On 22 June 2012, the Full Federal Court handed down its decision in LVR (WA) Pty Ltd v Administrative Appeals Tribunal [2012] FCAFC 90 which reinforces the overarching obligation of Australian Government agencies and their legal representatives to act as model litigants in accordance with the Legal Services Directions 2005 (Cth). This decision illustrates the supremacy of the model litigant obligation which may, in certain circumstances, extend further than merely acting honestly, ethically, legally and in accordance with court rules.

Background

On 30 July 2010, the Administrative Appeals Tribunal (Tribunal) dismissed an application for merits review made by LVR (WA) Pty Ltd (Applicant) in relation to a decision of the Commissioner of Taxation (Commissioner). In unique circumstances, the Tribunal dismissed the application without conducting a review of the decision on the basis that the Applicant had failed to comply with a procedural direction made by the Tribunal relating to the filing and serving of evidence.

The Tribunal’s decision to dismiss the application for review was the subject of a separate dismissal hearing (Dismissal Hearing), in anticipation of which the Tribunal had made directions for further evidence to be filed in relation to the non-compliance with its earlier directions in the main proceedings. The Applicant filed and served the affidavit of Mr Schokker (Schokker Affidavit) only three days before the Dismissal Hearing and some seven weeks after it was directed to do so. The Schokker Affidavit responded to the evidence filed by the Commissioner and addressed the Applicant’s non-compliance with the directions made by the Tribunal in the main proceedings.

Save for a small number of paragraphs, the published reasons of the Tribunal relating to its decision to dismiss the Applicant’s application were copied verbatim from the Commissioner’s written submissions (Submissions) without attribution. Because of the Applicant’s late service of the Schokker Affidavit, only two paragraphs of the Submissions referred to the Schokker Affidavit and those paragraphs were not reproduced in the Tribunal’s reasons.

The Applicant subsequently brought an action in the Federal Court seeking judicial review of the decision of the Tribunal to dismiss the application on the basis that the Tribunal had failed to take into account the responsive content of the Schokker Affidavit. In dismissing the application for judicial review, Gilmour J relied heavily upon the Tribunal’s reasons and found that the mere absence of any reference to the Schokker Affidavit in the Tribunal’s reasons did not indicate that the Tribunal had failed to take into account the Schokker Affidavit when making its decision. Critically, the fact that the Tribunal’s reasons had been almost entirely copied from the Submissions was not disclosed to the Court by either party.

The Applicant appealed from the decision of Gilmour J on the basis that his Honour had erred in finding that the Schokker Affidavit was taken into account by the Tribunal in making its decision. The critical fact relating to the source of the Tribunal’s reasons was again omitted from both parties’ written submissions to the Full Court which was comprised of North, Logan and Robertson JJ.

Prior to the matter being heard, the Court became aware of the source of the Tribunal’s reasons and queried the parties as to why this fact had not been disclosed at first instance or on appeal. The response of the Commissioner was that it merely responded to the submissions of the Applicant and given the source of the Tribunal’s reasons was not raised, it did not address the issue in its own submissions.

Judgment

The Full Court held that it was “a distraction to examine the reasons of the Tribunal as if they were an independent text without reference to their source” [at 130]. Given the substance of the Schokker Affidavit was not dealt with in the Submissions, the Full Court further found that it could not be inferred that the Tribunal took the substance of the affidavit into account when making its decision. The appeal was therefore allowed, the decision of the Tribunal set aside and the matter referred to the Tribunal for further consideration.

The Full Court stated that “being a model litigant requires the Commonwealth and its agencies, as parties to litigation, to act with complete propriety, fairly and in accordance with the highest professional standards” [at 42]. The Court further indicated that the content of this obligation may surpass other professional obligations to act honestly, ethically and in accordance with the law and court rules. The Court also traced the model litigant obligation back to the traditional relationship between the Crown and its subjects and noted that the Commonwealth and its agencies have no legitimate private interest in the performance of their functions and frequently also have greater access to resources than private litigants. For these reasons, the Court held that Australian Government agencies and their legal representatives should act as moral exemplars when engaging with private litigants.

In the present case, the Full Court found that the Commissioner had an obligation, as a model litigant, to ensure that the Court was fully aware of the relevant circumstances concerning the source of the Tribunal’s reasons. The Court stated that “if the appellants failed to fully explain the position to the primary judge then the Commissioner should have done so” [at 40] and indicated that it was inadequate of the Commissioner to only respond to the submissions made by the Applicant.

Implications

This decision of the Full Federal Court highlights the critical importance of Australian Government agencies to act as model litigants to ensure that its interactions with private litigants are fair and transparent. This decision further serves as a reminder that Australian Government agencies and their internal and external legal representatives must act as model litigants at all times, including where it is not necessarily in the strategic interests of the agency to do so.