Hua-Aus Pty Ltd v Commissioner of Taxation

THE DISCRETION TO EXTEND TIME 9 Although the discretion to extend time to institute an appeal pursuant to O 53 r 7 of the Rules is not expressly confined by specified criteria, there is a range of factors of varying actual importance, which have been developed by the Court in analogous situations. Frequently relied on are the criteria referred to by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 where his Honour was concerned with s 11 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) ('the AD(JR) Act') which, like O 53 r 7, does not set out any criteria by reference to which the court's discretion to extend time for an application for review under s 5 of the AD(JR) Act is to be exercised. At 348 his Honour said: Already there have been a number of decisions of judges of this Court, all sitting at first instance, dealing with the approach proper to be taken. They differ a little, both in language and in emphasis, but I venture to suggest that from them may be distilled the following principles to guide, not in any exhaustive manner, the exercise of the court's discretion … 10 His Honour then went on to deal with each of these principles, which, relevantly, may be paraphrased in the following way: (1) Special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper to do so. It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an 'acceptable explanation of the delay' and that it is 'fair and equitable in the circumstances' to extend time. (2) A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision and a case where the decision-maker was allowed to believe the matter was finally concluded. (3) Any prejudice to the respondent occasioned by the delay is a material factor militating against the grant of an extension. (4) The mere absence of prejudice is not enough to justify the grant of an extension. (5) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted. 11 The Commissioner's opposition to the grant of an extension of time for the applicant to file a notice of appeal from the decision of the Tribunal was mainly, indeed wholly, grounded on the principle in (5), namely, the merits of the applicant's proposed appeal. In submissions, the Commissioner referred to the fact that in Federal Commissioner of Taxation v Brown 99 ATC 4852 at [12] a Full Court of this Court referred to that matter as an 'important consideration'; an applicant should show that he or she has an 'arguable case' to warrant an extension of time: Brown, at first instance, 99 ATC 4516 at [56] per Hill J, accepting the view of von Doussa J in Windshuttle v Deputy Federal Commissioner of Taxation (1993) 46 FCR 235 at 243. 12 More recently, however, the importance to be attached to the merits of the appeal has, arguably, been downgraded in its ranking among the criteria to be taken into account by the court in exercising its discretion as to whether or not an extension of time should be granted. For example, in Culley v Australian Securities and Investments Commission [2008] FCA 1784 at [5], Jessup J observed: A party to a proceeding in the Tribunal has an appeal as of right on a question of law. Such an appeal is in the nature of a new proceeding in the original jurisdiction of the court. It is unnecessary for an applicant in such an appeal to have grounds of any particular strength or intrinsic merit (although I recognise, of course, the relevance of s 31A of the Federal Court of Australia Act 1976 (Cth) in these, as in all other, original proceedings). For this reason (and perhaps the more so because of the availability of s 31A), I consider that the court should be slow to reject an application for an extension of time under s 44(2A) of the AAT Act, where otherwise the principles in Hunter are appropriately satisfied, for no reason other than that the appeal, if prosecuted, would be unlikely - even very unlikely - to succeed. I note that this was effectively the approach taken by the court in Mustafa v Chief Executive Officer, Centrelink [2000] FCA 1897 and in Wiegand v Comcare Australia [2005] FCA 1904. I consider that such an approach would be consistent with that taken by Fitzgerald J in Lucic [v Nolan (1982) 45 ALR 411] and, because his Honour followed Lucic, by Wilcox J in Hunter. 13 Nevertheless, his Honour at [6] went on: While it will be apparent that I do not consider that an application for an extension of time is an occasion for any more than the most cursory examination of the merits of the proposed proceeding, nonetheless I recognise that, if such an examination does reveal the proceeding as being conspicuously devoid of merit, the application might well be rejected upon the ground that the prosecution of it would, in effect, be pointless. In relation to this last observation, see Tey v Commissioner of Taxation [2007] FCA 920 at [28] - [33] per Gilmour J. 14 Having regard to the following facts and circumstances, namely: (1) That Mr Hua, an unqualified person, appeared on behalf of the applicant at the hearing before the Tribunal; (2) the evidence embodied in Ex. 2, none of which was challenged; and (3) the evidence embodied in Ex. 1, none of which was challenged, I am satisfied that the only relevant consideration, a conclusion on which might militate against an exercise of discretion to extend the time for filing a notice of appeal, is whether the grounds of appeal as articulated in the amended draft notice of appeal disclose an arguable case, even if it is unlikely to succeed, or whether they are so devoid of merit as to render prosecution of the appeal pointless. Before turning to that issue, it is necessary that I deal with the various bases upon which the Commissioner assailed the amended draft notice of appeal.

THE AMENDED DRAFT NOTICE OF APPEAL (ANNEX 'J' TO EX. 1) 15 The Commissioner assailed the grounds relied on in the amended draft notice of appeal on an holistic basis claiming that they did not comply with O 53 r 3(2)(d) of the Rules which expressly provides that a notice of appeal must state 'briefly, but specifically, the grounds relied upon in support of the order sought'. 16 The lack of compliance was not articulated with any great precision or clarity. It was said that the grounds in the amended draft notice of appeal 'are little more than a duplication of the alleged question of law'. Grounds 4(a) to 4(j) differ only from the corresponding alleged questions of law in two ways: first, the word 'whether' is omitted from the opening words so that each paragraph is no longer prefaced as a question and; second, statutory references are inserted. But as the Commissioner acknowledges in his referral to various quotations from cases such as Australian Securities and Investments Commission v Saxby Bridge Financial Planning Pty Ltd (2003) 133 FCR 290 at [47] (Branson J); Australian Telecommunications Corporation v Lambroglou (1990) 12 AAR 515 at 523 (Ryan J); Young v Commissioner of Taxation [2008] FCA 1908 at [19] (Gilmour J); Price Street Professional Centre Pty Ltd v Commissioner of Taxation (2007) 243 ALR 728 at [75] (Greenwood J); and Birdseye v Australian Securities and Investments Commission (2003) 38 AAR 55 at [18] (Branson and Stone JJ), because the existence of a question of law is not merely a qualifying condition to ground the appeal, but must be the subject matter of the appeal itself - see TNT Skypak International (Aust.) Pty Ltd v Federal Commissioner of Taxation (1988) 82 ALR 175 at 178 (Gummow J) - there should be a link or symmetry between the question raised and the ground relied upon. Subject to the question raised being truly a pure question of law (see Birdseyeat [18] (Branson and Stone JJ)), the applicant's articulation of the grounds in the manner assailed by the Commissioner may well provide the necessary link or symmetry. I would not exercise my discretion to refuse to extend time on the basis that the amended draft notice of appeal does not comply with 0 53 r 3(2)(d). 17 Next, the Commissioner contended that paras 2(a) to 2(j) of the amended draft notice of appeal 'did not disclose questions of law', by which I understand him to mean that they are not pure questions of law, even though they may 'involve' questions of law which, it is conceded by the applicant, is not sufficient to ground an appeal under s 44(1) of the AAT Act. It is trite that prefacing each paragraph with the words: 'Whether the Tribunal erred in law …' does not transform what would otherwise be a question of fact, or a question of mixed fact and law, into a question of law, but I do not think it is helpful to deal with this particular issue on a general or holistic basis. Each of the questions, or group of questions if the questions comprising the group substantively raise the same issue, needs to be considered against the requirement of s 44(1) of the AAT Act.

Paragraphs 2(a) - (c) 18 These paragraphs substantively raise the same issue and, for present purposes, it suffices to recite (a): [W]hether the Tribunal erred in law in adopting an interpretation of sec. 14ZZK of the Taxation Administration Act, 1953 (Cth) ('the TA Act') (relevantly imposing on the applicant the burden of proving that the amended assessment under review ('the amended assessment') was excessive) which obviated the requirement for the Tribunal to make findings of fact, or findings of fact and law, as to satisfaction of the statutory criteria for the making by the applicant of taxable supplies on which GST was payable in the amount assessed in the amended assessment in the quarter ended 31 December 2004 ('the relevant quarter'); There is no doubt, in my mind, that this paragraph raises a question of law; not because it includes the phrase 'erred in law' but because of the nature and character of the question.

Paragraphs 2(d) and (e) 19 Again, each of these paragraphs substantively raise the same issue and it suffices to recite para (d): [W]hether the Tribunal erred in law in determining whether the applicant had explained the source of receipts for the purpose of treating them as consideration for taxable supplies made by it on which GST was payable in the relevant quarter by rejecting the evidence of the applicant's director, Mr Hua, as to the source of the receipts in the absence of corroborating evidence (including the failure to call Mr Li as a witness) without making any finding of credit against him (Mr Hua) which justified the rejection of his sworn evidence explaining the source; I am of the view that this paragraph also raises a question of law.

Paragraph 2(f) 20 This paragraph provides: [W]hether the Tribunal erred in law in concluding that there was no evidence before it which led to a conclusion that the amounts taken into account by the respondent in reaching the adjusted assessment in the objection decision should be treated differently by the Tribunal; This paragraph raises the correctness of the Tribunal's conclusion at [35]. In a real sense, it is related to the questions raised by paras (d) and (e) which, as I have indicated, do raise a question of law. So confined, this paragraph also raises a question of law.

Paragraph 2(g) 21 This paragraph provides: [W]hether the Tribunal erred in law in failing to make any findings or give any consideration as to whether the receipts by the applicant which were treated as consideration for taxable supplies by the respondent were properly to be characterised as financial supplies on which no GST was payable because they were input taxed supplies; The contention here advanced was not advanced by the applicant before the Tribunal. There will be cases where a question of law arises from a failure on the part of the Tribunal to deal with an issue not put to it: see Carpentaria Transport Pty Ltd v Federal Commissioner of Taxation 90 ATC 4590 at 4593 (Davies J), but generally this will not be so, and this case is no exception. There was no error of law on the part of the Tribunal in failing to consider and make findings as to whether the receipts by the applicant were properly to be characterised as consideration for financial supplies on which no GST was payable because they were input taxed supplies. This paragraph does not raise a question of law on which to ground the appeal: Commissioner of Taxation v Perkins 93 ATC 4524 at 4526 (Davies J, with whom French and Heerey JJ concurred); Commissioner of Taxation v Glennan (1999) 90 FCR 538 at [80] - [83] (Hill, Sackville and Hely JJ).

Paragraphs 2(h) - (j) 22 These paragraphs provide: (h) whether the Tribunal erred in law in concluding that the respondent's allowance to the applicant in its amended assessment for creditable acquisitions was correct because the applicant did not provide to the Tribunal any additional information in support of its objection, without considering on the merits, and making appropriate findings about, the information which the applicant had already provided to the respondent; (i) whether the Tribunal erred in law in concluding that the failure to withhold penalty assessed by the respondent in the amended assessment was correct for the reasons set out in the objection decision without going further and re-exercising the discretion to remit the penalty afresh; (j) whether the Tribunal erred in law in concluding that there were no grounds on which to further remit the failure to withhold penalty and that the objection decision correctly decided that the conduct of the applicant was reckless because the respondent had regard to the ATO Practice Statement Law Administration on Remission of Penalty for Failure to Withhold (PS LA 2003/11) without undertaking its own independent assessment or making its own findings in order to re-exercise the discretion to further remit the penalty for failure to withhold afresh; 23 Paragraph (h) does not have a question of law; it merely seeks merits review of the Tribunal's reasons for decision. The only information which the applicant had already provided to the Commissioner concerning creditable acquisitions was the amount claimed in its BAS - see [37] of the Tribunal's reasons where the Tribunal found that: 'The applicant has provided no further information to support the amount of creditable acquisitions claimed'. That can only mean: '… claimed in its BAS' having regard to the context in which the sentence appears, in particular, immediately following the first sentence of [37]. 24 Paragraphs (i) and (j) do not raise questions of law. The fact that the Tribunal found that the penalty imposed on the applicant 'was correct for the reasons set out in the reasons for the objection decision' ([45]) and found that there should be no further remission of the penalty: 'For these reasons [those set out in [48]], taking into account gross carelessness and deliberate risk taking in relation to the failure to withhold …' ([49]) do not constitute errors of law. They were findings that were open to the Tribunal on the material before it.

Paragraph (k) 25 This paragraph provides: [W]hether the Tribunal erred in its application of the principles enunciated by the High Court of Australia in Gauci v Federal Commissioner of Taxation (1975) 135 CLR 81 at 85-88, 90, cited by the Tribunal at [52]. Clearly this is a question of law which is relevantly related to the questions of law raised in paras 2(a) - (c) and the corresponding grounds in paras 4(a) - (c) and (k).

THE MERITS 26 The fact that I have found or concluded that a particular paragraph or two of the amended draft notice of appeal raises a question of law should not be taken as an endorsement of the merits of any argument underlying that ground. 27 During the course of the hearing of the application for an extension of time, I indicated to counsel for the applicant that I had serious reservations as to the underlying arguments upon which grounds 4(a) - (c) and (k) were predicated. I still do. But now is not the time to ventilate them. The grounds themselves are arguable, involving as they do a statutory context which has not previously been the subject of judicial consideration and scrutiny in reference to such arguments, particularly where there is no authority in point, let alone binding precedent; and that is sufficient for present purposes. The fact that I am presently of the view that there is a difficulty in accepting such arguments, does not mean that my discretion should by exercised against an extension of time; on the contrary, for the foregoing reasons, time should be extended to the extent indicated in the orders I propose to make.

I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Edmonds.

Associate: Dated: 13 July 2009 Counsel for the Applicant: Mr C Bevan

Solicitor for the Applicant: Zhang Shijing Lawyers

Solicitor for the Respondent: ATO Legal Services Branch