Caporale v Commissioner of Taxation

Federal Court of Australia|2012-05-30|Before: Robertson J, Katzmann J, Jacobson J

Introduction 1 This is an application for an extension of time to file a notice of appeal against orders made by a judge of the Court (Robertson J) on 17 February 2012. His Honour dismissed an appeal brought by Mr and Mrs Caporale on a question of law under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Tribunal dated 2 August 2011. 2 On that date, the Tribunal affirmed a decision made by the Commissioner on 24 December 2003 in respect of objections made by Mr and Mrs Caporale to assessments of their taxable income for the years ended 30 June 1996 to 30 June 2000. The effect of the Tribunal's decision was to disallow the taxpayers' objections: see Caporale and Commissioner of Taxation [2011] AATA 570. 3 The reason why the Tribunal came to that decision was that, after considering the lengthy history of the proceeding, including the many delays and extensions of time granted to the taxpayers, the Tribunal refused a further adjournment and held that the taxpayers had failed to discharge the burden of proof under s 14ZZK of the Taxation Administration Act 1953 (Cth). 4 The substance of the appeal before the primary judge was that the Tribunal erred in law by denying the Caporales procedural fairness in refusing their application for an adjournment on 2 August 2011. 5 The primary judge rejected the claim of denial of procedural fairness. He saw no error in the Tribunal's fact finding or its overall decision. 6 The application for an extension of time to file a Notice of Appeal was filed on 5 April 2012, some 3 ½ weeks after the time prescribed by Rule 36.03 of the Federal Court Rules 2011. 7 The application for an extension is made under Rule 36.05. That Rule, unlike its predecessor, does not require an applicant to establish "special reasons" but the considerations which previously informed the exercise of the discretion still guide the approach to be taken, although the considerations are now also to be informed by the provisions of s 37M of the Federal Court of Australia Act: see Dunlop v Fishburn (No 3) [2012] FCA 315 at [9] - [11] (Katzmann J). 8 Of particular importance are: An acceptable explanation for the delay. Time limits are not to be ignored and time will not be extended unless it is proper to do so. Prejudice to the respondent is a material factor but the mere absence of prejudice will not justify an extension. The merits of the proposed appeal are a significant consideration.

The AAT decision 9 The AAT decision and the procedural history which culminated in the decision of 2 August 2011 are set out in full detail by the primary judge at [8]ff. 10 It is sufficient to say that the procedural history shows that, from the time when the matter was reactivated in the Tribunal in 2010, there were numerous directions made by the Tribunal with which the applicants failed to comply and numerous extensions of time were granted by the Tribunal. 11 Ultimately, the proceeding came on for hearing on 31 May 2011 before Senior Member Frost. The critical issue before the Tribunal was the amount of the assessable income derived by the partnership business conducted by Mr and Mrs Caporale in running a service station at Gymea and an investment property at Helensburg. 12 Very little progress was made at the hearing on 31 May 2011 but the Tribunal granted an adjournment to the following day to Ms Rosa Caporale, the applicants' daughter, who appeared on their behalf, to do some further work on the matter. 13 On 1 June 2011, Mr Caporale gave evidence and was cross-examined. At the end of that day, the Commissioner submitted that given the state of the evidence, the Tribunal should resolve the dispute in the Commissioner's favour. The primary judge recorded at [28] that, despite the force of this submission the Tribunal considered that in the interests of justice the taxpayers should be granted one further indulgence, 14 The primary judge set out at [28] the relevant portion of the transcript of 1 June in which the Tribunal said that Ms Caporale needed to be able to satisfy the Tribunal that there was an appropriate methodology to establish a satisfactory taxable income figure for the applicants. Senior Member Frost told Ms Caporale to prepare that methodology for the 1996 income tax year only and that no extensions of time would be given and no exceptions made. 15 Directions to give effect to the Tribunal's requirements were made on 3 June 2011 and called for the methodology (which covered years 1996 to 2000) to be provided by 17 June 2011. A methodology was supplied on 21 June 2011 but the Commissioner indicated a number of concerns about it. 16 Senior Member Frost then made a further direction on 24 June 2011 which provided for an appropriate methodology for 1996 to be supplied by 15 July 2011. Importantly this methodology was confined to 1996 and did not extend to the other tax years. 17 About a week before the date on which the hearing was to resume before the Tribunal, Ms Caporale emailed the Tribunal seeking a six week adjournment. The Tribunal refused the adjournment. 18 On 2 August, when the hearing resumed, Mr Papadopoulos, Solicitor, appeared for the applicants and sought an adjournment. The basis of the adjournment was that Ms Caporale misunderstood that she was required to provide a methodology only for 1996. He submitted that Ms Caporale had brought material with her and she needed two weeks to collate and present it. 19 Senior Member Frost rejected the claim that Ms Caporale was under a misunderstanding. He acknowledged that Ms Caporale may have been able to present material but found there was no indication she could present a calculation of the taxable income of the partnership for 1996 as required by the direction. 20 The Tribunal's ultimate finding was at [37] of its reasons which were as follows: In the circumstances, after all the delays, all the extensions of time, and all the excuses, the applicants had failed, despite having been given ample opportunity, to discharge the burden of proof under s 14ZZK of the Administration Act. They had proposed no intelligible basis on which their taxable income for the relevant years might be arrived at, and as a result there was no prospect whatever of a finding that the Commissioner's assessments are excessive. Accordingly I affirmed the objection decisions.

The primary judge's reasons 21 The primary judge discussed the relevant principles and authorities at [42]ff. The effect of what he said was that the Administrative Appeals Tribunal Act requires a party to be given a reasonable opportunity to present his or her case; the Tribunal is not required to ensure that a party takes the best advantage of the opportunity. The authorities to which he referred included the decision of a Full Court in Kenso Marketing (M) SDN BHD v Chief Executive Officer of Customs [2011] FCAFC 26. 22 His Honour applied the most favourable basis on which to review the Tribunal's fact finding. He went on to consider the submissions put to him about the finding that Ms Caporale was under a misunderstanding. His Honour concluded at [71] that, in short, there was an unsupported "explanation" of misunderstanding and he saw no error in the Tribunal's finding. 23 His Honour also said at [73]:- The adjournment application made by Mr Papadopoulos was supported by no persuasive explanation: it contained no detail as to the alleged misunderstanding. There was no material before the Tribunal establishing the time the alleged misunderstanding arose, the basis of it, the objective reasonableness of it, or the consequences of it in terms of the preparation that had been done or the preparation that remained to be done. Similarly, in relation to Mr Papadopoulos' own position, the adjournment application was supported by no detail as to when he was retained, his familiarity with the case or his capacity to progress the matter to an early and final resumption of the adjourned hearing. Thus I reject the submission that, in those circumstances, the Tribunal erred in failing to take into account that there was a new solicitor in the matter on behalf of the applicants. 24 His Honour went on to say that the relevant question is whether the applicants were given a reasonable opportunity to present their case and that the relevant prejudice to be considered is not limited to that of the parties but includes matters of the efficient administration of justice discussed by the High Court in Aon Risk Services Aust Ltd v Australian National University (2009) 239 CLR 175 at [93]ff. 25 See also the statutory objectives stated in the Administrative Appeals Tribunal Act of providing a mechanism for review that is fair, just, economical, informal and fair. His Honour referred to this at [77]. 26 Importantly, his Honour said at [78]: In my view a very significant matter was the generality and vagueness with which the claim of misunderstanding of the direction was put. There was no material advanced in support of it. There was no detail in relation to the claimed misunderstanding or its basis. The application for a further adjournment called for an explanation and an explanation which was persuasive in terms of its detail, its coherence and its basis in fact: see Aon at [5] and [102]-[103]. None of this was forthcoming. 27 His Honour also observed at [81] and [82] that he saw no error in the Tribunal's decision and that, evaluating the material himself, he would have made the same findings and refused the adjournment. 28 His Honour also rejected a submission that the Tribunal was in error in dismissing the application on the merits under s 43(1) of the Administrative Appeals Tribunal Act rather than for procedural non-compliance under s 42A(5).

Consideration 29 When the present application was called on for hearing, Ms Caporale sought to appear on behalf of her parents. A difficulty arose in relation to her application for leave to appear for her mother because Mrs Caporale has been made bankrupt by an order of the Federal Magistrates Court. I therefore refused leave for Ms Caporal to appear on behalf of her mother. 30 Despite the ordinary rules governing a right of appearance in the Court, I granted Ms Caporale leave to appear on her father's behalf (although not without some reservations). 31 Ms Caporale relied on two affidavits sworn by her and one by her father in support of the application. She also relied on an affidavit of an accountant, Mr Cavanagh. 32 The effect of Ms Caporale's explanation for her delay in filing the present application is that her solicitor, Mr Papadopoulous, was unwell and that when she was present in Court with her counsel, Mr Rollinson, on 17 February 2012 to take the judgment, Mr Rollinson did not advise her as to the time limit for filing a notice of appeal. 33 Although Ms Caporale was not cross-examined on this explanation (some of which was given from the bar table), I do not consider that she has provided a satisfactory explanation for the delay. This is because Ms Caporale has considerable experience in the practice and procedures of litigation, having represented her parents on numerous occasions. In my opinion, she must be taken to have known that there was a time limit applicable to her appeal from Robertson J. 34 But even assuming that Ms Caporale had provided a satisfactory explanation, there are other reasons why I would refuse to exercise my discretion in favour of an extension of time. 35 The principal reason why I would refuse an extension is that, in my opinion, there is no error in the reasons for decision of Robertson J. His Honour dealt comprehensively with the application, applied the correct legal principles and took the most favourable view of the approach to a review of the Tribunal's findings of fact. 36 Indeed, as is plain from his Honour's reasons, he considered that the application for the adjournment was supported by no persuasive explanation, that the claim of misunderstanding was vague and lacking in detail. Importantly, his Honour said that he would have made the same findings of fact and would have refused the adjournment on the matters put to the Tribunal. 37 What should also be borne in mind is that the refusal of the adjournment should not be considered in isolation. It came at the end of a long and tortured history. The factual narrative set out by the primary judge demonstrates that the Tribunal went out of its way to provide every possible opportunity to present the case sought to be run by Mr and Mrs Caporale. They were extended far more than a reasonable opportunity to present their case. 38 Ms Caporale sought to attack the reasons of the primary judge by contending that she had prepared the appropriate methodology for the 1996 year on 1 June 2011 and that she had supplied it to the Tribunal. She told me from the bar table that this showed she could have proceeded on 1 June 2011 and moreover that her parents had an arguable case. The rest of it was, according to Mrs Caporale, only a book keeping exercise and, given her circumstances, a few more months to properly prepare it would not have mattered. 39 This explanation is quite inconsistent with the record of what took place on 31 May 2011 and 1 June 2011 and 2 August 2011 as recorded by the primary judge and I reject Mrs Caporale's protestations to the contrary. 40 Ms Caporale also sought to rely on the evidence of her accountant to suggest that all the material required by the Tribunal was now available and that it demonstrates that her parents have an arguable case. The evidence was put forward in support of a submission that Ms Caporale's parents will suffer material prejudice by reason of the refusal of the present application. 41 I reject this submission for two principal reasons. First, the evidence is vague and general and, even if the evidence had been available within the time permitted to the taxpayers, it does not address the finding of the Tribunal that Mr and Mrs Caporale were unable to discharge the burden of proof. 42 Second, the evidence fails to take into account the matters affecting the administration of justice referred to by the High Court in Aon. In particular, the question of prejudice is not limited to the interests of the parties. The effect on the Court and on other parties weighs strongly against the grant of an indulgence to parties who have a long history of non-compliance with orders made for the timely conduct of litigation. 43 In my opinion, Mr and Mrs Caporale have no prospects of success on appeal on either of the grounds suggested by Ms Caporale in her affidavits.

Conclusion 44 The application brought by Mr Caporale must be dismissed. He is to pay the costs of the application. 45 Mrs Caporale's application may well be incompetent by reason of her bankruptcy but even if it is competent, for the reasons set out above it must also be dismissed. No order for costs should be made against her. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jacobson.

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