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Iredale, Ian --- "The role of computers in judicial reasoning and analysis" [2006] NZYbkNZJur 19; (2006) 9 Yearbook of New Zealand Jurisprudence 286

Last Updated: 24 April 2015

The Role of Computers in

Judicial Reasoning and Analysis

Ian Iredale*

i. intrOdUctiOn

Judgments are traditionally written and delivered in narrative format and published in volumes of law reports. Occasionally judgments are delivered live via television.1 Judgments are also stored in electronic format and can be accessed electronically online.

Computers, in this age of digital technology, are being used by students, practitioners and judges in legal research, reasoning and writing. From word processing to researching legal databases, accessing law primary and secondary materials cutting, pasting and downloading and hyperlinking. However, computers have much more to offer.


The aim of this paper is to highlight a number of ways in which computers may be used to further enhance judicial reasoning and analysis.


Flowcharts are employed in many disciplines, including engineering, physics and management. They are coming to find increasing application in Law. Flowcharts can be constructed in hard copy using pen and paper. However, there are computer programs available that are more effective in constructing and manipulating flowcharts than doing it manually. Given the increasing complexity of factual situations in legal proceedings and provisions in statutes, flowcharts are being used more and more to represent the facts or to interpret statutory provisions.

Flowcharts and diagrams can be found in statutes, case law reports and law textbooks. For example, diagrams and flowcharts can be found in statutes such as, the Income Tax Assessment Act 1997 (Cth) and the Patents Act

* School of Law, University of Western Sydney.

1 I am not aware of any judgments being delivered directly online.

1990 (Cth).2 Flowcharts can also be found in textbooks, such as, Turner’s, Australian Commercial Law and Woellner et al., 2005 Australian Taxation Law.3 Diagrams also appear in case law reports to assist in explaining detailed fact situations.4

Flowcharts have been employed to assist students studying taxation law. Taxation Law is one of the most difficult subjects to teach and learn, because of the volume and complexity of the subject matter. Few academics are competent or willing to teach the subject.

Although income tax law is extensive and complex its foundation lies in two simple equations:5

Tax payable = Taxable income x Tax rates – Tax offsets and,

Taxable income = Assessable income – Deductions

It is possible to take both of these equations as the basis for a flowchart or tree diagram with the limbs being the various categories of income and deductions. Each limb has a number of branches with “leaves” or topic boxes that further explain the particular category of income or deduction. In hard copy format the flowchart measures 55cm x 85cm and comprises approximately 230 topic boxes. A benefit of the flowchart is that it provides an overview of income and deductions and acts as a roadmap, guiding students through the first

2 See for example:

Income Tax Assessment Act 1997 (Cth), s6-1. For the portrayal of a diagram showing relationship between the concepts assessable income, ordinary income, statutory income and exempt income.

Income Tax Assessment Act 1997 (Cth), s28-5. For a map of the Division highlighting the four alternative methods for claiming car expenses.

Income Tax Assessment Act 1997 (Cth), s100-15. For a diagrammatic overview of steps 1 and 2 in determining whether there is a taxable capital gain or capital loss.

Patents Act 1990 (Cth), s4. For a flowchart outlining the steps in getting and maintaining

a standard patent.

3 Turner, C., Australian Commercial Law (24th Ed, 2003) contains a foldout flowchart on The Law of Contract outlining the steps from formation to discharge of a contract. Woellner, R. H., Barkoczy, S., Murphy, S. and Evans, C., 2005 Australian Taxation Law, includes a diagrammatic overview of alternative appeal paths in challenging an income tax assessment, at p186 and a flowchart for The Simplified Tax System- A Flowchart, at p 944.

4 In Richard Walter Pty Ltd v Federal Commissioner of Taxation 95 ATC 4440, at 4444-4445, a diagram is included in the report to outline a complex trust arrangement relevant to the issue being considered by the Federal Court.

In Davis & Anor v Federal Commissioner of Taxation 89 ATC 4377, at p 4385, a diagram is employed to illustrate the facts of the case relating to as assignment of future income payments.

5 Income Tax Assessment Act 1997 (Cth), s4-10(3) and s4-15(1).

half of a taxation law subject. It can also be used by legal practitioners, the Federal Commissioner of Taxation and judges to formulate and structure their approach to taxation issues in legal proceedings. The skeleton of the flowchart is reproduced as Figure 1.6

The flowchart can be transposed into electronic format, burned onto a CD- ROM and/or accessed online. Each of the topic boxes that form the building blocks that make up the tree diagram or flowchart appear as screens online and each is able to be hyperlinked to the relevant statutory provisions, case authorities and paragraphs in Australian income taxation law textbooks.

In electronic format it is not possible to represent 55cm x 85cm flowchart on a single screen. However, it can be logically dissected into six “Roadmaps”, each capable of single screen representation. The 230 topic boxes are embodied in the roadmaps and each is contained on an individual screen.7 Four of the roadmaps are highlighted in bold in Figure 1. The roadmap relating to Ordinary income is represented in Figure 2. Although not all the topic boxes have been reproduced in detail. An example of one of the topic boxes is shown in Figure 3. The bold type shows the hyperlinking to statutory provisions, case law authorities and paragraphs in a taxation law textbook.

How then do computer assisted flowcharts contribute to judicial reasoning

and analysis?

They portray the entire law, both statute and common or case law relevant to the issue in a logical and structured format. The flowchart provides an overview of the particular area of law under consideration and shows the links and steps to be followed in analysing the legal problem. The flowchart also forms the foundation for hyperlinking.

6 A full versions is available as, CCH Online Tax Flowchart Guide (2005), in hard copy.

7 The flowchart has been transposed into electronic format by CCH Australia Limited. It is not possible to represent the entire flowchart on one screen so the chart is conveniently dissected into six Roadmaps, each of which for the basis of Topic Screens which make up the 230 topic boxes. Each topic box is capable of being represented on an individual screen.

I understand there is a computer program capable of representing a large, say A3, document on a single screen and allowing the reader to zoom in on a particular segment of the document or chart.

ii. hyperLinking

Hyperlinking is being used by judges to link words in their judgment to precedent cases, statutory provisions and facts, which can include images, both still and moving.8 There is scope to make more effective use of this technique by delivering judgments online or on CD-ROM or DVD and storing them on these platforms.

In the context of teaching and learning, lecture notes and materials can be uploaded onto the university’s intranet, for example WebCT. The lecture notes and materials can then be hyperlinked to relevant law sites, statutes or cases.

Law textbooks now make use of hyperlinking through access to the publisher’s web site. This can be done as a marketing technique to encourage adoption of the book as the required textbook for the subject. The material on the web site linked to from the textbook can include additional or supplementary text and commentary, statutory provisions, cases or extracts from cases, worked examples and testing questions, with or without answers.9 An alternative is to have a CD-ROM shrink-wrapped to textbook, containing structured materials hyperlinked to detailed materials.

How then does hyperlinking contribute to judicial reasoning and analysis? Computers and information in electronic format are necessary for hyperlinking. The techniques assist by more effective searching for relevant authorities, downloading the material and cutting and pasting to analyse the material and integrating it to structure the legal reasoning in coming to an opinion on the issue. Judgments themselves could be much shorter with much of the supporting material, such as, statutory provisions, case law precedents and extracts from lower court judgments hyperlinked rather than reproduced in the judgment.

iii. the LegaL paradigm

There is a well established legal paradigm employed by students, practitioners and judges in learning and practicing law. Facts and issues are delineated, on the one hand, and the relevant law is collected together, on the other. The law is then applied to the facts to come to a decision or holding. The law may

8 For example, see, Mobileworld Communications Pty Ltd v Q & Q Global Enterprise [2003] FCA (4 December 2003) at 8, which related to a trade mark image described as; MAN, CARTOON ATOP GLOBE.

9 See, for example, Gilders, F., Taylor, J., Richardson, G. and Walpole, M., Understanding

Taxation law: An Interactive Approach 2nd Ed (2004).

embody precedents and as an outcome of the case, precedents may be created, confined, extended or distinguished. The legal paradigm can be represented in flowchart format and each box in the chart, embodying facts or law can be hyperlinked. By representing the judgment in flowchart format the judicial reasoning and analysis underlying the case is more apparent.

The legal paradigm is represented in diagrammatic format in Figure 4. It has been applied to two leading taxation law cases. In The Commissioner of Taxation v Whitfords Beach Pty Ltd,10 [Figure 5], the issue to be decided was whether the profits from the sub-division and sale of land constituted proceeds from the carrying on a business or were attributable to the mere realisation of an asset. According to the law (common law re-enforced by statute), on the one hand, isolated transactions can give rise to assessable income and, on the other hand, the mere realisation of an asset (according to common law) does not give rise to assessable income. The High Court decided that the sub- division and sale of land did amount to carrying on a business and extended the rule that the normal proceeds from carrying on a business constitute assessable income to state that an isolated transaction can constitute carrying on a business. The diagrammatic representation of the case makes explicit the approach and structure and logic behind the Court’s reasoning in coming to a decision and laying down a precedent.

The case of Sun Newspapers Ltd and Associated Newspapers Ltd v Federal Commissioner of Taxation,11 [Figure 6], is a foundation case on establishing a test for the distinction between losses and outgoings of a capital or revenue nature. The distinction is important because losses and outgoings of a capital nature are not deductible where as those of a revenue nature are. The case is also notable because the “players” include members of the Packer family and the test was formulated by Dixon J. The diagrammatic portrayal of the case is instructive in that it can be linked back to previous common law capital v revenue tests and projected forward to a line of cases that have applied the “Dixon J” test.

How then do computers employed to graphically portray the legal paradigm assist in contributing to judicial reasoning and analysis? The technique shows or demonstrates explicitly the steps, processes, links and logic in judicial reasoning in coming to a decision on a legal problem or issue and establishing judicial precedents.

10 [1982] HCA 8; (1982) 150 CLR 355.

11 [1938] HCA 73; (1938) 61 CLR 337.

Analysis of Evidence

Scientific analysis of evidence has been attempted over the past 200 years. Almost one hundred years separate the leading works by Bentham on evidence12 and Wigmore on proof.13 More recent work on the subject has been by Professors William Twining, David Schum and Terence Anderson.14

The primary task in these works is to analyse a mixed mass of evidence available and classifying and placing each piece in its proper place in the scheme of proof and in making detailed inferences from stage to stage; finally arriving at a conclusion upon the main probandum or probanda.15 16

Flowcharts are an effective technique for undertaking the task with the diagrammatic presentation of all the relations between all the relevant evidence and the ultimate probanda in a particular case. “The constituent elements are simple propositions of fact, each listed and numbered in a ‘key-list’ of evidence; the relations between the propositions are depicted in the chart by a system of symbols devised by the author.”17 “The proposed method involves two steps: analysis, which involves the preparation of a key-list of all the relevant evidence expressed as simple propositions; and synthesis, in the form of a chart which depicts the relations between each item in the key-list with all other items.”18

“In this respect the chart method is analogous to the algorithm, that is a precise set of instructions, capable of being presented in diagrammatic form, for solving a well-defined problem. By breaking down a complicated rule (or body of data) into a number of simple components and presenting each in turn in a particular order, it can enable the reader to find his way around a complex body of rules and locate the answer to his particular problem.”19

12 Bentham, Rationale of Judicial Evidence, Specially Applied to English Practice, 5 Volumes, Edited by John Stuart Mill (1827).

13 Wigmore. The Principles of Judicial Proof as given by Logic, Psychology and General

Experience and Illustrated in Judicial Trials.

14 See Twining, W, Theories of Evidence: Bentham and Wigmore (1985) 135.

15 “Evidence is always a relative term. It signifies a relation between two facts, the factum probandum, or proposition to be proved, and the factum probans, or material evidencing the proposition.... On each occasion the questions must be asked, What is the proposition (Probandum) desired to be proved? What is the Evidentiary Fact (Probans) offered to prove it?” Anderson, T and Twining, W, Analysis of Evidence: How to do Things with Facts (1991)


16 See Twining, supra n 14 at 116, 125, 126.

17 Ibid, 126.

18 Ibid, 131.

19 Ibid, 133-4.

“The function of an algorithm is to present rules in a visually more comprehensible form than conventional prose.”20 “They can be used to organise into manageable form large quantities of data or other material, for example evidence to be presented at a lengthy trial or rules of particular areas of a law such as property law, tax law....”21

“[T]he chart method is a rather more flexible tool than Wigmore suggests, since it may be used to chart other matters.... It is theoretically possible for the same person to apply the chart method to a case, from the point of view of the actual arguments put forward at the trial, or from the point of view of an historian trying to analyse as detached as he can all the evidence available to him for whatever purpose he specifies, or even from the point of view of a logician to reconstruct the explicit and implicit arguments about particular probanda....”22

The flowchart technique has not met with widespread success. However, according to Twining, “like the algorithm the method [chart method] seems to offer considerable possibilities for use in connection with new information technology. This is as yet a largely unexplored field, but it seems quite possible that Wigmore’s method will come into its own in the computer age.”23

“Wigmore categorised the main relations between evidentiary propositions in terms of assertion, denial, explanation and rival assertion.... However, he did not provide a comparable vocabulary for differentiating the principal ways in which evidentiary propositions may be combined or accumulate or otherwise be seen as allies tending to support or to negate the same conclusion , either directly or indirectly.”24 Twining proposes five ways in which evidentiary propositions may be related, namely, by conjunction, compound propositions, corroboration, convergence or catenate inferences (inference upon inference or a chain of inferences).25

A hypothetical illustration of Wigmore’s method, incorporating Twinings’ combining of propositions, is presented in Figure 7. To establish guilt in a criminal case the prosecution may have to prove propositions A and B and C. Defences against conviction may be establishing Not A or Not B or Not C or establishing D and/or E. Propositions F1 and F2 and F3 are compound in relation to A1. G1 and G2 both independently corroborate proposition B. H1, H2 and H3 are three independent items of circumstantial evidence which

20 Twining, supra n 15 at 433.

21 Ibid, 433-434.

22 Twining, supra n 14 at 134.

23 Ibid, 135.

24 Ibid, 180.

25 Ibid, 180.

converge to support proposition C. Finally, A1, A2 and A3 are a chain of propositions that tend to establish A. On the other hand, propositions I, J or K will tend to disprove A+B+C. In addition either proposition L or M will be a defence against conviction. Relations between propositions on the defence side can be more elaborate than shown in the illustration.

An example of an algorithm in taxation law is shown in Figure 8. It relates to the general statutory provision for losses or outgoings incurred in gaining or producing assessable income.26

How then do computers employed to flowchart evidentiary propositions in pursuit of proof in judicial proceedings or employed in constructing algorithms embodying legal rules assist in contributing to judicial reasoning and analysis? In evidentiary analysis and synthesis flowcharts, being a diagrammatic format, are of great assistance in structuring and providing an overview of the inter- relationships between the various categories of propositions and the logic and pathways towards proof of the ultimate proposition to be established. Computers are of assistance in constructing and manipulating the flowcharts by adding to subtracting from or shifting the links between propositions. They are also necessary for hyperlinking to what lies behind the propositions. That may be facts, rules, statutory provisions or case law precedents, all of which go together to explain the propositions and their inter-relationships. Using computers, it is also possible to have an overview flowchart on one screen which then links to other sub-charts or screens that make up the pieces in the “jig-saw puzzle”.

26 Income Tax Assessment Act 1997 (Cth) Section 8-1 General Deductions

8-1(1) You can deduct from your assessable income any loss or outgoing to the extent that:

(a) it is incurred in gaining or producing your assessable income; or

(b) it is necessarily incurred in carrying on a business for the purpose of gaining or producing your assessable income.

8-1(2) However, you cannot deduct a loss or outgoing under this section to the extent that:

(a) it is a loss or outgoing of capital or of a capital nature; or

(b) it is a loss or outgoing of a private or domestic nature; or

(c) it is incurred in relation to gaining or producing your exempt income or your non- assessable non-exempt income; or

(d) a provision of this Act prevents you from deducting it.

In the case of algorithms, computers are more effective than manual techniques in constructing the algorithm. More importantly in electronic format the relevant statutory provisions and/or case law extracts (facts, issues, decisions or precedents) can be hyperlinked to each step in the logical chain of reasoning that underlies the algorithm.

Expert Systems

Expert systems are intended to provide “expert” problem-solving advice in some area in which they are competent. Such systems have been used in medicine to diagnose diseases and to recommend suitable treatments. Although Law is, in many ways, similar to medicine expert systems have not been extensively developed or applied in legal problem-solving. The widespread use of computers, the significant development of computer programs and the availability of the internet provide opportunities for developing and exploring the application of expert systems to legal problem- solving or judicial reasoning and analysis.

With expert systems, the computer takes over from the human as the “expert”. The human does not become redundant but is integrally involved in designing and programming the system and interacting with it.

The attributes of an expert system, posed with a legal problem include:

1. The system can ask questions of the lawyer. It can also ask successive questions in proceeding through an algorithm.

2. The system has a perfect memory. It embodies a dynamic database with links to all the materials in the database. It can call up legal information the lawyer has forgotten or is unaware of.

3. The system is flexible and non linear. Unlike a book, for example, where material is presented in a linear format, a computerised expert system can package materials drawn from a variety of sources.

“What we are after in an expert system is a means not only of representing the expert’s knowledge, but of systematically extracting it from the expert and refining it.”27

27 Tyree, A, Expert Systems in Law (1989) 10.

Judicial reasoning and analysis involves both statute and case law. It is relatively easy to build an expert legal system involving statute law only. Expert legal systems embodying case law or both statute and case law are more difficult to build because judgments involve a multitude of diverse elements.

To build a computer based expert legal system the legal information needs to be reduced to a computer program compatible format. The information can take the form of propositions relating to statutory provisions, facts, issues, decisions and precedents. The system then builds interrelationships between the propositions. The system can then be represented in diagrammatic format, known as a semantic net or frame diagram.28 An example relating to negotiable instruments is portrayed in Figure 9.29 The frame diagram is based on the Bills of Exchange Act 1909 (Cth) and portrays the creation, negotiation and discharge of a bill of exchange. It can be employed in judicial reasoning an analysis to deal with issues such as, the status of the holder of the bill or the liability of various parties on the bill. Each box in the model can be hyperlinked to relevant sections in the Act and case law authorities and likewise for each transaction between parties.

Another type of expert system that may find application in the Law is the “Finite State Machine.” “Such a machine is defined as follows: there are a number of different “states;” at each state, the user may be asked information and the reply together with the value of other variables of the system determines the next state that the machine enters.”30 Tyree uses the law relating to negligence as an example of a finite state machine.31 A variation of the model is reproduced in Figure 10. The machine proceeds through the four elements that need to be established in order to find a party liable for negligence. It can be used to structure legal reasoning and analysis and constructing judgments. Once again, each element in the machine can be hyperlinked to relevant principles and precedents. The model can be employed as a template for negligence cases with judges simply plugging in the law relating to each element and arriving at a decision as to liability.

Legal rules can be found in statutes and cases. In statutes they comprise sections of an act, where as in cases they constitute the ratio decidendi of the case. In general, the rules take the form of; if... then. “The difficulty of formulating rules which capture case law reasoning may reflect the fact that

28 See ibid, 43-46 for a more detailed explanation.

29 Ibid, 44 & 46, uses the law on negotiable instruments to provide an example of a semantic net and a frame diagram.

30 Ibid, 51.

31 Ibid, 54-57.

case law reasoning is closer to inductive than deductive reasoning. Although reasoning with case law may have some deductive components, the essence of it would appear to be to generalise from a number of instances rather than the application of logical rules.”32 One approach to formulating such rules and applying them in judicial reasoning and analysis is to employ the concept of “similarity”.

The approach involves collecting together all the relevant cases on a particular legal subject. Each case contains a number of materially relevant facts and an outcome, such as guilty or not guilty or liable or not liable or, more generally, win/lose. Each of the facts can be stated as a proposition which is either true or false and can be assigned a value “1” for true and “0” for false. Each case, on the particular subject, can then be represented by a vector of “1s” and “0s”. The range of cases x the defining attributes form a matrix. The outcome of the case can be added as a further column. A hypothetical example is shown in Figure 11, with rows of cases designated as C1 to C8 and the attributes or facts, in columns, designated as F1 to F6. The attributes or facts F1-F6 form a vector for each case, which leads to the outcome of W for win or L for lose. The next step is to assign weights to each of the facts, propositions or attributes. With the more significant facts attracting higher weights. Following this it is necessary to measure the distance between the cases. The shorter the distance between the cases the more likely that the same outcome will apply on the basis of a precedent common to those cases. The wider apart the distance between cases the more likely there are distinguishing facts and outcomes between the cases and the more likely a different precedent will apply. When a new dispute arises, judicial reasoning and analysis simply involves plugging the facts into the existing matrix, doing the calculations to see where the case in issue lies in relation to established cases and applying the decision and precedent of the closest cases. A hypothetical example of a matrix showing distances between cases is shown in Figure 12. It is up to the human expert to tease out the materially relevant facts and weight to assign to each one. The role of computers is to employ statistical techniques for determining the importance of each attribute across the range of cases and to measure the distance between cases. A worked example of this technique, applied to finders’ cases, has been demonstrated by Tyree.33

One difficulty in building and applying computer based expert legal systems is that the information may need to be in quantitative or numerical format. Fortunately, as illustrated above, it may be sufficient to simply be able to assign vales of “1” or “0” to build expert legal systems to be used in judicial reasoning and analysis.

32 Ibid, 133.

33 Ibid, 137-143.

Statistical Analysis of Interdependence

A judgement comprises a number of elements including, facts, issues, legal precedents, statutory provisions and holdings, decisions or opinions. Each of these elements are variable, in the sense that they vary from case-to-case. One role for the law is to collect together similar variables from a line of cases in order to establish principles of wider application to future cases. The statistical analysis of interdependence can assist in this regard, its goal is to give meaning to a set of variables. The statistical analysis techniques include, factor analysis, multidimensional scaling and cluster analysis. The techniques are dependant on computer programs for their implementation and they are capable of handling non-metric variables, of the type found in legal proceedings.

The techniques have been widely employed in marketing for, for example, positioning products in product space. They can also be applied to position political leaders in and along dimensions defining political space. It is suggested that the techniques could be fruitfully employed to position cases in “legal space”. The dimensions in legal space can be made up of vectors of facts derived from decided cases. New cases can then be located in legal space. Their position, in relation to clusters of decided cases will provide guidance as to the appropriate outcome and precedent to be applied.

“Factor analysis is a multivariate statistical technique that addresses itself to the study of interrelationships among a set of observed variables.... The primary purpose is the resolution of a set of observed variables in terms of new categories called factors.”34 The factors can then be rotated in order to more effectively describe the variables. Factor analysis is useful in that it can:

1. Point out the latent factors or dimensions that determine the relationship among a set of observed variables or vectors.

2. Point out relationships among observed variables that were there all the time but not easy to see.

3. Be used when things need to be grouped or clustered.

In other words, “Factor analysis is basically a method for reducing a set of data into a more compact form, while throwing certain properties of the data into bold relief. The user of factor analysis focuses on the set of variables

34 William D. Wells and Jagdish N. Sheth, ‘Factor Analysis in Marketing Research’ in Aaker, DA, Multivariate Analysis in Marketing: Theory & Application (1971) 213.

for which information has been collected and poses the question: Can the information contained in the original variables be summarised in a smaller number of new variables.”35

“The typical problem to be handled by the multi-dimensional-scaling procedures might roughly be stated as follows: Given a set of stimuli which vary with respect to an unknown number of dimensions, determine (1) the minimum dimensionality of the set and (2) projections of the set of stimuli (scale values) on each of the dimensions involved.”36

“The purpose of cluster analysis is to identify objects (or variables) which are similar with respect to some criteria. The resulting object clusters should have high internal (within cluster) homogeneity and high external (between clusters) heterogeneity). Geometrically, the objects within a cluster should be close together and the objects in different clusters should be far apart.”37 As mentioned above factor analysis can be used to cluster objects or variables. If a group of variables has in common high loadings on one factor (calculated by computer based statistical techniques), then they are viewed as forming a cluster.38 “More formally stated, the problem is: How should objects be assigned to groups so there will be as much likeness within groups and as much difference among groups as possible.”39

A hypothetical example of how these statistically based multivariate techniques might be employed to assist in judicial reasoning and analysis, without going into the statistical analysis, is as follows: Given a number of cases on a particular legal issue or topic, such as, negligent misstatement, subsistence of copyright or tax avoidance, what materially relevant facts determine that some cases are similar to others in their outcome and what materially relevant facts determine that groups of other cases are dissimilar in outcome. Further, what principle underlies each group of cases that are similar to each other but differentiated from other groups.

It has been demonstrated, above, that the facts in cases can be mathematically represented as vectors. It is now possible to represent those vectors in multi- dimensional legal space, which cannot be visualised but only operated on by statistical techniques. However, it is possible to provide a two dimensional

35 William F. Massey, ‘What is a Factor Analysis? Research’ in Aaker, D. A., Multivariate

Analysis in Marketing: Theory & Application (1971) 241.

36 Warren S. Torgerson, Theory and Methods of Scaling (1958) 247-8.

37 Aaker, DA, Multivariate Analysis in Marketing: Theory & Application (1971) 299.

38 Ibid, 300.

39 Ronald E. Frank and Paul E. Green, ‘Numerical Taxonomy in Marketing Analysis: A Review

Article’ in Aaker, DA, Multivariate Analysis in Marketing: Theory & Application (1971)


example, in Figure 13. Each of the vectors or variables represent facts in legal space. Factor analysis will tease out a minimum number of factors that explain the variables. It is then up to the legal expert to label the factors. Established cases, from which the fact vectors have been derived are then located in legal space. The legal expert can then spell out the legal principles each clusters have in common, with the assistance of the factors in the space. This constitutes an exercise in judicial reasoning and analysis. In the example, C1+C2+C5 form one cluster, C3+C4+C6 form another cluster and C7+C8 form a third cluster. Each cluster will have a common underlying legal principle or rule. It is the task of judicial reasoning and analysis to identify the common principle or precedent. Another task for the legal expert is to identify and label the factors. If the legal issue related to tax avoidance, then Factor 1 might be a dimension designated as Tax Planning and Factor 2 might be a dimension designated as Tax Avoidance.


Figure 1. Simplified Representation of the Income Tax Flowchart


Figure 2. Roadmap: Statutory Income

3.1 Income from personal exertion

[ 6-040, 7-000 – 7-020]

Ordinary income is interpreted as income according to the ordinary concepts and usages of mankind [Scott v C of T (NSW)] and is categorized as income from personal exertion or income from property. [97 s6(1)]

Income from personal exertion can be further sub-divided into income from work or provision of services and proceeds from carrying on a business.

Five categories of income from property are recognized, namely: annuities,

interest, rent, royalties and corporate distributions (dividends).

A number of propositions have been developed by the courts in order to determine whether a receipt constitutes income from personal exertion or income from property.


Figure 3. Topic screen: Ordinary Income – Income from Personal Exertion


Figure 4. The Legal Paradigm


Figure 7. Hypothetical Illustration of Relations Between

Evidentiary Propositions


Figure 8. Algorithm for Deductibility of Losses or Outgoings under s8-1


Figure 9. Bills of Exchange Model: Creation, Negotiation and Discharge


Figure 10. Negligence: Finite State Machine


Figure 11. Cases x Attributes and Outcomes Matrix


Figure 12. Measurement of the Distance between Cases


Figure 13. Fact Vectors and Location of Cases in Legal Space



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