Taylor v Johnson [1983] HCA 5; (1982-1983) 151 CLR 422

1. In his tax returns for each of the income years from 1995 to 1998 Mr Phillip Bird claimed significant deductions said to represent losses from carrying on a business. The losses claimed were,

•

1995 $11,893

•

1996 $24,131

•

1997 $33,860

•

1998 $26,840

The Commissioner made assessment in each year on the basis of the returns as lodged.

2. In 1999 the Commissioner undertook an audit into the claimed losses and on 23 September 1999 made amended assessments for each of the years disallowing the claimed losses. Mr Bird objected to the amended assessments on 20 March 2000. The objections were disallowed and Mr Bird was notified of the decision to disallow by letter dated 19 April 2000.

3. As that letter explained, Mr Bird had 60 days from the date of service of the objection decision letter to appeal the decision in Federal Court or to seek a review of it in the Tribunal. Mr Bird did not do so. It was not until 9 February 2006 that Mr Bird finally made application for an extension of time within which to lodge an application for a review of the Commissioner's decision.

4. It is that application that I am now dealing with.

5. By virtue of s 29(7) of the Administrative Appeals Tribunal Act 1975 (Cth.) the Tribunal had a discretion to extend the time within which a review of an objection decision may be sought. It is unnecessary for present purposes to undertake any survey of the jurisprudence that deals with the exercise of that discretion. It will suffice for me to note that, as Hill J put it in Brown v FCT (1999) 99 ATC 4,516 at page 4,525:

An extension should be granted where the justice of the case requires.

6. In my view the justice of this case requires me to refuse the application. Two matters, in particular, lead me to that conclusion,

•

I am satisfied, to use the phrase used in some of the cases, that Mr Bird has "rested on his rights" over a very considerable period of time before finally seeking to challenge the objection decision,

•

the prospects of success of the proposed application are such that no further expenditure of public money is warranted.

7. My conclusion in relation to the first matter is drawn from the history of dealings between Mr Bird (and his representatives) and the Commissioner. What follows is the chronology sworn to by Ms Gilligan on behalf of the Commissioner by reference to the records of the Commissioner. It was not challenged or contradicted by Mr Bird.

Interview held with Mrs Bird re audit (letter of authority received).

Audit decision letter issued. Letter passed on to taxpayers accountants.

Mrs Bird telephoned debt area of office to discuss outstanding debt re audit adjustments. Mrs Bird or Mr Bird requested to ring by 22 November re payment of debt in order to defer legal action.

Mrs Bird telephoned debt area - spoke to another officer - advised that deal with office in relation to this matter.

First officer telephoned Mrs Bird and left message requesting Mrs Bird to ring her

Mrs Bird telephoned. Options to pay off debt were discussed. Also discussion re non-lodgment of 1999 return. Mrs Bird to ring again on 30th to advise re finance and payment.

Mrs Bird telephoned and advised re bank appointments. To ring back on 3rd.

Debt officer telephoned Mrs Bird re update. Mrs Bird was advised that office would allow three weeks for finance negotiations.

Mrs Bird telephoned and advised that Bank would respond to request for finance by end of week.

Mrs Bird telephoned and advised that they had received no response from the banks. Possible option being considered by Mr Bird was voluntary redundancy, however uncertain whether the amount would cover outstanding debt.

Debt officer telephoned and message left on answering machine.

Message received from relative of taxpayer advising that taxpayer is on holiday until 27 January.

Debt officer telephoned and message left on answering machine.

Mrs Bird telephoned and left message that she would ring again on the 3rd of 4th.

Mrs Bird telephoned. Mrs Bird was advised that legal action would commence. Mrs Bird requested until 24th to discuss with husband.

Mrs Bird telephoned. Mrs Bird advised that she believed that they would obtain loan from Westpac and would ring back later today.

Mrs Bird telephoned re bailiff attempting to serve summons.

Written confirmation sent to taxpayer that no further legal action will be taking pending finalisation of objections.

Notice of Decision on Objections, with relevant appeal and review rights explained, issued.

Taxpayer telephoned and advised of default judgment obtained. However in view of letter of 5 April, the judgment is to be set aside by consent and 14 days is to be allowed for defence to be lodged. Mrs Bird requesting meeting to discuss objection decision.

Debt officer telephoned and left message on answering machine.

Debt officer telephoned and left message on answering machine.

Mrs Bird telephoned. Mrs Bird advised of review and appeal rights. As 60 days had lapsed, telephone number for AAT given and extension of time explained. Mrs Bird advised that she would probably seek advice of accountant re matter.

Letter sent to taxpayer enclosing order setting aside default judgment. Also advised that office would seek to enter judgment if no defence lodged within 14 days.

Debt officer telephoned and left message that default judgment would be entered on 20th as no defence had been lodged. A return call requested.

Mrs Bird telephoned and advised that she had sent letter dated 30th August to ATO to request a review of objection decision. Letter not received. A copy faxed to office.

Further call received. Mrs Bird was advised that position will not change. Mrs Bird advised of review rights, telephone number of AAT and extension of time applications.

Response to review request issued. Including appeal rights and that the AAT should be telephoned re extension application.

Debt officer telephoned and left message on answering machine. Received call that taxpayer was away on holiday and would be back in a week.

Debt officer telephoned and left message on mobile telephone. Message received from Mrs Bird that she would try and ring on the 30th and they will be home on the 5th of November.

Mrs Bird telephoned. A payment proposal was discussed. Mrs Bird to contact again re proposal by the 12th.

Mrs Bird telephoned and advised that she was still gathering information. Advised that Mr Bird was entering into contact in Hong Kong. Further call to be received next week.

Mrs Bird telephoned requesting Tax Packs for 1999 and 2000 years so as to lodge relevant returns. Response sent.

Telephone message from Mrs Bird. Returns to be sent today, as well as financials. Will telephone on 4th of December.

Debt officer telephoned and left message on answering machine. 2000 return lodged (no 1999 return). Payment proposal and financials not received.

Mrs Bird telephoned and advised that she had been on holidays and would be home on the 1st of February. Will send proposals and financials by 4th of February.

Debt officer telephoned and left messages on mobile telephone and answering machine.

Debt officer advised that she would accept interim arrangement of six (6) months at $5000 per month. Mrs Bird will advise re payment next week.

Debt officer telephoned and left message on answering machine. No payment received and 1999 return remains not lodged.

Payment of $3000 received. Letter advises that $2000 should be received within a week and further $5000 for March to be sent by end of month.

Debt officer telephoned and left message. Mrs Bird telephoned and advised that 1999 return will be prepared in the next few days.

Debt officer telephoned and left message on mobile number and answering machine. Mrs Bird telephoned and advised that $5000 for April and 1999 return in today's mail. Mrs Bird denied knowledge of $5000 March payment to be sent.

Mrs Bird telephoned that further payment being sent. The 1999 return was sent back to the taxpayer by the ATO as no group certificate included. Debt officer has sent statutory declaration to taxpayer.

Trial re damages claim to commence. Contracts re Mr Bird's employment in China to be sent when received.

Debt officer telephoned and left message on answering machine and mobile telephone.

Letter sent to taxpayer re defaulted payment arrangement.

Mrs Bird telephoned and advised that they had received a cheque from China but it had to be returned due to an error. Also a cheque for $5000 is to be sent today. 1999 return has been returned to taxpayer as Mrs Bird is signing declaration rather than the taxpayer Mr Bird.

Mrs Bird telephoned 1999 return had been lodged. Mr Bird expected home from Hong Kong in four weeks.

Austrac search has not shown overseas income being received by Mr Bird. Immigration search states that Mr Bird has not left country since January 2002.

1999 return not processed, as ATO awaiting information requested from taxpayer.

Facsimile message received from Quinn & Scattini stating that they act for Mr Bird and that the bankruptcy notice is relying upon a judgment that had been set aside.

Debt officer telephoned Warren Jiear of Quinn & Scattini and advised that default judgment was entered again on 24 November 2000.

Mrs Bird telephoned and advised that the solicitor had written to the ATO without her knowledge. Mrs Bird advised that the claim matter is still proceeding in Court. Mrs Bird will ring again re payment of the debt.

Warren Jiear of Quinn & Scattini telephoned to advise that the taxpayer wanted to put forward a payment arrangement. Proposal and supporting documents requested to be sent to ATO.

Facsimile message received re payment proposal. $7400 within 24 hours, $2000 per month and refinancing to be considered again.

Payment proposal rejected in letter which is faxed to solicitor.

Mrs Bird telephoned she will be sending the $7500 anyway, plus loan application when available.

Interview held at UMG ATO. Rights of review explained.

Debt officer telephoned the taxpayer's solicitor re re-financing. Solicitor advised that he had not heard from client, although he has been busy with claim trial.

Debt officer telephoned Mrs Bird to ask about loan application. Application not proceeded with as taxpayer currently out of work.

Mrs Bird telephoned and advised that she had visited the UMG ATO office and lodged further objections against the relevant assessments.

Mrs Bird telephoned and advised that she has received response to review request. Mrs Bird advised that she is sending further review request.

Civil claim is still continuing. Loan application to be lodged with St George.

Letter received from Paul Hudson of P M Lee and Co advising that he now acts for Mr Bird. Debt officer telephones Paul Hudson and requests authority.

ATO Complaints officer advised Mrs Bird that there are no outstanding technical matters

Letter sent finalising complaint. The appeal/review rights being explained, including copies of previous notices of decision on objection.

Further complaint re resolution of previous complaint.

ATO Complaints officer advised by Ombudsman office that complaint closed as client did not provide additional information as requested.

ATO Complaints officer telephoned Mrs Bird advising that no meeting is to be held (as it would not achieve anything). The review/appeal process was explained.

ATO Complaints officer telephoned Mrs Bird advising that finalisation letter sent today re complaint. Review rights and extension of time issues explained.

Debt officer telephoned and left message for Mrs Bird to telephone.

Facsimile received from Mrs Bird with some financial detail.

Debt officer telephoned and let message on answering machine.

No response to garnishee letter received. Garnishee notice issued to employer.

Mrs Bird telephoned re garnishee notice and that they have lodged an application in the Administrative Appeals Tribunal.

Letter sent explaining previous decisions and rights of review and extension of time applications.

Debt officer telephoned Mrs Bird and requested financial information before the issue of the garnishee notice can be considered. Information to be faxed by Mrs Bird.

Mrs Bird returned call. Current payslip and interest rate advice (re mortgage payments which appear high) was requested.

Debt officer telephoned Mrs Bird. Discussions involved history of matter. Requested reduction in GIC - to be put in writing. 2001 to 2004 returns to be lodged. Garnishee amount to be reduced.

Garnishee variation sent to employer and taxpayer (also response to withdrawal request).

Call returned and payout figure given. Noted 2001 to 2004 returns remain outstanding. Mrs Bird advises that she will be applying for a loan.

Three telephone calls received from Mrs Bird. Raised issue once again re applying for finance.

Mrs Bird telephoned advising that finance had been obtained. 2001-2004 still yet to be lodged.

Letter received from Craig Cavanagh of Bennett & Philp (letter dated 22 September 2005). Letter sent requesting that judgment obtained be set aside. Letter sent in response.

Mrs Bird telephoned and requested an account balance. Also requested GIC calculations (for claiming of deduction purposes).

8. That chronology makes it plain that Mr Bird has been told time and time again what he needed to do in order to seek a review of the objection decision. I conclude that Mr Bird made a conscious choice not to seek a review at a time more proximate to the objection decision. In these circumstances the Commissioner was entitled to conclude that the matter was not being pursued.

9. The other consideration is the absence of merits in the proposed review. I accept that there is a need for caution in examining the merits of the underlying dispute in an application of this nature but the present case is one where I can be confident that there is no utility in extending time because a review would be bound to fail.

10. To illustrate why that is so, it is necessary to note what is said as to the underlying dispute by Mr Bird. The business, as described in the application for extension,

was the arranging of various shopping vouchers from various suppliers, then compiling the vouchers into a booklet and then selling that booklet through various means ...

It is said that the business was carried on by Mr Bird and, of course, the resulting losses were claimed as a deduction from assessable income in his tax returns.

11. When the matter came before me on 19 May 2006 Ms Gilligan, for the Commissioner, tendered a bundle of documents from the business. Those documents, which include an invoice and various promotional literature for the business, indicate that it is Maanjo Pty Ltd that was carrying on the business. There was nothing in the material that suggested any direct involvement on the part of Mr Bird.

12. The hearing was adjourned to enable Mr Bird to put on any evidence to show that there was a real controversy about the entity running the business, that is, whether it was Mr Bird or the company. Mr Bird subsequently provided a letter dated 2 June 2006. In that letter Mr Bird made reference to advice that he had received from his accountant to trade "as a sole trader rather than through a company". The letter continues,

It was always our intention that this business would eventually be transferred to Maanjo Pty Ltd. For this reason we used the name of Maanjo as a trading name on all our stationary in order to ensure a seamless transition when eventually it did occur.

13. The law of contract in this country[1] operates upon the basis of objective, rather than subjective, considerations. Were it necessary to determine the entity contracting with a customer or a supplier the objective evidence points only to the fact that Maanjo Pty Ltd was the contracting party. It is not to the point that Mr Bird may have thought to the contrary.

14. If, objectively viewed, contracts with customers and suppliers are made with the company Maanjo Pty Ltd and not with Mr Bird it must follow that is was the company and not Mr Bird that was carrying on any business that may be found. I do not, by that, intend it to be thought that I have concluded that the company was, in fact, carrying on business. Rather my conclusion is that on any examination of the issue at a hearing, Mr Bird could not be found to have been carrying on the business.

15. Accordingly, I conclude that Mr Bird has no prospect of success in the proposed application.

16. Mr Bird placed reliance upon the fact that the officers of the Commissioner knew of the involvement of Maanjo Pty Ltd. Even if that were to be the case it seems to me to be irrelevant to the present issue. At best it may mean that there was a further reason at the audit stage for rejecting the claimed deductions. The fact that it was not relied on at that stage does not add to the merit of the case that Mr Bird now seeks to advance.

17. I refuse the application for an extension of time.

I certify that the 17 preceding paragraphs are a true copy of the reasons for the decision herein of Deputy President P E Hack SC.

Signed: ....................Signed.................................................

Leisa Pendle, Associate

Dates of Hearing 19 May 2006, 24 July 2006

Date of Decision 26 July 2006

The Applicant appeared in person

The Respondent was represented by Ms L Gilligan

[1] See e.g. Codelfa Constructions Pty Ltd v State Rail Authority of New South Wales [1982] HCA 24; (1981-1982) 149 CLR 337, 352-3; Taylor v Johnson [1983] HCA 5; (1982-1983) 151 CLR 422, 429.