FEDERAL COURT OF AUSTRALIA Smith v Oakenfull [2004] FCA 4 ADMINISTRATIVE LAW – where history of mal-administration – where claim under Compensation for Detriment Caused by Defective Administration scheme – whether scheme made under an enactment – whether scheme an instrument. WORDS & PHRASES – 'under an enactment'. Acts Interpretation Act 1901 (Cth) s 38 Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 3, 3(1)(a), 5 Commonwealth Constitution s 64 Financial Management and Accountability Act 1997 (Cth) ss 5, 33, 44 Australian Broadcasting Tribunal v Bond & Ors (1990) 170 CLR 321 considered Chittick v Ackland (1984) 1 FCR 254 considered Salemi v Mackellar (No 2) (1977) 137 CLR 396 considered Hutchins v Commissioner of Taxation (1996) 65 FCR 269 followed GRAHAM SCOTT SMITH v CHARLES OAKENFULL Q 137 OF 2003 DOWSETT J 2 FEBRUARY 2004 BRISBANE IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 137 OF 2003 BETWEEN: GRAHAM SCOTT SMITH APPLICANT AND: CHARLES OAKENFULL RESPONDENT JUDGE: DOWSETT J DATE OF ORDER: 2 FEBRUARY 2004 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The application be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY Q 137 OF 2003 BETWEEN: GRAHAM SCOTT SMITH APPLICANT AND: CHARLES OAKENFULL RESPONDENT JUDGE: DOWSETT J DATE: 2 FEBRUARY 2004 PLACE: BRISBANE REASONS FOR JUDGMENT 1 On 10 September 2003 the applicant sought, pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the "ADJR Act") judicial review of a decision of the respondent who is the Assistant Secretary - Personnel Services in the Department of Defence. The decision was notified to the applicant by letter dated 24 July 2003. It was made in connection with a scheme described as 'Compensation for Detriment Caused by Defective Administration' (the "CDDA scheme"). 2 The applicant is an ex-member of the Australian Army. In the course of his service he was injured in circumstances which entitled him to a pension and to have his medical expenses met by the Department of Defence or some other agency of the Commonwealth. He has experienced considerable difficulty in securing his entitlements. Errors have been made in calculating his pension, and medical bills have not been met promptly. He claims also to have discovered errors in relevant departmental records. The applicant claims to have incurred expenditure and other loss as a result of these errors and irregularities. As I understand it, the respondent concedes that administration of the applicant's file has been less than perfect. 3 The CDDA scheme offers compensation to persons who suffer detriment as a result of defective administration in government agencies. At some time prior to 24 July 2003, the applicant wrote an un-dated letter to the respondent seeking the amount of $59,739.35 as compensation. This letter was treated as a request for compensation pursuant to the CDDA scheme, which request was declined by letter dated 24 July 2003. That decision is the subject of this application. On 7 November 2003 the respondent moved to dismiss the application on the ground that no reasonable basis is demonstrated for it. The respondent also points out that the applicant needs an extension of time in order to bring the application and that necessary parties may not have been joined. The solicitor for the respondent did not abandon these points but submitted that the proceedings were defective in any event because the decision in question was not a decision to which the ADJR Act applies. 4 Section 5 of that Act permits review of '… a decision to which this Act applies …'. Pursuant to s 3 'decision to which this Act applies' means: '…a decision of an administrative character made, proposed to be made, or required to be made (whether in the exercise of a discretion or not and whether before or after the commencement of this definition): (a) under an enactment referred to in paragraph (a), (b), (c) or (d) of the definition ofenactment … .' 5 The term "enactment" relevantly means an 'Act' or an '…instrument (including rules, regulations or by-laws) made under such an Act ...' with certain irrelevant exceptions. Pursuant to s 38 of the Acts Interpretation Act 1901 (Cth), the word "Act" means an Act of the Parliament of the Commonwealth. The respondent submits that the decision in question was not made 'under an enactment'. 6 The CDDA scheme is outlined in guidelines issued as 'Attachment B to Finance Circular 2001/01'. The purpose of the scheme is set out in par 2 as follows: 'When a Commonwealth agency has acted unreasonably or provided wrong or ambiguous information which leads to a financial (and sometimes non-financial) loss, it is reasonable to expect that the agency should provide compensation for the loss even if its actions do not amount to a liability to the other party.' 7 Paragraphs 3, 4 and 5 are also of particular relevance. They provide: '3. CDDA is an administrative scheme, established in October 1995, to enable Commonwealth agencies to compensate persons who have been adversely affected by the "defective" actions or inaction of such agencies, but who have no other avenues to seek redress. 4. These guidelines encompass the Government approved framework (ie definitions, criteria and limitations) for CDDA as originally set out in Estimates Memorandum (EM) 1995/42. As such, these guidelines repeal and replace EM 1995/42 with effect from the date of the covering Finance Circular 2001/01. 5. These guidelines describe the CDDA scheme and set out the steps that a decision maker should take in considering whether to compensate a claimant. Factors described in the guidelines to be taken into account when making a decision are not checklists and each case must be determined on its own merits. Care should be taken to ensure that the principles of natural justice are applied to CDDA matters to ensure that claimants are treated equitably.' 8 Other relevant aspects of the CDDA scheme are that: ® it does not apply to Commonwealth authorities and companies which are legal entities, separate from the Commonwealth; ® the scheme does not place an obligation on a decision-maker to approve a payment in any particular case; and ® the scheme does not apply where it is reasonable to conclude that the Commonwealth would have a legal liability to pay in the event of litigation. 9 Paragraphs 53 and 54 provide: '53. Where an authority is given by a Minister to an agency official to approve payments under this scheme, that authority is to be conferred expressly - ie, separately from the Minister's general authorisations to incur expenditure. ® This requirement is in recognition of the special and potentially sensitive nature of decisions that may be made under the scheme, for which the agency and its Minister may be held accountable. … 54. In general, CDDA payments should be funded through Departmental Appropriations and reported under an appropriate agency outcome. However, if any part of a CDDA payment can be settled under statutory entitlement provisions, then it should be paid from the relevant Administered Appropriation and reported under the associated outcome.' 10 Finance Circular 2001/01 (to which the guidelines were attached) is headed 'Commonwealth Compensation "Schemes", Debt Waiver and Write-Offs'. It is a memorandum from the Department of Finance and Administration addressed to 'All Departments of State, Parliamentary Departments and Prescribed Agencies'. 11 Under the heading 'Key Points' it states that: 'This Circular provides a consolidated overview of Commonwealth compensatory "schemes", debt waiver and write-off provisions. It also provides detailed guidelines for agencies on the following schemes for which the Department of Finance and Administration (Finance) has policy responsibility: Compensation for Detriment Caused by Defective Administration (CDDA scheme); act of grace payments; and waiver of debts owed to the Commonwealth under the Financial Management and Accountability Act 1997 … .' 12 In Attachment A to the circular, the various schemes are summarized and the authority for each is identified. The CDDA scheme is said to be 'Provided under the Government's inherent Constitutional powers and a specific Government decision, Oct 1995'. The tenor of such "Government decision" appears from Estimates Memorandum 1995/42. It seems that the intention was to establish a regime for dealing with claims for compensation arising out of mal-administration. Such claims had previously been dealt with by way of "act of grace" payments. It was intended that they no longer be dealt with in that way. Nonetheless, "act of grace" payments were to continue to be available in circumstances not covered by the CDDA scheme. Section 33 of the Financial Management and Accountability Act 1997 (Cth) (the "FMA Act") authorizes the Finance Minister to consider and approve "act of grace" payments. It provides relevantly as follows: '(1) If the Finance Minister considers it appropriate to do so because of special circumstances, he or she may authorise the making of any of the following payments to a person (even though the payment or payments would not otherwise be authorised by law or required to meet a legal liability): (a) one or more payments of an amount or amounts specified in the authorisation (or worked out in accordance with the authorisation); (b) periodical payments of an amount specified in the authorisation… . (2) … (3) Conditions may be attached to payments under this section. … (4) Payments under this section are to be made out of money appropriated by the Parliament for the purposes of this section.' 13 The applicant's entitlement to judicial review depends upon there having been either: ® a decision "under" a Commonwealth statute; or ® a decision "under" an instrument made "under" such a statute. 14 The expression "under an enactment" poses numerous problems. The clearest and most authoritative statement of its meaning appears in the judgment of Mason CJ (Brennan and Deane JJ concurring) in Australian Broadcasting Tribunal v Bond & Ors (1990) 170 CLR 321 where his Honour said (at 337): '… a reviewable "decision" is one for which provision is made by or under a statute.' 15 Other questions arise as to whether the decision must be "final" and as to whether it must ultimately have some legal effect. It is not necessary to address those matters at this stage. Clearly, Attachment B makes provision for decisions such as that presently under review. The respondent's position is that Attachment B is not an enactment for the purposes of par 3(1)(a) of the ADJR Act because it is not an instrument made under a Commonwealth Act. That argument invites consideration of the authority of the Department of Finance and Administration to issue Finance Circular 2001/01. Pursuant to s 64 of the Constitution: 'The Governor-General may appoint officers to administer such departments of State of the Commonwealth as the Governor-General in Council may establish. Such officers shall hold office during the pleasure of the Governor-General. They shall be members of the Federal Executive Council, and shall be the Queen's Ministers of State for the Commonwealth.' 16 Apparently pursuant to this power, the Governor General issued an Administrative Arrangements Order ("AAO") dated 26 November 2001. It has been subsequently amended. It provides as follows: '1. The matters dealt with by a Department of State include: (a) the matters referred to in the Part of the Schedule relating to that Department; and (b) matters arising under the legislation administered by a Minister of State administering the Department. 2. The legislation administered by a Minister of State administering a Department is: (a) the legislation referred to in the Part of the Schedule relating to that Department; and (b) legislation passed before or after the date of this Order, that relates to a matter dealt with by the Department, not being legislation referred to in another Part of the Schedule.' 17 Part 9 of the Schedule deals with the Department of Finance and Administration. Relevantly, the matters dealt with by the Department are said to include: 'Government financial accountability, governance and financial management frameworks'. 18 None of the legislation listed in Part 9 appears to be relevant for present purposes. 19 Financial Circular 2001/01 readily falls within the description of "Government financial accountability, governance and financial management frameworks". However the conferment of authority upon the Department of Finance and Administration to act in that area appears to be in exercise of the executive power, and not pursuant to any legislation of the Commonwealth Parliament. In any event Attachment B cannot be properly described as an "instrument". In Chittick v Ackland (1984) 1 FCR 254 at 263-4 Lockhart and Morling JJ said: 'In our opinion for a document to answer the description of an instrument made under an Act or an Ordinance it must first be a document made "under" an Act or an Ordinance. The word "under", in the context of the Judicial Review Act, means "in pursuance of" or "under the authority of": ... . But as their Honours pointed out in Burns' case at 31 the difficulty lies in applying the word "under" to particular circumstances. Further, for a document to be an instrument for the purposes of s. 3(1) it must be a document under which decisions of an administrative character may be made. We think that some additional quality is required to give a document the status of an instrument for the purpose of s. 3(1) of the Judicial Review Act. Before stating what that additional quality is we must, however, sound a cautionary note. Questions of construction of enabling statues like the Judicial Review Act are rarely solved at the one time. In the continuing solution of such problems usually there is a history of development and sometimes of change. Bearing this in mind in our opinion this is not the time to seek to expound definitively the meaning and ambit of the expression "instrument ... made under such an act ...". This must be determined progressively in each case as particular questions arise. … As at present advised we accept that to qualify as an instrument for the purposes of the Judicial Review Act the document must be of such a kind that it has the capacity to affect legal rights and obligations. It seems to us that if a document has such capacity it should be regarded as an instrument for the purposes of that Act.' 20 In my view Attachment B is, in effect, a statement of policy. It is clearly revocable at any time; it is neither compelled nor expressly authorized by statute or regulation. The CDDA scheme is, in effect, a mechanism for dealing with complaints which do not raise any arguable assertion of legal wrongs. It is perhaps not unduly cynical to say that the CDDA scheme is designed to avoid public-relations problems involving public bodies and the political consequences of such problems. In Salemi v MacKellar (No 2) (1977) 137 CLR 396 at 406 - 407, Barwick CJ said: 'Statements of policy as a rule do not create legal obligations, though they may understandably excite human expectations as distinct from lawful expectations. … Governments are free to change policies. They are also free not to implement them.' 21 Paragraph 9 of Attachment B asserts that: 'The CDDA scheme does not obligate 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.' 22 Various aspects of the Attachment suggest that an applicant for compensation is entitled to procedural rights and a fair assessment of the complaint. However it is revocable at will. Those provisions seem to be merely advice as to how a decision-maker should proceed. The Attachment does not create legal rights and/or obligations. In my view the document cannot be classified as an instrument for the purposes of the ADJR Act. 23 There is one other possible statutory basis for the decision under challenge. It is reasonable to infer that the permanent head of the Department of Defence has responsibility for the assets of the Department, including its funds, and that the respondent's decision may have been made in exercise of powers inherent in such responsibility. In fact, s 44 of the FMA Act provides: '(1) A Chief Executive must manage the affairs of the Agency in a way that promotes proper use of the Commonwealth resources for which the Chief Executive is responsible. (2) ... (3) In this section: proper use means efficient, effective and ethical use.' 24 The definitions of the words "Agency" and "Chief Executive" in s 5 of the FMA Act suggest that this section applies to the permanent head of the Department of Defence. It is not difficult to imagine ways in which the payment of compensation to a dissatisfied client would bring about the saving of departmental resources. Such a client will often be perfectly capable of wasting large amounts of departmental time in one way or another. Further, there will always be the risk of litigation commenced by such a client, with little or no prospect of success. Such litigation would involve the Department in legal expense, often with little prospect of recovering costs from the client. Thus it could be argued that the permanent head has a duty to consider paying compensation to such a client. It might be thought to follow that a decision to do so, or not to do so, would be arguably made "under" s 44. 25 However the decision of the Full Court in Hutchins v Commissioner of Taxation (1996) 65 FCR 269 poses a considerable hurdle to such an argument. In that case the Court considered an application by an insolvent taxpayer for review of a decision by the Commissioner of Taxation to vote against a proposed scheme of arrangement. The Commissioner had the '…general administration of [the Income Tax Assessment Act 1936 (Cth)]'. The Act provided that income tax, when due and payable, should be a debt due to the Commonwealth and payable to the Commissioner. The Commissioner was expressly authorized to sue to recover such debt. The question was whether or not the decision by the Commissioner to oppose the scheme was a decision "under" the Act. Black CJ and Spender J concluded that it was not. Lockhart J held to the contrary. Black CJ referred to the passage from the judgment of Mason CJ in Bond to which I have already referred and continued at 271 et seq: 'Counsel for the respondent relied upon these observations of Mason CJ in Bond and submitted that the relevant enactment, the Income Tax Assessment Act, did not anywhere "make provision" for the making of the respondent's decision. He submitted that whilst the Income Tax Assessment Act conferred authority on the Commissioner to decide to vote at the meeting of creditors, the conferral of authority to make a decision, whether express or implied, did not mean that a statute necessarily "made provision" for the making of such a decision. He submitted further, in reliance upon what was said in General Newspapers Pty Ltd v Telstra Corporation (1993) 45 FCR 164 at 169, 170 and 172 by Davies and Einfeld JJ, with whom on that point Gummow J agreed, that for a decision to be a decision under an enactment, the enactment, or a principle of law applicable to the enactment, must give the decision statutory effect and force. The decision must have statutory effect because of the provisions of the federal enactment concerned. That, he submitted, was not the effect of the provisions of the Income Tax Assessment Act relied upon by the appellants. It is clear that there may be a decision "under an enactment" within the meaning of that expression in the ADJR Act notwithstanding that the enactment concerned does not expressly require or authorise the decision in question but does so impliedly. Thus in Minister for Immigration and Ethnic Affairs v Mayer (1985) 157 CLR 290 it was held by Mason, Deane and Dawson JJ, Gibbs CJ and Brennan J dissenting, that the Minister's decision that the respondent did not have refugee status was made in the performance of a function impliedly conferred upon him by s 6A(1)(c) of the Migration Act 1958 (Cth), which was to the effect that an entry permit was not to be granted unless one or more of a number of conditions was met, one of them being that "the Minister has determined ... that he has the status of a refugee". The decision was accordingly a decision made in the performance of the statutory function that the paragraph impliedly conferred upon the Minister and was, within s 3(1) of the ADJR Act, a decision made "under an enactment". Their Honours observed (at 302-303): "A legislative provision operating upon a specific determination of a Minister or other officer can readily be construed as impliedly conferring upon the designated Minister or other officer the statutory function of making the particular determination." See also Chan Yee Kin v Minister for Immigration and Ethnic Affairs (1989) 169 CLR 379 at 404 per Toohey J. Where a decision is impliedly required or where the authorisation for a decision is to be implied in a context as specific as that [in Mayer], the enactment can be seen "to make provision" for the making of the decision. Where, however, the authorisation is very general it is difficult to see how an enactment may be said "to make provision" for a decision in the sense in which that expression was used by Mason CJ in Bond at 337. It seems to me that Mason CJ contemplated that there might be acts, capable of being called decisions, that were authorised in the sense of being within the general scope of powers conferred by an enactment but as to which the enactment could not be said to make provision, and which would therefore not be decisions under the enactment. Thus, a decision for which "provision is made" by or under an enactment "will generally, but not always, entail a decision which is final or operative and determinative, at least in a practical sense, of the issue of fact falling for determination". If a decision is neither expressly nor impliedly required by an enactment and, although authorised, is authorised by an enactment only in a very general way, it is unlikely to have the character of a decision for which provision is made under an enactment. The connection between the text of the enactment and the decision is likely to be too remote for the decision to have the requisite character.' 26 Black CJ then referred to the decision of the Full Court in General Newspapers to which I have referred above, and continued at 273: 'A decision that is neither expressly authorised or required, nor impliedly required, by an enactment but which has as its sole source of authority general powers of administration conferred by an enactment is unlikely to be one that is given force or effect by an enactment or by a principle of law applicable to the enactment.' 27 Spender J agreed, but Lockhart J was of a different view, observing at 276: 'The Commissioner's powers to recover tax in courts of competent jurisdiction necessarily extend to all matters incidental to suing for the tax, including decisions to institute proceedings, to compromise them, and to recover tax by extra-curial means such as proving in the estates of bankrupt taxpayers. Attendance and voting at meetings of creditors of bankrupts, or of persons whose affairs are being administered or proposed to be administered under the provisions of … the Bankruptcy Act, are also within the Commissioner's powers. These capacities are derived from the Commissioner's power to administer the Assessment Act (s 8), in combination with the fact that income tax, when due and payable, is a debt due to the Commonwealth and payable to the Commissioner… . … Section 208, when read in conjunction with s 8, impliedly authorises the Commissioner to do all things that are reasonably necessary to recover tax due to the Commonwealth and payable to the Commissioner. Among those things authorised are decisions of the kind with which this case is concerned. In my opinion, the respondent's decision answers the description of a decision of an administrative character made under an enactment. The Assessment Act thus provides for the making of the respondent's decision.' 28 The differing views expressed in Hutchins result from differing assessments of the facts of the case, including the wording of the relevant sections of the Income Tax Assessment Act 1936 (Cth). However it is difficult to resist the inference that the reasoning of the majority must lead to the conclusion that the current decision cannot be said to have been a decision made under the provisions of s 44 of the FMA. It may be argued that the three decisions upon which Black CJ relied in Hutchins (Bond, Mayer and General Newspapers) did not deal with precisely the point raised in Hutchins. Nonetheless, the decision has stood for some years and has been frequently followed. In those circumstances I conclude that a decision made pursuant to Attachment B is not a decision made "under" s 44 of the FMA Act for the purposes of the ADJR Act. 29 In those circumstances the application must fail and should be dismissed. I understand the respondent does not seek an order for costs. 30 At least one document to which I have referred (Estimates Memorandum 1995/42) is not in evidence. It is attached to the respondent's outline of argument. That situation has arisen because the respondent has sought to satisfy my queries as to the authority pursuant to which Attachment B was issued. Of course, in reality, the applicant must demonstrate that there is a decision of which he is entitled to seek review. He has not sought to do so other than by making broad references to various statutes. The respondent's submissions and associated documents have been designed to meet my concerns rather than any case raised by the applicant. The document is of no real significance for present purposes other than for setting the historical context of Attachment B. The applicant was presumably aware that it was attached to the respondent's submissions. In any event, for the purposes of future identification, I will make the submissions and attached documents exhibit 1. I certify that the preceding thirty (30) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett. Associate: Dated: 2 February 2004 The Applicant appeared in person. Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 27 November 2003 10 December 2003 Date of Judgment: 2 February 2004