Re Knox and Commissioner of Taxation
[2011] AATA 906
•16 December 2011
CATCHWORDS – TAXATION – partnership - deductions claimed for losses, expenses, cash contributions to partnership – whether partnership – decision affirmed.
TAXATION – loan by shareholder to company – deductions claimed for expenses of borrowing funds to lend to company – whether nexus between taxpayer’s claimed expenses and production of assessable income for taxpayer – decisions affirmed.
TAXATION – ADMINISTRATIVE PENALTY – recklessness – applicant is a certified practising accountant - decisions affirmed.
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DECISION AND REASONS FOR DECISION [2011] AATA 906
ADMINISTRATIVE APPEALS TRIBUNAL )
) 2010/2841-2844
TAXATION APPEALS DIVISION )
Re:ANDREW KNOX
Applicant
And:COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Place: Melbourne
Date: 16 December 2011
Decision:The Tribunal decides to:
1.affirm the objection decisions made by the respondent on 13 May 2010 disallowing the applicant’s objections dated 24 November 2009 for the income years ending 30 June 2005, 2006 and 2007 and 10 December 2009 for the income year ending 30 June 2008 to the:
(a) Notices of Assessment dated:
(i)28 November 2005 for the income year ending 30 June 2005;
(ii)14 December 2006 for the income year ending 30 June 2006;
(iii)31 October 2007 for the income year ending 30 June 2007; and
(iv)26 November 2009 for the income year ending 30 June 2008; and
(b)Notices of Assessment and Liability to Pay Penalty dated:
(i)3 November 2009 for the income year ending 30 June 2005;
(ii)11 November 2009 for the income years ending 30 June 2006 and 30 June 2007; and
(iii)26 and 27 November 2009 for the income year ending 30 June 2008.
S A Forgie
Deputy President
REASONS FOR DECISION
Mr Knox is employed as the Chief Financial Officer of a public company listed on the Australian Stock Exchange. In addition, he is a Director, the Public Officer and Secretary of Silva Holdings Pty Ltd (Silva). He became a Director on its incorporation on 5 January 1995 and holds 50% of its shares as does Mr Paul Carlton, who is a co-Director. Silva has operated a farming and water business. For many years, Mr Knox’s father, Mr Richard Knox, and his step mother, Mrs Geraldine Knox, have grown grapes for wholesale sale and operated a winery. For many years, Mr Richard Knox and Mrs Knox have operated as a partnership, first under the name of RC & GJ Knox and then under the name of GJ Knox & RC Knox. For each of the tax years, 2004-05, 2005-06, 2006-07 and 2007-08 (years in dispute), Mr Knox claimed losses from wine production and from farming and forestry operations.
The Commissioner of Taxation (Commissioner) conducted an audit [1]and, after discussions with Mr Knox issued an audit report adjusting his taxable income in each of the years in dispute by a significant amount. He issued amended assessments and notices of assessment and liability to pay a penalty for each of the years. Mr Knox objected to each and adjusted his claims. He reduced the losses claimed in respect of the winery but claimed deductions in relation to interest he paid on moneys borrowed and contributed to the partnership and expenditure he, rather than the partnership, had incurred personally but for which he had not been reimbursed. The partnership also submitted revised taxation returns for the years in dispute and did so on the basis that Mr Knox was a partner with GJ Knox & RC Knox under the revised partnership name of GJ Knox & RC & AM Knox. In his objections, Mr Knox maintained his claim regarding Silva’s losses and also claimed as deductions interest and other expenses he had incurred in borrowing money to on-lend to Silva.
[1] Notice of audit given by letter dated 10 November 2008: T documents at 87-90
The Commissioner disallowed Mr Knox’s objections and he has applied for review. His applications for review raise three issues. Together with the relevant provision of the taxation legislation, they:
(1)in relation to the partnership, is Mr Knox entitled to a deduction for:
(a)50% of the losses incurred by the partnership operating the winery business: Income Tax Assessment Act 1936 (ITAA36), s 92(2);
(b)interest he incurred on funds he borrowed to contribute as capital to the partnership: Income Tax Assessment Act 1997 (ITAA97), s 8-1; and
(c)expenses he incurred in relation to his interest in the partnership: ITAA97, s 8-1;
(2)in relation to Silva, is Mr Knox entitled to a deduction for:
(a)interest he incurred on funds he borrowed to contribute as capital to Silva: ITAA97, s 8-1; and
(3)in relation to penalties:
(a)have tax shortfall penalties imposed for recklessness in the preparation of his income tax returns for the years in dispute been correctly imposed; and
(b)if so, should they be remitted.
I have affirmed the Commissioner’s decisions.
STRUCTURE OF REASONS
In an effort to make for easier reading, I have written these reasons with Attachments. They form part of these reasons as much as the paragraphs that precede them. As a guide, the reasons are divided in the following way:
| Paragraphs | Attachment | Subject |
| [5] – [8] | A | Summary of the claims and assessments |
| [9] – [21] | B | Burden of proof, standard of proof and the task |
| [22] – [58] | C | Rules of evidence and merits review |
| [59] – [219] | D | Deduction claimed in relation to the wine business |
| [220] – [316] | E | Deduction claimed in relation to the farm and water business |
| [317] – [338] | F | Administrative penalty and recklessness |
ATTACHMENT A
SUMMARY OF MR KNOX’S CLAIMS AND ASSESSMENTS
Claims as made in taxation returns
Mr Knox’s claims in relation to the years in dispute and the outcome of the Commissioner’s audits and amended assessments and assessments is reflected in the following table:
| Year | Claimed losses | Increased taxable income | Tax shortfall | Penalty at 50% | ||
| Loss from winery | Loss from farm | Total loss: wine/farm | ||||
| 2004-05 | $61,858 | $17,640 | $79,498 | $79,468 | $38,556.53 | $19,281.65 |
| 2005-06 | $56,338 | $17,176 | $73,514 | $73,514 | $35,464.39 | $17,732.20 |
| 2006-07 | $57,132 | $107,403 | $164,535 | $164,535 | $70,534.57 | $35,267.25 |
| 2007-08 | $56,318 | $108,690 | $165,008 | $165,008 | $69,456.12 | $34,728.05 |
Claims as made on objections regarding winery
On lodging his objections to the Commissioner’s amended assessments, Mr Knox revised his claims. They appear in the following table alongside the losses reported by the partnership in the name of Mr Richard Knox and Mrs Geraldine Knox when it lodged its taxation returns. Also appearing in the table are the losses reported in revised taxation returns lodged for the years in dispute by the partnership in the name of Mr Richard Knox, Mrs Geraldine Knox and Mr Knox. The figures relating to the partnership are shown in italics.
| Year | Original loss claimed by Mr Knox for winery | Loss reported by GJ Knox & RC Knox | Loss claimed by Mr Knox on objections | Revised loss claimed by GJ Knox & RC & AM Knox | Interest re borrowed money funding partnership | Unreimbursed expenses incurred as partner |
| 2004-05 | $61,858 | $18,615 | $33,266 | $66,532 | $6,543 | $2,499 |
| 2005-06 | $56,338 | $17,133 | $22,138 | $44,475 | $10,328 | $1,146 |
| 2006-07 | $57,132 | $4,654 | $13,258 | $26,517 | $3,565 | $4,299 |
| 2007-08 | $56,318 | $18,757 | $18,361 | $36,721 | $13,397 | $1,686 |
Claims as made on objections regarding Silva and the farming and water business
Mr Knox amended his claim for deductions when objecting to the Commissioner’s amended assessments. They appear alongside the losses he claimed in his original returns:
| Year | Original loss claimed by Mr Knox for farm | Interest expenses claimed on objections | Other expenses claimed on objections |
| 2004-05 | $17,640 | $13,721 | $2,408 |
| 2005-06 | $17,176 | $0 | $3,447 |
| 2006-07 | $107,403 | $0 | $4,540 |
| 2007-08 | $108,690 | $8,390 | $2,957 |
Silva’s financial statements for the years in dispute[2] and from its taxation returns in relation to the other years show that Silva’s financial position was:
[2] T documents at ST14 to ST21
| Year | Loan from Mr Knox | Loan from Mr Carlton | Negative net assets | Accumulated accounting loss | Current year profit (loss) | Taxable income (loss)/accntg income |
| 1994-95 | ($209,548) | ($211,549) | ($211,549) 0 | |||
| 1995-96 | ($13,330) | ($196,218) | 0 $329,900.00 | |||
| 1996-97 | ($35,811) | ($22,481) | ($22,481) 0 | |||
| 1997-98 | ($4,368) | $31,443 | 0 $47,452.00 | |||
| 1998-99 | ($42,431) | ($38,063) | ($38,063) $646,467.00 | |||
| 1999-00 | ($22,372) | $20,059 | 0 $56,557.00 | |||
| 2000-01 | ($93,251) | ($70,878) | ($70,878) 0 | |||
| 2001-02 | ($196,370) | ($103,119) | ($103,119) $36,009.00 | |||
| 2002-03 | ($248,565) | ($52,195) | ($52,195) $352.00 | |||
| 2003-04 | ($260,387) | ($11,821) | ($11,821) 0 | |||
| 2004-05 | $288,945.98 | $132,055.07 | ($263,715.02) | ($285,773.57) | ($3,328.72) | ($3,329) 0 |
| 2005-06 | $288,945.98 | $132,055.07 | ($264,294.67) | ($286,353.22) | ($579.65) | ($580) 0 |
| 2006-07 | $374,945.98 | $132,055.07 | ($267,847.65) | ($289,906.20) | ($3,552.98) | ($3,553) 0 |
| 2007-08 | $567,705.98 | $112,055.07 | ($74,312.86) | ($96,371.41) | $193,534.79 | 0 $242,983.77 |
| 2008-2009 | Not known | Not known | ($75,490) | Not known | ($1,170.00) | ($1,170) $29,849 |
| TOTAL | ($77,482) | |||||
| AVERAGE | ($5,165) |
ATTACHMENT B
BURDEN OF PROOF, STANDARD OF PROOF AND THE TASK
General principles
Generally, the conduct of a review in the Tribunal is governed by the Administrative Appeals Tribunal Act 1975 (AAT Act) but the provisions of that legislation may be modified, added to or excluded in relation to its review of particular administrative decisions.[3] It is often said that, subject to any additions, modifications or exclusions, the task of the Tribunal is that set out by Bowen CJ and Deane J in Drake v Minister for Immigration and Ethnic Affairs[4] (Drake) when they said:
“The question for the determination of the Tribunal is not whether the decision which the decision-maker made was the correct or preferable one on the material before him. The question for the determination of the Tribunal is whether that decision was the correct or preferable one on the material before the Tribunal.”[5]
[3] AAT Act, s 25(6)
[4] (1979) 24 ALR 577; 46 FLR 409; 2 ALD 60
[5] (1979) 24 ALR 577; 46 FLR 409; 2 ALD 60 at 589; 419; 68
The description of the Tribunal’s task implicitly recognises that neither the applicant seeking review nor the decision-maker whose decision is being reviewed has a duty to prove that the decision is the correct or preferable decision or that it is not. It recognises that the Tribunal is not limited to the material that was before the decision-maker although there are limitations upon the nature of that material. At the same time, it recognises that the decision-maker has a duty to assist the Tribunal.[6] It must do that by producing all material that is relevant to the review of the decision and that is in its possession or under its control[7] and by using its best endeavours to assist the Tribunal to make its decision.
[6] This is underlined by the more recent enactment of s 33(1AA) of the AAT Act.
[7] AAT Act, s 37(1)
Modification made by the TA Act: burden of proof
Section 14ZZK(b)(iii) of the Taxation Administration Act 1953 (TA Act) modifies the general application of the AAT Act. It provides that “the applicant has the burden of proving that … the taxation decision concerned should not have been made or should have been made differently”. As the question whether Mr Knox is in a partnership is a mixed question of law and fact,[8] the practical effect of this is that, in evidentiary terms, he must establish that he was in a partnership. He must do so on the balance of probabilities. How he does that is a matter for him but he will have in mind the indicia set out in various authorities, including those to which
Mr Kelly and Dr Bender referred me. In outline, he can do that by producing material relevant to and probative of the issues he must establish. He can rely on material produced by the Commissioner but the Commissioner has no obligation to produce evidence or material relevant to establishing the correctness or otherwise of Mr Knox’s case. That makes sense in policy terms for it is Mr Knox, rather than the Commissioner, who can be expected to hold, or have access to, the relevant material for he has made the claim.[8] Relying on Case N56 (1981) 81 ATC 277 at 280; [11], Dr Bender had submitted that the issue is a question of fact but I note that Burchett and Lee JJ decided in Jolley v Federal Commissioner of Taxation (1989) 86 ALR 297; 17 ALD 643; 89 ATC 4197 (Neaves J dissenting but not on this point) that “The question whether a partnership is a mixed question of law and fact … . If the tribunal has misunderstood the law relating to partnership that will raise a clear question of law …”: (1989) 86 ALR 297; 89 ATC 4197 at 299; 4199
Standard of proof
In the absence of any statutory provision to the contrary, the standard of proof applicable in civil proceedings in the courts is that applicable in the Tribunal i.e. on the balance of probabilities. In reaching that conclusion, Beaumont J, with whom Northrop and Spender JJ agreed, said in Repatriation Commission v Smith[9] that “There is … a distinction of substance to be drawn between the probabilities on the one hand and mere possibilities, even if they are real as distinct from fanciful, on the other …”.[10]
[9] (1987) 74 ALR 537; 15 FCR 327; 12 ALD 798; 7 AAR 17
[10] (1987) 74 ALR 537; 15 FCR 327; 12 ALD 798; 7 AAR 17 at 538; 335; 800; 26
The standard of proof on the balance of probabilities is not an absolute standard. Regard must be had to the principles set out by Dixon J in Briginshaw v Briginshaw:[11]
“… [R]easonable satisfaction is not a state of mind that is attained or established independently of the nature and consequence of the fact or facts to be proved. The seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding are considerations which must affect the answer to the question whether the issue has been proved to the reasonable satisfaction of the tribunal. In such matters ‘reasonable satisfaction’ should not be produced by inexact proofs, indefinite testimony, or indirect inferences. Everyone must feel that, when, for instance, the issue is on which of two dates an admitted occurrence took place, a satisfactory conclusion may be reached on materials of a kind that would not satisfy any sound and prudent judgment if the question was whether some act had been done involving grave moral delinquency. …”[12]
[11] (1938) 60 CLR 336; Latham CJ, Rich, Starke, Dixon and McTiernan JJ
[12] (1938) 60 CLR 336; at 362. The same principles have been considered and applied in numerous cases in the Tribunal including Re Pochi v Minister for Immigration and Ethnic Affairs (1979) 26 ALR 247 at 255 (Brennan J) and Hardcastle v Commissioner of Australian Federal Police & Anor (1984) 53 ALR 593 (Bowen CJ, Gallop and Lockhart JJ).
Modification made by the TA Act: limitations upon the applicant
Apart from the imposition of a burden of proof, s 14ZZK provides that an applicant is limited to the grounds stated in the taxation objection to which the objection decision relates.[13]
[13] TA Act, s 14ZZK(a)
The Tribunal’s task
When taken with the imposition of the burden of proof, this means that the Tribunal’s task, whether reviewing an objection decision in respect of an amended assessment of income tax, imposing a penalty or refusing to remit an amount of shortfall interest charge or an assessment of administrative penalty is explained in this way:
“ It is abundantly clear, of course, that even though the Tribunal does over again the work of the Commissioner, it does it in a significantly different way. Although it could be said to be part of an administrative hierarchy, its functions partake far more of the court than of the office desk.
It is clearly not cast in the role of the inquisitor. Although it does not act within the confines of formal pleadings, it is constrained in its inquiries and deliberations by the ambit of the taxpayer’s objections. Although it is not bound by the rules of evidence (sec. 33(1)(c)) in reaching its decision it must act upon the evidence which is placed before it. …”[14]
[14] Eldridge v Federal Commissioner of Taxation (1990) 90 ATC 4907; 21 ATR 897 at 4,921; 912 per Foster J
The Tribunal’s task was explained more fully in Federal Commissioner of Taxation v Dalco[15] (Dalco). Brennan J[16] observed that the purpose behind an assessment, objection and appeal or review “… is to ascertain the true tax liability of the taxpayer under the substantive provisions of the Act.”[17] Speaking of an appeal, but the principles are equally apt to a merits review in this Tribunal, his Honour continued:
“… It would be inappropriate for a court determining an appeal to make an order altering the tax liability assessed … unless the court were satisfied that the amount to which it proposed to alter the assessment represented the true tax liability of the taxpayer. Although the grounds of objection limit the grounds of appeal, the ultimate question for the court hearing the appeal is not whether the grounds have been made out but whether the amount assessed as taxable income is wrong. The burden which rests on a taxpayer is to prove that the assessment is excessive and that burden is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment.”[18]
[15] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; 20 ATR 1370; 64 ALJR 166; 90 ATC 4088
[16] With whom Mason CJ, Dawson, Deane, Gaudron and McHugh JJ concurred
[17] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 621; 344; 1373; 168; 4091. The case was concerned with s. 190(b) of the ITAA36 which was repealed and re-enacted in substance as s. 14ZZK(b)(i) of the TA Act by the Taxation Laws Amendment Act (No. 3) 1991, s. 112.
[18] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 621; 344; 1373; 168; 4091
Also in Dalco, Toohey J[19] explained:
“… A taxpayer does not necessarily discharge the onus of showing that an assessment is excessive, merely by showing that moneys treated by the Commissioner as income are in truth not the income of the taxpayer, though that may be a step in demonstrating his or her taxable income to be less than the assessment.”[20]
[19] With whom Mason CJ, Dawson, Deane, Gaudron and McHugh JJ concurred
[20] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 631; 351-352; 1379; 173; 4097 per Toohey J
The case of McCormack v Federal Commissioner of Taxation,[21] to which he referred, illustrates the application of the principles in the context of an assessment of income tax payable. The Commissioner had treated the net profit from the sale of a property as assessable income on the basis that it arose from the sale of a property she had acquired for the purpose of profit-making by sale within the meaning of s 26(a) of the Income Tax Assessment Act 1936 (ITAA36) as it was then in force. Gibbs J explained Mrs McCormack’s task:
“… The taxpayer bears the burden of proving that the assessment was excessive. To discharge that burden in a case such as the present he must prove affirmatively, on the balance of probabilities, that the property was not acquired for the purpose of profit-making by sale. The burden may be discharged by drawing inferences from the evidence. In some cases in which all the relevant facts are known, and there is no material upon which it might properly be concluded that the property was acquired for the relevant purpose, the inference may properly be drawn that the property was not acquired for the relevant purpose. But it is not enough, even when all the facts are known, that there is no material upon which it may be concluded that the property was acquired for the purpose mentioned in s. 26(a). If a taxpayer can succeed, simply because there is no evidence from which it can be concluded that the relevant purpose existed, that must mean that the burden of proving the existence of that purpose lies on the Commissioner. That in my respectful opinion would be to invert the onus of proof. The taxpayer will succeed if the proper inference from the evidence is that the property was not acquired for the relevant purpose, but if there is no evidence as to the purpose for which the taxpayer acquired the property the appeal must fail.”[22]
[21] [1979] HCA 18; (1979) 143 CLR 284; 23 ALR 583; 9 ATR 610; 53 ALJR 436; 79 ATC 4111
[22] [1979] HCA 18; (1979) 143 CLR 284; 23 ALR 583; 9 ATR 610; 53 ALJR 436; 79 ATC 4111 at [11]; 303; 597; 622; 443; 4,121
Merely establishing on the balance of probabilities that the Commissioner has made an error cannot satisfy the taxpayer’s burden of proof under
s 14ZZK(b)(i) in relation to an assessment for the burden is to prove that “the assessment is excessive”. The point was made in Dalco:“… A taxpayer who shows on the facts that are known a mere error by the Commissioner in assessing the amount of the taxpayer’s taxable income does not show that his objection should have been allowed or that the appeal against the assessment must be allowed. …”[23]
If all of the material facts were known and the amount of a taxpayer’s taxation liability turned on the application of the law to those facts, the taxpayer would discharge the burden of proof by establishing that the Commissioner had erroneously included in the assessed taxable income an amount that should not have been included.[24]
[23] [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J
[24] Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 625; 347; 1375-6; 170; 4094 per Brennan J
It is open to the taxpayer to attack the Commissioner’s power to make an assessment[25] or the calculation of the amount of an assessment. If the taxpayer chooses to attack the calculation of the amount of the assessment:
“… mere error in the formation of that judgment by the Commissioner does not warrant the setting aside of the amount assessed. Given the validity of the exercise of the power to make an assessment …, the ultimate question is whether the amount of the assessment is excessive. The amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous. …”[26]
[25] McAndrew v Federal Commissioner of Taxation (1956) 98 CLR 263 at 270-271 per Dixon CJ, McTiernan and Webb JJ
[26] Federal Commissioner of Taxation v Dalco [1990] HCA 3; (1990) 168 CLR 614; 90 ALR 341; (1990) 20 ATR 1370; (1990) 64 ALJR 166; 90 ATC 4088 at 623; 345; 1374; 169; 4092 per Brennan J
An example of the application of the principles is found in Richard Walter Pty Ltd v Commissioner of Taxation[27] (Richard Walter). The taxpayer had returned relatively small amounts of income from a large pathology practice. At first, the Commissioner claimed that a series of complex arrangements effected on the advice of the taxpayer’s tax accountants were shams. Those arrangements included a series of loans or trusts. The Commissioner later claimed that the loan arrangements between the taxpayer and other persons were shams. As a consequence, he issued assessments to the taxpayer on the basis that its assessable income was an amount much greater than that which it had returned. Hill J set out the principles in Dalco and McAndrew v Federal Commissioner of Taxation and continued:
[27] (1996) 67 FCR 243; 96 ATC 4550; 33 ATR 97; Lockhart and Hill JJ; Lehane J dissenting
“ These principles work out in the present case in the following way. The Commissioner alleges that the payments made from Morlea to Richard Walter are income. In order to show that the assessment is excessive Richard Walter must thus show on the balance of probabilities that the payments are not income. It seeks to do that in the present case by making a case that the payments were loans. If this is case is accepted, Richard Walter will, but subject to the s 260 issue, be entitled to succeed. In the present case it sought to show the amounts in question were loans through the evidence of Mr Holden who swore that they were and that the accounts reflecting them were correct. His Honour did not believe Mr Holden, finding that there was no intention that the loans would be repaid. This being the case, the payments in question were not loans. Whether they had some other character may have relevance to the question of sham, but that can for the moment be put to one side. It can not be correct to say that the onus lay upon the Commissioner to establish what the payments in question were. If they were not loans it will be for the taxpayer then to show that they are something else which does not have the character of income. If the taxpayer does not do this it will not have satisfied the onus of showing that the assessment is excessive.
Even if it had been necessary to determine whether the so-called loan transactions were shams, the onus could not have been on the Commissioner to show what the real transaction was, of which the payments formed part. Once sham is alleged by the Commissioner, he may then come under some factual obligation to identify the real transaction for which it is contended that the apparent transaction is but a disguise: Coppleson v Commissioner of Taxation (Cth) (1981) 52 FLR 95. But as that case itself illustrates, that is in the overall context of the statutory imposition of the burden of proof on the taxpayer and does not place upon the Commissioner an onus of satisfying the Court that there was a sham.
The onus not being upon the Commissioner to show a sham, so too the onus cannot be on the Commissioner to show what the genuine transaction was which is said to have been obscured by that sham.
As I have already sought to demonstrate, it was not necessary for his Honour to determine the matter by reference to sham in the sense of holding that the so-called loans were but a disguise for some other transaction. It was sufficient for his Honour to hold that the payments to Richard Walter were not loans. Once that finding had been made the question would then arise whether Richard Walter had satisfied the onus upon it of showing that the payments were not income.”[28]
[28] (1996) 67 FCR 243; 96 ATC 4550; 33 ATR 97 at 259; 4563; 111-112 and see also 245-246; 4552; 100 per Lockhart J
ATTACHMENT C
RULES OF EVIDENCE AND MERITS REVIEW
Extent to which financial records can be relied on in satisfying the burden of proof
On behalf of Mr Knox, Mr Kelly submitted that I could rely on the financial accounts prepared by the taxpayer’s accountant as evidence of the statements they made. Before turning to the authority on which he relies, I will consider the general principles established in the authorities and against the background of merits review.
A.The Tribunal is not bound by the rules of evidence
The majority in Drake did not make any observations about the way in which the Tribunal goes about determining whether the decision was the correct or preferable decision on the material before it but the starting point must be s 33(1)(c) of the AAT Act. It provides that, in a proceeding before it, the Tribunal “… is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate.” It has not been modified by the TA Act in relation to the Tribunal’s review of objection decisions.
B. The nature and boundaries of a discretionary power
Section 33(1)(c) confers a discretionary power upon the Tribunal. I describe it in those terms for it seems consistent with the way in which the word “discretion” is used in the High Court in, for example, Norbis v Norbis[29] to describe a discretionary order in contradistinction to a normative order i.e. “… an order the making of which is dictated by the application of a fixed rule to the facts on which its operation depends.”[30] In Norbis v Norbis, the High Court considered s 70 of the Family Law Act 1975 concerning the alteration of the interests of parties to a marriage. That was accepted as requiring the exercise of judicial discretion because it:
“… depends on the application of a very general standard – what is ‘just and equitable’ – which calls for an overall assessment in the light of the factors mentioned in s 79(4), each of which in turn calls for an assessment of circumstances. Because these assessments call for value judgments in respect of which there is room for reasonable differences of opinion, no particular opinion being uniquely right, the making of the order involves the exercise of a judicial discretion. …”[31]
[29] [1986] HCA 17; (1986) 161 CLR 513; 65 ALR 12; 60 ALJR 335; Mason, Wilson, Brennan, Deane and Dawson JJ at 518;14; 336 per Mason and Deane JJ
[30] [1986] HCA 17; (1986) 161 CLR 513; 65 ALR 12; 60 ALJR 335 at 518; 15; 337 per Mason and Deane JJ
[31] [1986] HCA 17; (1986) 161 CLR 513; 65 ALR 12; 60 ALJR 335 at 518; 14; 336-337 per Mason and Deane JJ
The nature of a “discretion” was also considered by Gleeson CJ, Gaudron and Hayne JJ in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission:[32]
“… In general terms, it refers to a decision-making process in which ‘no one [consideration] and no combination of [considerations] is necessarily determinative of the result’ …. Rather, the decision-maker is allowed some latitude as to the choice of the decision to be made …. The latitude may be considerable as, for example, where the relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion …. On the one hand, it may be quite narrow where, for example, the decision-maker is required to make a particular decision if he or she forms a particular opinion or value judgment.”[33]
[32][2000] HCA 47; (2000) 203 CLR 194; 174 ALR 585; 74 ALJR 1348; Gleeson CJ, Gaudron, Kirby, Hayne and Callinan JJ
[33] [2000] HCA 47; (2000) 203 CLR 194; 174 ALR 585; 74 ALJR 1348 at [19]; 204-205; 591; 1354. The following passage in their Honours’ judgment illustrates the various guises which a discretionary judgment may take. The power under consideration was found in s 170MW of the Workplace Relations Act 1996. It provided that the Industrial Relations Commission had a discretion to suspend or terminate a bargaining period if, but only if, satisfied of one of the circumstances specified in ss 170MW(2) to (7). Gleeson CJ, Gaudron and Hayne JJ said at [20]; 205; 592; 1354
In view of the latitude given to the decision-maker, the role of an appellate court is somewhat circumscribed as:
“… the correctness of the decision can only be challenged by showing error in the decision-making process … . And unless the relevant statute directs otherwise, it is only if there is error in that process that a discretionary decision can be set aside by an appellate tribunal. The errors that might be made in the decision-making process were identified, in relation to judicial discretions, in House v The King in these terms:
‘If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so ….’”[34]
[34] [2000] HCA 47; (2000) 203 CLR 194; 174 ALR 585; 74 ALJR 1348 at [21]; 205; 592; 1354
Apart from an appellate court’s not being able to exercise its own discretion for that of an administrative decision-maker, there is no distinction to be drawn between a discretionary decision made by an administrative tribunal and a discretionary decision made by a court. Discretionary decisions made by an administrative tribunal may be either general discretions (where relevant considerations are confined only by the subject matter and object of the legislation which confers the discretion) or much more confined discretions (where considerations that the decision-maker may take into account are confined or he or she is required to make a particular decision if he or she forms a particular opinion or value judgment on a particular matter or matters).
The discretionary decisions of administrative decision-makers are equally subject to review by the courts. Even if it appears that a general discretionary power is without boundaries, it clearly is not. As appears from the judgment of Mason J in Minister for Aboriginal Affairs v Peko-Wallsend Ltd[35] (Peko-Wallsend), the boundaries are drawn from the form of the subject-matter, scope and purpose of the legislation in which the power is found. His Honour said:
“… In the context of judicial review on the ground of taking into account irrelevant considerations, this Court has held that, where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of the discretion are similarly unconfined, except in so far as there may be found in the subject-matter, scope and purpose of the statute some implied limitation in the factors to which the decision-maker may legitimately have regard … By analogy, where the ground of review is that a relevant consideration has not been taken into account and the discretion is unconfined by the terms of the statute, the court will not find that the decision-maker is bound to take a particular matter into account unless an implication that he is bound to do so is to be found in the subject-matter, scope and purpose of the Act.”[36] As a rule, the power to give directions and make guidelines is determined by reference to “... the subject matter, scope and purpose of the statute ...”.[37]
[35] [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299; Gibbs CJ, Mason, Brennan, Deane and Dawson JJ
[36] [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299 at 40; 309. See also R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45; 27 ALR 321 at 49; 325 per Stephen, Mason, Murphy, Aickin and Wilson JJ citing with approval Water Conservation and Irrigation Commission (NSW) v Browning [1947] HCA 21; (1947) 74 CLR 492 at 505
[37] [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299 at 40; 309. This approach accords with the approach to statutory interpretation later endorsed in Project Blue SkyInc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; 72 ALJR 841; 153 ALR 490 at [69]; 381; 855; 509 by McHugh, Gummow, Kirby and Hayne JJ when they said:
Quite apart from these boundaries, there is a practical limitation of another sort on the power of the administrative decision-maker. That is a limitation on the manner in which the administrative decision-maker weighs evidence relating to the matters that are relevant and the weight he or she gives one matter over another. Justice Mason addressed that limitation as well after first setting out the general principle. His Honour said:
“… [I]n the absence of any statutory indication of the weight to be given to various considerations, it is generally for the decision-maker and not the court to determine the appropriate weight to be given to the matters which are required to be taken into account in exercising the statutory power …. I say ‘generally’ because both principle and authority indicate that in some circumstances a court may set aside an administrative decision which has failed to give adequate weight to a relevant factor of great importance, or has given excessive weight to a relevant factor of no great importance. The preferred ground on which this is done, however, is not the failure to take into account relevant considerations or the taking into account of irrelevant considerations, but that the decision is ‘manifestly unreasonable’. This ground of review was considered by Lord Greene M.R. in Wednesbury Corporation …, in which his Lordship said that it would only be made out if it were shown that the decision was so unreasonable that no reasonable person could have come to it. … [A] court should proceed with caution when reviewing an administrative decision on the ground that it does not give proper weight to relevant factors, lest it exceed its supervisory role by reviewing the decision on its merits.”[38]
[38] [1986] HCA 40; (1986) 162 CLR 24; 66 ALR 299 at 41-42; 309-310
C. The boundaries of the discretionary power under s 33(1)(c)
Returning to s 33(1)(c) of the AAT Act, there is an implicit boundary in the provision that it may inform itself “as it thinks appropriate”. What it thinks “appropriate” must be shaped by what is “suitable or proper”[39] to the task of reviewing the particular decision under consideration, by the legislative context in which it must be reviewed, in light of the factual issues that it must decide and having regard to the standard of proof that must be applied. The legislative context in which a particular administrative decision is made may limit the evidence and material to which the Tribunal may have regard.[40]
[39] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[40] See, for example, s 500(6H) of the Migration Act 1958 limiting the information to which the Tribunal may have regard when reviewing a decision made under s 501 and relating to a person in the migration zone.
What has been meant by provisions similar to s 33(1)(c) has been considered in cases such as R v War Pensions Entitlement Appeal Tribunal; ex parte Bott[41] (Bott), A & B v Director of Family Services[42] (A & B) and Lillywhite v Chief Executive Liquor Licensing Division, Department of Tourism, Fair Trading and Wine Industry Development[43] (Lillywhite). In A & B, Higgins J had said of a provision similar to s 33(1)(c) that:
“… it should be recognised that such provisions do not render the Rules of Evidence irrelevant. They should still be applied, unless, for sound reason, their application is dispensed with.”[44]
[41] [1933] HCA 30; (1933) 50 CLR 228; 39 ALR 533; 7 ALJR 169
[42] (1996) 132 FLR 172
[43] [2008] QCA 88; (2008) 100 ALD 586 at [34]; 594 per Muir JA, with whom McMurdo P and Chesterman J agreed
[44] (1996) 132 FLR 172 at 177
In Lillywhite, the Queensland Court of Appeal found his Honour’s interpretation in A & B to impose a procedural limitation that was not found in, and was inconsistent with, a different but similar legislative provision to be found in s 47(4) of the Commercial and Consumer Tribunal Act 2003 (Qld) (CCT Act). It declined to follow Higgins J and said that:
“ As the hearing before the tribunal was a rehearing on the evidence before the respondent … no question of excluding evidence arose. It was for the tribunal to determine the weight, if any, it should give that evidence.”[45]
[45] [2008] QCA 88; (2008) 100 ALD 586 at [35]; 595 per Muir JA, with whom McMurdo P and Chesterman J agreed
That statement must be understood in light of s 34 of the CCT Act and s 107C(1) of the Liquor Act 1992 (Qld) under which the decision under review had been made. Section 34 limits the Commercial and Consumer Tribunal to the evidence before the chief executive in that case. Section 107C(1) provides that “The chief executive may impose conditions on licences and permits – (a) …; (b) …; (c) to minimise harm caused by alcohol abuse and misuse and associated violence; and (d) to minimise alcohol related disturbances, or public disorder, in a locality.” Although referring to the principles stated by Mason J in Peko-Wallsend,[46] Muir JA found that:
“ The discretions conferred by s 107C(1)(c) and (d) were unconfined. The decision-maker is required to act in good faith and to not act arbitrarily or capriciously. The decision-maker is not required by s 107C(1) to consider any particular facts in making a decision to impose conditions in respect of the matters in paras (c) and (d). Nor is the decision-maker, with the exception stated later, obliged to hold an inquiry or to determine any facts before imposing a condition. The tribunal’s position differs from the respondent’s in that it is required to give reasons for its decisions. It may be inferred from that, from its status as a tribunal and from its obligation to afford natural justice, that it is obliged to find and state the facts on which it bases its decisions. However, in making its determination, the tribunal is confined to the evidence before the respondent.”[47]
[46] See [28] above
[47] [2008] QCA 88; (2008) 100 ALD 586 at [24]; 592-593
In so far as the procedural limitations are concerned, it seems to me that the approach of the Court of Appeal in Lillywhite is to be preferred to that taken in A & B in similar, but different, legislative provisions. Section 33(1)(c) in the AAT Act is plain in its drafting and should be read as meaning what it says i.e. the Tribunal is not bound by the rules of evidence. There is no room for the introduction of a procedural step of the type proposed by Higgins J in A & B.
Beyond that, I would respectfully suggest that the principles set out by the Court of Appeal in Lillywhite would not sit comfortably if their application to s 33(1)(c) were to mean that it were to be interpreted as unconfined with decision-makers being required only to act in good faith and to not act arbitrarily or capriciously. Applying the principles stated by Mason J in Peko-Wallsend, s 33(1)(c) is not a power without boundaries. There is an implicit boundary in the provision that the Tribunal may inform itself “as it thinks appropriate”. What it thinks “appropriate” must be shaped by what is “suitable or proper”[48] to the task of reviewing the particular decision under consideration. The task of reviewing must, in turn, be limited by the provisions of the particular legislative context in which the decision must be reviewed. That context determines the factual issues that must be decided and the standard of proof that must be applied. It may also limit the evidence and material to which the Tribunal may have regard.[49]
[48] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[49] See, for example, s 500(6H) of the Migration Act 1958 limiting the information to which the Tribunal may have regard when reviewing a decision made under s 501 and relating to a person in the migration zone.
In this case, Mr Knox has the burden of proving that the objection decision should not have been made or should have been made differently. Taking the partnership aspect of the case, this means that he must establish, on the balance of probabilities, that he was in a particular partnership and that he incurred expenses in funding contributions to that partnership and incurred other expenses in relation to the derivation of income from an interest in that partnership in the years in question. These are the matters that must draw the boundaries of the discretionary power I am given by s 33(1)(c) in relation to that aspect of the case. The manner in which I inform myself on these matters must be appropriate, and so proper or suitable, to the task of establishing, on the balance of probabilities that Mr Knox is a partner in a particular partnership. It must be logically probative if it is to be appropriate to the task I have. The Silva aspect of the case draws different boundaries but the process is the same.
D.Rules of evidence do not bind the Tribunal but have they any relevance?
Section 33(1)(c) raises for consideration the meaning of the word “evidence” and the expression “the rules of evidence” as well as the purpose those rules serve. Although the rules of evidence do not apply, the Tribunal is obliged under s 43(2B) of the AAT Act to include in its written reasons for decision “… a reference to the evidence or other material …” on which its findings were based. For reasons I gave in Re General Merchandise & Apparel Group PL and Chief Executive Officer of Customs[50] (General Merchandise) where I considered s 33(1)(c), the Tribunal could have regard to evidence, which is both relevant and admissible according to the rules of evidence, and, subject to its being fair to do so, to other material that is relevant but not necessarily admissible under those rules. By “fairness”, I was not thinking of procedural fairness whether enshrined in s 39(1) of the AAT Act or in its broadest
sense and explained that:
“… Taken together, s 39 and the rules of procedural fairness are focused on the parties’ having an opportunity to ascertain the relevant issues that will be considered by the Tribunal, inspect documents to which it proposes to have regard and present their cases. Fairness in an evidentiary sense is focused on the Tribunal’s relying on material that ‘…tends logically to show the existence or non-existence of facts relevant to the issue to be determined’.[51] As Deane J, with whom Evatt J agreed, said:
‘… the requirement that findings of material fact of a statutory tribunal must ordinarily be based on logically probative material and the requirement that the actual decision of such a tribunal must, when relevant questions of fact are in issue, ordinarily be based upon such findings of material fact and not on mere suspicion or speculation. Those requirements, like all the ordinarily applicable rules of natural justice, may be modified or abolished by the express words or intendment of the legislation establishing the tribunal or conferring jurisdiction upon it …’[52]”[53]
[50] [2009] AATA 988; (2009) 51 AAR 1 at [131] to [139]; 49-51
[51] Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139 at 160 per Deane J, with whom Evatt J agreed
[52] Minister for Immigration and Ethnic Affairs v Pochi (1980) 4 ALD 139 at 160
[53] [2009] AATA 988; (2009) 51 AAR 1 at[137]; 50-51
I adopt my conclusion in General Merchandise:
“138. Much of what tends logically to show the existence or non-existence of facts relevant to the issue, and so is logically probative or safe to rely upon, has been the subject of the rules of evidence and I will use one of them to illustrate the point. Although there are exceptions, the general rule is that evidence given by one person of what another person said, and so hearsay, is not admissible if it is put forward to prove the truth of what was said by that other person rather than to prove the fact that the person said the words. The reason for its not being admissible is that it is unreliable and so unsafe to rely upon because:
‘… Without the maker of the statement in court, it may be impossible to inquire into that person’s perception, memory, narration or sincerity. The statement itself may not be accurately recorded. Mistakes, exaggerations or deliberate falsehoods may go undetected and lead to unjust verdicts. Hence, the rule against hearsay is intended to enhance the accuracy of the court’s findings of fact, not impede its truth-seeking function.’[54]
139. Just as the courts have tested hearsay and found it, for most purposes, to be too unsafe to rely upon to establish a fact in issue, the Tribunal must go through a similar process with each piece of material to which it may decide to have regard. Although not bound by the rules of evidence, those rules provide a tried and tested means of assessing what material is safe to rely upon. If the material does not meet those rules, careful thought of the sort given in the context of hearsay must be given to the material. That is to say, its reliability and whether it is logically probative of a fact in issue must be carefully considered before regard may be had to it. Material that is speculative or mere suspicion does not meet the required standard.”[55]
[54] R v Khelawon [2006] 2 SCR 787; (2006) 274 DLR (4th) 385; 215 CCC (3d) 161 (SCC) at 793; 388-389; 165 [2] per Charron J
[55] [2009] AATA 988; (2010) 51 AAR 1 at [138]-[139]; 51
This is consistent, I respectfully suggest, with the following passage from the judgment of Evatt J in Bott when considering a requirement that the War Pensions Entitlement Appeal Tribunal act “according to substantial justice”:
“… Some stress has been laid by the present respondents upon the provision that the Tribunal is not, in the hearing of appeals, ‘bound by any rules of evidence.’ Neither it is. But this does not mean that all rules of evidence may be ignored as of no account. After all, they represent the attempt made, through many generations, to evolve a method of inquiry best calculated to prevent error and elicit truth. No tribunal can, without grave danger of injustice, set them on one side and resort to methods of inquiry which necessarily advantage one party and necessarily disadvantage the opposing party. In other words, although rules of evidence, as such, do not bind, every attempt must be made to administer ‘substantial justice.’”[56]
[56] [1933] HCA 30; (1933) 50 CLR 228 at 256
His Honour was in dissent in that case but this passage from his judgment was cited with approval by Brennan J, as President of the Tribunal, in Re Pochiand Minister for Immigration and Ethnic Affairs.[57] The reference to “substantial justice” in the passage raises two questions. First, what is meant by the expression and, second, how does removing the obligation to comply with the rules of evidence sit with any obligation to administer substantial justice? Justice Brennan answered the second and I will return to that but will start with the first question.
[57] [1979] AATA 64; (1979) 36 FCR 482; 26 ALR 247; 2 ALD 33; 36 FLR 482 at 492; 256; 41; 492
Tribunals such as the Refugee Review Tribunal (RRT) are under a statutory obligation to “act according to substantial justice”.[58] What is meant by “substantial justice” has been considered by Drummond J in Thanh Phat Ma v Billings J (Constituting the Refugee Review Tribunal)[59] and Foster J in Yao-Jing Li v Minister for Immigration & Multicultural Affairs.[60] Both considered its meaning in the context of private international law where it involves concepts quite different from those of natural justice or procedural fairness. Both considered the matter in detail but I will refer only to the final conclusion reached by Foster J:
“ I find it neither necessary nor desirable to undertake the task of defining ‘substantial justice’ where used in s 420(2)(b) of the Act. It is sufficient for present purposes that I express agreement with the general thrust of the passage from the Explanatory Memorandum cited above, namely that the term ‘substantial justice’ is concerned with the decision of the issues raised in the case rather than the process of deciding them. Considerations of natural justice focus upon ‘due process’ in the making of decisions. Whatever else ‘substantial justice’ may require it certainly demands, in my view, that a decision actually be made in respect of the significant issues posed in the case. If issues necessary for the proper determination of an application are clearly raised and left undecided by the decision- maker then, in my view, it is clear that ‘substantial justice’ within the meaning of the section has not been accorded to the applicant. Section 420(2)(b) mandates that the Tribunal act in accordance with substantial justice. A failure to do so would be a non-observance of a procedure required by the Act and reviewable under s 476(1)(a). It would also, in my opinion, be a decision ‘not authorised’ by the Act and, pursuant to s 476(1)(c), similarly reviewable. It is possible that it may also be reviewable under s 476(1)(e) but I prefer to express no concluded view as to this.”[61]
[58] Migration Act 1958, s 420(2)(b)
[59] [1996] FCA 1121
[60] [1997] FCA 289; (1997) 74 FCR 275; 144 ALR 179
[61] [1997] FCA 289; (1997) 74 FCR 275; 144 ALR 179 at 294-295; 198
His Honour’s conclusion is consistent with earlier authorities, to which he also referred. One is Kumar v Immigration Review Tribunal,[62] in which Wilcox J rejected a submission that a visa should be granted to Ms Kumar on that basis that “substantial justice” required the grant to her of a visa because she was a person with substantial secretarial qualifications and experience who would make an excellent migrant. Justice Wilcox said:
“… I do not think that the subsection provides a warrant for the Tribunal to ignore the nicely-calculated visa categories, and their criteria, and to grant a visa on the simple basis that the particular applicant would be likely to make a good migrant. …”[63]
“… I do not believe that the subsection authorises the Immigration Review Tribunal to grant a visa to an applicant who is unable to satisfy the criteria established by the Migration Act and regulations.”[64]
[62] [1992] FCA 319; (1992) 36 FCR 544; Wilcox J
[63] [1992] FCA 319; (1992) 36 FCR 544 at [24]; ….
[64] [1992] FCA 319; (1992) 36 FCR 544 at [28]; ….
The Tribunal is not required to act according to substantive justice.
Instead:
“In carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick.”[65]
At the same time, the Tribunal must also ensure that its proceedings are to be:
“(b) ... conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and a proper consideration of the matters before the Tribunal permit; and
(c) the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate.”[66]
[65] Administrative Appeals Tribunal Act 1975, s 2A
[66] AAT Act, s 33(1)
The ordinary meanings of the word “just” include:
“… 1 fair; impartial. 2 reasonable; based on justice. 3 deserved. …”[67]
Those of “justice” include:
“… 1 the quality of being just; just treatment; fairness. 2 the quality of being reasonable. 3 the law, or administration of or conformity to the law …”[68]
What is “fair” is “1 just; not using dishonest methods or discrimination. 2 in accordance with the rules. …”.[69] The meanings of the words “economic”, “quick” and “informal” do not require further explanation in this context.
[67] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[68] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
[69] Chambers 21st Century Dictionary, 1999, reprinted 2004, Chambers
The emphasis of these ordinary meanings is upon the manner in which an individual or case is treated when compared with the manner in which all in like position are treated. There is to be an absence of favouring, or not favouring, one over another and matters are to be resolved in accordance with the rules. Variously constituted Federal Courts have considered the meanings of such words in provisions such as s 420 of the Migration Act.[70] They have not always reached consistent interpretations. I analysed them in Re Staats and National Archives of Australia[71] together with the cases of Aon Risk Services Australia Limited v Australian National University[72] (Aon) and Haset Sali v SPC Ltd[73] (Haset Sali). I adopt [34] to [54] of my reasons in Staats and will not repeat them. Instead, I will summarise the points relevant in this case:
[70] See, for example, Sun Zhan Qui v Minister for Immigration and Ethnic Affairs [1997] FCA 324 in which Lindgren J said that s 420 does not establish procedures required by the Act to be observed. Hill J had expressed the same view in Eshetu v Minister for Immigration and Multicultural Affairs [1997] FCA 19; (1997) 142 ALR 474 at 484-485. On appeal in Eshetu v Minister for Immigration and Multicultural Affairs [1997] FCA 603; (1997) 71 FCR 300; 145 ALR 621, Davies J at 303; 624 and Burchett J at 314; 634 disagreed with that view saying that s 420 set out procedures with which the Refugee Review Tribunal is bound to comply and that, if it did not comply with them, the Court might set the decision aside. Whitlam J was in dissent. The Full Court, Wilcox, Burchett and North JJ followed the same approach in Sun Zhan Qui v Minister for Immigration and Ethnic Affairs [1997] FCA 1488; (1997) 81 FCR 71; 151 ALR 505 see, for example at 136-137; 564-565 per North J.
[71] [2010] AATA 531 at [34]-[54]
[72] [2009] HCA 27; (2009) 239 CLR 175; 258 ALR 14; 83 ALJR 951 at [22]; 188; 22
[73] [1993] HCA 47; (1993) 116 ALR 625; 67 ALJR 841 at [21]; 635; 848.
(1)Merits review tribunals must observe the rules of procedural fairness:
“… adherence to the requirements of natural justice [or procedural fairness] will ultimately promote administrative efficiency because of the greater public satisfaction and the fewer grievances that will result from the higher quality of decision-making thereby produced.”[74]
(2)Unless qualified by legislative provisions relating to a particular decision, merits review tribunals cannot resile from reaching the correct or preferable decision as they review each decision. Bowen CJ and Deane J addressed that obligation in Drake v Minister for Immigration and Ethnic Affairs[75] when they distinguished its role from that of a court.
(3)Given the Tribunal’s function, it cannot go outside the law in making its decision and, if making a discretionary decision, must exercise that discretion within the parameters drawn by the law.[76]
(4)Case management principles considered in cases such as Aon and Haset Sali v SPC Ltd[77] (Haset Sali) lead to the conclusion that case management is not a deciding factor in any particular case. It is, instead, a relevant factor and the weight it is accorded can only be determined when regard is had to all of the factors that are relevant. Justice does not take a single form. It is to be understood in, and take its form from, what is required to reach a just resolution of the “real issues” in the particular proceedings under consideration and what is required for the timely disposal of the proceedings and of all others. Those objectives are not to be attained at the expense of giving the parties the proper opportunity to present their case but what amounts to a proper opportunity is determined by reference to, among other relevant matters, the speedy and efficient disposition of the matter.
(5)The principle that underlies both Haset Sali and Aon is that objectives of the sort set out in s 2A of the AAT Act, and that are applicable in a case management system, must be understood and applied in a particular case in light of the particular circumstances of that case and in light of the Tribunal’s functions and its duties i.e. its duties to act with procedural fairness and to reach the correct or preferable decision.
(6)An external merits review tribunal is one part only of the administrative decision-making process. This was explained by Davies J in Jebb v Repatriation Commission[78] when he said that “… the general approach of the tribunal has been to regard the administrative decision making process as a continuum and to look upon the tribunal’s function as part of that continuum …”.[79] It is a continuum that encompasses not only the role of the initial or primary decision-maker in making the initial decision but extends through the internal review processes provided for in the agency and to external review in the Tribunal. Supervision of those forming part of the continuum is provided by the courts through the means of appeals on questions of law and judicial review under the Administrative Decisions (Judicial Review) Act 1977 and under s 39B of the Judiciary Act 1903.
[74] Professor SD Hotop (now Deputy President Hotop), Principles of Australian Administrative Law, 6th edition, 1985 at 171 referred to with approval by Lee J in Courtney v Peters & Ors (1990) 27 FCR 404; 98 ALR 645 at 411; 653
[75] (1979) 24 ALR 577; 46 FLR 409; 2 ALD 60
[76] Peko-Wallsend at [28] above
[77] [1993] HCA 47; (1993) 116 ALR 625; (1993) 67 ALJR 841
[78] [1988] FCA 105; (1988) 80 ALR 329; 8 AAR 285
[79] [1988] FCA 105; (1988) 80 ALR 329; 8 AAR 285 at [10]; 333; 289
(a) the business name consists of the name of that person and the name of each other person, if any, in association with whom that person is so carrying on business without any addition; or
(b) the business name is registered under this Act in relation to that person and each other person, if any, in association with whom that person is so carrying on business, and where the business name is so registered unless such of the provisions of section 12 as are required to be complied with by or on behalf of the person or persons in relation to whom the name is registered have been complied with.
Penalty: $200. Default penalty.”
“(1) All losses and outgoings to the extent to which they are incurred in gaining or producing the assessable income, or are necessarily incurred in carrying on a business for the purpose of gaining or producing such income, shall be allowable deductions except to the extent to which they are losses or outgoings of capital, or of a capital, private or domestic nature, or are incurred in relation to the gaining or production of exempt income.
(2) Expenditure incurred or deemed to have been incurred in the purchase of stock used by the taxpayer as trading stock shall be deemed not to be an outgoing of capital or of a capital nature.”
“The significance of the interplay between the law of contract and the doctrines and remedies of equity was further explained by Lord Millett in Hurst v Bryk[12] [[2002] 1 AC 185]. His Lordship observed that disputes between partners and the dissolution and winding up of partnerships have always fallen within the jurisdiction of the Court of Chancery, and continued[13][at 194]:
‘This is because, while partnership is a consensual arrangement based on agreement, it is more than a simple contract (to use the expression of Dixon J in McDonald v Dennys Lascelles Ltd[14] [[1933] HCA 25; (1933) 48 CLR 457 at 476; [1933] HCA 25.]); it is a continuing personal as well as commercial relationship. Neither during the continuance of the relationship nor after its determination has any partner any cause of action at law to recover moneys due to him from his fellow partners. The amount owing to a partner by his fellow partners is recoverable only by the taking of an account in equity after the partnership has been dissolved …. Only the Court of Chancery was equipped with the machinery necessary to enable such an account to be taken, and the basis upon which the account was taken reflected equitable principles. These could be modified by agreement, but they did not find their source in contract.’
This foundation for the engagement of equitable doctrines and concomitant remedies has given rise to judicial consideration of the nature of the interest conferred by equity upon each partner with respect to partnership assets as they exist from time to time and in advance of a ‘general’ dissolution under the control of a court of equity. …” [2010] HCA 43; (2010) 272 ALR 440; 85 ALJR 174; 78 ATR 1; French CJ, Gummow, Hayne, Heydon and Kiefel JJ
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