Greer v Deputy Commissioner of Taxation

The Proceedings 1 This is an application for an extension of time in which to file and serve a notice of appeal from a decision from the Administrative Appeals Tribunal ("AAT"), given on 2 November 1998. The applicant requires an extension of time because he did not lodge an appeal from the decision of the AAT within the twenty-eight day period specified in s 44 (2A) of the Administrative Appeals Tribunal Act 1975 (Cth) ("AAT Act"). The Court has power under sub-s (2A) to extend the time for the filing of an appeal and may exercise that power before or after the time has expired. The application for an extension of time in this case was lodged on 4 January 1999, in the form prescribed for the purpose by Federal Court Rules ("FCR"), O 53 r 7(2). 2 It is of some importance that the applicant did not appear at the hearing in this Court. Mr Aldridge, who appeared for the Commissioner, invited me to take the applicant's non-appearance into account in determining whether to grant an extension of time. His submission, in essence, was that I should decline to grant leave by reference to the usual criteria governing such applications. Rather curiously, the Commissioner did not apply, pursuant to the Federal Court Rules ("FCR"), O 32, r 2(1)(c), to dismiss the application by reason of the non-appearance of the applicant. The Decision of the AAT 3 The decision of the AAT is recorded in the form of a "direction" made by a Deputy President, as follows: "1. Pursuant to subsection 60(2) of the Bankruptcy Act 1966 the applications were stayed pending advice from the applicant's trustee in bankruptcy. 2. That trustee has indicated that he does not wish to pursue these applications. 3. The applicant has no standing to continue the applications, not being a person "dissatisfied" within the meaning of section 14ZZ of the Taxation Administration Act 1953, as was decided by a Full Court in MaCallum v Commissioner of Taxation (1997) 145 ALR 446. 4. At a directions hearing today called to consider whether the observations of Lehane J at page 462 had application to the present circumstances, it was decided that they did not. 5. Accordingly the applications are dismissed." 4 The AAT is required to give reasons for its decision, provision being made for a party to request written reasons where the AAT does not give reasons in writing: AAT Act, s 43(2), (2A). The applicant has not sought written reasons for the AAT's decision. However, Mr Aldridge said that the "direction" of the AAT should be understood as its reasons, albeit expressed "succinctly". In order to understand the decision and the direction, some background is necessary. Events Leading to the AAT's Decision 5 On 6 December 1990, the respondent ("the Commissioner") issued assessments to the applicant in respect of the tax years ended 30 June 1982 to 30 June 1988, inclusive. The assessments were issued pursuant to s 167 of the Income Tax Assessment Act 1936 (Cth) ("ITAA"), and followed the failure of the applicant to lodge any taxation returns in respect of those years. 6 The assessments issued to the applicant were based on an asset betterment report, which was prepared after what appears to have been a detailed audit of the applicant's affairs. The audit revealed that the applicant had acquired very substantial assets, in a variety of names, over the relevant period. According to the Commissioner's statement of findings, the applicant's revenue sources included the illicit sale of drugs over a two year period. In 1989, the applicant had been convicted and sentenced to a term of imprisonment for the supply and possession of prohibited drugs in 1987. 7 On 25 October 1991, the applicant requested that the Commissioner refer to the AAT, pursuant to s 187 of the ITAA as it then stood, his decision to disallow the applicant's objections to the assessments. Section 187, which was repealed by the Taxation Laws Assessment Act (No 3) 1991 (Cth), provided that a taxpayer who was "dissatisfied with" a decision on objection could lodge with the Commissioner a request to refer the decision to the AAT. For reasons that are not altogether clear, but may have been associated with other legal proceedings on foot between the Commissioner and the applicant, the reference to the AAT in this case apparently did not take place until December 1994. 8 Once the matter was before the AAT, it proceeded slowly. However, on 24 November 1995, the parties signed a form of Agreement to Discontinuance. The AAT thereupon ordered, pursuant to s 42A(1) of the AAT Act, that the application for review of the objection decisions should be dismissed. This order was apparently made by consent. (Section 42A(1) provides that, where all parties to an application for review consent, the AAT may dismiss the application without proceeding to review the decision.) 9 The applicant subsequently applied to reinstate the AAT proceedings. He appears to have taken this step pursuant to sub-ss 42A(6) and (9) of the AAT Act. Section 42A(6) provides that, if the AAT dismisses an application under the AAT Act "the proceeding to which the application relates, unless it is reinstated under subsection (9) or (10), is taken to be concluded." Section 42A(9) provides that the AAT, if it considers it appropriate to do so, may reinstate the application and give such directions as appear to be appropriate. Section 42A(10) deals with the special case of an application dismissed in error. 10 It is perhaps arguable that s 42A(9) is limited to the reinstatement of an application which has been dismissed under s 42A(2) by reason of a party failing to appear in the proceedings, as distinct from an application which has been dismissed by consent pursuant to s 42A(1). In any event, the applicant's attempt to reinstate the proceedings was unsuccessful. 11 While the applicant was endeavouring to secure reinstatement of the proceedings, the Commissioner obtained a default judgment against him, on the basis of the assessments that had already been issued. The judgment, which was obtained from the Supreme Court of New South Wales, was in an amount exceeding $2 million. 12 On 5 December 1996, the applicant lodged a fresh application with the AAT, in which he sought an extension of time to enable him to maintain a second application for review of the Commissioner's objection decisions. On this occasion, the applicant was successful and, on 17 March 1997, the AAT made orders, presumably pursuant to s 29(7) of the AAT Act, extending the time for the filing of the second application. 13 The second application was set down for hearing before the AAT on 2 March 1998. On that day, the applicant was represented by a solicitor, who sought an adjournment of the proceedings. The AAT acceded to this application and adjourned the proceedings until 7 April 1998. However, this was done on the basis that, if an agreed amount of costs thrown away was not paid by the applicant, the application would be dismissed. In the event, orders were made on 7 April 1998 dismissing the application. The precise status of those orders may be a matter for debate, since they appear not to have been made by consent, nor to have been made after a hearing on the merits. 14 Prior to the dismissal of the AAT proceedings, the Commissioner had lodged a creditor's petition, founded on the judgment against the applicant, seeking a sequestration order against the estate of the applicant. The petition was heard on 25 June 1998. The applicant, who was represented by counsel at the hearing, relied on the general principle that a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation for the bankruptcy proceedings. 15 Burchett J, in an ex tempore judgment, held that the general rule should not be applied in the circumstances of the case before him. He stated (at 6) that "It is a case in which repeated delays, and almost constant irresolution as to the pursuit of attempts to appeal against the assessments, have continued over a lengthy period. These matters must either undermine the genuineness of any appeal or, at the least, provide strong reasons in themselves why the court should not now, at the eleventh hour, withhold its hand, when the Deputy Commissioner seeks the remedies provided under the Bankruptcy Act". Accordingly, his Honour made the sequestration order against the applicant's estate. 16 It should be noted that on 16 February 1999, a Full Court dismissed an appeal by the applicant against the sequestration order made on 25 June 1998. In a brief ex tempore judgment, the Full Court held that the primary Judge's decision had not been attended by any error. 17 To return to the chronological narrative, on 26 May 1998, shortly before the hearing of the creditor's petition, the applicant filed an application in the AAT for the reinstatement of the second application. Once again, it is not clear on what basis the applicant sought reinstatement of the proceedings, although doubtless his application was related to the then imminent hearing of the creditor's petition. 18 On 16 July 1998, soon after Burchett J had made the sequestration order, the Official Receiver, as trustee of the applicant's bankrupt estate, elected not to continue, inter alia, the proceedings in the AAT. The trustee's election was made pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth) ("Bankruptcy Act"), which provides as follows: "An action commenced by a person who subsequently becomes a bankrupt is, upon his or her becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action". The word "action" is defined to mean "any civil proceeding, whether at law or in equity": s 60(5). Of course, at this stage, the only "proceeding" on foot in the AAT was the application to reinstate the second application which had been dismissed on 7 April 1998. 19 The proceedings in the AAT then took a rather strange course. Apparently at the urging of the AAT Deputy President presiding at a directions hearing, the Commissioner consented to the reinstatement of the proceedings. This was effected by a direction made on 10 August 1998, as follows: "Having found that this matter was dismissed in error, the Tribunal reinstates the matter pursuant to subsection 42A(10) of the [AAT Act]". The direction does not identify the "error" and there is no transcript to shed light on the nature of the error. It is perhaps possible that the Deputy President took the view that the dismissal of the proceedings on 7 April 1998 was based on a misapprehension of the AAT's powers. In any event, there is nothing to suggest that the reinstatement of the proceedings was intended to address or resolve the question of the effect of the sequestration order on the proceedings. 20 The effect of the order presumably was to revive the second application, which had been lodged by the applicant with the AAT on 5 December 1996. The "reinstated" proceedings came on for directions on 2 November 1998. A different Deputy President from the one who had made the direction of 10 August 1998 made the "direction" quoted earlier in these reasons. The Reasoning of the AAT 21 The "succinct" reasons of the AAT suggest that the Deputy President took the view that the proceedings in the AAT had been stayed by reason of the operation of s 60(2) of the Bankruptcy Act. This view presumably rested on the proposition that proceedings in the AAT constitute a "civil proceeding", within s 60(5) of the Bankruptcy Act, and that there were proceedings on foot in the AAT at the date of the sequestration order. 22 The reference in the reasons to McCallum v Commissioner of Taxation (1997) 145 ALR 446, was to a decision of a Full Court of this Court (Whitlam and Lehane JJ; Hill J dissenting). The majority in that case held that a taxpayer who has been made bankrupt lacks standing to apply for review of an objection decision pursuant to Part IVC of the Taxation Administration Act 1953 (Cth) ("TAA"). In particular, it was held that, although a trustee in bankruptcy can be "a person [who] is dissatisfied with the Commissioner's objection decision", for the purposes of s 14ZZ of the TAA, the bankrupt cannot be such a person, unless he or she can show that the objection decision would have consequences in relation to tax payable by the bankrupt personally, for example, after his or her discharge from bankruptcy. (Section 14ZZ of the TAA replaced s 187 of the ITAA in 1991). 23 The reference in par 4 of the AAT's reasons to the absence of any circumstances identified by Lehane J in McCallum, was presumably intended to be a finding that the objection decisions could not have imposed any obligation on the applicant to pay tax personally, bearing in mind that a sequestration order had been made against his estate on 25 June 1998. In short, it appears (although perhaps not with complete clarity) that the AAT intended to hold that, independently of s 60(2) of the Bankruptcy Act, the applicant lacked the standing necessary to institute or pursue a challenge to the objection decisions in the AAT.