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Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA NO. 176 of 2017
BETWEEN:
SOUTH SEAS TUNA CORPORATION LIMITED
Appellant
AND:
BETTY PALASO as COMMISSIONER GENERAL, INTERNAL REVENUE COMMISSION
First Respondent
AND:
INTERNAL REVENUE COMMISSION OF
PAPUA NEW GUINEA
Second Respondent
Waigani: Collier, Nablu and Neill JJ
2018: 29th October
2019: 14th February
TAXATION – interpretation of Goods and Services Tax Act 2003 – meaning of “assessment” for the purposes of the Goods and Services Tax Act – effect of s 32 of the Interpretation Act – whether journal entries constituted an “assessment” – whether the first respondent was functus officio
ADMINISTRATIVE LAW – whether common law principles of functus officio apply to administrative bodies in Papua New Guinea
Cases Cited:
Papua New Guinea Cases
Yagama v Uguro [2018] SC1682
Overseas Cases
Batagol v Federal Commissioner of Taxation [1963] HCA 51; (1963) 109 CLR 243
British Columbia (Workers’ Compensation Appeal Tribunal) v. Fraser Health Authority, 2016 SCC 25, [2016] 1 S.C.R. 587
Chandler v Alberta Association of Architects [1989] 2 SCR 848
Chopra v Canada (Attorney General) 2013 FC 644
Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681
Commissioner of Taxation v Ryan [2000] HCA 4; (2000) 201 CLR 109
Cooper Brooks (Wollongong) Pty Ltd v Commissioner of Taxation (1980) 147 CLR 297
Demetrio, R. (on the application of) v Independent Police Complaints Commission (IPCC) [2015] EWHC 593
Federal Commissioner of Taxation v Prestige Motors Pty Ltd [1994] HCA 39
Federal Commissioner of Taxation v S Hoffnung & Co Ltd [1928] ArgusLawRp 103; (1928) 1 ATD 310
Ika v Nauru Phosphate Royalties Trust [2011] NRSC 6
In re 56 Denton Road, Twickenham [1953] Ch 51
In re St. Nazaire Co. [1879] UKLawRpCh 217; (1879) 12 ChD, 88
Kabourakis v The Medical Practitioners Board of Victoria [2006] VSCA 301
Minister for Immigration and Border Protection v CLV16 [2018] FCAFC 80
Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597
Minister for Indigenous Affairs v MJD Foundation Limited [2017] FCAFC 37
Mordue v Palmer [1870] UKLawRpCh 111; (1870) 6 Ch App 22
Mwelo v Xiang Lin Timber (SI) Ltd [2018] SBHC 8
Paul Finance Ltd v Commissioner of Inland Revenue [1995] 3 NZLR 521
R v Deputy Federal Commissioner of Taxation; ex parte Hooper [1926] ALR 101
Re VGM Holdings Ltd [1941] 3 All ER 417
Ridge v Baldwin [1963] UKHL 2; [1964] AC 40
Rootkin v Kent County Council [1981] 1 WLR 1186
Sunbeam Transport Ltd v Pacific Transport Ltd [1995] FJCA 19
WT Ramsey Ltd v Inland Revenue Commissioners [1981] UKHL 1; [1982] AC 300
Legislation Cited:
Goods and Services Tax Act 2003
Income Tax Act 1959
Interpretation Act
Acts Interpretation Act (Cth) (Aust)
Architects Act (Canada)
Migration Act 1958 (Cth) (Aust)
Nauru Lands Committee Act 1956-1963 (Nauru)
Traffic Act (Cap 176) (Fiji)
War Damage Act 1943 (UK)
Counsel
M Goodwin with T Ivano, for the Appellant
S Sinen, for the First and Second Respondents
REASONS FOR JUDGMENT
14th February, 2019
1. COLLIER J: This is an appeal from an interlocutory decision of a National Court Judge in which his Honour found that it was unnecessary in the circumstances of the case to determine whether the respondents had made an assessment of tax payable under the Goods and Services Tax Act 2003 (GST Act), and that the doctrine of functus officio did not apply in respect of an administrative decision of the Internal Revenue Commission (IRC) under the GST Act. Leave to appeal was granted on 23 November 2017, with costs of that application being costs in the appeal. Before turning to the grounds of appeal it is helpful to examine relevant background facts and the decision of the primary Judge the subject of this appeal.
BACKGROUND
2. Uncontested background facts are set out in the affidavit of Mr Michael McCulley, the managing director of the appellant, sworn on 23 June 2016 in the primary proceedings.
3. The appellant was an incorporated joint venture of three companies, one of which was a Taiwanese entity FCF Fishery Company Ltd (FCF). The purpose of the incorporated joint venture was to enable ongoing compliance with multilateral and bi-lateral requirements, established by Papua New Guinea and other Pacific countries to enable access to fishing for tuna in the waters of those countries and access to the United States market for processed fish. At the time of the commencement of proceedings in the National Court the only remaining joint venturer was FCF, which had effectively become the parent company of the appellant.
4. On or about 5 July 2000 the appellant entered into a project agreement with the State and the East Sepik Provincial Government to develop a tuna processing facility in Wewak. The facility became operational in 2004. The project agreement provided economic incentives to the appellant to come to Papua New Guinea and avail itself of the opportunity to develop Papua New Guinea’s participation in the Western Pacific tuna fishery. In particular, Mr McCulley deposed that:
5. Pursuant to the agreement, the appellant constructed a processing facility at Wewak. Mr McCulley deposed that the arrangements for the operation of the facility included that it was fenced off from the rest of the port of Wewak, that its customers are external to Papua New Guinea, and that it was treated at all times as under the control of Papua New Guinea Customs. The appellant submits, in forceful terms, that this remains the case.
6. Between 2004 and 2015 the appellant filed a monthly return under the GST Act for each month of the calendar year, each time accepted and assessed by the Commissioner. Further, it appears that the respondents each year sent a team of auditors and inspectors to the premises of the appellant and examined the appellant’s books and records, including GST records, and each year the auditors left the premises satisfied with the appellant’s taxation compliance. Materially, Mr McCulley further deposed:
7. The appellant contended that, because it had few Papua New Guinea domestic sales, it accumulated nil or very little GST output debits from GST chargeable on its goods and services outputs. However because it was required to pay GST on all goods and services it had consumed each month it accumulated GST input credits. The appellant also submitted that it had claimed a refund of the excess amounts of GST input credits, that the respondents had been routinely late since 2004 in making those refunds, and that the appellant had been required to take legal action against the respondents to recover that excess and had twice been successful. I note, for example, that in 2006 the appellant was awarded mandamus orders against the respondents in the National Court in respect of outstanding GST refunds.
8. By a position paper from the respondents to the appellant dated 7 August 2015, the respondents advanced the propositions that the appellant had engaged in transfer pricing, and that the appellant had not charged GST on its services provided to FCF. In a letter dated 19 October 2015 to the Commissioner the appellant claimed that it was owed a GST refund of K2,389,033.19, and demanded payment.
9. The parties attended a meeting in December 2015. Mr McCulley deposed that, at that meeting, the respondents agreed to refund to the appellant K2,848,454.12 in GST. Mr McCulley deposed that, subsequently:
10. The appellant filed a notice of objection with the Commissioner on 24 March 2016 against the entries on the appellant’s GST account, and requested the Commissioner to provide details of and reasons for any decision resulting in the entries on the appellant’s GST trust account.
(I note that on 24 May 2016 Mr Des McMaster, a representative of the IRC, contacted the appellant stating that the IRC had no record of this notice of objection, and requested that a further copy be provided. The appellant’s lawyers provided the IRC with a further copy of the notice of objection on 2 June 2016.)
11. The respondents did not respond to the notice of objection, and on 24 May 2016 the appellant wrote to the Commissioner in the following terms:
NOTICE TO STATE A CASE FOR THE OPINION OF THE NATIONAL COURT
We refer to our letter dated 24 March 2016.
We note that your office has not responded to our objections after receiving a copy of the notice of objection on 24 March 2016.
As two months have elapsed, we are treating your non-response as disallowance or non allowance in full. If you have a different view of your obligation to respond, please set that position out.
We give notice to you to state a case for the opinion of the National Court pursuant to Section 77 (2)(a) and/or alternatively, 77 (3)(a) of the Goods and Services Act 2003.
The case is to be filed in the National Court of Justice at Waigani.
12. This was followed by a letter of 6 June 2016 in which the appellant noted that there were no prescribed forms under the relevant laws, and suggested filing an Originating Summons in the National Court seeking directions on the correct method by which the Court would determine the facts, deal with the Constitutional issues raised, and apply the laws, and set out a timetable to achieve the hearing of the matter.
13. The Commissioner responded by letter of 10 June 2016, stating that:
14. The appellant claimed, in substance, that the Commissioner made three assessments of GST in the first six months of 2016 for the period 2004 to 2014 and applied them to the GST account of the appellant. These claimed assessments were as follows:
6.1 The January 2016 GST Assessment 1: Journal entries the [respondents] have posted to the [appellant’s] GST account backdated to 1 January 2015 stating an amount owing by the [appellant] of PGK15,186, 356.09 for the period 2004 to 2014.
...
6.2 The 16 June 2016 GST Assessment 2: The journaling of a reversal of a GST refund entitlement in the sum of PGK537,934.66 which had previously been applied as a credit, and a debit of another PGK22,959,934.84 in GST to the [appellant’s] account for the period 2004 to 2014;
...
6.3 The 27 June 2016 GST Assessment 3: The amended GST assessments by letter dated 27 June 2016 from the [Commissioner] enclosing, among other matters, a GST Audit Report and amended notices of assessment of additional GST liability with penalties amounting to K64,543,072.47 for the period 2004 to 2014.
(Original emphasis.)
15. The appellant filed an originating summons on 24 June 2016, and an amended notice of motion on 19 July 2016. In the amended notice of motion the appellant sought the following orders:
...
16. The respondents submitted, in summary, that the first and second journal entries did not constitute assessments, and the third journal entry issued on 27 June 2016 did not constitute an assessment for tax pursuant to the GST Act. The respondents also contended that the GST Act provided for the Commissioner to alter or add to an assessment from time to time.
DECISION OF THE PRIMARY JUDGE
17. The primary Judge found that it was not necessary to make a determination in respect of the question whether some or all of the relevant journal entries to the appellant’s GST accounts were assessments as referred to in ss 67, 73 and 74. At [7] of the primary decision, his Honour observed that this was because s 73(7) provided, in essence, that an objection to a decision could be referred to the National Court by way of case stated, in the same way that an objection to an assessment could be referred.
18. His Honour noted the submissions of the appellants in respect of whether the doctrine of functus officio operated to render the second and third journal entries void because the appellant had invoked the judicial procedures of the GST Act before the second and third journal entries were made, including Australian authorities on comparable legislation. His Honour noted ss 67(3) and 83 of the GST Act and continued:
GROUNDS OF APPEAL IN THE SUPREME COURT
19. By notice filed on 28 February 2018 the appellant relied on the following grounds of appeal:
3.1 The Primary Judge erred in law in failing make [sic] a finding that on the construction, interpretation and application of section 32 of the Interpretation Act, this section raises a mere presumption which is generally rebuttable to prevent the exercise of a power of reconsideration of a decision which is inconstant [sic] with the requirement of finality in decisions, dependent on the construction of the statute governing the issue in dispute.
3.2 The Primary Judge erred in fact and in law in failing to determine whether the First Respondent can impose GST by posting entries in the Appellant’s GST account and whether that constitutes an Assessment of GST under the Goods and Services Tax Act 2003. The consequence of this is that there is no determination, or can be no determination, made of the Appellants objections as to:
3.2.1 Which of the three assessments or decisions of the First Respondent (January 2016 GST Assessment No. 1, 16 June 2016 GST Assessment No. 2 or 27 June 2016 GST Assessment No. 3) are justiciable and need to be pleaded in the stated case for clear judicial answer, and whether they are separate assessments, overlapping assessments or cumulative.
3.2.2 Whether, if the journal entries are not Assessments, the First Defendant was acting ultra vires her powers in making journal entries and has committed an offence under sections 462, 463, and 473 of the Criminal Code by making a false entry in an official government record, and
3.2.3 Consequently to 3.2.2, whether each or any of the journal entries should be struck down as a matter of civil law by the principle of ex turpi non antur (“no action may be founded on illegal or immoral conduct”) which arises as part of the underlying law.
3.3 The Primary Judge erred in law in failing to apply of [sic] the principle of functus officio (which provides that a person who is vested with decision-making powers may, as a general rule, exercise those powers only once in relation to the same matter) as it applies to powers arising pursuant to section 67 (3) of the Goods and Services Tax Act 2003 to make administrative decisions and GST assessments under that Act, particularly were [sic] a request has already been made for referral of an objection for the opinion of the National Court on a stated case and the National Court is seized of the matter.
3.4 The Primary Judge erred in fact and in law in failing to determine whether in the circumstances of this case the principle of functus officio applies and all GST Assessments subsequent to January 2016, including GST Assessments 2 & 3 by the Defendants dated 16 June 2016 and 27 June 2016 are functus officio and void.
3.5 The Primary Judge erred in law in his findings on the construction, interpretation and application of provisions of the Goods and Services Tax Act 2003, particularly Part XI and sections 67 (3), 73, 74, 75, 78 and 83 as follows:
3.5.1 The Primary Judge erred in law in finding that sections 67 (3) and 83 of the Goods and Services Tax Act 2003 give the First Respondent unfettered power to make assessments, reassessments, or amendments to assessments or decisions, even when the judicial procedures under the Act are invoked, effectively usurping judicial power, discretion, determination and review of the Courts, in breach of Division 5 of Part VI of the Constitution (including of [sic] sections 155 (3), (4), (5) & (6) and 158 (1));
3.5.2 The Primary Judge erred in law in failing to find that sections 67 (3) and 83 of the Goods and Services Tax Act 2003 are subject to the review of judicial provisions of Part XI of that Act;
3.5.3 The Primary Judge erred in law in failing to find that section 83 of the Goods and Services Tax Act 2003 is merely a facilitating provision to allow the First Respondent to make other unrelated assessments for GST not the subject of an objection or determination, or to correct or amend an assessment for GST to implement a determination made to an objection;
3.5.4 Once the Primary Judge found that sections 67 (3) and 83 gave the First Respondent unfettered power to make assessments, reassessments or amendments to assessments or decisions, even when the judicial procedures under the Goods and Services Tax Act 2003 are invoked, effectively usurping judicial power, discretion and determination, in breach of sections 155 (3), (4), (5) & (6) and 158 (1) of Division 5 of Part VI of the Constitution, the Primary Judge erred in law in failing to refer the issue of the construction, interpretation and application of sections 67 (3) and 83 of the Goods and Services Tax Act 2003 to the Supreme Court by Special Reference pursuant to section 19 of the Constitution.
3.5.5 The Primary Judge erred in law in failing to apply the provisions of Part XI of the Goods and Services Tax Act 2003, particularly section 77 (9), and find that once an objection to an assessment is referred to the National Court, the Respondents are required to state and sign a case as prescribed for the National Court, and no further power of assessment may be exercised in relation to the assessment that is the subject of the objection, subject only to formal correction to implement the answer to the stated case.
20. In addition to seeking an orders that the appeal be allowed, the orders of the primary Judge be set aside, and costs, the appellant also sought that the orders to the effect of those in [1] and [2] of the amended notice of motion in the National Court be entered in favour of the appellant, and that the matter be remitted to the National Court to provide directions in respect of the manner or form of procedure to be adopted for the case stated and the conduct of the proceedings.
CONSIDERATION
21. After hearing oral submissions from Counsel, we put it to the parties that, in light of their submissions and the overlapping nature of the grounds of appeal, there were fundamentally two issues for determination by the Court in this appeal. These issues were:
(1) First, when the Commissioner makes an “assessment” within the meaning of the GST Act and the Court is seized of process by requesting the Commissioner to state a case for the National Court pursuant to ss 77(2)(a) and 77(3)(a) of the GST Act – whether the assessment is functus officio such that the Commissioner cannot revisit the assessment by issuing further amendments (grounds of appeal 3.1, 3.3, 3.4 and 3.5); and
(2) Second, whether the journal entries of January 2016 did constitute an “assessment” for the purposes of the GST Act (ground of appeal 3.2).
22. The parties accepted that these issues summarised the grounds of appeal before the Court, and required determination. Accordingly, it is convenient to consider these issues in turn.
ISSUE 1: IS THE MAKING OF AN ASSESSMENT A DECISION WHICH IS “FUNCTUS OFFICIO”?
23. At the hearing of this appeal during submissions, Counsel for the respondents made the specific concession that the respondents accepted that, once the amended GST assessment was made on 24 June 2016, the decision of the Commissioner was functus officio in respect of that assessment. To that extent, it appeared that, by the conclusion of submissions, the only legal dispute between the parties concerned the point at which an assessment was made – the appellant claims that an assessment was made by journal entries in January 2016.
24. The effect of this concession on the part of the respondents is that, to the extent the appeal concerns the decision of the primary Judge in respect of the application of the principle of functus officio, the respondents appear to agree that his Honour erred at [13] of the primary judgment in his statement of relevant legal principles. However, so far as I am aware, there have been no authorities in Papua New Guinea considering the broader relevance of the principle of functus officio to administrative decisions and the more specific issue concerning the application of the principle to decisions of the Commissioner under the GST Act. Accordingly, and notwithstanding the apparent common ground of the parties in respect of the application of the legal principle of functus officio to an assessment of the Commissioner, it is appropriate for the Court to consider this issue and make relevant observations.
25. The principle “functus officio” was recently described by Lord Justice Burnett (as his Lordship then was) in Demetrio, R. (on the application of) v Independent Police Complaints Commission (IPCC) [2015] EWHC 593 in the following terms:
26. It is generally used in respect of decisions of judicial officers (see, for example, In re St. Nazaire Co. [1879] UKLawRpCh 217; (1879) 12 ChD 88; Re VGM Holdings Ltd [1941] 3 All ER 417; Mordue v Palmer [1870] UKLawRpCh 111; (1870) 6 Ch App 22; Yagama v Uguro [2018] SC1682). However, there is also considerable case law in other jurisdictions analysing the question whether the principle applies to administrative decision-making. The approach in courts of Canada, Australia and the United Kingdom has been that where an administrative body:
the decision, if validly made, is irrevocable and cannot be remade.
27. This approach has also been adopted in at a number of Pacific jurisdictions, namely the Solomon Islands, Fiji and Nauru.
28. It is useful to examine leading decisions from these jurisdictions in order to inform the issues currently before this Court.
Canada
29. In Canada the Supreme Court examined the issue of finality in decision-making by administrative bodies in the leading case of Chandler v Alberta Association of Architects [1989] 2 SCR 848. As the headnote to the case explains, the Board of the association had conducted a hearing to review the practices of a firm of architects which went bankrupt, and issued a report. Although the hearing was intended to be a practice review, the Board, in its report, made findings of unprofessional conduct against the firm and a number of the architects, levied fines, imposed suspensions and ordered them to pay the costs of the hearing. The firm challenged the Board’s findings and orders in the Court of Queen’s Bench, which ordered them quashed, for reasons including that, under s 39(3) of the Architects Act (Canada), the Board was simply responsible for reporting to the Council of the association and for making appropriate recommendations. The Board then notified the appellants that it intended to continue the original hearing to consider whether a further report should be prepared for consideration by the Council and whether the matter should be referred to the Complaint Review Committee. The Court of Queen’s Bench allowed the appellants’ application to prohibit the Board from proceeding further in the matter on the basis that the Board had completed and fulfilled its function and that it was therefore functus officio. The association appealed to the Court of Appeal which vacated the order of prohibition on the basis that the legislation required the Board to consider whether or not to make recommendations to the Council of the association or the Complaint Review Committee, and as the Board did not do so it had not exhausted its jurisdiction. By majority (Dickson CJ, Wilson and Sopinka JJ), the Supreme Court dismissed the appeal against the decision of the Court of Appeal. The judgment of the majority was delivered by Sopinka J.
30. The majority noted at 855 that, in order to determine whether the Board was empowered to continue its proceedings against the appellants, it was necessary to examine the statutory framework within which the Board operated. Their Honours noted that the Architects Act did not purport to confer on the Board the power to rescind, vary, amend or reconsider a final decision that it had made. Accordingly the key questions before the Court were:
31. The majority examined s 39 of the Architects Act and supporting regulations, and then turned to the decision of the Board. At 860, their Honours characterised that decision as follows:
The Board held a valid hearing into certain practices of the appellants. At the conclusion of the hearing, in lieu of considering recommendations and directions, it made a number of ultra vires findings and orders which were void and have been quashed. In these circumstances, is the decision of the Board final so as to attract the principle of functus officio?
32. Importantly, the majority continued at 861-862:
Apart from the English practice which is based on a reluctance to amend or reopen formal judgments, there is a sound policy reason for recognizing the finality of proceedings before administrative tribunals. As a general rule, once such a tribunal has reached a final decision in respect to the matter that is before it in accordance with its enabling statute, that decision cannot be revisited because the tribunal has changed its mind, made an error within jurisdiction or because there has been a change of circumstances. It can only do so if authorized by statute or if there has been a slip or error within the exceptions enunciated in Paper Machinery Ltd. v. J. O. Ross Engineering Corp., supra.
To this extent, the principle of functus officio applies. It is based, however, on the policy ground which favours finality of proceedings rather than the rule which was developed with respect to formal judgments of a court whose decision was subject to a full appeal. For this reason I am of the opinion that its application must be more flexible and less formalistic in respect to the decisions of administrative tribunals which are subject to appeal only on a point of law. Justice may require the reopening of administrative proceedings in order to provide relief which would otherwise be available on appeal.
Accordingly, the principle should not be strictly applied where there are indications in the enabling statute that a decision can be reopened in order to enable the tribunal to discharge the function committed to it by enabling legislation. This was the situation in Grillas, supra.
Furthermore, if the tribunal has failed to dispose of an issue which is fairly raised by the proceedings and of which the tribunal is empowered by its enabling statute to dispose, it ought to be allowed to complete its statutory task. If, however, the administrative entity is empowered to dispose of a matter by one or more specified remedies or by alternative remedies, the fact that one is selected does not entitle it to reopen proceedings to make another or further selection. Nor will reserving the right to do so preserve the continuing jurisdiction of the tribunal unless a power to make provisional or interim orders has been conferred on it by statute. See Huneault v. Central Mortgage and Housing Corp. (1981), 41 N.R. 214 (F.C.A.)
(Emphasis added.)
33. Turning to the case before it, the majority observed that the Board intended to make a final disposition, the disposition was a nullity and did not amount to a disposition at law, and that, traditionally, a tribunal which makes a determination which is a nullity is permitted to reconsider the matter afresh and render a valid decision. At 863 the majority referred to the decision of the House of Lords in Ridge v Baldwin [1963] UKHL 2; [1964] AC 40 and noted that if the error which renders the decision a nullity is one that taints the whole proceeding, then the tribunal must start afresh to cure the defect. They concluded at 863-864:
In this proceeding the Board conducted a valid hearing until it came to dispose of the matter. It then rendered a decision which is a nullity. It failed to consider disposition on a proper basis and should be entitled to do so.
On the continuation of the Board’s original proceedings, however, either party should be allowed to supplement the evidence and make further representations which are pertinent to disposition of the matter in accordance with the Act and Regulation. This will enable the appellants to address, frontally, the issue as to what recommendations, if any, the Board ought to make.
34. The decision of the Court in Chandler has been followed in subsequent cases in Canada. So, for example, in Chopra v Canada (Attorney General) 2013 FC 644, Scott J in the Federal Court of Canada observed:
[64] Based on Chandler, cited above, administrative tribunals have the jurisdiction to reopen a decision for which there is no right to appeal in the following cases: 1) they may always reopen a proceeding if there was a denial of natural justice which vitiates or nullifies it (see Chandler, at para 25; and Nazifpour v Canada (Minister of Citizenship and Immigration), 2007 FCA 35 (CanLII) at para 36); 2) “there are indications in the enabling statute that a decision can be reopened in order to enable the tribunal to discharge the function committed to it by enabling legislation” (the new evidence ground) (Chandler at para 22); 3) jurisdictional error (Chandler at para 24); and 4) failure to dispose of an issue which is fairly raised by the proceedings and of which the tribunal is empowered by its enabling statute to dispose (Chandler at para 23).
[65] Absent a legislative intent to the contrary, it is clear that an administrative tribunal may reopen a proceeding for a denial of natural justice, a jurisdictional error or a failure to address an issue fairly raised by the proceedings.
35. More recently in British Columbia (Workers’ Compensation Appeal Tribunal) v. Fraser Health Authority 2016 SCC 25; [2016] 1 SCR 587 the Supreme Court of Canada unanimously followed the decision in Chandler, in the following terms:
[26] Fraser Health, having sought reconsideration by the Tribunal, now takes the position that the majority at the Court of Appeal correctly characterized the reconsideration decision as a nullity. The Tribunal’s power to reconsider a decision under s. 253.1(5) of the Workers Compensation Act “to cure a jurisdictional defect” is, it says, limited to the common law power to reopen as stated by the Court in Chandler v. Alberta Association of Architects, [1989] 2 S.C.R. 848, at p. 861: “. . . [a final] decision cannot be revisited because the tribunal has changed its mind, made an error within jurisdiction or because there has been a change of circumstances”.
[27] Conversely, the Tribunal submits that s. 253.1(5)’s language of “cur[ing] a jurisdictional defect” is sufficiently broad to permit reconsideration for patent unreasonableness. In the Tribunal’s view, when it undertakes to reconsider its own decision, it effectively operates as a court on judicial review by applying the standard of review of patent unreasonableness stated in s. 58(2)(a) of the Administrative Tribunals Act.
[28] In light of the position taken by Fraser Health — that it should not have been able to obtain reconsideration of the Tribunal’s original decision and that the reconsideration decision is a nullity — I see no basis for interfering with the decision of the Court of Appeal on this issue.
Australia
36. The leading Australian authority addressing finality in decision-making by administrative bodies is the decision of the High Court of Australia in Minister for Immigration and Multicultural Affairs v Bhardwaj [2002] HCA 11; (2002) 209 CLR 597.
37. The relevant background facts in Bhardwaj were summarised in the decision of Gleeson CJ at [2]:
2. The respondent, whose student visa was cancelled by a delegate of the appellant, applied to the Immigration Review Tribunal (“the Tribunal”) for a review of the decision. The application was received on 21 August 1998. The Tribunal proposed to deal with the matter on 15 September 1998, and invited the respondent to attend a hearing. Late in the afternoon of 14 September 1998 the Tribunal received, from the respondent’s agent, a letter stating that the respondent was ill and would be unable to attend the next day, and requesting an adjournment. By an administrative oversight, the letter did not come to the attention of the member of the Tribunal to whom the matter had been assigned. The Tribunal dealt with the matter on 15 and 16 September, adversely to the respondent, and notified the respondent and his agent on 17 September. The reason given for the Tribunal’s decision was that the respondent had not provided any information which suggested that the cancellation of his visa was unfair or inappropriate. When the respondent’s agent was informed of the decision, the attention of the Tribunal member was drawn to the letter of 14 September. A new hearing date was arranged. The Tribunal heard the respondent’s explanation of the conduct which had resulted in the cancellation of his visa, accepted the explanation, and, on 22 October 1998, revoked the cancellation.
38. The issue before the High Court concerned the capacity of the Tribunal to proceed as it did. In summary, the appellant contended that the power of the Tribunal to review the delegate’s decision was spent after it made the decision in September. The resolution of the issue depended upon the nature and extent of the power conferred upon the Tribunal by the legislation under which it was acting.
39. In considering the case before the Court, Gleeson CJ observed as follows:
40. The relevant statutory scheme in that case was found in the Migration Act 1958 (Cth) (Aust). The appellant argued that that statute manifested an intention to preclude the reconsideration undertaken by the Tribunal in that case. Gleeson CJ summarised the appellant’s arguments as follows:
10. The appellant points to the following features of the Act. The Act permits merits review by the Tribunal of primary decisions, and judicial review of the Tribunal’s decisions, within a closely confined structure. There is no express power in the Tribunal to reconsider its own decisions. The Act contains restrictions upon the making of applications for further visas after earlier applications have been refused, and provides a mechanism by which the Minister may allow a person to make a second application for a protection visa only. Judicial review of Tribunal decisions in the Federal Court is available only upon limited grounds, and depends upon the filing of an application within a fixed period. The scheme for removal of unlawful non-citizens is related to the date of final determination of a visa application. It was argued that it would be inconsistent with that scheme if there existed a residual power in the Tribunal to re-open a decision once made
41. In considering this argument Gleeson CJ observed as follows:
42. His Honour concluded:
14. In the present case there was a denial of procedural fairness; but there was more to it than that. There was an error of the kind described as “error in fact” in the context of proceedings by writ of error: the non-fulfilment or non-performance of a condition precedent to regularity of adjudication such as would ordinarily induce a tribunal “to stay its hand if it had knowledge, or to re-open its judgment had it the power.”... The Tribunal, through an administrative error, failed to implement its own intention, and failed to comply with the statutory requirement to give the respondent an opportunity to be heard. In its reasons for its “decision”, the Tribunal merely noted the delegate’s decision, and observed that nothing had been put before it as to why the decision was unfair or inappropriate. That did not amount to the conduct of a review. The Act provided, in s 353, that the Tribunal, in reviewing the delegate’s decision, was not bound by technicalities or legal forms and should act according to substantial justice. When it learned of its own administrative error, the Tribunal recognised that it had not performed its functions and proceeded to do so.
43. His Honour concluded, accordingly, that it was not inconsistent with the framework of the Migration Act that, when the Tribunal became aware of its failure to conduct the proper review, that it should do so.
44. Justices Gaudron and Gummow in Bhardwaj observed that there was no reason in principle why the general law should treat administrative decisions involving jurisdictional error as binding or having legal effect unless and until set aside. Subject to issues not relevant to the current proceedings, McHugh J concurred with Gaudron and Gummow JJ. Critically, Gaudron and Gummow JJ observed at [51]:
A decision that involves jurisdictional error is a decision that lacks legal foundation and is properly regarded, in law, as no decision at all.
45. Their Honours considered the decision of the Supreme Court of Canada in Chandler, and continued:
46. Hayne and Callinan JJ agreed that the appeal should be dismissed.
47. The High Court’s decision in Bhardwaj has been repeatedly applied by Australian courts. So, for example, in Kabourakis v The Medical Practitioners Board of Victoria [2006] VSCA 301, notification was made to the respondent, The Medical Practitioners’ Board of Victoria concerning the treatment by the appellant medical practitioner of a patient. The Board gave notice to the appellant of an informal hearing pursuant the relevant medical practice legislation. A panel informally convened found that the appellant had not engaged in unprofessional conduct, however the ombudsman recommended that the Board re-open its investigation. The evidence indicated that a medical report by another practitioner relating to the appellant’s treatment of the patient had not been provided to the Board. The Board gave notice to the appellant of a further hearing under the legislation, however the appellant claimed that the Board was functus officio.
48. The Court of Appeal of Victoria accepted the contentions of the appellant. The lead judgment was delivered by Nettle JA (as his Honour then was). After considering Bhardwaj his Honour continued:
47 ... For whether an error is jurisdictional or non-jurisdictional, the question of whether a decision may be re-opened to correct an error turns in the end on the meaning of the statute under which the decision is made. But, unlike the judge, I consider that the effect of the Act properly understood is that a finding of the panel is final and binding except upon appeal or review.
48. Self evidently, an administrative decision has only such force and effect as is given to it by the law pursuant to which it is made. As was pointed out in Bhardwaj, Parliament may give an administrative decision whatever force it wishes. Consequently, as the judge made plain, the question in this case comes down to whether the statute manifests an intention to permit or prohibit reconsideration in the circumstances that have arisen. But, as was also said in Bhardwaj, as a rule a statutory tribunal cannot revisit its own decision simply because it has changed its mind or recognises that it has made an error within jurisdiction. More often than not, the requirements of good administration and the need for people affected directly or indirectly by decisions to know where they stand mean that finality is the paramount consideration, and the statutory scheme, including the conferring and limitation of rights of review on appeal, will be seen to evince an intention inconsistent with capacity for self correction of non-jurisdictional error. In the bulk of cases, logic and common sense so much incline in favour of finality as to permit of no other conclusion.
(Emphasis added.)
49. Other recent illustrations of the application of the principles explained in Bhardwaj are the decisions of the Full Court of the Federal Court of Australia in Minister for Indigenous Affairs v MJD Foundation Limited [2017] FCAFC 37 and Minister for Immigration and Border Protection v CLV16 [2018] FCAFC 80.
The United Kingdom
50. The leading statement of principle from the courts of the United Kingdom supporting the proposition that an administrative tribunal can “remake” a decision which is a nullity, is that of Lord Reid in Ridge v Baldwin [1963] UKHL 2; [1964] AC 40 at 79 where his Lordship stated:
I do not doubt that if an officer or body realises that it had acted hastily and reconsiders the whole matter afresh, after affording to the person a proper opportunity to present his case, then its later decision is valid.
51. However, in the earlier case of In re 56 Denton Road, Twickenham [1953] Ch 51, Vaisey J had examined relevant principles in the context of a decision of the War Damage Commission under the War Damage Act 1943 (UK). On 19 November 1940, the property the subject of the litigation was in part destroyed by enemy military action and the remainder was demolished by the authorities the next month. Under the War Damage Act, the Commission was empowered to make “value” payments, or “cost of works” payments (including circumstances where war damage resulted in total loss), depending upon the damage sustained and subsequent classification of the property.
52. On 30 November 1943 and 1 September 1944, the Commission notified the owner that 56 Denton Road had been given “a preliminary classification of total loss”. On 12 November 1945, after having consulted the owner’s architect, the Commission wrote that “the preliminary classification of ‘total loss’ in respect of this property has been reviewed”, that it had decided to cancel the earlier notifications, and asked if a reclassification would be agreeable. The Commissioner further explained that when a property was classified as ‘not a total loss’ it would make a cost of works payment. The owner agreed to the proposed reclassification.
53. On 15 July 1946, the Commission wrote again to the owner advising that it “decided to revert to the total loss classification” and on 10 February 1947 the owner received a form titled “Notice of determination under the War Damage Act, 1943, of the kind of payment to be made in respect of war damage”. The document indicated the Commission determined the loss suffered was “total loss” and that she would now receive a value payment.
54. The owner sought a declaration from the Court that the Commission had determined the type of damage sustained was “one for which a cost of works payment ought to be awarded” based on a proper construction of the War Damage Act and the letter of 12 November 1945. The Court was therefore required to consider whether the decision in that matter was merely “conditional and preliminary” or final and irrevocable in nature (at 55)
55. In the High Court of England and Wales the Commission argued that they had:
... a perfect right to change their minds as their policy changes or as fresh evidence comes to light or further advice is given to them by their technical advisers, and that unless a determination of theirs have been acted upon in some way so as to raise a case of estoppel, they can go on altering it, as, and as often as, occasion arises.
56. However, Vaisey J preferred the proposition of the plaintiff at 56-7:
... that where Parliament confers upon a body ... the duty of deciding or determining any question, the deciding or determining of which affects the rights of the subject, such decision or determination made and communicated in terms which are not expressly preliminary or provisional is final and conclusive, and cannot in the absence of express statutory power or the consent of the person or persons affect be altered or withdrawn by that body.
(Emphasis added.)
57. In finding that the determination in the letter of 12 November 1945 was final and irrevocable, his Lordship took the view that the letter in question “was one upon which the plaintiff was invited to rely and was and is entitled to rely” and that “the contrary view would introduce a lamentable measure of uncertainty” (at 57). The Commission was therefore bound by its determination.
58. The case of Rootkin v Kent County Council [1981] 1 WLR 1186 involved consecutive decisions of the local council in respect of the funding of a bus ticket for a school child. The Court of Appeal considered the operation of s 55(2) of the Education Act 1944 (UK) which provided:
A local education authority may pay the whole or any part, as the authority think fit, of the reasonable travelling expenses of any pupil in attendance at any school or county college or at any such course or class as aforesaid for whose transport no arrangements are made under this section.
59. The substantive appeal was dismissed on the basis that the decision-maker’s first decision was conceived by mistaken fact. Lawton LJ said at 1194H-1195A that the officer
... was duty bound ... to the council to reconsider the matter because, on the [original] facts as he knew them ... there was no duty to issue a bus season ticket to Helen. I can see no reason in law why he should not have reconsidered the matter when he found that a mistake had been made about the distance.
60. In distinguishing Rootkin from In re 56 Denton Road, Lawnton LJ explained at 1195B-C that:
It is the law that if a citizen is entitled to payment in certain circumstances and a local authority is given the duty of deciding whether the circumstances exist and if they do exist making the payment, then there is a determination which the local authority cannot rescind. That was established in Livingstone v. Westminster Corporation [1904] UKLawRpKQB 59; [1904] 2 K.B. 109. But that line of authority does not apply in my judgment to a case where the citizen has no right to a determination on certain facts being established; but only to the benefit of the exercise of a discretion by the local authority. The wording of section 55 (2) is far removed from the kind of statutory working which was considered in In re 56 Denton Road, Twickenham and Livingstone v. Westminster Corporation. I cannot, for my part, see any basis for the submission that the decision of [the education officer] was irrevocable when he found out what the true facts were.
Pacific jurisdictions
61. The High Court of the Solomon Islands, the Fiji Court of Appeal and the Supreme Court of Nauru have all commented on the question whether decisions of administrative bodies are functus officio.
62. In Mwelo v Xiang Lin Timber (SI) Ltd [2018] SBHC 8, the High Court of the Solomon Islands considered consecutive decisions by the Commissioner of Forest in respect of the issue of logging certificates. Brown J observed:
The power to act, once exercised pursuant to S.8 (3) by meeting and determination with customary landowners, gives rise to a duty to act in accordance with S.9 (2) of the Act. The requirement to issue a Certificate is mandatory, for S.9 (2) states “the appropriate Government shall as soon as practicable-...” It is because prejudice may be shown, by the Provincial failure to carry out its duty to act in accordance with S.9 (2) [by the use of “shall” in the subsection], that it may be said the section places a mandatory duty to act.
Conversely once the Province has acted by its determination and certificate, as I have found, the determination and certificate were lawful acts within power and duty so that the act by Hon. Menale on the 11 November in purporting to set aside or remedy the earlier lawful act by the Executive of the 5 November must fail. For Hon. Menale was not revisiting a decision of a discretionary nature based on an erroneous conception of factual matters, rather he was attempting to rehear the application for purposes unrelated to any erroneous understanding of the law set out in S. 8 (3) of the Act. The Act Interpretation Act which provides by implication, that unless the contrary intention appears, a power may be exercised or a duty performed from time to time as occasion requires, does not help the claimant, for in this case the Province (and Executive) is functus officio. The wording of these two sections of the F.R. & T.U. Act directly leads to the determination of the matters required of it, findings involving rights of persons, groups or tribes whose rights of redress, if aggrieved, are specifically spelt out in S.10(1). In this case, a Province in absence of an express power to revisit its determination, may not presume to revisit its own decision. It has, to use the expression, “discharged its office” in relation to the matter at hand, the application by this defendant Company. Certainly for reason which later become apparent, it would seem this purported attempt to set aside its earlier determination is attributable to influence on the member of the Executive, not because of procedural failure for instance, leading to the timber right hearing.
(Emphasis added; footnotes omitted.)
63. In Sunbeam Transport Ltd v Pacific Transport Ltd [1995] FJCA 19, the Fiji Court of Appeal considered a decision of the Transport Control Board under the Traffic Act (Cap 176) (Fiji). The Board had passed a resolution by which it had refused the first respondent’s application for a road service licence to operate a particular express bus service, but five days later decided to “cancel” that refusal and instead approve the application. The issue before the courts was whether, having passed its resolution refusing the application, the Board had exhausted its power to deal with the application.
64. The primary Judge found that, as the Board had not notified the first respondent or any of the objectors of its decision and had not published it, it retained the power to consider the application further and make a further decision in respect of it. The appellant appealed on numerous grounds, including that the Board was functus officio after making the first decision refusing the first respondent’s application.
65. The Court of Appeal held:
The circumstances in which bodies such as the TCB may change their decisions in the absence of statutory provision authorising or forbidding it have been the subject of discussion in several cases in the English Courts. They have been concerned with decisions made to alter or revoke previous decisions and to refuse things granted by the previous decisions. In Re 56 Denton Road, Twickenham [1953] Ch. 51 the High Court held that the War Damage Commission, having notified the owner of war-damaged premises of its decision to pay him compensation, had no power to vary or revoke the decision. On the other hand, in Rootkin v. Kent County Council [1981] 1 WLR 1186 the Court of Appeal decided that the Council had power to revoke its decision to pay the parents of a child reasonable expenses of travelling to school when it discovered that facts which it had believed to exist entitling the parents to the payment did not in fact exist. We have been unable, however, to find any case in which a court has considered whether a body such as the TCB which has made a decision to refuse an application made to it but has not itself acted on the decision or informed anyone else of it can vary or revoke it in the absence of fraud or of any error of fact going to the issue of legal entitlement. That does not cause us any surprise as in most such cases the fact that the first decision has been varied or revoked is not known to anyone outside the body which made it. In the present case it has become known because extensive litigation by various bus operators has led to the minutes of the TCB’s meetings becoming known to many who would otherwise have been unlikely to have seen them.
...
We come back necessarily to the provisions of the Act and the nature of the TCB’s functions. In respect of applications for road service licences its function is to inquire into their merits and then to decide whether to grant them or to refuse them and, if they are granted, to what conditions the licences should be subject. There can be no doubt, in our view, that once a decision has been promulgated the TCB is functus officio, as was the Registrar of Trade Unions in Fiji Public Service Association v. The Registrar of Trade Unions and Fiji Air Traffic Control Officers’ Association (Civil Appeal No. 51 of 1991; judgment delivered on 20 August 1993). It cannot change the decision, unless it was obtained by fraud or possibly unless it was made on the basis of facts that did not exist. Even then it should give the parties an opportunity of being heard. We consider that, as a matter of good practice, it should not change decisions which it has made, unless there are strong reasons for doing so. It should fully consider an application before deciding whether to grant or refuse it. However, like His Lordship, we consider that the TCB does not lack the power to change a decision before it has been promulgated. Its task is not completed until it has done that...
(Emphasis added.)
66. In Ika v Nauru Phosphate Royalties Trust [2011] NRSC 6, the Supreme Court of Nauru considered whether a particular determination of the Nauru Lands Committee identifying the landowner beneficiaries for the purposes of distribution of funds by the Nauru Phosphate Royalties Trust was functus officio. Eames CJ said:
The power of an administrative tribunal to change a determination with consent of all parties or persons affected has been accepted elsewhere: Re 56 Denton Road Twickenham, cited with approval by Nettle JA in Kabourakis v Medical Practitioners Board of Victoria. In the former case Vaisey, J. held that a decision or determination of a statutory body:
“... made and communicated in terms which are not expressly preliminary or provisional is final and conclusive, and cannot in the absence of express statutory power or the consent of the person or persons effected be altered or withdrawn by that body”...
(Footnotes omitted.)
67. His Honour examined the decisions in Chandler, Bhardwaj and Kabourakis, and said:
68. As his Honour explained, that analysis lead to a consideration of the terms of the Nauru Lands Committee Act 1956-1963 (Naru), whether that legislation permitted the Nauru Lands Committee to reconsider its decisions, and in what circumstances it might do so.
Section 32 of the Interpretation Act
69. Before endeavouring to distil general principles relating to functus officio and administrative decisions it is convenient to address issues raised in respect of s 32 of the Interpretation Act, both before the primary Judge and in this appeal. In particular I note the following observations of his Honour at [8] of the primary decision:
In regard to whether the doctrine of functus officio operates in this instance to render the second and third journal entries void because South Seas Tuna has invoked the judicial procedures of the GST Act before the second and third journal entries were made, on behalf of South Seas Tuna, it was submitted that amongst others, that from a perusal of Australian cases on the issue, that s. 32 Interpretation Act (which is almost the same as s. 23 (1) Acts Interpretation Act in Australia and s. 12 (1) Interpretation Act 1978 in England) raises a mere presumption which is generally rebuttable to prevent the exercise of a power of reconsideration of a decision which is inconsistent with the requirement of finality in decisions, and is particularly dependent on the construction of the statute governing the issue in dispute. Further, it was submitted that amongst others, an analysis of relevant English decisions established certain principles, one of which is, that it is necessary to examine the construction of any statutory provisions to determine what powers and rights are afforded or restricted.
70. Section 32 of the Interpretation Act provides as follows:
CONTINUING EFFECT OF POWERS AND DUTIES.
Where a statutory provision confers a power or imposes a duty, the power may be exercised, or the duty shall be performed, as the case may be, from time to time as occasion requires.
71. Interestingly, equivalent provisions to s 32 have been routinely raised in the context of claims of functus officio of administrative decision makers, and courts have routinely observed that the provision is of little assistance in determining the issue of functus officio in the relevant statutory context. So, for example, in MJD Foundation Mortimer J observed in respect of the equivalent Australian provision:
(Emphasis added.)
72. In Bhardwaj the High Court considered s 33(1) of the Acts Interpretation Act irrelevant. As Hayne J said:
155. That is why, in the present case, I consider the issue to be when the Tribunal exercised its powers and performed its duties to review the delegate’s decision. Once it is recognised, as it must be in the present case, that in September 1998 the Tribunal had not performed the duty imposed on it (to review in accordance with the statutory procedures, including allowing the respondent to be heard) it is clear that not only was there no bar to the Tribunal completing its task by the steps it took in October, it was duty bound to do so.
156. It also follows that no question arises which requires consideration of s 33(1) of the Acts Interpretation Act 1901 (Cth)...
73. Gaudron and Gummow JJ at [53] observed:
... Thus, not only is there no legal impediment under the general law to a decision-maker making such a decision but, as a matter of strict legal principle, he or she is required to do so. And that is so, regardless of s 33(1) of the Acts Interpretation Act.
(Emphasis added.)
74. In Mwelo, Brown J found that the Act Interpretation Act which provides by implication, that unless the contrary intention appears, a power may be exercised or a duty performed from time to time as occasion requires, did not help the claimant, for in this case the Province (and Executive) was functus officio.
75. To paraphrase Mortimer J in MJD Foundation, the language of s 32(1) of the Interpretation Act does not suggest that Parliament intended alterations to decisions, by implication, across all statutes granting decision-making powers to administrative bodies. Indeed, that would be a very curious result, not consistent with promoting certainty in administrative decision-making.
76. To that extent, I consider that s 32 (1) Interpretation Act is of no real assistance for the purposes of this case.
General principles concerning functus officio
77. Having regard to the authorities I have examined earlier in this judgment, it appears that the following general principles are applicable in other common law jurisdictions, and thus applicable in Papua New Guinea:
78. Against this background, I now turn to the issues raised in the current appeal.
Are assessments of the Commissioner under the GST Act functus officio?
79. We will shortly turn to the issue of the nature of “assessments” for the purposes of the GST Act. Assuming for present purposes however that “an assessment” under that legislation is a determination affecting the rights of the appellant – which the respondents seemed to accept, at least in respect of the assessment of 27 June 2016 – and further assuming that an assessment has been validly made, it is convenient to consider the statutory framework created by the GST Act, and the extent to which a contrary intention is manifested by the terms of that Act.
80. The relevant legislative provisions for present purposes are ss 67(3) and 83 of the GST Act, which deal with the powers of the Commissioner to amend assessments and with the effect of objections on the Commissioner’s powers, respectively.
81. Section 67(3) of the GST Act provides:
Subject to Section 72, the Commissioner may from time to time and at any time make all such alterations in or additions to an assessment made under this section as the Commissioner thinks necessary to ensure the correctness thereof, notwithstanding that tax already assessed may have been paid.
82. Section 83 of the GST Act provides:
83. DETERMINATION OF OBJECTION NOT TO AFFECT OTHER ASSESSMENT.
This determination of an objection under this Part shall relate solely to the assessment or decision (as defined in Section 73(1)) objected to, and shall not affect the right of the Commissioner to make any other assessment or such decision in respect of the objector, or to amend the assessment or such decision objected to in any manner rendered necessary by that other assessment or such decision.
84. The appellant submits that these provisions should be read narrowly, and subject to the principle of functus officio. In support of this submission, the appellant relies on the following principles of interpretation, which derive from the Australian decision of Cooper Brooks (Wollongong) Pty Ltd v Commissioner of Taxation (1980) 147 CLR 297 and the English House of Lords case of WT Ramsey Ltd v Inland Revenue Commissioners [1981] UKHL 1; [1982] AC 300:
85. There is also commentary in the New Zealand context that a value-based approach to interpretation is appropriate where it is not possible to determine parliamentary purposes or intent: see for example Tokeley K, “Interpretation of Legislation: Trends in Statutory Interpretation and the Judicial Process” (2002) 33 VUWLR 965 at 967. In such circumstances, the Court can interpret the statute so as to preserve fundamental values.
86. In light of these principles, the appellant submits that a literal interpretation would allow the Commissioner to act capriciously by continuously remaking or revoking assessments. The appellant further submits that it cannot be Parliament’s intention that the Commissioner is able to use her powers to amend arbitrarily in a manner which usurps judicial power, discretion and review of the courts.
87. However, I make the following observations in respect of ss 67(3) and 83.
88. First, the power of the Commissioner to amend assessments is subject to s 72 of the GST Act, which places a limitation on when the Commissioner can amend assessments. To this extent, the power to amend assessments is not unlimited. Section 67(3) must be read in the context of s 72.
89. Second, where specific restrictions have been included, as is the case in these circumstances by the inclusion of s 72, the Court should be less ready to imply additional restrictions into the statute. The inference can reasonably be drawn by the Court that Parliament has already directed its mind to defining the power of the Commissioner to amend assessments under the GST Act.
90. Third, although the appellants raise what is potentially a legitimate concern about the manner of exercise of the powers by the Commissioner under ss 67(3) and 83, that does not mean that the Court should interpret those powers so narrowly that, in effect, those powers cannot actually be exercised. The application of the functus officio principle in interpreting s 67(3) would effectively neuter the operation of that section – indeed, the specific inclusion of a power of amendment would be futile were the Court to adopt the approach contended for by the appellant. This is inconsistent with the apparent purpose of its inclusion.
91. The legislative policy in s 67 of the GST Act is that the Commissioner may revisit tax as paid by the taxpayer and make assessments of the amount that, in the Commissioner’s judgment, is payable under the GST Act. As Judges of the High Court of Australia observed in Commissioner of Taxation v Ryan [2000] HCA 4; (2000) 201 CLR 109 at [22] in respect of income tax:
... it must be recognised that the call may be made well after the year of income concerned. This may well cause hardship, or at least inconvenience, to a taxpayer who has ordered his or her affairs on the basis of the Commissioner’s earlier statement that nothing was owed. But hardship or inconvenience is seldom, if ever, sufficient reason for not complying with a statutory obligation.
92. Fourth, the appellant argued strongly that, once an objection to an assessment is made in accordance with s 74(1) of the GST Act or accepted by the Commissioner under s 74(2) of the GST Act, and the objection is referred directly to the National Court by way of a case stated in accordance with s 77, then the Court is seized of the proceedings and no further amendments to the assessment can be made by the Commissioner. The basis for this submission is, however, unclear. Certainly there is no specific provision in the GST Act which provides that, once a case has been stated to the National Court pursuant to s 77(9) of the Act, or an objection process has been commenced by the taxpayer, the Commissioner’s amendment powers are “frozen” or “suspended”. Indeed, it may be argued that the possibility of the Commissioner amending the assessment is contemplated to some degree by s 77(15) the GST Act, which allows the Commissioner to amend her case stated prior to it being set down for hearing.
93. To the extent that the appellant’s arguments raise the prospect of frustration of the court process by ongoing amendments to an assessment once a case is stated for the National Court, the Courts have inherent powers to protect their own processes and deal with parties who frustrate the Court’s processes. These powers can be implemented by the Courts in response to such concerns as the appellants have raised.
94. In our view, the statutory scheme created by the GST Act evinces a contrary intention to the principle of functus officio applying in respect of valid assessments under that Act, and includes circumstances where a case is stated for the National Court pursuant to s 77. If follows that the conclusion the primary Judge reached at [15] of the primary judgment was correct.
ISSUE 2: DID THE JOURNAL ENTRIES OF JANUARY 2016 CONSTITUTE AN “ASSESSMENT” FOR THE PURPOSES OF THE GST ACT?
95. The second issue identified at the hearing was whether an “assessment” within the meaning of the GST Act had occurred in respect of the journal entries made by the Commissioner on the appellant’s account in January 2016.
96. Counsel for the respondents submitted that the journal entries constituted “decisions” for the purposes of the GST Act, but were not “assessments” to which the principle of functus officio could apply. Counsel for the respondents also indicated a view that the journal entries were a step preliminary to the actual making of an assessment under s 67 of the GST Act.
97. The GST Act requires every registered person to calculate the amount of tax payable by that registered person in accordance with the provisions of s 31 of the statute, and pay the tax payable in accordance with s 65. The term “assessment” is not defined in the GST Act. However, the content and some of the process of an “assessment” is stated in s 67 of the Act as follows:
67. ASSESSMENT OF TAX.
(1) Subject to Section 72, the Commissioner may from time to time, from returns furnished under this Act and from any other information in the Commissioner’s possession, make assessments of the amount that, in the Commissioner’s judgment, is the tax payable under this Act by –
(a) a person required to furnish a return under this Act; or
(b) a person, not being a registered person, who supplies goods and services and represents that tax is charged on that supply; or
(c) a person whose registration has, under Section 44(6) been cancelled by the Commissioner, with effect from the date on which the person was registered under this Act; or
(d) in the case of an assessment in relation to goods deemed to be supplied by a person under Section 53 –
(i) the person selling the goods; or
(ii) the person whose goods are sold, where any written statement supplied by that person under Section 53(a) to the person selling the goods is in the judgement of the Commissioner incorrect,
and that person shall be liable to pay the tax so assessed except in so far as the person establishes an objection that the assessment is excessive or that tax is not payable.
(2) Where –
(a) a person is not satisfied with –
(i) a return furnished by that person under this Act; or
(ii) a return furnished under Section 54 by another person in relation to goods sold in or towards satisfaction of a debt owed by the person,
and requests the Commissioner, in writing, to make any addition or alteration to that return; and
(b) the Commissioner has not already made an assessment of the amount of tax payable in respect of the period to which the return relates,
the Commissioner shall make an assessment of the amount that, in the Commissioner’s judgement, is the tax payable under this Act, and the person so assessed shall be liable to pay the tax so assessed except in so far as the person establishes on objection that the assessment is excessive or that tax is not payable.
(3) Subject to Section 72, the Commissioner may from time to time and at any time make all such alterations in or additions to an assessment made under this section as the Commissioner thinks necessary to ensure the correctness thereof, notwithstanding that tax already assessed may have been paid.
(4) Where an assessment or amended assessment is made under this section, the Commissioner shall –
(a) cause notice of the assessment or amended assessment to be given to the person liable to pay the tax; and
(b) in the case of an assessment amended assessment in relation to goods deemed to be supplied by a person under Section 53, send a copy of such notice to whichever of –
(i) the person whose goods were sold; or
(ii) the person selling the goods,
is not the person assessed.
(5) In a case in which an assessment is not made until after the due date of the tax payable, or is increased after the due date, and the Commissioner is satisfied that the person has not been guilty of neglect or default in making due and complete returns for the purposes of that tax, the Commissioner shall fix a new due date, being one month after the date of the assessment, for the payment of the tax payable or, as the case may be, of the increase in the tax payable, and the date so fixed is deemed to be the due date of the tax or increase in tax for the purposes of this Act.
(6) Omission to give any notice under Subsection (4) does not invalidate the assessment or in any manner affect the operation thereof.
98. In respect of the meaning of “assessment”, the respondents relied on the Australian authority of R v Deputy Federal Commissioner of Taxation; ex parte Hooper [1926] ALR 101. In that case Isaacs J stated at 103:
... an “assessment” is not a piece of paper; it is an official act or operation; it is the Commissioner’s ascertainment, on consideration of all relevant circumstances, including sometimes his own opinion, of the annual amount of tax chargeable to a given taxpayer. Neither the paper sent nor the notification it gives is the “assessment”. That is and remains the act or operation of the Commissioner.
99. Subsequently, in Batagol v Federal Commissioner of Taxation [1963] HCA 51; (1963) 109 CLR 243 the High Court of Australia upheld the views of Isaacs J in Hooper, further stating that no step that the Commissioner may take, even to the point of satisfying himself of the amount of taxable income and the tax thereon, has any legal significance until a notice is served on the taxpayer advising it that the Commissioner has assessed the taxable income and the tax at specified amounts.
100. In Batagol over the course of several years assessing officers of the Commissioner of Taxation had, by mistake of law, reached the conclusion that the appellant had no taxable income, recorded the conclusion on a file in a manner conforming to the practice of the office, marked the file as having been dealt with, and had it put away. The appellant in that case was not informed of the conclusion in respect of the first two years, but subsequently after he had suffered deductions of tax from his wages a cheque by way of refund was sent to him together with a “refund advice” stating that no tax was payable. Materially, the appellant argued that, because in each of three years of income the entire internal procedure of the Commissioner’s office for dealing with his return had been conducted, an assessment had been made after disclosure by him of relevant material.
101. In the Australian income tax legislation as it then stood, “assessment” was defined as meaning, unless the contrary intention appeared, the ascertainment of the amount of taxable income and of tax payable thereon. Kitto J noted that “ascertainment” was a word the force of which depended on the context. His Honour continued at 252:
It is here used in an Act under which the service of a notice of assessment is the levying of the tax. Assessment in the sense of mere calculation produces no legal effect. No step that the Commissioner may take, even to the point of satisfying himself of the amount of the taxable income and of the tax thereon, has under the Act any legal significance. But if the Commissioner, having gone through the process of calculation, serves on the taxpayer a notice that he has assessed the taxable income and the tax at specified amounts, the tax becomes by force of the Act due and payable on the date specified in the notice or (if no date is specified) on the thirtieth day after the service of the notice: s. 204. Thus, and thus only, there is brought about an “ascertainment” of the taxable income and of the tax, in the sense that thereafter it is possible to say what could not have been said before: that amounts have been fixed so that they are to be taken for all purposes (except those of appeal: see s. 177) to be the result flowing from the application of the Act in the particular case. The respective amounts of the taxable income and the tax have been rendered certain. The word “ascertainment” being understood in this sense, the definition of “assessment” means, in my opinion, the completion of the process by which the provisions of the Act relating to liability to tax are given concrete application in a particular case with the consequence that a specified amount of money will become due and payable as the proper tax in that case.
(Emphasis added.)
102. Kitto J then referred to Federal Commissioner of Taxation v. Hoffnung & Co. Ltd. (1928) 42 CLR 39 at 55 where Isaacs J commented:
If an assessment definitive in character is made, it assumes that, so far as can there be seen, a fixed and certain sum is definitely due, neither more nor less. In short, it ascertains a precise indebtedness of the taxpayer to the Crown.”
103. Kitto J continued (at 252):
On this construction of the Act nothing done in the Commissioner’s office can amount to more than steps which will form part of an assessment if, but only if, they lead to and are followed by the service of a notice of assessment...
104. After examining relevant provisions of the Australian taxation legislation, Owen J observed at 256:
These provisions all show that the assessment of which s. 170(1) to (6) speak is something more than the completion inside the Taxation Department of the routines and processes necessary for the purpose of deciding whether or not in a particular case there is a taxable income and tax payable thereon. It includes the taking of all such further steps as are necessary to create a liability to pay the tax so calculated.
105. His Honour referred to comments of Isaacs J in Hooper and the distinction between an “assessment” and a notification of assessment, and continued at 257:
The distinction which his Honour drew is, of course, a valid one but the present case is concerned with the use of the word “assessment” not in its defined sense but as conveying the meaning that every necessary step has been taken to create a debt due and payable by the taxpayer to the Crown.
(Emphasis added.)
106. In Federal Commissioner of Taxation v Prestige Motors Pty Ltd [1994] HCA 39, it was similarly stated that the process of “assessment” is only completed once service has been effected on the taxpayer. This is because, as reiterated by the High Court of Australia, the power of amendment pre-supposes that an assessment is something creating a legal obligation: Commissioner of State Revenue v ACN 005 057 349 Pty Ltd [2017] HCA 6 at [68], see also Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32 at [49]. Further consideration was given to this by the High Court of Australia in Federal Commissioner of Taxation v S Hoffnung & Co Ltd [1928] ArgusLawRp 103; (1928) 1 ATD 310. In that case, the Commissioner had served the taxpayer with a document titled “Tentative – War-time Profits Tax”. The Court held that this did not constitute an “assessment”, finding that a valid assessment must be “definitive as opposed to provisional”.
107. Similar statements were accepted by the New Zealand Court of Appeal in Commissioner of Inland Revenue v Canterbury Frozen Meat Co Ltd [1994] 2 NZLR 681, which concerned income tax legislation but which was considered and accepted in the context of the New Zealand GST legislation in Paul Finance Ltd v Commissioner of Inland Revenue [1995] 3 NZLR 521.
108. In Paul Finance a computer systems error in the office of the Commissioner of Inland Revenue resulted in a GST refund cheque being issued and a document headed “notice of assessment” being attached. At the time no assessment had in fact been made, and an investigation was ongoing into the tax status of the appellant. The Commissioner stopped the cheque, and the appellant sought summary judgment in the amount of the cheque in the High Court of New Zealand. The GST Act provided, inter alia, that a computer-generated assessment or determination should be treated as being made by or under the properly delegated authority of the Commissioner. The Commissioner submitted that if a document was not, in fact, an assessment it could not be protected by the GST Act. A Master of the High Court refused summary judgment, concluding that it was arguable whether the Commissioner had directed his attention to making an assessment. The appellant appealed to the Court of Appeal of New Zealand.
109. The judgment of the Court of Appeal was delivered by Richardson J. At 526 the Court followed Canterbury Frozen Meat, where the Court of Appeal applied Batagol and Hoffnung. Richardson J continued:
In Commissioner of Inland Revenue v Canterbury Frozen Meat Co... this Court held that the making of an assessment requires the exercise of judgment on the part of the Commissioner in quantifying the statutorily imposed liability on the information then in the Commissioner’s possession. To constitute an assessment for income tax purposes the decision of the Commissioner must be definitive as to the liability of the taxpayer at the time it is made and final subject only to challenge through the objection process (p 690). But the Commissioner may properly make an assessment which the Commissioner believes is not necessarily correct, or even probably wrong to some extent, so long as the Commissioner believes it to be the best he (or she) can do until further information is obtained. What is essential is that the figure must represent the honest judgment of the Commissioner as to what is the correct figure, as best he (or she) can determine it in the state of the Commissioner’s knowledge at that time (p 693). Once the Commissioner has made an assessment in the sense of applying his or her mind to arriving as best he or she can at what appears to be the correct figure on the information available, then the Commissioner has properly exercised the statutory powers. In such case the assessment can only be challenged in proceedings on objection (p 694). It followed in the Canterbury Frozen Meat case that a provisional or qualified decision as to liability would not be an assessment for the purposes of the Income Tax Act and the impugned decision was accordingly susceptible to judicial review.
110. The Court of Appeal concluded that the Commissioner had an arguable defence and dismissed the appellant’s appeal. Their Honours noted at 528:
He said it was conclusive evidence from the Commissioner’s own records of the fact of an assessment. With respect, it does not follow. It may well be that the computer input was simply a record at that point of material provided by the taxpayer in its return without any acceptance or consideration at that time of its correctness. The department may have considered that the transfers made while the investigation was proceeding, amounting to only a quarter of the tax credit claimed by the appellant, could safely be made having regard to the anticipated results; or alternatively the Commissioner may simply never have turned his mind to the correctness of the taxpayer-provided information as to the $517,947.66. That would be consistent with Mr Rudd’s evidence that the content of the notice of assessment had never been through the process of assessment and a conscious decision made by the Commissioner.
(Emphasis added.)
111. Although s 67 of the GST Act does not contain a standard definition, it does outline a process of assessment and in that respect it can be read consistently with, and does not demur from, the explanation of the meaning of “assessment” in such cases as Hooper, Batagol, Hoffnung, Prestige Motors and Paul Finance.
112. Indeed, examining s 67, it can be inferred that an assessment within the meaning of the GST Act is an holistic process which comes with a degree of finality (subject, of course, to the power to amend it in accordance with ss 67(3) and 72 of the GST Act).
113. The explanations in Hooper and subsequent authorities indicate that elements of an “assessment” include:
(1) an official act or operation;
(2) consideration of all relevant circumstances;
(3) a degree of finality or definitiveness; and
(4) service or notice of the assessment such that the process of assessment is completed.
114. In relation to the issue of service or notice, the appellant submitted that this is not necessary, especially in light of s 67(6) of the GST Act, which provides that failure to give notice of an assessment does not invalidate it. However, I do not accept the appellant’s submission in this regard. This may be the language of s 67(6), but this provision does not detract from the fact that s 67(4) itself requires notice to be given to the prescribed person. In this light, I consider that, although an assessment will not be invalidated simply because it has not been served, in order to constitute an assessment in accordance with s 67 of the GST Act and the authorities outlined above, it must at least be intended or contemplated that the information contained therein is to be communicated to the taxpayer. So much is necessary to ensure that the taxpayer is able to object to the assessment in accordance with the relevant provisions of the GST Act.
115. In this respect, I consider that the process by which the appellant became aware of the journal entries in the appellant’s GST account is particularly telling. The appellant’s evidence before the National Court was that the appellant’s financial controller discovered the journal entries when he requested a copy of the statement of accounts from the IRC. Nothing has been adduced to suggest that the lack of notice in these circumstances was a mere omission – rather the journal entries appear to be part of a process internal to the IRC. There was no notice given, nor, does it seem, were the journal entries intended to be served or notified to the appellants.
116. In my view the journal entries were steps preliminary to the making of an assessment by the Commissioner, which occurred on 27 June 2016. They did not constitute “an assessment” within the meaning of the GST Act.
CONCLUSION
117. The common law principles of functus officio in respect of decisions of administrative bodies apply in Papua New Guinea. However, they are not applicable in the circumstances of these proceedings. There was no “invalid” decision of the Commissioner which triggered the prospect of a decision being remade as contemplated by Chandler and Bhardwaj. The statutory framework of the GST Act contains a contrary intention to the application of functus officio principles in respect of GST assessments under the GST Act. Finally, and fundamentally, the journal entries of January 2016 did not constitute an “assessment” within the meaning of the GST Act.
118. The grounds of appeal against the decision of the primary Judge are not substantiated. However, it is apparent that the appellant has been conducting its affairs, for years, in accordance with a position it was encouraged by the IRC to believe was legitimate. Whether the position was, in fact, legitimate may yet be the subject of determination should the appellant pursue its objection to the 27 June 2016 assessment. In these circumstances the appropriate order is that each party bear its own costs, in both the National Court and Supreme Court proceedings.
NABLU J:
119. I have had the opportunity of reading the draft judgement of Justice Collier, and I agree with the reasons to dismiss the appeal and the orders proposed by Her Honour.
NEILL J:
120. I concur entirely with the decision of the President, Justice Collier. Albeit the appeal is from an interlocutory decision and hence other matters in dispute between the parties are still to be ventilated, the facts in this appeal merit further comment.
121. From the time of establishment in 2000, the appellant had special GST taxation concession. Relying on the concession, the appellant built a canning factory in Wewak. The factory employed local people. The appellant was used to getting refunds of GST. Later there was a change in the appellant’s shareholding. However, some 14 years went by before IRC considered that transfer pricing had occurred such that the concession did not apply. Then instead IRC informed the appellant that tax was payable.
122. The assessments issued in June 2016 total over K64 ½ million. Of that total, K2, 464, 000 (rounded) is penalty and K37, 431, 720 (rounded) is interest, i.e. the tax claimed is far less than half the total claimed.
123. The individual monthly amended assessments show a systematic adding interest onto the previous month’s assessment. The appellant’s counsel says the amended assessment is so onerous that the appellant “will go under”. There will be flow on from that of loss of employment in the Wewak area and investor confidence.
124. Her Honour at paragraph 86 of her decision encapsulates the concern of the appellant about the IRC acting capriciously and continually remaking, revoking its view on the tax payable. That behaviour devastates business and the powers of the IRC should not be used in that way. The ultimate goal of tax is the benefit of tax to the people of PNG through the government but the ultimate goal is not achieved by IRC being heavy handed or reneging on arrangements that a taxpayer has acted upon.
THE COURT ORDERS THAT:
O’Briens: Lawyers for the Appellant
Legal Services Division, Internal Revenue Commission: Lawyers for the Respondents
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