Alamdo Holdings Pty Ltd v Commissioner of Taxation

1. The notice of appeal filed 24 May 2019 is dismissed as incompetent.
2. The applicant is to pay the respondent's costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THAWLEY J: 1 On 26 April 2019, the Administrative Appeals Tribunal made a direction in the following terms (Direction): The parties are to file and serve written submissions in accordance with paragraphs 201- 202 of the reasons and findings of fact attached at Annexure A. 2 Attached to the Direction was a document entitled "Decision and Reasons for Decision". This contained the "Reasons for Decision" but no separate "Decision". The Direction was signed. The attached "Decision and Reasons for Decision" were not certified. The "Reasons for Decision" included: CONCLUSION 197. The deemed objection decision should be varied so as to allow the Applicant's claimed loss on the sale of the shares in Company B. The penalty decision so far as it relates to that claim should be set aside. 198. The deemed objection decision so far as it disallowed the claimed loss on the sale of the Company A shares should be affirmed. The penalty decision in respect to the claimed loss on the sale of the Company A shares, being 50% based on recklessness as to the operation of a taxation law, should be affirmed. 199. I will hear from the parties in respect of the appropriate orders, a course that was mentioned during final submissions. At that time, I also asked a question concerning the losses claimed by the Applicant in the 2002 and 2003 years, and whether those claims, which were allowed, related to specific losses. 200. On reflection I do not think that question arises. I will, however, hear the parties on that issue as well. 201. The Applicant should lodge and serve draft orders within fourteen days of the date of publication of these reasons based on my findings above and, if so advised, within the same time lodge and serve written submissions on the above-mentioned point. 202. The Respondent shall have a further fourteen days to respond. 3 The Direction made by the Tribunal, which required the parties to lodge and serve draft orders and, if the parties were so advised, additional submissions, related to two applications for review under Part IVC of the Taxation Administration Act 1953 (Cth), concerning the applicant's liability to income tax and administrative penalty for the income year ended 30 June 2011. 4 On 24 May 2019, the applicant filed a notice of appeal in this Court. 5 On 7 June 2019, the respondent filed a notice of objection to competency. The objection was in the following form: The Respondent objects to the competency of the appeal. GROUNDS OF OBJECTION 1. There has been no "decision" from which an appeal may be brought to this Court under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth). 2. The Tribunal, having directed the parties to file further submissions, has not concluded its review of the Respondent's objection decisions in relation to the Applicant's liability to income tax and administrative penalty for the relevant year of income. 3. The Tribunal's direction and reasons dated 26 April 2019 do not constitute the effective decision or determination of the applications for review. The Respondent applies for the question of competency to be heard and determined before the hearing of the appeal. 6 On 15 July 2019, my Associate wrote to the parties seeking a submission of no longer than 2 pages within 7 days as to whether the appeal was competent. The email also stated that, absent reason not to, the question of competency would be determined on the papers. 7 On 19 July 2019, the solicitors for the applicant responded by email copied to the respondent indicating that the Tribunal had that morning issued a "Decision and Reasons for Decision". Through no fault of the applicant, this email was not provided to me until 25 July 2019. Under the heading "Decision", the Tribunal's "Decision and Reasons for Decision" of 19 July 2019 provided: 1. The objection decision deemed to have been made by the Respondent on or about 22 December 2015 is varied by reducing the Applicant's taxable income for the year ended 30 June 2011 of $4,397,992 to $3,012,275. 2. The objection decision deemed to have been made by the Respondent on or about 1 April 2016 is varied by reducing administrative penalties of $656,806.30 by $207,857.55 to $448,948.75. 3. The objection decisions are otherwise affirmed. 8 Under the heading "Reasons for Decision", which appeared immediately after the section headed "Decision", the Tribunal gave reasons which largely replicated the "Reasons for Decision" which had been annexed to the Direction of 26 April 2019, but contained additional paragraphs. The "Reasons for Decision" were certified. 9 The solicitors for the applicant, in their email of 19 July 2019, submitted it would not be efficient for the parties to draft submissions on competency of the "current appeal" or to ask the Court to spend time resolving the question. The email stated: We are conscious of the Court's expectations of the parties, as expressed in Central and the Tax Practice Notes, as to the efficient management of the proceedings. The course we have instead suggested to the Respondent is for a timetable to be put in place for the Applicant to file an Amended Notice of Appeal (say within 14 days) which also refers to today's decision and for the usual Rules to apply from the date of the filing of that Amended Notice of Appeal. As we understand it the Respondent's instructions to this suggestion are currently being obtained. The extension of time sought for the filing of submissions on the competency of the current appeal would enable those discussions to run their course. 10 On 22 July 2019, the respondent provided the Court with two pages of written submissions. 11 The respondent submitted that, whilst the Tribunal's reasons for the Direction indicated that particular aspects of the objection decisions "should be" affirmed or set aside, the Tribunal did not make decisions in writing affirming the decisions under review, varying the decisions under review or setting aside those decisions for the purposes of s 43 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). Rather, the Tribunal directed the parties to file draft orders and any further written submissions regarding the nature of losses utilised by the applicant in earlier income years. 12 The respondent noted that s 44 of the AAT Act provides that a party to a proceeding before the Tribunal may appeal to this Court, on a question of law, from any decision of the Tribunal in that proceeding. The respondent referred to Director-General of Social Services v Chaney (1980) 31 ALR 571 at 593, in which Deane J (with whom Fisher J agreed) said: The conclusion which I have reached is that, subject to the qualifications mentioned below, an appeal under s 44(1) of the Act lies only from a decision of the Tribunal which constitutes the effective decision or determination of the application for review. Ordinarily, such a decision will be the final decision formulated in accordance with the provisions of s 43 of the Act. The qualifications referred to are an appeal pursuant to s 44(2) from a decision that the interests of a person are not affected by a particular decision and the case where the proceeding before the Tribunal can properly be divided into two or more separate parts in respect of which independent "decisions" may properly be given. 13 Fisher J, at 596, noted that "it is generally considered inappropriate for courts to intervene until the statutory process is completed", adding that "the statutory process is complete when the Tribunal either decides to refuse to review the decision of the Administrator or makes a decision in writing affirming, varying or setting aside the decision". 14 The respondent referred also to the decision of the Full Court (Edmonds, Pagone and Davies JJ) in Commissioner of Taxation v Cancer and Bowel Research Association (2013) 305 ALR 534 (CBRA). After setting out passages from the judgments of Deane J and Fisher J in Chaney, their Honours stated at [8]: An appeal under s 44(1) requires that the disposition by the tribunal be "the effective decision or determination of the application for review". In the usual case an effective decision by the tribunal will be reflected in the orders made under s 43, but, as was explained by Deane J in Chaney, a decision may come within s 44 where it is (a) that the interests of a person are not affected by a particular decision (see s 44(2) of the AAT Act) and (b) where it is of a part of a proceeding which can properly be divided into separate parts. In such cases the disposition by the tribunal can be seen as deciding finally some aspect of a party's entitlements and, therefore, as having the effect of finally deciding or determining an aspect of a proceeding. Its quality as a decision within the meaning of s 44 is that it ends the whole or a properly separable part of the matter before the tribunal. 15 The respondent submitted that neither of the two qualifications referred to by Deane J applied in the present case. 16 The respondent also referred to the decision of Robertson J in Kishore v Tax Practitioners Board [2016] FCA 1328 at [19] to [22], where his Honour stated: 19 In my opinion, the point of the decision in Chaney is to avoid judicial review by way of an appeal to this Court instanter and as of right from non-determinative steps, determinations or decisions of the Tribunal. This reflects the undesirability of fragmenting proceedings in the Tribunal by the making of applications to the Federal Court seeking to challenge intermediate directions, determinations or decisions of the Tribunal: see the judgment of the Full Court in Geographical Indications Committee v The Honourable Justice O'Connor [2000] FCA 1877; 64 ALD 325 at [26]-[28]. 20 In the present case, it is plain that the Tribunal has not yet completed its review of the decision of the Tax Practitioners Board to terminate the appellant's registration as a tax agent: see [17] and [18] above. The Tribunal has not affirmed, varied or set aside the decision under review: see s 43 of the Administrative Appeals Tribunal Act. Applying the decision of the Full Court in Chaney, an appeal under s 44 of the Administrative Appeals Tribunal Act is incompetent. 21 The decision in Chaney has been approved or applied by many Full Courts including: Geographical Indications Committee v The Honourable Justice O'Connor [2000] FCA 1877; 64 ALD 325; Australian Postal Corporation v Forgie [2003] FCAFC 223; 130 FCR 279; Australian Securities and Investments Commission v PTLZ [2008] FCAFC 164; 48 AAR 559; Irwin v Military Rehabilitation & Compensation Commission [2009] FCAFC 33; 174 FCR 574; Kowalski v Repatriation Commission [2009] FCAFC 107; 259 ALR 444; Rana v Repatriation Commission [2011] FCAFC 123; 196 FCR 137; Australian Postal Corporation v Sinnaiah [2013] FCAFC 98; 213 FCR 449; Commissioner of Taxation v Cancer and Bowel Research Association [2013] FCAFC 140; 305 ALR 534 and Luck v Chief Executive Officer of Centrelink (No 2) [2015] FCAFC 112; 67 AAR 399. 17 The respondent submitted that the competency of an appeal is to be determined at the time the appeal was filed. The respondent submitted that the appeal was and remains incompetent and the subsequent delivery of the Tribunal's decision on 19 July 2019 does not alter that conclusion. It was submitted that the parties cannot make an appeal competent through agreement, referring to Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 243 ALR 728 per Kenny J at [31] and Greenwood J at [74]. 18 On 24 July 2019, the solicitors for the applicant wrote to my Associate, fairly noting that their email of 19 July 2019 had not been graced with a response, and attaching four pages of submissions. This letter and the email of 19 July 2019 were provided to me on 25 July 2019. I took steps to have the matter listed for hearing the next day (namely today) to resolve the issue. 19 The applicant noted that r 33.12(1) of the Federal Court Rules 2011 (Cth) (FCR) required a person who wants to appeal to the Court under s 44 of the AAT Act to file a notice of appeal in the prescribed form, which includes a statement of the part of the decision the applicant appeals from or contends should be varied. Rule 33.14 provides: Amendment of notice of appeal without leave - supplementary notice The applicant may, before the return date in the proceeding, amend the notice of appeal without leave of the Court by filing a supplementary notice of appeal. 20 The applicant submitted: The Court and parties must approach the application of all "civil practice and procedure provisions" (which include any provision made by the Federal Court Act 1976 (Cth) (FCA), the FCR and "any other Act with respect to the practice and procedure of the Court" (s 37M(4) of the FCA)) in the way that best promotes the overarching purpose and objectives expressed in s 37M(1)-(2) of the FCA, in particular, sub-sec (1)(b) and (2)(b)-(c) of the FCA. 21 The applicant then submitted that the Court should appoint a first return date that gave the applicant sufficient time to file an amended notice of appeal and the respondent sufficient time to consider that amendment. If the respondent then still wished to press an objection to competency, the parties should have an oral hearing. 22 In oral argument the applicant accepted, as I understood it, that there was nothing in the reasons for the 26 April 2019 decision of the Tribunal which it sought to challenge but would not otherwise be able to challenge in its foreshadowed appeal from the decision of 19 July 2019. 23 The applicant also submitted that the right of appeal under s 44(1) of the AAT Act is from any decision of the Tribunal which constitutes the effective (applicant's emphasis) decision or determination of the application for review, referring to Commissioner of Patents v AbbVie Biotechnology Ltd [2017] FCA 129 at [40]. The applicant submitted that, by the Direction, which annexed uncertified "Reasons for Decision", the Tribunal was "in terms" purporting to make a "decision" under the AAT Act. It was said that the decision: (1) found that the applicant had proved a 1992 capital loss, but not a 1991 capital loss; (2) decided that the deemed objection decision should be varied so as to allow the 1992 capital loss and the penalty decision so far as it related to that claim should be set aside (at [197]); (3) decided that the deemed objection decision so far as it disallowed the 1991 capital loss should be affirmed and that the penalty decision in respect of that claimed capital loss should be affirmed (at [198]). 24 The applicant submitted: The Tribunal did not say that until the making of the orders there was no effective decision or determination of the application for review. Its decision was deliberately formulated to reflect s 43(1) of the AAT Act. The Applicant in such circumstances should not have to second guess the Tribunal nor decide that the document is not really what it is stated to be and hence run the gauntlet of the 28 day limitation period for lodging an appeal and the risk its appeal rights if it gets it wrong. 25 The applicant submitted: [W]hilst a Court's decision takes effect upon the entry of orders, a Tribunal is not a Court. The fact that the Tribunal wished to hear from the parties as to the form of its "orders" was not an invitation to the parties to lead further evidence or increase the Tribunal's understanding of the merits in a way that might lead to a reconsideration of its decision. This was merely an invitation to express the consequences of a decision already in effect. By expressing these consequences in the form of "orders," the Tribunal was making further, discrete decisions pursuant to s 43(1) of the Act, namely to re-exercise the decision-maker's powers in certain limited respects, ie., the power to re-assess the taxable income of the Applicant in the 2011 year and the amount of its administrative penalty. 26 The applicant submitted, in the alternative, that the decision of 26 April 2019 did decide finally some aspect of the applicant's entitlements (for example, allowing the 1992 capital loss and disallowing the 1991 capital loss) and therefore had the effect of finally deciding or determining an aspect of a proceeding even if it had not concluded its review. 27 In my view, the notice of appeal is incompetent. 28 The Tribunal had not decided, on 26 April 2019, a separate part of the proceedings before it. It had decided no part of the proceedings before it. In this context, a decision is made, in the ordinary case, once the Tribunal "ends the whole or a properly separable part of the matter before the Tribunal" by making orders under s 43 of the AAT Act - see : CBRA at [9]. There was no decision of this nature. There was a direction which annexed uncertified "Reasons for Decision". 29 At the time the applicant filed its notice of appeal, the Tribunal had not concluded its review of the respondent's objection decisions. The Direction (and reasons) did not constitute the effective decision or determination of the applications for review. 30 Contrary to the submission advanced on behalf of the applicant, there was no need to "second guess" the Tribunal. The Tribunal made a direction and annexed uncertified reasons. No orders were made under s 43. There was no risk to the applicant that the timewithin which to start an appeal from a decision made under s 43 had begun to run. It was perfectly clear that the Tribunal was directing that draft orders and any further submissions on the issue raised by the Tribunal be provided by the parties, to assist the Tribunal to make its decision affirming, setting aside or varying the decisions under review. 31 As Robertson J said in Kishore at [19]: [T]he point of the decision in Chaney is to avoid judicial review by way of an appeal to this Court instanter and as of right from non-determinative steps, determinations or decisions of the Tribunal. This reflects the undesirability of fragmenting proceedings in the Tribunal by the making of applications to the Federal Court seeking to challenge intermediate directions, determinations or decisions … 32 The applicant chose to appeal the Tribunal's Direction without waiting for its decision. This was a choice which the applicant was entitled to make, even if it was a surprising one. The applicant must also shoulder the consequences of its choice. The respondent was put to the expense and trouble of dealing with an appeal process whilst still deploying resources to provide draft orders and submissions as directed by the Tribunal to finalise its review. This occurred in circumstances where it was obvious that a decision constituting the effective decision or final determination of the applications for review would shortly be made. 33 In addition, this Court's processes for examining potentially incompetent appeals were engaged, requiring Court staff and judicial resources to be directed to this matter and away from other matters. 34 The applicant's choice to file a notice of appeal when it was plain that the Tribunal's review was likely shortly to be finalised by the making of orders under s 43 (drafts of those orders having been requested by the Tribunal) was not consistent with the approach to litigation contemplated by s 37M of the Federal Court of Australia Act 1976 (Cth) (FCAA) to which the applicant referred in support of its submission that the Court should implement a timetable which permitted it to amend its notice of appeal. Nor was it consistent with s 37N of the FCAA. 35 An amendment to the present notice of appeal would be an amendment with the effect of instituting a new appeal, being an appeal from a different decision, namely that of 19 July 2019 which concluded the review by the making of orders under s 43 of the AAT Act. 36 It was eventually accepted by the applicant in oral submissions that the real dispute between the parties concerned the decision of 19 July 2019. The applicant stated it would have no difficulty abandoning the present appeal (from the decision of 26 April 2019), or it being dismissed as incompetent, if the Court would waive the filing fee in respect of an appeal from the decision of 19 July 2019. The applicant submitted that a "second" filing fee should be waived in circumstances where it lodged the appeal from the decision (the Direction) of 29 April 2019 for a protective reason, namely that it faced a risk that the decision of the Tribunal was a decision of a kind contemplated by Chaney and that it triggered the 28 day time limit for instituting an appeal. In my view, it was not reasonable to perceive such a risk given the terms of the Tribunal's decision which were expressly a direction and which expressly requested draft orders to assist the Tribunal to conclude the review by making a decision. The question of whether a "second" filing fee should be waived can only be determined if an appeal from the decision of 19 July 2019 is lodged (as I have no doubt it will be) and the applicant then asks for the fee to be waived. 37 I make the following orders: (1) The notice of appeal filed 24 May 2019 is dismissed as incompetent. (2) The applicant is to pay the respondent's costs. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.