FEDERAL COURT OF AUSTRALIA Macquarie Bank Limited v Commissioner of Taxation [2013] FCA 887 Citation: Macquarie Bank Limited v Commissioner of Taxation [2013] FCA 887 Parties: MACQUARIE BANK LIMITED (ACN 008 583 542) and MACQUARIE GROUP LIMITED (ACN 122 169 279) v COMMISSIONER OF TAXATION and JAMES CAMPBELL File number(s): NSD 198 of 2013 Judge(s): EDMONDS J Date of judgment: 3 September 2013 Catchwords: ADMINISTRATIVE LAW – application to review decision of Commissioner and his delegate to refuse to apply his view of the law on the allocation of Offshore Banking Unit expenses solely on a prospective basis – whether decision sought to be reviewed is a decision to which the Administrative Decisions (Judicial Review) Act 1977 (Cth) applies: whether decision is one made under an enactment; whether decision is one leading up to the making of assessments under the Income Tax Assessment Act 1936 (Cth) and/or Income Tax Assessment Act 1997 (Cth) that falls within para (e) of Sch 1 thereof – whether application liable to be summarily dismissed pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) on the ground that the applicants have no reasonable prospect of successfully prosecuting the proceeding – construction and operation of ATO Practice Statement – legal effect of same – relief sought would not serve purpose for which such relief is granted Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) ss 3, 5, 6, 7, 8, Sch 1 Judiciary Act 1903 (Cth) s 39B Income Tax Assessment Act 1936 (Cth) Div 9A, Div 11A, ss 8, 105A, 105AA, 109, 121C, 121EF, 128AE, 166A, 167, 170, 177F Income Tax Assessment Act 1997 (Cth) ss 4-10, 4-15, 6-5, 6-10, 8-1, 8-5, 10-5, 12-5, 25-90, 995-1 Federal Court of Australia Act 1976 (Cth) s 31A Financial Management and Accountability Act 1997 (Cth) s 44 Income Tax Rates Act 1986 (Cth) Taxation Administration Act 1953 (Cth) Pt IVC Migration Act 1958 (Cth) Cases cited: Ainsworth v Criminal Justice Commission (1992) 175 CLR 564 cited Australian Broadcasting Tribunal v Bond (1987) 170 CLR 321 cited Carltona v Commissioner of Works [1943] 2 All ER 560 cited Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 cited Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 approved Griffith University v Tang (2005) 221 CLR 99 applied Hadfield Finance Pty Limited v Federal Commissioner of Taxation (1988) 79 ALR 249 cited Intervest Corporation Pty Ltd v Commissioner of Taxation (1984) 3 FCR 591 cited Lucas v O'Reilly (1979) 36 FLR 102 cited Macquarie Bank Ltd v Commissioner of Taxation [2013] FCA 96 cited Meredith v Commissioner of Taxation (2002) 125 FCR 308 cited Minister for Industry and Commerce v Tooheys Limited (1982) 42 ALR 260 cited O'Reilly v Commissioners of the State Bank of Victoria (1982) 153 CLR 1 cited Plaintiff M61/2010E v Minister for Immigration and Citizenship (2010) 243 CLR 319 cited Raikua v Minister for Immigration and Multicultural and Indigenous Affairs (2007) 158 FCR 510 cited Robinswood Pty Ltd v Federal Commissioner of Taxation (1998) 55 ALD 717 cited S1083 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1455 cited Spencer v The Commonwealth (2010) 241 CLR 118 discussed Stewart v Deputy Commissioner of Taxation (2011) 194 FCR 194 cited Tooheys Limited v Minister for Business and Consumer Affairs (1981) 36 ALR 64 cited White Industries Aust Ltd v Commissioner of Taxation (2007) 160 FCR 298 applied Date of hearing: 2 and 3 April 2013, 2 August 2013 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 87 Counsel for the Applicants: Mr IM Jackman SC with Ms RL Seiden and Mr JAC Potts Solicitor for the Applicants: Speed & Stracey Counsel for the Respondents: Mr NJ Williams SC with Mr GR Kennett SC Solicitor for the Respondents: Australian Government Solicitor IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 198 of 2013 BETWEEN: MACQUARIE BANK LIMITED (ACN 008 583 542) First Applicant MACQUARIE GROUP LIMITED (ACN 122 169 279) Second Applicant AND: COMMISSIONER OF TAXATION First Respondent JAMES CAMPBELL Second Respondent JUDGE: EDMONDS J DATE OF ORDER: 3 SEPTEMBER 2013 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The Applicants' Amended Originating Application dated 2 April 2013 be dismissed. 2. The Applicants pay the Respondents' costs as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION NSD 198 of 2013 BETWEEN: MACQUARIE BANK LIMITED (ACN 008 583 542) First Applicant MACQUARIE GROUP LIMITED (ACN 122 169 279) Second Applicant AND: COMMISSIONER OF TAXATION First Respondent JAMES CAMPBELL Second Respondent JUDGE: EDMONDS J DATE: 3 SEPTEMBER 2013 PLACE: SYDNEY REASONS FOR JUDGMENT INTRODUCTION 1 By originating application, filed with the leave of the Court on 12 February 2013 at the conclusion of a hearing of an urgent application on an ex parte basis for interlocutory injunctive relief, the applicants invoke the jurisdiction of this Court pursuant to s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("ADJR Act") and under s 39B of the Judiciary Act 1903 (Cth) ("Judiciary Act") to review the decision of the first respondent ("Commissioner') by his delegate, the second respondent, communicated by letter dated 17 January 2013 ("the Letter"), to refuse to apply his view of the law on the allocation of Offshore Banking Unit ("OBU") expenses solely on a prospective basis ("the Decision"). 2 The applicants claim to be aggrieved by the Decision because in the Letter the Commissioner, by the second respondent, stated that the Australian Taxation Office ("ATO") would now proceed to issue amended assessments of income tax to the applicants based on a retrospective application of the Commissioner's view of the law on the allocation of OBU expenses, which would lead to a tax liability for the applicants that is higher than it would be if the assessments were issued on a prospective basis only. 3 On the hearing of the interlocutory application, the first applicant sought to restrain, until further order, the Commissioner from issuing amended assessments to the first applicant in circumstances where the first applicant apprehended that the Commissioner was going to apply, retrospectively, a changed view on the law appertaining to OBU expense allocations, the subject of the Decision. That interlocutory application was dismissed: Macquarie Bank Limited v Commissioner of Taxation [2013] FCA 96. 4 On 25 February 2013, the respondents filed a notice of objection to competency objecting to the competency of the originating application to the extent that it was made pursuant to s 5 of the ADJR Act. By that notice, the respondents claim that the Decision sought to be reviewed is not a decision to which the ADJR Act applies within the meaning of s 3 of that Act in that: (1) The Decision is not a decision made, proposed to be made, or required to be made under an enactment; or alternatively (2) The Decision is one made, or forming part of the process of making, or leading up to the making of, assessments of tax under the Income Tax Assessment Act 1936 (Cth) ("1936 Act") and/or the Income Tax Assessment Act 1997 (Cth) ("1997 Act") (the 1936 Act and the 1997 Act being hereinafter collectively referred to as "the Acts") and falls within para (e) of Sch 1 to the ADJR Act. 5 On 21 March 2013, the respondents filed an interlocutory application for summary judgment to be entered against the applicants, pursuant to subs 31A(2) of the Federal Court of Australia Act 1976 (Cth) ("FCA Act"), on the ground that the applicants have no reasonable prospect of successfully prosecuting the proceeding. BACKGROUND Statutory Context 6 The object of Div 9A of Pt III of the 1936 Act, inserted by Act No 191 of 1992, is to provide for concessional taxing, at the rate of 10%, of the offshore banking ("OB") income of an OBU: s 121A. 7 An OBU is a person of a kind described in subs 128AE(2) of the 1936 Act, declared by the Treasurer, by notice published in the Gazette, to be an offshore banking unit for the purposes of Div 11A of Pt III of the 1936 Act: s 121C. 8 Subdivision C of Div 9A sets out the operative provisions of Div 9A. Fundamental to these operative provisions are the definitional provisions of Subdiv B. One of these, s 121EF, sets out certain definitions used in Div 9A relating to allowable deductions of an OBU in relation to a year of income (subs (1)) and lies at the heart of the present controversy. 9 Section 121EF relevantly provides: 121EF Definitions relating to allowable deductions of an OBU … Allowable OB deduction (2) An allowable OB deduction is any of the following 3 kinds of allowable deduction: (a) an exclusive OB deduction; (b) a general OB deduction; (c) an apportionable OB deduction. Exclusive OB deduction (3) An exclusive OB deduction is any deduction (other than a loss deduction) allowable from the OBU's assessable income of the year of income that relates exclusively to assessable OB income. General OB deduction (4) A general OB deduction is so much of any deduction (other than a loss deduction, an apportionable deduction, an exclusive OB deduction or an exclusive non‑OB deduction) allowable from the OBU's assessable income of the year of income as is calculated using the formula: Adjusted assessable OB income Deduction x ____________________________ Adjusted total assessable income Apportionable OB deduction (5) An apportionable OB deduction is so much of any apportionable deduction allowable from the OBU's assessable income of the year of income as is calculated by multiplying the deduction by the following fraction: OBU's exclusive OB deductions + OBU's assessable OB income – OBU's general OB deductions___ OBU's taxable income + OBU's apportionable deductions Exclusive non-OB deduction (6) An exclusive non-OB deduction is any deduction (other than a loss deduction) allowable from the OBU's assessable income of the year of income that relates exclusively to assessable income that is not assessable OB income. Loss deduction (7) A loss deduction is any allowable deduction under Division 36 of the Income Tax Assessment Act 1997. Factual Context 10 The applicants are members of the Macquarie Group of companies (sometimes referred to as "Macquarie"). 11 The Macquarie Group is a leading provider of banking, financial, advisory, investment and funds management services in Australia and throughout the world. 12 The first applicant, Macquarie Bank Limited ("MBL"), is a subsidiary of the second applicant, Macquarie Group Limited ("MGL"), and a subsidiary member of Macquarie's tax consolidated group ("TCG"). 13 MGL is a non-operating holding company for the Macquarie Group and the head company of Macquarie's tax consolidated group. 14 MBL was formerly the holding company for the Macquarie Group and the head company of Macquarie's tax consolidated group. 15 The Macquarie Group includes several subsidiaries (including MBL) which are gazetted OBUs pursuant to s 128AE(2) of the 1936 Act. 16 Since 7 March 2011, the Macquarie Group has been the subject of a "Large Business Audit" by the ATO in respect of the 2006, 2007 and 2008 income years. 17 By letter dated 17 May 2012, the ATO sent MBL a position paper ("May 2012 position paper") for the year ending 30 September 2006 in relation to allowable deductions from offshore banking income. 18 Paragraph 19 of the May 2012 position paper sets out some of the major classes of expenses giving rise to deductions for the 2006 year of income. The classes of expenses are referenced by their descriptions in Macquarie's accounting records as follows: (a) "Profit Share Accrual"; (b) "Directors Profit Share Accrual"; (c) "Executive Remuneration"; (d) "Other Brokerage Expense"; (e) "Rent"; (f) "Sales Commission"; (g) "Temporary Contract Staff"; (h) "Salaries – Non Packaged"; (i) "Other Expenses"; (j) "Other Professional Fees"; (k) "Employee Options Expense"; (l) "Structured Finance Expense"; (m) "Fee Allocations"; (n) "Advisory Exp Incl M and A"; (o) "Spec Provs Exp Other Ext"; (p) "Other Commission Expenses"; (q) "Legal Fees – Deductible"; and (r) "Airfares Overseas". 19 The ATO put its position on two issues raised in the May 2012 position paper as follows: ATO POSITION Issue 1 – Has the Macquarie TCG correctly allocated allowable deductions between assessable OB income and assessable income that is not assessable OB income, for the purposes of determining its allowable OB deduction under section 121EF? 22. The Macquarie TCG has not correctly allocated allowable deductions between assessable OB income and assessable income that is not assessable OB income, for the purposes of determining its allowable OB deductions under section 121EF. 23. In the Commissioner's view, the deductions claimed by the Macquarie TCG, as set out in the table in paragraph 19, are general OB deductions. Accordingly, the Macquarie TCG must apply the formula in subsection 121EF(4) to allocate its general deductions between OB and non-OB activities. The Macquarie TCG cannot apply other methodologies (e.g. management accounting cost allocations) for the purposes of the allocation. Issue 2 – Are allowable deductions resulting from the recognition of Profit Share expenses by the Macquarie TCG, general OB deductions for the purposes of subsection 121EF(4)? 24. Allowable deductions resulting from the recognition of Profit Share expenses are general OB deductions as they were incurred in relation to both assessable OB income and assessable income that was not assessable OB income. Accordingly, deductions resulting from the recognition of Profit Share expenses must be apportioned using the formula in subsection 121EF(4). 20 In October 2012, position papers and, shortly after, revised position papers were received from the ATO for the years ending 30 September 2006, 2007 and 2008 relating to deductions for profit share expenses from offshore banking income. 21 The ATO puts its position on the issue raised by these position papers in the revised papers as follows: ATO POSITION Issue – Are allowable deductions resulting from the recognition of Profit Share expenses by the Macquarie TCG, general OB deductions for the purposes of subsection 121EF(4)? 18. Allowable deductions resulting from the recognition of Profit Share expenses are general OB deductions as they were incurred in relation to both assessable OB income, and assessable income that was not assessable OB income. Accordingly, deductions resulting from the recognition of Profit Share expenses must be apportioned using the formula in subsection 121EF(4). 22 On or around 18 February 2013, the ATO provided Macquarie with a position paper on two further classes of expenses (not referenced in the list at para 19 of the May 2012 position paper – see [18] above), namely: (1) Interest expenses giving rise to deductions under s 25-90 of the 1997 Act; and (2) expenses associated with the issue of "Infrastructure Bonds" by Macquarie. 23 The ATO put its position on these two issues as follows: ATO POSITION Sub Issue 1 – Are allowable deductions claimed under section 25-90 of the ITAA 1997 general OB deductions for the purposes of subsection 121EF(4)? 35. Yes. Allowable deductions claimed under section 25-90 of the ITAA 1997 are general OB deductions as they were incurred in relation to non-assessable non-exempt OB deductions as they were incurred in relation to non-assessable non-exempt ("NANE") income. Accordingly, deductions claimed under section 25-90 of the ITAA 1997 must be apportioned using the formula in subsection 121EF(4). Sub Issue 2 – Are allowable deductions claimed in relation to lbonds general OB deductions for the purposes of subsection 121EF(4)? 36. Yes. Allowable deductions claimed in relation to lbonds are general OB deductions as they were incurred in relation to both assessable income and non-assessable income. Accordingly, deductions claimed in relation to lbonds must be apportioned using the formula in subsection 121EF(4). It concludes at [73], [74] that the Commissioner will issue assessments to the Macquarie TCG for the relevant years to give effect to adjustments as indicated. HEARING 24 The applicants' originating application came before me for hearing on 2 April 2103. Rather than deal with the respondents' objection to competency and summary judgment applications, I indicated I would proceed to hear and determine the applicants' application on a final basis and that I would determine the objection to competency and summary judgment applications of the respondents at the same time. 25 Both parties indicated that they were happy to proceed on that basis. THE DECISION 26 As indicated in (1) above, the Decision was communicated by the Letter which relevantly reads: Application of PS LA 2011/27 to the Australian Taxation Office's (ATO) position in relation to Macquarie Bank Limited's (MBL) Offshore Banking Unit (OBU) Expense Allocation Thank you for your letters of 23 November and 14 December 2012. As you are aware, we wrote to you on 23 November 2012 in response to your original submission and advised you of our view that PS LA 2011/27 did not have application to apply the ATO view as expressed in the Draft Position Paper only on a prospective basis. We refer to your letters to the ATO on 23 November and 14 December 2012 where you have provided further submissions (in addition to your submission of 8 October 2012) where you claim that the ATO's conduct in relation to the OBU expense allocation issue, prior to 17 May 2012, could reasonably be taken and was understood by MBL to have conveyed a different view of the law from that in the draft position paper issued to MBL on 17 May 2012 (Draft Position Paper), and that consequently, as per Practice Statement Law Administration 2011/27 (PS LA 2011/27), it would only be appropriate for the ATO to take prospective action. We have examined in detail your further submissions of 23 November and 14 December 2012 and can advise that we have not changed our view as expressed in our letter of 23 November 2012. We consider that the ATO is entitled to apply its view of the law to prior income years relevant to these transactions. We would like to make the following comments regarding your submissions and this issue more broadly. In particular, these comments are important factors that evidence that your claims regarding the application of PS LA 2011/27 are not justifiable: …  ATO review work undertaken though the OBU project that focussed on the 1999 to 2001 years uncovered various approaches being adopted by taxpayers. The project did not identify substantial evidence of a consistent industry practice that was at odds with the method of determining the different types of expenses as prescribed in s121EF. In any event, the level of OBU activity identified in many instances was of very low materiality.  Whilst statements made through the IBSA forums do not in isolation constitute an ATO view, we acknowledge that minutes of IBSA meetings in the late 1990's did capture statements where the ATO accepted accounting allocations but where they produced a "reasonable outcome". The matter was further considered by the ATO (at the request of IBSA) with the ATO clearly stating its view at an IBSA meeting in December 2004 that "there was no scope for the Commissioner to accept the use of a methodology other than the formula provided by the legislation" and that "using management accounts to apportion expenses was not appropriate". ATO PRACTICE STATEMENT LAW ADMINISTRATION (PS LA 2011/27) 27 PS LA 2011/27 lies at the heart of the applicants' grievance. It relevantly provides: SCOPE 1. This practice statement:  outlines procedures to be followed and the factors to be considered by tax officers in relation to any circumstance in which the ATO is considering applying its view of the law  must be followed in any circumstance where a tax officer applies the ATO view of the law. In this context, applying the ATO view of the law includes undertaking compliance activities, providing interpretative advice or guidance or deciding the date of effect of a precedential ATO view document, such as a public ruling or ATO interpretative decision (ATO ID). BACKGROUND 2. This practice statement has been developed in response to the recommendations of the Inspector-General of Taxation (IGT) in the report Review into delayed or changed Australian Taxation Office views on significant issues released in March 2010. Legal framework 3. In considering the circumstances when the ATO will not take action to apply its view of the law in past years or periods, it is important to have regard to the legal framework under which the ATO administers the taxation and superannuation laws. 4. As a starting point, the law operates from the date of effect of the relevant legislative provision and, accordingly, the ATO would usually apply its view of the law from this date, with effect both before and after the view is formed. The legal framework does provide exceptions to this general rule and this is explained below. 5. Under the current self-assessment regime, taxpayers' returns (including activity statements) are generally accepted at face value, subject to post-assessment audit or other verification by the ATO. Under this system, a taxpayer's statement in their return is taken to represent their view of how the law applies to their circumstances. 6. Time limits apply to both taxpayers and the ATO which restrict the ability to amend assessments beyond set timeframes. These time limits provide taxpayers with finality and certainty in relation to past years or periods. Ruling regimes 7. In order to reduce the risks of uncertainty for taxpayers the current legislative framework protects taxpayers through the public, private and oral rulings regimes. For example, the private rulings regime offers a taxpayer the opportunity to obtain certainty about the application of the tax laws in relation to their specific tax affairs. 8. A taxpayer who follows a public, private or oral ruling that applies to them can be assured that the Commissioner is bound to assess them as set out in the ruling in relation to a particular matter. When the Commissioner is bound by the ruling and the correct application of the law is less favourable to a taxpayer than the ruling provides, the ruling protects the taxpayer against the law being applied by the Commissioner in that less favourable way. 9. A public ruling usually applies to both past and future years and protects a taxpayer from the date of its application which in the usual case would be from the date of effect of the relevant legislative provision. In addition, a public ruling that is withdrawn continues to apply to schemes that had begun to be carried out before the withdrawal. However, this rule does not apply to an indirect tax public ruling or an excise public ruling. 10. Even if a taxpayer does follow a ruling, the Commissioner may apply a relevant provision of the law in a way that is more favourable for the taxpayer where it is a correct application of the law. This may happen where the Commissioner subsequently comes to the view that the ruling is incorrect and disadvantages the taxpayer (provided the Commissioner is not prevented from doing so by a time limit imposed by the law). 11. The ATO's approach for determining the date of effect of public rulings is set out in Taxation Ruling TR 2006/10. The procedures outlined in this practice statement are consistent with this approach. Administrative binding advice 12. Law Administration Practice Statement PS LA 2008/3 provides that, in the interests of sound administration, the ATO's practice has been to provide administratively binding advice in a limited range of circumstances. These circumstances and the protection level provided by administratively binding advice are considered in detail in PS LA 2008/3. Other circumstances 13. In other circumstances the law will apply to both past and future transactions. The existence of uncertainty in the interpretation or application of the taxation laws is a matter that may affect the amount of penalty imposed or remitted. 14. The law also provides protection for taxpayers from penalties and interest charges where a taxpayer self assesses in accordance with ATO guidance or a general administrative practice. … Powers of general administration 20. The Commissioner has powers of general administration which can be exercised in relation to management and administrative decisions. Section 44 of the Financial Management and Accountability Act 1997 (FMAA) also imposes a general obligation on the Commissioner to manage the affairs of the ATO in a way that promotes proper use of the Commonwealth resources for which the Commissioner is responsible. In this context, "proper use" means that the Commissioner needs to make decisions about the allocation of ATO resources to compliance and other activities which promote the efficient, effective and ethical use of those resources. However, in doing so the Commissioner must still comply with the law. 21. The Commissioner cannot use the powers of general administration to accept non-compliance with the law. However, as part of the duty of good management, the Commissioner can decide not to undertake compliance action on a particular issue for prior years or periods. Law Administration Practice Statement PS LA 2009/4 discusses the exercise of the Commissioner's powers of general administration. It includes a range of factors the Commissioner will take into account in deciding whether to undertake compliance action in relation to prior years or periods. 22. This practice statement does not replace or modify PS LA 2009/4. One of the factors mentioned at paragraph 23 of Appendix B of PS LA 2009/4 is whether the ATO has contributed to non-compliance. This practice statement amplifies and clarifies this specific factor and explains the practices and procedures to be followed. 23. The ATO will not take action to apply its view of the law in past years or periods where it is considered appropriate not to do so after having regard to the approach and factors outlined in this practice statement. This is so regardless of the other factors listed in PS LA 2009/4 . STATEMENT 24. Before applying any product, position, opinion or view of the law, tax officers are required to determine whether there are circumstances which would make it appropriate to take action to apply the ATO view of the law only on a prospective basis. 25. To do this tax officers must: (a) undertake research to form an opinion whether any ATO publication, product or evidence of ATO conduct could have reasonably conveyed a different view of the law on a particular issue, to taxpayers generally, or to a particular class or industry group and (b) consider the factors outlined at paragraph 36 of this practice statement . … EXPLANATION Consider previous ATO publications and conduct 31. Before applying any new product, position, opinion or view of the law, ATO case officers are required to conduct their own research (at a minimum, by searching ATOlaw and, as appropriate, other material such as that found on the ATO external website) and form an opinion whether any ATO publications, products or conduct could have reasonably conveyed a different view on a particular issue. … Relevant factors 35. In considering the circumstances when the ATO will not take action to apply its view of the law in past years or periods, tax officers must have regard to the following factors. 36. If after considering the main factors in paragraph (a) below, a conclusion is reached that the ATO view should only be applied prospectively, this position will be overridden in individual cases if the factors in paragraphs (b) or (c) apply. Main factors (a) The extent to which the ATO has facilitated or contributed to taxpayers adopting a different view of the law (which may result from an industry practice or position), including: (i) whether the ATO became aware of the position adopted by taxpayers or an industry practice in applying the law (for example, through compliance activity) but did not challenge it within a reasonable timeframe having regard to the size of the risk (ii) whether the taxpayers' position or industry practice can be reasonably understood from ATO statements on how to apply the law (iii) whether a general administrative practice supporting the taxpayers' position or industry practice can be deduced from other ATO conduct (iv) the time that has elapsed since the ATO's first awareness of the issue, publicly announcing it would challenge the position or practice and the time taken to finalise its view. Overriding factors in individual cases (b) If there is evidence of fraud or evasion in a particular case. (c) Where tax avoidance is involved, for example, where a determination has been made to apply a general anti-avoidance provision. However, this factor does not apply if there was an administrative practice that an anti-avoidance provision did not apply in a particular factual context. 37. As pointed out at paragraph 16, in respect of superannuation guarantee matters, a relevant additional factor which must be taken into account is the interest of affected employees if the ATO view of the law were only applied prospectively. (a) Taxpayers' views and industry practices 38. In some instances, industry practices or views adopted by taxpayers may develop in relation to particular technical issues. Taxpayers may have adopted a practice that has existed for a number of years in the absence of any specific ATO advice or guidance on the issue. What needs to be considered is whether the ATO has contributed to such a view or practice. … 42. Whether an industry practice exists would need to be determined by evaluating any relevant evidence to support the practice. This could include published documents on an industry website, academic or conference papers, speeches or minutes from industry forums, ATO publications referring to the industry practice etc. The publication of a single document of itself may not be sufficient to establish an industry practice. However, the publication of a document on the ATO's website that accepts the industry practice would be evidence that the ATO has facilitated or contributed to the establishment of the industry practice. In the context of self assessment, simply issuing assessments consistent with the information returned by taxpayers in a particular industry would not by itself amount to an acceptance by the ATO of any industry practice. 43. If it is unclear in a particular case whether an industry practice exists or there is a perception that the ATO has facilitated or contributed to an industry practice then tax officers should consult with relevant industry stakeholders, usually through the relevant ATO forum for the industry concerned. … 45. Where after having conducted research, it is considered that no different taxpayer or industry practice exists or that the ATO has not facilitated or contributed to any different practice, the onus will then be on taxpayers or their representatives to provide evidence to the contrary. [Footnotes omitted.] GROUNDS OF REVIEW 28 The applicants were granted leave on the first day of the hearing to rely on an amended originating application, the grounds of which are as follows: (1) The Decision was one that no decision-maker acting reasonably could have made. (2) The Decision was illogical or irrational. (3) The Decision was one for which there was no evidence that could support the Decision. (4) The second respondent failed to take into account a relevant consideration, or took into account an irrelevant consideration. (5) The second respondent failed to observe the rules of natural justice. (6) The second respondent exceeded his authority and the Decision was therefore ultra vires. (7) The second respondent failed to comply with procedures he was required to observe. (8) The second respondent was affected by an apprehension of bias when he made the Decision. 29 The first three grounds were particularised in the following terms: In deciding whether to apply the ATO view of the law in relation to OBU expenses retrospectively, the [second respondent], purported to apply the Australian Taxation Office's Practice Statement PS LA 2011/27 ("the Practice Statement"). The Practice Statement provides that before applying any view of the law retrospectively, tax officers are required to determine whether there are circumstances, including whether ATO conduct could have reasonably conveyed a different view of the law on a particular issue to taxpayers generally or to a particular industry class or group, which would make it appropriate to take action to apply the ATO view of the law only on a prospective basis: at [24]–[25]. In the Decision (page 2) it was acknowledged that minutes of IBSA meetings in the late 1990's captured statements where the ATO accepted accounting allocations of OBU expenses where they produced a "reasonable outcome". The delegate also noted that the matter was further considered and at an International Banks and Securities Association of Australia ("IBSA") meeting in December 2004, the ATO stated its views that there was no scope for the Commissioner to accept the use of a methodology other than the formula provided by the legislation, and that using management accounts to apportion expenses was not appropriate, and therefore, the [second respondent] reasoned, the ATO had not engaged in conduct that could reasonably have conveyed a different view of the law on that issue to taxpayers generally, or to a particular class or industry group. The [second respondent's] reasoning hinged on the ATO's statement of its views at the IBSA meeting in December 2004 as effectively correcting any earlier impression its conduct had created. No decision maker acting reasonably could have so concluded because: (a) the [second respondent] misunderstood and misapplied the Practice Statement by reasoning that risk assessment decisions by the ATO could not constitute conduct by the ATO sufficient to have conveyed an ATO view of the law on a particular issue, when that very conduct was contemplated by the Practice Statement as being sufficient; (b) the evidence as to the December 2004 IBSA meeting relied upon by the [second respondent] demonstrated that the comments of the ATO relied upon as correcting any earlier impression created by ATO conduct were not expressed as a final or definitive statement of the ATO's view, and that the ATO was to come back and indicate its final views at a subsequent date (which did not occur until some 7 years later), and were therefore incapable of correcting any earlier impression created by the ATO's prior conduct which the [second respondent] accepted had occurred; (c) there was in any event, no evidence that the ATO's comments at the December 2004 IBSA meeting, which were critical to the [second respondent's] decision, had been communicated or conveyed to the industry, indeed if anything, the only evidence was that they had not; (d) in light of the contents of the Australian Financial Markets Association's ("AFMA") letter dated 14 December 2012, it was not open to the [second respondent], on the basis of the material before him, to conclude, contrary to the AFMA letter, that the ATO "did not become aware of material which would support ... an industry practice in applying the law (for example through compliance activity)" and that "accordingly it cannot be said that the ATO did not challenge the position within a reasonable … timeframe" (ATO letter dated 23 November 2012, page 8); [and] (e) the [second respondent] failed to undertake inquiries that were obvious and critical in the sense described in Prasad v Minister for Immigration and Ethnic Affairs (1985) 6 FCR 155, by failing to contact former ATO officers such as Mr Killaly or Mr King, and failing to make inquiries of [the] industry. 30 Ground 4 was particularised: The [second respondent] failed to take into account the matters particularised in the particulars to ground 1 at (a), (b) and (c) and failed to take into account the document ATO.002.0320 in its entirety, or the documents ATO.002.0085 ("the Bridges email") and ATO.005.0074 ("the Bleiby email") at all. 31 Ground 5 was particularised: The [second respondent] was required under paragraphs 31 and 42 of the Practice Statement to conduct his own research as to whether an industry practice existed. The [second respondent] was required under paragraph 43 of the Practice Statement, if it was unclear in a particular case whether an industry practice existed or there was a perception that the ATO had facilitated or contributed to an industry practice, to consult with the relevant industry stakeholders. The [second respondent] did not do this, but instead relied upon the Applicants to provide a letter from AFMA dated 14 December 2012 to convey the industry view, which was supportive of the Applicants' contentions. Paragraph 45 of the Practice Statement then dictated that where, after having conducted research, it was considered that no different or industry practice existed, or that the ATO had not facilitated or contributed to any different practice, the onus would then be on taxpayers to provide evidence to the contrary. The Practice Statement plainly contemplated that the research that the ATO would conduct would include industry consultation, and only after that, would an evidentiary onus shift to the Applicants. In this case, where the ATO failed to properly undertake its own research and consult with industry, but then proceeded to make its decision after the Applicants provided evidence of the industry's position to the [second respondent], the Applicants were denied an opportunity to present further evidence and submissions as contemplated by the Practice Statement. The Applicants sought deferral of the making of the Decision, and further time to allow the Inspector General to complete inquiries and then to permit the Applicants to put forward further evidence and submissions. The [second respondent] denied the Applicants' request. The [second respondent] was also obliged to give the Applicants notice of any adverse information that he had which was credible, relevant and significant. see: Applicant VEAL of 2002 v Minister for Immigration and Multicultural and Indigenous Affairs (2005) 225 CLR 88. The Applicants contend that this principle extends to any favourable information that was credible, relevant and significant, which the [second respondent] did not propose to accept, such as the Bridges email, so that the Applicants could make submissions about why it should be accepted. The failure to do so was also a denial of natural justice. 32 Ground 6 was particularised: The [second respondent] was exercising the Commissioner's general power of administration under s 8 of the Income Tax Assessment Act 1936 (Cth). There was no express or statutory conferral of authority on the [second respondent], and he was relying on the Carltona principle (Carltona Ltd v Commissioner of Works [1943] 2 All ER 560 at 562-563; applied in O'Reilly v Commissioners of the State Bank of Victoria (1982) 153 CLR 1 at 11-12) to exercise the Commissioner's authority. The Commissioner has however constrained the authority of those acting under the Carltona principle, through the issue of directives, which are intended to be mandatory (see PS LA 1998/1, paragraph 6; Practice Statement, paragraph 1) such as the Practice Statement. In failing to comply with the Practice Statement, the [second respondent] acted beyond his authority and the decision was ultra vires. 33 Ground 7 was particularised: The Practice Statement set out in detail the procedures that the [second respondent] was required to follow in making the Decision. The [second respondent] failed to comply with those procedures in that: (a) the research and inquiries he undertook were insufficient to amount to inquiries of the kind required by the Practice Statement: and (b) he failed to undertake inquiries of industry (see particulars to ground 5) and then afford the Applicants an opportunity to adduce further evidence and submissions. 34 Ground 8 was particularised: In his 23 November 2012 letter the [second respondent] said: (a) the ATO did not become aware of material which would support a position adopted by taxpayers or an industry practice in applying the law (for example through compliance activity) (ATO.007.0055 at 0062); (b) he had been unable to find anything which could have reasonably conveyed a view of the law different from that which the ATO has conveyed in the Draft Position Paper [i.e. the ATO's current view] (ATO.007.0055 at 0058); (c) neither the Applicants' asserted position nor an industry practice can be reasonably understood from ATO statements on how to apply the law (ATO.007.0055 at 0062); and (d) he had found no evidence a general administrative practice supporting the Applicants' position or industry practice that can be deduced from other ATO conduct (ATO.007.0055 at 0062). In fact the Officer had before him at that time Mr Geoff Bridges' email of 30 October 2012 (the Bridges email ATO.002.0085), which flatly contradicted these statement and were irreconcilable with them He also had before him: (e) on 30 October 2012 a 2003 ATO briefing note which states that expense allocation "has arisen in a number of risk assessments". In these cases the ATO sent the clients extracts from the relevant IBSA minutes so that they could gauge the general view of the ATO (ie that cost allocations should match economic costs of running the OBU, where the legislation permits this) (ATO.001.0737 at 0737); (f) extracts of those IBSA minutes, which record that Mr Jim Killaly told IBSA that the ATO would accept an accounting allocation of OBU expenses that gave a reasonable outcome (ATO.005.0113 at 0119, paragraph [32]); (g) an internal ATO file note in relation to the ATO's 2003 review of the Applicants' OBU (ATO.001.0656). The file note records that Bridges and another ATO officer (Hollis) had concluded that the Applicants' cost allocation was "entirely appropriate in light of Jim Killaly's comments at IBSA meetings" (ATO.001.0656 at 0656); (h) the ATO's Final Report on its OBU risk assessment of the Applicants dated 23 December 2003 (ATO.001.0660) and authored by Hollis. The only basis on which the statement in the 23 November 2012 letter can be reconciled with the Bridges email, and the other documents, is that the [second respondent] had foreclosed his mind to any other conclusion, and did not approach his task with a mind open to persuasion, but rather, with a preconceived determination to reach an outcome that was adverse to the Applicants. Further communications by the [second respondent] support the apprehension of bias: (i) ATO.002.0558; (j) the Bleiby email (ATO.005.0074). In the Decision the [second respondent] stated that the ATO had not changed its view as expressed in the letter of 23 November 2012. Any reasonable bystander would apprehend from these events that the [second respondent] was afflicted by bias. ORDERS SOUGHT 35 By their amended originating application, the applicants sought the following final relief (prayer (1) seeking interlocutory relief): (2) A writ of certiorari to quash the Decision. (3) A writ of mandamus to compel the respondents to determine whether to apply the ATO view of the law on the allocation of OBU expenses solely prospectively, according to law. (4) Alternatively, an order declaring that the Decision was invalidly made and an order requiring the respondents to make a decision whether to apply the ATO view of the law on the allocation of OBU expenses solely prospectively, according to law. (5) Alternatively, a declaration that the Decision was not made in accordance with the Practice Statement, and an injunction preventing the respondents from relying upon the Decision as being a decision made in conformity with PS LA 2011/27. OVERVIEW 36 I have come to the conclusion, largely if not wholly, on the basis of the submissions advanced by the respondents, that insofar as the applicants' amended originating application depends on the Court's jurisdiction under the ADJR Act, the application is incompetent. 37 I am also satisfied that the applicants have no reasonable prospect of obtaining the final relief they seek and that the proceeding should be summarily dismissed pursuant to s 31A(2) of the FCA Act. I am persuaded to this state of satisfaction by the submissions of the respondents which are replicated in the reasons which follow on that subject. 38 In the circumstances, it is unnecessary for me to consider the applicants' substantive grounds upon which it sought review of the Decision. OBJECTION TO COMPETENCY 39 The grounds of the respondents' objection to the competency of the amended originating application, insofar as it is made pursuant to s 5 of the ADJR Act, are set out in [4] above. The Decision is not a decision made, proposed to be made or required to be made under an enactment 40 This Court's jurisdiction under the ADJR Act is relevantly conferred by s 8 of that Act, to hear and determine applications made to the Court "under this Act". The applications that may be made "under" the ADJR Act are those provided for in ss 5, 6 and 7 of that Act. 41 Section 5 provides that a person who is aggrieved by "a decision to which this Act applies" may apply for an order of review in respect of that decision, on certain grounds. Section 6 provides the same right in respect of "conduct" that a person is engaging in or proposes to engage in "for the purpose of making a decision to which this Act applies". Section 7 provides the same right where a person "has a duty to make a decision to which this Act applies" and has failed to make that decision. In each case, the right to make the application (and hence, jurisdiction) depends on the actual or prospective existence of a "decision to which this Act applies". 42 The applicants rely on s 5, and seek orders in relation to a "decision" which is identified as: [T]he decision of the First Respondent ("the Commissioner"), by his delegate, the Second Respondent ("the Employed Officer"), communicated by letter dated 17 January 2013 ("the Decision"), to refuse to apply his view of the law on the allocation of Offshore Banking Unit ("OBU") expenses solely on a prospective basis. 43 "Decision to which this Act applies" is relevantly defined in s 3 as a "decision of an administrative character made, proposed to be made or required to be made … under an enactment". 44 The meaning of a decision made "under an enactment" was explained by the High Court in Griffith University v Tang (2005) 221 CLR 99. That case establishes that a decision is made "under an enactment" only where two criteria are met: the decision is expressly or impliedly required or authorised by the enactment; and the decision confers, alters or otherwise affects legal rights or obligations and derives that legal effect from the enactment: Tang at [10] per Gleeson CJ, [89] and [96] per Gummow, Callinan and Heydon JJ. It is necessary but not sufficient that the decision is authorised by the enactment: Tang at [10] per Gleeson CJ, [78], [89] and [96] per Gummow, Callinan and Heydon JJ. 45 Tang was applied, in relation to a "decision" directly analogous to the present one, in White Industries Aust Ltd v Commissioner of Taxation (2007) 160 FCR 298. The decision was one by a senior officer of the ATO to "approve access" to certain accounting documents under the Commissioner's "Guidelines to Accessing Professional Account Advisers' Papers". The consequence of the decision was that the ATO would seek to exercise its right to obtain and inspect certain documents in the context of litigation. The Guidelines, like PS LA 2011/27 upon which the present applicants rely, were not made in the exercise of any specific statutory power and did not purport to have any binding legal effect. Lindgren J held that the Guidelines were not an "enactment" and that the decision did not, by force of the Guidelines or of any enactment, affect legal rights or obligations (at [75]). His Honour held that the 1936 Act "does not expressly or impliedly provide for the making of guidelines or the making of a decision excluding particular documents from their scope", and did not give legal force or effect to the guidelines or to the decision made under them (at [67]). His Honour regarded the case as on all fours with Tang (at [79]), and upheld the objection to competency (at [99]). 46 In the present case, similarly, PS LA 2011/27 is not an exercise of any delegated law-making power and cannot be described as an "enactment". The 1936 Act does not expressly or impliedly require or authorise the making of PS LA 2011/27; nor does it require or authorise the making of a decision about whether to apply a "view of the law" to past events. This is so even if a decision of that kind is capable of being made by the Commissioner in the course of the "general administration" of the Act referred to in s 8: cf., White Industries at [67], [68]. 47 Further, in the present case as in White Industries at [75], the decision complained about is not one that has any direct effect on legal rights or obligations. The decision does not, and as a matter of law could not, affect the operation of relevant substantive taxing provisions or the existence of power to take action under the Act (such as issuing an amended assessment). Legal rights or obligations would be affected only if and when the decision came to be reflected in some specific action purporting to have statutory force. 48 The foundation for the applicants' argument that the Decision was a decision of an administrative character under an enactment is the contention that PS LA 2011/27 is "binding" because it is expressed in mandatory terms. The applicants put their submission in two ways: (1) First, had the Decision been lawfully made it would have been to the effect that the Commissioner's view of the law with respect to OBU expenses could only be applied prospectively. This would plainly affect the applicants' liability to tax. The Commissioner could not make an assessment in respect of OBU expenses in earlier years. (2) Secondly, under PS LA 2011/27 the applicants had a conditional immunity from the imposition of tax in relation to years gone by. In other words, the applicants had rights arising from PS LA 2011/27 which were affected by the refusal to exercise the discretion in accordance with PS LA 2011/27. 49 The applicants suggested that the proposition, that no conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act (Federal Commissioner of Taxation v Wade (1951) 84 CLR 105 at 117 per Kitto J), was only arguable. I cannot agree. It has been relied on and approved in countless subsequent authorities such that its precedential standing is not in any serious doubt. The further suggestion which was "piggybacked" upon it namely, that the Commissioner may be bound to adopt the procedure in PS LA 2011/27 even though it results in less tax being assessed than is otherwise authorised to assess, ultimately lies at the heart of the applicants' case. 50 The applicants submitted that insofar as White Industries, Stewart v Deputy Commissioner of Taxation (2011) 194 FCR 194 and Robinswood Pty Ltd v Federal Commissioner of Taxation (1998) 55 ALD 717 suggest that a decision with respect to guidelines published by the Commissioner are not amenable to judicial review, they are distinguishable or are, with respect, wrong on that issue. 51 The submission was developed in the following way. In Robinswood the guidelines with respect to conduct during an audit were not binding and stated expressly that they "are not intended to prejudice or compromise the [ATO's] statutory powers" (see at 727). In White Industries Lindgren J appears to have accepted that the guidelines had no "statutory effect" (at [98-9]) because they were not made under a specific provision of the 1936 Act. However, his Honour accepted that whether the guidelines were binding was a matter that should proceed to trial (at [112] in the context of the Judiciary Act proceedings). In Stewart the applicant accepted that because the guidelines were not made under a specific provision of the Act it was not a decision under enactment. In those circumstances, Perram J had no reason to depart from the decision in White Industries. 52 Here, it is said, PS LA 2011/27 is binding as between the taxpayer and the Commissioner. PS LA 2011/27 is given legal effect because it was authorised by s 8 of the 1936 Act. 53 The difficulty with the first sentence of [52] above is the fact that a practice statement issued by the Commissioner to staff is expressed in mandatory terms does not make it binding as between the taxpayer and the Commissioner or between the taxpayer and individual officers who may act in the name of the Commissioner. The difficulty with the second sentence of [52] above is that it is inconsistent with Tang at [10], [78], [89] and [96]. 54 In the alternative, the applicants submitted that the Decision was an intermediate decision of the kind to which Mason CJ referred in Australian Broadcasting Tribunal v Bond (1987) 170 CLR 321 at 337, but it is clear from what the Chief Justice said in that particular passage that it is confined to where the statute provides for the making of a finding or a ruling on the particular point so that the intermediate decision can be said to be made under an enactment; but PS LA 2011/27 is not an enactment. 55 It follows, in my view, that insofar as the applicants' amended originating application depends on the Court's jurisdiction under the ADJR Act, the application is incompetent. PS LA 2011/27 is not within the definition of "enactment" in s 3 of the ADJR Act; and the "Decision" does not directly affect legal rights or obligations. The Decision is one made, or forming part of the process of making, or leading up to the making of, assessments under the 1936 Act and/or the 1997 Act and falls within para (e) of Sch 1 to the ADJR Act. 56 Strictly speaking, it is not necessary to consider and determine this second challenge to competency: first, I have already concluded that insofar as the applicants' application depends on the Court's jurisdiction under the ADJR Act, the application is incompetent; and secondly, the reason it is incompetent – because the Decision is not a decision under an enactment and does not directly affect legal rights or obligations – means that there is no room for the operation of para (d) of the definition of the phrase: decision to which this Act applies. 57 The phrase "decision to which this Act applies", is relevantly defined in s 3(1) of the ADJR Act, to mean: 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 of enactment; or (b) by a Commonwealth authority or an officer of the Commonwealth under an enactment referred to in paragraph (ca) or (cb) of the definition of enactment; other than: (c) a decision by the Governor-General; or (d) a decision included in any of the classes of decisions set out in Schedule 1. 58 By virtue of the structure of the definition (paras (c) and (d) are "carve-outs" of paras (a) and (b)), a decision falling within paras (c) or (d) will be a decision made under an enactment. It follows that a decision included in any of the classes of decisions set out in Sch 1, must be a decision made under an enactment. As the Decision is not a decision made under an enactment, para (e) of Sch 1 has no operation. 59 That aside, I am of the view that the Decision is not one which falls within the text of para (e) of Sch 1 to the ADJR Act. As was said by Smithers J in Intervest Corporation Pty Ltd v Commissioner of Taxation (1984) 3 FCR 591 at 595: Decisions making or forming part of the process of making an assessment or calculation of tax are clearly made in the process of assessing tax. 60 The Decision was not made in the process of assessing tax. 61 As his Honour went on to say (at 595): Decisions leading up to the making of an assessment may not necessarily be so confined. But, in my view, decisions leading up to the making of an assessment do not include a decision which is anterior to an assessment, and is no more than an event in a chain of events of which the assessment is the last event. Something more is required; for the decision to be "leading up to the making" of the assessment, it must be one "… which [has] to be made, or, in the circumstances, it is appropriate to make, before the actual process of assessment … can begin": Tooheys Limited v Minister for Business and Consumer Affairs (1981) 36 ALR 64 at 78 per Ellicott J, in a passage which was approved by the Full Court; Minister for Industry and Commerce v Tooheys Limited (1982) 42 ALR 260 at 271; followed by Smithers J in Intervest at 595-6; and by Foster J in Hadfield Finance Pty Limited v Federal Commissioner of Taxation (1988) 79 ALR 249 at 255-6, with whom Woodward and Jenkinson JJ at 250 agreed. See too Lee and Cooper JJ in Meredith v Commissioner of Taxation (2002) 125 FCR 308 at [36]. 62 Hence, a "decision leading up to the making of an assessment" would not include a decision by the Commissioner refusing requests under s 105AA of the 1936 Act for a further period during which dividends might be paid for the purpose of making a sufficient distribution within the meaning of s 105A(1) of that Act, even though the refusal may be part of a chain of events, the last one of which was an assessment of undistributed profits tax: Intervest; Hadfield Finance. On the other hand, the making of a determination under s 177F(1) or (2A) of the 1936 Act is one which has to be made before an assessment to give effect to the determination can be made: Meredith at [42] per Lee and Cooper JJ. 63 A decision by the Commissioner refusing to apply his view of the law on the allocation of OBU expenses solely on a prospective basis is not one which has to be made or, in the circumstances, is appropriate to make, before the actual process of assessment can begin. I therefore do not think the actual text of para (e) of Sch 1 of the ADJR Act excludes the Decision in the present case although, for the reasons referred to at [56] – [58] above, it is not strictly necessary to consider and determine this issue. SUMMARY DISMISSAL The Relevant Test 64 Section 31A of the FCA Act relevantly provides: (2) The Court may give judgment for one party against another in relation to the whole or any part of a proceeding if: (a) the first party is defending the proceeding or that part of the proceeding; and (b) the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding. (3) For the purposes of this section, a defence or a proceeding or part of a proceeding need not be: (a) hopeless; or (b) bound to fail; for it to have no reasonable prospect of success. 65 In Spencer v The Commonwealth (2010) 241 CLR 118 at [23], French CJ and Gummow J observed that the power vested in the Court by s 31A "to dismiss a proceeding, is to be distinguished, in its application to deficient pleadings, from rules (such as O 11, r 16 of the Federal Court Rules) which provide for the striking out of pleadings". Their Honours referred to what Lindgren J said in White Industries at [47] with approval: [E]vidence may disclose that a person has or may have a 'reasonable cause of action' or 'reasonable prospect of success', yet the person's pleading does not disclose this. In such a case O 11, r 16 empowers the Court to strike out the pleading but … s 31A(2) would not empower the Court to give judgment for the respondent against the applicant. A failure after ample opportunity to plead a reasonable cause of action may suggest that none exists and therefore that the applicant has no reasonable prospects of success, but the existence of a reasonable cause of action and the pleading of a reasonable cause of action remain distinct concepts. 66 In the very next paragraph their Honours observed that the "exercise of powers to summarily terminate proceedings must always be attended with caution", referring to what was said by the High Court in Fancourt v Mercantile Credits Ltd (1983) 154 CLR 87 at 99. 67 In Spencer, Hayne, Crennan, Kiefel and Bell JJ at [53] said: [Section] 31A departs radically from the basis upon which earlier forms of provision permitting the entry of summary judgment have been understood and administered. Those earlier provisions were understood as requiring formation of a certain and concluded determination that a proceeding would necessarily fail. That this was the basis of earlier decisions may be illustrated by reference to two decisions of this Court often cited in connection with questions of summary judgment: Dey v Victorian Railways Commissioners [(1949) 78 CLR 52] and General Steel Industries Inc v Commissioner for Railways (NSW) [(1964) 112 CLR 125]. 68 At [56]–[60] their Honours said: Because s 31A(3) provides that certainty of failure ("hopeless" or "bound to fail") need not be demonstrated in order to show that a plaintiff has no reasonable prospect of prosecuting an action, it is evident that s 31A is to be understood as requiring a different inquiry from that which had to be made under earlier procedural regimes. It follows, of course, that it is dangerous to seek to elucidate the meaning of the statutory expression "no reasonable prospect of successfully prosecuting the proceeding" by reference to what is said in those earlier cases. Likewise, it is dangerous to apply directly what has been said in the United Kingdom about the application of a test of "no real prospect" or what has been said in United States decisions about summary judgment. The United Kingdom cases are directed to a different test. The controversies in the United States about what is sufficient to resist a motion for summary judgment, reflected in the recent decisions of the Supreme Court of the United States in Ashcroft v Iqbal and Bell Atlantic Corporation v Twombly and in that Court's earlier decision in Conley v Gibson, turn upon the requirements of the Federal Rules of Civil Procedure applied to a system of "notice" pleading. The notion of what is not a "plausible" claim, discussed in Iqbal and Twombly, may in some cases overlap, but does not coincide, with the notion of "no reasonable prospect". How then should the expression "no reasonable prospect" be understood? No paraphrase of the expression can be adopted as a sufficient explanation of its operation, let alone definition of its content. Nor can the expression usefully be understood by the creation of some antinomy intended to capture most or all of the cases in which it cannot be said that there is "no reasonable prospect". The judicial creation of a lexicon of words or phrases intended to capture the operation of a particular statutory phrase like "no reasonable prospect" is to be avoided. Consideration of the difficulties that bedevilled the proviso to common form criminal appeal statutes, as a result of judicial glossing of the relevant statutory expression, provides the clearest example of the dangers that attend any such attempt. In many cases where a plaintiff has no reasonable prospect of prosecuting a proceeding, the proceeding could be described (with or without the addition of intensifying epithets like "clearly", "manifestly" or "obviously") as "frivolous", "untenable", "groundless" or "faulty". But none of those expressions (alone or in combination) should be understood as providing a sufficient chart of the metes and bounds of the power given by s 31A. Nor can the content of the word "reasonable", in the phrase "no reasonable prospect", be sufficiently, let alone completely, illuminated by drawing some contrast with what would be a "frivolous", "untenable", "groundless" or "faulty" claim. Rather, full weight must be given to the expression as a whole. The Federal Court may exercise power under s 31A if, and only if, satisfied that there is "no reasonable prospect" of success. Of course, it may readily be accepted that the power to dismiss an action summarily is not to be exercised lightly. But the elucidation of what amounts to "no reasonable prospect" can best proceed in the same way as content has been given, through a succession of decided cases, to other generally expressed statutory phrases, such as the phrase "just and equitable" when it is used to identify a ground for winding up a company. At this point in the development of the understanding of the expression and its application, it is sufficient, but important, to emphasise that the evident legislative purpose revealed by the text of the provision will be defeated if its application is read as confined to cases of a kind which fell within earlier, different, procedural regimes. [Footnotes omitted.] Proper Construction and Operation of PS LA 2011/27 69 Just as no conduct on the part of the Commissioner could operate as an estoppel against the operation of the Acts (Wade at 117 per Kitto J), it is trite that no practice statement could derogate from the Commissioner's duty to assess in accordance with the Acts. The underlying claims of the applicants' case seem to overlook this fundamental premise. 70 In his written submissions, the Commissioner paraphrased the construction and operation of PS LA 2011/27 in terms which I respectfully adopt: (1) The importance of the legal framework is noted (at [3]). The "starting point" is that "the law operates from the date of effect of the relevant legislative provision and, accordingly, the ATO would usually apply its view of the law from this date, with effect both before and after the view is formed" (at [4]). (2) One exception to this proposition arises from the time limits on amending assessments (at [6]). If the relevant time limit has passed, the taxpayer's understanding of the law as embodied in its return will be accepted. (3) The second exception is the operation of the rulings regime (at [7]–[11]), which may require tax to be assessed on the basis that relevant provisions have the operation specified in a ruling. (4) Another exception is described as "administratively binding advice", which is described in detail in another Practice Statement (PS LA 2008/3), but is not applicable here (at [12]). (5) It is then said that in other circumstances the law will apply to both past and future transactions with the existence of uncertainty of interpretation or application to be dealt with by the penalty regime (at [13]). (6) Under the heading "Powers of general administration" the effect of s 8 of the 1936 Act is noted, along with s 44 of the Financial Management and Accountability Act 1997 (Cth) ("FMA Act") which requires the Commissioner to make decisions about the allocation of ATO resources that promote the "efficient, effective and ethical use of those resources" (at [20]). (7) At [21] it is noted (correctly) that "[the] Commissioner cannot use the powers of general administration to accept non-compliance with the law". (8) The qualification to this proposition is that as part of his "duty of good management" (i.e., the duty to allocate resources properly) the Commissioner "can decide not to undertake compliance action on a particular issue for prior years or periods" (at [21]). (9) Reference is then made to PS LA 2009/4, which deals with powers of general administration and "includes a range of factors the Commissioner will take into account in deciding whether to undertake compliance action in relation to prior years or periods" (at [21]). PS LA 2011/27 is said not to "replace or modify" PS LA 2009/4. Rather, it "amplifies and clarifies" the fifth factor referred to at [23] of Appendix B to that document, namely "whether the ATO has contributed to noncompliance" (at [22]). (10) In that context it is said (at [23]) that the ATO "will not take action to apply its view of the law in past years or periods where it is considered appropriate not to do so after having regard to the approach and factors outlined in this practice statement". (11) These observations and stipulations define the scope for operation of the "Statement" which follows (at [24]–[30]) and its ensuing "Explanation". 71 Read with the references to the legal framework within which the Commissioner must operate, and obligations arising under the FMA Act, the references in PS LA 2011/27 at [21] and [23] to taking "action" (or "compliance action") are to be read as referring to circumstances where there are resource allocation decisions to be made – e.g. whether to initiate an audit or some other form of investigation. PS LA 2011/27 does not purport to require that, in assessing the tax due for past years or periods (e.g., at the completion of an audit), officers are to make a decision about whether to make that assessment on the basis of the ATO's current understanding of the law or on the basis of some other understanding. 72 To the extent that any guideline or practice statement did purport to instruct an officer to act in that way, compliance with that instruction would be inconsistent with fundamental requirements of the Acts. The relevant guideline or practice statement would necessarily be read down accordingly. The provisions are familiar, but a brief summary contextualises the central problem in the applicants' submissions. (1) Section 166 of the 1936 Act requires the Commissioner, from the taxpayer's returns and any other information in his possession, to "make an assessment of the amount of the taxable income" of the taxpayer and of "the tax payable thereon". Consistently with that description of the task, the relevant meaning of "assessment" as defined in s 6 of that Act is "the ascertainment of the amount of taxable income … and of the tax payable on that taxable income". (2) "Taxable income" is defined in s 995-1 of the 1997 Act as having the meaning given by s 4-15 of that Act. Section 4-15 then provides that apart from certain special cases "taxable income" equals "assessable income" minus "deductions". "Assessable income" is defined in Div 6 to include "ordinary income" (s 6-5) and "statutory income" (s 6-10). A large number of provisions of the Acts (listed in s 10-5 of the 1997 Act) provide that specific amounts are part of a taxpayer's assessable income. (3) "Deductions" are defined by Div 8 of the 1997 Act to include "general deductions" (amounts which come within the terms of s 8-1) and "specific deductions" (amounts which other provisions of the 1997 Act make deductible: s 8-5). Section 12-5 lists the many provisions of the Acts that make specific amounts deductible. (4) The "tax payable" on a taxpayer's "assessable income" for a tax year (under s 4-10 of the 1997 Act) is ascertained by multiplying that income by the relevant "Rate" (which is found in the Income Tax Rates Act 1986 (Cth)) and subtracting any tax offsets. 73 According to the Commissioner, from this very basic survey, the following general propositions can be drawn: (1) There is no scope for discretion in the making of an assessment, except to the extent that a particular taxing provision might make the amount included in assessable income (or the amount of a deduction) depend on the Commissioner's view of what is reasonable or appropriate, e.g., s 109 of the 1936 Act. The relevant taxing provisions apply according to their terms, and the Commissioner's role is to calculate as best he can the result of their application to the taxpayer's circumstances in the relevant year. There is no scope for discretionary consideration of whether those taxing provisions should be treated as if they had some different operation. (2) No different rule applies where the Commissioner decides, under s 170 of the 1936 Act, to amend an assessment. The assessment once amended must still be an "assessment" – i.e., an ascertainment of the taxpayer's "taxable income" for the relevant tax year and the tax payable thereon. That ascertainment involves the application of the relevant taxing provisions to the circumstances of the taxpayer as the Commissioner finds them to be. The only exceptions to this regime are deemed assessments under s 166A and the default assessment provided for by s 167 of the 1936 Act. (3) Obviously there may be scope for doubt or disagreement as to the correct construction of a taxing provision or its application to a particular case. The resolution of such disagreements is one of the functions of the objection, review and appeal process provided for in Part IVC of the Taxation Administration Act 1953 (Cth) ("the TAA"), the scope of which is broadly defined. The outcome of a review or appeal may be that the Commissioner is required to amend an assessment, so as to give effect to the correct understanding of the relevant taxing provisions as identified by the Court or Tribunal. In making an assessment, however, the only understanding of the relevant taxing provisions which is open to the Commissioner (through his officers) to apply is that which, taking into account relevant authorities and legal advice, he ascertains to be the correct understanding. 74 I agree that each of these propositions are open to be drawn from structure of the Acts outlined in [72] above. 75 In the light of the limited scope of operation of PS LA 2011/27, I agree with the Commissioner's submission that the final relief sought by the applicants either does not lie or has no utility: (1) The proposed writ of mandamus (prayer 3) would require the respondents to embark on an inquiry which can have no place in the making of an amended assessment (that being the stage that has been reached in the present case, following the completion of an audit). Clearly the writ does not lie to compel a decision-maker to consider taking action that would be unlawful. Alternatively, a writ of mandamus would be futile (there being only one possible outcome of the inquiry which it would require to be undertaken) and should be refused in the exercise of the Court's discretion. (2) In the absence of mandamus to require reconsideration of the matter, there would be no utility in a grant of certiorari to quash the Decision (prayer 2). Further, the Decision did not constitute an exercise or refusal to exercise any statutory power (there being no power in the Commissioner to dispense with the law), and thus has no legal operation capable of being quashed, cf., the function of certiorari as described in Ainsworth v Criminal Justice Commission (1992) 175 CLR 564, 580. In any event, in terms of its outcome (i.e., that in making amended assessments the ATO would apply the correct view of the effect of the relevant taxing provisions) was the only decision that could have been made. (3) The considerations in (1) and (2) above apply equally to the two orders sought (presumably under the ADJR Act) in prayer 4. A declaration that the decision was made "invalidly" would not be appropriate in light of the absence of any power to make a different decision. (4) The declaration sought in prayer 5 would not settle any controversy as to legal rights, since on its proper construction PS LA 2011/27 did not purport to govern legal rights. In any event, as a matter of substance, the Decision was consistent with PS LA 2011/27 in that it did not purport to authorise the application of any alternative understanding of the relevant taxing provisions in making an assessment. (5) If the injunction sought in prayer 5 is intended to prevent the Commissioner from issuing an amended assessment, it is inconsistent with the fundamental principle identified in Lucas v O'Reilly (1979) 36 FLR 102 at 107–110, or should be refused on discretionary grounds absent proof of conscious maladministration. If it is not, the injunction serves no purpose. Quite apart from the particular considerations relating to assessments, the injunction is not appropriate in the absence of any evidence that the respondents intend to "rely upon" the Decision or that such reliance would result in some action that was unlawful. No "reliance" on the Decision is involved in issuing amended assessments of the applicants, since (as outlined above) the view of the relevant taxing provisions that must be applied in such assessments is dictated by the Acts. It is not appropriate to enjoin the performance of a duty to assess according to law. Lack of Legal Effect and Obligation to Consider 76 Although PS LA 2011/27 is framed in imperative language, it is not (and does not purport to be) an exercise of any delegated law-making power and does not have statutory force. Nor is there any provision in the 1936 Act that expressly or impliedly requires the Commissioner to consider whether some form of concessional treatment should be extended (assuming that to be possible) to taxpayers in circumstances where earlier conduct by the ATO might have contributed to them ordering their affairs in a particular way. PS LA 2011/27 is referable only to s 8 of the 1936 Act vesting the "general administration" of the Act in the Commissioner. While that may in some senses be properly described as a "power", though more accurately described as a duty, it does not include a power to make decisions that create, extinguish or modify the legal rights of taxpayers; nor does it include a power to promulgate rules that create legal rights or immunities or that otherwise have the force of delegated legislation. 77 This lack of statutory force and the lack of any identifiable obligation to consider exercising his "powers of general administration" in this way, is an additional reason why mandamus in the terms sought in the Amended Application does not lie against the Commissioner. A writ framed in those terms could not be said to compel the performance of any statutory duty. 78 Nor would mandamus in those terms lie against the second respondent, Mr Campbell. To the extent that Mr Campbell was to decide whether to "apply the ATO view of the law … solely prospectively", he would only do so as a delegate of or on behalf of the Commissioner. The fact that the Commissioner has issued instructions to his officers, as to when and on what basis such a decision is to be made, does not convert those instructions into statutory obligations enforceable at the suit of a taxpayer. Enforcement of those instructions is a matter for the Commissioner. 79 Further, as noted in [75(2)] above, the unavailability of mandamus provides a compelling reason why certiorari would not issue to quash the decision; and the decision under review in any event has no direct effect on legal rights capable of being quashed. It is important to note that what is in issue at this stage of the analysis is the effect (or lack thereof) of the decision on legal rights and obligations, in the sense of whether the decision has some legal force capable of being quashed or set aside, and not whether there is a sufficient effect on a particular person's interests to ground an obligation to afford procedural fairness to that person as submitted by the applicants. 80 Similar considerations stand in the way of the other orders sought in the Amended Application. (a) As to the orders sought in prayer 4, the decision cannot be said to have been "invalidly" made in the absence of any binding limitation on Mr Campbell's powers which can be said to have been transgressed. The proposed order requiring a further decision to be made is not appropriate for the same reasons as mandamus does not lie. (b) As to the orders sought in prayer 5, PS LA 2011/27's lack of statutory force means that a declaration to the effect that it was not complied with would not serve to settle any dispute as to legal rights. Nor is it a condition of the lawfulness of any contemplated future action, by either of the respondents, that a decision has been made "in conformity with" PS LA 2011/27. The circumstances in which an injunction would be appropriate do not exist. 81 Underlying these points about the availability of remedies is the central proposition that the applicants' case seeks to find enforceable obligations in a document which has no statutory force. If the view of the law expressed in the position papers is wrong, it is amenable to correction in Pt IVC proceedings. The relief sought proceeds on the premise that the respondents can be ordered to apply another view in the assessment process, irrespective of whether it is correct or not. If there were some obligation which could be enforced against the respondents so as to require the assessment to proceed on a particular basis, thereby affecting the amount of tax payable, the failure to perform that obligation would be something that could be taken up in proceedings under Pt IVC. But there is not. The obvious reality (apparently accepted by the applicants) that the Court or Tribunal in Pt IVC proceedings could not be asked to apply an incorrect view of the relevant taxing provisions serves to illustrate the incongruity of the contention that the Commissioner could be ordered to take such a course in making an assessment. 82 Meanwhile, each of the applicants' grounds of review is in effect a complaint that a "decision" was not made in accordance with PS LA 2011/27. Relevantly, the only decision is whether to make an amended assessment, and in what terms. Such complaints cannot lead to a grant of relief because PS LA 2011/27 is neither a source of power, nor a limitation on the scope of any power, to make decisions affecting legal rights; and the decision itself, unless and until put into effect by some step taken under the legislation (such as the issue of an assessment), does not have sufficient substance at law to make it a proper subject-matter for judicial review. 83 That representation as to procedure, can, in limited circumstances, give rise to an obligation to act fairly before departing from the representation, does not assist the applicants here. The issue here is, what view of the substantive law should be applied in the assessment process? That is a question which falls to be determined by reference to the substantive provisions, subject to any relevant authority on their meaning, unconstrained by any procedural representation. 84 Nor is the applicants' position assisted by seeking relief directly against the second respondent, Mr Campbell, on the basis that PS LA 2011/27 is said to be binding on him. (1) As noted in the applicants' submissions, no relevant delegation of statutory power exists. The two letters sent by Mr Campbell were signed by him on behalf of the Deputy Commissioner, Mr Konza. To the extent that they took effect under the tax legislation, they did so as things done in the name of the Deputy Commissioner under the principle discussed in Carltona v Commissioner of Works [1943] 2 All ER 560, 562–563 and O'Reilly v Commissioners of the State Bank of Victoria (1982) 153 CLR 1, 11–12. (2) If Mr Campbell's acts were done within the scope of authority conferred on him consistently with that principle, to act on the Commissioner's or a Deputy Commissioner's behalf, they have effect as acts of the Commissioner. Their legal validity or efficacy thus depends on the scope of the Commissioner's powers and the requirements for the proper exercise of those powers. PS LA 2011/27 in the present case does not bind the Commissioner; it could at any time be withdrawn by him, or expressly or impliedly amended. (3) If Mr Campbell's acts were not done within the scope of authority conferred on him, all that follows is that they would not have legal effect as acts of the Commissioner. If they purported to be exercises of statutory power affecting the applicants' rights, the applicants would be entitled to ignore them. That does not advance matters in the present case. It would have the result that no decision has yet been made by the Commissioner as to whether to apply the correct view of the relevant taxing provisions to past income years; but that does not avail the applicants if, as the respondents submit, the Commissioner is not under any statutory duty to make that decision in any event. (4) The Carltona principle, therefore, is no more than a mechanism by which acts of a subordinate are attributed to the officer who is the repository of the relevant power (and may then be tested for validity by reference to the scope of the statutory officer's power). It does not provide a basis for orders to be obtained against the subordinate, at the suit of a third party, by way of enforcement of the statutory officer's instructions. Any such orders would usurp the power of the statutory officer (here, the Commissioner) to vary the instructions from time to time, to excuse non-compliance with them or to choose to have the function performed by a different subordinate. (5) In any event, PS LA 2011/27 does not on its face purport to constitute the source of any particular officer's authority to exercise powers in the Commissioner's name. Nor does it define the extent of that authority, in any sense relevant to the Carltona principle: it does not designate a class of matters in which a particular officer is authorised (in the sense that an agent under the general law would be authorised) to act on behalf of the Commissioner. Rather it is part of the Commissioner's instructions – binding in the sense that he expects them to be carried out – as to how officers who do have that authority are to act. The only relevant legal limits on power are the limits on the Commissioner's powers under the 1936 Act. 85 There is some analogy here with the instructions (termed "Guidelines") which successive Ministers for Immigration have issued to their officers, as to classes of cases that are to be brought to the Minister's attention for the possible exercise of one of the non-compellable ministerial discretions under the Migration Act 1958 (Cth). This Court has repeatedly refused to entertain attempts to enforce those instructions by seeking orders against the officers based on alleged non-compliance with them, e.g., S1083 v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 1455; Raikua v Minister for Immigration and Multicultural and Indigenous Affairs (2007) 158 FCR 510 (esp at [64]). 86 In the special circumstances of Plaintiff M61/2010E v Minister for Immigration and Citizenship (2010) 243 CLR 319 (referred to in the applicants' submissions), where the procedure being undertaken (and its relationship to specific potential exercises of statutory power) provided the legal foundation for the detention of the plaintiffs (at [71]), and where that procedure constituted the means of compliance with Australia's obligations under the Refugees Convention (which were understood to underlay the text and structure of the Act) (at [27], [70]), the High Court saw utility in granting declaratory relief to the effect that the advice to the Minister was affected by denials of procedural fairness and errors of law (at [103]). The analogy breaks down at this point, however. The matter must be considered in the appropriate statutory context. That context relevantly includes the comprehensive review and appeal mechanisms in Part IVC. The present case does not have anything comparable to the special features of Plaintiff M61 just mentioned. In particular, a decision of the kind contemplated in PS LA 2011/27 may affect whether the ATO takes "compliance action" but does not have a necessary or direct relationship with any particular exercise of statutory power. 87 For the foregoing reasons, I am satisfied that the applicants have no reasonable prospect of obtaining the final relief they seek and the proceeding must, in consequence, be summarily dismissed pursuant to s 31A(2) of the FCA Act. I certify that the preceding eighty-seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds. Associate: Dated: 3 September 2013