Pitman v Commissioner of Taxation

Federal Court of Australia (Full Court)|2020-12-21|Before: Mr P, Davies J, Bromwich J, Allsop CJ, Bromwich JJ

Introduction 17 This is an appeal under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) from a decision of the Administrative Appeals Tribunal. The Tribunal dismissed an application for an extension of time in which to lodge an application for review of a decision of the respondent, the Commissioner of Taxation. In October 2016, the Commissioner had disallowed objections by the applicant, Ms Debbie Pitman, to income tax assessments made in August 2014 for the financial years ending 30 June 2011, 2012 and 2013. The basis for the assessments was unexplained deposits of money into a bank account in her name, which were treated as assessable income. In December 2017, a final order was made against Ms Pitman in the Supreme Court of Victoria for just over $2 million in favour of the Commissioner, being a tax debt arising out of the income tax assessments. In January 2018, she filed for bankruptcy, and in April 2018 she was declared bankrupt. 18 In October 2019, Ms Pitman was charged with four criminal offences, alleged to have taken place in the period between when the income tax assessments were made in August 2014 and the declaration of bankruptcy in April 2018. Each criminal charge was related to the tax debt or the administration of her bankrupt estate. 19 In August 2020, Ms Pitman made an application under s 14ZZ(1)(a)(i) of the Taxation Administration Act 1953 (Cth) (TA Act) to the Tribunal to review the Commissioner's objection decision, and an application for an extension of time within which to bring her review application. Section 14ZZ(1) of the TA Act provides: If the person is dissatisfied with the Commissioner's objection decision (including a decision under paragraph 14ZY(1A)(b) to make a different private ruling), the person may: (a) if the decision is a reviewable objection decision - either: (i) apply to the Tribunal for review of the decision; or (ii) appeal to the Federal Court against the decision; or (b) otherwise - appeal to the Federal Court against the decision. 20 The live question before the Tribunal was whether Ms Pitman was a person "dissatisfied" with the Commissioner's objection decision for the purposes of s 14ZZ(1)(a)(i), given that her financial affairs had become the responsibility and concern of her trustee in bankruptcy. In order to have standing, she had to have an interest in the review application outcome that transcended the financial and related interests of her bankrupt estate. The Tribunal found that she did not have such a transcendent interest. The application for the extension of time in which to bring the application for review of the Commissioner's decision was therefore dismissed.

Before the Tribunal 21 Ms Pitman had been charged with four criminal offences under Victorian State law in October 2019, not federal offences under Commonwealth law. They comprised three charges of obtaining a financial advantage from the Australian Taxation Office (ATO) by deception contrary to s 82(1) of the Crimes Act 1958 (Vic), and one charge of conspiracy to cheat and defraud the ATO of her liability for an income tax debt by deception, an offence at common law. The making of her August 2020 review application and extension of time application to the Tribunal was apparently motivated by the criminal charges brought against her, and the impact that a successful review application might have on her chances of defeating some or all of those charges. 22 Before the Tribunal, Ms Pitman accepted that ordinarily, as a bankrupt, she would not be a person who was "dissatisfied" for the purposes of s 14ZZ(1)(a). However, she argued that because of the criminal charges she was facing, the Commissioner's objection decision would have consequences for her that transcended her discharge from bankruptcy so as to give her standing. That was argued to be so because the four charges related to amounts that were the product of the assessments and the subject of the Commissioner's objection decision. Her argument was that if the review application was successful, the tax debt would cease to exist and a foundational element of at least the first three charges of obtaining a financial advantage by deception would no longer exist. For present purposes it is not necessary to address the otherwise live question of whether, even with the tax debt in existence, taking steps to prevent it being paid could ever constitute the obtaining of a benefit. 23 An alternative argument advanced by Ms Pitman was that even if the tax debt existed at the time of her conduct, all of which took place after the assessments had been made, she could rely upon those assessments being set aside and the tax debt being eliminated, or at least being of a different quantum, to raise a reasonable doubt as to the state of mind element of dishonesty. 24 The Tribunal considered the arguments advanced in some detail by reference to the nature of the charges and their elements, and a body of appellate authority in the High Court and in intermediate appeal courts, and how that interacted with the objection review rights in the TA Act and the obligations imposed by the Bankruptcy Act 1966 (Cth). In the course of that exercise, the Tribunal considered and applied the decision of the majority of the Full Court in McCallum v Commissioner of Taxation [1997] FCA 533; 75 FCR 458 per Lehane J, with whom Whitlam J agreed, Hill J dissenting. 25 The Tribunal concluded that even if Ms Pitman was successful in her review application, that would not reflect on the essential elements of the criminal charges, largely because the assessments and the objection decision all took place before the alleged conduct upon which the criminal charges were based. The Deputy President concluded that the review application and any successful outcome for Ms Pitman could not have any relevance to the hearing of the criminal charges so as to make her a person dissatisfied with the objection decision.

The Full Court decision in McCallum 26 In McCallum, Lehane J applied the decision of the High Court in Cummings v Claremont Petroleum NL [1996] HCA 19; 185 CLR 124, which by majority found that the right to pursue an appeal against the objection decision of the Commissioner is not "property" which vests in a trustee in bankruptcy. The bankrupts in Cummings did not have standing to appeal a judgment against them because they had no identified interest in the outcome of the proceeding which went beyond the effect of bankruptcy. That was because their assets and financial interests, being the only issue they sought to vindicate, had vested in the trustee in bankruptcy. The standing of a bankrupt to bring an objection review application before the Tribunal therefore turns on having an interest which is not itself subsumed by the effect of bankruptcy. 27 In McCallum, Lehane J was troubled by a range of potential outcomes in some circumstances if either a bankrupt, or a trustee in bankruptcy, could not challenge an adverse objection decision by the Commissioner. Even though McCallum was concerned with the bankrupt's standing to apply for a review by the Tribunal, his Honour assessed the related question of standing of both a bankrupt and a trustee in bankruptcy as a question of construction of the assessment, objection and objection appeal provisions of the Income Tax Assessment Act 1936 (Cth) and the corresponding objection appeal provisions in the TA Act. His Honour observed that this course of considering both perspectives was taken in Cummings. His Honour started with the position of the trustee, and then turned to the position of the bankrupt. 28 For the trustee, Lehane J considered that the three questions posed by s 14ZZ(1) were whether the trustee was "the person" referred to in that provision; whether the trustee was appropriately described as "dissatisfied"; and whether an application under that provision fell within the power in s 134(1)(j) of the Bankruptcy Act, namely, the power to "bring, institute or defend any action or other legal proceeding relating to the administration of the estate": McCallum at 472D. 29 Lehane J readily answered the second and third questions in favour of the trustee: the trustee was able to be characterised as "dissatisfied" if they considered the assessment excessive and thus prejudicial to other creditors; and the power in s 134(1)(j) should not be read in a way that narrowed rather than enlarged the authority of a trustee to take appropriate steps in the administration of an estate for the benefit of those having a claim upon it, such that "legal proceeding" encompassed Tribunal proceedings. 30 In relation to the first question, while "the person" in s 14ZZ(1) and other provisions dealing with making objections to assessments was the bankrupt taxpayer, such that the trustee had no power to lodge an objection, Lehane J concluded that this did not preclude the exercise of review or appeal rights under s 14ZZ of the TA Act, not as the exercise of a property right of the bankrupt, but rather because, like an appeal against a judgment debt, it was a proceeding relating to the administration of the estate authorised by 134(1)(j) of the Bankruptcy Act. However, that conclusion did not mean that Mr McCallum necessarily lacked standing also to apply for a review of the objection decision whilst a bankrupt, provided he could properly be regarded as a person who was dissatisfied with the Commissioner's objection decision. 31 Lehane J considered the related concepts pertaining to standing of being "a person who is aggrieved" by a decision or conduct for the purposes of seeking judicial review under ss 5(1) or 6(1) of the Administrative Decisions (Judicial Review) Act 1977 (Cth), or "a person interested" in a decision or conduct under s 12(1) of that Act. His Honour also considered general law requirements for standing to obtain a declaration of right or an injunction to restrain the infringement of a public right. His Honour concluded that it was difficult to see why "dissatisfaction" would bestow any more generous an outcome as to standing on a bankrupt taxpayer seeking a review of an adverse objection decision, than on a bankrupt person seeking to appeal against a judgment for debt. 32 Applying these conclusions, Lehane J found that Mr McCallum was "likely" to lack standing to apply to the Tribunal for a review of the objection decision. His Honour deliberately used that word to reflect the fact that Mr McCallum would not have standing merely because, for example, a successful challenge to the objection decision might produce a surplus in his estate, or because of any effect that the assessments or objection decision might have on his reputation. However, his Honour found that it was conceivable that there may be some other footing by which standing could be claimed, such as an objection decision having consequences in relation to tax payable in years following discharge from bankruptcy, for which Mr McCallum would be personally liable. In that event, the dissatisfaction would extend beyond the effect of bankruptcy, and Mr McCallum would have standing. Accordingly, the Tribunal's decision was set aside by reason of being contrary to Cummings, giving Mr McCallum an opportunity to claim standing.

The grounds of appeal and the Commissioner's notice of contention 33 Ms Pitman by her counsel pressed only the following grounds of appeal, abandoning at the hearing the remaining two grounds in the notice of appeal: [1] The Tribunal erred in law in deciding that the Applicant is not a person who is, within the meaning of s 14ZZ(1)(a) of the Taxation Administration Act 1953, "dissatisfied" with the Commissioner's objection decision and therefore the Applicant is not entitled to make an application to the Tribunal for review of that objection decision [7, 83 & 84]. [2] The Tribunal misunderstood and/or misapplied the decision of the Full Federal Court in McCallum v Commissioner of Taxation [1997] FCA 533. 34 Ms Pitman asserted that the dissenting judgment of Hill J in McCallum should now be followed, or in the alternative that she fell within a broad understanding of "dissatisfied" identified by Lehane J in McCallum at 475E, summarised above. The reasoning of Lehane J in McCallum has been followed by innumerable decisions of this Court in the intervening almost quarter of a century. His Honour's decision is plainly correct and should continue to be followed, obviating any need to consider the question of whether there is any issue of that decision being plainly wrong: see Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 per Allsop CJ. In any event, I would not depart from Lehane J in McCallum for the reasons given by both the Chief Justice and Davies J. 35 For the reasons given by Davies J, the applicant has failed to establish any error of law on the part of the Tribunal. In particular, I agree with her Honour's conclusions that: (a) the constitutional argument must fail because s 14ZZ does not operate to impose an incontestable tax liability on a taxpayer, following Giris Pty Ltd v Commissioner of Taxation (Cth) [1969] HCA 5; 119 CLR 365 at 378-379; (b) there was no legal error established in the Tribunal's application of McCallum, nor was any other vitiating legal error established; (c) there is no need to consider the Commissioner's notice of contention to the effect that Ms Pitman had not adduced any actual evidence that the objection decision might, if not set aside, have consequences for her consistent with McCallum, to which I add the note that the Full Court should ordinarily confine itself to considering "only those issues which it considers to be dispositive of the justiciable controversy raised by the appeal": Boensch v Pascoe [2019] HCA 49; 268 CLR 593 at [7]-[8], [101]; (d) there is no need to consider Ms Pitman's application to adduce fresh evidence of her now being charged, as a discharged bankrupt, with federal offences, because that could only be relevant to the question of remitter, which does not arise as the Tribunal's decision stands. 36 The application must therefore be dismissed with costs. I certify that the preceding twenty (20) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Bromwich.

Appeals Tribunal Act 1975(Cth)

Bankruptcy Act 1966(Cth)s 134(1)(j)

Crimes Act 1958(Vic)s 82(1)

ALLSOP CJ: 1 I have read the reasons to be published of Davies J. I agree with her Honour's reasons and with the orders that she proposes. I have also read the reasons of Bromwich J and I also agree with those reasons. 2 I wish to add only two comments, both of which are consistent with the reasons of Davies J and Bromwich J. 3 First, as to McCallum v Commissioner of Taxation [1997] FCA 533; 75 FCR 458, it is to be noted that the Full Court in that case was sitting (as we are) in the original jurisdiction, although hearing a statutory "appeal" from the Administrative Appeals Tribunal. Justice Davies has set out what I said in Minister for Immigration, Citizenship, Migrant Services and Multicultural Affairs v FAK19 [2021] FCAFC 153 at [2]-[13]. It is also necessary to reiterate the primacy of Full Court authority in this Court. As in FAK19 there was no argument on the matter, but for all the reasons set out in FAK19 at [14]-[29], in particular the reasons directed to the text and structure of the Federal Court of Australia Act 1976 (Cth), Full Court decisions in the original jurisdiction (often sat for the purpose of expressing a view on a legal or constructional question) should not be viewed somehow as of lesser authority than Full Court decisions in the appellate jurisdiction. 4 Secondly, the Tribunal here dealt with the matters put to it. There was no error of law in how it addressed the limited evidence and the submissions. It may well be, however, that in a given and different set of circumstances, a bankrupt taxpayer is "dissatisfied" within the meaning of the statute. It may be that the liability to tax said by the bankrupt taxpayer to have been wrongly imposed, is critical to the elements of a criminal charge concerned with the taxpayer's taxation affairs. But it should not be thought that such a conclusion built on logical legal analysis of the elements of the offence is the only way one could demonstrate the requisite standing of "dissatisfaction" in circumstances where the taxpayer has been charged with a criminal offence concerned with his or her taxation affairs. Juries do not always reason in strictly logical or analytical ways. If there were evidence from someone of relevant experience that the overturning of the assessment could be a material factor (whether entirely logical or analytically satisfying) in persuading a jury of the innocence of the taxpayer in a criminal trial, such would be relevant to the evaluation of the question as to "dissatisfaction" and so standing. I certify that the preceding four (4) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Chief Justice Allsop.

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