Farah Custodians Pty Limited v Commissioner of Taxation (No 2)  FCA 1076
In this matter, Farah Custodians Pty Limited sought leave to amend its pleadings in its claim against the Commissioner of Taxation to include claims in negligence arising from the Commissioner’s payment of tax refunds owed to Farah into a fraudulent account.
The Commissioner’s own investigations identified the possibility that the account was fraudulent, and allegedly did not inform Farah and continued to pay the refunds into the fraudulent account.
The Commissioner’s primary contention in relation to the futility of Farah’s negligence claim was that there was or could be no demonstrable basis for finding that the Commissioner owes a duty of care to taxpayers or anyone else in relation to the administration of tax refunds. The Commissioner submitted that he owes an enforceable statutory duty to pay refunds when the requisite conditions are satisfied, but beyond that, the Commissioner’s duty is to the Crown and to the Crown alone.
The question was whether it was reasonably arguable that the Commissioner might owe a duty to a particular taxpayer to exercise care in paying tax in circumstances where the Commissioner had reason to suspect or believe that the account that the refunds were being paid into was fraudulent.
On Friday, 12 July 2019, Justice Wigney held that it was reasonably arguable that the Commissioner owed Farah a duty of care at common law. This is a key decision, as no other superior Australian court has ever accepted that such a duty could exist against the Commissioner of Taxation.
This will be an interesting case to follow.
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