Engler v Commissioner of Taxation

Federal Court of Australia|1997-10-17|Before: French J, Nicholson J

REASONS FOR JUDGMENT 1 The applicants bring a notice of motion seeking an extension of time to appeal to the Full Court from the orders and judgment of French J given in this matter on 8 March 2002. Alternatively they seek an extension of time to seek leave to appeal to the Full Court from such orders and judgment.

Primary judgement 2 In the orders which he made French J struck out the applicants' application but gave them leave to file an amended application within twenty one days of the determination of proceedings pending in the Administrative Appeals Tribunal ("the AAT") (in which the first applicant is the applicant to that tribunal). He further ordered that any amended application is to be accompanied by a statement of claim which complies with the requirements of the Federal Court Rules. 3 In his reasons French J said that the applicants sue the respondent alleging a multiplicity of wrongdoing by officers of the Australian Taxation Office ("ATO") and asserting the invalidity of various amended assessments issued to them under the Income Tax Assessment Act 1936 (Cth). He said that broad accusations of dishonesty, fraud, conspiracy, collusive and malicious conduct, malfeasance in public office, want of good faith and negligence, among others, had been made. The matter came before him on a motion by the respondent to strike out the application. 4 In the reasons French J traced the history of the proceedings. He then reviewed the applicants' amended application. He set out the "Details of Claim" as appearing in it in twenty one paragraphs. He then stated: "It is sufficient simply to set out these paragraphs to demonstrate that the application cannot stand in its present form. It makes generalised assertions in language which indicates fundamental misunderstandings of the law. The repeated use of the term "estoppel" in the context in which it is used is misconceived. So too is the reference in par 7 of the points of claim invoking the doctrine of res judicata which is applicable to judicial but not administrative decision-making. It is necessary to go beyond the application to find out the essential nature of the applicants' case." 5 In the light of that he then examined the statutory framework relating to the making of assessments and amended assessments and the conduct of audits of taxpayer's affairs. Turning then to the points of claim filed by the applicants he said: "The applicants' points of claim seem to bury their case in a mass of sometimes irrelevant detail. Generally the case is concerned with the propriety and validity of the Commissioner's actions in the conduct of an audit into the taxation affairs of the applicants and in issuing certain amended assessments to them under the ITAA. The points of claim repeatedly refer, in various contexts, to the "legitimate and reasonable expectations of the applicants". This is a term relevant to the requirements of procedural fairness in administrative law. It is repeatedly misapplied in the points of claim as is the term "estopped"." In the course of his review of the points he stated that a number of matters pleaded in one of the paragraphs of the points of claim "do not appear to have any foundation in law". 6 In the course of further review of the points of claim he stated that "a notice of assessment" was issued in respect of 1995 and 1996. The applicants contend that was a finding by him that the document, the status of which they wished to contest, was a notice of assessment at law. I rejected this during the hearing and do so now. His Honour described the document to which the points of claim related, not ruling upon the status of either of them at law. 7 In the course of this examination his Honour also referred to proceedings in the AAT by the second applicant in relation to which he stated: "Mr Gates appealed against the objection decisions to the AAT on 7 April 2000. The partnership separately appealed on the same day. The applicants assert that in order to defraud them and/or the AAT the Commissioner made representations and/or filed documents and/or implied facts and/or did other things which were not true and correct and caused the AAT to make orders in reliance upon them. On or about 16 May 2000, the AAT dismissed the appeals by Mr Gates and the partnership. These dismissal orders were said to have been made because of the fraud of the Commissioner. The fraud was not specified. Like allegations are repeated against the Commissioner and his officers in relation to dealings with the AAT. Claims are also made that the Commissioner and/or his officers were negligent, engaged in fraud, conspired to defraud the applicants, were malicious, and "committed the offence of misfeasance in public office". The applicants contend they suffered loss and damage. All of these matters, it is said, will be the subject of full particulars provided prior to the trial." 8 Turning to the viability of the amended application, French J concluded that on the basis of non-compliance with the rules of the Federal Court alone "the application should be struck out for failing to do what it is required by the Rules of Court to do". He said there were fundamental difficulties which inhibited the rectification of the pleading by suitable amendments. In his view the application appeared to proceed in part upon "a mistaken view of the law as to the power of the Commissioner to extend to subsequent years the scope of an audit examination of a taxpayer's affairs commenced in relation to certain financial years". After examining other paragraphs and aspects of the application he concluded that "as a matter of form the application must be struck out. As a matter of substance … any case to be made by the applicants requires detailed reconsideration." 9 His Honour then concluded: "I will allow the applicants to amend their application and will require them, if they proceed to amend the application, to file, in lieu of the points of claim, a statement of claim which complies with the rules of pleading. I will however direct that any amended application and statement of claim not be filed until the conclusion of the hearing of the AAT appeals. Given the quantum of tax involved there is a risk that this matter which may be resolved in the AAT hearing will get quite out of hand in terms of scope and costs if pursued in this Court concurrently with the AAT proceedings. Indeed, as I observed at the hearing, it seems to me it might well be resolved by mediation."

Extension of time to seek leave to appeal 10 The point was made on behalf of the respondent and appears to have been accepted by the applicants during the course of the hearing that the orders made by French J on 8 March 2002 were interlocutory rather than final in that they did not dispose of the applicants' case, only of the pleadings. It follows that pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth), leave is required to appeal from the judgment. Pursuant to O 52 r 10 of the Federal Court Rules, leave may be sought from the judge making the order at the time of the pronouncement (which did not occur) or to a single judge or the Full Court by motion within seven days. The applicants were therefore required to file a motion seeking leave by 18 March 2002. No motion was filed until 27 March 2002. However, pursuant to O 52 r 10(2)(b) of the Federal Court Rules the judge to whom the motion is brought may enlarge the time within which it may be allowed. 11 The applicants each filed affidavits providing an explanation for the untimeliness of the application. The reasons given by the them, as summarised in the submissions for the respondent, were not disputed and are as follows: · The applicants were unaware of applicable time limits. · On 18 March 2002 (the day of expiry) an unknown officer at the registry advised the second applicant that there was 21 days within which to appeal. · The applicants advised the respondent of their intention to appeal on 19 March 2002. · The applicants were warned of the expiry of the applicable time limit on 20 March 2002. · The applicants could not give their full attention to the matter of the appeal because of other legal proceedings and because of personal matters and were not in a position to consider the appeal until 18 March 2002. 12 The case for the respondent does not seek to put into issue the strength of these reasons. Rather it contends that, if the applicants' reasons are sound ones (as appears to be the case in my view), the issue of whether time should be extended falls to be dealt with in accordance with the same principles as the application for leave to appeal. Those principles are, firstly, whether the decision is attended by any or sufficient doubt and, secondly, whether the refusal of leave is likely to give rise to any substantial injustice. It is the case that regard should be had to the history of the proceedings, the conduct of the parties, the nature of the litigation, the consequences to the parties of the grant/refusal of an extension, the prospects of success if the extension is granted and the vested right of the respondent to retain judgment: Gallo v Dawson (1990) 93 ALR 479 at 480. Even if the delay is explained, the application should be refused if the appeal would have no or very slight prospects of success: Gallo v Dawson (No 2) (1992) 109 ALR 319 at 320; Deighton v Telstra Corporation [1997] FCA (17 October 1997); Kalaba v The Queen [1996] FCA (13 September 1996); Wati v Minister for Immigration & Ethnic Affairs [1997] FCA (4 April 1997). 13 For the respondent it is submitted that in the present case, although the length of delay is not great and there is no prejudice to the respondent, the lack of merit in the appeal coupled with the modesty of the consequences to the applicants of an extension being refused are not sufficient to displace the vested right of the respondent to retain judgment nor the case flow considerations in connection with procedural decisions. It is submitted leave to extend time ought to be refused.

Leave to appeal 14 The general rule is that leave to appeal will be refused unless the applicant for leave can show that the decision was wrong or at least attended with sufficient doubt to justify the grant of leave and that substantial injustice would be done if the decision was to stand: Butterworths, Halsburys Laws of Australia, Vol 20, 325 Practice and Procedure, "3 Restrictions on Appeal" [325-11645]. As there explained, the two criteria are cumulative. If the order is correct there could be no substantial injustice. But if the order is not correct or is of doubtful correctness, that is not sufficient and it must also be shown that it causes a substantial injustice: ibid. There it is also stated that substantial injustice is more likely to be shown where the order, though interlocutory in form, is in effect final as, for example, by changing or taking away substantive rights or putting an end to the proceeding. 15 This statement of principles is relied upon for the respondent. To that, the submissions for the respondent add that leave will be more readily granted where the judgment below is attended by doubt or affects substantive rights: Western Australia v Bond Corp Holdings Ltd (1991) 5 WAR 40 at 56, 57 and 74; Johnson Tiles Pty Ltd v Esso Australia Ltd (2000) 104 FCR 564 at [1], [43] and [99]; Wilson v Metaxas [1989] WAR 285 at 294; Niemann v Electronic Industries Ltd [1978] VR 431; Stanley-Hill v Kool [1982] 1 NSWLR 460; Monash University v Berg [1984] VR 383; BHP Petroleum Pty Ltd v Oil Basin Ltd [1985] VR 756. 16 The submission for the respondent is that in the present case it can easily be seen the decision below was correct and does not affect substantive rights to any extent - it operates only as a temporary time bar. Only the pleadings, not the action itself, was struck out with the result that no substantial injustice will accrue to the applicants if leave is refused. It is submitted leave to appeal should therefore be refused.

Applicants' contentions and reasoning 17 The applicants continue to appear unrepresented. They submit firstly, that it is not correct that the orders of French J should be regarded as interlocutory when their effect was to stop forever the opportunity for the applicants to pursue an application. When asked to support this, the applicants' case was that although able to afford the same, they were unable to find a lawyer who would fearlessly take their case in relation to the respondent. In reality then, it was said, the orders of French J had the effect claimed. Those orders, of course, fall for characterisation in their terms and not on matters which fall into the category of evidence (and unproven facts in any event). There is no substance in this contention. 18 Secondly, it was contended that it is not correct to say that the orders of French J only affected the applicants' procedural rights. In the case of the second applicant it was said that his substantive rights were affected. It was submitted this was the case because, as the reasons of French J make apparent, the second applicant's case before the AAT and the partnership application in which he was involved have been concluded in the tribunal. It was said, therefore, there is no reason why the stay order on the filing of an amended application until the determination of the pending proceedings in the AAT should apply in respect of the second applicant. 19 An examination of the claim as previously formulated and dealt with in the reasons of French J does not make apparent the nature of the interest of the second applicant in the proceedings before the AAT brought by the first applicant. Indeed, it is not clear why they have sought to bring one claim to this Court, although in their oral submissions they suggested that cost savings may be a factor. Time was therefore spent at the hearing in giving them the opportunity to bring forward the nature of the interrelationship between the proceedings in the AAT brought by the first applicant and the matters which the second applicant seeks to pursue by way of an amended application in the Federal Court. The outcome of this was that the applicants accepted there was an interrelationship between the issues raised by the first applicant in the AAT and the issues which the second applicant intends to raise in an amended application before this Court. It was said this was because if certain matters are established in her application, income there in issue will be to the account of the second applicant. 20 French J founded his stay order on considerations of proper management or proceedings in the light of the quantum of tax involved, the scope of matters at issue and cost impacts if concurrent proceedings were allowed to be maintained even by different parties in the AAT and this Court. In the light of the applicants' acceptance of the interrelationship as explained and these further considerations, there was clearly a proper foundation for the view which his Honour reached in the exercise of his discretion. 21 Thirdly, it was said on behalf of the applicants that the pursuit of an amended application in this Court by the second applicant would be in effect the exercise by him of his right of appeal from the decision of the AAT made in respect of his application to it. There is no foundation in law for that submission. It does not in any event show the decision of French J was wrong or attended by doubt. 22 Fourthly, the applicants submitted that the proper formulation of an amended application and further statement of claim is hampered by the lack of access to relevant documents. However, no application has been made to the Court for pre-pleading discovery. The matter is not a consideration relevant to the application of the above stated tests to the orders and judgment of French J. 23 Fifthly, a concern was expressed by the applicants that the orders of French J were allowed to stand there could be estoppel arise in respect of the applicants in a proceeding brought in this Court. That could not be the case in respect of the second applicant who is not a party to the proceeding brought by the first applicant in the AAT. Furthermore, the matter was dealt with by French J in his reasons where the distinction was drawn between what the applicants characterised as "estoppel" and the doctrine of "res judicata" and its non-applicability to administrative decision-making.

Conclusion 24 Having considered these matters I am not of the view that the applicants have shown the decision of French J was wrong, either in relation to its reasoning or in the formulation of the orders. Nor in my view have they succeeded in establishing that the orders and judgment are at least attended with sufficient doubt to justify the grant of leave and that substantial injustice would be done if the decision was to stand. There is no sufficient doubt established or evident substantial injustice. I accept the submission for the respondent that in the circumstances the stay applicable to the applicants operates only as a temporary time bar and that the substantive rights are not precluded because properly formulated pleadings would allow the applicants to press the cause of action which they are convinced they have. 25 As I consider that there is no case for a grant of leave to appeal it follows that the application for extension of time to seek such leave must be refused. Accordingly, the motion will be refused. I certify that the preceding twenty-five (25) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Counsel for the Respondent: Mr AA Jenshel

Solicitor for the Respondent: Australian Government Solicitor

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