Bolton v Commissioner of Taxation

1. The application for an extension of time in which to make an application for judicial review be dismissed with costs. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

PAGONE J: 1 The applicant ("Mr Bolton") applied by application dated 19 July 2017 for an extension of time under r 31.02 of the Federal Court Rules 2011 (Cth) to lodge an application for an order for review of a decision of the Administrative Appeals Tribunal ("the Tribunal") under the Administrative Decisions (Judicial Review) Act 1977 (Cth) ("the Judicial Review Act"). On 19 September 2017 the application for an extension of time was listed to be heard on 20 November 2017 and orders were made for the filing of material in preparation for the hearing. An application for an adjournment was made at the hearing on the morning of 20 November 2017 on the basis that Mr Bolton was not available to be cross examined at the hearing on the affidavit he had filed with the application dated 19 July 2017. The application for the adjournment was rejected at the hearing with these reasons to be provided subsequently. 2 The application for an extension of time relates to a decision made by the Tribunal on 29 November 2013 in a proceeding under Part IVC of the Taxation Administration Act 1953 (Cth) ("the 1953 Act") commenced by Australian Style Investments Pty Ltd ("ASI") as trustee for the Australian Style Investments Unit Trust. Mr Bolton was not a party to those proceedings but he was the sole director of ASI and the outcome, and the consequences, of that decision have led to the Australian Securities & Investments Commission ("ASIC") disqualifying Mr Bolton from managing corporations for a period of three years. On 6 October 2015 Mr Bolton was served by ASIC with a Disqualification Order under s 206F of the Corporations Act 2001 (Cth) and was informed that the basis of the disqualification was that ASI had been wound up primarily because of its failure in the proceeding in the Tribunal. The cause for winding up ASI was explained at [46]-[48] of the reasons for decision of ASIC's delegate as follows: ASI -False business activity statement 46. ASI operated the business of providing share trading services during the period 11 June 2004 until sometime in 2012. ASI held units in trusts. ASI was the trustee of the Australian Style Investments Unit Trust. ASI was wound up on 6 March 2014. 47. ASI was wound up with assets estimated by its liquidator of $15,000, unsecured creditors estimated by its liquidator of $2,070,096 and a deficiency estimated by its liquidator of $2,055,096. Unsecured creditors included the ATO who was owed $871,242.26. 48. The liquidator in his report concerning ASI states "it appears that the primary cause of failure is the successful prosecution of the company for GST on a $4.5 million transaction". Mr Bolton was ASI's only director since 11 June 2004 and was the only director since 1 April 2004 of ASI's ultimate shareholding company, Australian Style Holdings Pty Ltd, ("ASH"). 3 On 8 April 2009 ASI had entered into a deed under which it was required to perform a number of functions in return for the payment to ASH of $4,500,000 by Thiess Pty Ltd and John Holland Pty Ltd (which may together be conveniently be referred to as "TJ"). ASI did not report a GST liability regarding the $4,500,000 but was assessed by the Commissioner, following an audit, to GST of $409,091 and an administrative levy of $204,545.50. The Commissioner commenced proceedings to wind up ASI on 2 September 2011 but those proceedings were deferred pending ASI's application for review of the assessments under Part IVC of the 1953 Act. The Tribunal subsequently, on 29 November 2013, affirmed the Commissioner's decision and made findings which ASIC relied upon in its reasons for its decision to make a Disqualification Order against Mr Bolton in which it concluded that Mr Bolton had not complied with s 180(1) of the Corporations Act 2001 (Cth) in causing ASI's business activity statement to be prepared and lodged in circumstances "where he knew that its contents might be significantly false" and had not taken appropriate measures to obtain proper legal advice as to whether its contents were in fact false. 4 The application for extension of time dated 19 July 2017 was accompanied by an affidavit by Mr Bolton dated 17 July 2017, and exhibited to that affidavit was a draft application said to comply with r 31.02 of the Federal Court Rules 2011 (Cth). The orders made at a case management hearing on 19 September 2017 included the fixing of 20 November 2017 as the date for the hearing of the application on an agreed estimate of half a day. Counsel appearing for the Commissioner at that hearing expressly put Mr Hager, the solicitor for Mr Bolton, on notice that the Commissioner would seek to cross-examine Mr Bolton on his affidavit of 17 July 2017 at the hearing which was fixed for 20 November 2017. There was no suggestion when the hearing date was sought and fixed (being the date upon which Mr Hager was expressly put on notice that Mr Bolton would be required to be cross-examined) that Mr Bolton would not be available to be cross-examined on 20 November 2017. The need for Mr Bolton to attend the hearing for cross-examination was also stated at a mention of the proceeding on 8 November 2017, but on 20 November 2017 Mr Bolton did not attend the hearing and was not available to be cross-examined. 5 The explanation given by Mr Bolton's solicitor for Mr Bolton's unavailability was unsatisfactory and revealed conduct on Mr Hagar's part which fell below the appropriate standard of professional conduct for a practitioner in this Court. Mr Bolton's solicitor incorrectly stated in a sworn affidavit on 15 November 2017 that he had not been advised before 8 November 2017 that the Commissioner had wished to cross-examine Mr Bolton. In the affidavit Mr Hager said in paragraph [4]: On 8 November 2017, the ATO wrote to me a letter (copied to the Court) and advised that it requires the applicant to be available on 20 November 2017 for cross examination. At no time prior to 8 November 2017 had the ATO advised me that it wished to cross examine the applicant. The statement in the last sentence was plainly incorrect and contrary to the express notice which Mr Hager had been given when he attended Court on behalf of Mr Bolton on 19 September 2017. His failure to have made a note of what he was told was both inexplicable and unacceptable. At the case management hearing in this Court on 19 September 2017 Mr Hager was given a hearing date for the application commenced by him on behalf of Mr Bolton. Mr Hager was specifically put on notice on 19 September 2017 that the attendance of Mr Bolton would be required for cross-examination at the hearing on 20 November 2017 and Mr Hager gave no evidence in his explanation to the Court of any attempt whatsoever to secure the attendance of Mr Bolton for the hearing even if it be assumed, improbable as it may seem, that Mr Hager forgot the express statement by counsel for the Commissioner on 19 September 2017 that Mr Bolton would be required for cross-examination. Mr Hager, indeed, gave no evidence of having made any diligent inquiries, at any stage, about his client's availability to be cross-examined on his affidavit before he obtained a hearing date. Much the same can be said about the basis upon which Mr Hager was given dates to comply with other directions which contemplated that Mr Bolton file other affidavits by 16 October 2017. There was no evidence of Mr Hager having put in place any arrangement at any stage to ensure that he, and his client, could comply with orders that affidavits be filed by 16 October 2017. Mr Hager's only explanation was that at some unspecified date after 19 September 2017, junior counsel, who had previously been retained to act for Mr Bolton in the proceeding, had ceased to be available for the hearing on 20 November 2017 and that Mr Bolton had, for some unexplained reason, not put Mr Hager in funds. There had previously been, however, no reason for Mr Hager to have assumed before seeking a hearing date that Mr Bolton would not have been required for cross-examination on his affidavit at the hearing at which the affidavit would be relied upon. A diligent and competent practitioner would, at very least, have discussed with his client the possibility that he might be required for cross-examination on an affidavit and, therefore, to have obtained instructions about the client's availability on any date sought from, or given by, the Court for the hearing of the proceeding. Mr Hager gave no evidence of any such discussions or of any attempts to obtain such instructions. A diligent practitioner would also not have made a bold assertion in a sworn affidavit to a court of not having been put on notice that his client would be required for cross-examination without checking the transcript or having made other inquiries. 6 The adjournment sought on 20 November 2017 was said to be needed for a relatively short period until after 1 December 2017. Adjournments for short periods may seem reasonable if all other things were equal, but they are, however, often difficult to accommodate in cases managed by judges with a docket of other cases where other matters have been fixed to be heard on the dates following those given to the parties seeking an apparently short adjournment. It will often be the case that what may appear to be a relatively reasonable request for a short adjournment would necessarily cause a proceeding to be adjourned for a much longer period without causing inconvenience and disruption to other matters fixed for hearing by a judge in his or her docket. In this case, however, the basis upon which Mr Hager had instructions for an adjournment until after 1 December 2017 gave no confidence that an adjournment to that time, if it were otherwise able to be accommodated, would result in Mr Bolton's presence for cross-examination. Communications between Mr Bolton and Mr Hager had been taking place by occasional email and text messages in circumstances which gave no confidence that Mr Hager's instructions were well-founded. Mr Bolton appeared to be somewhere in South America and was thought by Mr Hager to be returning to Australia after around 22 November 2017, but Mr Hager's basis for that belief was no more than Mr Hager's imprecise recollection of possibly a text message, or possibly an email, neither of which was produced in response to a formal call for production. 7 Parties do not have unfettered rights to an adjournment: see AON Risk Services Australia Ltd v Australian National University (2009) 239 CLR 173. Mr Bolton had sought and had been given a hearing date for his application for an extension of time and it is in the public interest for hearing dates to be maintained unless the interests of justice require otherwise. The explanation for his absence was unsatisfactory, unconvincing and did not outweigh the public interest in maintaining hearing dates and in avoiding unnecessary costs and inconvenience to the other parties and to other litigants. For those reasons, the adjournment was not granted and the proceeding commenced to be heard. 8 Mr Bolton's application for an extension of time was, as previously mentioned, accompanied by an affidavit and a draft application dated July 2017. Mr Bolton's unavailability for cross-examination meant that the affidavit could not be used unless compliance with r 29.09(3) was dispensed with pursuant to r 1.34 of the Federal Court Rules 2011 (Cth). The draft application dated July 2017 was, for its part, sought to be substituted by an amended draft application in November 2017 which sought to add a substantial ground of review which was not found in the draft application of July 2017. 9 Rule 29.09(3) provides that a person's affidavit "may not be used" if the person making an affidavit fails to attend for cross-examination after notice was given requiring the person to attend for cross-examination. Rule 1.34, however, permits the Court to dispense with compliance with any of the rules where justice requires: see also Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146; Canberra Residential Development Pty Ltd v Brendas [2010] FCA 90 at [10]. Senior counsel for Mr Bolton sought to rely upon the affidavit of Mr Bolton and sought dispensation from compliance with r 29.09. He correctly conceded that there had been a failure to comply with r 29.09 but submitted that it was appropriate to dispense with compliance. The explanation given for the failure to comply with r 29.09 was, for the reasons given above in rejecting the application for adjournment, unconvincing and unsatisfactory. However, the bulk of the affidavit was uncontentious and procedural, and the Commissioner, correctly, did not press a submission of any serious prejudice in not being able to cross-examine Mr Bolton, although there was some prejudice to the Commissioner in not being able to do so. Mr Bolton, for his part, might also have been prejudiced to some extent by his reliance upon an affidavit containing statements which were contradicted by material relied upon by the Commissioner and which Mr Bolton was not able to comment upon or to explain, as would ordinarily occur if the material contradicting his statements were put to him in cross-examination. Mr Bolton's affidavit contained, for example, express statements that he was not aware that ASI had been deregistered prior to the decision of the Tribunal and that he had not been informed that it had been re-registered, but those assertions were contradicted by, and seemed unlikely from, the evidence filed by the Commissioner of correspondence sent to Mr Bolton by ASIC. At [14] of the affidavit Mr Bolton said that he was not aware that ASI had been deregistered until he attempted to appeal the decision of the Tribunal. That evidence, however, was inconsistent with the facts and inferences in the affidavits and exhibits of Mr Sadhu who, in particular, tendered the correspondence from ASIC to Mr Bolton. On 12 September 2013 ASIC had sent two letters, in the same terms, of notice of intention to deregister ASI. One letter was sent to ASI at an address in Queen Street, Melbourne, and the other to Mr Bolton at an address in St Kilda. On 17 November 2013 ASIC sent another letter to Mr Bolton informing him that ASI had been deregistered on 17 November 2013. 10 Section 160 of the Evidence Act 1995 (Cth) creates a presumption that a postal article sent by prepaid post addressed to a person at a specified address in Australia was received at that address on the fourth working day after having been posted. The section provides: Postal articles (1) It is presumed (unless evidence sufficient to raise doubt about the presumption is adduced) that a postal article sent by prepaid post addressed to a person at a specified address in Australia or in an external Territory was received at that address on the fourth working day after having been posted. (2) This section does not apply if: (a) the proceeding relates to a contract; and (b) all the parties to the proceeding are parties to the contract; and (c) subsection (1) is inconsistent with a term of the contract. (3) In this section: "working day" means a day that is not: (a) a Saturday or a Sunday; or (b) a public holiday or a bank holiday in the place to which the postal article was addressed. Note: Section 182 gives this section a wider application in relation to postal articles sent by a Commonwealth agency. Senior counsel for Mr Bolton submitted that the presumption created by the section was rebutted by sufficient evidence to raise doubt about the presumption. That evidence was said to be what Mr Bolton had said in paragraphs [14] and [17] of his affidavit and the evidence of Mr Hager in his affidavit. At paragraphs [14] and [17] Mr Bolton said: 14. I did not ask that ASIC deregister the Second Respondent. Further, I was not aware that the Second Respondent was deregistered until I attempted to cause the Third Respondent's lawyers, Mills Oakley, to appeal the Decision in late 2013 or early 2014. […] 17. I was not informed by ASIC that the Second Respondent had been reregistered. As the sole director of the Second Respondent, I would have expected to have been informed of such an action. I understand that the First Respondent requested that ASIC reinstate the Second Defendant. The reference to the second respondent in these paragraphs was to ASI but that to the third respondent in [14] would appear to be a typographical error and as intended to refer also to ASI. Mr Hager also swore an affidavit dealing with those matters under a heading that Mr Bolton had not received ASIC's correspondence. Paragraphs [18] and [19] of Mr Hager's affidavit of 15 November 2017 deposed as follows: The applicant did not receive ASIC's correspondence 18. I refer to paragraph 5(b) of Mr Sadhu's affidavit of 9 October 2017 in which Mr Sadhu deposes that the applicant was sent a letter from ASIC dated 12 September 2013 in relation to Australian Style Investments Pty Ltd, the former trustee of the Australian Style Investments Unit Trust. At 'MS-2' Mr Sadhu exhibits a copy of this letter to his affidavit of 9 October 2017 19. I am informed by the applicant and believe that he did not receive a copy of the 12 September 2013 letter referred to in and exhibited to Mr Sadhu's affidavit of 9 October 2017. It is clear from the materials that Mr Hager was involved in the preparation both of his affidavit and that of Mr Bolton. Mr Bolton's application and affidavit had been filed on his behalf by Nick Stretch Legal but the application was stated to have been prepared on his behalf by "Vaughan Hager" with an email address bearing Mr Hager's name. Mr Hager's subsequent affidavit was filed on behalf of Mr Bolton by Keypoint Law but was sworn by Vaughan Hager, who was identified as the person having prepared Mr Bolton's application the previous July. 11 It emerged in cross-examination of Mr Hager that he had no instructions from Mr Bolton (albeit hearsay) other than, at most, of a failure to have received ASIC's letters of 12 September 2013. Significantly, however, Mr Hager had said nothing in his affidavit about any instructions from Mr Bolton about not having received the letter dated 17 November 2013 informing Mr Bolton that ASI had been deregistered. In response specifically to a question to Mr Hager that Mr Bolton had not informed Mr Hager that Mr Bolton "had not received the 17 November 2013 letter" Mr Hager said "[n]ot specifically, I don't believe, no". 12 The assertion in those circumstances by Mr Bolton of not being aware of ASI having been deregistered is not evidence sufficient to raise a doubt about the presumption otherwise created by s 160 of the Evidence Act 1995 (Cth). The limited, and hearsay, evidence of Mr Hager of having been told by Mr Bolton that he did not receive the notifications of 12 September 2013 was weak and unreliable. Mr Hager at first thought the matter may have been discussed by text message but he was subsequently unsure whether it may have been by email and, in any event, nothing was produced when the communication in whatever form it existed was formally called for production. The evidence of Mr Bolton was at best general, self-serving and unconvincing. The evidence of Mr Hager was similarly not specific, unconvincing and, in any event, did not rebut or cause any doubt about Mr Bolton's receipt of the letter of 17 November 2013 in circumstances in which it might be thought that a diligent practitioner would have sought instructions clearly and unequivocally about each and every item of correspondence which, by that stage, had been put in evidence for the Commissioner in the proceeding. The presumption flowing from the letters from ASIC are therefore not brought into doubt. 13 The draft application for judicial review as filed with the application dated 19 July 2017 had, as the only substantial ground of review of the Tribunal's decision, that ASI had ceased to exist when the decision was handed down on 29 November 2013. ASI had been deregistered by ASIC on 17 November 2013 and had not been reinstated until 5 March 2014. The Commissioner had made assessments on 14 May 2010 which ASI had sought to have reviewed by the Tribunal on 15 October 2010, and on 1 June 2011 a creditor's statutory demand for payment of the debt had been served upon ASI. In September 2011 winding up proceedings against ASI had been commenced. On 4 October 2011 an application was made to the Tribunal for review of the Commissioner's assessment and the winding up proceedings were adjourned a number of times to allow the completion of the review by the Tribunal. A hearing was held on 4 February 2013 but on 17 November 2013, before the Tribunal's decision was made, ASI was deregistered by ASIC pursuant to s 601AB of the Corporations Act 2001 (Cth). ASI was reinstated on 5 March 2014 pursuant to s 601AH but on 29 November 2013, when the Tribunal's decision was made, ASI was not legally in existence. The draft notice first filed for Mr Bolton in the application had as the only ground that the decision of the Tribunal should not have been made because ASI did not exist on the day the decision was made. The draft notice filed and served on 15 November 2017 added an entirely new ground, namely, that the Tribunal's decision was wrong in concluding that the supply made by ASI of proxy voting rights pursuant to a deed dated 8 April 2009 with TJ was not a "financial supply" within the meaning of s 195-1 of the A New Tax System (Goods and Services Tax) Act 1999 (Cth) and Division 40 of the A New Tax System (Goods and Services Tax) Regulations 1999 (Cth). 14 In Hamden v Secretary, Department of Human Services (2013) 59 AAR 108 Besanko J summarised the factors to which the Court should have regard in determining whether to extend the time under s 11 of the Judicial Review Act for the making of an application for review at [35]-[36]: 35. The factors the Court takes into consideration in deciding whether to extend the time limit under s 11 of the ADJR Act are well established. Relevant to this case I think they are as follows: 1. The length of the delay; 2. The explanation for the delay; 3. The prejudice to the applicant if an extension of time is not granted; 4. The prejudice to the respondent and any third parties if an extension of time is granted; 5. The nature of the decision and, in that context, relevant public interest considerations including the need for finality in litigation; and 6. The merits of the substantive application. (Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349 per Wilcox J). 36. This Court has said in the context of the time limit under the Federal Court Rules 1979 (Cth) O 52 r 15(2)) that something very persuasive will be required to justify a grant of an extension of time after, for example, a year: Jess v Scott (1986) 12 FCR 187 at 195. McHugh J made a similar observation in the context of the High Court's jurisdiction to issue prerogative writs: Re Commonwealth of Australia; Ex parte Marks (2000) 75 ALJR 470 at 474 [16]. It is proper to take into account the merits of an applicant's substantive application in considering whether to extend time, and the Court will not grant an extension of time where an applicant has no arguable case for relief: Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349 per Wilcox J; Re Commonwealth of Australia; Ex parte Marks (2000) 75 ALJR 470 at 474 [17]; WAJU v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCA 150 at [18] per Moore J. In considering these factors it is important to bear in mind that they are not exhaustive and that any consideration of the merits of the case arises in the context of an interlocutory application: see Mentink v Minister for Home Affairs [2013] FCAFC 113, [35]-[39]. 15 The significance of each of these factors will vary with the circumstances of each case. In the present case no explanation for the delay in making the amendment sought on 15 November 2017 was offered. The proposed new ground was raised for the first time on 15 November 2017, being less than four business days before the hearing of Mr Bolton's application for an extension of time on 20 November 2017. The decision Mr Bolton sought to impugn had been made nearly four years previously and the current application for an extension of time has been on foot for almost four months. There have been two scheduling orders made in the proceeding and in neither case was provision made for the application to be amended as was proposed on 15 November 2017 or at all. 16 The written submissions for Mr Bolton described the explanation for delay in making the application on 25 July 2017 in general, but also unconvincing, terms. At [27] of the written submissions for Mr Bolton it was said: As to the length of, and explanation for, the delay in seeking judicial review, apart from the fact, that is submitted to be decisive, that the application probably cannot be brought until the orders sought by the Commissioner are made, Mr Bolton deposes that he was unable to appeal the Decision on account of not being a director of the Company and the Company not being in existence during the allotted time to appeal the Decision - it having been published on 29 November 2013 and the Company not being reinstated until 5 March 2014. Further, it was not until July of this year that Mr Bolton became aware that he had standing, personally, to seek review of the Decision as a 'person aggrieved'. Mr Bolton further deposes that the significant financial strain he suffered and his inability to fund investigation of the ASIC Banning Order, the circumstances of the Decision and his standing to seek review of it, also contributed to his delay. It was not until Mr Bolton obtained additional funding that he was able to bring this application. (Emphasis as in original) (Footnotes omitted). Each of these reasons is unconvincing as an explanation. The first of them would, at most, provide an explanation until 5 March 2014 but fails to explain why Mr Bolton, in his personal capacity as a person aggrieved, could not have sought judicial review of the decision when it was made. Furthermore, Mr Bolton's generalised statements of an inability to have ASI lodge an appeal were not supported by evidence of any prior attempt or desire to have done so. That he may only have become aware in July of this year of having standing, personally, to seek review of the decision as a person aggrieved does not explain what, if any, steps he had sought to take on his own behalf, or on behalf of ASI, at any time since the decision was made. Broad statements of having significant financial strain that materially delayed his ability to review the Disqualification Order are too generalised and self-serving to provide a basis for the Court to find an explanation sufficient to grant an extension. 17 The competing prejudice to the parties in the present case also weighs against the grant of the extension of time. It was submitted for Mr Bolton that he "merely" sought to engage his rights under the Judicial Review Act "at a time later than contemplated" by the Act. However, the time periods for the making of applications are neither to be ignored nor to be treated as suggestions to be adopted if convenient. Nor, in this case, was the prejudice suffered by Mr Bolton reliably to be seen as caused from a failure to grant an extension of time. Mr Bolton's prejudice may, rather, be seen to flow from his inactivity to seek to set aside the decision until learning of a new avenue that had not previously been explored. As against those factors there was also to be weighed the public interest in the finality of litigation and the diligent prosecution of legal rights. 18 A consideration of the merits of the case does not outweigh the other factors against the granting of the extension sought by Mr Bolton. Considering the merits of the substantive application is, as was observed in Mentink, something to be undertaken with caution. The legal question sought to be raised by the amended version of the draft application of 17 November 2017 seeks to challenge the conclusion reached by the Tribunal at [110] that the interest provided by ASI was not a "property interest" in or under the capital of the trusts or rights to a benefit produced by the trust in the sense described by the majority in Federal Commissioner of Taxation v American Express Wholesale Currency Services Pty Ltd (2010) 187 FCR 398. It is undesirable in the present circumstances to express a view about the construction of the relevant provisions and of their application to a particular instrument by the Tribunal. The alleged error, if it be an error, in this case would in the final analysis be to the application of the relevant provision to a particular instrument entered into between the parties to the instrument. The submissions for Mr Bolton about the Tribunal's construction of the relevant provisions, and their application to the particular instrument, did not show either the construction or the application, in the context of this case, to be so clearly wrong or doubtful as to outweigh the other factors weighing against the application to grant an extension of time. 19 It becomes unnecessary to consider the interlocutory application brought by the Commissioner for a declaration under either s 601AH(3)(c) or s 601AH(3)(d), declaring the decision of the Tribunal made on 29 November 2013 to be valid during the period, in effect, when ASI was deregistered. The parties were agreed that such an order could, and should, be made but they disagreed about the form in which such an order was to be made in the present circumstances. The decision not to grant an extension of time makes it unnecessary, and undesirable, to make the order sought in either form sought by the parties. Furthermore, there are no findings of fact that need to be made in the event that this application were the subject of any further appeal. 20 Accordingly, the application for an extension of time in which to make an application for judicial review will be dismissed with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Pagone.