Federal Court of Australia|1990-10-12|Before: Davies J

Re Commissioner of Taxation of the Commonwealth of Australia v Marita Mccabe [1990] FCA 389; 21 Atr 992 12 Aar 447 26 FCR 431 (12 October 1990)

Re: COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA

Administrative Law - appeal from the Administrative Appeals Tribunal - whether factual inferences may be challenged on ground of unreasonableness

Income Tax - deductions - superannuation contributions - s.82AAS(2) Income Tax Assessment Act 1936 (Cth) - "eligible person" - meaning of "reasonable to expect"

Solicitor for the applicant: Australian Government Solicitor

2. The matter is remitted to the Administrative Appeals Tribunal to be heard and decided again with or without further evidence.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

This is an appeal from a decision of the Administrative Appeals Tribunal which allowed the objection of the taxpayer, Dr M.P. McCabe, lodged with respect to an assessment for the year of income ended 30 June 1986.

2. The issue before the Tribunal was Dr McCabe's entitlement to a deduction of $1500 in respect of contributions of that amount which she made during the year to the State Superannuation Fund, a superannuation fund constituted by the Superannuation Act 1916 (N.S.W.). Dr McCabe's entitlement to the deduction turned on whether or not she was an "eligible person" for the purpose of s.82AAS of the Income Tax Assessment Act (1936)(Cth) ("the Act"). Section 82AAS(2) reads:-

"82AAS(2) Subject to sub-section (3), a person (in this sub-section

referred to as the `relevant person') is an eligible person in relation to a

year of income for the purposes of this Subdivision unless -

(a) during the whole or a part of the year of income

circumstances existed by reason of which it was reasonable to expect

that superannuation benefits would be provided for the relevant person

upon retirement or for dependants of the relevant person in the event

of the death of the relevant person (whether or not any condition other

than the retirement or death of the relevant person would be required

to be satisfied in order that those benefits be provided); and

(b) to the extent to which those benefits would be

attributable to the year of income -

(i) the benefits would be wholly or partly attributable to

contributions made to a superannuation fund in relation to the

relevant person by a person other than the relevant person; or

(ii) the benefits would, in whole or in part, be paid out of

moneys that would not represent -

(A) contributions made by the relevant person to a

superannuation fund;

(B) contributions made by the relevant person under a

scheme for the payment of benefits upon retirement or death, being

scheme constituted by or under a law of the

Commonwealth or of a State or Territory; or

(C) income or accretions arising from contributions

referred to in sub-subparagraph (A) or (B)."

(the emphasis is mine)

3. The Tribunal held that the criteria specified in s.82AAS(2)(a) and (b) did not apply in relation to Dr McCabe during the year ended 30 June 1986 and, therefore, that she was an eligible person.

4. Dr McCabe was at the time a lecturer in psychology in the School of Behavioural Sciences at Macquarie University and had been appointed for a fixed term of five years effective from 1 January 1984. From the commencement of that employment, Dr McCabe and Macquarie University both contributed to the State Superannuation Fund in accordance with the provisions of the Superannuation Act. The Tribunal did not say so in its reasons for decision, but Dr McCabe had been employed at Macquarie University in a number of capacities continuously since 1978. She had had five appointments, each for a five year term, commencing with an appointment as a tutor. From time to time prior to her appointment as lecturer, she had applied for and been appointed to a different position as a tutor or as a senior tutor and, on each occasion, the new appointment had been made for the term of five years. The Tribunal described the subsequent facts as follows:-

"In her thirty-fifth year the Applicant secured an academic appointment

lecturing at a State University. For the first time she qualified for

admission to the relevant State Superannuation Fund. In addition it was a

condition of her employment that, in the absence of being granted

exemption from membership by that superannuation fund, she should

become a member of that fund. For her own reasons she opted to make

the minimum contributions permitted to her. He appointment to the

University was a fixed term appointment for five years only. She had

no assurance that she would continue in the service of that University

or any other employer beyond that term. There was no assurance that

that position would be continued beyond that date by the University or

that, if the University did chose (sic) to continue the position, she

be appointed to it. In the event the University did extend the position

and advertised internationally seeking applications for the position.

The present Applicant applied and she was successful. With effect from

1 January 1989 she commenced a second five year appointment on the

academic staff of the University. If she completes that current term of

service and then retires, without her appointment having been

extended or any other appointment provided, she will qualify for

superannuation benefits; and, it is not disputed, the benefits to which

will then be entitled will reflect her employer's contributions to the fund.

But, had she retired from the service of the University upon the

expiration of her initial appointment, or if she was to retire otherwise

than by reason of ill health or disability before completing ten years of

service to the University, she will not be entitled to the fullness of

benefits. In those events she will only be entitled to have returned to

her her own contributions and an amount reflecting earnings thereon."

5. The Tribunal's crucial finding of fact was as follows:

"Throughout the year of income ended 30 June 1986 the only

reasonable expectation was that this particular Applicant would not

serve the University beyond the term of her existing contract and that,

following her retirement occasioned by the expiration of that contract,

such benefits as would then come to her would relate only to her own

contributions and would not in any way reflect employer's

contributions."

6. Mr S.W. Gibb, counsel for the Commissioner, first challenged the Tribunal's decision on the footing that the Tribunal misinterpreted s.82AAS. In this respect the Tribunal had said:-

"Section 82AAS(2) speaks of reasonable expectations: a proposition

which I would understand to be a reference to `probabilities'."

Mr Gibb submitted, as did the Commissioner's representative before the Tribunal, that s.82AAS(2)(a) was satisfied if there was a likelihood or a real possibility which was not remote or fanciful that the taxpayer or the taxpayer's dependants would receive the specified retirement or superannuation benefits on retirement or death.

7. I agree with the Tribunal that the approach so contended for on behalf of the Commissioner is wrong. Section 82AAS(2)(a) means what it says. The provision requires there to be an assessment as to the future, as to what it is reasonable to expect will happen. It would not be reasonable to expect that superannuation benefits would be provided on retirement or death if the decision-maker considered it improbable that that would happen. The correct interpretation of the provision is, as the Tribunal said, stated by Sheppard, Wilcox and Hartigan JJ. in Federal Commissioner of Taxation v. Arklay (1989) 89 ATC 4563 at p 4567 as follows:-

"We are of the opinion that the phrase with which we are concerned in

the context of sec.82AAS of the Act requires a determination whether

or not circumstances exist by reason of which the decision-maker is able

to expect on reasonable grounds that superannuation benefits would be

provided as stipulated in the section. That test is an objective one.

However, in applying the test the decision-maker, in considering the

circumstances, should have regard to any relevant matters concerning

the taxpayer personally. Put another way our understanding of the

meaning of the expression is one which involves the application of an

objective test, but, as one of the concomitant elements of that test, the

subjective intentions of the taxpayer may be relevant."

This statement makes it clear that the relevant expectation is an expectation as to what will happen in the future and that, while the test is an objective one, any relevant matters concerning the taxpayer personally, including any relevant subjective intentions of the taxpayer, must be taken into account.

8. Mr Gibb submitted that such an interpretation was administratively inconvenient, for officers of the Taxation Department would have difficulty applying it. However, s.82AAS(2) is clear both in its terms and in its policy and it must be applied accordingly.

9. Mr Gibb referred to the fact that the reasons of the Administrative Appeals Tribunal which were under consideration in Arklay's case included the sentence "In the present context `to expect' means to regard as likely to happen" and that this and other parts of the reasons of the Administrative Appeals Tribunal in Arklay's case were set out by their Honours without disapproval. Mr Gibb further submitted that the word "likely" in that passage had, of the various meanings which were discussed by Bowen C.J. in Tillmanns Butcheries Pty Ltd v. Australasian Meat Industry Employees' Union [1979] FCA 85; (1979) 27 ALR 367 at 375-6 and by Deane J. at pp 380-1, the meaning referred by Bowen C.J. at p 375 when his Honour said, "It may mean `material risk' as seen by a reasonable man `such as might happen'. It may mean `some possibility' - more than a remote or bare chance." Mr Gibb said that the term had been used by the Administrative Appeals Tribunal in Arklay's case in that sense. However, the Full Court in Arklay's case did not so read it. As Deane J. said in Tillmanns' case at p 381, "... the ordinary and natural meaning of the word `likely' is synonymous with the ordinary and natural meaning of the word `probable' and both words mean that there is an odds-on chance of the thing happening." The word was so used by the Administrative Appeals Tribunal in Arklay's case and was so understood by the Full Court on appeal.

10. Mr Gibb further pointed out that, in Arklay's case, Sheppard, Wilcox and Hartigan JJ. cited with approval from the judgment of Bowen C.J. and Beaumont J. in Attorney-General's Department and Anor v. Cockcroft (1986) 64 ALR 97 where their Honours said at p 106 in relation to the phrase `could reasonably be expected' appearing in s.43 of the Freedom of Information Act 1982 (Cth):-

"It is undesirable to attempt any paraphrase of these words. In

particular, it is undesirable to consider the operation of the provision

terms of probabilities or possibilities or the like."

I agree that a like comment may be made with respect to s.82AAS(2). The words "reasonable to expect" are not ambiguous and it is undesirable to paraphrase them or to use other words. In particular, they are words appropriate to the task of making an assessment as to the future. It is not useful to adopt other words. The adoption of words such as "probability" or "balance of probabilities" tend to introduce a concept or to have a connotation of proof, which may detract from the application of the section by an administrative decision-maker.

11. However, that is not to say that the Tribunal in the present case made an error of law. The Tribunal made it clear that it considered it to be improbable that superannuation benefits would be provided under the Superannuation Act for Dr McCabe on her retirement or for her dependants in the event of her death. That approach accorded with the terms of the section and with the observations of the Full Court in Arklay's case.

12. Accordingly, I reject Mr Gibb's submission that the Tribunal made an error in its interpretation of the Act and agree with the submission put by Mr B.A. Coles, counsel for Dr McCabe, in this respect.

13. A more difficult aspect of this appeal lies in the administrative law issue which it raises.

14. Mr Gibb submitted that the Tribunal's decision that Dr McCabe was an eligible person as defined by s.82AAS(2) was made without evidence or was unreasonable in the Wednesbury sense, that it to say, a decision to which no reasonable decision-maker could have come. Yet, the finding which the Tribunal was required to make involved as its crux not a finding as to existing fact but a prognostication as to the future. Moreover, unless the Tribunal was satisfied that the circumstances described in s.82AAS(2)(a) existed, then it was bound to find that Dr McCabe was an eligible person.

15. In such a case, I would be loath to conclude that the ultimate finding by the Tribunal that Dr McCabe was an eligible person was an unreasonable one, though I may myself have come to a different conclusion. Dr McCabe gave evidence that she was employed on a five year contract and that renewal was not guaranteed. That was a matter, the weight and effect of which the Tribunal had to assess. Putting on one side the Tribunal's reasons for decision, I would not regard the ultimate decision as a decision to which no reasonable decision-maker could have come.

16. However, the Tribunal's crucial finding that "the only reasonable expectation was that this particular Applicant would not serve the University beyond the term of her existing contract" stands in a different position.

17. The evidence on which this finding was based was the evidence that Dr McCabe was employed for a fixed term of five years and the renewal of the contract was not guaranteed. The crux of the evidence by Dr McCabe was as follows, given in answer to a question asked by her representative:-

"Under your fixed term contract is there any guarantee that you will get

continuation of employment after the fixed term contract expires?---No.

It is for a fixed term of 5 years. At the end of that time the

in which I am employed needs to make a case to the staffing committee at

the university. The staffing committee then makes a recommendation to

the budget committee of the university and then that makes a

recommendation to the vice chancellor as to whether that position

continues or not, but at any point along that path the decision may be

made that the position does not continue. If the position is seen to

continue then the position is then advertised both nationally and

internationally and applicants are taken for that position. A selection

committee is then established to determine who gains that position and

there are certainly no guarantees whatever that either the position will

be there after that 5 year term nor that I would gain that position."

18. In accordance with that evidence, the Tribunal found that "She (Dr McCabe) had no assurance that she would continue in the service of that University or any other employer beyond that term." But, the essential issue was whether it was reasonable to expect, on objective not subjective grounds, whether superannuation benefits would be provided to Dr McCabe or her dependants from contributions made by the Macquarie University or a like employer to the State Superannuation Fund. On the above evidence, it was perverse for the Tribunal to hold that the only reasonable expectation was that Dr McCabe would not serve the University beyond the term of her existing contract. Dr McCabe had been employed by the University since 1978 and her position at the University had improved. There was no evidence that she was not well regarded at the University or that she wished to leave the University or did not have in mind applying for renewal when the time came. If she so applied, (as she did), her existing position as a lecturer at the University would carry weight for, in the affairs of people and of organisations such as universities, circumstances tend to continue. Phipson on Evidence, 13th Ed., para 9-16 speaks of "the presumption of continuance", although the work rightly treats this as an inference to be drawn in appropriate circumstances rather than as a presumption. Examples of its application may be seen in, e.g., Clarke v. Alexander 8 Scot NR 161 and Brown v. Wren (1895) 1 QB 390.

19. Dr McCabe in due course applied for renewal of her contract, obtained the renewal and, at the time of the hearing before the Tribunal, held a contract which secured continuous employment with the Macquarie University until 31 December 1994. That fact had evidentiary weight, for the renewal of the contract was reasonably proximate to the 1986 year and confirmed the appropriateness of drawing the inference of probability of the continuance of her employment. The evidence was that Dr McCabe commenced employment with Macquarie University in 1978, had continuous employment at the University thereafter and held, at the time of the Tribunal's hearing, a contract which would not terminate until 31 December 1994.

20. In this context, it was unreasonable for the Tribunal to conclude, and indeed arbitrary for it to conclude without discussion, that the only reasonable expectation was that Dr McCabe would not serve the University beyond the term of the five year contract which commenced in 1984 and concluded in 1989. The evidence did not reasonably admit of this conclusion. See Federal Commissioner of Taxation v. Broken Hill South Ltd [1941] HCA 33; (1941) 65 CLR 150, at pp 155, 157, 160.

21. In making this finding, the Tribunal may unconsciously have transposed the question as to what objectively it was reasonable to expect would happen to the predominantly subjective question whether Dr McCabe was entitled to expect a renewal of her contract. The Tribunal may have concluded that Dr McCabe was not entitled to expect renewal of her contract, because she had a five year contract with no guarantee of its renewal and thus that it was not reasonable to expect such a renewal. If that was the way the Tribunal approached the matter, the Tribunal posed the wrong question, for the test is an objective one.

22. That brings me to the crux of the administrative law issue. An appeal from the Administrative Appeals Tribunal is an appeal limited to a question of law. See s.44(1) of the Administrative Appeals Tribunal Act 1975 (Cth). As Brennan J. said in Waterford v. The Commonwealth, [1987] HCA 25; (1987) 61 ALJR 350 at p 359:-

"There is no error of law simply in making a wrong finding of fact."

23. In some cases, a combination of arbitrariness (in the sense of lack of discussion) and unreasonableness (in the sense that no reasonable person would have made the finding) has been thought to be significant for administrative law purposes. Prior to the decision of the High Court in Australian Broadcasting Tribunal v. Bond [1990] HCA 33; (1990) 64 ALJR 462, I would have considered this case in accordance with the principles stated in Independent FM Radio Pty Limited v. Australian Broadcasting Tribunal (unreported, delivered 21 April 1989) ("I.F.M.") and in Minister of State for Immigration, Local Government and Ethnic Affairs v. Pashmforoosh, noted in (1989) 18 ALD 77 ("Pashmforoosh"). What was said in those cases was that a decision could be set aside if the reasoning process leading to it involved the making of a finding of fact which was unreasonable, particularly findings which seemed arbitrary in the sense that contrary contentions were not discussed. The present is just such a case.

24. In Australian Broadcasting Tribunal v. Bond, Mason C.J., with whom Brennan, Toohey and Gaudron JJ. agreed in this respect, referred adversely to remarks in I.F.M. and Pashmforoosh. On one view, Bond's case enunciated a new approach to administrative law. There are aspects of the remarks of Mason C.J. which support that view. After anxious consideration, I have, however, concluded that the Chief Justice and the other Justices did not intend to do so. I have come to the view that their Honours intended the contrary, namely that judges should heed the existing law and not embark upon a new approach to judicial review.

25. The significant passage, for our purposes, appearing in Mason C.J.'s comments, is at p 479 when his Honour, after referring to remarks in Pashmforoosh went on to say:-

"This statement is unobjectionable to the extent that a finding of fact

constitutes a `decision' such that it can be reviewed for

unreasonableness and on other appropriate grounds. But if the finding

does not constitute a `decision', it is beyond review independently of

such a `decision'. In accordance with what I have already said, a

finding of fact will then be reviewable on the ground that there is no

probative evidence to support it and an inference will be reviewable on

the ground that it was not reasonably open on the facts, which amounts

to the same thing."

26. In the second sentence of that passage, Mason C.J. used the word "independently" and, in the following sentence, the words "will then be reviewable". Those words do not convey that a finding of fact which is not itself a decision but is made in the course of the reasoning leading to a decision is not examinable. His Honour said that such a finding must be examined only in the context of the review of a decision. Thus, a decision may be invalidated on the ground of unreasonableness if, taking into account the reasoning process leading to it, it was a decision to which no reasonable decision-maker would have come.

27. The contention that, in applying grounds of review such as unreasonableness, only the ultimate decision and not the course of reasoning leading to that decision can be considered was also rejected by Pincus J. in Nuchapohn Detsongjarus v. Minister for Immigration, Local Government and Ethnic Affairs (unreported, delivered 19 September 1990). Pincus J. referred by way of example to the reasons for judgment of McHugh J. in Chan v. Minister for Immigration and Ethnic Affairs [1989] HCA 62; (1989) 63 ALJR 561, reasons with which Mason C.J. expressed his concurrence. Pincus J. pointed out that, in McHugh J.'s reasons, "the test of unreasonableness is being applied, not to the ultimate decision as a whole, but to a factual element in the reasoning." Another example to the same effect may be found in the reasons for judgment of Mason J. in Minister for Aboriginal Affairs v. Peko-Wallsend Limited [1986] HCA 40; (1986) 162 CLR 24. In those oft-cited reasons for judgment, Mason J. analysed a number of grounds of judicial review. At p 41, Mason J. said:-

"It follows that, in the absence of any statutory indication of the weight

to be given to various considerations, it is generally for the

decision-maker and not the court to determine the appropriate weight to

given to the matters which are required to be taken into account in

exercising the statutory power: Sean Investments Pty Ltd v. MacKellar

(1981) 38 ALR, at p 375; Reg. v. Anderson; Ex parte Ipec-Air Pty Ltd

[1965] HCA 27; (1965) 113 CLR 177, at p 205; Elliott v. Southwark London Borough

Council (1976) 1 WLR 499, at p 507; (1976) 2 All ER 781, at p 788;

Pickwell v. Camden London Borough Council (1983) QB 962, at p 990.

I say `generally' because both principle and authority indicate that in

some circumstances a court may set aside an administrative decision

which has failed to give adequate weight to a relevant factor of great

importance, or has given excessive weight to a relevant factor of no

great importance. The preferred ground on which this is done,

however, is not the failure to take into account relevant considerations

or the taking into account of irrelevant considerations, but that the

decision is `manifestly unreasonable.'"

28. After referring to a number of decisions in which the ground of unreasonableness had been accepted, Mason J. said at pp 41-2:-

"However, in its application there has been considerable diversity in

the readiness with which courts have found the test to be satisfied: cf.,

e.g., Wednesbury Corporation (1948) 1 KB, at 230, and Parramatta City

Council (1972) 128 CLR, at p 328, with the conclusions reached in

South Oxfordshire District Council v. Secretary of State for the

Environment (1981) 1 WLR 1092, at p 1099; (1981) 1 All ER 954, at

p 960; Shoreham-By-Sea Urban District Council (1964) 1 WLR 240;

(1964) 1 All ER 1; and Minister of Housing and Local Government v.

Hartnell (1965) AC 1134, at p 1173. But guidance may be found in the

close analogy between judicial review of administrative action and

appellate review of a judicial discretion. In the context of the latter,

has been held that an appellate court may review a discretionary

judgment that has failed to give proper weight to a particular matter,

it will be slow to do to do so because a mere preference for a different

result will not suffice: Lovell v. Lovell [1950] HCA 52; (1950) 81 CLR 513, at p 519;

Gronow v. Gronow [1979] HCA 63; (1979) 144 CLR 513, at pp 519-520, 534, 537-538;

Mallet v. Mallet [1984] HCA 21; (1984) 156 CLR 605, at pp 614-615, 622. So too in the

context of administrative law, a court should proceed with caution when

reviewing an administrative decision on the ground that it does not give

proper weight to relevant factors, lest it exceed its supervisory role by

reviewing the decision on its merits."

These passages make it clear that a decision may be invalidated because of an unreasonable step in the reasoning process if that step was of sufficient significance to the ultimate decision to invalidate it.

29. In Bond's case, in the passage I have set out above and elsewhere, Mason C.J. emphasised the distinction, for the purposes of error of law, between a finding of primary fact and an inference made from those facts. This distinction was discussed in an administrative law context in Bracegirdle v. Cobley (1947) 1 KB 349 in which the question was whether a decision of Justices on a point of fact should be set aside for error of law. Lord Goddard C.J., with whom Humphreys, Lewis and Cassels JJ. agreed, considered that the decision of the Justices was perverse, that is to say unreasonable, and therefore should be set aside. But for our purposes, the comments of Denning J. are apposite. His Lordship said at p 358:-

"I agree. The question whether a determination by a tribunal is a

determination in point of fact or in point of law frequently occurs. On

such a question there is one distinction that must always be kept in

namely, the distinction between primary facts and conclusions from

those facts. Primary facts are facts which are observed by the witnesses

and proved by testimony; conclusions from those facts are inferences

deduced by a process of reasoning from them. The determination of

primary facts is always a question of fact. It is essentially

a matter for the tribunal which sees the witnesses to assess their

credibility and to decide the primary fcts which depend on them.

The conclusions from those facts are sometimes conclusions of fact

and sometimes conclusions of law. In a case under s.II of the Road

Traffic Act, 1930, the question whether a speed is dangerous is a

question of degree and a conclusion on a question of degree is a

conclusion of fact. The court will only interfere if the conclusion

cannot reasonably be drawn from the primary facts, but that is the

case here. In my opinion, the conclusion drawn by these justices

from the primary facts was not one that could reasonably be drawn

from them."

The distinction was discussed and applied in another context in the oft-cited Warren v. Coombes [1979] HCA 9; (1979) 142 CLR 531. The distinction is clearly important when the decision has been reached after the hearing of oral evidence, particularly when the evidence has dealt fully with the factual issues. It may have less significance when the decision has been made on the papers, as frequently occurs with administrative decisions.

30. In Bond's case at p 477, Mason C.J. stated the law in Australia in these terms:-

"Thus, at common law, according to the Australian authorities, want of

logic is not synonymous with error of law. So long as there is some

for an inference - in other words, the particular inference is reasonably

open - even if that inference appears to have been drawn as a result of

illogical reasoning, there is no place for judicial review because no

error of law has taken place."

This last comment could be seen to reflect the comments of Lord Sumner, delivering the opinion of the Judicial Committee, in R. v. Nat Bell Liquors Limited (1922) 2 AC 128, where his Lordship said at pp 143-4, in rejecting the argument that review of facts in an administrative decision was to be approached on a like basis to the review of a jury verdict:-

"Whether the verdict was one which twelve reasonable men could

have found, whether the evidence was such that a jury could find on it

otherwise than in one way, whether the evidence was such that a jury

could safely convict upon it, and whether it was such that a Court of

criminal appeal should refuse to interfere with the conviction, are

questions which, though fully argued, have no relation to the functions

of a superior Court on certiorari. They all imply that there was

evidence, but not much; they all ask whether that little evidence was

enough; they are all applied to a body of men who are not the absolute

judges of fact, but only judges whose decision may, though rarely, be

disturbed. On certiorari, so far as the presence or absence of evidence

becomes material, the question can at most be whether any evidence at

all was given on the essential point referred to. Its weight is entirely

for the inferior Court: `If indeed there had been any evidence whatever,

however slight, to establish this point,' said Lord Kenyon in Rex v.

[1800] EngR 191; (1800) 8 TR 588, 590, `and the magistrate who convicted the defendant

had drawn his conclusion from that evidence, we would not have

examined the propriety of his conclusion; for the magistrate is the sole

judge of the weight of the evidence. And for this reason I think there

no foundation for the first objection .... There was some evidence from

which he might draw the conclusion.'"

However, Mason C.J. did not enunciate that approach. In the passage I have just cited and elsewhere, his Honour used the expression "reasonably open".

31. His Honour's use of that expression accords with many observations found in judgments of the High Court. Thus, in Metropolitan Gas Co. v. Federal Commissioner of Taxation [1932] HCA 58; (1932) 47 CLR 621 at p 632, Gavan Duffy C.J. and Starke J. said that the Federal Commissioner of Taxation:-

"... must act `according to the rules of reason and justice, not according

to private opinion ... ; according to law, and not humour': he must not act

in a vague or fanciful manner, but legally and regularly (Sharpe v.

Wakefield) (1891) AC 173 at p 179".

In Australasian Scale Co. Ltd v. Commission of Taxes (Qld)(1935) [1935] HCA 23; 53 CLR 534 at p 555, Rich and Dixon JJ. said as to the examinability of the exercise of the Commissioner's discretion:-

"If he exercises his discretion capriciously, or fancifully, or upon

irrelevant or inadmissible grounds, it may be set aside."

In Federal Commissioner of Taxation v. Broken Hill South Ltd [1941] HCA 33; (1941) 65 CLR 150, Starke J. said at p 156 that the question was:-

"... whether there was material before it (a board of review) upon which

it could reasonably reach its conclusion".

At p 157 McTiernan J. referred to "materials ... upon which the board could properly find".

"The only question of law which arises on the appeal, therefore, is

whether there is any evidence on which the board could reasonably

conclude ..."

In R. v. Connell; ex parte The Hetton Bellbird Collieries Ltd [1944] HCA 42; (1944) 69 CLR 407 at p 430, Latham C.J. said:-

"Thus, where the existence of a particular opinion is made a condition

of the exercise of power, legislation conferring the power is treated as

referring to an opinion which is such that it can be formed by a

reasonable man who correctly understands the meaning of law under

which he acts."

"If the opinion which was in fact formed was reached by taking into

account irrelevant considerations or by otherwise misconstruing the

terms of the relevant legislation, then it must be held that the opinion

required has not been formed. In that event the basis for the exercise

of power is absent, just as if it were shown that the opinion was

These are only some of many such illustrations of dicta which accept that unreasonableness in the sense of perverseness, arbitrariness, capriciousness and the like may give rise to a reviewable error of law. I have already referred to more recent authorities such as the judgment of Mason J. in Peko-Wallsend and the judgment of McHugh J. with whom Mason C.J. agreed in Chan's case.

32. In the passages I have mentioned in Bond's case, Mason C.J. indicated that the ground of "no probative evidence" and the ground of "not reasonably open" amounted to the same thing, and therefore that a decision must be reasonably open on the evidence. His Honour pointed out, however, that mere want of logic was not synonymous with error of law and he referred to the comment made by Menzies J. in R. v. The District Court; ex parte White [1966] HCA 69; (1966) 116 CLR 644 where his Honour said at p 654, "To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law."

33. I read Mason C.J.'s comments as a warning not to blur the distinction between unreasonableness or perverseness on the one hand and want of logic on the other and that a strong case is necessary to upset a factual finding. Similarly, in Nuchapohn Detsongjarus v. Minister for Immigration, Local Government and Ethnic Affairs, Pincus J., having expressed the view that factual inferences may be challenged on the ground of unreasonableness, went on to say that, "Bond's case and others show that a strong case indeed is necessary to upset factual views on such a ground."

34. In the present case, the Tribunal found that, "Throughout the year of income ended 30 June 1986 the only reasonable expectation was that this particular Applicant would not serve the University beyond the term of her existing contract." The finding was an inference from primary facts and not itself a finding of primary fact. No direct evidence was given or could have been given as to it. I am entitled to consider if the finding was a finding to which no reasonable decision-maker would have come. As plainly the weight of the evidence was to the contrary, as the Tribunal used the word "only" to describe the expectation, when plainly the opposite could and should have been expected, and as the Tribunal failed to discuss the contentions to the contrary which favoured the Commissioner's case, then it is proper in my view to draw the conclusion that the finding was unreasonable and arbitrary, or to use other adjectives, capricious, fanciful and perverse. The finding was so crucial to the ultimate decision made by the Tribunal that, in the light of the Tribunal's reasons, the Tribunal's decision should be set aside on the ground that, being a decision to which no reasonable decision-maker would have come, it involved an error of law.

35. The matter will be remitted to the Administrative Appeals Tribunal to be heard and decided again with or without further evidence. In this event, counsel for the Commissioner did not seek costs.

Tax Assessment Act 1936

Appeals Tribunal Act 1975

Information Act 1982

Tax Assessment Act 1936

Appeals Tribunal Act 1975

Information Act 1982

Tax Assessment Act 1936

Appeals Tribunal Act 1975

Information Act 1982

Tax Assessment Act 1936

Appeals Tribunal Act 1975

Information Act 1982

Re Commissioner of Taxation of the Commonwealth of Australia v Marita Mccabe [1990] FCA 389; 21 Atr 992 12 Aar 447 26 FCR 431

At a glance

Court

Decision date

Before

Source

Judgment (98 paragraphs)

Re Commissioner of Taxation of the Commonwealth of Australia v Marita Mccabe [1990] FCA 389; 21 Atr 992 12 Aar 447 26 FCR 431 (12 October 1990)

Parties

Legislation Cited (12)

Cases Cited (15)