15 Jun The High Court’s strict interpretation of taxation laws favours the Commissioner
The High Court’s decision in Commissioner of State Revenue v ACN 005 057 349 Pty Ltd affirms the favoured purposive approach to statutory interpretation. Statutory powers and provisions must be read within their legislative framework to give effect to the legislature’s intention (in this case the certainty of state revenue from land tax) even where this produces harsh results for individual taxpayers.
So powerful was this analysis that the statute of limitations upheld in this instance in favour of the Commissioner operated, or should have operated, as a limitation on the Victorian Supreme Court’s jurisdiction to hear the matter. The High Court also applied FCT v Futuris (2008) 237 CLR 146, finding that the Commissioner will not be found to have engaged in conscious maladministration in the event of an honest mistake, however serious or obvious. Such an interpretation of the concept of conscious maladministration would “drain it of its content”.
The Respondent owns two adjoining properties in Toorak one of which was the subject of duplicate tax assessments. The Respondent was initially notified of this error by the Commissioner who issued a reassessment and refund for the period 2008 to 2011. Ten years later the Respondent discovered further duplicate assessments between 1990 and 2002 and sought an amended assessment under s19 of the Land Tax Act 1958 (Vic) (LTA). The Commissioner refused on the basis that the three-year time frame for recovering a refund under s90AA of the LTA (including via court proceedings) had passed making any exercise of the discretionary power futile.
The Respondent brought two unsuccessful proceedings against the Appellant before Sloss J in the Supreme Court of Victoria. The first by originating motion seeking a mandamus to compel the Commissioner to amend the assessment and refund the difference plus interest, and the second commenced by writ claiming restitution for the excess tax paid under the LTA plus interest. The proceedings were statute barred by s90AA of the Act. The Respondent appealed against both decisions.
Overruling Sloss J, the Court of Appeal (Hansen and Tate JJA and Robson AJA) found the Commissioner’s decision not to exercise the s19 amendment power to be a wilful refusal to correct an error he was duty bound to correct to ensure the integrity of the land tax scheme and amounted to conscious maladministration. The Court of Appeal ordered that the Commissioner amend the assessment and refund the taxpayer with interest.
High Court ruling
In reversing the Court of Appeal’s decision and finding for the Commissioner with costs, the High Court (Kiefel and Keane JJ, Bell and Gordon JJ and Gagelar J) emphasised the overall purpose of the LTA as creating some certainty of state revenue from land tax which is reflected in the time-limit imposed on taxpayers seeking refunds. The High Court criticised the Court of Appeal’s handling of the case on a number of grounds:
- the Court of Appeal did not have jurisdiction to hear the matter because s90AA expressly precluded it;
- the Court of Appeal’s construction of the key provisions was ‘contrary to the text, context and purpose of the LTA’, namely misconstruing the discretionary power in s19 as imposing a duty on the Commissioner to amend erroneous assessments in contradiction to the legislature’s intention to limit the time for refunds; and
- the finding of conscious maladministration lacked any basis in law or fact and was not open to the Court of Appeal to make.
Notably, the High Court indicated that no finding of conscious maladministration may apply for an honest mistake by the Commissioner.
Need to know
This case restates and applies the following principles:
- provisions must be read in their legislative context to give effect to the legislation’s overall purpose;
- legislative schemes that expressly alter the jurisdiction of courts to hear matters falling under that legislation or that limit the circumstances and time for bringing actions must be adhered to in order to give effect to the legislation’s overall purpose;
- discretionary powers are “facultative” and as such rarely impose a duty to act (excepting where they include detailed criteria for triggering the power);
- as a serious allegation denoting corruption in public office, conscious maladministration should not be entertained where the facts do not support it and where the decision is permitted on the face of the governing legislation; and
- the relevance of cases dealing with different tax schemes (eg. in this case income tax) is often limited highlighting the primacy of a tax provision’s specific legislative history and policy rationale and its interaction with other provisions within the act.
Co-authored by Laura Keily and Chloe Armstrong.