The Taxpayer and Commissioner of Taxation
[2006] AATA 429
•17 May 2006
Administrative
Appeals
Tribunal
PRELIMINARY DECISION AND REASONS FOR PRELIMINARY DECISION [2006] AATA 429
ADMINISTRATIVE APPEALS TRIBUNAL № VT2003/184‑185
TAXATION APPEALS DIVISION
Re: the taxpayer
Applicant
And: commissioner of taxation
Respondent
PRELIMINARY DECISION
Tribunal: Mr Egon Fice, Member
Date:17 May 2006
Place:Melbourne
Decision:The applicant’s request for referral of questions of law to the Federal Court of Australia pursuant to s 45 of the Administrative Appeals Tribunal Act 1975 is denied.
(sgd) Egon Fice
Member
PRACTICE AND PROCEDURE – referral to Federal Court on a question of law – question of law arising in a proceeding before the Tribunal
Income Tax Assessment Act 1936 (Cth)
Administrative Appeals Tribunal Act 1975 (Cth) s 45
Repatriation Act 1920 (Cth)
Acts Interpretation Act 1901(Cth)
Re Hassell; Ex parte Pride and Commonwealth (1984) 58 ALR 219
R v Industrial Court; Ex parte Hunkin [1934] SASR 208
Harris v Commissioner of Taxation (2002) 125 FCR 46
Prebble v Commissioner of Taxation [2003] ATC 4770
Federal Commissioner of Taxation v Salenger [1988] 81 ALR 25
Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166
REASONS FOR PRELIMINARY DECISION
17 May 2006 Mr Egon Fice, Member
1. The taxpayer seeks review by the Tribunal of decisions made by the Commissioner of Taxation in respect of her income tax returns for the years ended 30 June 1999 and 30 June 2000. She lodged objections to amended assessments on 13 April 2003 and the Commissioner, by notice of decision dated 6 August 2003, disallowed the taxpayer’s objections in respect of both tax years.
2. As a preliminary matter, the taxpayer requested that the Tribunal refer this matter to the Full Court of the Federal Court of Australia pursuant to s 45 of the Administrative Appeals Tribunal Act 1975 (the AAT Act). According to the taxpayer, the questions of law that ought to be decided by the Federal Court include:
(a)whether the decisions of the Full Court in Harris v Commissioner of Taxation (2002) 125 FCR 46 and Prebble v Commissioner of Taxation (2003) ATC 4770 were inadvertently given per incuriam by failure of the parties before the court to refer the Court to key authorities in the relevant extrinsic materials to the Income Tax Assessment Act 1936 (Cth) (the Income Tax Assessment Act) which refuted the arguments of both applicants and the Commissioner;
(b)whether these decisions [Harris and Prebble] of the Federal Court were clearly and plainly erroneous due to the Court’s failure to initially construe s 82AAA of the Income Tax Assessment Act in it’s legislative context as it stood at its time of enactment to determine if this accorded with the Commissioner’s construction and if not, to determine if any later legislative amendment could alter the section’s meaning from that initially construed so as to accord with the Commissioner’s interpretations;
(c)whether the decisions were clearly and plainly erroneous consequent upon the failure of the Federal Court to accurately determine the legislative origin of the taxation anomaly at issue and concomitantly to correctly apply s 15AB of the Acts Interpretation Act 1901 (Cth) to the legislative source of the anomaly as the remedy;
(d)whether the Full Court in deciding Harris was clearly wrong to decide a matter that was not before the Court and so extinguished, without allowing representation, the appeal rights of a class of taxpayers whose affairs were distinguishable from those of Harris;
(e)relevantly, to determine what precedent remains where a majority of Members of a second Full Federal Court doubt the reasons applied in an essentially similar case decided in the first instance, unanimously by another Full Court; but where the second Court unanimously follows rather than overrules the decision of the first Court, predominantly on the basis that to do otherwise would leave a substantial taxation anomaly extant; and
(f)whether the decisions of the Full Federal Court in Harris and Prebble create a binding precedent upon the Tribunal in deciding this application if the Tribunal finds that the applicant has satisfactorily distinguished her case from those of Harris and Prebble; and in the event of the Tribunal finding that the applicant has satisfactorily distinguished her circumstances from those of Harris and Prebble, how the Tribunal is to address the interpretation of s 82AAA given that this provision is common to all of these cases.
3. Section 45 of the AAT Act, insofar as it is relevant, provides:
(1) The Tribunal may, of its own motion or at the request of a party, refer a question of law arising in a proceeding before the Tribunal to the Federal Court of Australia for decision but:
(a)a question must not be so referred without the concurrence of the President; and
(c)in respect of a proceeding before the Small Taxation Claims Tribunal—in so referring a question, the interests of the applicant seeking review of a relevant taxation decision must be taken into account.
...
4. The first question which arises is whether, upon the request of a party, the Tribunal is bound to refer a question of law to the Federal Court despite the use of the word “may” in the enabling provision. When dealing with a similar provision in the Repatriation Act 1920 (Cth) (the Repatriation Act), Toohey J in Re Hassell; Ex parte Pride and Commonwealth (1984) 58 ALR 219, at 223, decided that the context in which the word appears determines whether the word is a word of permission or of obligation. In his view, the relevant section of the Repatriation Act contained a machinery provision, designed to enable the Tribunal, if so minded, to obtain from the Federal Court an answer to a question of law arising in a proceeding before the Tribunal. In my view, that is good authority for the proposition that pursuant to s 45 of the AAT Act, I am not bound to refer a question of law to the Federal Court at the request of a party. Nevertheless, I am required to consider whether I should exercise my discretion to do so. Should I decide to exercise that discretion, the question of law cannot in any event be referred to the Federal Court without the concurrence of the President of the Tribunal. That step can only be taken following my decision whether to exercise the discretion vested in the Tribunal by s 45.
5. My discretion to proceed in accordance with s 45 of the AAT Act is only enlivened where there is a question of law “arising in a proceeding before the Tribunal”. As I understand that requirement, it must be a question that the Tribunal will be required to decide in the proceeding before it, for example, the interpretation of a phrase used in a statute. Often, this occurs because the legal issue is yet to be decided by any Tribunal or Court and therefore it is a matter of some public interest (R v Industrial Court (SA); Ex parte Hunkin [1934] SASR 208 at 210). It is the Tribunal’s role to review administrative decisions, and in doing so, it is required to consider the law to be applied and its proper interpretation.
6. The questions of law posed by the taxpayer in this case are, essentially, whether the decisions of the Full Court of the Federal Court in Harris v Commissioner of Taxation (2002) 125 FCR 46 and Prebble v Commissioner of Taxation [2003] ATC 4770 were given per incuriam or, in ignorance or forgetfulness of an earlier relevant case or an inconsistent legislative provision. In effect, the taxpayer claims that the decisions of the Full Court in Harris and Prebble were clearly wrong and should not be followed by the Tribunal under the doctrine of precedent (stare decisis).
7. The issues considered by the Full Court in Harris and Prebble depended on the interpretation of an interaction between s 82AAE and s 82AAA(1) of the Income Tax Assessment Act. In particular, the Court was required to determine whether, in respect of the superannuation payments made by a taxpayer, the taxpayer and the eligible employee for whose benefit those payments were made can be the same person. Although in the taxpayer’s case, the section relied on is s 82AAC rather than s 82AAE, the definition of “eligible employee” set out in s 82AAA(1) is common to both. Therefore, subject to any submissions made to the contrary by the taxpayer at the hearing of this matter, the issue for the Tribunal in this case cannot be relevantly distinguished from that decided by Harris. Prebble involved the same issues as those in Harris but the appellant in that case sought to demonstrate that the decision of the Full Court in Harris was plainly erroneous and ought not be followed. The Full Court in Prebble rejected that argument.
8. The problem for the taxpayer is that the questions she seeks to have referred to the Federal Court are not questions of law which arise in this proceeding. There can be no issue about the fact that this Tribunal is bound to follow relevant judicial pronouncements and it cannot decline to follow a judicial pronouncement on the meaning of an act simply because it disagrees. As French J said in Federal Commissioner of Taxation v Salenger [1988] 81 ALR 25 at page 34:
I should add, with the greatest respect to the tribunal, that it is difficult to see how it is open to a senior member to form the view that a decision of the Supreme Court of a State which is on the very point before the tribunal is incorrect and not to be followed. In the special case of conflicting decisions of superior courts, the tribunal may have to decide which to follow, but that occasion does not arise here. Ordinarily, senior members of the tribunal should apply the law as stated by the judges of this court or by judges of the Supreme Courts of the States.
I have no doubt that what French J said about a Senior Member applies equally to a Member of the Tribunal. I also have no doubt that what was said by the Court of Appeal in Proctor v Jetway Aviation Pty Ltd [1984] 1 NSWLR 166 when referring to courts of lower jurisdiction, equally applies to the Tribunal. At page 177, the Court of Appeal said:
The obligation of every court loyally to follow the decisions of any court superior to it has been often stated. At times it may appear to a judge or to an appeal court that the reasoning or absence of it in a binding decision renders that decision unsatisfactory. However, the law concerning precedent, based as it is on the need for certainty in the law, absolutely binds him to follow the precedent. He is as much bound by the law of precedent and the law so pronounced as he is by any other law. The law provides its own rules to admit of flexibility. These rules, which are part of the binding rule of precedent, permit departure from prior erroneous decisions, but only in prescribed circumstances. The law binding on all does not include any right of a court to depart from a decision of a superior court and hence one binding upon it upon some basis, such as that some matter is considered to have been overlooked by a superior court or for some other reason it appears to be wrong. It does not permit it to disregard a binding decision of an appellate court on some view based on the reasoning of judges in a decision of an ultimate appellate court which does not overrule the binding decision. ...
9. Furthermore, although the doctrine of precedent may not compel a court to follow a decision made per incuriam, that exemption is strictly limited. As the Court of Appeal said in Proctor at page 177:
The per incuriam rule is not available to a court in relation to a decision of a court superior in the hierarchy. It is a rule which applies only to a review by a court of its own decision. An equivalent result cannot be achieved by regarding a binding decision of the Superior Court as distinguishable on the basis that it did not decide the question which it did by making the order that it did, but that it only decided the question apparently argued before it or on the basis that its reasons were its decision.
Prior error in a decision can be adjusted only by a court higher in the appellate hierarchy or in exceptional cases by the appellate court itself…
10. It is abundantly clear that, unless distinguished on the facts, this Tribunal is bound by the decisions of the Full Court of the Federal Court in both Harris and Prebble. Therefore, the questions put by the taxpayer as questions of law to be referred to the Federal Court are not questions which the Tribunal can decide in any event and, accordingly, they are not questions of law arising in this proceeding. It follows that I would decline the taxpayer’s request to refer her questions to the Federal Court of Australia. For that reason, I need not refer this matter to the President.
11. The applicant’s request for referral of questions of law to the Federal Court of Australia pursuant to s 45 of the AAT Act is denied.
I certify that the eleven [11] preceding paragraphs are a true copy of the reasons for the preliminary decision herein of
Mr Egon Fice, Member
(sgd) Olympia Sarrinikolaou
Clerk
Date of Directions Hearing: 1 May 2006
Date of Preliminary Decision: 17 May 2006
Solicitor for the applicant: Nil – Self‑representedSolicitor for respondent: Ms C. Leslie, Australian Government Solicitor
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