22 December 2003 PAAN was placed into liquidation and Mr. Georgiou ceased to control PAAN. From that date he had no standing to object to the payroll tax assessment. The oral examinations, conducted as part of the liquidation process in 2006 and 2007, did not suggest that he and Mrs Georgiou might be personally liable for the debts of the company. In August 2009 when Mr. Georgiou learned that the Commissioner was taking action against him and his wife personally, he did not delay in seeking permission from the liquidator for PAAN to make an out of time objection. Until then the Georgiou's saw no reason to challenge the assessment. A further delay resulted because their usual solicitors had a conflict of interest and Mr and Mrs Georgiou were required to change solicitors. On 31 August 2010, their new solicitors foreshadowed to the Commissioner, that they would make an out of time submission, which they did on 17 December 2010.

4. Mr. Walker said that the Commissioner would not suffer any prejudice if the objection was lodged out of time because most of the relevant assessment material was in documentary form and readily available.

1. Mr Erskine for the Commissioner contended that in considering whether a late objection is to be permitted the Tribunal should note that Mr Georgiou, after receiving legal and accounting advice, took considered and deliberate action in mid-December 2004 to put PAAN into liquidation and out of his control. The placing of PAAN into liquidation triggered the operation of section 56B(5)(c). This terminated the recovery action against Mr Georgiou personally which had been commenced on 2 December 2004. Prior to the date of liquidation Mr Georgiou had the right to object to the payroll tax assessment but he had chosen not to do so.
2. Mr Erskine argued that the Commissioner had suffered prejudice because he had incurred substantial costs of some $374,000.00 in investigating PAAN's affairs including a public examination and proceedings in the Federal Court to recover the payroll tax from the Georgiou's personally.
3. Mr Erskine disagreed that PAAN had an arguable case and said the assessment was reached after careful consideration and discussion with PAAN and its accountants. Mr Erskine said that the evidence at the oral examination confirmed that PAAN was not an employment agent and the "eight day rule" did not apply.
4. Although there is no express onus of proof in an application under section 103 for an extension of time an applicant does bear the onus when objecting to an assessment under section 101 of the TAA.

1. Mr Georgiou said he had had checked the calculations of payroll tax the subject of the assessment using wage and financial records. He discovered arithmetical and other errors that reduced the payroll tax owing to $233,066.17. In addition, he said if PAAN was in fact an employment agent and the eight day rule applied then the resulting exemption further reduced the payroll tax owing to $160,589.17. He tendered his calculations and the documents on which they were based to the Tribunal.
2. Mr Georgiou outlined the business history of PAAN prior to liquidation including the formation of the Peter Georgiou Family Trust and the division of business between them. Many of the arrangements were made and contracts signed seemingly without a distinction being made between PAAN in its own right and as trustee of the Peter Georgiou Family Trust. Both PAAN and the trust operated from a single bank account. Mr Georgiou said his accountant attended to these matters when he did the annual accounts of the businesses.
3. During 2003 and part of 2004 there were numerous communications between PAAN represented by Beams and Associates and the Commissioner regarding the exemptions that PAAN believed it was entitled to. The assessment of

1 November 2004 made it clear that the Commissioner had rejected PAAN's submissions. On 30 November 2004, Mr Georgiou met with PAAN's solicitor and accountant who also acted for him personally. They discussed what actions were available, including that Mr Georgiou put PAAN into funds, so that the assessment could be contested. Their advice however was to see an insolvency practitioner which they did on 9 December 2004. Shortly afterwards, Mr Georgiou was told by his accountant that the recommendation from the meeting was to place PAAN into liquidation, which he did on 22 December 2004. 4. Mr Georgiou was understandably concerned about the issue of personal liability. At the time of his public examination in August and September 2006 and March 2007, he did not think the issue was personal liability but rather whether or not the company had traded while insolvent. He was not worried because he said he knew it had not traded in that condition. He told the Tribunal it was "a nasty shock" when he was served with Federal Court proceedings in August 2009. On 21 December 2009, his solicitors sought the liquidator's permission to contest the assessment which was given on 7 May 2010. However they ceased to represent him because of a conflict of interest and the permission was not conveyed to him. His new solicitors wrote to the liquidator on 28 June 2010, received permission on 28 July 2010 and contacted the Commissioner on 31 August 2010.

1. Section 103 does not set out the matters to be considered in exercising the discretion to grant an extension of time. In Bond Corporation Holdings Ltd v Australian Broadcasting Tribunal [1988] FCA 433; (1988) 84 ALR 669 at 680, Gummow J said in relation to such a power:

"Where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of discretion are similarly unconfined, except in so far as their may be found in the subject matter, scope and purpose of the statute some implied limitation on the factors to which the decision- maker may legitimately have regard."

1. Both parties addressed three of the six principles or criteria set out by Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349, which they considered to be relevant in the exercise of the discretion under section 103 of the TAA. They did not deal with principles 2, 4 and 6 although there is some overlap between principles 1 and 2. Before discussing the three principles two preliminary comments should be made. Wilcox J said that these principles were "to guide, not in any exhaustive manner, the exercise of the court's discretion" in dealing with the extension of time. He also noted that Hunter Valley Developments was an application under the Administrative Decisions (Judicial Review) Act 1977 and under other legislation different considerations might be relevant. The Principles are addressed below.
2. Principle No. 1: "It is a pre-condition to the exercise of discretion in his favour that the applicant show an 'acceptable explanation of the delay' and that it is 'fair and equitable in the circumstances' to extend time". Wilcox J also said that "special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper to do so". Any prescribed period is not to be ignored. "Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained". Although Principle No. 2 was not discussed it is closely related to the first principle. If an applicant has by "non-curial" means made the decision maker aware that he continues to dispute the finality of the decision, then that is a factor in favour of granting an extension of time. It is one aspect of the acceptable explanation of the delay.
3. There are few facts in dispute in this matter. The assessment was made on

1 November 2004 and served on PAAN within a day or so. On 24 November 2004 Mr Georgiou's accountant was told by the staff of the Commissioner that section 56B of TAA could be used to make a director personally liable for PAAN's tax debt. Mr Georgiou contacted his solicitors the next day. A notice of claim against him personally was served on 3 December 2004. His solicitors advised him on 7 December that section 56B(5) operated to stop personal recovery action against him if an administrator or liquidator was appointed to PAAN. A meeting took place on 9 December between the liquidator, his accountant and solicitor. Following the meeting they advised that he should liquidate the company. On 22 December 2004, the company was placed into liquidation and the liquidator took control of PAAN. Prior to that Mr Georgiou controlled PAAN. On 19 April 2006, at the Annual General Meeting of PAAN Mr Georgiou made a written note that the liquidator said to him "The ACT Government Solicitor asked me if you were prepared to settle. I told them you were not as you had advice to say that you owed them nothing". In August 2009 Mr and Mrs Georgiou were served with Federal Court proceedings against them personally. Their solicitors wrote to the liquidator in late December 2009 and were given permission to challenge the assessment out of time. 4. During the six weeks from the service of the assessment to PAAN's liquidation Mr Georgiou as the sole director had the power to object to the tax assessment but did not do so. From that date to the present, he needed the consent of the liquidator which was finally obtained on 28 July 2010. During almost five years from 22 December 2004 to the date he first instructed his solicitors to obtain permission to object i.e. in late 2009, he seems to have done very little. It was always open to him to initiate contact with the liquidator to fund an objection. In April 2006, the Commissioner's solicitors were interested in a possible settlement but Mr Georgiou did not attempt to negotiate with them when the liquidator communicated this interest in a settlement to him. The explanation for the delay is obvious for it was only after August 2009 that the spectre of personal liability arose again. Mr Georgiou was entitled to take advantage of section 56B(3) to limit his personal liability under the TAA and no criticism should be made against him for protecting his assets in this way. He delayed taking action after 22 December 2004 because he believed that his personal assets were not at risk and he only became active in late 2009 when he realised that they were. However, the Tribunal does not believe that this explanation of the delay is acceptable. 5. Wilcox J spoke of his first principle as a precondition to the grant of an extension of time although later decisions of the Federal Court do not seem to have treated the principal in this way. Wilcox J's use of the expression "precondition" however does emphasise the importance he placed on this principal. 6. Principle No.2 was not addressed by the parties. 7. Principle No.3: "Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of the extension". 8. In Windshuttle v Commissioner of Taxation [1993] FCA 553; (1993) 46 FCR 235, Von Doussa J at p.249 said the

"kind of prejudice which is relevant is prejudice that could arise to the opposing party in properly and fairly dealing with the subject matter of the dispute that will require determination if the extension is granted. Relevant matters will be whether witnesses have disappeared or their recollections have faded ................and cannot be refreshed; whether avenues of useful enquiry have dried up or become difficult to pursue; and whether material documents have been destroyed."

1. In this matter, the material documents were made available to the Tribunal. The principal witness gave evidence to the Tribunal as he did in the public examination in late 2006 and early 2007. The Commissioner contended that he had been prejudiced because he had been forced to incur costs of some $374,000.00 for the public examination and the Federal Court proceedings. It seems to the Tribunal that these costs were not incurred in defending proceedings occasioned by the delay and at least some of these costs may be recovered. The Tribunal is of the view that the Commissioner will suffer little or no prejudice if the extension of time is granted.
2. Principal No.4 was not addressed by the parties.
3. Principal No.5: "The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted". In Windshuttle at pp.243-244 von Doussa J warned that the Tribunal should not "embark on a full scale trial of the merits of the underlying question". He said that in considering the extension of time, if the factual assertions of the applicant when applied to the relevant law "would bring about the result for which the applicant contends" that would satisfy the requirement that the substantial application had merit. This low level test was expressed in different words by Drummond, Sackville and Hely JJ in Federal Commissioner of Taxation v Brown (19 August, 7 September 1999 unreported) when the court said "the arguable merits test requires the taxpayer's case to be assessed at its highest".
4. The Tribunal has taken account of the evidence of Mr Georgiou and considers that PAAN has an arguable case on the merits.
5. In Zizza v Commissioner of Taxation, both the Full Federal Court [(1999) FCA 848, 99 ATC 4711] and Katz J at first instance [(1999) FCA 37] quoted without dissent the Commonwealth Administrative Appeals Tribunal when it said "merit alone is not a sufficient ground to grant an extension". In Mt Gibson Manager Pty Ltd v Deputy Commissioner of Taxation (1997) FCA 1457 French J found no error of law by the Commonwealth Administrative Appeals Tribunal when it held that no extension of time should be granted even though the Deputy Commissioner conceded that the objection if lodged in time would have been upheld.
6. Principle No.6 was not addressed by the parties.
7. The Tribunal is not aware of any other matters that may affect the decision whether or not to exercise the discretion to grant an extension of time to lodge an objection in this matter.

1. The Tribunal has found that PAAN has an arguable case on the merits, that the Commissioner will suffer little or no prejudice but that there was not an acceptable explanation of the five year delay in applying for an extension of time. The question for the Tribunal is how to reconcile the competing principles. The lack of an acceptable explanation for the delay is in the Tribunal's view the main impediment to the grant of an extension of time. In both Zizza and Mt Gibson Manager five judges of the Federal court considered that having an arguable case on the merits does not necessarily mean that an extension of time must be granted.
2. Applying the law to the facts in this case the Tribunal concludes that an extension of time should not be granted to PAAN under section 103 of the TAA.
3. The Tribunal confirms the decision of the Commissioner.

THE COMMISSIONER FOR ACT REVENUE

FULL REPORT ( ) CASE NOTE ( ) UNREPORTED DECISION ( )