Caporale v Commissioner of Taxation [2012] FCA 86 | Case summary

Federal Court of Australia|2012-02-17|Before: Deane J, Robertson J

Introduction 1 This is an appeal from the Administrative Appeals Tribunal ("the Tribunal") which, on 2 August 2011, affirmed the Commissioner's objection decisions dated 24 December 2003 in respect of the years ended 30 June 1996 to 30 June 2000. 2 The appeal is brought under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) and is therefore on and limited to a question of law. 3 The substance of the matters raised in the notice of appeal is that the Tribunal erred in law by denying procedural fairness to the applicants in refusing their solicitor's application for an adjournment of the hearing on 2 August 2011. Having refused the adjournment, the Tribunal decided that the applicants had failed to discharge their burden of proof under s 14ZZK of the Taxation Administration Act 1953 (Cth) (the Administration Act) and affirmed the Commissioner's objection decisions. 4 The respondent Commissioner accepted that the appeal fell within s 44 of the AAT Act. 5 Section 39 of the AAT Act provides that, subject to ss 35, 36 and 36B, the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case: see Sullivan v Department of Transport (1978) 20 ALR 323 at 342, per Deane J. 6 The evidence before the Court was a folder of directions, letters and emails which were said to have been before the Tribunal when the Senior Member made his decision, and transcript of the hearings before the Tribunal on 31 May, 1 June and 2 August 2011. No affidavit evidence was before me.

Consideration 42 There is no doubt that the Tribunal is bound to afford procedural fairness to those appearing before it. 43 There is also no doubt that a failure to accede to a reasonable request for an adjournment can constitute procedural unfairness. In Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [40], Gaudron and Gummow JJ said: [40] Procedural fairness, which is one aspect of the rules of natural justice, requires that a person who may be affected by a decision be informed of the case against him or her and that he or she be given an opportunity to answer it. The opportunity to answer must be a reasonable opportunity. Thus, a failure to accede to a reasonable request for an adjournment can constitute procedural unfairness. (citations omitted) 44 The Australian cases their Honours referred to in relation to the last proposition included Sullivan v Department of Transport (above) at 343, where Deane J said: A refusal to grant an adjournment can constitute a failure to give a party to proceedings the opportunity of adequately presenting his case. . . . In this regard, however, it is important to remember that the relevant duty of the Tribunal is to ensure that a party is given a reasonable opportunity to present his case. Neither the Act nor the common law imposes upon the Tribunal the impossible task of ensuring that a party takes the best advantage of the opportunity to which he is entitled. (original emphasis) 45 More recently, in Kenso Marketing (M) SDN BHD v Chief Executive Officer of Customs [2011] FCAFC 26, Kenso submitted that the Tribunal erred by denying procedural fairness to it when the Tribunal refused to require the production of documents and when it disallowed the use of documents disclosed by another party when cross-examining that party's witness. The Full Court said, at [45]: Section 39 of the AAT Act requires that a party be given a "reasonable opportunity to present his or her case". It is well settled by authority that s 39 does not require the Tribunal to ensure that "a party takes the best advantage of the opportunity to which he [or she] is entitled." (Sullivan v Dept of Transport (1978) 20 ALR 323 at 343; Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at 611; De Simone v Commissioner of Taxation (2009) 51 AAR 161; (2009) 77 ATR 936; [2009] FCAFC 181 at [15]-[18]). The Full Court added, at [48], As the procedural history which we have set out shows, Kenso had ample opportunity to prepare and present its case. Any deficit in that case did not result from a denial of procedural fairness, but from the failure by Kenso and its advisers over the months before the Tribunal hearing to comply with directions, the propriety of which they never disputed even as they failed to obey them. The authorities were collected in Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111 at [51]. 46 It was common ground before me that the task of the Court was to review the material which was before the Tribunal and to assess whether or not there was a denial of procedural fairness. The ultimate issue, in the circumstances of this case, was whether the Tribunal had given a reasonable opportunity to the applicants to present their case. 47 In Ali v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1415; (2005) 41 AAR 410 Lindgren J was considering an appeal from a decision of the Administrative Appeals Tribunal on the ground that the Tribunal's refusal to grant Mr Ali's application for an adjournment amounted to a failure to accord procedural fairness. His Honour said at [27] that "[u]ltimately each complaint of a failure to accord procedural fairness by reason of the refusal of an adjournment turns on its own facts. Whether an adjournment should be granted is a matter within the discretion of the trial Judge (or Tribunal), to be resolved according to the overall requirements of justice in the particular circumstances". 48 Lindgren J went on to say, at [29], that it had been recognised in the authorities that a decision on an adjournment application may involve: • the assessment of competing claims by litigants in other cases awaiting hearing; • knowledge of the working of the listing system of the particular court or tribunal; and • awareness of the importance to the proper working of that system of adherence to dates fixed for hearings. 49 Beyond what can be seen from the AAT Act and the Tribunal's Listing and Adjournment Practice Direction to which the Tribunal referred, this Court is not in a position to assess the matters enumerated by Lindgren J with any accuracy. Put differently, the Tribunal has a much keener appreciation of those matters than does the Court. It follows that the evaluation by the Court of the Tribunal's decision must have regard to these differences. 50 As will be seen, the applicants' appeal turned in large part on some aspects of the Tribunal's fact-finding. Here again, at least in the present case, the Court is at a disadvantage. The major complaint made by the applicants was in relation to the Tribunal's rejection of the submission that Ms Caporale had misunderstood the relevant direction of the Tribunal. Part of the Tribunal's evaluation of that submission must have involved, at least implicitly, the Tribunal's appreciation of Ms Caporale's level of understanding in the course of the hearings in which she had represented the applicants. I do not share that advantage. Ms Caporale did not give evidence before me. 51 This leads to the question of the possible bases on which the Court should review the Tribunal's fact finding. Expressed shortly, where there is no evidence tendered in the Court which was not before the Tribunal, the possibilities include: (i) the Court should find the facts for itself, allowing for any position of advantage of the Tribunal in respect of particular facts; (ii) the Court should ask only whether a finding of fact was open to the Tribunal; (iii) the Court should examine only whether there was any evidence to support a finding of fact or otherwise examine the finding for extreme irrationality or illogicality. 52 In the view I take of the material before me I do not have to resolve the question of which basis of review is applicable. I shall apply the basis most favourable to the applicants which is (i) above. 53 In their submissions, the applicants accepted Ms Caporale did not prepare adequately for the hearing listed for 31 May to 1 June 2011; she did not file evidence or arguments capable of proving the assessments were incorrect. Senior Member Frost invited the applicants to attend in person and give oral evidence, which they did. Senior Member Frost decided to adjourn the hearing, make directions for the applicants to file proper material addressing the real issues, and then to list the case for resumed hearing. 54 The applicants also accepted in their submissions that Ms Caporale did not comply fully with these directions. 55 Before me, the applicants submitted certain matters "in mitigation" to displace an impression that Ms Caporale did not take the Tribunal's directions seriously, or was stalling for time. The applicants, in their submissions, accepted that on 11 March 2011 Ms Caporale filed a hearing certificate notifying her readiness for hearing but, they submitted, "properly advised, she would not have done so as she was not ready." This was not a matter put to the Tribunal or the subject of evidence before me. 56 The submissions also made reference to the respondent Commissioner's summons to produce documents but that matter is of little present relevance. In fact the summons to produce documents was not called on and so much was indicated in the letter from the respondent Commissioner to the Senior Member's Associate dated 25 May 2011. It was common ground before me that a copy of the respondent Commissioner 's letter had also been sent to Ms Caporale at or about that time. 57 It was put on behalf of the applicants that the Tribunal had implicitly made an adverse finding on the reasonableness and credibility of Ms Caporale and thus taken that matter into account as an indication of the unreasonableness of the application for vacation of the hearing date. 58 In my view however this material was recited as part of the history of the matter and it did not found any conclusion about Ms Caporale's reasonableness or credibility. The fact was that Ms Caporale, on behalf of the applicants, had notified their readiness for a final hearing but had then sought to have those hearing dates vacated by reason of the respondent Commissioner's summons to produce documents. 59 The applicants in their submissions accepted the account of events at the hearing on 31 May and 1 June 2011 subject to one point which centred on the question of whether Ms Caporale knew on 14 March 2011, when the Tribunal date was taken, that the bankruptcy matter was already listed on 31 May 2011 and the inference, so it was submitted, that the Tribunal found that Ms Caporale was reckless. Attention was drawn to an email dated 24 May 2011 at 4.59 pm from Ms Caporale to the Tribunal and to the respondent Commissioner to the effect that she received confirmation "yesterday" that she had to appear before the Federal Magistrates Court in relation to the bankruptcy notice the respondent Commissioner had issued on 31 May 2011. 60 As I understand the Tribunal's reasons, the inference was not as submitted on behalf of the applicants. Rather than the inference being that Ms Caporale knew on 14 March 2011, when the Tribunal hearing date was taken, that the bankruptcy matter was already listed on 31 May 2011, in my view the inference drawn by the Tribunal was that Ms Caporale took the return date of the bankruptcy matter knowing that that date, 31 May 2011, was the date on which her parents' application had been set down for final hearing in the Tribunal. 61 However, this matter seems to me to be of little significance as there is no indication that the appearance in the Federal Magistrates Court required the vacation of the hearing dates. Further, there was a letter dated 25 May 2011 from the respondent Commissioner in response to Ms Caporale's email dated 24 May 2011 stating that the respondent Commissioner would agree to the Federal Magistrates Court proceedings being stood over for two weeks by consent and to mention the matter in the Federal Magistrates Court on behalf of the applicants. An email from the Tribunal drew Ms Caporale's attention to that agreement and proposal. The respondent Commissioner also pointed out in his letter dated 25 May 2011 that it was his understanding that the date of 31 May 2011 was specifically sought by the applicant's representative at the time of filing the application on 24 May 2011 when the applicants' representative was fully aware that such a return date would conflict with the date set down for the commencement of the Tribunal proceedings. 62 I do not understand the Tribunal to have been implying that Ms Caporale was reckless. The Tribunal recited the history as consistent with the applicants' overall approach which indicated that they had continually failed to confront what they needed to do to succeed in their application to the Tribunal. 63 Next it was submitted in the applicants' submissions that Ms Caporale misunderstood the direction made on 3 June 2011. I accept that Ms Caporale sent an email on 15 July 2011 at 5.45 pm requesting an extension of time to finalise the copying, to collect the documents in the order required and to summarise the figures for each of the years 1996 to 2000 inclusive. 64 That application for an adjournment was refused on 26 July 2011 after it had been made clear by Ms Caporale by email dated the 25 July 2011 that the applicants were seeking to extend the hearing time for six weeks from 2 August 2011 to 13 September 2011. That email at 2.53 pm on 25 July 2011 said that the photocopying should be completed "by the end of the week". There is then reference to compiling "one set in the (sic) order of all documents and mark each as page numbers so [I] can then reference the page numbers into the spreadsheets and summaries". 65 It is correct to say that the Tribunal rejected the claim as to a misunderstanding but on the basis that the direction itself was clear, in requiring "a calculation of the taxable income of the partnership, supported by all relevant supporting source documents and 'summary' work sheets (all of which must also be provided) in relation to the 1996 income year (that is 1 July 1995 - 30 June 1996)". Moreover, the Tribunal said, the direction was consistent with what it had indicated to Ms Caporale on the second day of the hearing, on 1 June 2011 (see above). 66 However, contrary to the applicants' submissions, I do not accept that this was a finding adverse to the honesty of Ms Caporale or that that adverse finding "obviously played a crucial role in the decision to refuse any adjournment". As to the former, in my view the Tribunal was referring to whether there was any objective basis for such a misunderstanding. There was no express reference to Ms Caporale's honesty and I would not infer that that was intended. Ms Caporale did not give evidence. As to the latter, it was the fact that the hearing could not proceed because the direction had not been complied with which was the important factor. 67 Part of this contention was that the submission made by Mr Papadopoulos as to Ms Caporale's misunderstanding tallied with the terms of Ms Caporale's email of 25 July 2011; the Tribunal had not referred in its reasons to that email; and the Court should conclude that there was a genuine misunderstanding. 68 In the alternative to contending that the Tribunal had found Ms Caporale to be dishonest, the applicants contended that if the Tribunal misunderstood the fact of Ms Caporale's alleged misunderstanding then the validity of the Tribunal's rejection of the application was undermined: because that error in fact finding preceded the exercise of the Tribunal's discretion and because the errors were material the Court should consider for itself the correct exercise of the discretion on the true facts. 69 As I have said, I do not construe the Tribunal's reasons as involving any finding of dishonesty. A submission of a misunderstanding was made by Mr Papadopoulos on 2 August 2011 once the Tribunal had referred to the terms of the direction of 24 June 2011. Mr Papadopoulos did not in his application for an adjournment refer to the terms of Ms Caporale's email and there was therefore no reason for the Tribunal to refer to it. In addition, the Tribunal's reasons were given ex tempore. Further, the email did not in terms refer to or establish that there was a misunderstanding by Ms Caporale. In any event I do not see why the Tribunal should be required to take as fact the contents of an email sent to it. 70 For the same reasons I also reject the alternative submission, that the Tribunal, although not finding dishonesty, misunderstood the fact of Ms Caporale's misunderstanding and thus erred in its fact-finding in that respect. 71 In short, there was an unsupported "explanation" of misunderstanding and I see no error in the Tribunal been unpersuaded by it. 72 It was conceded before me by the applicants that their conduct of the case up to 2 August 2011 was unacceptable but it was put that the Tribunal was wrong to refuse or erred in law in refusing the adjournment application in circumstances where provided that Mr Papadopoulos was given adequate time there was a reasonable prospect that the matter could be brought forward thereafter. 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. 74 The applicants' submissions proceeded by reference to the position of Ms Caporale or indeed Mr Papadopoulos. In my view this is not the correct perspective. The issue is whether the applicants were given a reasonable opportunity to present their case. 75 Further I do not accept that the Tribunal overlooked the fact that this conduct was not by the applicants but by their representative Ms Caporale. That is not how I read the concluding paragraphs of the Tribunal's reasons. 76 I also do not accept that the Tribunal had only to weigh the prejudice suffered by the applicants against that suffered by the respondent Commissioner in the sense that because the tax debt remained fully enforceable while the Tribunal review was pending the respondent suffered no prejudice. For many years the conduct of litigation has not been merely a matter for the parties and their interests: see for example Sali v SPC Ltd (1993) 67 ALJR 841 at 849 cited with approval in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon) at [93]-[95]. 77 The question is whether the applicants were given a reasonable opportunity to present their case. The relevant prejudice to the respondent was not limited to whether the tax debt was or was not enforceable but included the matters referred to by Lindgren J in Ali and also included the different perspective required by Aon. In terms of its overall decision, the Tribunal exercised its discretion in light of the Tribunal's statutory objectives in s 2A of the AAT Act: see Aon at [114]. Section 2A provides that, in carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick. 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. 79 In addition, the Tribunal was offered no timetable for the completion of the hearing. In that respect I also note in the present appeal the following submission by the applicants: It is not now argued that the Member could on 2 August positively have found that, if an adjournment to a further hearing in two weeks had been given full compliance would have occurred by that date. Rather, the Member should have concluded that, with the intervention, now, of a legal practitioner, there was sufficient assurance that after two weeks, there would be, if not full compliance, a reliable indication of how and when full compliance would be achieved, in aiding the case to go forward on a date to be fixed. 80 I do not accept that, in the circumstances, the mere fact that a solicitor appeared at the resumed hearing should have persuaded the Tribunal to grant the further adjournment. As I have said, there was no detail. It was by no means self-evident that the applicants had given timely or full instructions to the solicitor. 81 For these reasons I reject the submission that the Tribunal denied procedural fairness to the applicants when it refused the application made by their solicitor on 2 August 2011 for a further adjournment. I see no error in the Tribunal's fact finding or in its overall decision. 82 Evaluating the material for myself, I would have made the same findings of fact and I also would have refused the adjournment application. 83 I also note the applicants' submission that the decision to dismiss the application on its merits, as opposed to dismissal for procedural non-compliance under s 42A(5) of the AAT Act, was unjustified. The submission continued that the decision to dismiss on the merits made it practically impossible for the applicants to reagitate the correctness of the assessments in the Tribunal or any other forum. 84 Section 42A(5) is in the following terms: (5) If an applicant for a review of a decision fails within a reasonable time: (a) to proceed with the application; or (b) to comply with a direction by the Tribunal in relation to the application; the Tribunal may dismiss the application without proceeding to review the decision. 85 This provision confers a discretion. It was not suggested that it was not open to the Tribunal to act under s 43(1) as a matter of substance. 86 I see no difference for present purposes in the consequences of the Tribunal acting under s 42A(5) rather than under s 43(1). Ultimately, counsel for the applicants accepted that if the applicants did not succeed on the procedural fairness ground they could not succeed on this ground.

Orders 87 I conclude that the Tribunal gave the applicants a reasonable opportunity to present their case. The applicants have not established a denial of procedural fairness. I therefore dismiss the application to this Court with costs. I affirm the decision of the Tribunal. I certify that the preceding eighty seven (87) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Robertson

Caporale v Commissioner of Taxation

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