Nugawela v Commissioner of Taxation

The Tribunal hearing 12 Directions were made by the Tribunal for the filing of written submissions on the application by the Tribunal for the dismissal of the six applications. Dr Nugawela filed written submissions dated 30 October 2017. Even though they were submissions on the Commissioner's application for dismissal, they commenced by listing the orders sought by Dr Nugawela in the following terms: The orders I seek are as follows: (i) Dismissal of ATO application to have AAT actions dismissed; (ii) AAT actions to be further stayed until all other pending court actions and hearings are finalised. In particular, (a) There is an appeal on foot against the default judgment of the Review of the Registrar's order of sequestration (heard unopposed in the absence of the Respondent and his legal team); (b) Judicial Review application under s.39B; (c) Review of the Trustee in Bankruptcy. (iii) AAT actions recommence subject to judicial determination from Review of Trustee's decision; (iv) AAT actions be stayed and recommence when the applicant gains standing to exercise constitutional rights to determine accurate tax liability. (original emphasis) 13 The submission then set out a summary of the grounds in support in the following terms: The grounds in support of the orders sought are Jurisdictional Error, National Law & Precedent, Integrity of Part IVC under the TAA, Prejudice and Injustice to the Applicant, Conduct and Responsibilities of the Respondent as Model Litigant, requirement for continuing currency of the applications before the AAT, Trustee Review pending, accountability, public interest to recover correct tax. 14 In the course of lengthy written submissions, the following matters were raised by Dr Nugawela: The respondent may well argue that a bankrupt has no standing to continue before the AAT. However, judicial determination on this matter has not been obtained. The review may require the trustee to proceed with these actions in order to determine my proper tax liability which would lead to establishing solvency and discharging bankruptcy. Hence, I firmly reject the respondent's claim in para 16(e) of her affidavit that my interest in an application in respect of a taxation debt would be purely hypothetical. Furthermore, the AAT of its own accord or decision, within its objectives, functions and purpose, may elect to stay this matter until the bankruptcy is discharged within 12 months as foreshadowed by the impending legislative changes. … An application has been made towards overturning the Trustee's decisions with respect to the AAT applications … The AAT decisions are capable of having, or likely to have, a significant impact not only on the judgment debt, but also the subsequent tax returns and objections. Already, more than $238,000 has been returned from the internal review. … I advised the Federal Court again on 6 September 2017 (WAD434/2017) that the prospect of annulment of bankruptcy was still available. The judge sought and obtained clarification of the proposition. This requires that the AAT hear applications on foot to quantify the taxation debt do occur. Otherwise the taxation debt remains conclusive evidence of a falsely and significantly elevated figure, locked away from review and accountability. The loss of standing has been created by improper application of the legal process to accelerate bankruptcy. These are the very same laws meant to collect revenue, but now applied to abandoning it. … New legislation is to restrict bankruptcy to at least one year, after which I will have standing to review the applications to quantify taxation debt. In that case, it may be that the properly quantified debt could result in annulment of bankruptcy soon thereafter and less than the stipulated additional 2 years following discharge. Otherwise, the repayments would unfairly and unnecessarily continue for the additional 2 years. 15 The submissions by Dr Nugawela also addressed in some detail his complaint that the manner in which the sequestration order had been obtained by the Commissioner meant that the contestability and scrutiny of his tax liability as required by law had been, in his words, systematically dismantled. He complained that dismissal would mean that the power of the Commissioner would be unchallenged if the applications were dismissed. 16 It can be seen that the submissions by Dr Nugawela had at least three main threads. One, a complaint about the Commissioner seeking summary dismissal rather than allowing scrutiny of the Assessments. Second, a very general complaint about the trustee having abandoned the six applications. Third, a claim that the six applications should be held over until his bankruptcy was concluded at which time he maintained that he would be able to pursue the applications himself. There was also a generalised assertion that the Assessments may affect Dr Nugawela's future tax liability (during which he made reference to his challenge to the trustee's decision not to pursue the applications). 17 On the morning of the Tribunal hearing, Dr Nugawela filed further written submissions in which he restated the orders that he sought and added orders that would require the Assessments to be reconsidered by the Commissioner. In the written submissions, Dr Nugawela placed reliance upon an obiter observation in the judgment of Lehane J in McCallum v Commissioner of Taxation [1997] FCA 533; (1997) 75 FCR 458 to the effect that there may be circumstances in which a trustee and a bankrupt may have concurrent standing to challenge income tax assessments. On that basis, Dr Nugawela submitted: I submit that the [Commissioner] made notice of election under s 60(3) of the Bankruptcy Act 1966 and deemed the actions abandoned. However, the Trustee's election does not prejudice my rights to pursue my constitutional rights for review by the AAT, currently or at a future point in time; nor does it follow that the [Commissioner] may unjustly and unnecessarily seek dismissal. 18 As to the application to review the decision of the trustee, the submissions said: There is a Review of Trustee pending judicial determination in addition to other appeals on foot. This premature and aggressive attempt by the [Commissioner] to seek dismissal of the AAT actions is contemptuous of the Court's jurisdiction to determine what is just and equitable as well as my attempt to seek judicial determination, as a person whose interests are directly and adversely affected and who is relevantly dissatisfied in respect of the possible impact on future determinations, now only partially considered by the AAT. That the change in my standing has been the result of a series of events carefully choreographed through legal actions to accelerate bankruptcy in order to defeat constitutional rights and legal accountability, is an intentional tort that may well invoke discretionary powers of the courts or tribunals to contain 'legal' misfeasance. Only the AAT is empowered to make determinations both in merit and law. (original emphasis) 19 Later, Dr Nugawela referred to authorities as to the circumstances in which a trustee's decision may be reviewed. 20 Dr Nugawela then submitted that the review of the Assessments by the Tribunal could enable him to fulfil his tax obligations and make payment of tax that is due and payable. He expressed concern that the conclusive evidence provisions would otherwise operate to prevent any Court from going behind the debts claimed by the Commissioner. 21 Then, under the heading 'ADJOURNMENT', Dr Nugawela submitted: I seek the indulgence of the AAT in granting a further adjournment of the 6 actions that may be addressed subject to instructions from the courts where there are actions pending; or subject to lifting of bankruptcy under the new legislative provisions. 22 The request for an adjournment was also stated in the conclusion to the written submissions which was as follows: I seek consideration and support from the AAT to make orders: (i) Dismissing the Respondent's application for dismissal of the six actions; (ii) Remitting to the Respondent for review the actions for 2017/3323, 2017/3324, 2017/3325 and 2017/3326; (iii) Granting me standing or 'leave' to establish my tax liability for all six actions, to facilitate my ability to establish solvency on a properly established tax assessment and ensure a fair and just opportunity in my pending appeal against sequestration; (iv) In the alternative, adjourning all actions until I may exercise and reactivate my actions. 23 At the hearing before the Tribunal, counsel for the Commissioner (who also appears in the present appeal), dealt with matters relevant to standing and other complaints raised by Dr Nugawela about the conduct of the Commission. Counsel then made the following submission: So, we just again submit that this is - he's not got standing to make the submission that the matter should be remitted, but also provides no basis for why it should go back to the Commissioner to review. Lastly, he asks for an adjournment of today, again pending his release from bankruptcy, or pending a further hearing at another time. The Commissioner says that's not going to be helpful or useful. The matter is now with the trustee to resolve. The trustee has right to pursue actions, including applications to this tribunal in order to review assessments of debt, if that's appropriate. That's a matter for the trustee to pursue. At the moment the trustee has indicated, by silence, that he does not wish to pursue the six applications before us today, and in those circumstances … the Commissioner says, in accordance with the submissions today, and in accordance with the application made several weeks ago, that these applications are [best] dismissed. 24 Counsel then referred to the application by Dr Nugawela against the trustee and indicated that the trustee may be able to assist. The trustee then referred to those proceedings as still pending prompting the Tribunal to inquire of counsel for the Commissioner what would be the position if the six applications were dismissed and then Dr Nugawela was successful in the proceedings against the trustee and whether that would be fatal to Dr Nugawela's ability to agitate the dispute in relation to the debt owed to the Commissioner. 25 Counsel submitted that it might be possible for Dr Nugawela or the trustee to pursue the applications by seeking an extension of time, noting that it may or may not be granted. The matter was put in terms of a possibility that was 'conceivable'. It was also submitted that an application by the trustee in bankruptcy to pursue the applications after they had been dismissed 'may or may not be granted, depending on the history of why it has taken so long'. 26 The Tribunal took time to consider the application.

The Tribunal's reasons 27 The Tribunal decided to allow the Commissioner's application and all six applications were dismissed. In its reasons, the Tribunal began by characterising the application that it had to consider as being an application by the Commissioner to dismiss the six review applications on the basis that Dr Nugawela (a) is bankrupt; (b) has no standing to progress the applications; and (c) cannot progress the applications once he is discharged from bankruptcy (at para 2). 28 The Tribunal then set out a detailed chronology of the history of the Assessments, the objections to them and the six applications to review the Assessments as well as the course of the proceedings in relation to the sequestration order against the estate of Dr Nugawela and communications with the trustee concerning his attitude to proceeding with the six applications (paras 3-29). There was no mention in the chronology of the challenge by Dr Nugawela to the decision by the trustee not to proceed with the six applications. 29 The Tribunal noted that there was no appearance by Dr Nugawela at the hearing (para 30). However, it referred to extensive submissions provided by Dr Nugawela in writing (para 31). 30 The Tribunal noted that the basis upon which the dismissal application was brought was 'not altogether clear' as the submissions for the Commissioner did not expand on why the identified circumstances relied upon in support of the application should cause the dismissal of the application (para 41). 31 Under the heading 'Consideration', the Tribunal then referred to the submissions filed by Dr Nugawela as canvassing 'a wide range of issues most of which are irrelevant to the application to dismiss'. The Tribunal then listed matters that were included in those issues (para 46). The final matter listed was described as follows: (e) The standing of the Applicant as a 'dissatisfied person' and the effect of subsection 60(3) of the Bankruptcy Act, the Respondent's status as a major creditor in the Applicant's bankruptcy and the conduct of the Respondent and having the applications adjourned or held in abeyance while various other court proceedings proposed by the Applicant are determined (Applicant's submissions of 18 December 2017). 32 It is to be noted that the nature of those proceedings was not specifically adverted to by the Tribunal. In particular, the fact that proceedings had been brought to challenge the trustee's decision to abandon two of the applications and the fact that the approach of the trustee in not proceeding with the other applications was also challenged was not specifically mentioned. 33 The Tribunal then quoted some 16 paragraphs of the Commissioner's submissions (para 47). The quoted passages included the following: The applicant has indicated he has commenced an application to the Federal Court (WAD528/2017) to review of the trustee in bankruptcy's decision to abandon the AAT proceedings. There is no evidence on which to assess the strength of the review or the time period in which it will be determined. There is no evidence on which to assess the relative cost, time and efficiency merits of an adjudication in this tribunal as against an adjudication of claims within the usual processes of administering the bankrupt estate of the applicant pursuant to the Bankruptcy Act 1966 (Cth) and its regulations. The absence of that information or even the period in which the review will be completed make it impossible for the AAT to assess the assertions of standing if the review was successful. 34 However, most of the quoted passage was concerned with the circumstances in which a bankrupt may have standing to progress applications challenging taxation assessments after the bankruptcy is discharged. The quoted passage from the Commissioner's submissions concluded: The applicant indicates a desire to progress these applications once his bankruptcy has concluded. The claims by creditors are released at the completion of the bankruptcy and the claims against creditors remain the property of the trustee in bankruptcy. The discharge from bankruptcy will not permit the applicant to pursue these applications ... 35 Therefore, in the quoted submissions, the Commissioner couched what Dr Nugawela sought to do as being to undertake a personal challenge to the assessments as distinct from complaining that his trustee in bankruptcy should challenge those assessments. As I have indicated, that was part of Dr Nugawela's position. However, he also claimed that his trustee in bankruptcy should be proceeding with the six applications. 36 The Tribunal then stated that subject to one matter (not presently relevant) that it 'agrees with the [Commissioner's] submissions' (para 48). 37 The Tribunal then went on to consider a number of authorities concerned with the circumstances in which a bankrupt can pursue objections to income tax assessments and pursue applications in the Tribunal concerned with such matters (paras 49-58). Therefore, it was not the case that the Tribunal simply adopted the Commissioner's submissions as its own reasons. It went on to express its reasons for agreeing with the Commissioner's submissions. In the course of doing so, the Tribunal made no mention of the contention that the matter should be adjourned pending the determination of the challenge by Dr Nugawela to the trustee's approach. 38 The Tribunal concluded its reasons with the following statement under the heading 'Decision' (para 59): For the reasons set out above, the Tribunal finds that: (a) The Applicant has no standing to progress the applications; and (b) The applications have been deemed to be abandoned by operation of s 60(3) of the Bankruptcy Act; and (c) Accordingly, the applications: (i) are frivolous or vexatious for the purposes of s 42B(1)(a) of the AAT Act; and/or (ii) have no reasonable prospect of success for the purposes of s 42B(1)(b) of the AAT Act; and/or (iii) are otherwise an abuse of process of the Tribunal for the purposes of s 42B(1)(c) of the AAT Act. 39 Therefore, the Tribunal approached the matter on the basis that all matters turned on the question of standing.

The Commissioner's submissions on the appeal 40 The Commissioner says that by reciting the submissions and then indicating that the Tribunal agrees with the Commissioner's submissions, the Tribunal should be taken to have considered and dismissed the contention by Dr Nugawela that any dismissal of the proceedings should abide the outcome of his challenge to the approach being adopted by the trustee in bankruptcy. It is further submitted that the inquiry made by the Tribunal at the oral hearing about what would happen if the proceedings were dismissed indicated that the Tribunal had in mind the issue of whether there should be an adjournment pending the outcome of those proceedings. Finally, it is said that the order dismissing the proceedings being 'antithetical' to an adjournment, the Tribunal in making that order must be taken to have considered and rejected the possibility that the six applications might be adjourned or held in abeyance. 41 However, having regard to the overall structure of the reasons, I am unable to accept those submissions. Rather, the Tribunal focussed upon whether the abandonment by the trustee had the effect that there was no standing for Dr Nugawela to pursue the six applications in the Tribunal in all circumstances. That is to say, in effect, the outcome of the application to challenge the trustee's decision concerning the six applications could not enable Dr Nugawela to have standing to pursue his complaints about the assessments either during or after his bankruptcy. This is evident from the terms in which the Tribunal summarised its decision. It is also evident from the fact that the quoted submissions from the Commissioner were directed to that issue as were the reasons of the Tribunal that followed those quoted submissions. 42 For the Commissioner it was also submitted that the dismissal did not close out Dr Nugawela (or his trustee) from seeking to bring further applications to challenge the Assessments and that could be done by seeking an extension of time to bring those applications and could be done because the applications had not been substantively dismissed. Therefore, their dismissal was not a matter of 'catastrophic prejudice' and the Tribunal's reasons should be considered in that context. It may be observed that a trustee who was to seek an extension of time to bring fresh applications to challenge the Assessments in circumstances where the Tribunal had made a considered decision to dismiss the proceedings based upon the abandonment of those proceedings by the trustee may not be facing plain sailing. At the time the matter was before the Tribunal it was concerned with challenges to the Assessments that had been brought within time. Plainly, there is prejudice in the sense that a trustee bringing proceedings if required to do so after a review of the trustee's approach in abandoning the proceedings, would face difficulties that would not arise if the applications were still on foot and had simply been held in abeyance pending the challenge by Dr Nugawela to the trustee's approach to the assessments. 43 In any event, the issue raised by the ground is not addressed by pointing to matters that may have justified a decision by the Tribunal not to hold matters in abeyance. The issue was whether that aspect of the issues for determination by the Tribunal, being a material matter, was addressed by the Tribunal at all. If it was not, it is not for this Court on review to form a view about whether the Commissioner's dismissal application should have been held over for a period of time pending the challenge to the trustee's approach or whether the proceedings should have been dismissed despite those proceedings being ongoing. That is a determination for the Tribunal to make. 44 The Commissioner did not contend that there would be an absence of legal error if the Tribunal ignored the submission by Dr Nugawela that matters should be adjourned or held in abeyance. Rather, the Commissioner's position was that it was a submission that had been considered. For reasons I have given, I am not persuaded that it was considered. The relevant error of law may be characterised as a failure to accord procedural fairness or as a failure to discharge the statutory task. No doubt the Tribunal faced difficulties given the discursive nature of the written submissions filed by Dr Nugawela. However, for reasons that have been given, the point was expressed a number of times (albeit amongst other matters). It was a matter of some importance. It was a matter that the Tribunal turned its mind to at the brief oral hearing. However, in the result, in my view, the matter was not addressed in the Tribunal's reasons. 45 Therefore, the appeal should be allowed and the matter remitted to the Tribunal for consideration of the limited question whether a determination of the application by the Commissioner should be held in abeyance pending the outcome of Dr Nugawela's challenge to the approach by his trustee.

Other matters 46 A tax may not be made incontestable because to do so would place the impost beyond examination as to the limits upon legislative power: Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23; (1995) 183 CLR 168 at 221-222. In Commissioner of Taxation v Futuris Corporation Limited [2008] HCA 32; (2008) 237 CLR 146 at [6]-[7], Gummow, Hayne, Heydon and Crennan JJ described the nature of the review provided for in respect of income tax assessments in the following terms: Part IVC of the Taxation Administration Act 1953 (Cth) (the Administration Act) contains provisions for the making of taxation objections and their disposition by the Commissioner, for review by the Administrative Appeals Tribunal (the AAT) and for 'appeals' to the Federal Court against decisions by the Commissioner upon certain taxation objections. Further, s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) provides an 'appeal' to the Federal Court, on a question of law, from a decision of the AAT. With respect to a decision of the AAT, the Commissioner is obliged by the Administration Act to take such action, including amendment of any assessment concerned, as is necessary to give effect to the decision (s 14ZZL). The Commissioner is required also to implement orders of the Federal Court by steps which may include the amendment of assessments (s 14ZZQ). Neither the AAT nor the Federal Court itself is empowered by Pt IVC to vary assessments. 47 Much of the submissions advanced by Dr Nugawela on the present appeal (and before the Tribunal) concerned whether his bankruptcy and the failure by his trustee to pursue the applications to review the Assessments meant that the Assessments were not subject to any scrutiny and, in consequence, were incontestable. Further, it appears that Dr Nugawela claims that by reason of the dismissal of the six applications he was deprived of the ability to challenge the Assessments for the purpose of demonstrating that the liability to the Commissioner was less than the amount assessed which may enable him to demonstrate that his bankruptcy should be annulled. Particular reliance was placed on the dissenting view of Hill J in McCallum v Commissioner of Taxation to the effect that, notwithstanding bankruptcy, a taxpayer retains the right to challenge an assessment even if it relates to the period of the bankruptcy. That view has not had favour: Robertson v Commissioner of Taxation [2003] FCA 944 at [22]-[23], upheld on appeal in Robertson v Commissioner of Taxation [2004] FCAFC 46; (2004) 137 FCR 513; see also the analysis by McKerracher J in Commissioner of Taxation v Bosanac [2016] FCA 448 at [69]-[79] and the recent decision to the same effect by Jagot J in Hanna v Deputy Commissioner of Taxation [2020] FCA 1021 at [21]-[31]. In any event, these matters appear to concern grounds on which Dr Nugawela may himself have had an interest that meant he had standing to pursue the six applications notwithstanding his bankruptcy. For reasons I have given, that aspect of the decision by the Tribunal is not in issue in the appeal. Further, as I have noted, in the course of oral submissions Dr Nugawela confirmed that he seeks to have the trustee pursue the six applications and that he does not wish to pursue them himself. It may be that they are matters that Dr Nugawela advances as reasons why his trustee should proceed with the six applications challenging the Assessments. If so, they are matters to be raised in the context of that application. 48 Dr Nugawela also complained that a hearing had been listed by the Tribunal in respect of two of the applications for March 2017 but the sequestration proceedings led to those proceedings being deferred while the stay of the sequestration orders was in place. Those matters, which substantially preceded the decision of the Tribunal under review, are not relevant to the present issues before the Court. 49 Reference was also made to aspects of the challenge to the validity of the bankruptcy notice on which the Commissioner's application for a sequestration order was based. Those matters were determined by a Full Court of this Court in Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164 (North, Dowsett and Edelman JJ). 50 Complaints were also raised about the timing of the application for a sequestration order but Dr Nugawela has also pursued complaints about the making of that order to the Full Court, unsuccessfully. Having been determined in those proceedings they do not arise in the present appeal.

Conclusion 51 It follows that the appeal should be allowed, the decision of the Tribunal set aside and the matter remitted to the Tribunal for further determination in light of the reasons of this Court. 52 It was accepted by the Commissioner that costs should follow the event. There will be an order that will allow Dr Nugawela to recover such costs as may be recovered by a litigant in person. I certify that the preceding fifty-two (52) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Colvin.