The applicant, ACN 092 138 442 Pty Ltd (In Liquidation) (ACN) was placed into liquidation on 26 July 2007. Mr Geoffrey Buckfield is a shareholder and the sole director of ACN.
On 25 January 2012, Mr Buckfield was granted leave by Gzell J in the Supreme Court of New South Wales to lodge an objection in the name of ACN against an amended assessment and penalty issued by the Commissioner of Taxation (the Commissioner) for the year ended 30 June 2006. The amended assessment was issued in November 2011 and arose out of an audit by the Australian Taxation Office (ATO) following information provided by the liquidator of ACN. The Commissioner disallowed the objection and on 18 March 2013 on the instructions of Mr Buckfield an application for review of the objection decision was lodged in the name of ACN.
The Commissioner seeks an order that the application for review be dismissed for want of jurisdiction. It is submitted that the Tribunal does not have jurisdiction to hear the review proceedings because Mr Buckfield did not have authority to lodge the application for review. ACN is in liquidation and the powers of Mr Buckfield as a director of ACN are suspended by reason of s 471A of the Corporations Act 2001 (Cth) (the Corporations Act). A director may only exercise a function as an officer of a company with the written approval of the liquidator or the approval of the Court (s 471A(1A)). Mr Buckfield obtained approval from the Court to lodge the objection, but not to make the application for review. Moreover, the liquidator has not given written approval. The Commissioner submitted that the proceedings should be dismissed, either under of the (Cth) (AAT Act) or under the Tribunal's inherent jurisdiction.
Mr Buckfield submitted that the original grant by Gzell J extends to the commencement of proceedings to review the objection decision. In the alternative, it is submitted that Mr Buckfield is entitled to commence the proceedings as a person whose interests are affected by the decision under s 27(1) of the AAT Act.
If it is determined by the Tribunal that leave is required, Mr Buckfield submitted that the proceedings should be adjourned to allow for such an application to be made to the Court. The Commissioner submitted that this would not cure the invalidity of the present application and, regardless of the outcome of such an application, the proceedings should be dismissed.
The issues for determination are whether Mr Buckfield had authority to commence these review proceedings and, if not, what is the implication for the further conduct of the proceedings. In particular, the question arises as to whether the proceedings should be adjourned, dismissed or whether any order can be made when the proceedings have been commenced without authority. In addition, counsel for Mr Buckfield submitted that the matter should be referred to the Full Federal Court under s 45 of the AAT Act to determine questions of law about constitutional validity of the assessment on the grounds that any interpretation of the order of Gzell J that denied standing to prosecute a review was incompatible with the Constitution.
[2]
Prior to its liquidation, ACN was the trustee of a property trust. In 2010, the liquidator of ACN commenced proceedings in the Supreme Court of New South Wales against Mr Buckfield and Bristrol Custodians Ltd, a company incorporated in New Zealand, for losses incurred by ACN. Those proceedings are still on foot.
There are disputes between Mr Buckfield and the liquidators of ACN as to the conduct of the liquidation. Mr Buckfield alleges that the liquidator "agitated" for the Commissioner to issue an amended assessment in order to maintain the validity of the proceedings in the Supreme Court. He seeks to challenge the amended assessment, which he alleges is excessive, firstly, because the assessment was made outside the four year limitation period and, secondly, because the capital gains made by ACN in the year ended 30 June 2006 were exempt from tax.
Mr Buckfield filed an interlocutory application in the Supreme Court proceedings and on 25 January 2012, Gzell J made an order in the following terms:
[3]
The Applicant is granted leave to lodge an Objection against the Notice of Amended Assessment - year ended 30 June 2006 and the penalty assessment issued on 28 November 2011 pursuant to Part IVC of the Taxation Administration Act (Cth) 1953 in the name of the Company ACN 092 138 442 Pty Limited (in liquidation) by Friday 27 January 2012.
[4]
An objection was made to the amended assessment by Mr Buckfield in the name of ACN on 27 January 2012. The Commissioner disallowed the objection and the decision was notified to the lawyers of Mr Buckfield on 22 January 2013. Lawyers for Mr Buckfield lodged an application for review in the name of ACN on 18 March 2013. It is common ground that the liquidator did not consent to Mr Buckfield lodging the application.
By letter dated 18 April 2013, the ATO wrote to Mr Buckfield's lawyers advising that the Commissioner would seek an order that the review proceedings be dismissed on the grounds that Mr Buckfield did not have standing. The letter further noted that if an application for leave was made by Mr Buckfield to the Court, the Commissioner would agree to adjourn the proceedings pending the determination of the application.
There was no further correspondence provided explaining what subsequently occurred and by letter dated 1 May 2013 to the Tribunal, the Commissioner requested that the matter be listed for a jurisdictional hearing. The matter was listed before me and on the morning of the hearing an affidavit from Mr Buckfield's lawyer and submissions by both parties were handed up. There was brief oral argument and, given that neither party had prior notice of the arguments raised by each other, both parties requested the opportunity to file further written submissions.
[5]
The basis for the Commissioner's application, as confirmed in written submissions, was that Mr Buckfield did not have leave to commence these review proceedings on behalf of ACN and therefore the Tribunal has "no jurisdiction" to hear this matter.
It is clear that the question of whether Mr Buckfield had leave to commence is a critical threshold issue. However, I am not satisfied that lack of jurisdiction is the appropriate characterisation of the problem if Mr Buckfield did not have leave, and therefore no authority, to commence review proceedings in the name of ACN.
Section 25 of the AAT Act provides that the Tribunal may review decisions as prescribed by an enactment. Section 14ZZ(1)(a) of the TAA provides that if a person is dissatisfied with a reviewable objection decision the person may apply to the Tribunal for a review of the decision. There is no dispute that the decision which is the subject of the application for review is a reviewable objection decision. There is also no dispute that ACN, as the taxpayer, has standing to apply for the review. As such, this is not an issue of whether there is jurisdiction to hear the application, but rather whether the application has been properly made. If not, there is no valid application on foot and the Tribunal cannot deal with the application unless and until the application has been validated.
I have concluded that Mr Buckfield did not have authority to make the application for review in the name of ACN but the application is capable of being validated if Mr Buckfield obtains retrospective leave from the Court to effectively 'ratify' the commencement. I therefore have decided to make no order on the basis that neither dismissal nor adjournment is appropriate at this stage. My reasons follow.
[6]
Did Mr Buckfield have authority to commence the review proceedings?
[7]
There is no dispute that Mr Buckfield's power to exercise any functions as an officer of ACN have been suspended by its liquidation but he may exercise those functions with the leave of the Court.
Mr Buckfield submitted that the leave granted by Gzell J to make an objection also extends to the commencement of proceedings to review the objection decision of the Commissioner. The review is part of the continuum of the administrative decision-making process in relation to the objection. The leave granted by Gzell J was to lodge an objection "pursuant to Part IVC" of the Taxation Administration Act 1953 (Cth) (TAA). Part IVC establishes a regime for a person who is dissatisfied with an assessment, determination, notice or decision of the Commissioner to object (s 14ZL of the TAA). Once an objection is made, the Commissioner must decide whether to allow or disallow the objection (s 14ZY). If a person is dissatisfied with the Commissioner's objection decision, the person may apply to the Tribunal (s 14ZZ). Mr Buckfield, having made the objection in the name of ACN, was therefore entitled to apply for a review of the objection decision. The leave granted by Gzell J must intend to refer to the whole process of review under Part IVC of the TAA. To interpret the terms of the leave otherwise would be incompatible with the Constitution as "liability for tax cannot be imposed upon the subject without leaving open to him some judicial process by which he may show that in truth he was not taxable or not taxable in the sum assessed." (Deputy Federal Commissioner of Taxation (NSW) v Brown[1958] HCA 2; (1952) 100 CLR 32). Having regard to the constitutional issues raised, it would be appropriate to refer this matter to the Federal Court for determination.
The Commissioner submitted that the order of Gzell J is clear and unambiguous. It permitted Mr Buckfield to lodge an objection but not a review of any objection decision. An objection against an amended assessment and penalty is a separate and different process from a review of the objection decision. The statutory scheme for objections is set out in Division 3 of Part IVC whereas the regime for the Tribunal's review of the objection decisions is set out in Division 4. The vast majority of objections are not followed by a review. Furthermore, the issues for decision by the Tribunal are not necessarily the same as those addressed by the objection process and the Tribunal, while standing in the shoes of the Commissioner, conducts merits review and may hear new evidence during the course of the review. There is no incompatibility with the Constitution. This application to the Tribunal by Mr Buckfield is not the only way for the assessment to be reviewed. There is a mechanism set out in s 471A(1A), which Mr Buckfield can pursue on behalf of ACN by making an application for leave or through a special purpose liquidator.
I am persuaded by the submissions of the Commissioner. The order of Gzell J is clear. Mr Buckfield was permitted to lodge an objection pursuant to Part IVC in the name of ACN and nothing more. The order could easily have been framed to include a review by the Tribunal or an appeal to the Federal Court. It did not do so. I do not accept the submission that an order permitting a person to lodge an objection in the name of a company in liquidation also permits, by inference, all of the potential processes set out in Part IVC that may follow. When a person is dissatisfied with an assessment of the Commissioner the administrative decision-making process commences with an objection. The process may culminate in a review or an appeal in respect of the objection decision. While I accept that the process established by Part IVC is a continuum, each stage of the process is separate and distinct. Once the Commissioner makes an objection decision, there are three possible outcomes: the person may accept the objection decision, the person may apply to this Tribunal for a review or the person may appeal to the Federal Court.
When a company is insolvent, there is a statutory regime set out in the Corporations Act for external management by a liquidator, who has statutory obligations and liabilities. This is to ensure that the interests of creditors and third parties dealing with the company are protected. The authority of the officers of the company is suspended but there is a mechanism for an officer to exercise functions under s 471A(1A) of the Corporations Act. If the liquidator does not consent an officer may seek leave from the Court and the Court, after considering all relevant information, will either grant or refuse leave. This process provides adequate scope for action to be taken in the interests of a company in liquidation where the liquidator chooses not to take action. Importantly, there is a mechanism for judicial scrutiny.
Thus, there are remedies available to challenge an assessment on behalf of a corporate taxpayer, where the taxpayer is in liquidation. There is no constitutional incompatibility and it is not inimical to the intent and purpose of s 471A(1A) of the Corporations Act for the objection regime for review of objection decisions set out in Part IVC of the TAA to be considered as a separate and distinct stage in the process. Indeed, it would be efficacious to do so. It may be appropriate to confine leave to the making of an objection to an assessment so that the liquidator or the Court can make an informed decision about the merits of proceeding with an application for review. If there are little or no prospects of success, there would be no benefit to the company or creditors in proceeding with an application for review and there would be unnecessary expenses incurred, not only by the Commissioner but the Tribunal. In considering this issue, I concluded there was no need for this question to be referred to the Federal Court pursuant to s 45 of the AAT Act. It is competent for the Tribunal to form an opinion about the validity of legislation and to act on the basis of that opinion (Re Walsh and Commissioner of Taxation[2012] AATA 451).
Having regard to these matters, I am not satisfied that the terms of the leave granted by Gzell J extend to an application for review of the objection decision to this Tribunal.
In the alternative, Mr Buckfield submitted that he was entitled to make the application for review as a "person ... whose interests are affected by the decision" pursuant to s 27(1) of the AAT Act. Mr Buckfield asserted, through his lawyer and counsel, that the status of the Commissioner as a creditor was critical to the ability of the liquidators to maintain proceedings against him. The Commissioner did not address this issue and there was no evidence or submissions directed to the question of whether this assertion could be substantiated. However, even if I accepted this proposition, Mr Buckfield's submission must fail. Section s 27(1) of the AAT Act is not available to Mr Buckfield by reason of s 14ZZB(1) of the TAA which precludes the operation of the section in applications for review of an objection decision.
Furthermore, Mr Buckfield applied for leave to lodge an objection in the name of the company, not in his own name, presumably in recognition that ACN, as the taxpayer, is the party entitled to object. While Mr Buckfield is dissatisfied with the assessment, only a taxpayer has standing to commence a review (McCallum v Commissioner of Taxation[1997] FCA 533; (1997) 75 FCR 458). This being the case, Mr Buckfield does not have standing to bring these review proceedings in his own name.
In summary, Mr Buckfield had no authority to commence these review proceedings when they were commenced, either in his own name or in the name of ACN. Given there is presently no valid application before the Tribunal, the question arises as to what action should be taken or orders, if any, should be made.
[8]
The Commissioner submitted that the proceedings should be dismissed, rather than adjourned, because an application for leave, even if successful, could not cure the deficiency in authority. There was no detail provided in the written submissions but presumably the basis for the submission was that if leave was granted after the application for review it could not cure the fact that Mr Buckfield did not have authority at the time the application was filed.
Neither party addressed the issue of whether an application could be made seeking an order that leave be granted nunc pro tunc, namely retrospectively authorising the earlier commencement of these review proceedings by Mr Buckfield.
In HFGC Nominees (No 2) Pty Ltd v Hancock as Liquidator of 246 Arabella Investments Pty Ltd (In Liquidation) (2010) 80 ATR 442; [2010] FCA 1005 Perram J considered an application under s 511 of the Corporations Act by a contributory for leave to use the name of the company in liquidation to pursue an application for review on its behalf against an unfavourable objection decision made by the Commissioner. In that case, HFGC Nominees (No 2) Pty Ltd lodged an objection against an assessment made by the Commissioner before its liquidation, the Commissioner substantially disallowed the objection but the liquidator declined to pursue a review. Mr Higgins was a shareholder of HFGC Nominees (No 2) Pty Ltd. He made an application for review to this Tribunal prior to his application for leave. After considering whether the review was sufficiently arguable to be allowed to proceed, Perram J concluded that the power to grant leave could be exercised nunc pro tunc. As Perram J noted, whether an order for leave may be made nunc pro tunc "requires attendance to the statutory language" of the section in respect of which the order is being made.
In my view, there is nothing in the language of s 471A(1A) of the Corporations Act that would preclude such an order. As such, it would be open to the Court to grant leave to Mr Buckfield nunc pro tunc if the Court is satisfied the review of the objection decision is sufficiently arguable. Having regard to the possibility that the defect may be cured by a successful application for leave pursuant to s 471A(1A) of the Corporations Act, I propose making no order. If Mr Buckfield does not make an application for leave and thereby prosecute this application in a timely manner, consideration could be given as to whether these proceedings may be dismissed under s 42A(5) of the AAT Act.
[9]
I certify that the preceding 30 (thirty) paragraphs are a true copy of the reasons for the decision herein of Ms J L Redfern, Senior Member