03 Sep 2015
A question of law: The Full Federal Court allows greater flexibility for AAT appeals
by Caroline Bush, Mathew Bock
Federal Court judges are embracing a new "substance rather than form" approach to identifying questions of law, and are more likely to deal with appeals from decisions of the AAT on a final, rather than interlocutory, basis.
The Federal Court of Australia has overruled previous authority in relation to its jurisdiction to consider appeals from decisions of the Administrative Appeals Tribunal (AAT). Federal Court judges will now have greater flexibility in identifying questions of law in relation to which appeals may be made.
A properly articulated question of law as a basis for appeal
Section 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act) confers a right to appeal a decision of the AAT to the Federal Court on a question of law. In considering the scope of the Federal Court’s jurisdiction, it had previously been remarked that a question of law must be "stated with precision as a pure question of law" (see Birdseye v Australian Securities and Investments Commission  FCAFC 232). Further, the absence of a properly articulated question of law was said to leave the Federal Court with no jurisdiction under section 44 to consider appeals from decisions of the AAT.
The need for a properly articulated question of law was first reconsidered by the Federal Court in Haritos v Commissioner of Taxation  FCA 96;  FCAFC 92. This matter arose following a decision of the AAT to affirm the Commissioner of Taxation's decisions in relation to certain assessments and penalties for particular years.
The taxpayers commenced proceedings in the Federal Court by way of a notice of appeal which initially contained questions of law that were formulated in the abstract and without reference to the Tribunal's decision or an aspect of the decision which was said to be wrong in law. Even after subsequent amendments to the taxpayer's notice of appeal (which were allowed during the course of argument at the final hearing) the Court was not satisfied that it had jurisdiction to consider the appeal and observed (at ) that:
"[T]he true complaints of the taxpayers were not about questions of law but about the Tribunal's findings on the evidence before it and what the taxpayers were seeking in the appeal was a merits review by the Court of the Tribunal's decision."
The taxpayers appealed this decision to the Full Federal Court and engaged new counsel to represent them. Before the Full Federal Court the taxpayers relevantly argued that their appeal was competent and that the AAT decisions should have been set aside.
The Full Court gives greater flexibility to the Federal Court when hearing appeals from the AAT
A Full Court of five judges was empanelled to revisit the question of how courts determine whether they have jurisdiction to hear appeals pursuant to section 44 of the AAT Act. Relevantly, the Full Court accepted that there must be a question of law in order to enliven the Court's jurisdiction but that any consideration of whether a question of law had been properly articulated ought to be addressed as a matter of substance rather than form. In particular, the Full Court found that:
- having a "precise" question of law, while being of assistance to the efficient and effective hearing and determination of appeals, is not a matter that goes to the existence of the jurisdiction conferred on the Court;
- section 44 should not be construed so as to require a "pure" question of law, rather some so called "mixed questions of fact and law" may fall be within the jurisdiction of the Court to review;
- a question of law is not restricted to jurisdictional errors and extends to non-jurisdictional errors of law.
The Full Court then turned to consider the taxpayer's grounds stated in their notice of appeal to the Full Court. The Full Court was satisfied of a number of errors of law in the Tribunal's decision, including that the Tribunal:
- made findings that were irrational, illogical and not based on findings or inferences supported on logical grounds;
- misconstrued the burden of proof in section 14ZZK of the Tax Administration Act 1953 (Cth); and
- erroneously concluded that certain payments were ordinary income for the purposes of section 65 of the Income Tax Assessment Act 1997 (Cth).
Accordingly, the Full Court allowed the appeal and remitted the matter for reconsideration according to law by the AAT. However, on the question of costs, notwithstanding the fact that the taxpayers were ultimately successful on appeal, they were unable to secure a favourable costs order for the proceedings before the primary judge (Haritos v Commissioner of Taxation (No 2)  FCAFC 107).
What does this mean for appeals from the AAT?
We consider that most significant effect of the decision in Haritos is that Federal Court judges are now more likely to deal with appeals from decisions of the AAT on a final, rather than interlocutory, basis (see: Kennedy v Secretary, Department of Industry  FCA 714 at ). Further, it is clear that Federal Court judges are already embracing the new "substance rather than form" approach to identifying questions of law (see: Sherrah v Commonwealth Superannuation Corporation  FCA 698; Rigoli v Commissioner of Taxation  FCA 803).
We are also conscious of the Court's observations about the impact that a failure to identify questions of law with precision can have upon the efficient and effective conduct and determination of appeals. In this regard, we consider that the Court may be more receptive to arguments made by respondents concerning costs incurred as a result of poorly expressed questions of law or late amendments to notices of appeal, particularly where the applicants are legally represented.