Lyons v Commissioner of Taxation

The relief sought in relation to the Amended Assessments and Penalty Notices 15 In the principal proceeding, by an amended application filed on 20 June 2019 (although that application is sometimes incorrectly described as having been filed on 24 June 2019), the Lyons applicants apply for the following orders "under section 39B of the Judiciary Act 1903 [(Cth)]" in relation to subject matter described as the "Incorrect Amended Assessments and Penalties": Certiorari, Declaration and Prohibition 1. That the decisions to issue the Incorrect Amended Assessments and Penalties to the First, Second and Third Applicants are ordered quashed. 2. That the Incorrect Amended Assessments and Penalties issued to the First, Second and Third Applicants are declared invalid. 3. That the Respondent be restrained from making the invalid decisions to issue the Incorrect Amended Assessments and Penalties to the First, Second and Third Applicants. 16 The first order sought is the constitutional writ of certiorari quashing both the Commissioner's decision to issue the Amended Assessments issued to each applicant and the decision to issue or impose administrative penalties. 17 Section 75(v) of the Constitution confers original jurisdiction on the High Court in all matters in which a writ of mandamus or prohibition, or an injunction, is sought against an officer of the Commonwealth. In the case of the writ of mandamus, the question the Court examines is whether the person (in this case, officers of the Commissioner) has failed to exercise a power which he or she was bound to exercise. In the case of the writ of prohibition, the question is: what are the limits of the person's authority to decide a question or exercise a particular power (most often conferred under a Commonwealth statute)? That conferral of jurisdiction on the High Court carries with it an "ancillary" or "incidental" authority to grant the writ of certiorari quashing the challenged decision, even though there is no reference in the text of s 75(v) of the Constitution to the writ of certiorari: Re Refugee Review Tribunal; Ex parte AALA (2000) 204 CLR 82 ("AALA"), Gaudron and Gummow JJ at [14]. 18 Section 77(i) of the Constitution confers authority on the Commonwealth Parliament to make laws defining, relevantly, the jurisdiction of any Federal Court with respect to any of the matters mentioned in ss 75 and 76 of the Constitution. By s 39B(1) of the Judiciary Act 1903 (Cth), the jurisdiction of the Federal Court of Australia includes jurisdiction with respect to any matter in which a writ of mandamus or prohibition or an injunction is sought against an officer of the Commonwealth (that is, the subject matter of s 75(v) of the Constitution, and in this case, the relevant Commonwealth officer is the Commissioner). This legislative conferral of jurisdiction on the Federal Court also carries with it ancillary or incidental authority to grant the writ of certiorari. 19 The second order sought is a declaration that the Amended Assessments and Penalty Notices issued to each applicant are "invalid". I will return to that matter shortly. 20 The third order sought falls under the heading "Prohibition". The Lyons applicants seek that order so as to prevent the Commissioner "making the invalid decisions to issue" the challenged Amended Assessment decisions and the challenged decisions to impose administrative penalties. This third order is framed in terms of a "restraint" and it may be that the Lyons applicants had in mind an injunction restraining the Commissioner from making again decisions "declared invalid" assuming they could establish a basis for the making of such a declaration. However, the Lyons applicants frame this claim as an application for the constitutional writ of prohibition under s 39B of the Judiciary Act, which must mean that the Lyons applicants contend that in issuing the Amended Assessments and the administrative penalties, the Commissioner exceeded the limits of the power to do so when taking those steps: s 39B(1) (s 75(v) of the Constitution). 21 In the context of the events described shortly, this order is difficult to comprehend on its face. 22 Some things about the very nature of this relief, especially in the context of challenges to decisions of the Commissioner, need to be kept firmly in mind. 23 When an applicant applies for relief in the form of the constitutional writs directed to amended assessments of the Commissioner or decisions as to administrative penalties, the question that arises is whether there has been error in the exercise of the statutory powers conferred on the Commissioner amounting to an excess or want of jurisdiction otherwise known as jurisdictional error. 24 In other words, the applicants must demonstrate "that measure of judicial review for jurisdictional error which is provided by s 75(v) of the Constitution and by s 39B of the Judiciary Act" [emphasis in bold added]: Commissioner of Taxation of the Commonwealth v Futuris Corporation Limited (2008) 237 CLR 146 ("FCT v Futuris"), Gummow, Hayne, Heydon and Crennan JJ at [10]. Thus, the Lyons applicants must satisfy the requirements of that "measure" of judicial review appropriate to "jurisdictional" error rather than demonstrating "merely … an error of fact or law by the Commissioner": FCT v Futuris at [4]. 25 As Hayne J observes in AALA at [160]: "The inquiry is not about whether a decision which was made in exercise of the authority was right or wrong on the merits. It is an inquiry about the boundaries of the power conferred" [original emphasis]. 26 As to the principles governing that measure of judicial review appropriate to jurisdictional error, it is sufficient for present purposes to simply note that the principles are to be found in the observations of Brennan, Deane, Toohey, Gaudron and McHugh JJ in Craig v South Australia (1995) 184 CLR 163 at 179; Minister for Immigration and Multicultural Affairs v Yusuf (2001) 206 CLR 323 ("Yusuf") at [82], McHugh, Gummow and Hayne JJ; Minister for Immigration and Citizenship v Li (2013) 249 CLR 332 ("Li"), French CJ at [23]-[31], Hayne, Kiefel and Bell JJ at [63]-[76], and Gageler J at [88]-[92] and [105]-[113]; Hossain v Minister for Immigration and Border Protection (2018) 359 ALR 1 ("Hossain"), Kiefel CJ, Gageler and Keane JJ at [24]-[31], Edelman J at [46] and [60]-[74]. 27 Apart from the principles reflected in the discussion referred to in these authorities, the exercise of the judicial power of the Commonwealth by Ch III courts, or courts invested with federal jurisdiction, not only involves ensuring that the exercise of executive or administrative power does not exceed the limits of the conferred power but also involves ensuring that the conferred power is not exercised for ulterior or improper purposes. Often, a reference to an ulterior or improper purpose has a narrow and technical meaning where "the act done was beyond the power conferred irrespective of the motive or intention of the party exercising the power": FCT v Futuris, the plurality at [13]. In this "softer sense" (FCT v Futuris at [13]), a lack of good faith "suggests no degree of moral obliquity": FCT v Futuris at [13]; SZFDE v Minister for Immigration and Citizenship (2007) 232 CLR 189 at [13]. In this "softer sense" the question simply is whether the relevant person was actuated by a purpose which, in the circumstances of the case, was extraneous to those permitted by the statute: Western Australian Planning Commission v Temwood Holdings Pty Limited (2004) 221 CLR 30, Heydon J at [181]. 28 The Lyons applicants, however, assert, by their amended pleading, not only that the power in question was exercised for an improper purpose and thus falls outside the scope of the power, they assert that the exercise of the power falls outside the scope of the power due to "conscious maladministration", "defective administration", "reckless indifference", "deliberate dishonesty" and the issuing of the Amended Assessments and Penalty Notices "without proper regard to the facts and for a collateral purpose". I will return to these matters later in these reasons and their relationship with the 36 Act and the Administration Act. 29 Apart from the considerations which govern the issue of the constitutional writs by reference to questions of jurisdictional error, a fundamental matter, as a matter of discretion, is the likelihood that the relief under s 39B(1) (and s 75(v) of the Constitution) will be withheld in circumstances where there is another remedy that either was, or could have been, invoked to address the matters said to otherwise give rise to the claimed relief: that is, whether another form of relief is or was available, typically under the relevant statute, and whether as a matter of construction of the legislation, contended errors or conduct of the Commissioner or his or her officers go to jurisdiction. 30 This important matter concerning the discretion, requires consideration to be given to the statutory framework relating to the issue of amended assessments, administrative penalties and related matters. I will return to the statutory framework later in these reasons. However, for present purposes, it is important to note, in the context of the discretion, the following matters as drawn from the amended statement of claim. 31 In February 2011, Mr Marco Ducci, on behalf of the Commissioner, commenced an audit of the tax affairs of the third applicant (the restaurant business of the Trust) for the years ending 30 June 2005 to 30 June 2010 and an audit of the tax affairs of Mr and Mrs Lyons for the financial years ending 30 June 2005 to 30 June 2009: paras 27 and 28. 32 It seems to be common ground that prior to the commencement of the audit, income tax returns in relation to the activities of the Trust had not been lodged with the Commissioner for the financial years ending 30 June 2006 to 30 June 2009 and income tax returns had not been lodged with the Commissioner by Mr and Mrs Lyons for the financial years ending 30 June 2006 to 30 June 2009 (although the Commissioner contended that Mr and Mrs Lyons had failed to lodge tax returns for the financial years 2002, 2003 and 2004 as well). It seems that on 3 March 2011, the auditor advised the accountant/book-keeper employed by the Trust, Mr Roseby, to lodge all outstanding income tax returns for the Trust and for Mr and Mrs Lyons by 22 March 2011 and all outstanding returns were lodged on 22 March 2011. 33 On 7 June 2011, the Commissioner issued "Notices of Amended BAS Assessments" and "Penalty Notices" to the third applicant giving rise to a GST liability of $146,083.00 and penalties of $73,042.50: para 34. The Amended Assessments of Business Activity Statements ("BAS") were said to arise out of understated income in the conduct of the restaurant undertaking revealed in the audit, and the penalties were said to be referrable to false and misleading statements concerning the understated income (and matters relating to an issue concerning contended voluntary disclosure of a particular matter): paras 35 and 46. 34 The contended understated income of the Trust was said to be $2.2 million: para 11. The understated net income of the Trust was said to be $999,476.00. 35 The Commissioner contended that Mr and Mrs Lyons were "presently entitled" to the net income of the Trust for tax purposes, a matter contested by them. 36 As to the Amended BAS Assessments giving rise to a GST liability in the third applicant of $146,083.00, the Commissioner attributed $115,389.00 of that liability to the understatement of income said to have been revealed during the audit. 37 On 21 July 2011 and 22 July 2011, "Notices of Amended Assessments" and "Penalty Notices" respectively, were issued to Mr Lyons for the financial years ending 30 June 2006 to 30 June 2009. The Commissioner assessed Mr Lyons to $499,738.00 of undisclosed taxable income and tax of $200,601.50; administrative penalties of $100,300.65; and a General Interest Charge ("GIC") of $57,001.57, amounting to $357,903.22 in all. In July 2011, Notices of Amended Assessment and Penalty Notices were issued to Mrs Lyons in the same amounts giving rise to a combined debt due to the Commonwealth by Mr and Mrs Lyons of $715,806.44: paras 39-42. 38 On 9 August 2011, objections were lodged by the Trust to the Commissioner's Amended Assessments and Penalty Notices. Objections were also lodged by Mr and Mrs Lyons to the Amended Assessments and Penalty Notices issued to them. 39 On 22 January 2013, the Commissioner decided the objection by the Trust and concluded that the Trust did not earn any net income in the relevant years; that there was "error" and there were "deficiencies" in the calculation (at audit) of the contended "gross margin" on food and beverage sold in the restaurant, with the objection decision-maker observing: "The use of an overstated cost of sales figure would have compounded any error caused by deficiencies in the gross profit percentage calculation": paras 79-81. 40 On 31 May 2013, the Commissioner decided the objections of Mr and Mrs Lyons. The objections were allowed in full reducing the combined tax liabilities of Mr and Mrs Lyons from $715,806.44 to nil: paras 82 and 83. 41 By invoking the objection procedures under the Administration Act so as to address the errors of fact affecting the Amended Assessments and Penalty Notices, Mr and Mrs Lyons ultimately obtained a decision of the Commissioner which addressed those errors on the merits and reduced the Amended Assessments and Penalty Notices to nil (subject to a matter related to a voluntary disclosure). 42 In the principal proceeding, the Lyons applicants contend that, in the course of the audit, in particular, officers of the Commissioner purported to exercise powers conferred under the taxation laws of the Commonwealth on the Commissioner and purported to exercise administrative procedures related to the exercise of those powers, and did so in a way that gave rise to decisions made, and steps taken, that had no basis in fact; were unreasonable; and reflected a lack of competency, care and honesty, which directly caused Mr and Mrs Lyons to suffer loss and thus suffer detriment. 43 There are many pleaded criticisms (contested by the Commissioner) made by Mr and Mrs Lyons of the conduct of the audit by the Commissioner's officers which are said to have led to the issue of the Amended Assessments and the decisions to issue administrative penalties and thus the purported exercise of powers conferred on the Commissioner. As I mentioned earlier, I will return to the content of these criticisms later in these reasons and their relationship with the relief claimed in the principal proceeding. 44 Having noted these factual matters relating to the Amended Assessments and Penalty Notices in the context of the observations at [29] and [30] of these reasons, it is important to note some other matters related to the relief claimed by the Lyons applicants so far as the Amended Assessments and Penalty Notices are concerned. 45 The Lyons applicants claim by Order 2 a declaration that the Amended Assessments and Penalty Notices are "invalid", that is, a declaration that those instruments are not valid as a matter of law. That declaration is sought under s 39B of the Judiciary Act. Neither s 75(v) of the Constitution nor s 39B(1) of the Judiciary Act, refers to a declaration. The principles of jurisdictional error that control the grant of the constitutional writs do not "attend" the declaratory order. It follows that the equitable remedies of a declaration and an injunction, available at the suit of applicants with a sufficient interest in the subject matter of the suit, operate to declare invalidity and to restrain the implementation of invalid exercises of power: FCT v Futuris, Gummow, Hayne, Heydon and Crennan JJ at [47]. However, whether a conclusion of invalidity can be reached concerning the issue of the Amended Assessments and the issue of the Penalty Notices involves a question of construction of s 175 of the 36 Act, any limitations upon the reach of that section according to the jurisprudence, and related provisions of the 36 Act and the Administration Act, as discussed later in these reasons. 46 It should also be remembered that s 21 of the Federal Court of Australia Act 1976 (Cth) (the "Court Act") confers power on the Court to make "binding declarations of right" in relation to "a matter in which it has original jurisdiction". Section 21 is not a source of jurisdiction but rather a conferral of power in a proceeding in which it is invested with jurisdiction. 47 In these proceedings, the Lyons applicants seek, by Order 2, a declaration "under section 39B of the Judiciary Act 1903". That remedy is clustered under the heading "Certiorari, Declaration and Prohibition" and the Lyons applicants seem, plainly enough, to have s 39B(1) squarely in mind in which event it is necessary to "underpin" the remedy with a finding of jurisdictional error on the part of the Commissioner in exercising the power to issue the Amended Assessments or Penalty Notices or both: FCT v Futuris, the plurality at [48]. 48 In other words, the remedy of the declaration is directed to invalidity which in turn is directed to jurisdictional error. 49 It should be noted that s 39B(1) is not the only conferral of jurisdiction on the Federal Court by s 39B. Section 76(ii) of the Constitution provides that the Commonwealth Parliament may make laws conferring original jurisdiction on the High Court "in any matter … arising under any laws made by the Parliament", and s 77(i) of the Constitution confers authority on the Commonwealth Parliament (with respect to any matter falling within s 76(ii)) to make laws "defining the jurisdiction of any federal court other than the High Court". The Commonwealth Parliament has enacted such a law by s 39B(1A) of the Judiciary Act which confers original jurisdiction on the Federal Court "in any matter … 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": s 39B(1A)(c). 50 If, notwithstanding the matters at [47] of these reasons, the source of the jurisdiction invoked by the Lyons applicants under s 39B of the Judiciary Act is s 39B(1A) rather than s 39B(1), and if the source of the jurisdiction invoked is properly characterised as "a matter arising" under a taxation law of the Commonwealth and, in particular, the exercise of powers conferred on the Commissioner under the 36 Act or the Administration Act, a declaration of right under s 21 of the Court Act may be sought as to the relevant "matter". However, these things should be noted. 51 First, the Lyons applicants are plainly relying on s 39B(1) as the source of the Court's jurisdiction to support the remedy of a declaration of right as to invalidity, thus relying upon the ground of jurisdictional error to support the claimed declaration. 52 Second, even if they were relying on s 39B(1A) as the source of the Court's jurisdiction, the relevant "matter arising" as framed by them is "invalidity" in the exercise of powers conferred on the Commissioner on the ground of want or excess of jurisdiction by reason of the character of the conduct. 53 Third, the provisions of the 36 Act and the Administration Act, properly construed, might result in no invalidity arising (a matter addressed later in these reasons). 54 Fourth, as a matter of discretion, the remedy might be withheld if processes under the 36 Act and the Administration Act have been invoked, through the objection process, to reduce the Amended Assessments and Penalty Notices to nil. 55 Having regard to the matters noted at [28] of these reasons, it should be noted that the Lyons applicants say that they seek a declaration as to the invalidity of the Amended Assessments and Penalty Notices so as to "seek compensation" by reason of "misfeasance in public office" of particular individuals notwithstanding that the Lyons applicants are "not bringing a claim now for that". The Lyons applicants seek to establish "invalidity of the decisions first" and so they are "using section 39B as an avenue to actually open up exactly the quantum of compensation" even though those causes of action are not pleaded to support the relief claimed by the amending originating application: T, p 8, lns 27-47. 56 Even though the amended statement of claim pleads no cause of action based on misfeasance in public office, it should be noted that in Sanders v Snell (1998) 196 CLR 329 at [42], Gleeson CJ, Gaudron, Kirby and Hayne JJ accepted the observations in Northern Territory v Mengel (1995) 185 CLR 307 at 345 (Mason CJ, Dawson, Toohey, Gaudron and McHugh JJ) that the weight of authority in Australia, and in the United Kingdom, is "clearly to the effect" that misfeasance in public office is a deliberate tort in the sense that there is no liability unless either there is an intention to cause harm or the officer concerned knowingly acts in excess of his or her power. In the United Kingdom, a claim that an officer has acted knowingly in excess of his or her power might be made out where "recklessness" on the part of the officer is demonstrated: Three Rivers District Council v Bank of England (No 3) [2003] 2 AC 1 at 192, 228, 231.

The statutory framework relating to the powers exercised by the Commissioner 57 As to the statutory source of the powers exercised by the Commissioner now under challenge, and the statutory framework generally, these things should be noted. 58 The Commissioner has the general administration of the 36 Act, the 97 Act and relevant parts of the Administration Act having regard to the definitions of "this Act" in each Act: s 6 and s 8 of the 36 Act; s 995-1, s 1-7 of the 97 Act. The Commissioner and APS employees assisting the Commissioner, together constitute a Statutory Agency: s 4A(2), Administration Act. From returns, and from any other information in his or her possession, or from any one or more of such sources, the Commissioner shall make an assessment of the amount of the taxable income (or that there is no taxable income) of any taxpayer, and of the tax payable (or that no tax is payable): s 166, 36 Act. Put simply, an assessment is the ascertainment of the amount of taxable income (or that there is no taxable income) and the tax payable on that taxable income (or that no tax is payable): see, definition, "assessment" at s 6(1), 36 Act. Sections 166A, 167 and 168 provide for a deemed assessment, a default assessment and a special assessment. 59 Where a person is liable to pay tax under the 36 Act taken together with the 97 Act (including a nil liability), the Commissioner may make an assessment of the amount of such tax (or an assessment that no tax is payable): s 169, 36 Act. 60 By s 169A of the 36 Act, where a return of income of a taxpayer of a year of income is provided to the Commissioner (whether or not by the taxpayer), the Commissioner may, for the purposes of making an assessment in relation to the taxpayer under the 36 Act, the 97 Act together with the Administration Act, accept, either in whole or in part, a statement in the return, of the assessable income derived by the taxpayer, and of any allowable deductions or rebates the taxpayer claims to be entitled to, and any other statement in the return, or otherwise made by or on behalf of the taxpayer. 61 Section 170 of the 36 Act provides for the amendment of assessments including the timeframe within which an assessment can be amended by the Commissioner having regard to particular grounds identified in the subsections to s 170. It is not necessary to set out all of those circumstances. It is sufficient to note that the power to issue amended assessments is conditioned by an intersection of timeframes and relevant grounds. 62 As to when income tax becomes payable, s 5-5 of the 97 Act sets out "when income tax you must pay for a financial year is due and payable": s 5-5(1). The income tax is only due and payable if the Commissioner makes an assessment of income tax for the year. Sections 5-10 and 5-15 of the 97 Act provide for the circumstances in which a "shortfall interest charge" and the "general interest charge" is payable. 63 The income tax due and payable (including any shortfall interest charge or general interest charge or an administrative penalty) issued by the Commissioner (a tax-related liability) is a debt due to the Commonwealth and is payable to the Commissioner: s 255-5, Sch 1, Administration Act. As to the debt due to the Commonwealth arising out of a tax-related liability, the Commissioner has power to defer the time for payment or permit payment by instalments or both: Subdivision 255-B, Sch 1, Administration Act. Subdivision 255-C contains provisions relating to recovery proceedings by the Commissioner to recover a tax-related debt. Subdivision 255-D provides that the Commissioner may require a taxpayer to give security for the due payment of an existing or future tax-related liability. 64 Subdivision 260-A applies in circumstances where there is a tax-related liability (debt) due to the Commissioner. If a third party owes money to the person or entity who has such a tax-related liability to the Commissioner, the Commissioner may give written notice to a third party requiring the third party to pay nominated amounts, within a nominated period of time, directly to the Commissioner rather than to the person or entity owing the tax-related liability to the Commissioner. 65 Except as otherwise provided, every amended assessment is an assessment for all purposes of the 36 Act, the 97 Act and the Administration Act: s 173, 36 Act. 66 The Commissioner is to serve notice of the assessment in writing by post or otherwise upon the person liable to pay the tax: s 174, 36 Act. 67 The validity of any assessment "shall not be affected" by reason that any of the provisions of the 36 Act, the 97 Act or the relevant provisions of the Administration Act "have not been complied with": s 175, 36 Act. 68 A taxpayer who is dissatisfied with an assessment made by the Commissioner may object in the manner set out in Part IVC of the Administration Act: s 175A(1), 36 Act. A taxpayer cannot object against an assessment that the taxpayer has no taxable income or that the taxpayer has an amount of taxable income and no tax is payable, unless the taxpayer is seeking to increase the taxpayer's liability: s 175A(2) and s 175A(3), 36 Act. 69 The production of a notice of assessment, or of a document under the hand of the Commissioner, a Second Commissioner or a Deputy Commissioner, purporting to be a copy of a notice of assessment, shall be "conclusive evidence" of the "due making" of the assessment and, "except" in proceedings under Part IVC of the Administration Act on a review or appeal relating to the assessment, that "the amount, and all the particulars of the assessment, are correct": s 177(1), 36 Act. 70 Part IVC of the Administration Act applies in relation to the making of objections to an assessment or an amended assessment (s 14ZL), the review by the Administrative Appeals Tribunal of decisions of the Commissioner in relation to particular taxation objections (s 14ZO) and "appeals" to the Federal Court against decisions of the Commissioner in relation to certain taxation obligations: s 14ZP. 71 Division 3 of Part IVC addresses the topic of making taxation objections. It also addresses the topic of objections to amended assessments and objections against administrative penalties. Section 14ZY of Div 3 provides (subject to a particular qualification), that if the taxation objection has been lodged within the required time, the Commissioner must decide whether to allow it, wholly or in part, or disallow it. Such a decision is an "objection decision". If a person is dissatisfied with the Commissioner's objection decision, the person may, if the decision is a "reviewable objection decision" either seek review of the decision before the AAT or appeal against the decision to the Federal Court. If the decision is other than a reviewable objection decision, the person may appeal against that decision to the Federal Court: s 14ZZ, Administration Act. 72 Division 4 of Part IVC addresses the topic of the review of reviewable objection decisions before the AAT and modifications, for that purpose, to the Administrative Appeals Tribunal Act 1975 (Cth) (the "AAT Act"). On an application for review, the applicant is limited to the grounds contained in the taxation objection (s 14ZZK(a)), and has the burden of proving that the assessment, the subject of the challenged decision, is "excessive": s 14ZZK(b). 73 Division 5 of Part IVC addresses the topic of appeals to the Federal Court against an objection decision. In those proceedings, the appellant is limited to the grounds contained in the taxation objection (subject to orders otherwise) and has the burden of proving that the assessment the subject of the challenged decision is excessive: s 14ZZO(a) and (b). 74 As to an audit of compliance by a taxpayer with obligations arising under a taxation law of the Commonwealth, the Commissioner's power to conduct an audit arises under the conferral of the general administration of the 36 Act and the 97 Act on the Commissioner. 75 In FCT v Futuris, the plurality said this at [23]: The significance of s 175 for the operation of the Act and for the scope of judicial review outside Pt IVC is to be assessed in the manner indicated in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355. … [C]onsistently with the reasons in Project Blue Sky of McHugh, Gummow, Kirby and Hayne JJ [at 390-391 [93]], the question for the present case is whether it is a purpose of the Act that a failure by the Commissioner in the process of assessment to comply with provisions of the Act renders the assessment invalid; in determining that question of legislative purpose regard must be had to the language of the relevant provisions and scope and purpose of the statute. [emphasis added in bold] 76 In FCT v Futuris, the plurality at [24] said this: 24 Section 175 must be read with ss 175A and 177(1). If that be done, the result is that the validity of an assessment is not affected by failure to comply with any provision of the Act, but a dissatisfied taxpayer may object to the assessment in the matter set out in Pt IVC of the Administration Act; in review or appeal proceedings under Pt IVC the amount and all the particulars of the assessment may be challenged by the taxpayer but with the burden of proof provided in ss 14ZZK and 14ZZO of the Administration Act. Where s 175 applies, errors in the process of assessment do not go to jurisdiction and so do not attract the remedy of a constitutional writ under s 75(v) of the Constitution or under s 39B of the Judiciary Act. [emphasis added in bold] 77 The phrase in the last sentence of [24] quoted above, "Where s 175 applies", is very important. It caused the plurality to immediately reflect on the boundaries of s 175 which, as already mentioned, provides that the validity of any assessment shall not be affected by reason of non-compliance with any of the provisions of the Act (as defined): see [67] of these reasons. At [25], the plurality said this: 25 But what are the limits beyond which s 175 does not reach? The section operates only where there has been what answers the statutory description of an "assessment". … Further, conscious maladministration of the assessment process may be said also not to produce an "assessment" to which s 175 applies. … [emphasis added in bold] 78 In FCT v Futuris, the Full Court had determined that the Commissioner knew that his chosen course in issuing the relevant assessment involved "double counting" and that the double counting was "deliberate" (although subject to an assumption on the Commissioner's part that "all could be made good by a subsequent compensating adjustment determination in reliance on s 177F(3)"). This was a finding as to the Commissioner's "mental element" in making the assessment and exercising the power. The High Court held that those conclusions of the Full Court were not open especially having regard to the compensating adjustment expressly recognised by the Commissioner. However, the further question for the plurality was whether such a finding would "enliven principles respecting jurisdictional error" notwithstanding the earlier views the plurality had taken about the relationship between ss 175, 175A and 177(1). As to that question, the plurality said this at [55], [56] and [60]: 55 The issue here is whether, upon its proper construction, s 175 of the Act brings within the jurisdiction of the Commissioner when making assessments a deliberate failure to comply with the provisions of the Act. A public officer who knowingly acts in excess of that officer's power may commit the tort of misfeasance in public office in accordance with the principles outlined earlier in these reasons. Members of the Australian Public Service are enjoined by the Public Service Act (s 13) to act with care and diligence and to behave with honesty and integrity. This is indicative of what throughout the whole period of the public administration of the laws of the Commonwealth has been the ethos of an apolitical public service which is skilled and efficient in serving the national interest. These considerations point decisively against a construction of s 175 which would encompass deliberate failures to administer the law according to its terms. 56 Such failures manifest jurisdictional error and attract the jurisdiction to issue the constitutional writs. … 60 Allegations that statutory powers have been exercised corruptly or with deliberate disregard to the scope of those powers are not lightly to be made or upheld. Remarks by Hill, Dowsett and Hely JJ in Kordan Pty Ltd v Federal Commissioner of Taxation (2000) 46 ATR 191 at 193 are in point. Their Honours said: "The allegation that the Commissioner, or those exercising his powers by delegation, acted other than in good faith in assessing a taxpayer to income tax is a serious allegation and not one lightly to be made. It is, thus, not particularly surprising that applications directed at setting aside assessments on the basis of absence of good faith have generally been unsuccessful. Indeed one would hope that this was and would continue to be the case. As Hill J said in San Remo Macaroni Co Pty Ltd v Federal Commissioner of Taxation (1999) 43 ATR 53 at 71 it would be a rare case where a taxpayer will succeed in showing that an assessment has in the relevant sense been made in bad faith and should for that reason be set aside." [emphasis in bold added] 79 The claims of the Lyons applicants need to be considered in the context of all of the matters at [15] to [78].

The relief sought in relation to the CDDA Scheme, the elements of the Scheme and the basis for the Scheme 80 The CDDA Scheme was established by the Australian Government in 1995. 81 The foundation documents say that the CDDA Scheme was established by "administrative action" rather than under legislation. The terms of the CDDA Scheme, in the form they took at 17 April 2008, are to be conveniently found in Attachment A to a document described as "Finance Circular 2006/05": see Report of Professor John McMillan, Commonwealth Ombudsman, August 2009, entitled Putting things right: compensating for defective administration; Administration of Decision-Making Under the [CDDA Scheme]. That document is a convenient starting point. 82 Attachment A describes the Scheme as an administrative scheme to enable Commonwealth agencies to compensate persons who have suffered detriment as a result of an agency's "defective" actions or inaction, and who have no other avenues of redress. Although the Department of Finance is responsible for providing policy advice on the CDDA Scheme, Portfolio Ministers continue to have responsibility for decisions made under the Scheme: clause 1. 83 The document is a "guidance document": clause 2. It is not intended to be "exhaustive" but does identify criteria to be applied and factors that might be taken into account in making a decision about whether or not compensation should be paid under the CDDA Scheme: clause 3. 84 The key features are that decisions are made at the "discretion" of the decision-maker and payments are approved on the basis that there is "a moral, rather than legal obligation to the person or body concerned": clause 4. The claimant's own actions are a relevant factor in deciding whether there is a "moral obligation to pay compensation": clause 5. 85 Where authority is given by a Minister to an "agency official" to approve payments under the CDDA Scheme that authority is to be conferred "expressly" and authorisations must be given "separately" from the Minister's general authorisation to incur expenditure: clause 8. Where a decision-maker is a person other than the Minister, the decision-maker acts as an "agent" of the Minister and not as a "delegate": clause 9. 86 The CDDA Scheme does not oblige the decision-maker to approve a payment in any particular case. However, the decision whether to approve or refuse a payment must be publicly defensible having regard to all the circumstances of the case: clause 21. 87 Because the CDDA Scheme is "a mechanism of last resort", the Scheme does not apply to any claims for monetary compensation where it is reasonable to conclude that the Commonwealth would be found liable if the matter were litigated: clause 22; or where it is reasonable to conclude that there is an administrative review mechanism which has the capacity to provide a remedy for defective administration: clause 22; or to overcome the effect of flawed legislative provisions: clause 22; or to offset the payment of a recoverable debt to the Commonwealth: clause 22. 88 "Defective administration" is defined as a specific and unreasonable lapse in complying with existing administrative procedures: clause 23; or an unreasonable failure to institute appropriate administrative procedures: clause 23; or an unreasonable failure to give to (or for) a claimant, the proper advice that was within the official's power and knowledge to give (or reasonably capable of being obtained by the official to give): clause 23; or giving advice to (or for) a claimant that was, in all the circumstances, incorrect or ambiguous: clause 23. 89 An "unreasonable" lapse or failure is one where the actions of the officer(s) involved are considered to be contrary to the standards of diligence that the agency expects to be applied by reasonable officers acting in the same circumstances with the same powers and access to resources: clause 25. Circumstances may arise where instances of administrative omissions or errors may not be regarded as unreasonable when considered in isolation from each other but may constitute defective administration when considered "in totality" in the context of the "combined impact" of the omissions or errors on the client involved: clause 26. 90 Where advice or information given to a claimant was incorrect or ambiguous, it is not necessary for an element of the unreasonableness to be present for the action to fall within the definition of defective administration: clause 27. 91 In assessing whether defective administration has occurred, consideration is to be given to compliance with the "Australian Public Service values" and "Code of Conduct" set out in sections 10 and 13 of the Public Service Act 1999 (Cth) (the "PSA"). 92 Detriment involves quantifiable financial loss suffered by a claimant which might involve personal injury including mental injury, economic detriment and detriment relating to damage to property: clause 36. Compensation is available for pure economic loss: clause 44. Pure economic loss can arise from a lost opportunity: clause 47. If the pure economic loss claimed is "directly caused" by alleged incorrect or ambiguous advice, compensation will only be payable if the agency should have appreciated the implications of the claimant being given incorrect or ambiguous advice, and it was reasonable in all the circumstances for the claimant to seek, and rely upon, the advice: clause 46. Compensation for detriment suffered by a claimant is only available where it has been directly caused, "in a common sense view" by defective administration, by the agency's actions or omissions: clauses 51 and 52. 93 As to review, decisions made under the CDDA Scheme are not made under an enactment and thus they are not reviewable under the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the "ADJR Act"): clause 78. Clause 78 also suggests that decisions "are potentially subject to judicial review by the Federal Court under subsection 39B(1) of the Judiciary Act [1903] (Cth)". Some agencies have an internal review mechanism. The Commonwealth Ombudsman has a role to play in making recommendations to an agency about whether a financial remedy is appropriate: clause 81. 94 On 1 July 2013, sections 1 to 5 of the Public Governance, Performance and Accountability Act 2013 (Cth) (the "PGPA Act") commenced operation. Section 5 recites the objects of the PGPA Act in these terms: 5 Objects of this Act The objects of this Act are: (a) to establish a coherent system of governance and accountability across Commonwealth entities; and (b) to establish a performance framework across Commonwealth entities; and (c) to require the Commonwealth and Commonwealth entities: (i) to meet high standards of governance, performance and accountability; and (ii) to provide meaningful information to the Parliament and the public; and (iii) to use and manage public resources properly; and (iv) to work cooperatively with others to achieve common objectives, where practicable; and (d) to require Commonwealth companies to meet high standards of governance, performance and accountability. 95 On 1 July 2014, sections 6 to 112 of the PGPA Act commenced operation. The PGPA Act applies to "Commonwealth entities" which are either a "corporate Commonwealth entity" (a Commonwealth corporate entity for the purposes of the Corporations Act 2001 (Cth)) or a "non-corporate Commonwealth entity": ss 8, 10(1) and s 11 of the PGPA Act. Sections 25 to 29 set out the general duties of officials of Commonwealth entities. Sections 25 to 28 are in these terms: 25 Duty of care and diligence (1) An official of a Commonwealth entity must exercise his or her powers, perform his or her functions and discharge his or her duties with the degree of care and diligence that a reasonable person would exercise if the person: (a) were an official of a Commonwealth entity in the Commonwealth entity's circumstances; and (b) occupied the position held by, and had the same responsibilities within the Commonwealth entity as, the official. (2) The rules may prescribe circumstances in which the requirements of subsection (1) are taken to be met. 26 Duty to act honestly, in good faith and for a proper purpose An official of a Commonwealth entity must exercise his or her powers, perform his or her functions and discharge his or her duties honestly, in good faith and for a proper purpose. 27 Duty in relation to use of position An official of a Commonwealth entity must not improperly use his or her position: (a) to gain, or seek to gain, a benefit or an advantage for himself or herself or any other person; or (b) to cause, or seek to cause, detriment to the entity the Commonwealth or any other person. 28 Duty in relation to use of information A person who obtains information because they are an official of a Commonwealth entity must not improperly use the information: (a) to gain, or seek to gain, a benefit or an advantage for himself or herself or any other person; or (b) to cause, or seek to cause, detriment to the Commonwealth entity, the Commonwealth or any other person. 96 The obligations arising under the PGPA Act apply to all "APS employees" as that term is defined in s 7 of the PSA: s 32, PGPA Act, s 13(4), PSA (and see also s 13(1) and s 13(2) in relation to the Code of Conduct, PSA). 97 The obligations arising under ss 25-28 of the PGPA Act do not limit a law of the Commonwealth or any principles or rules of the common law or equity relating to the duty or liability of a person because of his or her position or employment in relation to a Commonwealth entity: s 31(a), PGPA Act. 98 Section 71(1) of the PGPA Act confers power, within the context of a general prohibition, on a Minister of a Department of State (s 8, PGPA Act), which includes non-corporate government entities, to approve "a proposed expenditure of relevant money" only if the Minister is satisfied, after making reasonable inquiries, that the expenditure would be "a proper use of relevant money". 99 It is readily apparent that the general duties of officials of a Commonwealth entity contained in ss 25-28 of the PGPA Act were not in force at the moment in time when the events occurred in 2011 in relation to the audit of the affairs of the Lyons applicants and the decisions taken by the Commissioner to issue Amended Assessments and Penalty Notices and the related matters which are the subject of complaint by the Lyons applicants concerning the conduct of officers of the Commissioner. 100 However, the standards adopted by the Parliament in ss 25-28 of the PGPA Act might well be thought to be a normative statement of the irreducible minimum duties or standards of conduct of officials of a Commonwealth entity (including, by definition, a non-corporate Commonwealth entity) when exercising powers, performing functions or discharging duties. Moreover, the irreducible minimum duties adopted by the Parliament as from 1 July 2014 might well be thought to be a rational and coherent codification or encapsulation of the duties and standards of officials of a Department of State (including what is now described as a non-corporate Commonwealth entity), required to be discharged prior to the commencement of those provisions on 1 July 2014 consistent with the obligations arising under s 13(1), s 13(2), s 13(11) of the PSA. As to the relationship between Resource Management Guides and the PGPA, see the report entitled Commonwealth Resource Management Framework and the Clear Read Principle, Auditor-General Report No. 14 2019-20; Performance Audit, clause 2.4. 101 In June 2014, immediately before the commencement of ss 6-112 of the PGPA Act, the Department of Finance issued a guide to assist the staff of non-corporate Commonwealth entities in managing and determining claims made under the CDDA Scheme which had operated, as described earlier, since 1995. The "guide" is described as Resource Management Guide No. 409 ("RMG 409"). It recites that it is to come into effect on 1 July 2014 when the PGPA Act "also takes effect". Certainly, the author of the guide seems to have thought that there was a relevant relationship between principles reflected in the PGPA Act and the role of the CDDA Scheme and the guide. 102 Although RMG 409 expressly came into operation on the same day that the PGPA Act took effect, clause 6 of RMG 409 recites that the CDDA Scheme operates on the basis of "authority provided to individual portfolio ministers under the executive power of sections 61 and 64 of the Constitution", rather than under any authority conferred under the PGPA Act and, in particular, s 71 of that Act, or any other Act. RMG 409 provides that portfolio Ministers are to decide applications for payments under the Scheme although the Minister may authorise an official in a portfolio entity to consider and decide applications under the CDDA Scheme. The Minister's authority must be conferred "expressly" and be given "separately" from general authorisations to incur expenditure. The official acting with such authority does so as the "agent" of the Minister, not as the Minister's "delegate". These principles reflect a continuation of the formulation that existed well prior to the commencement of the PGPA Act, especially with its administrative focus. 103 RMG 409 was revised in May 2017 and again in November 2018. 104 On 8 April 2015, Mr and Mrs Lyons made a claim for compensation under the CDDA Scheme to the Australian Taxation Office (the "ATO"). A number of meetings took place between officers of the Commissioner (and lawyers within the ATO), and Mr and Mrs Lyons and their legal advisers. 105 In making the claim under the CDDA Scheme, the Lyons applicants raised all of their concerns about the conduct of the audit; the hypothesis adopted by the auditor as to the "gross margin" derived on the sale of each food and beverage item sold in the restaurant and the resultant net earnings of the Trust (an hypothesis later abandoned by the Commissioner by the objection decision); the contended lack of a proper basis for the issue of the Amended Assessments and Penalty Notices to each applicant; the contended failure of the auditor to act on information put to him by or on behalf of the Lyons applicants; the contended failure to provide the Lyons applicants with a reasonable opportunity to respond to the hypothesis (and the interim report); steps taken by the Commissioner to recover the debt (or a significant contribution to the debt) due to the Commonwealth arising out of the issue of the Amended Assessments, Penalty Notices and the general interest charge; and other matters. 106 Ultimately, on 31 August 2018, Ms Jane Ferry (a "Principal Lawyer" within the ATO and presumably a person who has an express conferral of authority from the Portfolio Minister (the Treasurer) for the purposes of the CDDA Scheme in conformity with RMG 409) decided that no compensation is payable to Mr Lyons, Mrs Lyons and the Trust having regard to the analysis of the content of the various claims and contentions of the applicants set out in the reasoning in the decision letter of 31 August 2018. 107 The elements of the CDDA Scheme applicable at the date of Ms Ferry's decision on 31 August 2018 (as the agent of the Portfolio Minister), as an employee within the non-corporate Commonwealth entity in the form of the ATO (the "Statutory Agency" under the Administration Act) was the version of the Scheme reflected in RMG 409 as at May 2017. That document is not significantly different from the revision of November 2018. In any event, the CDDA Scheme in the form reflected in the June 2014 document applied to the ATO and it seems clear enough that the Scheme prior to June 2014, operating under the "guidance document" of 17 April 2008, applied to the ATO. It is not clear which particular version of the terms of the CDDA Scheme were applied by Ms Ferry in reaching her decision. Perhaps she applied the version applicable at the date of the events the subject of the complaint by the Lyons applicants (fundamentally 2011) or perhaps she applied the version applicable at the date she reached her decision (being the version at May 2017, which is the revision of the June 2014 document brought into existence at the same time as the commencement of the PGPA Act). 108 If the version applied by the decision-maker was the earlier guide of 17 April 2008, I have already noted the primary elements of that document and, in particular, clauses 23 and 24. 109 If the version applied by the decision-maker was one of the later RMG 409 documents (either June 2014 or May 2017), these aspects of those documents should be noted. 110 The source of the authority to decide is said to be the Executive Power of the Commonwealth rather than any statutory foundation (at least according to the author). The decision-maker acts as the agent of the Minister. Clause 17 of RMG 409 sets out the role of the CDDA Scheme in these terms: 17. The CDDA Scheme provides that if a minister or an official authorised by the minister forms an opinion that an official of the entity, acting, or purporting to act, in the course of duty, has directly caused a claimant to suffer detriment, or, conversely, prevented the claimant from avoiding detriment, due to: • a specific and unreasonable lapse in complying with existing administrative procedures that would normally have applied to the claimant's circumstances • an unreasonable failure to institute appropriate administrative procedures to cover a claimant's circumstances • giving advice to (or for) a claimant that was, in all [the] circumstances, incorrect or ambiguous • an unreasonable failure to give to (or for) a claimant, the proper advice that was within the official's power and knowledge to give (or was reasonably capable of being obtained by the official to give) the minister or the authorised official may authorise a payment to the claimant. 111 The CDDA Scheme is said to be "permissive", in that "it does not oblige the decision-maker to approve a payment in any particular case": clause 18. If other avenues exist to remedy defective administration, those options must be investigated before the matter is considered under the CDDA Scheme: clause 19. The PGPA Act "includes discretionary mechanisms, available to individuals or other entities, that are able to provide discretionary financial redress": clause 20. The CDDA Scheme is not to be used in relation to claims in which it is reasonable to conclude that the Commonwealth would be found liable if the matter were litigated: clause 23. Compensation under the CDDA Scheme is only available where the detriment found to have been suffered by a claimant has arisen as a direct result of defective administration: clause 54. 112 RMG 409 discusses the notion of detriment, quantifiable financial loss, economic loss and non-economic loss. 113 As to judicial review, RMG 409 observes that as CDDA Scheme decisions are not made under an enactment, such decisions are not amenable to review under the ADJR Act although "they may be subject to judicial review under section 75 of the Constitution or section 39B(1) of the Judiciary Act 1903": RMG 409, clause 93. 114 As to the claim for compensation, the Lyons applicants quantified their claimed detriment as $1,518,053.57 made up in the following way, as described in Ms Ferry's decision of 31 August 2018: • $875,000 being $375,000 for the difference in the value of the property (84 Royal Albert Crescent, Paradise Point) sold by the applicants and the actual consideration received, and $500,000 [being] the difference between the value of the property in 2012 and 2015; • $477,000 being the shortfall on the bank loan after the sale of the Lazy Lobster restaurant (held by the Trust), which the applicants were personally liable for; • $57,000 being the shortfall on the bank loan after the sale of 48 Coronet Crescent, Burleigh Waters (held by the Trust), which the applicants were personally liable for; • $12,446.50 being legal fees incurred by the applicants to object to the amended assessments issued by the ATO following the audit; • $43,815.20 being legal fees incurred by the applicants to review the objection decision issued by the ATO in the Administrative Appeals Tribunal; • $33,541.87 being accountancy fees incurred by the Applicants to review the ATO auditor's calculations and advise the applicants; • $2,750.00 being the accountancy fees incurred by the applicants to draw the Trust objection and assist with their personal objections; and • $16,500 being fees incurred by the [applicants] to obtain insolvency advice. 115 Ms Ferry described the scope of the allegations of defective administration in the following way at para 8 of her decision: 8. The initial claim made a number of allegations of defective administration which were summarised in an email from Adrian Scarpinto (Senior Tax Manager, Boroughs) dated 7 September 2015, as: - Defective administration at the audit stage; - Denial of professional representation for the applicants; - Defective administration at the debt recovery stage; and - Defective administration at the objection stage by the failure to deal with the objections in a reasonable time-frame. 116 When Ms Ferry made the decision on 31 August 2018 to deny payment of the claim described at [89] of these reasons, or any part of the claim, the Minister with portfolio responsibility for the non-corporate commercial entity in the form of the Statutory Agency of the Commissioner was the Treasurer (at least according to the published Ministerial arrangements). 117 At that moment in time, the PGPA Act applied to the question of whether the Minister could approve expenditure of "relevant money". Ms Ferry, under the CDDA Scheme, was standing in the shoes of the Portfolio Minister (expressly as the "agent" of the Minister) to decide whether the Minister (her principal) should, or should not, pay any sum of money in respect of any of the claims of the Lyons applicants. Section 71(1) of the PGPA Act at 31 August 2018 provided that a relevant "Minister must not approve [and thus his or her agent could not approve] a proposed expenditure of relevant money unless the Minister is satisfied, after making reasonable inquiries, that the expenditure would be a proper use of relevant money". 118 In this case, of course, no "expenditure of relevant money" was "proposed" because Ms Ferry had rejected all claims of the Lyons applicants. However, the repository of the power under s 71(1) to approve an expenditure of relevant money to a person, is the Minister. The Minister must reach a state of satisfaction about the relevant expenditure after making reasonable inquiries that the expenditure would be a proper use of relevant money. A question might well "arise under the PGPA Act" about the scope and operation of s 71(1) of that Act in the context of Ms Ferry's decision. In this case, it seems that Ms Ferry considered all of the relevant matters relating to the claims made by the Lyons applicants and decided those matters. There was no engagement by the Minister on any aspect of the matter of whether relevant monies were to be expended or not. This, of course, is the very aim of the CDDA Scheme which is why Ms Ferry, as agent for the Minister, decided all of the matters in issue in connection with the claims of the Lyons applicants without any engagement by the Minister and without the Minister reaching a state of satisfaction about any aspect of the matter. It may be that s 71(1) is only engaged once an expenditure of relevant monies is proposed to be made (perhaps, for example, as a result of deliberations by a relevant "agent" under the CDDA Scheme). There may be a question of construction arising under s 71(1) about whether the requirement that the Minister must approve a payment engages an obligation on the part of the Minister to consider whether a claim for the payment of relevant monies is to be made or not. 119 These matters in relation to the CDDA Scheme are mentioned as background and context to the remaining aspects of the relief sought by the Lyons applicants in the principal proceeding. 120 As to the decision of Ms Ferry of 31 August 2018, the Lyons applicants seek the following orders: Certiorari and Prohibition 4. That the CDDA Decision and official record of the CDDA Decision of 31 August 2018 is ordered quashed. 5. That the Respondent be restrained from making the invalid CDDA Decision. Mandamus 6. That the Respondent perform his duty, in accordance with the purpose of the CDDA guidelines, in making a new CDDA Decision, properly considering the issue of the quantum of the losses suffered by the Applicants. 7. That the Respondent accept a revised CDDA claim, from the Applicants, in relation to the issue of the quantum of the losses suffered by the Applicants. 121 The amended originating application seeking the seven forms of relief described in these reasons, was filed together with an amended statement of claim (also filed on 20 June 2019) which is in the nature of a document asserting facts, issues and contentions. It sets out the content of the various assertions of the Lyons applicants in the course of 150 paragraphs. As already noted, the relief sought by the Lyons applicants relies upon s 39B(1) of the Judiciary Act and thus the grant of the constitutional writs. 122 The interlocutory application filed by the Commissioner seeks the following orders: (1) Pursuant to rule 16.21 or alternatively rule 6.01 of the Federal Court Rules 2011 (Cth) (the "Rules"), paragraphs 13-14, 16, 18-26, 35, 40, 42-48, 50-58, 63, 65-67, 71, 80-81, 89, 91, 98, 102-108 and 122-146 of the amended statement of claim be struck out. (2) The Lyons applicants pay the Commissioner's costs of and incidental to the Commissioner's interlocutory application filed on 23 October 2019 on a standard basis to be assessed if not agreed. 123 The Commissioner also seeks directions as to the future conduct of the matter. The Commissioner opposes the interlocutory application of the Lyons applicants filed on 9 October 2019 in the principal proceeding and seeks an order for costs against the Lyons applicants in respect of that application. 124 As to the interlocutory application filed by the Lyons applicants on 9 October 2019, they seek these orders: 1. The Applicants are seeking that the Respondent complies with orders made by His Honour Justice Greenwood on 19 June 2019, in that the Respondent attend mediation with the Applicants, as ordered and without conditions precedent. 2. The Applicants are seeking costs, on an indemnity basis, for the Respondent's failure to comply with orders made by His Honour Justice Greenwood on 19 June 2019 and the Respondent's breaches of its model litigant obligation under common law. 125 In the principal proceeding, orders were made on 2 May 2019 that the Lyons applicants file an amended originating application and an amended statement of claim by 31 May 2019; that the respondent file a defence within 28 days after service of the amended application and statement of claim; that the case be referred to mediation to be conducted by a judicial Registrar of the Federal Court on a date to be determined by the Court although no earlier than 29 July 2019 (Order 3); that the fees charged by the Court in conducting a mediation be shared equally between the parties; that the respondent provide the Lyons applicants and the judicial Registrar with copies of the pleadings and copies of documents considered by Ms Ferry in making the CDDA Scheme decision on 31 August 2018, two weeks prior to the date set for the mediation (Order 5); and further orders. 126 On 19 June 2019, the date for the filing by the Lyons applicants of an amended originating application and an amended statement of claim was extended to 20 June 2019 (Order 1). The orders of 19 June 2019 also provided for the respondent to file a defence within 28 days after the conclusion of the mediation should the mediation fail to resolve the proceedings between the parties (Order 4); and further orders. 127 Although the Lyons applicants, in their interlocutory application, refer to the order of 19 June 2019 requiring the respondent to participate in a mediation with them, the primary order referring the proceeding to mediation is the order of 2 May 2019 (Order 3) with the facilitative matters described in Order 5 of those orders. The order of 19 June 2019, by Order 4, contemplates the mediation, the subject of Orders 3, 4 and 5 of the orders of 2 May 2019. 128 Before addressing the interlocutory application of the Lyons applicants, it is convenient to address the Commissioner's interlocutory strike-out application in relation to the identified paragraphs. However, before doing so, it is necessary to set out the statutory framework under which the Commissioner exercised powers now under challenge by the amended originating application as supported by the amended statement of claim, on the ground of jurisdictional error as the basis for the claim for the grant of the constitutional writs. 129 Before turning to those matters, the following further matter should simply be noted. 130 On 12 November 2019, the solicitors for Mr and Mrs Lyons (and the Trust) sought to put on short supplementary submissions (four paragraphs) directed to the question of whether the "Amended Assessments" are "spent" which is an observation made by the Commissioner's legal advisers in their document of 8 November 2019. Objection was taken to the further submissions of 12 November 2019 on the footing that the Court had asked for further submissions from the Lyons applicants addressing the "CDDA Scheme" and the "utility point" by 6 November 2019 with a response from the Commissioner as to those matters by 8 November 2019. The Commissioner's advisers say that any further submissions directed to any other or related matters were not contemplated by the directions for further submissions and thus objection is taken to the further submissions of 12 November 2019. I will address those matters in the course of these reasons. 131 Before turning to the amended statement of claim, these propositions arising out of the above matters should be noted. 132 First, it would be open to the Lyons applicants to seek a declaration that the Amended Assessments issued to them do not meet the statutory description of an "assessment" on the footing that officers of the Commissioner engaged in acts of "conscious maladministration". The notion of conscious maladministration should be understood as "deliberate failures" to administer the tax law of the Commonwealth "according to its terms": FCT v Futuris, the plurality at [25] and [55] to [60]. 133 Second, obviously enough, such allegations are a very serious matter indeed and the pleading of the material facts said to support the making of such a declaration need to be clear, precise and complete. There is no room for statements at a high level of generality. 134 Third, there may or may not be utility in making such a declaration. Such a declaration might be sought as explanatory of the basis on which other relief is sought. For example, if the Amended Assessments are declared not to meet the statutory description of an "assessment" for reasons of proven conscious maladministration, it may mean that the legality of recovery steps taken by the Commissioner in reliance upon the assessments as giving rise to a debt due to the Commonwealth (and payable to the Commissioner) are called into question. It may be, however, that conscious maladministration needs to be proven in respect of each step in the exercise of powers conferred on the Commissioner. Alternatively, it may be that once it is shown that the Amended Assessments do not meet the statutory description of an "assessment", all steps taken in reliance on the assessments (on the mistaken footing that they do meet the statutory description), lack legal force. This matter has not been addressed in submissions. 135 Fourth, it may be that such a declaration is sought in aid of, and explanatory of, the basis for relief in the form of damages for loss caused by acts of deliberate failure to administer the tax law of the Commonwealth according to its terms, as the expression of the tort of misfeasance in public office by particular officers of the respondent. Again, the material facts said to support such a tort must be pleaded with clarity and precision having regard to the seriousness of such a contention. 136 Fifth, as to the CDDA Scheme, the Lyons applicants must identify the particular terms or considerations upon which the exercise of the "authority to decide", conferred on the decision-maker, is conditioned; whether the relevant terms are those applicable at the date of the decision or those applicable at the date of the events said to give rise to "defective administration"; whether a consideration of that question engages obligations arising under the PSA at the time of the events or the PGPA Act at the time of the decision; whether the contended conduct of the decision-maker engages a basis for relief under s 39B(1) of the Judiciary Act (if the decision-maker has stepped outside the limits of the conferred authority) and whether the principles in Hossain at [24]-[31], [46] and [60]-[74] are engaged or not.

The challenge to the amended statement of claim 137 In this discussion of the amended statement of claim, references to numbers are references to paragraphs of the amended pleading and references to the applicants are references to the Lyons applicants. 138 At 1 to 12, the applicants plead the standing of the parties, the commencement of the audit in 2011, the Commissioner's decision to "impose" taxation liabilities on the applicants of an amount in excess of $1 million based on understatements of income of greater than $2.2 million, objections lodged, objection decisions reducing the liability to nil, and the Commissioner's conclusion that the Trust made losses. None of these paragraphs are challenged by the Commissioner. 139 At 13 and 14, the applicants plead that the Commissioner made admissions that his decisions "in relation to issuing the amended assessments and penalties 'were incorrect' from the outset and in their entirety"; that the Trust "did not earn net income"; and Mr and Mrs Lyons "never received 'deemed trust distributions'". The Commissioner challenges 13 and 14. If extracts from one or more objection decisions are a material fact or alternatively pleaded as a matter of context, the precise matter should be quoted properly, referenced to a particular decision (date, paragraph, etc) with reference to reliance on the decision according to its terms as produced. 140 At 15, the applicants plead that the Commissioner commenced, and refused to defer, garnishee action and recovery proceedings pending the making of objection decisions. There is no challenge to 15. 141 At 16, the applicants plead that the "relentless pursuit" of the applicants during the period of the pending objection decision "resulted in the disposal of the principle place of residence" of Mr and Mrs Lyons. The Commissioner challenges 16. The notion of a "relentless pursuit" assumes a collection of facts and amounts to a conclusion. The primary material facts must be pleaded. 142 At 17, the applicants plead that they sought compensation under the CDDA Scheme. 143 At 18, they plead that the Commissioner denied any instance of defective administration and "relied on his contention that the original decisions he made to issue the amended assessments and penalties were valid and 'open and reasonable' for him to make". 144 At 19, the applicants plead that the Commissioner's "contention, in his CDDA Decision, effectively required the elements of conscious maladministration to be present for defective administration to have occurred under the CDDA Scheme". 145 At 20, the applicants "contend that defective administration is admitted to have occurred as a result of the Respondent's admission that his original decisions to issue the amended assessments and penalties 'were incorrect' from the outset and in their entirety". 146 At 21, the applicants plead that as a result of the respondent "enlivening the issue of conscious maladministration, the Applicants have precisely outlined their position in this claim [so as] to address the elements of conscious maladministration as they apply to the questions of validity of the CDDA Decision as well as the validity of the original decisions to issue the amended assessments and penalties". 147 At 22, they plead that the CDDA Decision is "directly affected by the original decisions to issue the amended assessments and penalties to the Applicants". 148 At 23, they plead that the merits of all disputed issues emanating from the audit were resolved in their favour. 149 At 24, they plead that the Court is not being asked to conduct a further merits review of the audit. 150 At 25, they plead that the audit, objections, debt recovery and CDDA processes culminated in decisions "that were fully endorsed by the Respondent". They plead that, for the purposes of the proceeding, "the decisions made by the Respondent's Officers will be taken to have been made by the Respondent". 151 At 26, the applicants plead that there are five central questions to be resolved by the Court in the proceeding. They are said to be these: 1. Are the elements of conscious maladministration required to be present for defective administration to have occurred under the CDDA Scheme? If so, to what degree? 2. Is the finding of defective administration satisfied by the Respondent's admissions that his original decisions to issue the amended assessments and penalties "were incorrect" from the outset and in their entirety? 3. Did the Respondent make an invalid CDDA Decision? 4. Did the Respondent make invalid original decisions to issue amended assessments and impose penalties on amounts that he knew, or ought to have known, were "never earned"? 5. Should the Respondent compensate the Applicants for all losses incurred? 152 The Commissioner challenges 18 to 26 of the pleading. 153 These paragraphs introduce the CDDA Scheme into the proceeding and assert that the applicants' application for compensation was rejected because the Commissioner considered that his original decisions to issue the Amended Assessments and Penalties were "valid, open and reasonable". The applicants say that the "effect" of the decision is to import the notion of "conscious maladministration" into the concept of "defective administration" (for the purposes of the CDDA Scheme) and they say that this is inconsistent with the Commissioner's admission (which they contend for) that the original decisions to issue the Amended Assessments and penalties were incorrect from the outset and in their entirety. They say that due to the introduction, by the Commissioner, of this notion of "conscious maladministration" into the CDDA Scheme decision-making, the applicants have chosen to set out their position on the "elements of conscious maladministration" applying to the "validity" of the CDDA Decision, as well as the "validity" of the original decision to issue the Amended Assessments and penalties. 154 The proper approach is this. 155 The applicants ought to identify the Scheme correctly and identify the terms governing the Scheme and whether the source of the authority of the decision-maker is the Executive Power of the Commonwealth or whether the Scheme has any relevant relationship with an Act of the Commonwealth Parliament (the PSA, the PGPA Act or otherwise). They ought to identify the material elements of the decision under challenge and the basis on which error in that decision is said to arise with clear identification of all of the material matters. The contention seems to be that "jurisdictional error" has occurred in the decision-making process leading to the CDDA Decision. The applicants say that they have been drawn into identifying the elements of "conscious maladministration" in the decision under the CDDA Scheme because the Commissioner asserts, "in effect", that conscious maladministration is an element of what is required to establish a valid claim for compensation under the Scheme. The questions pleaded at 26 might be some of the "issues" to be resolved in a proceeding properly constituted and pleaded but they must arise out of a sequence of material facts supporting an identifiable claim to the relief sought in the proceeding. 156 The starting point is to identify the Scheme, its content, source of authority, the contended error, the character of the error and the relationship between all of those elements and the right to the asserted relief in the proceeding. In this respect, the pleading is wanting. 157 At 27-34, the applicants plead the commencement of the audit; the financial years under review, the provision of financial records by the applicants to their accountant to enable them to prepare outstanding taxation returns for the years 2006-2009; meetings with the Commissioner's representatives; the Interim Report issued to the trustee on 23 May 2011; the call for a response by 31 May 2011; the "escalation" of the matter concerning each applicant to the level of "Prosecution" on 24 May 2011; the issuing of the "Completion of Audit Report" on 7 June 2011 and the issue of "Notices of Amended BAS Assessments" and "Penalty Notices" to the third applicant as described at [33] of these reasons (resulting in a GST liability in the third applicant of $146,083.00 and penalties of $73,042.50). 158 Paragraphs 27 to 34 of the pleading are not challenged by the Commissioner. 159 At 35, the applicants plead that they are challenging the "validity" of the Commissioner's decision to attribute an amount of $115,389.00 of GST liability to the third applicant arising out of contended understatement of income in the audit years. The applicants say that they are also challenging the "validity" of the decision to impose administrative penalties of $73,042.50 on the third applicant for making contended false and misleading statements in relation to an alleged understatement of income in the relevant years under audit. 160 This part of the claim is said to engage the following additional matter. 161 The applicants say that at the audit stage, officers of the Commissioner "knew" that the applicants had made a "voluntary disclosure" on 1 March 2011 that Mr and Mrs Lyons had made cash drawings from takings (sales) in the restaurant business, as repayments of business loans made to the business (although the amount of the drawings were not fully identified until 22 March 2011 (para 46)), but had failed (they say inadvertently) to include those amounts in sales reported in the GST Business Activity Statements. They say that despite the "voluntary disclosure" of the matters said to have been disclosed, officers of the Commissioner "denied" that the disclosure had occurred and "reported" that the accounting records were unable to be reconciled with the lodgement of BAS documents by the applicants. As to the last point, the applicants seem to be saying that had officers of the Commissioner taken into account the matters voluntarily disclosed, there would have been no lack of reconciliation. 162 At 35, the applicants say that the attribution of a GST liability to the third applicant of $115,389.00 and penalties of $73,042.50 were reduced to nil at the objection stage. 163 Paragraph 35 is challenged by the Commissioner. 164 Paragraph 35 asserts a challenge to the "validity" of the BAS amendment and a challenge to the "validity" of the decision to impose penalties. No basis for that challenge is identified at 35 as matters of material fact identifying elements of conscious maladministration as earlier described supporting a ground of jurisdictional error. To the extent that the matters at 35 are cross-referenced to matters at 46, there is an assertion at 46 that, at the audit stage, officers of the Commissioner knew something and "denied" that they knew it and then "purported" to be "unable" to reconcile accounting records maintained by the applicants with lodgements made by them. It is not clear from the pleading what matters were disclosed or to whom; the circumstances of the denial and what was denied; and the content of that which was unable to be reconciled as between the accounting records and the lodgements. If the combination of paras 35 and 46 are said to give rise to matters of conscious maladministration leading to the issuing of the Amended Assessments, they would need to be pleaded more precisely. 165 At 36 to 39, the applicants plead that an Interim Report was issued on 9 June 2011 (by someone) to Mr and Mrs Lyons; a response to it was required by 21 June 2011; on 9 June 2011, the Commissioner prepared "Debt Recovery Referral documents" and "escalated" the matter to a modality of "Debt Recovery" although the time for a response had not by then elapsed. They plead that on 22 June 2011, a Completion of Audit Report issued to Mr and Mrs Lyons. They plead that on 21 July 2011 and 22 July 2011 Notices of Amended Assessments and Penalty Notices, respectively, were issued to Mr Lyons, as described at [37] of these reasons, giving rise to a liability of $357,903.22 in respect of tax, penalties and the general interest charge. 166 No challenge is made by the Commissioner to 36-39 of the pleading. 167 At 40, the applicants plead that Mr Lyons is challenging the "validity" of the Commissioner's decisions "to deem [Mr Lyons] to be presently entitled, pursuant to s 97 of the [36 Act], to understated taxable/net income of the Relevant Trust of $499,738 and to impose taxation liabilities (including penalties) of $357,903.22". The particulars of the challenge are that the "amounts of $499,738 and $357,903.22 were subsequently reduced to nil by the Respondent". 168 Paragraph 40 is challenged by the Commissioner. 169 Paragraph 40 suffers from the same defect as 35. A challenge to "validity" supporting relief in the form of the constitutional writs on the ground of jurisdictional error on the basis of "conscious maladministration" leading to the issuing of the Amended Assessments cannot be made good by pleading a decision to determine Mr Lyons as "presently entitled" to the net earnings of the Trust for the purpose of s 97 of the 36 Act and then a subsequent decision at the objection stage to reduce the net income of the Trust and the tax payable by Mr Lyons to nil. The material facts going to a claim of invalidity based on the conscious maladministration of a relevant officer must be pleaded. 170 At 41, the applicants plead the Notices of Amended Assessment and Penalty Notices issued to Mrs Lyons in the same amounts issued to Mr Lyons. 171 At 42, the applicants plead that a challenge is made to the "validity" of the decision to treat Mrs Lyons as presently entitled to the net income of the Trust for the purposes of s 97 of the 36 Act; to treat the Trust as having derived net income of $499,738; and to impose taxation liabilities (including penalties) on Mrs Lyons of $357,903.22. 172 Paragraph 42 suffers from the same difficulty as 40. 173 At 43, the applicants plead that at the audit stage, the Commissioner (although the relevant officer is not identified) "acted with reckless indifference and/or deliberate dishonesty when he made decisions to issue the Incorrect Amended Assessments and Penalties" to the applicants "without proper regard to the facts and for a collateral purpose" as described "at paras 44 to 48" of the pleading. 174 At 44, the applicants plead that the Commissioner "knew, or ought to have known", that the applicants kept records in compliance with s 262 of the 36 Act. They plead that, at the audit stage, the Commissioner determined that the applicants "have not retained income source documents to support the accounting records" which the applicants presented during the course of the audit. That paragraph is expanded upon by 10 subparagraphs of the pleading. Those subparagraphs address these matters. 175 First, the applicants plead that they provided the Commissioner with accurate records of source documents including Excel spreadsheets of sales revenue, MYOB records of all expenses, invoices, receipts and bank statements. 176 Second, the applicants plead that they reconciled their Z-totals (Z-readings) from the Z-tapes (the physical cash register records), for lunch and dinner, to a daily summary sheet specifying credit card transactions, gift vouchers, refunds, mistakes, overrings and taking into account cash taken from the register for business expenses and personal use. 177 Third, the applicants plead that the Z-totals, on the daily summary sheets, were reconciled with cash sales and recorded in Excel spreadsheets on a weekly basis. 178 Fourth, they plead that the Z-tapes and summary sheets had faded and subsequently ceased to be retained once they were reconciled. 179 Fifth, they plead that the Commissioner knew that the applicants were not required to keep Z-tapes after 30 days where they had correctly reconciled their Z-totals in conformity with ATO policies and procedures. 180 Sixth, they plead that documents of the Commissioner obtained by them in response to an FOI request "confirm" that, at the audit stage, the Commissioner "knew" that the applicants had "correctly reconciled" their records, including daily reconciliations of their Z-totals. 181 Seventh, they plead that the Commissioner "knew" that the applicants kept "accurate" MYOB records and that they had "diligently recorded MYOB records". 182 Eighth, they plead that the Commissioner "knew" that the applicants performed monthly bank reconciliations. 183 Ninth, they plead that the Commissioner "knew" that the MYOB and Excel records which contained the reconciliations of their Z-totals were retained for five years. 184 Tenth, they plead that the Commissioner, at the objection stage, "confirmed" that the Excel records of the applicants were "reliable and accurate" and that the applicants had "correctly reconciled their Z-totals". The applicants plead that the respondent was obliged, at the audit stage, to make the same finding as the Commissioner made at the objection stage but nevertheless the Commissioner "deliberately failed to do so". 185 As to the last matter of a "deliberate failure" to make a finding, at the audit stage, that an officer was "obliged" to make, three particulars are given. The first is that the applicants had complied with ATO Practice Statements Law Administration ("PSLA") requirements (and, in particular, PSLA 2007/24 and PSLA 2005/2). The second is that ATO Taxation Ruling 96/7 recognises that "a person may discard the rolls of tape after one month provided the person has reconciled the Z-totals with actual cash sales and banking for that period". The third particular is that FOI documents supporting the contention will be produced at the hearing. 186 At 45, the applicants plead that the Commissioner, at the audit stage, "knew" that the applicants had complied with the Commissioner's request to provide a representative sample of the Z-tapes and daily summary sheets for the period 28 February 2011 to 28 March 2011. The applicants plead that despite the Commissioner's request of them to produce that material, the respondent failed to carry out a reconciliation of the Z-tapes and the summary sheets for the period. The applicants describe the obligation of the Commissioner to do so having made the request for the material as a "mandatory reconciliation". The applicants, at 45, plead that, at the objection stage, the Commissioner "tested" the same representative sample (although the pleading recognises that the sample was extended from 28 February 2011 to 28 June 2011 rather than the earlier period ending 28 March 2011) and "confirmed" that the applicants Excel records were "accurate and reliable". The applicants say that as to the "mandatory" characterisation of the obligation: "It was mandatory for the Respondent to have made a similar finding during the audit [as that made during the objection phase], based on ATO policies and procedures, but he deliberately failed to do so". 187 The applicants plead that the Commissioner ought to have acted in accordance with ATO Taxation Ruling 96/7, para 13, which provides that: "we consider that it is necessary for the person to keep the one month representative sample so that ATO staff can verify that the summary record is an accurate summary of every individual transaction that relates to a person's income and expenditure". 188 At 46, the applicants plead that the Commissioner, at the audit stage, "knew" that the applicants had made the voluntary disclosure described at [161]. The pleaded matter is that despite knowledge of the elements of the disclosure on 1 March 2011 concerning the pleaded "cash drawings" (although not the amount), the Commissioner denied that the voluntary disclosure had occurred and notwithstanding the disclosure of the fact of cash withdrawals, the respondent "purported" to be unable to reconcile "accounting records to the lodgements made". As already mentioned, the applicants plead at 46 that the Commissioner, at the objection stage, "confirmed" that the applicants had made "a voluntary disclosure in relation to the cash drawings and that there were no understatements of income as the accounting records did reconcile with the lodgements". 189 At 47, the applicants plead that the Commissioner "knew, or ought to have known" that "he manipulated the calculations to arrive at his 'desired sales' figure exceeding $2 million using his illegitimate gross margin percentage of 60%". The applicants plead at 47 that "this constituted the collateral purpose of the Respondent, at the audit stage". As to those matters so pleaded, there are 15 subparagraphs which expand upon those matters. The pleaded factual sequence is set out at [190] to [197]. 190 On 24 March 2011, at the request of the Commissioner, Mr Lyons provided a restaurant menu to the Commissioner's officers marked with the estimated cost of each item offered for sale (the "cost of goods", "COG"). On 12 April 2011, an officer of the Commissioner handed to Mr Lyons a worksheet headed "Lyons Trust Analysis" and told Mr Lyons that he had calculated the business gross margin percentage to be 60% and based on that margin percentage, there were significant understatements of sales amounting to $2.4 million. The applicants plead that that amount was adjusted, on the same day, by 1% to $2.2 million. On 12 April 2011, an officer of the Commissioner sent an email to the accountant acting for the applicants attaching a calculation of the gross profit margin percentage which consisted of "four additional excel worksheets ("Calculus 1", "Calculus 2", "Analysis of Margins" and "Workings")". The applicants plead that they, and their accountant, were "shocked" and "unable to verify" the contents of the additional Excel worksheets as those documents did not reveal the basis of the gross margin percentage calculation and did not reconcile with the applicants' records. The applicants plead that officers of the Commissioner used the term "desired sales" in the worksheets provided to the applicants "revealing an intention at wanting to achieve his arbitrary 60-40 split". They plead that documents obtained from the respondent pursuant to an FOI request "confirmed" that the respondent, early in the audit, stated that "60-40 is achievable" and made a specific calculation "comparing the correct gross margin percentage figures for each audit year with the 'desired sales' figures at the 60% gross margin percentage ('Desired Sales Calculation')". They plead that documents obtained by the applicants from the Commissioner as the result of an FOI request reveal that an Excel spreadsheet calculation entitled "Analysis of Menu" was undertaken which demonstrates "how the Respondent manipulated the gross margin percentage to arrive at his Desired Sales Calculation". 191 They plead that the "illegitimate gross margin percentage" was derived by calculating the individual gross margin percentage for "each item on the menu"; by then "adding" the individual gross margin percentages for each item together to derive a total; and by dividing that total by the number of "menu items". 192 They plead that this "illegitimate calculation" "also contained inexplicable errors and omissions". They plead that the Commissioner's calculation of the gross margin percentage "also significantly failed to exclude the GST from the selling price of all menu items which further exacerbated the illegitimate gross margin percentage calculation". 193 They then plead that the respondent's methodology "illegitimately averaged the gross margin percentages and included the GST, enabling the respondent to arrive at his Desired Sales Calculation that did not conform to any accounting methodology". 194 They plead that the correct accounting methodology for calculating the gross margin percentage would use the "total monetary gross margin percentage divided by the total monetary sales which was proved to be 49.93% or thereabouts". They plead that documents (described as "Accounting Practices") obtained from the Commissioner as a result of an FOI request "also confirmed that the respondent had tested the correct gross margin percentage to be 49.93% and agreed that it was 'in line with industry'". 195 They plead that the respondent, at the audit stage, "knew" that the correct gross margin percentage was 49.93%. 196 They plead that the "Desired Sales Calculation", the "Analysis of Menu" and the "Accounting Practices" (documents) were "deliberately withheld from the Applicants". 197 They plead that the Commissioner, at the objection stage, accepted "Error Reconciliation Spreadsheets" which determined the errors in the "Analysis of Menu". They plead that this information was provided to the Commissioner by an "Expert Tax Adviser" retained by the applicants. They plead that "this information", so provided, "proved that the Respondent knew, or ought to have known, that there were understatements of income of the Related Trust and that the Respondent had illegitimately overstated the gross margin percentage calculation to arrive at his Desired Sales Calculation". They plead that copies of the worksheets of officers of the respondent, documents produced by the Commissioner in response to FOI requests (including the Analysis of Menu, Desired Sales Calculation and Accounting Practices, documents) and the Error Reconciliation Spreadsheets will be produced in evidence at the hearing. 198 At 48, the applicants plead that the respondent "knew, or ought to have known that the 'desired sales' figure he arrived at, exceeding $2 million, did not exist by simply checking his calculations, complying with usual accounting practices and doing the mandatory testing required in cash economy audits by ATO policies, procedures and processes". 199 This pleaded matter is then supported by seven subparagraphs of the pleading which expand upon 48. Those elements are these. 200 First, the applicants plead that documents obtained from the Commissioner pursuant to an FOI request reveal that the Commissioner, at the audit stage, "tested and was satisfied with the ratio of cash takings to debit and credit card sales with cash takings being 21% ('the Credit/Cash Ratio')". The applicants plead that the Commissioner "deliberately disregarded his calculation". 201 Second, the applicants plead that in order for the respondent's postulated "desired sales" figures to be correct, "the cash takings would need to be approximately 50% of turnover which is clearly not achievable as most restaurant patrons paid with credit cards or Electronic Funds Transfer ('EFT')". 202 Third, the applicants plead that documents obtained from the Commissioner pursuant to an FOI request reveal that the Commissioner "tested the ratio of wages to turnover as being 13% ('the Wages/Turnover Ratio')". They plead that an increase of turnover "to the [desired sales] level would have made the wages to turnover ratio absurd". They plead that the respondent "deliberately disregarded this information". 203 Fourth, the applicants plead that the "desired sales" figures "significantly exceeded the Personal Living Expenditure and Asset Particulars provided by the Applicants to the Respondent, at the audit stage". They plead that the respondent "deliberately disregarded this information". 204 Fifth, the applicants plead that, at the audit stage, the respondent "deliberately failed to undertake any other proper form of comparative testing, including asset betterment or T-account analysis, to support his 'desired sales' figures as required by ATO procedures". 205 Sixth, they plead that the respondent, at the objection stage, accepted "an Asset Betterment Worksheet provided by the Applicants' Expert Tax Adviser, which proved the Applicants had no unexplained asset increases during the period under review". 206 Seventh, they plead that the Commissioner, at the objection stage, concluded that in each period of the audit, the business either made a net loss or had carried forward losses to offset net income. They plead that this finding should have been made by the Commissioner at the audit stage "before the decisions to issue the Incorrect Amended Assessments and Penalties were made, but he deliberately failed to do so". They plead that copies of the Commissioner's "Credit/Cash Ratio", "Wages/Turnover Ratio" and "ATO Cash Economy Audit processes and procedures" together with the "Asset Betterment Worksheet" in relation to the applicants will all be provided in evidence at the hearing. 207 The Commissioner challenges 43-48 of the pleading. 208 The Commissioner contends that these paragraphs are concerned with a claim for relief in relation to a decision which is not amenable to judicial review under s 39B of the Judiciary Act. They say that the paragraphs and the subordinate paragraphs which expand upon the principal matters do not plead material facts but rather plead matters of evidence. They say that to the extent that references are made to documents obtained as a result of FOI requests, the documents should be identified especially if findings are urged on the basis of things contained in the documents or the documents are to be relied upon to support inferences giving rise to findings. 209 The matters pleaded at 43-48 and the subordinate paragraphs within those paragraphs raise serious matters. The pleading at those paragraphs is directed to seeking to establish the proposition that the Amended Assessments issued to the applicants (and thus purporting to be "assessments" for the purposes of the Act) do not meet the statutory description of an "assessment" on the footing that officers of the Commissioner engaged in acts of "conscious maladministration" in the sense described earlier, that is to say, "deliberate failures" to administer the tax law of the Commonwealth "according to its terms": FCT v Futuris, the plurality at [25] and [55]-[60]. The question is whether the pleading at [43]-[48] properly pleads material facts which establish deliberate failures on the part of officers of the Commissioner to administer the tax law of the Commonwealth according to its terms leading to the issue of the assessments. The challenge must be to the issuing of the Amended Assessments. If that were to be so, as a matter of pleading, the paragraphs would support a claim for a declaration that the Amended Assessments do not meet the statutory description of an assessment, subject to the discretionary factors discussed earlier. 210 There are, however, quite a number of difficulties with the paragraphs as pleaded. For example, at 44, the applicants plead that the Commissioner "knew" or "ought to have known". This formulation appears a number of times. Under that formulation, two possibilities are being put forward. If the applicants contend that the Commissioner knew relevant facts and acted inconsistently with those known facts in a way which suggests a conclusion that a relevant officer deliberately failed to administer the tax law of the Commonwealth, according to its terms, that would be one thing. If, on the other hand, the contention is that officers of the Commissioner ought to have known certain things and acted in disregard of things they ought to have known or perhaps acted in reckless disregard of things they ought to have known, that is another thing. 211 If the pleading is that officers of the Commissioner knew things, those known things need to be pleaded and the basis for the state of knowledge of the relevant officer needs to be pleaded. If the pleading is that officers ought to have known things, the things they ought to have known needs to be pleaded and the basis upon which they ought to have known them ought to be pleaded. Conduct in the light of known things or things thought out to have been known needs to be pleaded. 212 The chronological sequence relating to allegations of this kind is important. Precision is important in pleading conduct of this kind going to a challenge under s 39B(1) to the issuing of the Amended Assessments. For example, at [180] of these reasons, reference is made to the pleading that documents obtained from the Commissioner in response to an FOI request confirm that at the audit stage the Commissioner knew that the applicants had correctly reconciled their records including daily reconciliations of Z-totals (having regard to the matters at [175]-[179]). What are the documents of the Commissioner relied upon by the applicants? What does the word "confirm" mean? What do the documents actually say on the relevant topic? At [181], what is the basis for the state of knowledge and what precisely was known? The same question arises in relation to [182] and [183]. At [184], what exactly was confirmed and in what terms and when? At [184], the pleading of the applicants that the Commissioner "deliberately failed" to make the particular finding is noted. What is the basis for the state of mind of the relevant officer which brings about the factual conclusion of a deliberate failure to do something which the officer, on behalf of the Commissioner, was required to do? At [188], there is a reference to the "voluntary disclosure". It is not clear exactly what was voluntarily disclosed. What was the content of the voluntary disclosure? How was it made? Was it in writing or orally and precisely what was it that was communicated? If there was a denial of a voluntary disclosure, what exactly was denied? Was there a difference of opinion about what was put? The pleading needs to avoid any ambiguity about that matter. 213 At [189], the applicants' pleading that the Commissioner "knew, or ought to have known" something is noted. That which he knew or ought to have known is described as a "manipulation". At [190], the applicants' pleading that four worksheets were provided by the Commissioner to the applicants is noted and the pleading that officers of the Commissioner used the term "desired sales" in worksheets is noted. The applicants say that this term reveals an "intention" to achieve an arbitrary "60-40 split". They say that the respondent "early in the audit" "stated" that "60-40 is achievable". They say that documents obtained in response to an FOI request revealed the "Analysis of Menu" document which demonstrates "how the Respondent manipulated the gross margin percentage". These matters of a deliberate and calculated decision to apply an "arbitrary" gross margin of 60% and support it independently of the facts as a matter of "manipulation" of the facts, needs to be pleaded with absolute precision. References to worksheets and FOI documents and "desired" sales is not sufficient. The precise chronological sequence of relevant material facts should be pleaded with specific reference to properly identified documents and the content of those documents which are said to give rise to a conclusion that pleaded things occurred which meet the description of deliberate failures to administer the tax law of the Commonwealth according to its terms. 214 Similarly, at [194], the applicants' plead that documents obtained from the Commissioner as a result of an FOI request also "confirmed" that officers of the respondent had "tested" the correct gross margin percentage to be 49.93% and confirm that this margin is in accordance with industry benchmarks. At [195], the pleading is noted of a "deliberate withholding" from the applicants of three classes of documents which presumably are said to reveal these serious matters. Again, the documents need to be identified. What do they say? When did the testing occur? What was tested? What exactly was revealed? What do the documents actually say? Who knew the relevant matters described at [195]? The same sequence of analysis needs to be applied to all of the matters noted at [197] to [206]. 215 The same principles apply to the proposition that the decision to apply administrative penalties leading to Penalty Notices do not meet the statutory description of a Penalty Notice for the purposes of the Act on the footing that officers of the Commissioner imposed a penalty in circumstances where there was conscious maladministration of the tax laws of the Commonwealth. 216 At 49, the applicants plead that, at the audit stage, the respondent, acting with "reckless indifference and/or deliberate dishonesty, denied the Applicants procedural fairness, natural justice and reasonableness in his decisions to issue the Incorrect Amended Assessments and Penalties against the Applicants" as described in paras 50 to 60 of the amended pleading. 217 At 50, the applicants plead that the Commissioner insisted that the applicants "disprove his 'desired sales' calculation in the short time allowed when the Respondent would not reveal to the Applicants the basis of the gross margin percentage calculation, despite numerous requests from the Applicants to do so and before issuing the IR [Interim Report] to the Applicants". Paragraph 50 is supported by five subparagraphs and they address these matters. 218 First, the applicants plead that on 12 April 2011, the Commissioner insisted that the applicants provide their response simply by relying upon "worksheets" of the Commissioner "and in the absence of being issued a position paper or interim report that outlines the logical basis of the gross margin percentage calculation". 219 Second, the applicants plead that it was "an impossible task" for the applicants to "disprove something that did not exist having regard to a document that was not finalised". 220 Third, the applicants plead that the Commissioner "continued to refuse to reveal the basis of the gross margin percentage calculation in the Third Applicant's IR". 221 Fourth, the applicants plead that the Commissioner provided "unreasonable timeframes of response to the Third Applicant's IR being less than 7 business days". 222 Fifth, the applicants plead that the Commissioner acted in contravention of ATO policies and procedures. As to that matter, the applicants say that the ATO's audit processes provide: "During the latter stages of an audit it is our usual practice to provide you with a position paper that clearly explains our position and gives you an opportunity to respond before we finalise the audit". The applicants say that copies of the ATO's audit processes revealed on the ATO's website will be provided in evidence and that copies of correspondence revealing the applicants' requests for an explanation will also be provided in evidence. 223 At this point, it should be noted that the principal contention at 49 is that the Commissioner, in issuing the Amended Assessments and imposing administrative penalties, did things (denied the applicants procedural fairness, denied them natural justice and denied them reasonableness in decision-making and the exercise of powers conferred upon the Commissioner), with a certain state of mind, either, "reckless indifference" or "deliberate dishonesty", or both, as set out at 50-60 of the pleading (and most immediately at 50 of the pleading). 224 An allegation of a failure to provide procedural fairness, natural justice and reasonableness in decision-making as features of jurisdictional error would not give rise to relief under s 39B(1), at least in relation to the decisions now under challenge, for the reasons described at [75] to [79] of these reasons. However, if the Amended Assessments do not meet the "statutory description" of an "assessment" because officers of the Commissioner exercised the power to issue the assessments out of "deliberate dishonesty" or "reckless indifference" (if that be said to be sufficient to constitute "conscious maladministration"), the exercise of the power would, in that circumstance, be susceptible of relief under s 39B(1) of the Judiciary Act. 225 Taking 49 and 50 together, the pleaded contention is that the sequence of steps at [218] to [222] were undertaken with deliberate dishonesty or reckless indifference. This is a very serious contention. Of course, serious conduct does occur. However, allegations of this kind must be properly pleaded so as to identify every material fact relied upon, and to the extent that documents are called in aid of the various propositions of material fact, the documents need to be identified and their relevance to the matter asserted properly. 226 The matters described at [218] to [222] of these reasons are said to engage something put or said by someone, an officer or officers of the Commissioner (amounting to a matter of "insistence"), to the applicants on 12 April 2011. The relevant officer or officers are said to have "continued to refuse to reveal the basis of the calculation said to show the gross margin contended for by the Commissioner leading to the Commissioner's conclusion about understated income". The combination of 31, 49 and 50 is that the Interim Report issued to the third applicant on 23 May 2011, and the requirement of the Commissioner that the applicants provide a response by 31 May 2011 (less than seven business days later), ignoring the Commissioner's "usual practice" of providing a "position paper" to the taxpayer, is said to be the expression of unreasonableness, a lack of procedural fairness and a lack of natural justice undertaken with the pleaded mental element. 227 Again, the difficulty with 50 as an explanation of the contention at 49 is that both paragraphs represent a series of contentions or contentions integrated with some assertions of fact. In effect, the applicants, by these two paragraphs, are simply making assertions without properly identifying the material facts which give rise to the conclusions asserted. What is required of an allegation of this character is the pleading of all the material facts (which for the sake of a pleading question as currently in issue here, will be assumed to be true for the purposes of the pleading), which, if made good, would lead to a conclusion, either as a matter of primary fact, or as a finding based on inferences supported by findings of primary fact, that a person did things (that is to say, appropriately pleaded things) which resulted in, or at least contributed to, the exercise of the power to issue an "assessment" (in this case Amended Assessments which are treated as an assessment; and the same matters of principle apply to the exercise of the power to apply administrative penalties), as the expression of conscious maladministration, that is, the expression of a deliberate failure to apply the tax law of the Commonwealth according to its terms. 228 That case must be pleaded by reference to the sequence of material factual matters which, if established, give rise to a conclusion, as a matter of pleading, of the contention the applicants are trying to make. 229 At 51, the applicants plead that the Commissioner "made false allegations against the Applicants in the IR decisions and in the Prosecution Referral Templates ('PRTs')". This paragraph is supported by six subparagraphs which address the following matters. 230 First, the applicants plead that on 24 May 2011, the Commissioner "escalated the matter" to "Prosecutions" by completing PRTs for each of the applicants before interim reports were issued to Mr and Mrs Lyons; before a response was due from the third applicant to the interim report issued to it; before the completion of the audit; and before the Amended Assessments and Penalty Notices were issued to the applicants. 231 Second, the applicants plead that the interim report decisions and the "PRTs" contained "false allegations" against the applicants including, but not limited to allegations that a "voluntary disclosure" was "not made" by the applicants and that the applicants had made "false and misleading statements to him [the Commissioner's officers]". 232 Third, the applicants plead that the Commissioner "knew that the allegations he made against the Applicants were false". 233 Fourth, the applicants plead that the Commissioner "imposed severe penalties on the Applicants for failing to make a voluntary disclosure and making false and misleading statements to him". 234 Fifth, the applicants plead that the documents obtained by the applicants from the Commissioner in response to an FOI request, "reveal that the Respondent, at the audit stage, acknowledged that a voluntary disclosure was made to him by the Applicants and stated that: 'Mr Lyons has been very cooperative and has supplied answers to all our questions'". 235 Sixth, the applicants plead that the Commissioner acted in contravention of ATO policies and procedures. The particulars of that matter are these. First, the PRTs contained "other false allegations against the Applicants of failing to keep records, failing to report cash sales, incorrect use of till registers, making false statements, poor record keeping, lack of source documents, inability or unwillingness to explain accounts and report cash sales, evading statements of facts when presented with the Respondent's findings, and that personal income tax lodgements had not been made since 2003". Second, the applicants plead that copies of "FOI documents" and the relevant "audit processes" will be produced at the trial of the proceeding. 236 At 51 and the subordinate paragraphs, as noted, allegations are made of false and misleading statements and the making of false allegations by the Commissioner. These paragraphs suffer the same difficulty as that described at [223] to [228] of these reasons. 237 At 52, the applicants plead that the respondent "closed the audit on 7 June 2011, denying the third applicant an extension of time to provide a response to the [Interim Report]" and "knowing that [Interim Reports] had not been issued to [Mr and Mrs Lyons]", in respect of their affairs. Again, this assertion is said to be the expression of steps taken by an officer or officers of the Commissioner as steps along the way to the decision to issue the Amended Assessments and Penalties in circumstances where the steps are the expression of "reckless indifference and/or deliberate dishonesty" in the denial of procedural fairness, natural justice and reasonableness to the applicants. The pleading at 49 and 52 is supported by seven subordinate paragraphs. They address these matters. 238 First, the applicants plead that on 26 May 2011, the Commissioner refused a request for an extension of time by Mr Lyons, the Commissioner knowing that "he had yet to issue the IRs to the first and second applicants". 239 Second, the applicants plead that on 7 June 2011, the Commissioner dismissed the request of the applicants' "Expert Tax Adviser" to be provided with the Commissioner's gross margin percentage calculation and "stated that the audit was 'closed' before issuing the IRs to [Mr and Mrs Lyons]". 240 Third, the applicants plead that on 7 June 2011, the Commissioner closed the audit by issuing a "Completion of Audit Report" to the third applicant "knowing that the final decision for the Third Applicant would impact on [Mr and Mrs Lyons]". 241 Fourth, the applicants plead that documents obtained by them in response to an FOI request of the Commissioner "reveal" that the Commissioner's "Audit Approving Officer, Ms Lynda Vietheer, made a decision to approve the issuing of the Incorrect Amended Assessments and Penalties against [Mr and Mrs Lyons] before their IR response was due". 242 Fifth, the applicants plead that Ms Vietheer "approved the use of the illegitimate gross margin percentage without reviewing its accuracy and reliability". This matter, although not pleaded in this way, might be a matter said to arise out of an examination of the documents referred to at [241]. 243 Sixth, the applicants plead that on 9 June 2011, the Commissioner referred matters related to Mr and Mrs Lyons "to Debt Strategy Recovery before their IRs and Incorrect Amended Assessments and Penalties were issued". 244 Seventh, the applicants plead that the Commissioner acted (presumably in undertaking each of the steps pleaded as discussed at [238] to [243]) "in contravention of ATO policies and procedures" (to be produced in evidence in the principal proceeding). 245 The sequence of matters pleaded at 52 and the subordinate paragraphs provides a little more detail than the earlier paragraphs. For example, the applicants, for the first time, identify an officer who took a step. That officer is, by the pleading, said to have taken the pleaded step with the relevant pleaded mental element. Again, the documents relied upon by the applicants of the Commissioner, said to have been produced as a result of an FOI request, need to be identified and the material content relied upon, pleaded. At 52 and the subordinate paragraphs, the applicants make assertions mixed with some fact. The sequence of material facts need to be pleaded with precision such that the pleaded facts relevant to the matters, the subject of 52 and the subordinate paragraphs, lead to a conclusion, if made good, of findings of primary fact or inferences drawn from primary fact, that an officer or officers of the Commissioner, took pleaded steps bearing the character described at 49 with the mental element pleaded, said to constitute the element of "conscious maladministration" leading to the issuing of the Amended Assessments and Penalties. 246 At 53, the applicants plead that the Commissioner "failed to consider any of the information provided by the Applicants in their IR response, dated 21 June 2011, before the decisions to issue the Incorrect Amended Assessments and Penalties were made". Again, that failure is said to be the expression of reckless indifference and/or deliberate dishonesty. At 53, the applicants also plead that their "Expert Tax Adviser … contacted the Respondent but he was immediately dismissed and told that the IR Response would not be considered and the 'case is now closed'". The applicants plead that in giving that response, the Commissioner acted in contravention of ATO policies and procedures. As to that last matter, the applicants give these particulars. First, the ATO's audit processes provide: "We will give you an opportunity to comment and we will consider your comments before making our final decision, including request for an independent review". Second, FOI documents obtained by the applicants "confirmed" that the Commissioner did not consider the applicants' IR response dated 21 June 2011. Third, copies of contemporaneous notes made by the applicants' Expert Tax Adviser "of all conversations with the Respondent's auditor will be provided in evidence". Fourth, copies of ATO processes contained on the ATO website will be provided in evidence. 247 Again, the pleading at 53 is inadequate. A sequence of material facts (no doubt carefully identifying the relevant chronology, steps in the chronology and material documents relevant to the chronology) need to be pleaded. If the proposition is that the Commissioner (by an officer) had an obligation under the tax law of the Commonwealth (for example, as a matter of the exercise of the Commissioner's administration of the tax law in the conduct of an audit), to consider the IR response of the applicants dated 21 June 2011 and the Commissioner failed to consider the document as a matter of a deliberate failure to discharge the obligation thus arising, all the material facts said to give rise to the obligation and the mental element informing the conduct need to be pleaded. If there are material documents which are said to "reveal" things or said to "confirm" things, the underlying things need to be pleaded. 248 At 54, the applicants plead that the Commissioner made "false statements" that the applicants had "not lodged tax returns since 2003". The applicants plead that before the commencement of the audit, the applicant had furnished their returns up to and including the 2005 financial year. 249 Again, the pleading is that an officer of the Commissioner made "false statements" as a step along the way to the issue of the Amended Assessments and Penalties with "reckless indifference" and/or "deliberate dishonesty". It may be that an officer of the Commissioner made a statement somewhere, or in a document, to the effect that the applicants had not lodged tax returns since 2003 which is capable of being shown to be incorrect because, objectively viewed, the applicants had lodged tax returns up to and including the 2005 financial year. The pleading needs to demonstrate not that an incorrect statement or false statement was made but that, in the conduct of the audit, in the exercise of powers, an officer of the Commissioner made a false statement as a matter of "deliberate dishonesty" which bears a relationship with the issuing of the Amended Assessments. No facts are pleaded which support the pleading at 54 taken in conjunction with 49. 250 At 55, the applicants plead that the Commissioner "did not comprehend the Applicant's record keeping methodology and failed to carry out basic reconciliations". Again, this simply amounts to a contention and is not supported by any pleading of any fact, let alone material fact. Moreover, the matters of material fact need to make good the proposition that whatever 55 means, it was something done with the relevant mental element pleaded at 49. 251 At 56, the applicants plead that the Commissioner "astonishingly intimidated and bullied the Applicants, who were in their 60's, over the course of the audit". This matter, which is not supported by any pleading of material fact, is said to be supported by three particulars. First, the applicants plead that the Commissioner's auditor made "bullying remarks" to Mr and Mrs Lyons throughout the audit process by making statements to the effect of a statement which is specifically pleaded. Second, the applicants plead that in response to their having expressed "deep shock" at the suggestion of the Commissioner's auditor that they had understated income by $2.4 million, the Commissioner's auditor threatened them with words to the effect as set out at 56(ii). Third, the applicants plead that the Commissioner's auditor also threatened them to the effect that they would need to sell their house; that he would be recommending prosecution against them; and that penalties of 200% would be imposed. 252 It may be, having regard to the standards of conduct governing the behaviour of officers of the Commissioner, taken in conjunction with the Taxpayers' Charter, the Code of Conduct and statutory obligations arising under the PSA at the relevant time, that it goes without saying that in the conduct of an audit, an officer of the Commissioner cannot engage in conduct characterised as "intimidating" or "bullying". Whether conduct bears that character requires a factual examination of the conduct and context. However, let it be assumed for present purposes that the matters pleaded at 56(i), 56(ii) and 56(iii) fall into that category (and I note that at the hearing of the applications counsel for the Commissioner observed that these allegations are strongly contested). Let it also be assumed that an officer of the Commissioner charged with the important responsibility of conducting an audit is taken to know and understand the elements of the Code of Conduct and the elements of the Taxpayers' Charter. It would follow, as a matter of inference, that if such a person engaged in the pleaded conduct (if made good and found to bear the characterisation pleaded), that such a person would do so in circumstances where they "deliberately" did so, and thus deliberately failed to comply with obligations sufficiently related to obligations of the Commissioner (as part of the exercise of the power of administration of the Act) and thus obligations arising in the exercise of the tax law of the Commonwealth leading to the issue of the Amended Assessments. 253 However, the pleading at 56 remains inadequate. The pleading is expressed in terms of conduct which "astonished" the applicants. The applicants need to plead that on a certain date, at a particular place, a particular officer said something (the pleading refers to remarks to Mr and Mrs Lyons). A particular sentence is pleaded (and I have not reproduced the pleaded sentences in these reasons as these matters are contested). However, that sentence ought to be put in the context of whatever was occurring which gave rise to the pleaded remark. Similarly, the events at 56(ii) need to be pleaded as matters of material fact in the same way as already mentioned in respect of 56(i). The matters at 56(iii) need to be pleaded properly. 254 At 57, the applicants plead that the Commissioner "sacrificed natural justice and procedural fairness" to finalise "his decisions before the Respondent's auditor went on Long Service Leave". The applicants plead that the respondent's auditor commenced long service leave on 24 June 2011 (until 3 October 2011), two days after the applicants submitted their response to the Interim Report. 255 Again, the pleading is inadequate. If what is being said is that the Commissioner's auditor was under an obligation (however arising, whether under guidelines, policies and procedures or other instruments) to do something and rather than do that thing, the auditor took a step reflecting a deliberate failure to comply with the obligation so arising, as the expression of the pleaded mental element of acting out of "reckless indifference and/or deliberate dishonesty", all of the material facts to support the pleading arising out of 49, taken together with 57, need to be pleaded. It seems to be suggested that there was a denial of an obligation and an inference can be drawn that a step was taken by the Commissioner's auditor motivated by a desire to deny compliance with the obligation because compliance with the obligation would get in the way of the Commissioner's auditor commencing long service leave on 24 June 2011. 256 The pleading as it stands is inadequate. 257 At 58, the applicants plead that the Commissioner "deliberately failed to consider the relevant circumstances of the Applicants". Eight relevant circumstances which the Commissioner deliberately failed to consider are identified. Taken with 49, the proposition must be that the Commissioner deliberately failed to consider the identified matters in reaching the decision to issue the Amended Assessments and the Penalty Notices. The eight relevant circumstances are directed to the trading circumstances of the restaurant and might be thought to go to the question of the revenue, costs and net profit of the restaurant undertaking and the question of the gross margin contended for by the Commissioner and whether or not understated taxable income was derived in the course of the restaurant business. The Commissioner is said to have deliberately failed to consider the eight relevant circumstances, but the failure is not limited to eight circumstances and there may be others. The eight circumstances are these: the larger portion sizes provided to customers to compete and retain customers; the higher food wastage as a result of the type of food (seafood); the inability to achieve a reasonable profit margin on all seafood, especially shellfish; the highly competitive price environment in which the applicants operated; the poor economic climate with less people dining out; the circumstance that more than 20 adjunct restaurants in the building and adjoining premises had gone out of business during the periods under review; the location of the restaurant did not expose it to local foot traffic; and the necessity to offer half-price menu items for lunch and dinner to maintain viability. 258 As particulars of this matter, the applicants say documents obtained by them from the Commissioner in response to FOI requests "reveal" that the Commissioner was "aware of the relevant circumstances of the Applicants but deliberately failed to consider those circumstances in his decisions to issue the Incorrect Amended Assessments and Penalties". 259 Again, material facts need to be pleaded which lead to a conclusion that an officer of the Commissioner, as a matter of conscious and deliberate failure to discharge an obligation, elected to refuse to consider matters relevant to the question of whether the third respondent had derived taxable income and net earnings not disclosed by the applicants. All of the material facts which support that conclusion need to be pleaded and if documents are called in aid which are said to establish the fact that the relevant circumstances were not considered and that an officer of the Commissioner deliberately chose not to consider the relevant matters, the precise content and sequence of those things needs to be pleaded properly. Moreover, the matters at 58 are said to be the expression of "reckless indifference and/or deliberate dishonesty". The reference at 58 in the "Particulars" to "deliberate failure" might be thought to take up the notion at 49. However, a question of deliberate failure and questions of "deliberate dishonesty" and "reckless indifference", are not matters of particulars but are fundamental matters of material fact. All of the facts material to the conclusion need to be identified. 260 At 59, the applicants plead that the Commissioner instituted garnishee notices and debt recovery action against them and their associates "without regard to their financial positions and [without] consideration of any concurrent appeal and objection processes". Five subordinate matters are relied upon to support that pleading. Again, the matters at 59 are the expression of the pleaded mental element at 49 and thus these steps are said to have been taken as a matter of "deliberate dishonesty and/or reckless indifference". 261 First, the applicants plead that on 24 June 2011, the Commissioner issued garnishee notices to St. George Bank in respect of the third applicant's tax liability. 262 Second, the applicants plead that on 27 June 2011, the Commissioner issued garnishee notices against Mr and Mrs Lyons to "IAG" in respect of the personal tax liability of Mr Lyons and to the Bank of Queensland in respect of the personal tax liability of Mrs Lyons. 263 Third, the applicants plead that as a result of the garnishee notices, the Bank of Queensland Bank Manager advising the applicants, told them that the Bank would no longer offer any further financial support through further borrowings and that if there were any defaults, the Bank of Queensland might call in loans made to the applicants. 264 Fourth, the applicants plead that on 25 July 2011, the Commissioner issued a creditor's statutory demand against D & S Lyons Holdings Pty Ltd (an associate company of the applicants). 265 Fifth, the applicants plead that the Commissioner acted in contravention of ATO policies and procedures and, in particular, PSLA 2011/18 when issuing garnishee notices against the applicants. The applicants say that copies of the garnishee notices and debt recovery demands and PSLA 2011/18 will be relied upon in the proceeding. 266 No challenge is made to 59 of the pleading. 267 At 60, the applicants plead that the Commissioner "knew, or ought to have known", that a determination was made on 5 August 2011 by the third applicant that Mr and Mrs Lyons had disclaimed any present entitlement to income pursuant to clause 3.2 of the Lyons Discretionary Trust Deed. The applicants plead that despite this contended state of knowledge, or knowledge the Commissioner ought to have known, the Commissioner "continued to deem [Mr and Mrs Lyons] to be presently entitled to a share of the net income of the Related Trust". Four matters are relied upon to support this pleading. 268 First, the applicants plead that on 5 August 2011, a Deed of Disclaimer for each of Mr and Mrs Lyons was prepared as a Deed Poll to operate "ab initio i.e. from the date of the establishment of the Trust Deed". 269 Second, the applicants plead that on 5 August 2011, a determination was made by the third applicant that Mr and Mrs Lyons had disclaimed any present entitlement to net income. 270 Third, the applicants plead that the effect of the Deeds of Disclaimer was that Mr and Mrs Lyons had disclaimed any interest they had (or had ever had) under the default distribution clause and were never presently entitled to any share of the net income of the Trust. 271 Fourth, the applicants plead that on or before 10 August 2011, the Commissioner was notified and provided with a copy of the Deeds of Disclaimer for each applicant and the third applicant's determination. The applicants plead that the Commissioner did not provide a response to, or act on, "this information". 272 No challenge is made by the Commissioner to 60. 273 At 61, the applicants plead the lodging of objections to the Amended Assessments and Penalty Notices on 9 August 2011 and 19 September 2011 respectively. 274 At 62, the applicants plead that as early as 27 September 2011, the Commissioner's Objection Officer advised the debt area that the objections of the applicants would likely be allowed in full. Recovery action was temporarily suspended against the applicants. 275 At 63, the applicants plead that having regard to the temporary suspension of recovery action, they removed their principal place of residence at Paradise Point from sale (whether by private sale or auction). 276 At 64, the applicants plead that a number of different objection officers were assigned to the role of deciding the objections made by the applicants and decisions on the objections took a protracted period of time to be made. 277 At 65, the applicants plead that during January 2012, Mr Lyons received a series of threatening phone calls from the Commissioner's "Recovery Officer", Ms Sandra Oo. The applicants plead that Ms Oo told Mr Lyons that a summons would be filed commencing court action against the applicants to recover the full amount payable to the Commissioner "irrespective of the ongoing Objection process". 278 At 66, the applicants plead that they were "shocked" by Ms Oo's statement. 279 At 66, the applicants plead that the Commissioner refused to enter into a payment deferral arrangement pending the objection decisions being made. 280 At 67, the applicants plead that Mr and Mrs Lyons "were forced" to place their Paradise Point property and the third applicant's property at Burleigh Waters, on the market for sale. Three matters are pleaded as the reasons for those steps. 281 First, the applicants plead the "Respondent's intimidation, threats and demands (particularly the Recovery Officer's threatening phone calls)". 282 Second, the applicants plead the increasing pressure to meet living expenses and find funds for legal and accounting and other expert assistance in contesting the Commissioner's assessments. 283 Third, the applicants plead the Bank of Queensland's refusal to extend any further finance to the applicants "caused directly by the garnishee notices issued by the Respondent". 284 At 68, the applicants plead that on 4 March 2012 they placed their properties on the market for sale. 285 At 69 to 78, the applicants plead a sequence of steps in relation to the sale and disposal of the properties, the sale price and related matters. One of those matters at 71 is a pleading that the applicants, "under duress" from the Commissioner's "intense pressure", were compelled to accept a bid for the Paradise Point property at $1.675 million, significantly below market price. 286 The Commissioner objects to the matters pleaded at 65 to 67 and 71. If the matters at 65 to 67 and 71 are said to be material facts which support a claim under s 39B(1) for the relief claimed in the principal proceeding, it would be necessary for the applicants to plead facts which demonstrate that the pleaded steps involve a deliberate failure to apply the tax law of the Commonwealth relating to recovery according to their terms. The steps taken by Ms Oo to issue a summons or take steps to prepare to issue a summons or give notice to Mr and Mrs Lyons that a summons was to be issued would need to be the subject of a pleading which demonstrates material facts making good a claim that the Commissioner, by Ms Oo, deliberately failed to apply the tax law of the Commonwealth according to its terms. At 71, the applicants plead a step taken by them due to "intense pressure" from the Commissioner. Again, if this matter of intense pressure to do something is said to be a matter which engages a claim that an officer of the Commissioner did something which constitutes a deliberate failure to apply the tax law of the Commonwealth according to its terms and thus conscious maladministration of the tax law, all of the material facts need to be pleaded. 287 At 79, the applicants plead that on 22 January 2013, the Commissioner finalised objection decisions for the Trust. 288 At 80, the applicants plead that in relation to the Amended Assessments and Penalties issued to the third applicant, the Commissioner admitted (presumably in the objection decision relating to the third applicant) that "the Related Trust 'did not earn' any net income and that there was 'error' and 'deficiencies' in the gross margin percentage calculation". The applicants plead a statement of the Commissioner (again, presumably drawn from the objection decision concerning the third applicant) in these terms: "The use of an overstated cost of sales figure would have compounded any error caused by deficiencies in the gross profit percentage calculation". 289 At 81, the applicants plead that the Commissioner also "verified the reporting methodology used by the Applicants in their business, specifically, confirming that the use of the Excel spreadsheets to record their sales figures was a reliable and accurate mechanism". They plead a statement of the Commissioner in these terms: "The Respondent tested a sample, for the period 28 February 2011 to 28 June 2011, from the 2011 sales spreadsheet to the Z tapes and found those records to be accurate". 290 At 82 to 84, the applicants plead the objection decisions relating to Mr and Mrs Lyons and the consequence that the Amended Assessments and Penalties were allowed in full, reducing their combined tax liabilities from $715,806.44 to nil. 291 The Commissioner objects to the matters pleaded at 80 and 81. The ground of objection is that the paragraphs are simply a matter of evidence and that they refer to quotes from an unidentified document. It seems clear enough that the quoted statements seem to come from the objection decision of the Commissioner concerning the third applicant. If the statements are material to relief claimed or even if they are contextual, the Commissioner rightly says that the source of the statement should be pleaded and the document identified in a precise way. 292 At 89, the applicants plead that, in relation to the topic of the Part IVC proceedings and other matters, that it "appeared to [them]" that the Commissioner was "unjustifiably pursuing this small issue to avoid embarrassment and reputational risk associated with the incorrect position he has taken in relation to the alleged understatements of income". This paragraph suffers from the difficulty that the appearance or thinking or views of the applicants, as stated at 89, are ultimately neither here nor there. The question is whether the Amended Assessments and Penalty Notices do not meet the statutory description because of reasons of conscious maladministration. 293 At 91, the applicants plead that "by that stage" (that is, 28 October 2013 being the date on which Part IVC proceedings were terminated), the applicants "felt exhausted, completely demoralised by the conduct of the Respondent against them and had no more finances to pursue the matter". Although these matters may reflect the position of the applicants as at 28 October 2013 and their view of the Commissioner's conduct, these matters as pleaded are not material facts going to a ground of relief under s 39B(1) referable to conscious maladministration in the issuing of the Amended Assessments and Penalty Notices. 294 From 93, the applicants address matters in relation to the CDDA claim. 295 At 98, the applicants plead that at a meeting (on 17 June 2016), the Commissioner admitted that the applicants suffered loss as a result of defective administration. The particulars of that matter do not expose the foundation facts about which the admission is said to have been made. The pleading at 98 uses the term "defective administration" in a conclusionary sense. The pleading ought to set up the material facts relating to the CDDA claim as earlier described and ought to plead the material facts which give rise to a conclusion that the Statutory Agency in the form of the Commissioner engaged in conduct which meets the description "defective administration". The pleading might then logically plead, as a conclusion, that the applicants suffered loss directly caused by conduct constituting defective administration. It might be relevant to plead a formal admission made to that set of circumstances if the admission is responsive to that set of circumstances. 296 At 101, the applicants plead the decision of Ms Ferry of 31 August 2018. 297 At 102, 103 and 104, the applicants plead that the Commissioner did things "in excess of legislative powers" under the 36 Act, the 97 Act and the Administration Act "with reckless indifference and/or deliberate dishonesty". At 102, the act is treating Mr and Mrs Lyons as presently entitled to net income of the Trust when the Commissioner "knew, or ought to have known" that net income was never earned by the Trust during the periods under review. 298 At 103, the same formulation and language is employed but the act is one of attributing a GST shortfall to the third applicant on net income of the Trust that the Commissioner knew, or ought to have known, was never earned during the periods under review. 299 At 104, the same language is employed but the act is one of imposing administrative penalties on the applicants on amounts the Commissioner knew, or ought to have known, were never earned during the periods under review. 300 The pleading at 102, 103 and 104 might be intended to be conclusionary of earlier matters in the pleading. If that is so, these paragraphs fail for the reasons that earlier paragraphs fail. If they are intended to be conclusions arising out of other matters, they are not cross-referenced to earlier parts of the pleading and, in any event, the cross-referenced paragraphs would need to be sustainable to support these paragraphs. If they are intended to be assertions that stand on their own feet, they rise no higher than contentions unsupported by the relevant facts. 301 At 105, the applicants plead that the Commissioner admitted, in his objection decisions, that the related Trust did not earn any net income for the purposes of the 36 Act during the period under review and that the applicants ought not to have been deemed to be presently entitled under s 97 of the 36 Act to net income of the Trust (which, in any event, was never earned). Particulars of the admission are given. The objection decisions may contain the statements set out in the particulars. However, in a pleading, the document should be identified properly and the relevant paragraphs or sentences relied upon ought to be quoted in the proper way and referenced correctly. Again, 105 pleads an admission. However, the foundation facts ought to be identified to which the admission is said to be responsive and the relevant matters as pleaded need to bear relation to a remedy as sought under s 39B(1). 302 At 106, the applicants plead that, at the objection stage, the Commissioner did not rely on any new information or require the provision of any new information for the purpose of "overturning his original decisions". The applicants plead that all information was already available to the Commissioner, at the audit stage, "but he deliberately failed to rely on it". The applicants plead that "the Respondent, in effect, accepted that he had failed to make a proper determination of income on which he could raise a valid assessment". This paragraph pleads a "deliberate failure" and pleads an "effect". Neither of those matters are able to be pleaded in that way. The foundation facts making good a contention of a deliberate failure to do something need to be pleaded and the specific matter said to have been accepted by the Commissioner ought to be identified. 303 At 107, the applicants plead that the Commissioner cannot take any one of four steps under the relevant legislation "on amounts that he knew, or ought to have known, were incorrectly calculated using non-existent facts". This pleading might be thought to be a conclusion arising out of earlier paragraphs in the pleading. It is not expressed that way. In any event, if it is intended to operate in that way, it can rise no higher than earlier paragraphs of the pleading, properly pleaded. The pleading at 107 says that the Commissioner cannot issue amended assessments, or deem a beneficiary to be presently entitled or raise amended BAS assessments or impose penalties on amounts that he knew, or ought to have known, were incorrectly calculated using non-existent facts. If this pleading is intended to contend that those steps engage conscious maladministration because officers of the Commissioner deliberately failed to discharge or perform an obligation arising under a tax law of the Commonwealth, material facts to support that matter need to be pleaded. As it stands, 107 is simply a contention. 304 At 108, the applicants plead that the Commissioner was not authorised under the 36 Act, the 97 Act or the Administration Act "to make such decisions as he did not have [a] proper basis to do so and by doing so deliberately disregarded the proper scope of those powers". Paragraph 108 is a conclusion and it can rise no higher than the foundation facts pleaded to support it. 305 At 109, the applicants plead that the Commissioner cannot be protected under s 175 of the 36 Act "because he deliberately failed to comply with the provisions of the [36 Act, 97 Act and the Administration Act]. 306 Again, 109 is conclusionary and rises no higher than the material facts pleaded to support it. 307 At 119, the applicants plead matters relating to the topic of "Challenge to validity of CDDA Decision under section 39B of the Judiciary Act 1903". That matter is addressed at 119 to 135. 308 At 122, the applicants plead that the Commissioner "with reckless indifference and/or deliberate dishonesty, distorted the facts and evidence, in his CDDA Decision, found by the Respondent to be incorrect in his Objection Decisions". They plead that it was "neither 'open' nor 'reasonable' for the Respondent to engage in the process of reasoning he did". 309 At 123, the applicants plead that the "CDDA Decision" is contradictory, illogical and irrational. 310 At 124, the applicants plead that the Commissioner "in his adverse CDDA Decision, was recklessly indifferent and/or deliberately dishonest when he distorted all the facts and evidence to deny defective administration had ever occurred, as set out in [particular paragraphs]". 311 At 125, 126, 127, 128, 129, 130, 131, 132, 133 and 134, the applicants plead that the Commissioner made false statements about particular matters. 312 At 135, the applicants plead that the Commissioner denied them procedural fairness during the course of the decision-making process for the CDDA claim. 313 At 144 to 150, the applicants assert a claim to the relief set out in the originating application. 314 The difficulty with all of these paragraphs is that they rely upon matters which are said to demonstrate an excess or want of authority on the part of the decision-maker. To the extent that some of the paragraphs rely upon statements which are "false", a question arises about whether the decision-maker has fallen into error about particular matters and whether that error takes the decision-maker beyond the scope of the authority to decide the question before the decision-maker. Is the error an error within jurisdiction or an error going to jurisdiction? If the error goes to jurisdiction because the decision-maker acted "with reckless indifference and/or deliberate dishonesty", that matter would need to be pleaded by reference to all of the material facts which would lead to such a conclusion. 315 If errors (the contended various false matters) occurred which go to an excess or want of jurisdiction, the applicants would need to identify the precise foundation for the authority to decide matters under the CDDA Scheme and the basis upon which decisions under that Scheme are susceptible of a remedy under s 39B(1) of the Judiciary Act. If the Scheme operates under an Act or is relevantly engaged by an Act conferring a source of authority, it must be identified. If the Scheme rests on an exercise of the Executive Power of the Commonwealth, the applicants will need to plead facts which demonstrate that the Executive Power of the Commonwealth, so far as the CDDA Scheme is concerned, is to be exercised within particular limits or bounds and the decision-maker has exceeded those limits so as to engage the constitutional writs and thus the original jurisdiction of this Court under s 39B(1). 316 The pleading does not do that. 317 Throughout these reasons in discussing the challenge to the amended statement of claim, I have indicated my view about the various paragraphs. Those paragraphs are to be struck out. The more coherent resolution of the application is to strike out the amended statement of claim in its entirety with leave being given to the applicants to file a further amended pleading which seeks to address the criticisms of the current pleading reflected in these reasons. 318 Having regard to the current circumstances in relation to COVID-19, a little more time than usual will be afforded to the applicants to file and serve a further amended pleading. The further amended pleading is to be filed within six weeks. 319 The costs will be reserved. 320 The question of the interlocutory application by the applicants will be adjourned generally. 321 No procedural directions will be made. For present purposes, it is sufficient to order that the amended statement of claim filed on 20 June 2019 is dismissed with leave being given to the applicants to file a further amended statement of claim within six weeks of the orders. I certify that the preceding three hundred and twenty-one (321) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Greenwood.