again, much of the judgment is dedicated to disposing of the IRS argument for dismissal of the plaintiff‟s claim on the basis of failure to exhaust other administrative remedies. 334
2009 appears to confirm this fact with the issue falling out of the top 10 most litigated issues in 2009.901
Of course, this relative lack of taxpayer success, while aiding in allaying chill factor and floodgates public policy concerns, may equally be indicative of a lack of effectiveness or inadequacy of the United States TBOR legislation. Accordingly, a factor to be discussed in the context of formulating an Australian statutory damages remedy is whether the same or similar restrictions on the availability of statutory relief which have posed such difficulties for United States taxpayers should be replicated in the Australian provisions.902
The low success rate of United States taxpayers under § 7433 is also a pertinent reminder that well-intended legislation will not automatically result in more effective and adequate protection of taxpayer rights. As pointed out by Bennett in the context of questioning the effectiveness of the United States TBOR legislation:
…[T]here seems to have developed a widespread presumption that any law with the words taxpayer rights in the title inevitably will benefit taxpayers. That‟s like saying all laws mentioning tax reform are a step forward.903
Such comments serve as a useful cautionary note in the drafting of an Australian statutory damages remedy. However, it must be remembered that increased taxpayer success rates in claims against the Commissioner are not the ultimate goal of the reforms called for in this thesis. The measures of effectiveness and adequacy chosen in this study are capable of accommodating a remedy which would not necessarily see a marked jump in successful taxpayer claims against the Commissioner. Provided the remedy produces a more effective and adequate approach to disposing of those claims (for example, through allaying legal
901 See National Taxpayer Advocate, United States of America, 2009 Annual Report to Congress (2009), 403. 902 Part III below discusses this issue. 903 Bennett, above n 776, 621. 335
uncertainty and entrenching a uniform approach to claims), taxpayer success rates are relatively inconsequential. It is a more procedurally robust approach to dealing with taxpayer compensation claims that is the main objective.
Of course, reform which is seen by taxpayers as unfair or simply preserving the status quo may eliminate any prospect of resultant increased cooperation with tax authorities and tax compliance which a new statutory remedy might bring about.904 In this respect, therefore, some improvement in taxpayer success rates in claims against the Commissioner may be a desirable, if not strictly necessary, by- product of any Australian reforms.905
However, by far the most comprehensive examination of the effectiveness and desirability of the statutory remedy introduced as § 7433 of the Code by the TBOR legislation is contained in the detailed academic debate between Lederman and Johnson. Lederman is one of the numerous United States commentators who lament that the TBOR legislation generally does not go far enough. Her criticisms are unique in a number of respects however. First, Lederman maintains that the legislation, and § 7433 in particular, is ineffective, even in its third incarnation. Much of the similar academic observation relates to the earlier versions of the legislation, and, in particular, the exclusion of relief for negligent collection activity in the TBOR-1 and TBOR-2 versions of § 7433.906 Most significantly, though, Lederman has drafted an additional statutory damages provision which
904 Coppinger, writing about the United States reforms, points out the possible link between perceptions of fairness of taxpayer rights reforms and taxpayer compliance, observing that „the implementation and understanding of the [TBOR] bill may contribute to the public‟s perception of fairness in our voluntary compliance system.‟ Coppinger, above n 876. 905 The relevance of historical taxpayer success rates as an indicator of effectiveness of existing remedies was discussed at length in Part II of Chapter 5. 906 See, for example, Jones and Schleef, above n 864, who note, in respect of TBOR 1, at 488-489: „OTBOR, as enacted, is substantially weaker than as proposed. In general, except in limited circumstances, victims of heavy-handed IRS tactics will have no satisfactory remedy. Most of the new protections lie in the area of collections and will benefit only those who, whether knowingly or not, underpaid their taxes. One wonders whether other classes of taxpayers – eg, those who paid their taxes in full but were audited and incurred substantial fees in defending their return positions - are not also worthy of protection…It is questionable whether OTBOR does much to advance the position of these taxpayers, who in many instances were able to take advantage of uncodified IRS policies to obtain some measure of fairness in hardship cases.‟ For similar views see also Coppinger, above n 876; and Cavanagh, above n 876. 336
she advocates should be inserted in the United States Tax Code as a new § 7438.907 This new section aims to address the deficiencies and shortcomings which Lederman asserts are inherent in the existing statutory damages remedy.
Insofar as these asserted deficiencies and shortcomings are concerned, Lederman is particularly critical of the anecdote-driven nature of the TBOR reforms. She also expresses dismay that the numerous rounds of TBOR legislation appear to have resulted in the imposition of a raft of procedural requirements on the IRS, rather than real taxpayer rights with effective enforcement mechanisms.908 However, her specific criticisms, and those of most direct relevance to this study, are the criticisms Lederman directs at the § 7432 and § 7433 limited statutory damages provisions.
She asserts that these sections are not enough to adequately compensate taxpayers in many cases of violations of taxpayer rights. With respect to § 7433, she is particularly critical of the limitation of the section to faulty tax collection
907 The Lederman provision is as follows: „Section 7438. Civil damages for material violation of laws and rules: (a) In general. If any officer, employee or Oversight Board Member of the Internal Revenue Service knowingly, or by reason of negligence, commits, with respect to a taxpayer, any act that materially violates the Internal Revenue Code, any Treasury or Internal Revenue Service regulation, any Revenue Procedure, or any provision of the Internal Revenue Manual, the taxpayer may bring a civil action for damages against the Internal Revenue Service in a district court of the United States. (b) Exceptions. No liability shall arise under this section with respect to any act - (1) that results from a good faith, but erroneous interpretation of the Internal Revenue Code, any Treasury or Internal Revenue Service Regulation, Revenue Procedure, or provision of the Internal Revenue Manual, as the case may be, (2) that is requested by the taxpayer, (3) that results in actual damages to the taxpayer of less than $1,000, or (4) a civil damage action with respect to which is available under another section of this Title. (c) Damages. In any action brought under subsection (a), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the sum of - (1) the actual damages sustained by the plaintiff as a result of such prohibited act, plus (2) in the case of a wilful prohibited act or a prohibited act that is the result of gross negligence, punitive damages, plus, (3) the costs of the action, plus, (4) in the case of a plaintiff described in section 7430(c)(4)(A)(ii), reasonable attorney fees if the plaintiff is the prevailing party (as determined under section 7430(c)(4)). (d) Period for bringing action. Notwithstanding any other provision of law, an action to enforce any liability created under this section may be brought, without regard to the amount in controversy, at any time within two years after the date of discovery of the plaintiff of the prohibited act. (e) Definitions. For the purposes of this section - (1) „prohibited act‟ means any act that materially violates the Internal Revenue Code, any Treasury or Internal Revenue Service regulation, any Revenue Procedure, or any provision of the Internal Revenue Manual, and that results in actual damages to the taxpayer, (2) „materially violates‟ means fails to follow or abide by, in a way that is more than inconsequential, and, (3) „actual damages‟ includes consequential damages.‟ See Lederman, above n 776, 1139. 908 Lederman, above n 776, 1135. 337
activities. Lederman‟s proposed new § 7438 contains no such limitation, extending to any instances of „material‟ violations of the Code and/or documented internal IRS procedures.
Johnson, while agreeing with many of Lederman‟s general criticisms of the TBOR legislation, attacks a number of Lederman‟s specific assertions. In particular, Johnson does not agree with the proposal to extend taxpayer rights to damages through enactment of Lederman‟s proposed new § 7438. He concludes:
The gains from the increased compensation and increased deterrence in appropriate cases that might be produced by a new, residual damages provision would, I believe, be considerably exceeded by the costs inflicted by it. In this case, the cure would be worse than the disease.909
Johnson‟s conclusions stem from a number of specific criticisms of the Lederman statutory damages proposal. First, he asserts that provisions of the type advocated by Lederman serve to move the litigation option „to the front line‟910 of dispute resolution. The Lederman proposal, Johnson contends, is deficient in not requiring taxpayers to have recourse to less-litigious avenues of relief prior to turning to the statutory damages alternative. Johnson points to a number of specific flaws of the Lederman model including the lack of any requirement to exhaust administrative remedies, no limitation of recovery only to direct damages, and no monetary cap on damages recoverable or requirements that a taxpayer mitigate their losses.911
He also criticises the Lederman proposal as being just as anecdote-driven as the existing TBOR provisions.912 He additionally asserts that „further targeted, less radical reforms‟913 would be capable of achieving as much if not more than Lederman‟s proposed § 7438. The proposed reforms, argues Johnson, would lead
909 Johnson, above n 896, 407. 910 Ibid, 397. 911 Ibid, 398. 912 Ibid, 399-400. Lederman, for example, discusses at length the unsatisfactory outcome in the Lojeski case to lend support to her argument for a further statutory damages provision. 913 Ibid, 400. 338
to many cases of little merit, adding substantial costs in terms of time, effort and money on all parties and the courts.914 These criticisms extend to the risk Johnson sees of the new provision conflicting with existing rules and causing legal uncertainty. Finally, he suggests a possible chilling effect on the IRS of extending damages recovery as proposed by Lederman.915
Lederman formally responds to the Johnson critique.916 She maintains her stance, pointing to the symbolic benefits of extended taxpayer rights, the ability of her proposed remedy to eliminate the need for numerous further rounds of „piecemeal‟917 TBOR legislative efforts and rebutting each of Johnson‟s numerous specific criticisms in turn.
It is outside the scope of this study to seek to resolve the debate between Johnson and Lederman. However, the debate between these two commentators does serve to bring to light and demonstrate some of the difficult challenges likely to be encountered in drafting an appropriate Australian statutory damages remedy. Attention now turns to these challenges. Many of the specific issues raised by Johnson and Lederman will be examined again in this context.
914 Ibid, 401. 915 Ibid, 406. 916 Leandra Lederman, „Taxpayer Rights in the Lurch: A Response to Professor Johnson‟ (2000) 88 Tax Notes 1041. 917 Ibid, 1043. 339
PART III - LEARNING FROM THE UNITED STATES EXPERIENCE: FORMULATING AN
AUSTRALIAN STATUTORY DAMAGES REMEDY FOR ATO OPERATIONAL ACT OR
OMISSION CAUSING TAXPAYER LOSS
Armed with an understanding of the United States TBOR legislation and the context in which it has arisen, how it has evolved, how it is being applied, and the academic debate surrounding it, attention can now turn to formulation of an Australian statutory damages remedy. The proposal is to broadly base this remedy on the United States model but specifically aim to compensate taxpayer victims of ATO operational act or omission causing taxpayer loss. Accordingly, many of the specific elements and safeguards contained in the TBOR statutory damages provisions will be closely examined as part of the discussion below.
A – Defining the Operational Constraint
Arguably the most fundamental and difficult challenge to be addressed in drafting an Australian statutory damages remedy dealing with ATO operational act or omission causing taxpayer loss is the question of how to confine the remedy to „operational‟ activities of the Commissioner. There are a number of approaches which could be taken for dealing with this issue. The basic trade-off, however, is the choice between specifically listing the activities sought to be regulated as „operational‟ activities and generically describing the activities sought to be captured, leaving the detail of whether a case falls within the relevant broad category to the courts.918 Neither approach is completely satisfactory.
918 Historically the choice between detailed, specific drafting and more general simpler drafting was seen as a trade-off between precision and clarity. Proponents of this view include Ernest Gowers, The Complete Plain Words (1985), 559; David Mellinkoff, The Language of the Law (1963), 398, and Joe Kimble, „Plain English: A Charter for Clear Writing‟ (1992) 9 Thomas L Cooley Law Review 1, 53. For a comprehensive discussion of this argument and its proponents, see Brady Coleman, „Are Clarity and Precision Compatible Aims in Legal Drafting?‟ [1998] Singapore Journal of Legal Studies 376. However, there is an increasing recognition that „precision and clarity are not competing goals.‟ See Law Reform Commission of Victoria, Plain English and the Law, Report No 9 (1987), 48-49. 340
A detailed listing or definition of „operational‟ acts or omissions has the attraction of leaving less to chance and the prospect of the judiciary endowing the cause of action with a narrower or broader scope than intended by the legislature.919 The counter-point is the risk that such an approach could lead to criticisms of legislative attempts to micro-manage the tax administration function. This was a criticism raised in the debates preceding the introduction of the TBOR legislation in the United States.920 Bennett notes that in 1988 prior to the introduction of TBOR-1, the IRS were concerned with just this possibility:
IRS Commissioner Fred T. Goldberg, Jr., …did give notice that he believes that taxpayer rights provisions can sometimes do more harm than good, arguing against legislation that in his view “attempts to micro-manage tax administration or attempts to mandate good behaviour.” “These latter approaches are doomed to failure. At best, they will be a costly distraction; at worst, they could be counterproductive,” he warned.921
While there may be some merit in this stance, the specific context of the legislative reforms called for in this study - that one of the core objectives is the alleviation of complexity and uncertainty which is inherent in the suite of existing taxpayer avenues of relief - must be borne in mind. With this fact in mind, a „micro-management‟ approach to confining the operational constraint may be more appropriate than a generalised approach. The latter necessarily leaves much more scope for further judicial interpretation and uncertainty. Consequently, a „micro-management‟ approach to the definition of operational activities, albeit not ideal, may be preferable.
919 The problem of lack of specificity has been judicially explained as leaving the courts without guidance as to how questions should be answered and forcing the courts to adopt the role of legislators. See R v O‟Connor [1987] VR 496, 500. 920 Although this concern does not appear to have been raised in Australia in the debate leading to the introduction of the detailed provisions of the ADJR Act and the imposition of those provisions on public authority decision-making processes generally. Query, therefore, whether this concern would be a significant one in the Australian context. 921 Bennett, above n 776, 120. 341
An additional advantage of defining the operational parameter of the legislation in a relatively specific manner is that such an approach is more likely to provide useful advance guidance to the Commissioner as to the types of activities potentially capable of being made the subject of a taxpayer statutory damages claim. Bagshaw highlights the practical benefits for administrators of legislation drafted with this goal in mind:
Importantly, a project ought to go beyond determining what combination of rules best resonates with grand abstract principles or lends itself to elegant presentation in a textbook or judgment, and should confront the more difficult question of how well such rules will translate into instructions that administrators can (and ought to) use to settle disputes in a predictable and fair manner.922
While this appears to be an alluringly straightforward approach to the problem, there are two flaws that undermine the attractiveness of dealing with the operational parameter of the proposed remedy in this detailed and explicit way. First, as noted in Part I of Chapter 2 and Part II of Chapter 3 in discussing the tortious policy/operational dichotomy, the search for the dividing line between operational and policy-infused activities can be difficult to draw in some cases.923 No list of ATO operational activities could confidently be considered comprehensive or completely reliable. Inevitably, situations will arise in which otherwise meritorious claims will be unsuccessful merely because the rigidity of the specific approach would not allow sufficient scope to capture particular ATO activity as „operational.‟
Second, and most critically, the search for where the line should be drawn is a distraction from the more important search. This is the search for a remedy with a scope which addresses the inadequacies and inefficiencies identified in Chapter 5, without unduly compromising good tax administration practices. Unacceptable
922 Bagshaw, above n 832, 25. 923 Reflected in comments such as those of Mason J in Sutherland Shire Council v Heyman, above n 36, 469, to the effect that „[t]he distinction between policy and operational factors is not easy to formulate.‟ 342
fettering of the Commissioner in carrying out his vital tax administration and collection function must be avoided in order to fully achieve this objective. It is doubtful that reliance on a formal and inflexible definition of „operational‟ activity will achieve this goal in all, or even the vast majority, of cases.
This suggests that a third alternative to the characterisation of the operational constraint of the proposed legislation may be more appropriate. Such an alternative characterisation would strike a balance between the need for some specificity in defining the operational constraint, while being characterised by sufficient flexibility to ensure the broader objectives of the legislation are at all times kept in sight in its application. The aim is to respect the view that „neither precision nor simplicity should be sacrificed on the altar of the other.‟924
With this aim for balance between specificity and flexibility in mind, the approach recommended in the drafting of the statutory remedy in this study is to broadly define the Commissioner‟s operational sphere of activity.925 The balance between simplicity and precision is achieved through defining the term by exclusion rather than inclusion. In this way, the temptation to „micro-manage‟ the tax administration functions of the Commissioner is resisted. The operational constraint will be sufficiently flexible to capture activities not foreseen by the legislature. However, clear no-go zones which reflect existing statutory intentions and private law public policy concerns can still be readily incorporated and respected. This will aid in ensuring that the tax administration functions of the Commissioner are not unduly fettered. At the same time, both taxpayers and tax officials can proceed with some confidence as to scope of the proposed remedy.
924 Law Reform Commission of Victoria, above n 918, 48. 925 This approach broadly accords with what has been described as the „European‟ approach to legal drafting which Turnbull cites as the approach underlying tax simplification efforts of recent times. See Ian Turnbull, „Clear Legislative Drafting: New Approaches in Australia‟ (1990) 11 Statute Law Review 161, 164-165. See also Ian Turnbull, „Drafting Simple Legislation‟ (1995) 12 Australian Tax Forum 247. James and Walschutzky have also advocated such an approach to tax drafting. See James and Walschutzky, above n 814. The authors are, however, quick to point out that no legislative drafting method can completely eliminate the inherent complexity of many tax law principles. Equally, it would be unrealistic for any definitional approach to eliminate all the complexity of defining the operational activities of a public authority. 343
In effect, adopting this „definition by exclusion‟ approach, the operational constraint question becomes one framed in terms of what types of activity should be considered „operational‟ in light of the critical objective of ensuring the inadequacies and ineffectiveness identified in Chapter 5 are addressed, without undue compromise to good tax administration practices. This is a significantly more targeted and direct approach than any search for a definition of what is or is not technically an „operational‟ activity, in the hope that such a technical definition will indirectly achieve this objective.
With all of this in mind, it is specifically recommended that the definition of the operational constraint comprise two limbs. The first limb will comprise guidelines for determining whether an activity should be considered appropriate for judicial scrutiny as an „operational act‟ or „operational omission.‟926 The second limb defines as „exempted operational acts or omissions‟ those functions which are subject to specific existing statutory protection and which, if subjected to scrutiny via the statutory damages provision, would result in treatment inconsistent with those existing statutory protections. Subject to these two significant limitations, it is proposed that any activity of the Commissioner is capable of being captured as a regulated „operational‟ activity.
More specifically, the first limb of the definition would start with a basic definition of operational activity as activity in the nature of implementation of a policy decision. These clearly operational activities are prima facie capable of being the subject of a statutory damages claim. However, activities which display some policy characteristics are not automatically immune from scrutiny. For those activities, judges will be required to assess public policy concerns to determine whether the activity is sufficiently operational to fall within the ambit of the statute. The five factors included to guide the judiciary in this determination are:
926 See sub-section 1-7(1) of the model statutory damages remedy set out in Part IV of this Chapter. 344
(a) The character and severity of the plaintiff‟s loss; (b) Efforts made by the plaintiff in good faith to resolve the matter informally; (c) Efforts made by the plaintiff in good faith to mitigate his or her losses; (d) The justiciability of the complained of act or omission; and (e) Any demonstrable effect on desirable and effective tax administration practices of imposing liability.927
The first three factors aim to concentrate attention on the nature of the harm caused to the plaintiff taxpayer by the complained of act. Where these factors militate against the plaintiff taxpayer, there seems little incentive to risk any possible adverse outcome on tax administration practices which might result from imposing liability on the Commissioner.
The penultimate consideration captures the separation of powers and institutional competence concerns which underpin the justiciability base of the traditional tortious policy/operational dichotomy. The inclusion of this requirement that courts consider their capacity to evaluate the act or omission that is the subject of the complaint allows judges to, for example, directly address any concerns they might have in offending the separation of powers through intrusion into the legislative decision-making domain. This unveiled approach to dealing with justiciability concerns „enables a more nuanced approach‟928 to the problem of deciding the extent to which operational activities of the Commissioner are
927 This list is, in part, derived from the list of factors Jaffe has proposed as alternative considerations to address the concerns inherent in the policy/operational dichotomy. Jaffe‟s list is as follows: „the character and severity of the plaintiff‟s injury, the existence of alternative remedies, the capacity of a court or jury to evaluate the propriety of the officer‟s action and the effect of liability whether of the officer or of the treasury on effective administration of the law.‟ See Jaffe, above n 317, 219. 928 Writers such as Stanton advocate this „undisguised‟ approach to justiciability. He observes, in calling for abandonment of the policy/operational dichotomy in favour of a direct application of justiciability principles, that: „[c]haracterising a decision as “operational” or “policy” may well coincide with saying it is or is not justiciable. But viewing the matter as one of justiciability enables a more nuanced approach to the problem of deciding the extent to which decisions giving effect to policy should be subject to a concurrent private law liability.‟ Stanton et al, above n 87, 77. 345
appropriate for judicial scrutiny than a separate listing of each strand of the concept of justiciability.929
The final element allows some judicial flexibility for judges to directly address any further possible adverse consequences for good tax administration practices which might result from imposing liability in a particular case which are not captured by the preceding element. Clearly this factor opens the door for arguments to be raised regarding important public policy concerns such as over- defensiveness or indeterminate liability. Conversely, however, the requirement also is broad enough for any demonstrable positive motivational effects to be raised by plaintiff taxpayers as a counter to such concerns. The inclusion of the requirement of demonstrability aims to encourage judges to deal with such concerns with similar rigour as they would require of any other evidence presented to them, rather than accepting vague or anecdotal assertions of possible effects on tax administration practices of imposing liability.930
Notably, the definition makes no attempt to completely screen out discretionary matters, even though such matters would not satisfy the traditional private law characterisation of an operational activity. This path has been chosen as an attempt to shift the emphasis away from any question of whether discretion would be fettered as an „all or nothing‟ determinant of potential liability. Instead, the aim is to encourage a broader and more explicit weighing up of public policy issues to determine the ramifications of finding for or against the plaintiff taxpayer for proper administration of the taxation system.
This is not a new suggestion. For example, as discussed in Part II of Chapter 4, there have been academic calls for a similar approach to be adopted in the estoppel context:
929 The many strands of the concept of justiciability were introduced in Chapter 2. See the discussion in Part I of that Chapter. The issue was also re-examined in Part IV(B) of Chapter 5. 930 The detailed consideration in Part IV of Chapter 5 of the core public policy reasons often relied upon by judges in determining tax disputes demonstrated that some of these policy concerns may be readily challengeable if subjected to the same rules of evidence as are applied to other material proposed to be tendered as evidence. 346
The appropriate criteria to decide whether estoppel ought to be allowed should be the proper functioning of public administration. We should not be concerned about whether to allow an estoppel in a particular case would fetter public powers but rather whether as a general rule is more or less conducive to better public administration.931
It is understandable that there would be some nervousness around adopting such an approach in the application of remedies such as estoppel where the usual remedy is the denial of the right of the promisor to resile from his or her representation. This is obviously a significant concern in cases where the promisor is a public authority, and the result might be to turn a statutory discretion into a statutory duty. However, there is no need for such an „all-or-nothing‟ approach to the issue where the proposed remedy is monetary relief, even in the context of a no-fault liability provision such as that proposed in this thesis.932
To illustrate, assume the Commissioner wishes to resile from a clearly erroneous representation made to a taxpayer as a consequence of an operational act or omission which was reasonably and detrimentally relied on by the taxpayer. To bind the Commissioner to the representation in an estoppel action might offend core justiciability concerns, particularly if such a verdict was viewed as potentially fettering the discretion of the Commissioner. The problem, however, is that to render such matters non-justiciable does nothing to promote error free and conscionable tax administration practices. Nor would it foster confidence and trust between taxpayers and tax officials - with possible consequent adverse tax compliance consequences.933
931 Pagone, above n 420, 281-282. 932 The „all or nothing tendency‟ of the application of the justiciability doctrine in our courts is questioned extensively by Bayne in Peter Bayne, „The Common Law Basis of Judicial Review‟ (1993) 67 Australian Law Journal 781. 933 The link between voluntary compliance behaviour and fairness of treatment was discussed in Part IV(A) of Chapter 5. 347
However, imposing a monetary penalty on the Commissioner in these circumstances instead of injuncting or reversing the decision of the Commissioner arguably respects traditional justiciability concerns. Provided he is prepared to pay the monetary penalty, the Commissioner remains free to maintain his stance. However, the taxpayer is compensated, signalling a judicial recognition that he or she is the victim of what may be an undesirable tax administration practice.934
The main challenge to this element of the definition of the operational constraint is not, therefore, the shift away from adopting the traditional „policy‟ / operational delineations per se. It is the risk that application of the statutory remedy becomes little more than a complex exercise in judicial discretion.935 However, as already noted above, it is simply impossible to completely eliminate all complexity from such questions. As Fairgrieve has observed:
Another argument which is commonly invoked by dissenters is that the policy- operational distinction is inherently uncertain. Yet, uncertainty is effectively unavoidable...There is no acceptable bright-line method of delimiting justiciable and non-justiciable issues. It is inevitable that the courts will need to look closely at the factual basis of claims to ascertain whether it is appropriate for it to reassess a particular administrative act...936
The inevitability referred to by Fairgrieve will not be eliminated by any amount of attention to drafting of the „operational‟ constraint in the proposed statutory damages remedy.
934 A similar argument was made in the discussion of compensation and justiciability in Part II of Chapter 2. Objections to such an approach usually centre on the inadequacy of a monetary penalty for plaintiffs in many circumstances. This would not be expected to be a significant issue in the tax context where almost all claims would concern questions of monetary liability of the taxpayer in any event. For a generic discussion of this issue see Pagone, above n 420, 278. 935 Stanton has made similar comments in the context of discussion of the judicial trend toward determining negligence actions against public authorities by reference to a „checklist‟ of policy factors. See Stanton et al, above n 87, 98. See, also Jane Stapleton, above n 192; and Anthony Dugdale and Keith Stanton, Professional Negligence (3rd ed, 1998). 936 Fairgrieve, above n 78, 62. See also similar comments by Buckley, above n 58, 41; and Reynolds, above n 45, 128-129. 348
The second limb of the definition of „operational‟ acts or omissions937 is intended fundamentally to ensure consistency with existing statutory measures. Accordingly, it is proposed to specifically exempt from the operation of the statutory remedy any activity which would bring into question assessment activities which are not capable of being subjected to judicial review by virtue of s 175 or s 177 of the ITAA36.938 It is conceded that this is a significant limitation on the scope of the provision. However, to create inconsistency with existing legislative protections of the Commissioner would run contrary to the aim of correcting inadequacies of the existing array of taxpayer avenues of relief through alleviating uncertainty and complexity.
This limb of the definition is also aimed at ensuring that the remedy does not simply become a de-facto mechanism for challenging or objecting to assessments of substantive tax liability. Accordingly, it is similarly proposed to exclude the operation of the section where the mechanisms and procedures relating to objections, reviews and appeals of taxation decisions contained in Part IVC of the Taxation Administration Act 1953 (Cth)939 apply. If such a constraint was not included, any loss in the form of lawfully assessed tax liability might be sufficient to found a statutory claim insofar as operational activity was involved in making that assessment.
937 See sub-section 1-7(2) of the model statutory damages remedy set out in Part IV of this Chapter. 938 It will be recalled that, in accordance with s 175, an assessment in not invalid merely because the Commissioner has not complied with any provision of the ITAA36. Further, as observed above at n 670, s 177(1) provides that where the Commissioner produces a notice of assessment, that assessment will be conclusive evidence of the due making of the assessment and that the amount and details of that assessment are correct. In respect of the reach of s 175, the High Court recently observed in Commissioner of Taxation v Futuris Corporation Ltd, above n 124, 612, as follows: „The section operates only where there has been what answers the statutory description of an “assessment”. Reference is made later in these reasons to so-called tentative or provisional assessments which for that reason do not answer the statutory description in s 175 and which may attract a remedy for jurisdictional error. Further, conscious maladministration of the assessment process may be said also not to produce an “assessment” to which s 175 applies.‟ In effect, therefore, the majority in Futuris confine the availability of judicial review where a purported assessment is concerned to two circumstances: First, where what is said to be assessment is not in truth an assessment; and second, where there has been conscious maladministration. 939 Section 175A of the Income Tax Assessment Act 1936 (Cth) provides that a taxpayer who is dissatisfied with an assessment made in relation to the taxpayer may object against it in the manner set out in Part IVC of the Taxation Administration Act 1953 (Cth). 349
For the same reasons, it is also recommended that the existing provisions contained in Divisions 357-361 of the Taxation Administration Act 1953 (Cth) dealing with reliance on Rulings and other ATO advice and information also be preserved through excluding them from the purview of the new statutory provisions. Further, it is recommended that operational activities which would be excluded from judicial review by virtue of the restrictions on judicial review of decisions dealing with the calculation of tax contained in the Administrative Decisions (Judicial Review) Act 1977 (Cth)940 also be excluded from the definition of „operational‟ act or omission.
Notwithstanding these significant limitations on the scope of the proposed statutory damages remedy, an obvious and inescapable truth remains: The application of any approach to the confinement of the proposed statutory remedy by use of the operational activity constraint should not be looked upon as a complete solution for properly confining the operation of any proposed new statutory damages remedy. A number of other safeguards, limitations and clarifications are also worth considering. These include limits on quantum claimable, strict limitation periods, and costs penalties for unsuccessful claimants. Discussion of these and other safeguards, limitations and clarifications follows.
B - Limiting Recoverable Damages
As noted above, in formulating any Australian statutory damages remedy for ATO operational act or omission causing taxpayer loss, one of the key concerns will be to ensure that liability does not extend beyond what is reasonably required to correct the inadequacies and ineffectiveness identified in Chapter 5. As Bentley has observed, „[i]t is not in the interests of taxpayers, government or the revenue
940 The limitations on the judicial review of tax decisions imposed by this Act were discussed in Part III of Chapter 4 and Part IV of Chapter 5. 350
authority to undermine the operation of the tax system by over-reacting to abuse of the system by any party.‟941
In addition to limiting the scope of the remedy through the operational constraint as discussed above, there is a further critical way of minimising the prospect of the new cause of action resulting in the type of undermining of our system of tax administration alluded to by Bentley. This is through the incorporation of well considered and reasonable limits on the potential monetary liability of the Commissioner. The no-fault nature of the proposed cause of action heightens this need as, without appropriate monetary limits, the remedy might operate as a general right of indemnity against the Commissioner. Fordham has vividly cautioned against the formulation of a statutory damages remedy without incorporating reasonable limits on potential monetary liability aimed at avoiding such an outcome:
A “general right to indemnity” would be a disaster. It would turn judicial review into medical negligence-style bingo. We know that judges make choices with resource-implications in mind. Imagine recovery of damages for all foreseeable losses arising whenever a public body acts unlawfully, unreasonably or unfairly. The bill to the taxpayer would be huge.942
Few would argue with this suggestion.943 There are obvious valid concerns to ensure that liability pursuant to any statutory damages remedy should be significantly restricted in order to minimise possible adverse indeterminate liability/floodgates public policy outcomes and/or resultant possible chill factor/over-deterrence effects.
941 Bentley, above n 888, 55. 942 Fordham, above n 154. 943 Although writers such as Roots, who consider the potential long term benefits in terms of higher quality administrative action which might result from extensive public rights to recover from public authorities as far outweighing any short term negative effects, might take some issue with this conclusion. See Roots, above n 635, 71. 351
The question, therefore, is simply one of how to frame appropriate monetary liability constraints on the operation of a statutory damages remedy for ATO operational act or omission causing taxpayer loss. There are two general approaches to addressing this issue. The first is to limit the type of damage recoverable by plaintiff taxpayers. The second is to impose monetary limits on the quantum recoverable in any single claim.
As noted in Part II of this Chapter, a combination of both approaches has been applied in the United States TBOR legislation. Section 7433 imposes an upper monetary limit on quantum recoverable of US$100,000 in the event of negligence and US$1 million for any other breach of the provision by the IRS.944 In addition, however, § 7433(b)(1) requires that damages claimable be limited to „actual‟ direct economic damages sustained by the plaintiff.
The limitation of recovery to „actual‟ damages has attracted some academic attention. Meland, for example, asserts that the judicial interpretation of such terms will be the key determinant of whether the section is ultimately effective as a useful avenue of relief for aggrieved taxpayers.
The phrase “actual damages” is employed in many Federal statutes, but there is no plain meaning of “actual damages” at common law or elsewhere. Thus, the meaning and probable application of “actual damages” must be derived from the bill‟s purposes and its relationship with other Code provisions. In addition, it is appropriate to analyse this ambiguous language in light of its usage in other, analogous Federal statutes. In large part, the bill‟s effectiveness will be determined by judicial construction of this language.945
It is likely that „actual damages‟ simply refers to compensatory damages and seeks to exclude punitive damages from the ambit of recovery. Certainly, the
944 Sub-Section 7433(b). 945 Creighton Meland, „Omnibus Taxpayers‟ Bill of Rights Act: Taxpayers‟ Remedy or Political Placebo?‟ (1988) 86 Michigan Law Review 1787. 352
judicial approach in Olender v United States,946 one of the few cases in which the taxpayer has been successful under § 7433, goes some way toward validating this theory. In that case, Kovachevich J characterised actual damages as simply economic damages incurred as a proximate result of offending actions of an IRS employee. Her Honour further observed that „the plain language of this statute sets a maximum recovery rather than a statutory penalty.‟947 This is consistent with a compensatory rather than punitive interpretation of the term. Accordingly, in that case, the taxpayer claim for US$100,000 (the statutory cap on recovery in cases of negligence) was rejected, with recovery limited to identified losses of closer to US$6,000.
Notwithstanding, there remains some uncertainty about the meaning of the term. And, if Meland‟s fears are correct, then the qualification on the type of damage recoverable pursuant to § 7433 is likely to add general complexity and uncertainty to the applicability of the remedy. Accordingly, to avoid such complexity and uncertainty, it is recommended that an Australian statutory damages remedy avoid including express restrictions on the type of losses recoverable, aside from an unveiled reference to recovery of „çompensatory‟ damages. In any event, there seems to be little that additional restrictions would add to the Australian common law principles for determining damages recoverable including the usual rules of causation and remoteness. An added advantage of avoiding special statutory rules aimed at limiting the type of loss recoverable is that the approach will be consistent with other existing avenues of relief and long established legal principle in this country.
A far more desirable approach to confining potential liability is through imposing appropriate limits on quantum recoverable. The principles extra-judicially espoused by Lord Woolf are a good starting point for determining appropriate limits. His Lordship notes that in quantifying the appropriate scope of monetary liability imposed pursuant to any statutory damages remedy, „quantum of the
946 Above n 900. 947 Ibid, 6050. 353
award should be moderate. Certainly, the award should not exceed analogous awards made in the case of tortious claims and normally they should be on the low side by comparison to tortious awards.‟948
Adopting a conservative approach to the question of quantum of liability it is recommended that the proposed statutory damages remedy incorporate both upper and lower monetary limits.949 A cap on the maximum recoverable has the advantage of limiting the maximum exposure of the ATO for any particular claim. Accordingly, a cap of $100,000 is proposed, except where representative actions are involved, in which a $1 million cap on recovery is recommended given the likely large number of plaintiffs seeking compensation.950 A $100,000 cap is a sufficiently large amount to allow the section to deal with significant harm caused by ATO operational acts or omissions. However, it is not so large as to accommodate massive commercial claims which might have a significant impact on the Commonwealth revenue.951
A $100,000 limit is also consistent with the basic limits on a number of existing statutorily authorised avenues of compensatory relief. For instance, act of grace payments are only permitted beyond $100,000 when authorised by a report of an Advisory Committee.952 Similarly, Australian Public Service employment payments are only authorised up to $100,000 under s 73 of the Public Service Act 1999 (Cth). These existing guidelines lend weight to the choice of a $100,000 limit.953
948 Harry Woolf, „The Human Rights Act 1998 and Remedies‟ in Mads Andenas and Duncan Fairgrieve, Judicial Review in International Perspective (2000), 433-434. 949 Statutory measures which seek to quantify and set limits on damage recoverable have been advocated by writers such as Schuck who suggest that statutory damages provisions should operate as closely as possible as liquidated damages provisions operate in contracts. For discussion see Schuck, above n 689, 40. 950 See sub-section 1-2(1) of the model statutory damages remedy set out in Part IV of this Chapter. 951 The cap will obviously need to be reviewed from time to time to ensure it continues to fall within these parameters. 952 In accordance with s 33 of the Financial Management and Accountability Act 1997 (Cth). 953 The CDDA Scheme is an exception to the trend toward a $100,000 threshold. No monetary limit is set on payments under the scheme. However, departments are required to obtain legal 354
It is conceded, though, that such maxima do little to address the indeterminacy of claims concern in terms of the number of potential claims that might be brought against the Commissioner. This is arguably a more significant indeterminacy concern than the maximum quantum recoverable in respect of any individual successful claim.
This is where a minimum would be of some use. For example, frivolous or vexatious claims could be filtered out through this minimum quantum requirement. It is proposed to exclude claims for losses less than $5,000 from the scope of the provision.954 This effectively rules out the use of the provision as a forum for the resolution of small tax claims, and ensures that mechanisms such as ATO Internal Complaints and the Commonwealth Ombudsman do not become redundant. Small claims should be resolved informally and without recourse to time-consuming and expensive litigation.955
In effect, such a restriction is tantamount to the inclusion of a requirement of „materiality‟ of the offending activity without the problems which accompany difficult terms of that nature.956 Any materiality requirement would simply introduce an unnecessary layer of additional complexity and uncertainty. At best, such a requirement is unnecessary where, as proposed, the applicability of the
advice before approving any payment in excess of $25,000. See Finance Circular No 2006/05, above n 206, 13. 954 See sub-section 1-2(2) of the model statutory damages remedy set out in Part IV of this Chapter. In the United States context, Lederman has suggested a similar requirement that the taxpayer can demonstrate a loss of at least US$1,000 in order to bring an action. However, a higher limit of $5,000 has been chosen here given the no-fault nature of the proposed Australian remedy. The Lederman proposal was for a fault-based provision founded on common law concepts of negligence. See Lederman, above n 776. The $5,000 limit is also consistent with the current jurisdictional limit of the Small Taxation Claims Tribunal division of the Administrative Appeals Tribunal where an amount of tax liability is in dispute. 955 It will be recalled from the discussion in (i) above that even with claims that meet the $5,000 threshold judges are directed, in determining the operational justiciability of the complaint, to consider bona fide efforts made by the taxpayer to resolve the matter informally. 956 Lederman, in her detailed construction of a proposed broad United States statutory damages remedy against the IRS has proposed the incorporation of such a materiality requirement in the form of a search for a „material‟ breach of a legal obligation by the relevant revenue officer. For discussion and justification of the inclusion of such a materiality requirement see Lederman, above n 776. 355
remedy is limited by an appropriate monetary limit on loss claimable. There is likely to be a high correlation between the materiality of the relevant operational act or omission and the quantum of loss caused to any individual taxpayer.
The main flaw with this argument is a situation where small losses are caused to a large class of taxpayers. The example which has already been cited on numerous occasions in this study is the recent loss of the entire unencrypted child care payment database by HM Revenue and Customs in the United Kingdom.957 This would be an instance of a material and significant operational act or omission which may have collectively contributed to significant loss, but for which few, if any, taxpayers might be able to meet the $5,000 threshold for individual demonstrable loss.
For this reason, it is also proposed that the provision provide for the bringing of representative actions by a class of affected taxpayers where the collective quantum claimable exceeds the $5,000 threshold. The aggregation will, however, extend to ensure that only a single maximum of $1 million is claimable in total in such cases. This would assist in allaying indeterminate liability concerns which might otherwise arise in representative action cases. Save for these qualifications, the applicable rules for bringing such representative actions will be those rules set out in Part IVA of the Federal Court of Australia Act 1976 (Cth).958
C - Immunity for Individual Tax Officers
While the United States model for taxpayer rights has received some criticism in Australia, including from the Joint Committee of Parliamentary Accounts („JCPA‟), it should be noted that much of the resistance has been to the extension of taxpayer rights to recovery from individual tax officials in some cases as
957 See, for example, the discussion above at n 280 in Part II of Chapter 3, and also the discussion in Part V(D) of Chapter 4 in the context of the discussion of compensatory remedies available to Australian taxpayers for breaches of privacy. 958 See sub-section 1-5 of the model statutory damages remedy set out in Part IV of this Chapter. 356
distinct from limiting liability to the tax authority itself.959 McClennan notes this specific objection by the JCPA in the context of discussing the Australian Taxpayers‟ Charter:
In considering whether the Charter should go beyond the provision of common law rights to incorporate rights making officers of the ATO personally responsible for actions, the JCPA rejected the American model as likely to “stymie all administrative action” and not be supported.960
The JCPA stance is a reasonable one. It would be difficult to justify extension of recovery rights pursuant to a no-fault remedy to individual tax officers. In particular, there is a strong prospect that such an extension of liability to individual tax officers might encourage judges, in seeking to restrict the potential exposure of individuals, to more narrowly interpret the scope of the new statutory remedy than might have been envisaged by the legislature. It was noted in Part III of Chapter 3, in discussing the fact that the tort of misfeasance in public office is a personal tort, that this may be a contributing factor in the current restrictive judicial approach to the application of that common law action.961
Such an extension would also create strong incentives for individual tax officers to make decisions in an overly-defensive manner. There is a high risk of adverse chill-factor effects if such an approach was adopted.
Accordingly, it is strongly recommended that an Australian statutory damages remedy be restricted to permitting the bringing of an action only against the Commonwealth of Australia for a breach of the statutory provisions.962 No
959 This does not appear to be a criticism which can validly be directed at § 7433. Sub-section 7433(a) clearly limits recovery to actions against the United States in any action brought about by act or omission of an individual officer or employee of the Internal Revenue Service. 960 McClennan, above n 530, 25. McClennan was commenting on the observations of the JCPA in their 1993 report - Australian Joint Committee of Parliamentary Accounts, above n 516. 961 The majority in Northern Territory v Mengel, above n 298, note the policy concerns in this regard. See the comments reproduced above at n 348. 962 For this reason, the primary cause of action set out in sub-section 1-1(1) of the model statutory damages remedy set out in Part IV of this Chapter is expressly limited to an ability to bring action 357
exception should be entertained, even where the relevant officer has acted in bad faith and with malicious intent. This is because such cases are capable of being dealt with through application of the existing tort of misfeasance in public office. This ensures that deliberate torts such as misfeasance in public office retain their relevance in a taxpayer rights landscape that includes a statutory damages remedy for ATO operational act or omission causing taxpayer loss.
D - Interaction with Existing Avenues of Relief
There have been a number of allusions in the preceding discussion to mechanisms aimed at, or having the effect of, preserving the continuing role of existing taxpayer avenues of relief. Specific references have been made to the need to preserve a role for ATO Internal Complaints and other „informal‟ mechanisms such as the Commonwealth Ombudsman. In addition, as noted above, instances of malicious intent by individual tax officers are still envisaged as being most appropriately pursued through the tort of misfeasance in public office.
However, there will undoubtedly be significant overlap between the proposed statutory remedy and some existing avenues of relief. For instance, it would be difficult to see why a taxpayer would pursue an action in tort where the option to bring a statutory damages action was available. Tort would have an independent role only outside of the parameters of the statutory remedy. Similarly, in a case of an erroneous representation sought to be resiled from by the Commissioner, it is difficult to see why a taxpayer would pursue the very limited avenue of relief available through pursuing an equitable estoppel claim given the current restrictive judicial attitude to the justiciability of estoppel actions against the Commissioner of Taxation. The exception might be where the remedy sought by the taxpayer is not a monetary one. The proposed statutory remedy otherwise provides a much more palatable and straight-forward alternative. These are
against the „Commissioner of Taxation.‟ Lederman includes a similar limitation in her proposed new general statutory damages remedy by virtue of expressly limiting the right of recovery to an action against the Internal Revenue Service. See Lederman, above n 776, 1139. 358
precisely the avenues of relief which have displayed much of the ineffectiveness and inadequacy identified in Chapter 5. Accordingly, the proposed statutory remedy hits its target in this respect.
However, there is still the issue of ensuring that taxpayers faced with a number of alternative avenues of relief do not engage in forum-shopping or engage the Commissioner in drawn out scatter-gun legal proceedings in the vain hope of recovering from one or more forum. This issue needs to be dealt with in drafting the proposed statutory damages remedy.
The United States solution is to require taxpayers seeking to make a claim pursuant to § 7433 to first have exhausted all alternative administrative avenues of relief.963 As already noted in Part II, this limitation has proven to be an overwhelming hurdle for the vast majority of claimants. In 87% of claims in 2007, the claim was defeated on the basis that the plaintiff did not satisfy this requirement. The exhaustion of administrative remedies requirement was also a significant contributor to the 89% failure rate of taxpayer plaintiffs in 2008.964
Lederdman criticises this approach to the interaction between the statutory damages alternative and existing remedies. Referring to her proposal for incorporation of a new broad-based statutory damages remedy in the United States Tax Code as § 7438, Lederman asserts:
A mechanical requirement of exhaustion of administrative remedies might, in some cases, hinder the goal of section 7438. That is, exhaustion of remedies would do further harm in cases…where damages are exacerbated by delay…A more appropriate solution would be to provide in section 7438 that courts may
963 Sub-section (d)(1). 964 As noted by the United States Taxpayer Advocate. See National Taxpayer Advocate, above n 899, 596. Each case is listed in Table 4 of Appendix #3 of the Report. The data trail runs cold in 2009 with the issue falling out of the list of the top ten most litigated issues reported upon by the Taxpayer Advocate. See National Taxpayer Advocate, above n 901, 403. 359
consider whether failure to exhaust administrative remedies resulted in a failure to mitigate damages, and, if so, reduce the amount of damages awarded.965
While this approach has the attraction of flexibility which the strict requirement in § 7433 does not afford, it does little in the way of providing certainty for litigants in bringing their claims or for the Commissioner in defending those claims. Accordingly, the recommendation is that an Australian statutory damages remedy deal with the matter through requiring plaintiffs to make a binding election on commencing statutory damages proceedings.
In effect, if the taxpayer chooses to pursue a statutory damages claim, the taxpayer waives his or her right to pursue the matter through any alternative avenue of relief.966 In this way, it is anticipated that rather than duplicating or adding to the litigious burden on the court system, the new remedy may even operate to streamline and reduce the case load on both the Commissioner and the Courts.967 There remains, however, the possibility that a taxpayer may pursue alternative legal avenues before resorting to the statutory remedy. This possibility is minimised if a relatively short limitation period is applied to actions sought to be brought under the statutory remedy. This is because, if the limitation period is short enough, the taxpayer will be unlikely to have completed any common law claim prior to the option to bring a statutory claim also having expired. A limitation period of 2 years or shorter is likely to have this result. The merits of the imposition of a 2 year limitation period are discussed in (F) below.
An added benefit of the „election‟ approach is that it discourages a „litigate-first‟ attitude to application of the statutory damages remedy. Plaintiffs will know that the choice to pursue the statutory solution will extinguish any concurrent common
965 Lederman, above n 916, 1047. 966 See sub-section 1-1(2) of the model statutory damages remedy set out in Part IV of this Chapter. 967 It is pertinent to note that the more liberal approach to the issue by Lederman has been criticised by Johnson on the basis of the likely increased burden on the Courts that such a flexible approach would engender. Johnson notes: „The federal courts already confront burgeoning case loads, threatening the quality and timeliness of justice they dispense. Caution is required as we consider adding to this burden…‟ See Johnson, above n 896, 401. 360
law or administrative law rights. As noted in Part II of this Chapter, Johnson, in criticising the relatively liberal approach to access to statutory damages proposed by Lederman, has cautioned against creating such a „litigate-first‟ mentality among aggrieved taxpayers:
It is not hard to predict how behaviour would change under the new regime. Self- correction within the system would be an afterthought. Actually or arguably aggrieved taxpayers‟ first moves would be to file ... complaints in district court. A “litigate first” approach cannot be the way to achieve effective tax administration in this country.968
Nor is it an approach to be fostered in Australia.
E - Mitigation of Losses and Costs Sanctions
Two possible further issues addressed in the United States TBOR provisions are also worthy of specific attention in drafting an Australian statutory damages remedy. First, is the question of whether an express limitation to the effect that plaintiff taxpayers be required to have taken steps to mitigate their losses prior to seeking to recover statutory damages should be adopted. Second, is the issue of whether a costs sanction should be used to either encourage or discourage the commencement of proceedings. Both of these issues have been the subject of substantial debate in the United States.
In respect of the mitigation requirement, § 7433(d)(2) expressly provides that any damages awarded will be reduced by the amount that could reasonably have been mitigated by the plaintiff taxpayer.969 While there is undoubtedly some merit in this inclusion in terms of discouraging vexatious litigants and a „litigate first‟
968 Steve Johnson, ibid, 398. 969 Aside from some initial hesitation by commentators such as Lederman, there is no academic criticism of the inclusion of this requirement in the United States legislation. Even Lederman ultimately concedes, in the context of discussing the content of her proposed new broad-based statutory damages remedy, that „proposed section 7438 could be improved by the…addition of a provision for taxpayer mitigation of damages.‟ See Lederman, above n 916, 1051. 361
mentality, dealing with the issue in this way in an Australian statutory damages remedy is not recommended. Rather than the issue being dealt with as a separate restriction, the matter should be left to the discretion of the courts as one of the factors to be weighed up in the determining whether the complained of activity is a justiciable operational act or omission as discussed in (A) above.970
The reason for dealing with the issue in this way is that it encourages courts to consider the issue as part of the necessary broader weighing up of individual taxpayer interests against the implications for good tax administration practices of imposing liability on the ATO. It intrinsically links the issue of mitigation of loss to broader questions of public policy. The desired effect of dissuading vexatious litigants and also repelling the adoption among taxpayers of a „litigate-first‟ mentality is not lost by treating the issue in this way.
Turning to the question of using costs sanctions to either encourage or discourage the use of the statutory damages provision, the issue was first addressed in the United States in TBOR-1. TBOR-1 introduced the possibility of a successful taxpayer being awarded their legal costs from the IRS. TBOR-2 expanded this right through altering the burden of proof. Greenbaum explains the change:
The burden in TBR1 was that, the taxpayer had to establish that the position of the government in the proceeding was not substantially justified, before the taxpayer was able to recover legal fees from the government. TBR2 shifts the burden to the government to prove that its position was substantially justified.971
A significant motivator for taxpayers utilising the unauthorised collection activity provisions is that there is no commensurate costs provision included in the event of the IRS being successful in defending a taxpayer action. Critics such as
970 See the definition of „operational act‟ in sub-section 1-7 of the model statutory damages remedy set out in Part IV of this Chapter. 971 Greenbaum, above n 872, 158. 362
Greenbaum point to this inequity as counterproductive to the goal of fostering good tax administration practices.972
To avoid similar inequities in Australia, the proposal is to preserve the rights of the Commissioner to recover legal costs if successful in defending a taxpayer claim. Further, the recommendation is that courts be provided with the ability to make a costs order in favour of the Commissioner on a solicitor/own client basis in the event of a taxpayer claim being deemed vexatious or frivolous.973 Further, claims in which the taxpayer claims less than the $5,000 minimum recoverable pursuant to the section should be able to be deemed „vexatious or frivolous‟ to further discourage the use of the provision for mass small claims against the Commissioner.974 The aim is to unambiguously discourage potential vexatious litigants or frivolous claims.
To balance these potential costs sanctions against taxpayers, taxpayers should be able to claim their legal costs in the event of a successful claim. However, in order to address indeterminacy of liability public policy concerns, it is recommended that such costs should be included in the $100,000 cap on recovery in any single successful claim.975 In some cases this may see the taxpayer disadvantaged through not being able to claim their costs in full in the event of a successful claim. Indexing of the cap to inflation is, therefore, strongly advisable to ensure that over time there is no erosion in the maximum level of indemnification in real terms.
972 Ibid, 159. 973 See sub-section 1-4(1) of the model statutory damages remedy set out in Part IV of this Chapter. 974 See sub-section 1-4(2) of the model statutory damages remedy set out in Part IV of this Chapter. 975 See sub-section 1-2(1) of the model statutory damages remedy set out in Part IV of this Chapter. 363
F - Limitation Periods and Appeal Rights
On the question of an appropriate limitation period, again the United States experience is enlightening. It has been noted by the United States Taxpayer Advocate Nina Olsen in her recent Annual Report to Congress that the two year statute of limitations restriction in § 7433 was significant in restricting availability of relief in a large number of cases.976
Certainly, in setting a limitation period there is a trade-off between ensuring that taxpayer rights are not prematurely extinguished while ensuring that ATO activities are not subject to the contingency of judicial scrutiny for an indefinite or inordinately lengthy period of time. The ramifications for the public purse of the latter are particularly significant and have been canvassed in the context of academic discussion of unjust enrichment claims for invalid tax collection activities.977
Striking the appropriate balance is difficult. Adopting an arrangement reflecting the current legislative provisions relating to the Commissioner‟s powers to amend taxpayer assessments where the taxpayer‟s affairs are not „complex‟ may be a useful compromise. This approach would at least create some symmetry by subjecting the Commissioner‟s activities to review for a similar time period to that which applies to the Commissioner‟s ability to review taxpayer assessments. In effect this approach leads to a recommendation that taxpayers be barred from bringing statutory damages claims more than two years after their cause of action has arisen.978
976 See National Taxpayer Advocate, above n 879, at 516 where it is observed that the issue was raised in 9 of the 78 § 7433 cases in 2008. The issue is not addressed in the 2009 Taxpayer Advocate Annual Report to Congress as litigation under § 7433 fell outside of the top ten most litigated issues discussed in the Report. See National Taxpayer Advocate, above n 901, 403. 977 As discussed in Part II of Chapter 4. 978 See sub-section 1-3 of the model statutory damages remedy set out in Part IV of this Chapter. This mirrors s 170(1) of the ITAA36 which provides that the Commissioner can amend a taxpayer‟s Notice of Assessment within 2 years after the notice of the assessment is given to the taxpayer where the taxpayer does not have „complex affairs.‟ 364
It is conceded that a two year limitation period might well result in taxpayers who have chosen first to pursue an existing civil law avenue of relief having their right to make a statutory damages claim extinguished prior to the final disposition of their civil law claim. However there are strong policy arguments weighing against this potential disadvantage to some individuals. Among these is ensuring that the statutory remedy is not used as a de facto re-hearing mechanism. Benefits include reducing the probability that the statutory remedy will add to existing court case loads through the same complaint being heard more than once. Further taxpayers will be encouraged to utilise the express tax-specific statutory remedy in preference to the ineffective and inadequate existing civil law avenues of relief.
A final issue and one which does not appear to have been directly addressed in § 7433 of the United States Code is the question of appeal rights.979 Given the need to ensure that the Commissioner is not unduly engaged in protracted and expensive litigation, some reasonable limits on appeal rights available pursuant to an Australian statutory damages remedy should be imposed. It is, therefore, specifically recommended that appeal rights be restricted to questions of law and that any appeal be filed within 28 days of the date of any judgment.980 In this way it is anticipated that appeals will generally only be pursued by those with a genuine issue raising one or more questions of legal significance.
979 The usual rights of appeal applicable to United States District Court determinations - appeals to the United States circuit Courts of Appeal within 30 days of entry of final judgment - would appear to apply. 980 See sub-section 1-6 of the model statutory damages remedy set out in Part IV of this Chapter. 365
PART IV - THE AUSTRALIAN STATUTORY DAMAGES REMEDY PRESENTED
Using the template provided by § 7433 of the United States Code and incorporating into that template the modifications and features discussed above, the proposed Australian statutory damages remedy for ATO operational act or omission causing taxpayer loss should broadly accord with the following provisions:981
Division 1 Civil damages for certain operational tax administration activities
1-1 Cause of Action (1) If, in connection with the collection and/or administration of any Commonwealth tax with respect to a taxpayer, any officer or employee of the Commissioner of Taxation commits an operational act, or operational omission causing taxpayer loss, the taxpayer suffering that loss may bring a civil action for compensatory damages against the Commissioner of Taxation in the Federal Court.
(2) If the taxpayer elects to bring civil action pursuant to sub-section (1), that action will be the exclusive remedy for recovering damages resulting from such operational act or operational omission. The taxpayer will be taken to have irrevocably waived his or her rights in respect of any other cause of action giving rise to a right to damages in respect of such operational act or operational omission.
981 Of course, the author does not purport to have the drafting skills of Parliamentary Counsel. Accordingly, the provisions contained in this Part are simply intended to be an indicative example of the general form the proposed remedy might take, rather than a final product subjected to scrutiny of Parliamentary Counsel and the rigours of the political process. 366
1-2 Damages (1) Subject to sub-section 1-5, in any action brought under sub- section 1-1(1), upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of $100,000 or the sum of - (a) damages sustained by the plaintiff as a proximate result of the actions of the officer or employee; and (b) the costs of the action.
(2) Subject to section 1-5, no liability will arise under this section with respect to any act that results in total damages to the taxpayer of less than $5,000.
1-3 Period for bringing action Notwithstanding any other provision of law, an action to enforce liability created under this section may be brought only within 2 years after the date the right of action accrues.
1-4 Vexatious or frivolous claims (1) If the Court determines that the claim of a taxpayer brought pursuant to this section is vexatious or frivolous, the Court may at any stage of the proceedings dismiss the claim of the taxpayer and order that the taxpayer pay the legal costs of the Commissioner of Taxation assessed on a solicitor/own client basis.
(2) Without limiting the discretion of the Court to make an Order in accordance with sub-section 1-4(1) the Court may deem any claim by a taxpayer brought with respect to any act which results in total damages to the taxpayer of less than $5,000 to be vexatious or frivolous.
(3) Nothing in this section 1-4 is to be construed as limiting the rights of the Commissioner of Taxation to claim legal costs in the event 367
of successfully defending a taxpayer claim pursuant to this Division.
1-5 Representative Actions (1) A taxpayer will be permitted to participate in a representative action proposed to be brought in accordance with Part IVA of the Federal Court of Australia Act 1976, in which the aggregate claimed in the said proposed representative action exceeds the amount set out in sub-section 1-2(2) notwithstanding that the said taxpayer claim would not otherwise meet the requirements of sub- section 1-2(2).
(2) In any action under this sub-section 1-5, upon a finding of liability on the part of the defendant, the defendant shall be liable to the plaintiff in an amount equal to the lesser of $1,000,000 or the sum of - (a) damages sustained by the plaintiff as a proximate result of the actions of the officer or employee; and (b) the costs of the action.
1-6 Appeals (1) Any party to proceedings brought pursuant to this section may appeal the judgment to the Full Federal Court on the basis of an error of law.
(2) Any appeal must be lodged with a period of 28 days from the date of the judgment.
1-7 Definitions For the purposes of this section: (1) operational act or operational omission means any act or omission which is the carrying out of some policy and which is not an exempt operational act or exempt operational omission. Where the 368
operational act or omission appears to be a policy act or omission it may still be regarded as operational if it is; (a) on balance, assessed as appropriate for judicial scrutiny after consideration of each of the following factors; (i) The character and severity of the plaintiff‟s loss; (ii) Efforts made by the plaintiff in good faith to resolve the matter informally; (iii) Efforts made by the plaintiff in good faith to mitigate his or her losses; (iv) The justiciability of the complained of act or omission; and (v) Any demonstrable effect on desirable and effective tax administration practices of imposing liability; and; (b) it is not an exempt operational act or exempt operational omission.
(2) exempt operational act and exempt operational omission mean, respectively, any act or omission which, if made the subject of a claim pursuant to this Division 1, would result in a treatment of the act or omission which is inconsistent with the treatment of the said act or omission pursuant to any pre-existing legislative provision including, without limitation:
(a) Sections 175, 175A and 177 of the Income Tax Assessment Act 1936; (b) Part IVC of the Taxation Administration Act 1953; (c) Divisions 357-361 of the Taxation Administration Act 1953; and (d) The Administrative Decisions (Judicial Review) Act 1977.
369
PART V - CONCLUSIONS
The ultimate conclusion reached in this Chapter – the presentation of a proposed model no-fault Australian statutory damages remedy – is undoubtedly not the final word on the matter. There will clearly be a number of practical issues which will impact upon the ultimate success of the proposed remedy. These are matters which are worthy of note.
For example, the challenge facing policy makers in guiding judges in interpreting the scope of the provision and, in particular, the weight to be afforded to various public policy concerns is a significant one. So is the related question of distinguishing between operational and exempt activities. The task of convincing legislators to take up this challenge and to deal with it in a full and effective manner will not be an easy one. The explicit approach to public policy proposed is novel and legislators are likely to be uncomfortable with it.
Judges will also need to be convinced to take a new approach to matters of statutory authority monetary liability. It is also conceded that there will remain a significant discretionary role for judges in interpreting and determining the intended and proper scope of the proposed remedy, irrespective of legislative efforts to guide the exercise of that discretion. The five factors proposed in the model remedy presented in this Chapter are a starting point but do not absolve judges from having to continue to address difficult questions of justiciability and the effect on tax administration practices of imposing liability on the Commissioner.
It is unlikely, therefore, that the enactment of the proposed remedy will be a „once and for all‟ exercise. Legislators will need to be mindful of the fact that the complex policy issues underlying the field of taxpayer authority monetary liability are unlikely to be resolved in one simple legislative instrument, however well- intentioned or constructed. Even if they could, community attitudes toward these issues evolve and change over time. Accordingly, researchers and academics are also likely to be required to play a role in ensuring the effectiveness of the proposed remedy beyond its initial implementation. In particular, work to 370
periodically test the validity and strength of the various public policy concerns which impinge upon this field will undoubtedly fall to these stakeholders.
371
CHAPTER 8 - CONCLUSION
This thesis argues that a no-fault statutory damages remedy is needed to adequately and effectively compensate taxpayers for losses caused by ATO operational acts or omissions. It establishes that existing compensatory avenues of relief available to taxpayers where there is loss caused by an ATO operational act or omission are neither individually effective nor collectively adequate. In particular, judges presently determine taxpayer claims in a manner that is not consistent, predictable or built upon a solid foundation of precedent and legislative direction. Instead, untested public policy concerns are determinative.
These judicial deficiencies in determining taxpayer claims are of utmost concern. They are more concerning than the fact - also identified in this thesis - that taxpayer attempts to recover compensation from the ATO will usually fail.982 Taxpayers should not expect success in every compensation claim for loss caused by ATO operational activity. They are, however, entitled to expect every claim for compensation to be dealt with in a legally robust and defensible manner. This is a minimum requirement for the proper administration of justice and to ensure confidence in our system of tax administration is maintained.983
The preoccupation in this thesis with procedural justice rather than taxpayer claim outcomes is consistent with the fact that this thesis has not set out to make any assertion about the extent to which taxpayer private law rights to sue the ATO for
982 The analysis of the existing avenues of relief contained in Chapters 3 and 4 bears this out. Taxpayer track record of success in compensatory claims against the Commissioner is summarised in Part II(F) of Chapter 5. 983 The relevance of taxpayer confidence and trust in the ATO for encouraging taxpayer compliance has been discussed on numerous occasions in this thesis. See, for example, the discussion in Part I(B) of Chapter 2. In turn, trust and confidence is built upon perceptions of fairness, and procedural justice is a key indicator of fairness. Murphy has specifically studied and confirmed the link between procedural justice and taxpayer compliance. See Kristina Murphy, above n 116. Any specific link between the availability of effective avenues of taxpayer compensatory relief when operational mistakes are made and taxpayer compliance, while intuitively logical, has not been tested. It would be a useful avenue for further investigation. 372
compensation should impinge on ATO public law tax administration powers.984 Therefore, while the case law examined in this thesis clearly shows that the trade- off between taxpayer rights and tax administration powers in taxpayer damages actions is presently heavily skewed in favour of the ATO, this thesis makes no judgment on whether this is appropriate or desirable.985 The focus is on the identified deficiencies in legal process and principle which have tipped the scales of justice in favour of the ATO. These are the sole basis for the conclusion in this thesis that existing avenues of compensatory relief are both individually ineffective and collectively inadequate.
Insofar as effectiveness is concerned, this thesis identifies six separate measures - scope of application, mental element requirements, public policy hurdles, reliability, neutrality, and track record of success.986 The results of testing the effectiveness of each existing avenue of relief against these measures are clear and revealing.987 Each existing avenue of relief fails on at least one measure of effectiveness. Save for Privacy Act relief and recourse to the Commonwealth Ombudsman, all avenues of relief fail on at least two of the measures of effectiveness. With the exception of the tort of negligence, all of the tortious and equitable avenues of relief examined fail four of the six measures of effectiveness. The problems clearly run deeper than simply a lack of taxpayer success.
The results of the assessment of systemic adequacy in this thesis confirm this fact and highlight procedural deficiencies as the key problem. This thesis demonstrates that the existing combination of available remedies and their application and interpretation by courts has resulted in an uncertain, highly complex and restrictive legal environment for taxpayers seeking compensation for loss-causing ATO operational acts or omissions. Further, there are unexplained inconsistencies
984 The stance that this thesis would not seek to resolve the fundamental tension between taxpayer private rights and ATO public powers was foreshadowed in Chapter 1. It was reiterated and elaborated in Part III(A) of Chapter 5. 985 This would undoubtedly be a fertile matter for further and independent investigation. This study clears the way for such further investigation. However this thesis has not attempted to cover that territory. 986 These were fully explored in Part II of Chapter 5. 987 See Table 5.1 in Part II of Chapter 5 for a tabular summary of the results. 373
between the judicial application of core tortious and equitable principles in tax cases and non-tax cases. Specifically, the results show that public policy concerns, particularly around justiciability, separation of powers, floodgates/indeterminate liability and protection of the revenue underpin the existing restrictive judicial approach to compensatory claims against the ATO.988
The case for statutory reform to correct these deficiencies is compelling. A statutory approach alleviates the risk of creating judicial complexity through piecemeal incremental judicial development in the regulation of ATO operational activities.989 Given that judicially-generated uncertainty and inconsistency is a major source of the existing inadequacy and ineffectiveness, this factor weighs heavily in favour of a statutory solution. The case for a legislative solution is sealed by the further fact that legislative reforms are clearly best suited for allaying public policy concerns, especially those around justiciability and separation of powers which have heavily influenced judicial thinking in the cases to date.990
The argument for applying a no-fault standard for liability in the statutory remedy is similarly compelling, especially once it is accepted that a tortious standard of fault-based liability is the only practically likely alternative.991 In particular, the possibility of entrenching a „twin-track‟ approach by tailoring special tortious rules for application in a tax context is a strong disincentive for adopting a tax- specific statutory solution based on tortious standards of care. This thesis has shown that courts are already applying a twin-track approach by treating cases against the ATO differently to cases involving disputes with other public
988 These results are drawn from the analysis in Part III(B) of Chapter 5. 989 This argument is elaborated in Part II of Chapter 6. 990 As discussed in Part II(D) of Chapter 6. 991 Despite some attractions in terms of suitability for dealing with public authority liability, crafting an administrative law solution aimed at providing compensation to deserving taxpayers was ultimately viewed as inconceivable given the current long-standing statutory and judicial approach to barring the availability of compensatory relief in administrative law judicial review proceedings. See the discussion in Part II(A) of Chapter 6. A restitutionary approach was not considered appropriate as restitution is not equivalent to compensation. See further above at n 829. 374
authorities.992 This thesis has argued that legislative reform is needed to reverse this trend. A tax-specific tortious approach risks the opposite - legislatively enshrining a tortious double-standard.993
This thesis has addressed concerns about the potential ambit of a no-fault remedy and has demonstrated that these can be easily allayed without abandoning its strict liability foundation. This thesis argues that the no-fault statutory remedy must be framed with care to ensure consistency with existing statutory limitations on taxpayer recovery.994 It must have strict monetary caps, tight limitation periods, limited appeal rights, include forum-shopping disincentives and costs sanctions for frivolous or vexatious claims. It must encourage mitigation of losses and negotiated settlements. The statutory remedy presented in Chapter 7 displays all of these characteristics.
Its key characteristic, however, and that which goes furthest in addressing the systemic inadequacies identified in this thesis, is its requirement that judges in tax cases deal with public policy concerns in a direct, express and questioning manner. The proposed reforms specifically call for a case-by-case judicial assessment in difficult cases of (1) the justiciability of the complained of activity; and (2) the demonstrable effect on desirable and effective tax administration practices of imposing liability on the ATO.995 Additionally, the recommended statutory damages remedy requires judges to consider both positive and negative policy concerns. Critically, it also requires judges to consider the demonstrability of these concerns.
992 This is the substance of the argument made in Part III(B) of Chapter 5. 993 The fact that a no-fault remedy would constitute a „fresh start‟ alternative generally minimises the risks of entrenching rather than correcting the inadequacies of the existing fault-based remedies. This argument is elaborated in Part III(B) of Chapter 6. 994 It was recommended in the preceding Chapter that any statutory damages remedy be expressly drafted so as to preserve the existing specific protections of tax assessments and procedures for challenging those assessments contained in ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth), Part IVC and Divisions 357-361 of the Taxation Administration Act 1953 (Cth), and the Administrative Decisions (Judicial Review) Act 1977 (Cth). 995 See Part III(A) of Chapter 7. 375
In effect, judges will need to subject public policy concerns to some degree of evidentiary scrutiny rather than accepting them according to their inherent appeal to logic. This thesis reveals that there is sufficient uncertainty in the existing academic studies and commentary and enough gaps in those studies and commentary to warrant the application of at least some judicial scepticism.996 The statutory remedy demands that judges subject policy concerns to this type of scrutiny.
The result would be a vast improvement on the current situation for the ATO, taxpayers and their advisers alike. The required judicial transparency and consistency in the treatment of public policy issues would provide the certainty and clarity currently lacking for all tax administration stakeholders. At the same time, the recommended approach is flexible enough to ensure that legal precedent in cases of loss-causing ATO operational act or omission is developed and applied in a way that is sensitive to traditional policy concerns but not hostage to those concerns.
The reform recommendations in this thesis undoubtedly burden legislators with the responsibility for dealing with difficult questions of public policy, taxpayer rights and tax administration operational standards. It is clear, though, that legislators ultimately need to take the lead in dealing with these issues rather than leaving judges to operate largely in a legislative vacuum in determining taxpayer compensation claims. This legislative vacuum has allowed the ineffectiveness and inadequacies exposed by this thesis to flourish. Through recommending the enactment of a no-fault statutory damages remedy, this thesis provides a primer for the filling of that vacuum. From this position we are less likely to see any further unconscious „erosion of taxpayer rights in the name of exaction of taxes‟997 in cases of ATO operational act or omission causing taxpayer loss.
996 As evidenced by the literature reviewed in Part IV of Chapter 5. This is a field ripe for further empirical or other testing. Given the increasing recognition of the significance of public policy concerns in cases involving the assertion of private law rights against public authorities, the time is right for such attention to be cast on public policy concerns. 997 Hill, above n 637, 1005. 376
BIBLIOGRAPHY
PART I - ARTICLES & BOOKS
Abel, Richard, „A Critique of Torts‟ (1990) 37 UCLA Law Review 785
Alexander, Mary, „Equitable Estoppel: Does Governmental Immunity Mean Never Having to Say You‟re Sorry?‟ (1981) 56 St. John‟s Law Review 114
Allan, Trevor, „Legislative Supremacy and the Rule of Law: Democracy and Constitutionalism‟ (1985) 44 Cambridge Law Journal 111
Allars, Margaret, Introduction to Australian Administrative Law (1990)
Allars, Margaret, „Tort and Equity Claims Against the State‟ in Finn, Paul (ed), Essays on Law and Government (1996) vol 2, 49
Allison, John, „The Procedural Reason for Judicial Restraint‟ [1994] Public Law 452
Amos, Merris, „Extending the Liability of the State in Damages‟ (2001) 21 Legal Studies 1
Andenas, Mads and Fairgrieve, Duncan, Judicial Review in International Perspective (2000)
Andenas, Mads and Fairgrieve, Duncan, „Misfeasance in Public Office, Governmental Liability and European Influences‟ (2002) 51 International and Comparative Law Quarterly 757
Andrews, J A, „Estoppels against Statutes‟ (1966) 29 Modern Law Review 1
377
Archer, Peter and Martin, Andrew (eds), More Reform Now: A Collection of Essays on Law Reform (1983)
Aronson, Mark, „Government Liability in Negligence‟ (2008) 32 Melbourne University Law Review 44
Atrill, Simon, „The End of Estoppel in Public Law?‟ (2003) 62 Cambridge Law Journal 3
Bagshaw, Roderick, „Monetary Remedies in Public Law - Misdiagnosis and Misprescription‟ (2006) 26 Legal Studies 4
Bailey, Stephen and Bowman, Michael, „The Policy-Operational Dichotomy - Cuckoo in the Nest‟ (1986) 45 Cambridge Law Journal 430
Baker, D, „Maladministration and the Law of Torts‟ (1986) 10 Adelaide Law Review 207
Baker, Philip, „Taxation and the European Convention on Human Rights [2000] British Tax Review 211
Balkin, Rosalie and Davies, Jim, Law of Torts (2nd ed, 1996)
Bamforth, Nicholas, „Fairness and Legitimate Expectation in Judicial Review‟ (1997) Cambridge Law Journal 1
Baxt, Robert, „Taxpayers‟ Bill of Rights‟ (1993) 22 Australian Tax Review 161
Bayne, Peter, „The Court, the Parliament and the Government - Reflections on the Scope of Judicial Review‟ [1991] 20 Federal Law Review 1
Bayne, Peter, „The Common Law Basis of Judicial Review‟ (1993) 67 Australian Law Journal 781 378
Beatson, Jack, „Restitution of Taxes, Levies and Other Imposts: Defining the Extent of the Woolwich Principle‟ (1993) 109 Law Quarterly Review 401
Bennett, Bob, „The Myth of Taxpayer Rights‟ (1990) 47 Tax Notes 611
Bennett, Bob, „What‟s Wrong with Taxpayer Rights?‟ (1990) 47 Tax Notes 477
Bennett, Bob, „The Slow Road to Real Taxpayer Rights Protections‟ (1991) 53 Tax Notes 119
Benson, Peter, „The Basis of Corrective Justice and its Relation to Distributive Justice‟ (1992) 77 Iowa Law Review 625
Bentley, Duncan, „A Taxpayers Charter: Opportunity or Token Gesture‟ (1995) 12 Australian Tax Forum 1
Bentley, Duncan, „The Taxpayers‟ Charter: More than a Mission Statement‟ (1995-1996) 4 Taxation in Australia Red Edition 259
Bentley, Duncan, „Formulating a Taxpayers‟ Charter of Rights: Setting the Ground Rules‟ (1996) 25 Australian Tax Review 97
Bentley, Duncan (ed), Taxpayers‟ Rights: An International Perspective (1998)
Bentley, Duncan, „Taxpayers‟ Rights: Current Trends and Themes from an International Perspective‟ in Evans, Chris and Greenbaum, Abe (eds), Tax Administration: Facing the Challenges of the Future (1998) 357
Bentley, Duncan, Taxpayers‟ Rights: Theory, Origin and Implementation (2007)
Berger, Raoul, „Estoppel Against the Government‟ (1954) 21 University of Chicago Law Review 680 379
Bevacqua, John, „The Plaintiff-Proof Barrier: The Justiciability of Activities of the Commissioner of Taxation in Tortious and Equitable Estoppel Taxpayer Claims‟ (2008) 1 Journal of the Australasion Law Teachers Association 365
Bevacqua, John, „A Detailed Assessment of the Potential for a Successful Negligence Claim against the Commissioner of Taxation‟ (2008) 37 Australian Tax Review 241
Bevacqua, John, „The Duties of Tax Commissioners: The Sustainability of the General Judicial Denial of Any Tortious or Equitable Duties to Australian and New Zealand Taxpayers‟ (2009) 4 Journal of the Australasian Tax Teachers Association 95
Birks, Peter, „Restitution from Public Authorities‟ (1980) 33 Current Legal Problems 191
Book, Leslie, „The Collection Due Process Rights: A Misstep or a Step in the Right Direction‟ (2004) 40 Houston Law Review 1145
Booth, Cherie and Squires, Dan, The Negligence Liability of Public Authorities (2006)
Bowal, Peter and Wanke, Irene, „Taxpayers‟ Rights‟ (1999) 23 Law Now 8
Bowman, Michael and Bailey, Stephen, „Negligence in the Realms of Public Law: A Positive Obligation to Rescue?‟ [1984] Public Law 277
Bradgate, Robert, „Anns: The Retreat Continues‟ (1988) 51 Modern Law Review 382
Braithwaite, Valerie and Levi, Margaret (eds), Trust and Governance (1998)
380
Brand, Phil, „Compliance: A 21st Century Approach‟ (1996) 49 National Tax Journal 213
Brauenstein, Michael, „In Defense of a Traditional Immunity: Toward an Economic Rationale for not Estopping the Government‟ (1982) 14 Rutgers Law Journal 1
Brock, Margaret, „Restitution of Invalid Taxes - Principles and Policies‟ (2000) 5 Deakin Law Review 127
Brodie, Douglas, „Public Authorities and the Duty of Care‟ [1996] Juridical Review 127
Broom, Herbert, A Selection of Legal Maxims (3rd ed, 1852)
Brown, Stuart, „Bad Faith and Issuing Assessments: Atkinson v FCT‟ (1996) 25 Australian Tax Review 49
Buckley, Richard, „Negligence in the Public Sphere: Is Clarity Possible?‟ (2000) 51 Northern Ireland Legal Quarterly 25
Busch, Lisa, „Standards of Review of Administrative Decision-Making and the Role of Deference in Australian Public Law‟ (2006) 11 Judicial Review 363
Butler, Desmond, „A Comparison of the Adoption of the Ipp Report Reforms and other Personal Injuries Liability Reforms‟ (2005) 13 Torts Law Journal 203
Campbell, Enid, „The Citizen and the State in the Courts‟ in Finn, Paul (ed), Essays on Law and Government (1996) vol 2, 1
Campbell, Tom, Goldsworth, Jeffrey and Stone, Adrienne (eds), Protecting Rights Without a Bill of Rights (2006)
381
Cane, Peter, An Introduction to Administrative Law (1986)
Cane, Peter, Tort Law and Economic Interests (2nd ed, 1996)
Cane, Peter, „Suing Public Authorities in Tort‟ (1996) 112 Law Quarterly Review 13
Cane, Peter, „Damages in Public Law‟ (1999) 9 Otago Law Review 489
Cane, Peter, Attiyah‟s Accidents, Compensation and the Law (7th ed, 2006)
Canon, Bradley, „Studying Bureaucratic Implementation of Judicial Policies in the United States: Conceptual and Methodological Approaches‟ in Hertogh, Marc and Halliday, Simon (eds), Judicial Review and Bureaucratic Impact: International and Interdisciplinary Perspectives (2004) 76
Cappelletti, Mauro, „The Law-Making Power of the Judge and its Limits (1981) 8 Monash Law Review 15
Carey, Annamaria, „Taxpayers Charter‟ (1995-1996) 30 Taxation in Australia 543
Carmody, Michael, „Future Directions in Tax Administration or Community Confidence: The Essential Building Block‟ in Evans, Chris and Greenbaum, Abe (eds), Tax Administration: Facing the Challenges of the Future (1998) 255
Cavanagh, Rita, „The New Protections of the Taxpayers Bill of Rights 2: Useful Changes Across the Board‟ (1996) 85 Journal of Taxation 210
Charlesworth, Hilary, „The Australian Reluctance About Rights‟ (1993) 31 Osgoode Hall Law Journal 195
382
Cialdini, Robert, „Social Motivations to Comply: Norms, Values and Principles‟ in Roth, Jeffrey and Scholz, John (eds), Taxpayer Compliance: Social Science Perspectives (1989) vol 2, 200
Clarke, Jennifer, „Casenote: Cubillo v Commonwealth‟ (2001) 27 Melbourne University Law Review 7
Clayton, Richard, „Legitimate Expectations, Policy and the Principle of Consistency‟ (2003) 62 Cambridge Law Journal 93
Coase, Ronald, „The Problem of Social Cost‟ (1960) 3 Journal of Law and Economics 1
Cockburn, Tina, „Personal Liability of Government Officers in Tort and Equity‟ in Horrigan, Bryan (ed), Government Law and Policy: Commercial Aspects (1998) 340
Cohen, David, „Thinking About the State: Law Reform and the Crown in Canada‟ (1986) 24 Osgoode Hall Law Journal 379
Cohen, David, „Suing the State‟ (1990) 40 University of Toronto Law Journal 630
Cohen, David and Smith, Joseph, „Entitlement and the Body Politic: Rethinking Negligence in Public Law‟ (1986) 64 Canadian Bar Review 1
Coke, Sir Edward, A Commentary Upon Littleton (19th ed, 1832)
Cole, Howard, „Torts: The Discretionary Function Exception in the Federal Tort Claims Act‟ [1954] 52 Michigan Law Review 733
Coleman, Brady, „Are Clarity and Precision Compatible Aims in Legal Drafting?‟ [1998] Singapore Journal of Legal Studies 376
383
Coleman, Jules, „Beyond Inclusive Legal Positivism‟ (2009) 22 Ratio Juris 359
Collins, Stephen, „The Time is Ripe for a Taxpayer Bill of Rights‟ [1988] Journal of Accounting 12
Convery, Jane, „Public or Private? Duty of Care in a Statutory Framework: Stovin v Wise in the House of Lords‟ (1997) 60 Modern Law Review 559
Cooke, Frederick, „A Proposed New Definition of Tort‟ (1898) 12(5) Harvard Law Review 335
Coppinger, Walter, „The Taxpayer Bill of Rights‟ (1989) 20(5) Tax Adviser 297
Cordes, Joseph and Burton, Weisbrod, „Government Behaviour in Response to Compensation Requirements‟ (1979) 11 Journal of Public Economics 47
Cornish, William, „Colour of Office: Restitutionary Redress Against Public Authority‟ (1987) 14 Journal of Malaysian and Comparative Law 41
Cowan, David, Halliday, Simon and Hunter, Caroline, „Adjudicating the Implementation of Homelessness Law: The Promise of Socio-Legal Studies‟ (2006) 21 Housing Studies 381
Cowell, Frank, „Tax Evasion and Inequity‟ (1992) 13 Journal of Economic Psychology 521
Craig, Paul, „Compensation in Public Law‟ (1980) 96 Law Quarterly Review 413
Craig, Paul, Administrative Law (1983)
Craig, Paul and Fairgrieve, Duncan, „Barrett, Negligence and Discretionary Powers‟ [1999] Public Law 626
384
Creyke, Robin and McMillan, John, „The Operation of Judicial Review in Australia‟ in Hertogh, Mark and Halliday, Simon, (eds) Judicial Review and Bureaucratic Impact - International and Interdisciplinary Perspectives (2004)
Curtis, Lindsay, „Judicial Review of Administrative Acts‟ (1979) 53 Australian Law Journal 530
Davies, G L, „The Judiciary - Maintaining the Balance‟ in Finn, Paul (ed), Essays on Law and Government (1995) vol 1, 267
Davies, Martin, „Common Law Liability of Statutory Authorities‟ (1997) 27 University of Western Australia Law Review 21
Davies, Martin, „Common Law Liability of Statutory Authorities: Crimmins v Stevedoring Industry Finance Committee‟ (2000) 8 Torts Law Journal 1
Davis, Kenneth, „Administrative Common Law and the Vermont Yankee Opinion‟ (1980) 87 Utah Law Review 3
Deakin, Nicholas, „Accentuating the Apostrophe: The Citizen‟s Charter‟ (1994) 15 Policy Studies 48
Deegan, Anne, „The Public/Private Law Dichotomy and its Relationship with the Policy/Operational Factors Distinction in Tort Law‟ (2001) 1 Queensland University of Technology Law and Justice Journal 18
Dench, Simon, „The Tort of Misfeasance in Public Office‟ (1980-1983) 4 Auckland University Law Review 183
Derrington, Desmond, „Theory of Negligence Advanced in the High Court of Australia‟ (2004) 78 Australian Law Journal 595
385
Doyle, John, „Common Law Rights and Democratic Rights‟ in Finn, Paul (ed), Essays on Torts (1989) vol 1, 144
Doyle, John, „Tort Liability for the Exercise of Statutory Powers‟ in Finn, Paul (ed), Essays on Torts (1989) vol 1, 229
Doyle, John, „The Liability of Public Authorities‟ (1994) 2 Tort Law Review 189
Doyle, John and Redwood, Jonathon, „The Common Law Liability of Public Authorities: The Interface Between Public and Private Law‟ (1999) 7 Tort Law Review 30
Drewry, Gavin, „Whatever Happened to the Citizen‟s Charter?‟ [2002] Public Law 9
Dugdale, Anthony and Jones, Michael (eds), Clerk and Lindsell on Torts (19th ed, 2006)
Dugdale, Anthony and Stanton, Keith, Professional Negligence (3rd ed, 1998)
Durak, Peter and Wilson, Ronald, „Do We Need a New Constitution for the Commonwealth?‟ (1967) 41 Australian Law Journal 231
Dworkin, Gerald, „Intentionally Causing Economic Loss - Beaudesert Shire Council v Smith Revisited‟ (1974) 1 Monash University Law Review 4
Dworkin, Gerald and Harari, Abraham, „The Beaudesert Decision - Raising the Ghost of the Action upon the Case‟ (1967) 40 Australian Law Journal 296
Dworkin, Ronald, Limits: The Role of the Law in Bioethical Decision-Making (1996)
386
Ellinghaus, Manfred, Bradbrook, Adrian and Duggan, Anthony, (eds) The Emergence of Australian Law (1989)
Elliot, Mark, „Unlawful Representations, Legitimate Expectations and Estoppel in Public Law‟ (2003) 8 Judicial Review 71
Erbacher, Sharon, Australian Restitution Law (2nd ed, 2002)
Eustice, James, „Tax Complexity and the Tax Practitioner‟ (1989) 45 Tax Law Review 7
Evans, Chris and Greenbaum, Abe (eds), Tax Administration: Facing the Challenges of the Future (1998)
Evans, Robert, „Damages for Unlawful Administrative Action: The Remedy for Misfeasance in Public Office‟ (1982) 31 International and Comparative Law Quarterly 640
Fairgrieve, Duncan, State Liability in Tort: A Comparative Law Study (2003)
Fairgrieve, Duncan, „Damages Claims Against Public Bodies: The Role of Misfeasance in Public Office‟ (2007) 12 Judicial Review 169
Falkinger, Josef, „Tax Evasion, Consumption of Public Goods and Fairness‟ (1995) 16 Journal of Economic Psychology 63
Faure, Michael, Tort Law and Economics (2009)
Feld, Lars and Frey, Bruno, „Trust Breeds Trust: How Taxpayers are Treated‟ (2002) 3 Economics of Governance 87
Finn, Chris, „The Justiciability of Administrative Decisions: A Redundant Concept?‟ (2002) 30 Federal Law Review 239 387
Finn, Paul (ed), Essays on Torts (1989) vol 1
Finn, Paul (ed), Essays on Law and Government (1995) vol 1
Finn, Paul (ed), Essays on Law And Government (1996) vol 2
Finn, Paul and Smith, Kathryn, „The Citizen, the Government and “Reasonable Expectations”‟ (1992) 66 Australian Law Journal 139
Fleming, John, „The Economic Factor in Negligence‟ (1992) 108 Law Quarterly Review 9
Flynn, Michael, „Substance Versus Form in Tax Disputes: An Analysis of Recent Developments‟ (1995) 24 Australian Tax Review 171
Fordham, Michael, „Reparation for Maladministration: Public Law‟s Final Frontier‟ (2003) 8 Judicial Review 104
Forsyth, Christopher, „Wednesbury Protection of Substantive Legitimate Expectations‟ [1997] Public Law 375
Freedman, Judith, „Tax, Crime and Human Rights‟ (2002) 6 British Tax Review 445
Fridman, Gerald, „Malice in the Law of Torts‟ (1958) 21(5) The Modern Law Review 484
Fuller, Lon, „The Forms and Limits of Adjudication‟ (1978) 92 Harvard Law Review 353
388
Gageler, Stephen, „Legitimate Expectations: Comment on the Article by the Hon Sir Anthony Mason AC KBE‟ (2005) 12 Australian Journal of Administrative Law 111
Galligan Brian, Knopff, Rainer and Uhr, John, „Australian Federalism and the Debate Over a Bill of Rights‟ (1990) 20 Publius: The Journal of Federalism 53
Galligan, Denis, „Judicial Review and the Text-Book Writers‟ (1982) 2 Oxford Journal of Legal Studies 257
Ganz, Gabriele, „Compensation for Negligent Administrative Action‟ [1973] Public Law 84
Gellhorn, Walter and Schenck, C Newton, „Tort Actions Against the Federal Government‟ (1947) 47 Columbia Law Review 722
Genn, Hazel, Paths to Justice: What People Do and Think About Going to Law (1999)
Geuther, Thomas, „The Search for Principle: The Government‟s Liability in Negligence for the Careless Exercise of its Statutory Powers‟ (2000) 31 Victoria University of Wellington Law Review 34
Gleeson, Murray, „Judicial Legitimacy‟ (2000) 20 Australian Bar Review 4
Goldstein, Benson, „The Omnibus Taxpayer Bill of Rights Act: An Overview‟ (1989) 34(2) The National Public Accountant 20
Goodin, Robert, „Theories of Compensation‟ (1989) 9 Oxford Journal of Legal Studies 56.
Gordley, James, „Tort Law in the Aristotelian Tradition‟ in Owen, David (ed), Philosophical Foundations of Tort Law (1995) 131 389
Gould, B C, „Damages as a Remedy in Administrative Law‟ (1972) 5 New Zealand Universities Law Review 105
Gowers, Ernest, The Complete Plain Words (1985)
Grbich, Yuri, „New Modalities in Tax Decision-Making: Applying European Experience to Australia‟ [2004] 2 eJournal of Tax Research 7
Greenbaum, Abe, „The Taxpayer Bill of Rights 1 And 2: A Charter to be Followed by the Rest of the World or Just Another Attack on the Tax Authority?‟ (1997) 7 Revenue Law Journal 138
Greenbaum, Abe, „United States Taxpayer Bills of Rights 1, 2 And 3: A Path to the Future or Old Whine in New Bottles?‟ in Bentley, Duncan (ed), Taxpayers‟ Rights: An International Perspective (1998) 347
Greenbaum, Abe, and Evans, Chris (ed), Tax Administration - Facing the Challenges of the Future (1998)
Griffith, J A G, „Constitutional and Administrative Law‟ in Archer, Peter, and Martin, Andrew (eds), More Reform Now: A Collection of Essays on Law Reform (1983) 57
Griggs, Lynden, „The Unconscionability Provisions of the Trade Practices Act 1974: Contrasting Judicial Developments‟ (2001) 9 Competition and Consumer Law Journal 241
Groves, Matthew, „Substantive Legitimate Expectations in Australian Administrative Law‟ (2008) 32 Melbourne University Law Review 15
390
Gumley, Wayne, „The Taxation Appeals System: An Administrative Law Perspective‟ in Evans, Chris and Greenbaum, Abe (eds), Tax Administration: Facing the Challenges of the Future (1998) 299
Haggstrom, Peter, „A Critical Review of Tax Administration in Australia from an Ombudsman‟s Office Perspective‟ in Greenbaum, Abe and Evans, Chris (eds), Tax Administration - Facing the Challenges of the Future (1998) 263
Hannett, Sarah, „Misfeasance in Public Office: The Principles‟ (2005) 10 Judicial Review 227
Harlow, Carol, „“Public” and “Private” Law: Definition Without Distinction‟ (1980) 43 Modern Law Review 241
Harlow, Carol, State Liability (2004)
Harris, Bruce, „Judicial Review, Justiciability and Prerogative of Mercy‟ (2003) 62 Cambridge Law Review 631
Harris, Bruce and Schnepper, Robert, „Federal Tort Claims Act: Discretionary Function Exception Revisited‟ (1976-77) 31 University of Miami Law Review 161
Harris, Donald, „Can the Law of Torts Fulfil its Aims?‟ (1990) 14 New Zealand Universities Law Review 114
Hart, H L A, The Concept of Law (2nd ed, 1994)
Hasseldine, John, „How Do Revenue Audits Affect Taxpayer Compliance?‟ (1993) 47 Bulletin for International Fiscal Documentation 424
Hertogh, Mark and Halliday, Simon (eds), Judicial Review and Bureaucratic Impact: International and Interdisciplinary Perspectives (2004)
391
Heydon, J D, Gummow, W M and Austin, R P, Cases and Materials on Equity and Trusts (4 ed, 1993)
Hiley, Graham and Lindsay, Alan, „Tort Liability Clarified: Northern Territory of Australia v Mengel‟ (1994) 18 University of Queensland Law Journal 334
Hill, D Graham, „What Do We Expect from Judges in Tax Cases?‟ (1995) 69 Australian Law Journal 992
Hilson, Chris, „Judicial Review, Policies and the Fettering of Discretion‟ [2002] Public Law 111
Hilson, Chris, „Policies, the Non-Fetter Principle and the Principle of Substantive Legitimate Expectations: Between a Rock and a Hard Place?‟ (2006) 11 Judicial Review 289
Hilson, Chris and Rogers, W V H, „X v Bedfordshire County Council: Tort Law and Statutory Function - Probably Not End of the Story‟ (1995) 3 Torts Law Journal 1
Hink, Heinz and Schutter, David, „Some Thoughts on American Law of Government Tort Liability‟ (1965-1966) 29 Rutgers Law Journal 710
Hogg, Karen, „Negligence and Economic Loss in England, Australia, Canada and New Zealand‟ (1994) 43 The International Comparative Law Quarterly 116
Hogg, Peter, Liability of the Crown (2nd ed, 1989)
Honore, Tony, „The Morality of Tort Law - Questions and Answers‟ in Owen, David (ed), Philosophical Foundations of Tort Law (1995) 73
Horrigan, Bryan, (ed), Government Law and Policy: Commercial Aspects (1998)
392
Hutchinson, Terry, Researching and Writing in Law (2002)
Hyer, Andrew, „The Discretionary Function Exception to the Federal Tort Claims Act: A Proposal for a Workable Analysis‟ [2007] Brigham Young University Law Review 1091
III, JHS „The Emerging Concept of Tax Estoppel‟ (1954) 3 Virginia Law Review 313
Jaffe, Lewis, „Suits Against Governments and Officers: Damage Actions‟ (1963) 77 Harvard Law Review 209
James, Fleming, „Tort Liability of Governmental Units and Their Officers‟ (1954- 55) 22 University of Chicago Law Review 610
James, Simon, Murphy, Karina and Reinhart, Monika, „The Taxpayers‟ Charter: A Case Study in Tax Administration‟ (2004) 7 Journal of Australian Taxation 336
James, Simon and Wallschutzky, Ian, „The Shape of Future Tax Administration‟ (1995) 49 Bulletin for International Fiscal Documentation 217
James, Simon and Wallschutzky, Ian, „Tax Law Improvement in Australia and the United Kingdom: The Need for a Strategy for Simplification‟ (1997) 18 Fiscal Studies 445
Jayson, Lester, „Application of the Discretionary Function Exception‟ (1964) 24 Federal Bar Journal 153
Jeffries, W P, „ADR: The Advantages and Disadvantages from a Legal Viewpoint‟ (1992) 18 Commonwealth Law Bulletin 763
Job, Jenny and Reinhart, Monika, „Trusting the Tax Office: Does Putnam‟s Thesis Relate to Tax?‟ (2003) 38 Australian Journal of Social Issues 307 393
Johnson, Charles, „Judicial Decisions and Organisational Change‟ (1979) 11 Administration and Society 27
Johnson, Charles, „Judicial Decisions and Organisational Changes: Some Theoretical and Empirical Notes on State Court Decisions and State Administrative Agencies‟ (1979) 14 Law and Society Review 27
Johnson, Steve, „A Residual Damages Right Against the IRS: A Cure Worse than the Disease‟ [2000] 85 Tax Notes 395
Jones, Kaplin and Schleef, Joan, „Omnibus Taxpayer Bill of Rights: Cure of „Seizure Fever” or Election Year Placebo?‟ (1989) 69 Michigan Bar Journal 480
Jones, Timothy, „Judicial Review and Codification (2000) 20 Legal Studies 517
Kafka, Gerald, „Taxpayer Bill of Rights Expands Civil Safeguards and Civil Remedies‟ (1989) 70 Journal of Taxation 4
Kakalik, James, et al, An Evaluation of Mediation and Early Neutral Evaluation Under the Civil Justice Reform Act (1996)
Katter, Norman, „Duty of Care in Australia: Is the Fog Lifting?‟ (1998) 72 Australian Law Journal 871
Katter, Norman, Duty of Care in Australia (1999)
Keating, Mark, „New Zealand‟s Tax Dispute Procedure - Time for a Change‟ (2008) 14 New Zealand Journal of Taxation Law and Policy 425
Keeler, John, „Report of the National Committee of Inquiry into Compensation and Rehabilitation in Australia‟ (1975) 5 Adelaide Law Review 121
394
Kenny, Paul, „Taxpayers‟ Charter: The Quiet Achiever‟ (2000) 7 Taxation in Australia 379
Kimble, Joe, „Plain English: A Charter for Clear Writing‟ (1992) 9 Thomas L Cooley Law Review 1
Kirby, Michael, „The Politics of Achieving Law Reform‟ (1988) 11 Adelaide Law Review 315
Kneebone, Susan, „Misfeasance in a Public Office after Mengel‟s Case: A “Special Tort” No More‟ (1996) 4 Tort Law Review 111
Kneebone, Susan, Tort Liability of Public Authorities (1998)
Knight, Lee and Knight, Ray, „Dispute Resolution with the IRS and Taxpayer Bill of Rights 2‟ (1997) 13 Akron Tax Journal 27
Kornhauser, Marjorie, „When Bad Things Happen to Good Taxpayers: A Tale of Two Advocates‟ (1998) 78 Tax Notes 1301
Lederman, Leandra, „Of Taxpayer Rights, Wrongs, and a Proposed Remedy‟ (2000) 87 Tax Notes 1133
Lederman, Leandra, „Taxpayer Rights in the Lurch: A Response to Professor Johnson‟ (2000) 88 Tax Notes 1041
Lee, Yong, „Civil Liability of State and Local Government: Myth and Reality‟ (1987) 47 Public Administration Review 160
Legg, Michael, „Negligent Acts and Pure Economic Loss in the High Court‟ (2000) 12 Insurance Law Journal 1
395
Levinson, Daryl, „Making Governments Pay: Markets, Politics and the Allocation of Constitutional Costs‟ (2000) 67 University of Chicago Law Review 345
Lindell, Geoffrey, „“Judge & Co” - Judicial Law Making and the Mason Court‟ (1998) 5 Agenda 83
Linden, Allen, and Mullany, Nicholas (eds), Torts Tomorrow - A Tribute to John Fleming (1998)
Loutzenhiser, Glen, „Holding Revenue Canada to its Word: Estoppel in Tax Law‟ (1999) 57 University of Toronto Faculty of Law Review 127
Luntz, Harold, „Reform of the Law of Negligence: Wrong Questions - Wrong Answers‟ (2002) 25 University of New South Wales Law Journal 49
Luntz, Harold, and Hambly, David, Torts - Cases and Commentary (3rd ed, 1992)
Luntz, Harold, and Tilbury, Michael, „Punitive Damages in Australian Law‟ (1994) 17 Loyola of Los Angeles International and Comparative Law Review 769
Ma, Kernell, „The Present Situation in Australia Regarding Recovery of Payments Made Pursuant to Ultra Vires demands‟ (1992) 4 Bond Law Review 198
Macdonald, Roderick, „Recommissioning Law Reform‟ (1997) 35 Alberta Law Review 831
Major, Sarah, „Am I Special Enough? The Payment of Ex Gratia Compensation by the Commonwealth‟ (1995) 6 AIAC Forum 14
Markensinis, Basil et al, Tortious Liability of Statutory Bodies: A Comparative and Economic Analysis of Five English Cases (1999)
396
Mason, Keith, „Money Claims By and Against the State‟ in Finn, Paul (ed), Essays on Law and Government (1996) vol 2, 104
Mason, Robert and Calvin, Lyle, „Public Confidence and Admitted Tax Evasion‟ (1984) 37 National Tax Journal 489
Mason, Sir Anthony, „Administrative Review: The Experience of the First Twelve Years‟ (1988-1989) 18 Federal Law Review 122
Mason, Sir Anthony, „The Importance of Judicial Review of Administrative Action as a Safeguard of Individual Rights‟ (1994) 1 Australian Journal of Human Rights 3
Mason, Sir Anthony, „Administrative Law: Form Versus Substance‟ (1995) 6 Australian Institute of Administrative Law Forum 1
Mason, Sir Anthony, „Negligence and the Liability of Public Authorities‟ (1998) 2 Edinburgh Law Review 3
Mason, Sir Anthony, „Legislative and Judicial Law Making: Can We Locate an Identifiable Boundary?‟ (2003) 24 Adelaide Law Review 15
Mason, Sir Anthony, „Procedural Fairness: Its Development and the Continuing Role of Legitimate Expectations‟ (2005) 12 Australian Journal of Administrative Law 103
McAuslan, Patrick, „Administrative Law, Collective Consumption and Judicial Policy‟ (1983) 46 Modern Law Review 1
McBride, Jeremy, „Damages as a Remedy for Unlawful Administrative Action‟ (1979) 38 Cambridge Law Journal 323
397
McCabe, Bernard, „The Investigatory Powers of the Commissioner Under the Income Tax Assessment Act and Individual Rights‟ (1993) 3 Revenue Law Journal 1
McCarthy, Geoffrey, „Mengel: A Limited Remedy in Damages for Wrongful Administrative Action‟ (1996) 4 Australian Journal of Administrative Law 5
McLean, Hazel, „Negligent Regulatory Authorities and the Duty of Care‟ (1988) 8 Oxford Journal of Legal Studies 442
McClennan, Margaret, „The Principles and Concepts in the Development of the Taxpayers‟ Charter‟ (2003) 32 Australian Tax Review 22
McKerchar, Margaret, „Philosophical Paradigms, Inquiry Strategies and Knowledge Claims: Applying the Principles of Research Design and Conduct to Taxation‟ (2008) 6 eJournal of Tax Research 5
McKerchar, Margaret, Design and Conduct of Research in Tax, Law and Accounting (2010)
Meland, Creighton, „Omnibus Taxpayers‟ Bill of Rights Act: Taxpayers‟ Remedy or Political Placebo?‟ (1988) 86 Michigan Law Review 1787
Melinkoff, David, The Language of the Law (1963)
Milakovich, Michael, „Balancing Customer Service, Empowerment, and Performance with Citizenship, Responsiveness and Political Accountability‟ (2003) 4(1) International Public Management Review 61
Miller, Richard and Sarat, Austin, „Grievances, Claims, and Disputes: Assessing the Adversary Culture‟ (1980-81) 15 Law Society Review 525
398
Morabito, Vince and Barkoczy, Stephen, „Restricting the Judicial Review of Income Tax Assessments - The Scope and Purpose of Schedule 1(e) of the Administrative Decisions (Judicial Review) Act 1977 (Cth)‟ (1999) 21 Sydney Law Review 36
Moses, Lyria, „Adapting the Law to Technological Change: A Comparison of Common Law and Legislation‟ (2003) 26 University of New South Wales Law Journal 394
Moss, Philip, „Towards Community Ownership of the Tax System: The Taxation Ombudsman‟s Perspective‟ [2005] 3 eJournal of Tax Research 9
Mullany, Nicholas, „Proximity, Policy and Procrastination‟ (1992) 9 Australian Bar Review 80
Mullany, Nicholas and Linden, Allen (eds), Torts Tomorrow - A Tribute to John Fleming (1998)
Murphy, Kristina, „Procedural Justice and Tax Compliance‟ (2003) 38 Australian Journal of Social Issues 379
Murphy, Kristina, „The Role of Trust in Nurturing Compliance: A Study of Accused Tax Avoiders‟ (2004) 28 Law and Human Behaviour 187
Nodoushani, Patricia and Locke, Aurelle, „Taxpayer Bill of Rights 2‟ [1996] Taxes 535
Nolan, Donal, „Suing the State: Governmental Liability in Comparative Perspective‟ (2004) 67 Modern Law Review 844
399
Note, „Equitable Estoppel Against the Federal Government‟ (1990) 104 Harvard Law Review 286
Note, „Separation of Powers and the Discretionary Function Exception: Political Question in Tort Litigation Against the Government‟ (1971) 51 Iowa Law Review 930
O‟Leary, Rosemary, „The Impact of Federal Court Decisions on the Policies and Administration of the US Environmental Protection Agency‟ (1989) 41 Administrative Law Review 549
Oliver, Dawn, „Anns v London Borough of Merton Reconsidered‟ (1980) 33 Current Legal Problems 270
Olsen, Nina, „Taxpayer Rights, Customer Service and Compliance: A Three- Legged Stool‟ (2003) 51 Kansas Law Review 1239
Owen, David (ed), Philosophical Foundations of Tort Law (1995)
Pagone, G Tony, „Estoppel in Public Law: Theory, Fact and Fiction‟ (1984) 7 University of New South Wales Law Journal 267
Pannam, Clifford, „The Recovery of Unconstitutional Taxes in Australia and in the United States‟ (1964) 42 Texas Law Review 779
Parker, Malcolm, „Reforming The Law Of Negligence: Solutions in Search of a Problem‟ (2003) 11 Torts Law Journal 136
Parker, Robert, „Policy and Administration‟ in Spann, Richard and Curnow, Geoffrey (eds), Public Policy and Administration in Australia: A Reader (1975) 144
400
Pearce, Dennis, Campbell, Enid and Harding, Don, Australian Law Schools: A Discipline Assessment for the Commonwealth Tertiary Education Commission: A Summary (1987)
Peck, Cornelius, „The Federal Tort Claims Act: A Proposed Construction of the Discretionary Function Exception‟ (1956) 31 Washington Law Review 207
Perry, Stephen, „Beyond the Distinction Between Positivism and Non-Positivism‟ (2009) 22 Ratio Juris 311
Phegan, Colin, „Breach of Statutory Duty as a Remedy Against Public Authorities‟ (1974) 8 University of Queensland Law Journal 158
Poole, Melissa, „Legitimate Expectation and Substantive Fairness: Beyond the Limits of Procedural Propriety‟ (1995) 4 New Zealand Law Review 426
Pope, Jeff, „Compliance Costs of Taxation: Policy Implications‟ (1994) 11 Australian Tax Forum 85
Pose, Kevin, „In Defence of an Assessment‟ (1993) 22 Australian Tax Review 256
Pose, Kevin, „The High Court Reconsiders Assessments‟ (1995) 24 Australian Tax Review 119
Posner, Richard, „The Present Situation in Legal Scholarship‟ (1981) 90 The Yale Law Journal 1113
Posner, Richard, „The Jurisprudence of Skepticism‟ (1988) 86 Michigan Law Review 827
Raz, Joseph, The Authority of Law: Essays on Law and Morality (1979)
Raz, Joseph, „Legal Rights‟ (1984) 4 Oxford Journal of Legal Studies 1 401
Read, James, „Damages in Administrative Law‟ (1988) 14 Commonwealth Law Bulletin 428
Reynolds, Osborne, „The Discretionary Function Exceptions of the Federal Torts Claims Act‟ (1968) 57 Georgetown Law Journal 81
Rider, Cameron, „Estoppel of the Revenue: A Review of Recent Developments‟ (1994) 23 Australian Tax Review 135
Roberts, Melanie, „Public Law Representations and Substantive Legitimate Expectations‟ (2001) 64 Modern Law Review 112
Roberts, Michael and Hite, Peggy, „Progressive Taxation, Fairness and Compliance‟ (1994) 16 Law and Policy 27
Roots, Lachlan, „A Tort of Maladministration: Government Stuff-Ups‟ (1993) 18 Alternative Law Journal 67
Roth, Guenther and Wittich, Claus (eds), Max Weber - Economy and Society (1978)
Roth, Jeffrey and Scholz, John (ed), Taxpayer Compliance: Social Science Perspectives (1989) vol 2
Roth, Jeffrey, Scholz, John and Witte, Ann (eds), Taxpayer Compliance: An Agenda for Research (1989) vol 1
Russell, David, „Brave New World - Dawn Rises on Tax Rights‟ (1994) 29 Taxation in Australia 176
Sadler, Robert, „Whither Beaudesert Shire Council v. Smith?‟ (1984) 58 Australian Law Journal 38 402
Sadler, Robert, „Will Administrative Liability Topple Public Service Pole-Sitters‟ (1987) 61 Law Institute Journal 30
Sadler, Robert, „Liability for Misfeasance in Public Office‟ (1992) 14 Sydney Law Review 137
Sales, Philip, „Legitimate Expectations‟ (2006) 11 Judicial Review 186
Sales, Philip and Steyn, Karen, „Legitimate Expectations in English Public Law: An Analysis‟ [2004] Public Law 564
Salter, Michael and Mason, Julie, Writing Law Dissertations: An Introduction and Guide to the Conduct of Legal Research (2007)
Saunders, Cheryl, „Governments, Legislatures and Courts: Striking a Balance‟ in Ellinghaus, Manfred, Bradbrook, Adrian and Duggan, Anthony (eds), The Emergence of Australian Law (1989) 296
Saunders, Cheryl, „The Mason Court in Context‟ in Saunders, Cheryl (ed), Courts of Final Jurisdiction: The Mason Court in Australia (1996) 2
Sawyer, Adrian, „A Comparison of New Zealand Taxpayers‟ Rights with Selected Civil Law and Common Law Countries - Have New Zealand Taxpayers Been “Short-Changed”?‟ (1999) 32 Vanderbilt Journal of Transnational Law 1345
Schmit, Joan, Pritchett, S Travis, and Fields, Paige, „Punitive Damages: Punishment or Further Compensation?‟ (1988) 55 Journal of Risk and Insurance 453
Scholz, John, „Trust, Taxes and Compliance‟ in Braithwaite, Valerie and Levi, Margaret (eds), Trust and Governance (1998) 135
403
Scholz, John and Lubell, Mark, „Trust and Taxpaying: Testing the Heureristic Approach to Collective Action‟ (1998) 42 American Journal of Political Science 398
Schonberg, Soren, Legitimate Expectations in Administrative Law (2000)
Schroeder, Christopher, „Causation and Moral Responsibility‟ in Owen, David (ed), Philosophical Foundations of Tort Law (1995) 347
Schuck, Peter, Suing Government (1983)
Schuck, Peter, „Legal Complexity: Some Causes, Consequences, and Cures‟ (1992) 42 Duke Law Journal 1
Schwartz, Bernard, An Introduction to American Administrative Law (1962)
Selway, Bradley, „The Source and Nature of the Liability in Tort of Australian Government‟ (2002) 10 Tort Law Review 14
Shaya, Linda, „The New Taxpayers‟ Bill of Rights: Panacea or Placebo?‟ (1988) 65 University of Detroit Law Review 445
Sheffrin, Steven and Triest, Robert, „Can Brute Deterrence Backfire? Perceptions and Attitudes in Tax Compliance‟ in Slemrod, Joel (ed), Who Pays Taxes and Why? Tax Compliance and Enforcement (1992) 193
Slemrod, Joel (ed), Who Pays Taxes and Why? Tax Compliance and Enforcement (1992)
Smillie, John, „Liability of Public Authorities for Negligence‟ (1985) 23 University of Western Ontario Law Review 213
404
Smillie, John, „The Foundation of the Duty of Care in Negligence‟ (1989) 15 Monash University Law Review 302
Smith, Adam, „An Inquiry into the Nature and Causes of the Wealth of Nations‟ in Heilbroner, Robert (ed), The Essential Adam Smith (1986)
Smith, Philippa, „Service Charters: The Latest Fad or Last Hope?‟ [1997] Administrative Review 28
Sopinka, John, „The Liability of Public Authorities: Drawing the Line‟ (1993) 1 Tort Law Review 123
Spaeth, Harold and Segal, Jeffrey, Majority Rule or Minority Will: Adherence to Precedent in the United States Supreme Court (2001)
Spann, Richard, Government Administration in Australia (1979)
Spann, Richard and Curnow, Geoffrey (eds), Public Policy and Administration in Australia: A Reader (1975)
Standish, M J, „Case Note: Beaudesert Shire Council v Smith‟ (1967-1968) 6 Melbourne University Law Review 225
Stanton, Keith et al, Statutory Torts (2003)
Stapleton, Jane, „Duty of Care and Economic Loss: A Wider Agenda‟ (1991) 107 Law Quarterly Review 249
Stapleton, Jane, „Duty of Care Factors: A Selection from Judicial Menus‟ in Stapleton, Jane, and Cane, Peter (eds), The Law of Obligation: Essays in Celebration of John Fleming (1998) 59
405
Stapleton, Jane, and Cane, Peter (eds), The Law of Obligation: Essays in Celebration of John Fleming (1998)
Steele, Iain, „Substantive Legitimate Expectations: Striking the Right Balance‟ (2005) 121 Law Quarterly Review 300
Steffen, William, „A Federal Tort Claims Act Tort‟ (1966-67) 34 Tennessee Law Review 367
Steinwall, Ray, „The Liability of the Crown and its Instrumentalities under the Trade Practices Act 1974 (Cth)‟ (1994) 17 University of New South Wales Law Review 314
Stewart, Richard and Sunstein, Cass, „Public Programs and Private Rights‟ (1982) 95 Harvard Law Review 1195
Stone, Mark, „Taxpayer Bill of Rights 2‟ (1997) 67 The CPA Journal 42
Tang, Reynah, „The Commissioner‟s Powers of Access to Information from Third Parties and a Taxpayer‟s Right to Privacy - A Case for Reform?‟ (2005) 34 Australian Tax Review 20
Tanzi, Vito and Shome, Parthasarathi, „A Primer on Tax Evasion‟ (1994) 48 Bulletin for International Fiscal Documentation 328
Taxation Institute of Australia, „Taxpayers‟ Bill of Rights‟ (1993) 28 Taxation in Australia 50
Thomson, Joshua, „Estoppel by Representation in Administrative Law‟ (1998) 26 Federal Law Review 83
Tiley, John, „Human Rights and Taxpayers‟ (1998) 57 Cambridge Law Journal 269 406
Todd, Stephen, „The Negligence Liability of Public Authorities: Divergence in the Common Law‟ (1986) 102 Law Quarterly Review 370
Todd, Stephen, „Liability in Tort of Public Bodies‟ in Linden, Allen, and Mullany, Nicholas (eds), Torts Tomorrow - A Tribute to John Fleming (1998) 36
Tomlinson, Hugh and Clayton, Richard, „Damages From Public Authorities: Misfeasance in Public Office‟ (1986) 130 Solicitors‟ Journal 363
Tur, Richard, „Time and Law‟ (2002) 22 Oxford Journal of Legal Studies 463
Turnbull, Ian, „Clear Legislative Drafting: New Approaches in Australia‟ (1990) 11 Statute Law Review 161
Turnbull, Ian, „Drafting Simple Legislation‟ (1995) 12 Australian Tax Forum 247
Underwood, Ashley, „Legitimate Expectations: Current Issues‟ (2006) 11 Judicial Review 294
Veitch, Edward and Miers, David, „Assault on the Law of Tort‟ (1975) 38(2) Modern Law Review 139
Vines, Prue, „The Needle in the Haystack: Principle in the Duty of Care in Negligence‟ (2000) 23(2) University of New South Wales Law Journal 35
Virgo, Graham, „Restitution From Public Authorities: Past, Present and Future‟ (2006) 11 Judicial Review 370
Weaver, William and Longoria, Thomas, „Bureaucracy That Kills: Federal Sovereign Immunity and the Discretionary Function Exception‟ (2002) 96 American Political Science Review 335
407
Weir, Tony, „Governmental Liability‟ [1989] Public Law 40
Wells, Belinda, „Restitution From the Crown: Private Rights and the Public Interest‟ (1994) 16 Adelaide Law Review 191
Wenzel, Michael, „The Impact of Outcome Orientation and Justice Concerns on Tax Compliance: The Role of Taxpayers‟ Identity‟ (2002) 87(4) Journal of Applied Psychology 629
Wheeler, Fiona, „Judicial Review of Prerogative Power in Australia: Issues and Prospects‟ (1992) 14 Sydney Law Review 432
Wheelright, Karen, „Taxpayers Rights in Australia‟ (1997) 7 Revenue Law Journal 226
Wheelright, Karen, „Taxpayers‟ Rights in Australia‟ in Bentley, Duncan (ed), Taxpayers‟ Rights: An International Perspective (1998) 57
Wickerson, John, „Measuring Taxpayer Compliance: Issues and Challenges Facing Tax Administrations‟ (1994) 11 Australian Tax Forum 1
Williams, Glanville, „The Aims of the Law of Tort‟ (1951) 4 Current Legal Problems 137
Williams, George, A Bill of Rights for Australia (2000)
Williams, George, The Case for an Australian Bill of Rights (2004)
Witting, Christian, „The Three-Stage Test Abandoned in Australia - Or Not?‟ (2002) 118 Law Quarterly Review 214
Woodall, Kevin, „Private Law Liability of Public Authorities for Negligent Inspection and Regulation‟ (1992) 37 MacGill Law Journal 83 408
Woodhouse, Diana, In Pursuit of Good Administration: Ministers, Civil Servants and Judges (1997)
Woolf, Harry, Protection of the Public - A New Challenge (1990)
Woolf, Harry, „The Human Rights Act 1998 and Remedies‟ in Andenas, Mads and Fairgrieve, Duncan (eds), Judicial Review in International Perspective (2000) 429
Worsham, Ronald, „The Effect of Tax Authority Behaviour on Taxpayer Compliance: A Procedural Justice Approach‟ (1996) 18 The Journal of the American Taxation Association 19
Zeidner, Rita, „Taxpayer Rights and Collecting Taxes: Striking a Delicate Balance‟ (1992) 54 Tax Notes 832
Ziegler, Peter, „A General Theory of Law as a Paradigm for Legal Research‟ (1988) 51 Modern Law Review 569
Zines, Leslie, „Constitutionally Protected Individual Rights‟ in Finn, Paul (ed), Essays on Law and Government (1996) vol 2, 136
Zumbo, Frank, „Tax Assessments and Judicial Review: Do the Courts Have a Supervisory Role?‟ (1995) 2 Australian Journal of Administrative Law 217
Zumbo, Frank, „Prohibiting Unconscionable Conduct Within Business Transactions‟ (1998) 72 Australian Law Journal 93
409
PART II - CASE LAW
Admiralty Commissioners v Valverda (Owners) (1938) AC 173
AGC (Investments) Ltd v Federal Commissioner of Taxation (1991) 91 ATC 4180
Air Canada v British Columbia (1989) 59 DLR (4th) 161
Amaca Pty Ltd v New South Wales (2004) Australian Torts Reports 81-749
Anns v Merton Borough Council [1977] 2 All ER 492
Ansett Transport Industries (Operations) Pty Ltd v Commonwealth (1977) 139 CLR 54
Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223
Atkinson v FCT (1995) 31 ATR 424
Attorney-General v Quin (1990) 170 CLR 1
Barrett v Enfield London Borough Council [2001] 2 AC 550
Beaudesert Shire Council v Smith (1966) 120 CLR 145
Bell Bros Pty Ltd v Shire of Serpentine - Jarrahdale (1969) 121 CLR 137
Bellinz v Federal Commissioner of Taxation (1998) 39 ATR 198
Beswick v Beswick [1968] AC 58
Blomley v Ryan (1956) 99 CLR 362 410
Breen v Williams (1996) 186 CLR 71
British Columbia Ferry Corp v MNR [2001] 4 FC 3
Brodie v Singleton Shire Council (2001) 206 CLR 512
Caledonian Collieries Ltd v Speirs (1957) 97 CLR 202
Caltex Oil (Australia) Pty Ltd v The Dredge “Willemstad” (1976) 136 CLR 529
Caparo Industries v Dickman [1990] 2 AC 605
Capital and Counties plc v Hampshire County Council [1997] QB 1004
Central London Property Trust v High Trees Ltd [1947] 1 KB 130
Ch‟elle Properties (NZ) Ltd v Commissioner of Inland Revenue [2005] NZHC 190
Coleman v Inland Gas Corporation 21 SW 2d 1030 (1929)
Combe v Combe [1951] 2 KB 215
Commercial Bank of Australia v Amadio (1983) 151 CLR 447
Commissioner of State Revenue (Vic) v Royal Insurance Australia Ltd (1994) 182 CLR 51
Commissioner of Taxation v Futuris Corporation Ltd (2008) 247 ALR 605
Commonwealth of Australia v Verwayen (1990) 170 CLR 394
Concrete Constructions (NSW) Pty Ltd v Nelson (1990) 169 CLR 594 411
Consolidated Bearing Company (SA) Pty Ltd v Molnar Engineering Pty Ltd (1994) ATPR (Digest) 46-122
Constable Holdings Pty Ltd v Federal Commissioner of Taxation (1987) 72 ALR 265
Conyngham v Minister for Immigration and Ethnic Affairs (1986) 68 ALR 441
Copyright Agency Ltd v Haines (1982) 1 NSWLR 182
Cox v Deputy Federal Commissioner of Land Tax (Tas) (1914) 17 CLR 450
Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1
Dalehite v United States 346 US 15 (1953)
Darrell Lea v Commissioner of Taxation (1996) 72 FCR 175
David Jones Finance and Investments Pty Ltd v FCT (1991) 21 ATR 1506
David Securities v Commonwealth Bank (1992) 175 CLR 353
DCT v Jewiss and Johnson (2004) 57 ATR 195
DFC of T v Richard Walter Pty Ltd (1995) 183 CLR 168
Dietrich v The Queen (1992) 177 CLR 292
Doe dem. Murray, Lord Bishop of Rochester v Bridges (1831) B.A Ad. 847
Dorney v Commissioner of Taxation: Simons v Commissioner of Taxation [1980] 1 NSWLR 404 412
Dorset Yacht Co. Ltd v Home Office [1970] AC 1004
Downs v Williams (1971) 126 CLR 62
Dunlop v Woollahra Municipal Council (1982) AC 158
Dyson v Attorney-General [1911] 1 KB 410
Engler v Commissioner of Taxation (No 3) [2003] FCA 1571
Ex Parte Island Records Ltd [1978] Ch 122
Ex Parte Kearney (1917) 17 SR(NSW) 578
FAI Insurances Ltd v Winneke (1982) 151 CLR 342
Farrington v Thomason [1959] VR 289
FCT v Patcorp Investments Ltd (1976) 6 ATR 420
FCT v Prestige Motors Pty Ltd (1994) 28 ATR 336
FCT v Stokes (1996) 34 ATR 478
FCT v Wade (1951) 84 CLR 105
Garrett v Attorney-General [1997] 2 NZLR 332
Gates v Commissioner of Taxation [2006] FCA 739
Global Sportsman Pty Ltd v Mirror Newspapers Ltd (1984) ATPR 40-463
413
Gluck v FCT (2005) 61 ATR 230
Hadley v Baxendale (1854) 9 Exch 341
Ham v Los Angeles County (1920) 46 Cal App 148
Hams v Deputy Commissioner of Taxation (2001) 47 ATR 406
Heatley v Tasmanian Racing and Gaming Commission (1977) 137 CLR 487
Hedley Byrne and Co Ltd v Heller & Partners Ltd [1964] AC 465
Henderson v Deputy Commissioner of Taxation [2005] FCA 1806
Hill v Chief Constable for West Yorkshire [1989] AC 53
Hull v Canterbury Municipal Council [1974] 1 NSWLR 300
Indian Towing Co v United States 350 US 61 (1955)
Inland Revenue Commissioners v National Federation of Self-Employed and Small Business Ltd [1982] AC 617
Intervest Corporation Pty Ltd v FCT (1984) 3 FCR 591
James Hardie Industries Pty Ltd v Grigor (1998) 45 NSWLR 20
Just v The Queen in Right of British Columbia (1989) 2 SCR 1228
Kamloops v Neilsen [1984] 2 SCR 2
Kitano v The Commonwealth (1973) 129 CLR 176
414
Kordan Pty Ltd v Federal Commissioner of Taxation (2000) 46 ATR 191
Ku-ring-gai Cooperative Building Society (No 12) Ltd (1978) 36 FLR 134
Lamb v Cotogno (1987) 164 CLR 1
Lonrho Ltd v Shell Petroleum Co Ltd (No 2) [1982] AC 173
Lucas v O'Reilly (1979) 79 ATC 4081
Macksville & District Hospital v Mayze (1987) 10 NSWLR 708
Madden v Madden & Ors (1996) 136 ALR 98
Mason v New South Wales (1959) 102 CLR 108
McIlkenny v Chief Constable of the West Midlands [1980] 1 QB 283
Meredith v FCT (2001) 48 ATR 6
Mid Density Development Ltd v Rockdale Municipal Council (1992) 39 FCR 579
Minister for Arts Heritage and Environment v Peko-Walsend (1987) 15 FCFR 274
Minister for Immigration, Local Government and Ethnic Affairs v Kurtovic (1990) 92 ALR 93
Ministry of Housing and Local Government v Sharp (1970) 2 QB 223
Moreau v FCT (1926) 39 CLR 65
Mutual Life and Citizens Assurance Co Ltd v Evatt (1968) 122 CLR 556
415
Nationwide News Pty Ltd v Wills (1992) 177 CLR 1
Northern Territory v Mengel (1995) 185 CLR 307
O'Connor v SP Bray Ltd (1937) 56 CLR 464
Ogle v O'Neill and Strickland (1987) 13 FCR 306
Olender v United States 100 AFTR 2d (RIA) 6047 (2007)
O'Neal v Wratten (1986) 65 ALR 451
Park Oh Ho v Minister for Immigration and Ethnic Affairs (1988) 81 ALR 288
Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221
Perre v Apand Pty Ltd [1999] 73 ALJR 1190
Perry v Hall [1997] QB 924
Phelps v Western Mining Corporation Limited (1978) 33 FLR 327
Precision Polls Pty Ltd v FCT (1992) 92 ATC 4549
Pyrenees Shire Council v Day (1998) 192 CLR 375
Queensland Trustees v Fowles (1910) 12 CLR 111
R v Board of Inland Revenue; Ex parte MFK Underwriting Agencies Ltd [1990] 1 All ER 91
R v Commissioner of Customs and Excise; Ex parte F & I Services Ltd [2001] EWCA Civ 762 416
R v Deputy Governor of Parkhurst Prison; Ex parte Hague [1992] 1 AC 58
R v East Sussex County Council; Ex parte Reprotech (Pebsham) Ltd [2002] 4 All ER 58
R v Governor of Brockhill Prison; Ex parte Evans [2000] 4 All ER 15
R v Home Secretary; Ex parte Hindley [2001] 1 AC 410
R v Inland Revenue Commissioners; Ex parte Preston [1985] AC 835
R v Inland Revenue Commissioners; Ex parte Unilever plc [1996] BTC 183
R v North East Devon Health Authority; Ex parte Coughlan [2001] QB 213
R v O'Connor [1987] VR 496
Radnedge v Government Insurance Office of New South Wales (1987) 9 NSWLR 235
Raffaele v Raffaele [1962] WAR 238
Rawlinson v Rice [1997] 2 NZLR 651
Re Minister for Immigration and Multicultural and Indigenous Affairs; Ex parte Lam (2003) 214 CLR 1
Re Young v Commissioner of Taxation [2008] AATA 115
Robinson v Harman (1848) 154 ER 363
417
Romeo v Conservation Commission of the Northern Territory (1998) 192 CLR 431
Rowling v Takaro Properties Ltd [1988] 1 All ER 163
San Sebastian Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (1986) 162 CLR 340
SGIC v Trigwell and Ors (1979-1980) 142 CLR 617
Shaddock and Associates Pty Ltd v City of Parramatta (1981) 150 CLR 225
Southend-on-Sea Corporation v Hodgson (Wickford) Ltd [1962] 1 QB 416
Stovin v Wise [1996] AC 923
Sullivan v Moody (2001) 207 CLR 562
Sutherland Shire Council v Heyman (1985) 157 CLR 424
Tame v New South Wales (2002) 211 CLR 317
Tampion v Anderson [1973] VR 715
The Colonial Sugar Refining Company Limited v The Attorney-General for the Commonwealth (1912) 15 CLR 182
Three Rivers District Council v Bank of England [2000] 3 All ER 1
Tooheys Ltd v Minister for Business & Consumer Affairs (1981) 36 ALR 64
Ultramares Corp v Touche 255 NY 170 (1931)
418
Unilan Holdings Pty Ltd v Kerin (1993) 44 FCR 481
United States v Gaubert 499 US 315 (1991)
Uren v John Fairfax & Sons Pty Ltd (1966) 117 CLR 118
Waltons Stores (Interstate) Ltd v Maher (1988) 164 CLR 387
Werrin v Commonwealth (1938) 59 CLR 150
Williams v Hursey (1959) 103 CLR 30
Winter v DCT (1987) 19 ATR 244
Woolwich Equitable Building Society v IRC [1993] AC 70
X L Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448
X (Minors) v Bedfordshire County Council [1995] 2 AC 633
419
PART III - LEGISLATION
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Audit Act 1901 (Cth)
Chancery Amendment Act 1858 (UK)
Federal Court of Australia Act 1976 (Cth)
Federal Tort Claims Act 1948 (US)
Financial Management and Accountability Act 1997 (Cth)
Freedom of Information Act 1982 (Cth)
Income Tax Assessment Act 1936 (Cth)
Income Tax Assessment Act 1997 (Cth)
Industrial Relations Act 1988 (Cth)
Inspector-General of Taxation Act 2003 (Cth)
Internal Revenue Service Restructuring and Reform Act of 1998 (US)
Judiciary Act 1903 (Cth)
Limitation of Actions Act 1958 (Cth)
Ombudsman Act 1976 (Cth)
Privacy Act 1988 (Cth) 420
Public Health Act 1936 (UK)
Public Service Act 1999 (Cth)
Public Service Regulations 1999 (Cth)
Supreme Court Act 1970 (NSW)
Taxation Administration Act 1953 (Cth)
Taxation Laws Amendment (Improvements to Self Assessment) Act (No 2) 2005 (Cth)
Taxation Laws Amendment (Self Assessment) Act 1992 (Cth)
Taxpayer Bill of Rights Act of 2008 (US)
Taxpayer Bill of Rights 2 of 1996 (US)
Technical and Miscellaneous Revenue Act of 1988 (US)
Trade Practices Act 1974 (Cth)
United States Internal Revenue Code of 1986 26 USC (1986)
421
PART IV - PAPERS, THESES & REPORTS
Alberta Law Reform Institute, The Presumption of Crown Immunity, Report No 71 (1994)
Australian Joint Committee of Public Accounts, Commonwealth of Australia, An Assessment of Tax - A Report on an Inquiry into the Australian Taxation Office, Report No 326 (1993)
Australian Law Reform Commission, Adversarial Background Paper 2 - Alternative or Assisted Dispute Resolution (1996)
Beninger, Michael, „Taxpayer Rights: Emerging Legal Techniques‟ (Paper presented at the 52nd Annual Canadian Tax Foundation Conference, Toronto, 24- 27 September 2000)
Bevacqua, John, „A Bridge Too Far: The Prospect of a Successful Misfeasance Claim Against the Commissioner of Taxation‟ (Paper presented at the 9th ATAX International Tax Administration Conference, Sydney, 7-9 April 2010)
Braithwaite, Valerie, „Are Taxpayers‟ Charters “Seducers” or “Protectors” of Public Interest? Australia‟s Experience‟ (Working Paper No 70, Centre for Tax System Integrity, Australian National University, 2005)
Canada Law Reform Commission, „The Legal Status of the Federal Administration‟ (Working Paper No 40, Canada Law Reform Commission, 1985)
Consultative Group on Research and Education in Law, Canada, Report to the Social Sciences and the Humanities Research Council of Canada (1983)
422
Feld, Lars and Frey, Bruno, „Deterrence and Tax Morale: How Tax Administrators and Taxpayer Interact‟ (Paper presented at the Second International Conference on Taxation, Canberra, 10-11 December 2001)
James, Simon, Murphy, Kristina and Reinhart, Monika, „The Citizens‟ Charter: How Might Such Initiatives Be More Effective?‟ (Working Paper No 65, Australian National University, 2005)
Knight, Dean, Estoppel (Principles?) In Public Law: The Substantive Protection of Legitimate Expectations, (D Phil Thesis, University of British Columbia, 2004)
Law Reform Commission of New South Wales, Proceedings By and Against the Crown - Report No 24 (1992)
Law Reform Commission of Victoria, Plain English and the Law, Report No 9 (1987)
Law Reform Committee of South Australia, Proceedings By and Against the Crown, Report No 104 (1987)
Law Reform Committee of Tasmania, Recommendations for the Establishment of a No Fault System of Compensation for Motor Vehicles Victims (1972)
McKerchar, Margaret, The Impact of Complexity upon Unintentional Non- Compliance for Australian Personal Income Taxpayers (D Phil Thesis, University of New South Wales, 2002).
National Committee of Inquiry, (Chair: Owen Woodhouse), Commonwealth of Australia, Compensation and Rehabilitation in Australia (1974)
New Zealand Public and Administrative Law Committee, Damages in Administrative Law, Report No 14 (1980)
423
OECD, Committee of Fiscal Affairs Working Party, Taxpayers Rights and Obligations - A Survey of the Legal Situation in OECD Countries, Paper No 8, OECD (1990)
Office of the Commonwealth Ombudsman, Commonwealth of Australia, To Compensate or Not to Compensate? Own Motion Investigation of Commonwealth Arrangements for providing Financial Redress for Maladministration (1999)
Panel of Eminent Persons (Chair: David Ipp), Commonwealth of Australia, Review of the Law of Negligence: Final Report (2002)
Quigley, Bruce, „The Commissioner‟s Powers of General Administration: How Far Can He Go?‟ (Paper presented at the 24th Taxation in Australia National Convention, Sydney, 12 March 2009)
Senate Standing Committee on Legal and Constitutional Affairs, Commonwealth of Australia, The Doctrine of the Shield of the Crown (1992)
The Law Commission, Public Law Team, United Kingdom, Monetary Remedies in Public Law: A Discussion Paper (2004)
The Law Commission, United Kingdom, Administrative Redress: Public Bodies and the Citizen, Consultation Paper No 187 (2008)
Walpole, Michael, „Taxpayer Rights and Remedies - Australia, New Zealand and China‟ (Paper presented at the Second World Tax Conference, Institute of Taxation, Dublin, Ireland, May 2001)
424
PART V - OTHER SOURCES
Attorney-General‟s Department, Commonwealth of Australia, Legal Service Directions 2005 (2005)
Australian Government, The Treasury, „Joint Communiqué: Ministerial Meeting on Public Liability‟ (30 May 2002)
Australian Privacy Commissioner, Tax File Number Guidelines 1992 - Annotated Version (2004)
Australian Public Service Commission, APS Code of Conduct (2009)
Australian Taxation Office, Accessing Information Under the Freedom of Information Act, NAT 2554 (2007)
Australian Taxation Office, Applying for Compensation, NAT 11669 (2009)
Australian Taxation Office, Claiming Compensation, NAT 11668 (2009)
Australian Taxation Office, Commissioner of Taxation - Annual Report 2007-08 (2008)
Australian Taxation Office, Commissioner of Taxation - Annual Report 2008-09 (2009)
425
Australian Taxation Office, Fair Use of our Access and Information Gathering Powers, NAT 2559 (2007)
Australian Taxation Office, Getting Advice from the Tax Office, NAT 2553 (2007)
Australian Taxation Office, If You‟re not Satisfied, NAT 2556 (2007)
Australian Taxation Office, If You‟re Subject to Enquiry or Audit, NAT 2558 (2007)
Australian Taxation Office, Making it Easier to Comply (2009)
Australian Taxation Office, Our Service Standards (2009)
Australian Taxation Office, Practice Statement PS LA 2001/4 (2001)
Australian Taxation Office, Taxation Ruling - TR 2006/10 (2006)
Australian Taxation Office, Taxation Ruling - TR 2006/11 (2006)
Australian Taxation Office, Taxpayers‟ Charter: Expanded Version, NAT 2547 (2007)
Australian Taxation Office, Taxpayers‟ Charter: What You Need to Know, NAT 2458 (2007)
Australian Taxation Office, Treating You Fairly and Reasonably, NAT 2549 (2007)
Australian Taxation Office, Who Can Help You With Your Tax Affairs, NAT2555 (2007)
Australian Taxation Office, Your Honesty and Complying With the Tax Laws, NAT 2550 (2007)
Australian Taxation Office, Your Privacy and the Confidentiality of Your Tax Affairs, NAT 2552 (2007)
Board of Taxation, Role (2008)
D‟Ascenzo, Michael, Commissioner‟s Foreward - Taxpayers‟ Charter (2009) Australian Taxation Office,
Department of Finance and Deregulation, Commonwealth of Australia, Finance Circular No 2006/05 (2006) 427
Evidence to the Senate Finance Subcommittee on Private Retirement Plans and Oversight of the Internal Revenue Service, United States, 100th Congress, 1st Session, 10 April 1987 (Thomas Treadway).
Inspector-General of Taxation, Objective (2008)
Inspector-General of Taxation, Role (2008)
Law Reform Commission of New South Wales, „Why Law Reform Commissions are Important‟ (2009) Lawlink New South Wales
National Taxpayer Advocate, United States of America, 2007 Annual Report to Congress (2007)
National Taxpayer Advocate, United States of America, 2008 Annual Report to Congress (2008)
National Taxpayer Advocate, United States of America, 2009 Annual Report to Congress (2009)
OECD, Centre for Tax Policy and Administration, Principles of Good Tax Administration, Practice Note GAP001 (2001)
Office of the Commonwealth Ombudsman, Commonwealth of Australia, Activities 2005 (2006)
Office of the Commonwealth Ombudsman, Commonwealth of Australia, Activities 2006 (2007) 428
Office of the Commonwealth Ombudsman, Commonwealth of Australia, Taxation Ombudsman Activities 2007 (2008)
Office of the Commonwealth Ombudsman, Commonwealth of Australia, Taxation Ombudsman Activities 2008 (2009)
429