Caporale v Deputy Commissioner of Taxation

REASONS FOR JUDGMENT 1 These proceedings were commenced on 5 April 2013 by originating application under s 39B of the Judiciary Act 1903 (Cth). No specific relief was sought in the originating application, the relevant terms of it being "the Applicant applies for the following relief under section 39B of the Judiciary Act 1903: 1. (1A) (b) arising under the Constitution, or involving its interpretation; or 2. (1A) (c) arising under any laws made by the Parliament, other than a matter in respect of which a criminal prosecution is instituted or any other criminal matter 3. The grounds and details are in the accompanying affidavit 2 The claim for interlocutory relief provides some indication of the applicant's purpose, those claims being: 1. That a stay on enforcement of any judgement and on all current legal proceedings and orders made with respect to the Rosa Caporale v Deputy Commissioner of Taxation/Commissioner of Taxation at the Federal Magistrates Court on the 4th February 2013 2. That a stay on any other current proceedings before the Federal Court be suspended and/or stayed to allow this application to be determined 3. That the court order and consent to the Model Litigant Provisions under Legal Services Directions issues and in relation to the conduct of the Deputy Commissioner of Taxation to be raised and admitted in any legal proceedings relating to the applicant 4. That the court order and consent to any new evidence and for the evidence being able to be used and admitted by the applicant in any legal proceedings relating to the applicant 3 The accompanying affidavit of the applicant affirmed on 4 April 2013 and filed on 5 April 2013 provided some further indication of the applicant's claims. I shall refer to that affidavit in greater detail below. 4 The applicant's point was that the Model Litigant Policy, which forms Appendix B to Schedule 1 to the Legal Services Directions 2005 made by the Attorney-General pursuant to s 55ZF of the Judiciary Act 1903, had not been complied with by the respondent; that this gave rise to legal rights in her; and the relevant provisions of s 55ZG of the Judiciary Act 1903, ss 55ZG(2) and (3), were invalid to the extent that they purported to prevent those rights from arising or being enforceable in the courts. 5 Section 55ZG of the Judiciary Act 1903 specifies, amongst other things, who must comply with Legal Services Directions: 55ZG Compliance with Legal Services Directions (1) The following persons or bodies must comply with Legal Services Directions that have been published and with Legal Services Directions of which the person or body has been notified: (a) a person or body referred to in subsection 55N(1); (b) a person or body referred to in subsection 55N(2), in relation to a matter, if the AGS is acting for the person or body in that matter; (c) a person or body in respect of whom the Attorney-General has made a request under subsection 55N(3), in relation to a matter, if the AGS is acting for the person or the body in that matter; (d) a person or body in respect of whom the CEO has made a determination under subsection 55N(4), in relation to a matter, if the AGS is acting for the person or body in that matter; (e) the AGS; (f) a legal practitioner or firm of legal practitioners, in relation to a matter, if the legal practitioner or firm is acting for a person or body referred to in subsection 55N(1) in that matter. (2) Compliance with a Legal Services Direction is not enforceable except by, or upon the application of, the Attorney-General. (3) The issue of non-compliance with a Legal Services Direction may not be raised in any proceeding (whether in a court, tribunal or other body) except by, or on behalf of, the Commonwealth. I admitted into evidence, subject to relevance, an email the applicant sent to the Commonwealth Attorney-General's Department dated 19 March 2013 applying or requesting to raise the issue of non-compliance with the Legal Services Directions in a legal proceeding "on behalf of the Commonwealth and the Attorney General". No reply to that email has been provided or consent or approval given. 6 Section 55N of the Judiciary Act 1903 sets out or describes the persons and bodies for whom the AGS may provide services. There was no dispute that the respondent was such a person. 7 For completeness, I also reproduce s 55ZI of the Judiciary Act 1903: 55ZI Anything done under Legal Services Directions not actionable (1) The Attorney-General is not liable to an action or other proceeding, whether civil or criminal, for or in relation to an act done or omitted to be done in compliance, or purported compliance, with a Legal Services Direction. (2) A person (other than the Attorney-General) is not liable to an action or other proceeding, whether civil or criminal, for or in relation to an act done or omitted to be done by the person in compliance, or in good faith in purported compliance, with a Legal Services Direction. 8 Given the interrelationship of this matter with other proceedings in the Court in which Ms Caporale is a party or has been appearing on behalf of a number of corporations, on the day the application was filed, 5 April 2013, by consent I set the application down for final hearing on 8 May 2013, the day I had already fixed for the final hearing of the present applicant's appeal from orders made on 4 February 2013 in the Federal Magistrates Court (now the Federal Circuit Court) for the sequestration of her estate: NSD188/2013. 9 I directed the applicant to file and serve any further affidavits on which she intended to rely by 29 April 2013. I directed the respondent Deputy Commissioner of Taxation to file and serve any affidavit on which he relied and an outline of submissions by 6 May 2013. 10 These procedural orders were later varied. 11 I also directed that appropriate notices be given by the respondent under s 78B of the Judiciary Act 1903. I am satisfied that those notices were given on 12 April 2013 and that the requirements of s 78B have been met. 12 The applicant's affidavit to which I have referred covered some 25 pages and was discursive in form and content. I do not attempt to summarise it but some articulations of the applicant's point are: 7. Questions Arising under Section 39B of the Judiciary Act 1903: … c. Whether current legislation and its interpretation has overridden, tainted and compromised the constitutional rights of the public, individual and entities d. Whether the current legislation has unduly influenced judicial process and outcomes and in turn compromised the judicial system and constitutional rights of the public, the individual and entities e. … f. Whether public confidence has been eroded in the judicial system that is forced to adopted [sic] legislation and practices that denied procedural fairness to the public, individuals and entities g. Whether the independence of the judicial system has been compromised by current legislation and resulting case law from the interpretation of legislation h. Whether legislation impedes and hinders the courts from properly and fairly administering their judicial functions and roles and in turn compromising the constitutional rights of the public i. Whether the current legislation and its interpretation has meant that the separation of power and judicial process and system has been compromised and lost j. Whether legislation has automatically has [sic] impeded the automatic entitlement of the public and individual to take legal action against unlawful conduct undertaken by any party including the ATO. … cc. Whether current legislation impedes judicial process from being fairly administered … ii. The applicant is seeking to review of the [sic] whether current legislation has interfered with judicial process jj. Whether the constitutional rights to defend oneself of the applicant have been deprived by the current legislation and the weight to legislation places favouring the ATO kk. Whether the public interest is being compromised by the legislation and the weight to legislation has placed favouring the ATO at the expense of the individual ll. Whether the constitutional rights of the individual or corporation has been overridden by legislation and subsequent cases that have created precedence [sic] which courts now rely on to further erode the fundamental basic rights of the individual under the Constitution 13 Based on the matters in the affidavit to which I give weight or which are not controversial, the facts are as follows, limited for the present purpose of deciding the constitutional question to matters that may be relevant to the applicant's appeal in NSD 188/2013 against the sequestration order of 4 February 2013 in the Federal Magistrates Court. 14 Default assessments of income tax were issued in 2002 for the years of income ended 30 June 1995 to 2000. The applicant objected to those assessments. In December 2003 the Commissioner decided the objections adversely to the applicant. The applicant filed an application with the Administrative Appeals Tribunal for review of the Commissioner's objection decisions of December 2003. In 2006 the Commissioner and the applicant executed a request for a decision requesting the Tribunal under s 42C of the Administrative Appeals Tribunal Act 1975 (Cth) to make a decision in accordance with the request in respect of the objection decisions and the Tribunal made such a decision in about April 2006. The applicant does not accept the validity of that decision of the Tribunal. 15 Thereafter, in June 2010, the respondent filed a statement of claim in the District Court of New South Wales for tax owing for the years ended 30 June 1995 to 2000 and for the additional years 2001 and 2002, where the Commissioner had issued notices of assessment purportedly, according to the applicant, in accordance with the income tax returns lodged by her for each of those years. On 11 August 2011 the District Court of New South Wales gave judgment for the Commissioner against the present applicant in these proceedings. 16 Following an unsuccessful application by the applicant to set aside the judgment in the District Court, a bankruptcy notice was issued in October 2011. 17 Later that month the applicant lodged objections with the Commissioner in respect of the 1995 to 2010 income years and sought an extension of time. The Commissioner refused an extension of time in December 2011. The applicant filed an application for review with the Administrative Appeals Tribunal. 18 Later in October 2011 the applicant's second motion to set aside the judgment in the District Court was dismissed by that Court. 19 In May 2012 the respondent Commissioner filed a creditor's petition in the Federal Magistrates Court against the applicant. After a number of interlocutory steps were taken, to which I refer more fully below, on 4 February 2013 a sequestration order was made against the estate of the applicant. Proceedings under that order are presently stayed. 20 In the meantime, in October 2012 the Administrative Appeals Tribunal had affirmed the Commissioner's decision to refuse the extension of time requests made by the applicant. I understand the applicant disputes the validity of the Tribunal's decision. Further, on 21 December 2012 the applicant filed a third notice of motion in the District Court of New South Wales seeking to set aside the judgment of that Court. This application has not yet been determined. 21 As to the interlocutory steps in the Federal Magistrates Court, to which I have just referred, as I have said, the creditor's petition was filed in May 2012. On its first return date, 14 June 2012, the petition was adjourned to 2 August 2012. On that date his Honour made procedural orders to ready the matter for hearing, including for the filing and serving of evidence. His Honour adjourned the hearing of the creditor's petition to 7 November 2012. On 8 October 2012 the applicant filed a notice of interim application seeking to vacate the hearing listed for 7 November 2012 and for a new timetable for evidence. On 31 October 2012 the applicant's interim application was dismissed. On 7 November 2012 the applicant made a further application for an adjournment. The petition was nevertheless heard. His Honour reserved judgment but made orders for the filing and service of further written submissions. On 3 December 2012 the applicant filed and served an interim application seeking further time to file evidence and submissions. The applicant filed a subpoena with the registry. On 10 December 2012 the applicant's interim application was dismissed and the subpoena set aside. A further timetable was set for written submissions and the matter was listed for judgment on 4 February 2013. 22 The matters raised in the applicant's affidavit which she contends to be referable to the Commonwealth's obligation to act as a model litigant in Schedule 1, Appendix B to the Legal Services Directions 2005 are that the settlement of proceedings in the Administrative Appeals Tribunal "was not procured in good faith"; that the Statement of Claim contained incorrect income tax liabilities; that the respondent had secured a judgment in the District Court on 11 August 2011 in reliance on s 177 of the Income Tax Assessment Act 1936 in circumstances where, I understand, the applicant contends that section did not apply; that "new evidence was brought to light in relation to the conduct of the ATO on the 3rd October 2012 in relation to Sappia Investments Pty Ltd v DPP (Deputy Commissioner of Taxation)"; the income tax assessments issued "were not procured in good faith by the ATO or procured illegally by the ATO"; the ATO resisted providing information; and the ATO resisted having witnesses available or subpoenas issued at the request of the applicant in the Federal Magistrates Court. I shall assume, without deciding, for the purposes of the present application that each of these matters is referable to the Legal Services Directions although, of itself, the issuing of assessments, for example, may not be. 23 The authorities referred to by the applicant were Morley & Ors v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205; Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd (No. 2) [2010] FCA 1224; (2010) 190 FCR 11; Phillips, in the matter of Starrs & Co Pty Limited (In Liquidation) v Commissioner of Taxation [2011] FCA 532; and Shah & Ors v Minister for Immigration and Citizenship & Anor [2011] HCATrans 196. As is apparent, the reference to Shah & Ors v Minister for Immigration and Citizenship & Anor is to a transcript of proceedings in the High Court and not to a judgment. 24 So far as the applicant seeks to impugn the validity of ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth), I regard that course as foreclosed by Commissioner of Taxation v Futuris Corp Ltd (2008) 237 CLR 146, especially at [65] and following, and the cases there cited, including Nicholas v R (1998) 193 CLR 173. 25 Turning to the authorities relied on by the applicant, Morley & Ors v Australian Securities and Investments Commission [2010] NSWCA 331; (2010) 274 ALR 205 was relevantly reversed by the High Court in Australian Securities and Investments Commission v Hellicar (2012) 286 ALR 501. 26 The obligation of the Australian Securities and Investments Commission to act fairly informed the Court of Appeal's conclusion at [777] that the failure of the Australian Securities and Investments Commission to call Mr Robb undermined the cogency of its case on the passing of the draft ASX announcement resolution. The Court's discussion of the obligation to act fairly at [701]-[707] included reference to the duty to act as a "model litigant" and to the Legal Services Direction 2005 made under s 55ZF of the Judiciary Act 1903. 27 In the High Court, Australian Securities and Investments Commission v Hellicar (2012) 286 ALR 501, the plurality held at [9] that the Court of Appeal was wrong to hold that the Australian Securities and Investments Commission breached a duty of "fairness" by not calling Mr Robb and the Court of Appeal further erred in concluding that a failure to call a witness, in breach of a duty of "fairness" diminished the cogency of the evidence that was called. Their Honours said at [147] and [152]: [147] It may readily be accepted that courts and litigants rightly expect that ASIC will conduct any litigation in which it is engaged fairly. Nothing that is said in these reasons should be taken as denying that ASIC should do so. But the Court of Appeal concluded that ASIC was under a duty in this litigation to call particular evidence and that breach of the duty by not calling the evidence required the discounting of whatever evidence ASIC did call in proof of its case. Neither the source of a duty of that kind, nor the source of the rule which was said to apply if that duty were breached, was sufficiently identified by the Court of Appeal or in argument in this court. … [152] For the purposes of deciding these matters, it is convenient to assume, without deciding, that ASIC is subject to some form of duty, even if a duty of imperfect obligation, that can be described as a duty to conduct litigation fairly. What consequences might be thought to follow if failure to call a witness could, and in a particular case did, amount to a breach of a duty of that kind can then be elucidated by reference first to prosecutorial duties in criminal proceedings. Justice Heydon, in a separate judgment said, relevantly: [239] ASIC as a model litigant. ASIC did not dispute that it had an obligation to conduct proceedings fairly, as a model litigant. But it argued that that obligation did not create duties on it different from those which apply to other litigants in relation to the calling of witnesses in civil proceedings. ASIC accepted that there is, in the words of Griffith CJ, an "old-fashioned traditional, and almost instinctive, standard of fair play to be observed by the Crown in dealing with subjects". Its powers are exercised for the public good. It has no legitimate private interest in the performance of its functions. And often it is larger and has access to greater resources than private litigants. Hence it must act as a moral exemplar. [240] ASIC also did not dispute that it had a duty to act as a "model litigant" pursuant to the Legal Services Directions made under s 55ZF of the Judiciary Act 1903 (Cth). But App B of the directions does not create any specific obligation of the kind which the Court of Appeal relied on. In any event, s 55ZG(3) of that Act provides that noncompliance cannot be raised in any proceeding except by or on behalf of the Commonwealth. The Commonwealth has the same rights as any other litigant. It has the same powers to enforce those rights. That is so whether the Commonwealth is suing or being sued. And it is so even where, as here, no other person could have brought the proceedings. Nothing in the Legal Services Directions suggests that the Commonwealth's obligations as a model litigant extend to the question of which witnesses it should call. And nothing suggests that if the Commonwealth fails to call a particular witness, the evidentiary consequences are those that the Court of Appeal's reasoning contemplated. The Solicitor-General of the Commonwealth correctly submitted that the duty to act as a model litigant requires the Commonwealth and its agencies, as parties to litigation, to act fairly, with complete propriety and in accordance with the highest professional standards, but within the same procedural rules as govern all litigants. But the procedural rules are not modified against model litigants - they apply uniformly. (footnotes omitted) 28 In Deputy Commissioner of Taxation v Clear Blue Developments Pty Ltd (No. 2) [2010] FCA 1224; (2010) 190 FCR 11, Logan J was considering an application made on behalf of the Deputy Commissioner for professional costs as well as outlays. Amongst other reasons for refusing that application, his Honour said at [47]-[48]: [47] All in all, the position which obtains is a confusing one. That confusion is caused by a failure to adhere to the requirements of the Federal Court Rules in relation to a signification of a party acting by a solicitor. Tellingly, in relation to the giving an address for service, there is nothing which alerts the defendant corporation to the fact that a solicitor acts for the plaintiff. I am not persuaded that there is a solicitor on the record. [48] In the face of that and having regard to the requirements of the Federal Court Rules, the officers and members of Clear Blue Developments were, in my opinion, entitled to assume that, in the event of a winding up order being made, costs of the plaintiff would be limited to outlays, as is the case where a litigant acts for him or herself. For this reason also, I do not propose to award professional costs to the Deputy Commissioner. Indeed, so to do would be to reward work which is not of a standard to be expected of a person asserted to be solicitor on the record for a person to whom model litigant obligations adhere. The Deputy Commissioner's outlays are said to be $1,248.86. I order that those costs be the Deputy Commissioner's costs in the winding up. 29 His Honour does not appear to have been considering any question of the operation or validity of s 55ZG of the Judiciary Act 1903. That his Honour was dealing with a narrow point, compliance with the rules of this Court in relation to the presence of a solicitor on the record, is made clear by Logan J's later decision Deputy Commissioner of Taxation v Croftworth Property Holdings (No 2) Pty Ltd (No 2) [2011] FCA 373 at [10]. I need not consider the question whether making a costs order taking into account the Legal Services Direction 2005 is or is not consistent with s 55ZG of the Judiciary Act 1903. 30 In Phillips, in the matter of Starrs & Co Pty Limited (In Liquidation) v Commissioner of Taxation [2011] FCA 532, Lander J was dealing with a case where the Australian Taxation Office had failed to comply with a direction to file an affidavit in response to the plaintiffs' affidavit in support of the plaintiffs' originating process. His Honour made an order extending the time within which the defendant had to comply but ordered that the defendant pay the plaintiff's costs on an indemnity basis, such costs to be paid immediately upon taxation. His Honour said the Australian Taxation Office was a well-resourced agency or instrumentality of the Crown and a model litigant which was obliged to comply with any directions made by this Court. It was not entitled nor was the Commissioner entitled to disregard any directions of this Court. 31 His Honour was not considering any question concerning the operation or validity of s 55ZG of the Judiciary Act 1903. 32 As to the applicant's reference to Shah & Ors v Minister for Immigration and Citizenship & Anor [2011] HCATrans 196, there appears from the transcript to have been a delay on the part of the Commonwealth in relation to an affidavit to be used by it in the interlocutory hearing. The transcript is not of a judgment. What was said does not assist the applicant. 33 There are of course decisions before and after the making of the Legal Services Directions 2005 which refer to model litigant obligations or to the Crown's duty of fairness but this observation demonstrates the narrowness of the present point which is that s 55ZG applies only to the Legal Services Directions 2005 or to a future Legal Services Direction made under s 55ZF. Where it has been sought to enforce the Legal Services Directions 2005, it has been said by the Full Court of this Court in Croker v Commonwealth of Australia [2011] FCAFC 25 at [19] that compliance with the directions was not enforceable by the applicant and could not be raised in any proceeding other than by or on behalf of the Commonwealth: see also Leerdam & Anor v Noori & Ors [2009] NSWCA 90; (2009) 255 ALR 553 at [57]. 34 These decisions do not deal with the present question of invalidity of s 55ZG of the Judiciary Act 1903. None of the authorities relied on by the applicant support her submission that s 55ZG does not stand in the way of rights and duties being owed to non-Commonwealth litigants once it is understood that the section is concerned only with the Legal Services Directions 2005 or a future Legal Services Direction made under s 55ZF. 35 The applicant submitted that the terms of various documents, which I admitted into evidence subject to relevance, were relevant to the validity of the provisions of s 55ZG and the question of legislative power which is raised in the application. In my opinion what is said or done by the respondent or other member of the Executive is not relevant to the question of power raised on the application: in my opinion, those matters do not affect the validity of ss 55ZG(2) or (3). 36 As to the applicant's email to the Commonwealth Attorney-General's Department, in my opinion the correspondence does not go to the validity of the provisions in question. Whatever the answer to the email, it would remain the position that it would be the Commonwealth which would be raising the issue of non-compliance. I also note the concession on the part of the respondent that he did not seek to sustain the validity of the provisions on the footing that the Attorney-General might consent to raising the issue of non-compliance with the Legal Services Directions 2005. 37 Once it is accepted that the necessary and correct starting point is the construction of the Legal Services Directions 2005 and an analysis of the nature of the obligations imposed by those Directions and once it is accepted, as it must be, that the Commonwealth may create or impose obligations on officers of the Commonwealth owed only to it then in my opinion no question of impermissible interference with the independence or functions of the courts created under or contemplated by Chapter III can arise. In other words, in circumstances such as the present it could only be, at best for the applicant, if those courts were prevented from or curtailed in enforcing rights which a person had that a Chapter III question could arise. 38 In Re East and Others; Ex parte Nguyen (1998) 196 CLR 354 the High Court said at [20]: The identification of what (if any) private rights are conferred by the [Racial Discrimination] Act, either by its express terms or by necessary implication, requires an examination of the nature, scope and terms of the statute "including the nature of the evil against which it is directed, the nature of the conduct prescribed, the pre-existing state of the law, and, generally, the whole range of circumstances relevant upon a question of statutory interpretation": Sovar v Henry Lane Pty Ltd (1967) 116 CLR 397 at 405 [per Kitto J]. 39 That exercise in the present case yields the result that no private rights are conferred by Appendix B "The Commonwealth's obligation to act as a model litigant". Insofar as concerns officers of the Executive branch, I accept that the Parliament may in the first instance shape and limit such obligations and rights which the Parliament itself creates, leaving aside any question of a subsequent limitation or repeal of those rights. 40 It is to be noted that Schedule 1 to the instrument entitled Legal Services Directions 2005 sets out Directions made by the Attorney-General under s 55ZF of the Judiciary Act 1903. The Model Litigant Obligations are an Appendix to Schedule 1 of Directions made under s 55ZF of the Judiciary Act 1903. 41 That section provides: 55ZF Attorney-General may issue directions (1) The Attorney-General may issue directions (Legal Services Directions): (a) that are to apply generally to Commonwealth legal work; or (b) that are to apply to Commonwealth legal work being performed, or to be performed, in relation to a particular matter. (2) The Attorney-General may publish or give notice of Legal Services Directions in any manner the Attorney-General considers appropriate. (3) In this section: Commonwealth legal work means: (a) any work performed by or on behalf of the AGS in the performance of its functions; or (b) any legal work performed by a person for any of the following: (i) the Commonwealth; (ii) a body established by an Act or regulations or by a law of a Territory (other than the Australian Capital Territory, the Northern Territory or Norfolk Island); (iii) a company in which the Commonwealth has a controlling interest (including a company in which the Commonwealth has a controlling interest through one or more interposed Commonwealth authorities or Commonwealth companies); (iv) other persons or bodies referred to in subsection 55N(1), to the extent that the work relates to the person's or body's performance of a Commonwealth or Territory function. 42 The terms are referred to in cl 4.2 of the Schedule to the Legal Services Directions 2005 and are set out in Appendix B to Schedule 1: The Model Litigant Obligation 4.2 Claims are to be handled and litigation is to be conducted by the agency in accordance with the Directions on The Commonwealth's Obligation to Act as a Model Litigant, at Appendix B, noting that the agency is not to start legal proceedings unless it is satisfied that litigation is the most suitable method of dispute resolution. Note For the application of this provision to Australian Government bodies other than FMA agencies, see paragraph 12. … Appendix B The Commonwealth's obligation to act as a model litigant The obligation 1 Consistently with the Attorney-General's responsibility for the maintenance of proper standards in litigation, the Commonwealth and its agencies are to behave as model litigants in the conduct of litigation. Nature of the obligation 2 The obligation to act as a model litigant requires that the Commonwealth and its agencies act honestly and fairly in handling claims and litigation brought by or against the Commonwealth or an agency by: (a) dealing with claims promptly and not causing unnecessary delay in the handling of claims and litigation (aa) making an early assessment of: (i) the Commonwealth's prospects of success in legal proceedings that may be brought against the Commonwealth; and (ii) the Commonwealth's potential liability in claims against the Commonwealth (b) paying legitimate claims without litigation, including making partial settlements of claims or interim payments, where it is clear that liability is at least as much as the amount to be paid (c) acting consistently in the handling of claims and litigation (d) endeavouring to avoid, prevent and limit the scope of legal proceedings wherever possible, including by giving consideration in all cases to alternative dispute resolution before initiating legal proceedings and by participating in alternative dispute resolution processes where appropriate (e) where it is not possible to avoid litigation, keeping the costs of litigation to a minimum, including by: (i) not requiring the other party to prove a matter which the Commonwealth or the agency knows to be true (ii) not contesting liability if the Commonwealth or the agency knows that the dispute is really about quantum (iii) monitoring the progress of the litigation and using methods that it considers appropriate to resolve the litigation, including settlement offers, payments into court or alternative dispute resolution, and (iv) ensuring that arrangements are made so that a person participating in any settlement negotiations on behalf of the Commonwealth or an agency can enter into a settlement of the claim or legal proceedings in the course of the negotiations (f) not taking advantage of a claimant who lacks the resources to litigate a legitimate claim (g) not relying on technical defences unless the Commonwealth's or the agency's interests would be prejudiced by the failure to comply with a particular requirement (h) not undertaking and pursuing appeals unless the Commonwealth or the agency believes that it has reasonable prospects for success or the appeal is otherwise justified in the public interest, and (i) apologising where the Commonwealth or the agency is aware that it or its lawyers have acted wrongfully or improperly. Note 1 The obligation applies to litigation (including before courts, tribunals, inquiries, and in arbitration and other alternative dispute resolution processes) involving Commonwealth Departments and agencies, as well as Ministers and officers where the Commonwealth provides a full indemnity in respect of an action for damages brought against them personally. Ensuring compliance with the obligation is primarily the responsibility of the agency which has responsibility for the litigation. In addition, lawyers engaged in such litigation, whether Australian Government Solicitor, in-house or private, will need to act in accordance with the obligation and to assist their client agency to do so. Note 2 In essence, being a model litigant requires that the Commonwealth and its agencies, as parties to litigation, act with complete propriety, fairly and in accordance with the highest professional standards. The expectation that the Commonwealth and its agencies will act as a model litigant has been recognised by the Courts. See, for example, Melbourne Steamship Limited v Moorhead [sic] (1912) 15 CLR 133 at 342; Kenny v State of South Australia (1987) 46 SASR 268 at 273; Yong Jun Qin v The Minister for Immigration and Ethnic Affairs (1997) 75 FCR 155. Note 3 The obligation to act as a model litigant may require more than merely acting honestly and in accordance with the law and court rules. It also goes beyond the requirement for lawyers to act in accordance with their ethical obligations. Note 4 The obligation does not prevent the Commonwealth and its agencies from acting firmly and properly to protect their interests. It does not therefore preclude all legitimate steps being taken to pursue claims by the Commonwealth and its agencies and testing or defending claims against them. It does not preclude pursuing litigation in order to clarify a significant point of law even if the other party wishes to settle the dispute. The commencement of an appeal may be justified in the public interest where it is necessary to avoid prejudice to the interests of the Commonwealth or an agency pending the receipt or proper consideration of legal advice, provided that a decision whether to continue the appeal is made as soon as practicable. In certain circumstances, it will be appropriate for the Commonwealth to pay costs (for example, for a test case in the public interest.) Note 5 The obligation does not prevent the Commonwealth from enforcing costs orders or seeking to recover its costs. Merits review proceedings 3 The obligation to act as a model litigant extends to agencies involved in merits review proceedings. 4 An agency should use its best endeavours to assist the tribunal to make its decision. Note The term 'litigation' is defined in paragraph 15 of these Directions in terms that encompass merits review before tribunals. There are particular obligations in relation to assisting a tribunal engaged in merits review to arrive at a decision. Agencies should pay close attention to the legislation under which a tribunal is established, and any practice directions issued by the tribunal. In the case of the Administrative Appeals Tribunal see in particular subsection 33(1AA) of the Administrative Appeals Tribunal Act 1975 and the explanatory memorandum to the Administrative Appeals Tribunal Amendment Bill 2005. Alternative dispute resolution 5.1 The Commonwealth or an agency is only to start court proceedings if it has considered other methods of dispute resolution (eg alternative dispute resolution or settlement negotiations). 5.2 When participating in alternative dispute resolution, the Commonwealth and its agencies are to ensure that their representatives: (a) participate fully and effectively, and (b) subject to paragraph 2 (e) (iv), have authority to settle the matter so as to facilitate appropriate and timely resolution of a dispute. 43 The applicant emphasised the terms of cll 2 and of 2(e)(i) and (ii) and 2(f) and the cases referred to in Note 2 above. 44 The terms of these provisions indicate an intention that the Directions are a means of control by the Attorney-General of Commonwealth legal work. In my opinion they are not designed to create obligations owed by the persons or bodies referred to in s 55ZG to others, especially other litigants. 45 As I have earlier indicated, the issue of non-compliance referred to in s 55ZG(3) is closely related to the nature of the obligations imposed by s 55ZG(2). 46 The Legal Services Directions themselves contain provision for sanctions, as follows: Part 3 Sanctions for non-compliance 14 Sanctions for non-Compliance 14.1 The Attorney-General may impose sanctions for non-compliance with the Directions. Note Examples demonstrating the range of sanctions and the manner in which OLSC approaches allegations of a breach of the Directions are set out in the Compliance Strategy for Enforcement of the Legal Services Directions. Complaints alleging a breach of the Directions may be made to OLSC at . 14.2 When entering into a contract for legal services, agencies are to include a provision stating that the contract includes appropriate penalties in the event of a breach of the Directions to which the legal services provider has contributed, including the termination of the contract in an appropriate case. 47 The history of these provisions supports the same conclusion, that is, the devolution from the Crown Solicitor to include other providers of legal services to the Commonwealth. 48 Part VIIIC of the Judiciary Act 1903, which includes s 55ZG, was inserted by the Judiciary Amendment Act 1999 (Cth). The Explanatory Memorandum, at page 10, supports the construction of the language of the provision and confirms the history which I have set out above. It said, relevantly: The persons and bodies who must comply with Legal Services Directions include, in effect, the Commonwealth, a Commonwealth authority or company, a client for whom the AGS was acting and a client for whom a private practitioner was performing Commonwealth legal work, as well as the AGS, and a private practitioner and their firm performing Commonwealth legal work (new subsection 55ZG(1)). The power to issue Legal Services Directions is intended to enable the Attorney-General to protect the legal interests of the Commonwealth in relation to the delivery of legal services. For this reason, Directions will be enforceable only by, or on the application of, the Attorney-General (new subsection 55ZG(2)). This would enable the Attorney-General, in an extreme case, to seek an injunction to address a breach. Non-compliance with the Directions will be able to be raised in proceedings only by or on the application of the Commonwealth (new subsection 55ZG(3)). Thus, it will not be possible for a party other than the Attorney-General or the Commonwealth to assert non-compliance as the basis of any claim or defence in legal proceedings. In particular, it is not intended that litigants opposed to the Commonwealth should be able to rely on the Directions to challenge Commonwealth actions. Rather, the question of compliance with the Directions should be a matter primarily between the Attorney-General as First Law Officer and the relevant Department or agency. Any other approach could give rise to technical arguments and result in additional costs and delay in litigation involving the Commonwealth. For example, it is not intended that a litigant be able to argue that the Commonwealth was making a technical argument in breach of the model litigant obligation (if this were provided in the Legal Services Directions). The alleged breach could, however, be raised by the litigant with the Attorney-General or the Office of Legal Services Coordination (the office established within the Attorney-General's Department, on the recommendation of the Report of the Review of the Attorney-General's Legal Practice, to support the Attorney-General in relation to his responsibilities for legal services to the Commonwealth). 49 As I have indicated, the first task is to construe the impugned provisions and to consider their field of operation and the rights and liabilities they create and impose. 50 I accept the submission of the respondent that s 55ZG(3) does not operate as a privative clause to take jurisdiction from any courts, but is reflective of the limited scope and nature of the obligations that arise under, in particular, Schedule 1, Appendix B "The Commonwealth's obligation to act as a model litigant". Thus the provisions do not direct courts that they should not, for example, enforce or give effect to a right which a litigant has. Rather, the provision is a corollary of the limited nature of the obligations and to whom they are owed: a litigant may not rely on a breach of an obligation not owed to him or her. 51 It is important to note the limited field of operation of ss 55ZG(2) and (3). I accept the submission on behalf of the respondent as follows: To the extent that the common law has recognised any principles that govern or regulate the conduct of bodies politic or other public bodies involved in litigation (as to which see Melbourne Steamship Co. Ltd v Moorehead (1912) 15 CLR 333 at 342; Scott v Handley (1999) 58 ALD 373 at [43]-[44]), ss 55ZG(2) and (3) say nothing about who may seek to agitate, rely upon or enforce obligations said to arise under such principles forming part of the common law. The sole effect of ss 55ZG(2) and (3) is in relation to obligations that arise under Legal Services Directions made under s 55ZF of the Judiciary Act. 52 I do not need to and should not consider the position on any broader basis. No question of the interrelationship between ss 175 and 177 of the Income Tax Assessment Act 1936 (Cth) and ss 55ZG(2) and (3) of the Judiciary Act therefore arises. Also general questions going to the undermining of the judicial system, as contended for by the applicant, and the other matters on which the applicant seeks to rely, examples of which I have set out at [11] above, do not arise. 53 The respondent also submitted in the alternative that relief should be granted only if the applicant could establish that s 55ZG(3) in the facts of this case was operating or would operate to prevent the applicant from lawfully advancing an issue, contrary to Chapter III of the Constitution. The respondent submitted that the applicant had failed to make out any coherent non-compliance with the Legal Services Directions sufficient to justify the Court granting the relief. As a result, the respondent submitted, the validity of s 55ZG(3) of the Judiciary Act 1903 did not arise. Further, constitutional questions should not be answered unless it was necessary to do so: see ICM Agriculture Pty Ltd v Commonwealth (2009) 240 CLR 140 at [141] and the authorities there cited. 54 I accept at the level of principle that this must be so. In the circumstances of the present case however, given the implications of the claim by the applicant for invalidity for at least her appeal in NSD 188/2013, I have considered the claim for invalidity on its merits. 55 It follows from my conclusion rejecting the submissions as to invalidity that I do not need to consider the submissions of the respondent directed to severance if I had found that ss 55ZG(2) or (3) were invalid. In short that submission was that Pt VIIIC of the Judiciary Act 1903 was to be read as a whole and that if ss 55ZG(2) or (3) were invalid then the respondent wished to argue that the entirety or a greater part of Pt VIIIC would also fall for invalidity as inseverable. 56 In the result, the challenge to the validity of s 55ZG(2) and (3) of the Judiciary Act 1903 fails. The applicant's claims for interlocutory relief, which I have set out at [2] above, fail in relation to the "Model Litigant Provisions under Legal Services Directions". As to the first interlocutory claim, I refuse to grant the stay on enforcement. As to the second interlocutory claim, the application has been determined so that claim falls away. As to the third and fourth interlocutory claims, because I have found that ss 55ZG(2) and (3) are not invalid those claims also fail. 57 The application must be dismissed, with costs. I certify that the preceding fifty-seven (57) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson.