Case: Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40 ; (1986) 162 CLR 24
Outcome: cited
In the section under the heading "Explanations" which dealt with the discretion it was said, in [82]: This part of the Ruling provides a general guide for taxpayers and officers of the ATO when considering the exercise of the discretion. This is desirable in the interests of consistent, efficient administration and equity among taxpayers in similar circumstances. However, the decision-maker must exercise the discretion according to the merits of each case and should not fetter the discretion by inflexibly applying, or acting in blind obedience to a policy or rule ... There were then set out in [83] and [84] "Factors relevant to the exercise of the discretion". Those two paragraphs provided: 83. The exercise of the discretion under subsection 80G(6A) (paragraph 170-50(2)(d)) includes a two-step process of identifying relevant factors and applying a weighting to each of those factors, having regard to the circumstances of the case. Further, it is for the decision-maker to determine the appropriate weighting to be applied to these factors - see Minister for Aboriginal Affairs and Anor v Peko-Wallsend Ltd and Ors [1986] HCA 40 ; (1986) 162 CLR 24. 84. Applications for the exercise of the discretion usually fall into one of two broad categories. The first is where it can be said that there has been delay on the part of the taxpayer that results in non-compliance with the ... time limit. The second is where the request for an extension of time to make an agreement arises out of an adjustment to the tax position of the company group by the Commissioner. The following paragraphs outline the factors the Commissioner considers to be relevant to the exercise of the discretion ... in both categories, although they are by no means exhaustive. 136 A failure to take into account a relevant consideration or considerations in the exercise of a power is one of the grounds set out in s 5(2) of the ADJR Act for finding that there has been an improper exercise of the power within the meaning of s 5(1)(e) of that Act. In Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40 ; (1986) 162 CLR 24 at 39 Mason J made the following points about this head of review: (a) The ground of failure to take into account a relevant consideration can only be made out if a decision-maker fails to take into account a consideration which he is bound to take into account in making that decision. (b) What factors a decision-maker is bound to consider in making the decision is determined by construction of the statute conferring the discretion. If the relevant factors are not expressly stated, they must be determined by implication from the subject matter, scope and purpose of the Act. (c) Not every consideration that a decision-maker is bound to take into account but fails to take into account will justify the court setting aside the impugned decision and ordering that the discretion be re-exercised according to law. (d) The limited role of a court reviewing the exercise of an administrative discretion must constantly be borne in mind. It is not the function of the court to substitute its own decision for that of the administrator by exercising a discretion which the legislature has vested in the administrator. 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 be given to the matters which are required to be taken into account in exercising the statutory power. 137 Paragraph 36(a) of the application set out some 29 matters each of which were said to be a relevant consideration not taken into account by the first respondent. These included various aspects of the factual history which has already been outlined. It is not necessary for present purposes to address each of those matters. This was not done in the submissions. Many of them, as elements of the factual history could not conceivably be mandatory relevant considerations. Rather it is helpful to focus upon those matters, which having regard to the nature of the discretion, could be said to be mandatory relevant factors. 138 Earlier in these reasons a number of matters relevant to the discretion to extend time under s 170-50(2)(d) were set out. Some of them overlapped with those set out by Wilcox J in Hunter Valley Developments Pty Ltd 3 FCR 344. They were however formulated by reference to the scope and purpose of Subdiv 170-A and s 170-50 of the ITAA 1997. While many aspects of the history of dealings between the Commissioner, his officers and DRI and Development Finance could not be said to be mandatory relevant considerations, there were features of that history overall that went to matters at the heart of the statutory purpose. Although the reasons for his decision given by Mr Duffus in his letter of 14 February 2006 made reference to Taxation Ruling TR 98/12 they disclosed no consideration of the general purpose of Subdiv 170-A. There was no reference to the effect on the statutory purpose, in this case, of the requested extension of time. There was no reference to any adverse impact upon DRI and Development Finance of the inability to transfer losses or of any prejudice to the position of the Commissioner for the good administration of the Act were the extension of time to be allowed. A failure to have regard to those general issues may have resulted in a failure to give express consideration to certain of the factual matters referred to in [36] of the application. There was no evidence in the reasons for decision of any balancing of competing considerations having regard to those purposes. 139 It was also a relevant factor, apparently not taken into account by Mr Duffus, that the Commissioner was well aware of the intention of DRI to transfer tax losses to Development Finance when its position had crystallised. That crystallisation took a long time because of the extended audit of the tax position of Development Finance. On 30 November 2004 Mr Killaly wrote to Mr Mulqueen, in respect of extensions for the year ended 30 June 2000 saying that: In our view, there is no reason to seek the Commissioner's permission to make additional loss transfer agreements until such time as the loss deductions available to the income companies are finally determined. And further: We consider that the appropriate time to seek the favourable exercise of the Commissioner's discretion would be once amended assessments had issued to the income companies (were this to occur). Mr Killaly described the issue at that time as "hypothetical". The letter of 1 December 2004 from Mr Killaly to Mr Clough of Mallesons was to similar effect. 140 This matter is specifically referred to as a mandatory relevant consideration not taken into account in [36(a)(xxvi)]. Importantly, no consideration appears to have been given to the fact that the Commissioner was well aware well in advance of the request that the BHPGroup proposed to request a transfer of tax losses in the relevant years. A finding that the factor of delay should be "taken into account but should not be weighted heavily against the favourable exercise of the discretion" indicates a narrowly based approach to the question of the delay. Had the relevant statutory purposes and the factors of prejudice on both sides together with the ongoing advice of the intention to effect loss transfers been taken into account, then this factor might well have been treated as neutral and not weighed against DRI and Development Finance at all.