Spender J

Federal Court of Australia

Judgment date: 31 July 1996

Spender J

This is an application for an order to review which seeks a review of what is said to be the decision of the first respondent as a Senior Member of the Administrative Appeals Tribunal (``the AAT''), given on 4 May 1995, whereby he directed that the applicant file and exchange answers to a number of questions concerning the investigation, prosecution and conviction during the previous fifteen years of Mr Daniel Devine (``Devine'') with respect to tax offences or other fraud offences, and the time at which the applicant was in possession of such knowledge.

This application is brought pursuant to the Administrative Appeals (Judicial Review) Act 1977 (``the ADJR Act''), which provides a mechanism for judicial review by the Federal Court of Australia of decisions which are subject to review under that Act. Section 3 of that Act relevantly defines ``a decision to which this Act applies'' as ``... a decision of an administrative character made... under an enactment...''. This application therefore is different from proceedings in this court pursuant to s 44(1) of the Administrative Appeals Tribunal Act 1975 (``the AAT Act''), which section provides:

``A party to a proceeding before the Tribunal may appeal to the Federal Court of Australia, on a question of law, from any decision of the Tribunal in that proceeding.''

Notwithstanding the reference to ``any decision'' of the Tribunal, a ``decision'' in s 44(1) is to be given a restricted meaning: the decision there referred to is a final decision or determination. Appeals under s 44(1) lie only from a decision of the Tribunal which constitutes the effective decision or determination of the application for review. In
The Director-General of Social Services v Chaney (1980) 31 ALR 571 Deane J, with whom Fisher J agreed, said at 590:

``The word `decision' is a word of indeterminate meaning. In some contexts, it can refer to the mental process of making up one's mind. In the context of judicial or administrative proceedings, the word will ordinarily refer to an announced or published ruling or adjudication. In such a context, the word `decision' may be apt to include the determination of any question of substance or procedure, including, for example, rulings on procedural questions such as whether particular evidence should be received, or the meaning of the word may be limited to a determination effectively resolving an actual substantive issue. When the word `decision' has the last-mentioned limited meaning, it can refer to any such determination whether final or intermediate (see, eg,
Registrar of Workers' Compensation Commission v FAI Insurances Ltd [1977] 1 NSWLR 422 at 448) or be limited to referring only to a determination which effectively disposes of the matter in hand (see, eg
Winter v Winter [1933] NZLR 289 at 295;
Penniel v Driffill [1980] WAR 30 at 32).''

and at 593:

``The conclusion which I have reached is that, subject to the qualifications mentioned below, an appeal under s 44(1) of the Act lies only from a decision of the Tribunal which constitutes the effective decision or determination of the application for review. Ordinarily, such a decision will be the final decision formulated in accordance with the provisions of s 43 of the Act.''

What is sought by the Commissioner of Taxation in this proceeding is a review of a decision made by the Tribunal in the nature of a direction in the conduct of proceedings before it. Such a direction is inherently interlocutory. It is immediately apparent that there is the question of whether the direction is a ``decision... made under an enactment''; if so, the question arises whether the Court, in the exercise of the discretion conferred by s 16 of the ADJR Act, should, in its discretion, decline to review it.

While the proceedings have been conducted as a single application for an order of review, it seems to me that there were five separate taxpayers, each concerned with a similar

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question, and it is simply as a matter of convenience that what is in truth five separate applications is being dealt with as one.

The second respondents allege that they invested various sums of money, some not insubstantial, with various companies who were in the business of producing films. Devine was employed by the second respondents as their tax adviser, and advised the second respondents to so invest in order to obtain substantial allowable deductions in each of their income tax.

The second respondents' claims for allowable deductions in relation to the film investments were disallowed on the basis that the amounts claimed had not in fact been expended on producing the films, and necessary declarations had not been lodged. Additional tax by way of penalty was imposed pursuant to s 233(1) of the Income Tax Assessment Act 1936 (``the ITAA'') in respect of the financial years ending 1990, 1991 and 1992, and pursuant to s 226G of the ITAA in respect of the financial year ending 1993. After receipt of objections to the imposition of the penalties, partial remissions were granted by the applicant pursuant to the Commissioner of Taxation's discretion under s 227(3) of the ITAA, on the basis that the taxpayers' conduct amounted to no more than carelessness.

As it now appears, Devine was not a registered tax agent at the time of his advice to the second respondents but was in fact using another registered tax agent's registered tax agent number. In addition, Devine was also the director of one of the film production companies involved, Plaza Productions Pty Ltd, and the principal executive officer of another, Dracon No. 42 Pty Ltd. Most of the funds ``invested'' with the companies by the second respondents never reached those companies.

The objections of each of the second respondents, which were in similar terms, were, in essence, that the investment had been made in good faith in the belief that it was a genuine film investment which met the requirements of the ITAA; and that in each case Devine had been employed as a tax adviser, that accurate information had been given to him, and that such enquiries by each taxpayer thought reasonably necessary had been made of Devine. Each second respondent also said that he had no suspicion that the money was being invested other than as instructed, that full compliance with the provisions of the ITAA had not occurred, and each adverted to their full cooperation with the Australian Taxation Office when required.

It is convenient to consider by way of sufficient example the material in relation to Mr Colin W. Carey, for the 1990 tax year. In the ``Statement of Findings on Material questions of Fact, Evidence and Reasons for the Decision'', the Unit Manager, Appeals and Review, indicated that the dispute was whether the remission of the additional tax for incorrect return and/or interest on underpayments to an amount or amounts not less than $6,081.26 in the 1990 income tax year is justified in full or in part.

The Statement indicated that Devine was not a registered tax agent at the material time he lodged the return on behalf of Mr Carey. The statement recites a litany of correspondence and communications by Devine with the ATO. On 28 September 1993, it was noted that a letter had been sent to the taxpayer advising that his claim for a film deduction was going to be disallowed, citing as reasons that the amount claimed had not actually been expended by way of contribution to the cost of producing the films and declarations in accordance with s 124ZADA(2) of the ITAA had not been lodged in relation to the films for which deductions were claimed. An officer of a film production company advised on 21 October 1993 a cheque dated 28 June 1993 for $390,000.00 was received from Plaza Films Limited on 16 August 1993 and that when she advised Devine that she was going to present the cheque for $390,000.00, Devine placed a ``stop payment'' on that cheque. The 1990 taxable income of Mr Carey was increased as the result of disallowing the $25,000.00 claimed for the film deduction.

The reasons for decision the subject of the application to the AAT included the statement:

``The investors have been assured by Daniel Devine that the film deduction claims were genuine investments. Daniel Devine represented himself as an investment advisor and registered tax agent. Daniel Devine was able to show investors provisional certificates, letters from film producers and copies of production contracts.''

There was a further statement that:

``On the evidence, it cannot be stated positively that at the time of the taxpayer

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making the investment, Daniel Devine did not intend to organise filing of the certificates or did not intend to forward the money to the film producers...''

The reasons noted:

``The taxpayer is vicariously liable for the actions of his agent Daniel Devine but as the agent is not a registered tax agent, the taxpayer has no action available under s 251M of the ITAA.''

The reasons for the partial allowance of the objection by remitting the culpability component of the additional tax to 15% was accompanied by the statement:

``The taxpayer has been careless in not having, either himself or by independent advice, sought to ascertain the criteria for deductibility of the claim that he made and to ensure that those criteria were met before lodging his income tax return.''

Implicit in this claim is that the taxpayer, acting reasonably, was not entitled to rely on the correctness of representations by Devine and others, but should have independently audited the correctness of those claims.

The second respondents before the AAT contended that they had not failed to exercise reasonable care (for the purposes of s 226G of the ITAA) nor had they been careless, enquiries having been made in relation to the investment and there being no reason for thinking that the ITAA had not been complied with. The material before the Tribunal indicated that Arts Queensland had provided funds in respect of two of the films the subject of the claim, and that provisional certificates had been obtained for six of the films; the taxpayer advised the ATO that he had attended a number of board meetings at which were present film production people as well as a person who was a stockbroker, barrister, company law expert etc; he was shown 10BA certificates, film scripts from all the various films which he believed he was investing in; he was shown minutes of meetings which were attended by the head of the Qld Film Unit of the State Government; he met with a solicitor who was involved in the early organisation of the legal documents of all matters relating to Dracon No 42 Pty Ltd and also all legal requirements relating to film investment; he asked one Dr Nick Harris at a board meeting late in the financial year ended 30 June 1993 for advice in relation to film investment in the current year and Dr Harris replied that he could see no reason why he should not invest.

The second respondents pointed out that they are not able to pursue Devine because he is not a registered tax agent. It was further submitted that the additional tax should be remitted because of hardship.

The Commissioner contended that each of the second respondents had made false and misleading statements and had been careless, their enquiries had been inadequate and they had failed to seek a ruling as to the allowability of the deduction. The Commissioner disputed the claim of hardship.

At a directions hearing in the AAT on 4 May 1995, the second respondents sought and obtained a direction by the Tribunal that the Commissioner of Taxation ``file and exchange answers to the following questions'':

  • ``(i) Has the Commissioner of Taxation or any of his authorised agents, representatives or employees been involved in the investigation, charging, conviction or prosecution of Mr Daniel Devine during the past 15 years?;
  • (ii) If the preceding question is answered in the affirmative, provide the full and complete details of any investigations, prosecutions, convictions and the extent the respondent's office was involved. Provide details of the years the charges were laid, any convictions recorded, the courts involved, any fine, penalty, custodial sentence of any other Order made, and any other relevant details.;
  • (iii) Is the Commissioner of Taxation or any of his authorised agents, representatives or employees aware of any other investigations, charges, convictions and/or prosecutions made in respect of Mr Daniel Devine in relation to fraud or any other related offences under taxation laws?;
  • (iv) If the preceding question is answered in the affirmative, provide details similarly to question (ii);
  • (v) When did the Commissioner of Taxation first have knowledge of the information relating to questions (i)-(iv)? and;
  • ...''

and the Tribunal further directed:

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``pursuant to section 35(2)(b) of the Administrative Appeals Tribunal Act 1975 publication or disclosure of any response to paragraph (a) of this direction is prohibited to all persons except the parties, the Tribunal and the Tribunal's personal staff.''

These directions were made pursuant to s 33 of the AAT Act, which relevantly provides:

``(1) In a proceeding before the Tribunal-

  • (a) the procedure of the Tribunal is, subject to this Act and the regulations and to any other enactment, within the discretion of the Tribunal;
  • (b) the proceeding shall be 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.

(1A) The President may authorise a member to hold a directions hearing in relation to a proceeding.


(2A) Without limiting the operation of this section, a direction as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may:

  • (a) require any person who is a party to the proceeding to provide further information in relation to the proceeding; or
  • (b) require the person who made the decision to provide a statement of the grounds on which the application will be resisted at the hearing; or
  • (c) require any person who is a party to the proceeding to provide a statement of matters or contentions upon which reliance is intended to be placed at the hearing.


The application for an order of review filed by the applicant asserts a number of possible grounds to overturn what is said to be the decision of the AAT of 4 May 1995. Amongst others, the applicant submits that the questions that the AAT directed the applicant to answer are irrelevant, beyond the power of the first respondent, in breach of the secrecy provisions of the ITAA (s 16), require the disclosure of privileged information, and are embarrassing for uncertainty. In addition the applicant alleges that the decision is an improper exercise of power under the ADJR Act, and involve errors of law, it being submitted that there was no evidence to support the decision, the decision was beyond power of the AAT, as the decision was made for a purpose other than a purpose for which the power was conferred, and that the decision was generally contrary to law. The central complaint, however, is that the answers to the questions are irrelevant to any issue before the Tribunal.

Another before the Court is the second respondent's notice of objection to competency, which objects to the jurisdiction of the Federal Court to try this application for an order of review under the ADJR Act on the grounds that the decision of the AAT of 4 May 1995 is not ``a decision'' to which the ADJR Act applies; and that the decision is not of an administrative character; and that the first respondent has not engaged in ``reviewable conduct'' pursuant to the provisions of the ADJR Act.

It is clear that in making the directions in question pursuant to s 33 of the AAT Act, the Senior Member was acting in an administrative character. The functions of the Tribunal are administrative in character. In
Drake v Minister for Immigration & Ethnic Affairs (1979) 24 ALR 577, at 584, Bowen CJ and Deane J said:

``The general functions conferred upon the Tribunal are plainly administrative in character. This is particularly so in the case of the function of reviewing decisions of the Minister under s 12 of the Migration Act where the Tribunal has no power to set aside the Minister's decision but may either affirm it or remit the matter for reconsideration in accordance with any recommendations which it might make (Schedule, Pt XXII). Neither the fact that the Tribunal possesses certain procedural powers ordinarily enjoyed by courts nor the fact that the Tribunal is authorized to decide questions of law arising in proceedings before it means that, in performing these administrative functions, it is exercising judicial power: see,
Shell Company of Australia v Federal

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Commissioner of Taxation
[1931] AC 275 at 296-298;
Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 at 174-179; and
R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1970) 123 CLR 361 at 411; [1970] ALR 449 at 478. Such procedural powers and the power to decide such incidental questions of law are commonly conferred on administrative tribunals.''

In my opinion, the giving of a direction pursuant to s 33 of the AAT Act is not the making of a decision within the meaning of s 3 of the ADJR Act, nor in my opinion does the AAT, in making a direction under s 33 engage in conduct for the purpose of making a decision to which the ADJR Act applies, within the meaning of s 6(1) of the ADJR Act.

Riordan v Parole Board of the Australian Capital Territory (1981) 34 ALR 322, Lockhart J held the prima facie meaning to be given to the word ``decision'' in s 5 is an ultimate or operative determination rather than a reference to adjudication or determination of issues arising in the course of making such an ultimate or operative determination. He followed the majority view in Director-General of Social Services v Chaney (supra) and the decision of a full bench of the Federal Court in
Duncan v Defence Force Retirement & Death Benefits Authority of the Commonwealth of Australia (1980) 30 ALR 165.

Notwithstanding the views which I expressed as a member of the Full Court in
Hutchins v DFC of T 96 ATC 4372; 136 ALR 153, consistent with authority binding on me, I conclude that a direction pursuant to s 33(2A) of the AAT Act as to the procedure to be followed in connection with the hearing of a proceeding before the Tribunal, requiring any person who is a party to the proceeding to provide further information in relation to the proceeding, lacks that quality of finality or ultimate determination which the authorities say is necessary before any particular decision can be a decision ``made under an enactment''.

Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321, Mason CJ (with whom Brennan and Deane JJ agreed) said at 337:

``... a reviewable `decision' is one for which provision is made by or under a statute. That will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for consideration. A conclusion reached as a step along the way in a course of reasoning leading to an ultimate decision would not ordinarily amount to a reviewable decision, unless the statute provided for the making of a finding or ruling on that point so that the decision, though an intermediate decision, might accurately be described as a decision under an enactment.

Another essential quality of a reviewable decision is that it be a substantive determination.''

Mason CJ said later at 337:

``If `decision' were to embrace procedural determinations, then there would be little scope for review of `conduct', a concept which appears to be essentially procedural in character. To take an example, the refusal by a decision-maker of an application for an adjournment in the course of an administrative hearing would not constitute a reviewable decision, being a procedural matter not resolving a substantive issue and lacking the quality of finality. Then it is the `conduct' of the hearing in refusing an adjournment that is the subject of review. To treat the refusal of the adjournment in this way is more consistent with the concept of `conduct' than with the notion of `decision under an enactment'.''

In this case there has been a direction on a procedural matter. It is not properly to be characterised as a decision made under an enactment.

Nor in my opinion is it ``conduct'' engaged in for the purpose of making a reviewable decision: vide s 6 of the ADJR Act.

At p 342, Mason CJ said:

``It would be strange indeed if `conduct' were to extend generally to unreviewable decisions which are in themselves no more than steps in the deliberative or reasoning process.

Accordingly, there is a clear distinction between a `decision' and `conduct' engaged in for the purpose of making a decision. A challenge to conduct is an attack upon the proceedings engaged in before the making of the decision. It is not a challenge to decisions made as part of the decision- making process except in the sense that if the decisions are procedural in character

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they will precede the conduct which is under challenge. In relation to conduct, the complaint is that the process of decision- making was flawed; in relation to a decision, the complaint is that the actual decision was erroneous. To give an example, the continuation of proceedings in such a way as to involve a denial of natural justice would amount to `conduct'. That is not to deny that the final determination of the proceedings would constitute a decision reviewable for denial of natural justice.''

The position may be different where compliance with directions of the Tribunal would amount to denial of natural justice:
Australian Postal Commission v Hayes (1989) 23 FCR 320; 87 ALR 283.

In my opinion, for the above reasons, the objection to competency succeeds.

If I be wrong in that conclusion, it seems to me that this is a case where in any event the Court ought to decline to consider the grant of relief pursuant to the ADJR Act, exercising the discretion which s 16 of that Act confers. It is in my opinion wholly undesirable that the process contemplated by the AAT Act should be fragmented by applications seeking to challenge intermediate directions or determinations made along the way to reaching an ultimate determination of the issue before the Tribunal, in the same way that this Court should be reluctant to fragment the criminal process by entertaining applications under the ADJR Act in relation to committal proceedings and, in particular, intermediate rulings or determinations made in the course of committal proceedings rather than the ultimate decision to commit.

Further, however, it seems to me that even if the Court were minded to consider the correctness of the directions made by the Tribunal under s 33 of the AAT Act, while it might be said that the time frame over which the material to be provided is very extensive and the width otherwise of the information to be provided is large, in my view it cannot be said that the matters the subject of the directions were plainly irrelevant to the issues in the proceedings in the Tribunal.

It should not be forgotten that pursuant to s 43(1) of the AAT Act, for the purpose of reviewing a decision, the Tribunal may exercise all the powers and discretions that are conferred on the person who made the decision. The Tribunal, in these proceedings, stands in the shoes of the Commissioner for Taxation in considering the application before it. Its function is to determine whether the decision of the decision maker is the ``correct or preferable'' one on the material before it: Drake v Minister for Immigration (1979) 24 ALR 577 at 589. Any relevant knowledge that the Commission has relevant to the discretion that has to be exercised should be available to the Tribunal.

The activities of Devine and the particular impact of those activities on the state of mind of the taxpayers seemed to me to be central questions on the amount, if any, of penalty tax to be imposed on the taxpayers.

It is claimed by the taxpayers that a relevant consideration of the appropriate penalty to be imposed might be the consideration that the Commissioner of Taxation was in possession of knowledge concerning the affairs of Devine, of which none of the second respondents was in possession, and in circumstances where each of the taxpayers had no reason to believe that Devine was not what he purported to be and no reason to believe that he was not acting in accordance with his instruction. The Taxation Office dealt with Devine as if he were a registered tax agent entitled to act on behalf of each of the taxpayers at all material times, when in fact, contrary to the knowledge of each of the taxpayers, Devine was never registered as a tax agent. The Taxation Office clearly at all material times had the capacity to know whether Devine was registered as a tax agent. The taxpayers claim that they were misled by this conduct on the part of the Taxation Office.

It seems to me that it was open to the Tribunal to conclude that the nature of the material the subject of the directions (though not perhaps the full extent of what was sought or the period of time over which the information was sought) was relevant to the issues the Tribunal had to consider. The claim by the taxpayers was that Devine was a rogue who duped them. The genuineness of that claim and the weight to be given to it might vary, depending on the demonstrated capacity of Devine to dupe people and the extent of his deceptive conduct both in terms of the persons affected and time over which that conduct happened.

It seems to me that in order to ascertain the culpability of the taxpayers, it is relevant to

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consider the true nature of the culpability of Devine and the verisimilitude of his fraudulent conduct. It is one thing if only a greedy fool in a hurry would be deceived by the conduct of Devine; it is quite another if Devine was a person who over a long period of time had successfully deceived a large number of ordinary taxpayers.

The basis of the review sought by the Commissioner focussed on the irrelevancy of the questions directed to be answered; review was not predicated on the fact that the questions went too far or extended over too long a time frame. These considerations were urged in support of the submission that the whole thrust of the questions was irrelevant.

In the abstract, reservations might reasonably be entertained as to the width and extent and duration of time in respect of which information was to be provided; those considerations, however, are not of themselves within the proper purview of this Court on an application under the ADJR Act. The matter is one of a procedural character and is properly to be regarded within the province of the Tribunal pursuant to s 33 of the AAT Act.

For the above reasons, the objection to competency should be upheld and the application dismissed with costs, to be taxed if not agreed.


1. The objection to competency be allowed.

2. The applicant pay to the second respondents their costs of the application, to be taxed if not agreed.

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