Windshuttle v Deputy Federal Commissioner of Taxation 93 ATC 4992;

Federal Court of Australia|1997-12-18|Before: French J

REASONS FOR JUDGMENT INTRODUCTION Mt Gibson Manager Pty Ltd paid fringe benefits tax in respect of meals provided for its employees at a mine site in 1988 and 1989. The payments were made pursuant to assessments issued by the Commissioner of Taxation for those years. In 1995 the company lodged objections to the assessments and applications that the objections be treated as duly lodged. The applications were refused. The company appealed to the Administrative Appeals Tribunal which affirmed the Commissioner's decision. It was common ground between the company and the Commissioner that if the extension were granted the objections would have been allowed. The company now appeals to this Court from the decision of the Administrative Appeals Tribunal. FACTUAL BACKGROUND Mt Gibson Manager Pty Ltd is a public company in the business of gold mining and exploration at Mt Gibson in Western Australia. Employees of the company in 1988 and 1989 were provided with sleeping quarters and meals while at the Mt Gibson mine site. In taxation returns for the two years ended 31 March 1988 and 31 March 1989, the company included, as taxable fringe benefits, board fringe benefits within the meaning of s 35 of the Fringe Benefits Tax Assessment Act 1986. These benefits included the provision of meals. Assessments issued on 15 June 1988 and 18 September 1989 which determined that the company was liable for fringe benefits tax on the meals it had provided to its employees. In 1994 the company began using Duesburys Chartered Accountants, to advise on its tax affairs. In May 1994 Mr Peter Moltoni, a partner in that firm, lodged objections to similar fringe benefits tax assessments for the years ended 31 March 1990 to 31 March 1993 respectively. Objections to the assessments for 1988 and 1989 respectively were lodged on 13 January 1995. An application to treat the 1990 to 1993 objections as duly lodged under s 82 of the Fringe Benefits Tax Assessment Act 1986 or s 14ZY of the Taxation Administration Act 1953 was lodged on 18 May 1994. A similar application in respect of the 1988 and 1989 years was lodged on 13 January 1995. The application and objections in respect of the 1990 to 1993 assessments were allowed. Those relating to the assessments of 1988 and 1989 were not. In disallowing the 1988 and 1989 objections, the Commissioner's delegate noted that the time limited for lodging them had expired sixty days after the assessments issued. Thus, they were more than six and five years out of time respectively. These delays had been explained in terms of: i) the conduct of the Australian Taxation Office which allegedly led the company to believe that the board expenses would be the subject of fringe benefits tax; ii) an alleged acknowledgment by the Commissioner that the objection would have been allowed if lodged within time; iii) the effect of the decision of the Federal Court in Windshuttle v Deputy Federal Commissioner of Taxation 93 ATC 4992; (1993) 46 FCR 225. A delegate of the Commissioner concluded on the merits of the objection as follows: "In summary, it is considered that the provision of meals in these circumstances constitutes a property fringe benefit which is either an exempt benefit due to the operation of section 41, or which has a nil taxable value by virtue of section 44. However, as the requests have been lodged outside the three year time limit for credit amendments, no amendment can be made." (AB36) But as was said at par 22 of the reasons for disallowance: "This is not a case where the objection would have been allowed had it been lodged within the prescribed time. As discussed further at paragraph 36 below, it has been the Commissioner's policy until only recently that such employees would not have been entitled to an income tax deduction for such meals if they had purchased the meals themselves. In any event, the objections here were not lodged as soon as circumstances reasonably permitted. The employer chose not to object after receiving the assessments (based on the returns as lodged), choosing instead to accept the assessments as correct and to "rest on their rights". Objections were not lodged until more than six years had expired for the 1988 assessment and more than 5 years in the case of the 1989 assessment. IT 2455 does not support granting the extensions." The applicant appealed against the disallowance to the Administrative Appeals Tribunal. On 21 May 1996 the Administrative Appeals Tribunal affirmed the Commissioner's decision. The company now appeals against that decision to this Court. STATUTORY FRAMEWORK Employees of the company were, at the relevant time, covered by the Gold Mining Consolidated Award 1980. Under the Award they were, in certain circumstances, entitled to be provided with one meal each day. Additional meals were provided by way of concession and not under an award entitlement. The dining facilities were located adjacent to the mine site. They were also said by the company to be open to the public who could use them for a fee. An employer who provided a "board meal" to an employee was taken to have provided a benefit to that employee for the purposes of the Fringe Benefits Tax Assessment Act 1986 (s 35). The Act provided a scheme for assessment of FBT, objections to assessments and the lodgment of objections out of time. An employer dissatisfied with an assessment could within sixty days lodge with the Commissioner an objection in writing against the assessment (s 80). An objection lodged out of time could, on application to the Commissioner, be treated as duly lodged:

"82(1) Where the period for the lodgment by an employer of an objection against an assessment has ended, the employer may, notwithstanding that the period has ended, send the objection to the Commissioner together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged."

Section 83(1) provided: "83(1) The Commissioner shall consider each application made under sub section 82(1) and may grant or refuse the application." The taxpayer could appeal an adverse decision under s 83(3): "83(3) An employer who is dissatisfied with a decision under subsection (1) in respect of an application made by the employer may apply to the Tribunal for review of the decision." These provisions should be read with s 74 of the Act relating to amendment of assessment which provides in part: "74(1) The Commissioner may, at any time within a period of 3 years after the original assessment date in relation to an assessment, amend the assessment by making such alterations or additions to it as the Commissioner thinks necessary. (2) Subject to this section, the Commissioner may, after the end of 3 years after the original assessment date in relation to an assessment, amend the assessment by making such alterations or additions to it as the Commissioner thinks necessary. . . . (4) No amendment effecting a reduction in the liability of an employer under an assessment shall be made after the end of 3 years after the original assessment date. . . . (7) Nothing in this section prevents the amendment of an assessment: (a) in order to give effect to a decision on a review or appeal; or (b) by way of reduction in any particular pursuant to an objection made under this Act or pending an appeal or review. " THE COMMISSIONER'S BOOKLET In March 1988 the Commissioner published a revised version of a booklet entitled "Fringe Benefits Tax - A Guide for Employers". An explanatory note on the inside front cover of the booklet stated: "This booklet is designed to help employers meet the requirements of the FBT legislation. There are separate chapters dealing with the main kinds of fringe benefits which employers are likely to provide." An introduction at p 9 said: "This booklet is designed to tell employers about the operation of the Fringe Benefits Tax. Specifically, it allows employers to: . know whether they have to pay the tax . understand what their obligations and responsibilities are . calculate the tax they have to pay on various kinds of fringe benefits . decide what records they have to keep . know when returns and instalment payments have to be made to the Tax Office." Chapter 10 of the booklet was entitled "Board fringe benefits". It included the following statements: "An employee is treated as being provided with board if the employee is entitled to the provision of accommodation and the following conditions are satisfied: . there is an entitlement under an industrial award to be provided with at least two meals a day; or . under an employment arrangement at least two meals a day are ordinarily provided. Some common examples of where the board rules could apply are where meals are given to farm hands, etc., in a farmhouse kitchen or in a meal area attached to a bunkhouse. They could also apply to meals in a dining facility located on a remote construction site, oil rig or ship." "To be a 'board meal', the meal must also be: supplied by the employee's employer or, if the employer is a company, by a related company in a wholly owned group." The statement went on to say that "meals provided in a dining facility open to the public, except for board meals provided to employees of a restaurant, motel, hotel etc" were not regarded as board meals. THE TRIBUNAL'S DECISION The Tribunal identified the issue before it as: "...whether the applicant's application to lodge objections for the years ended 31 March 1988 and 31 March 1989, which were lodged on 13 January 1995, should be treated as having been duly lodged pursuant to s 82(1) of the FBTAA as then applicable." In truth the issue was whether the objections should be treated as being duly lodged. But this was a slip of the pen and nothing turns on it. The substantive taxation issue was not before the Tribunal. Nevertheless it referred to evidence from Mr Moltoni in support of a submission by counsel for the company that the company and its advisors included board meals in its returns in the mistaken belief that they were assessable. It appeared, however, that the meals were not assessable because they were provided by the company to its employees in a dining facility open to the public. It was common ground before the Tribunal that if the objections were to be treated as lodged within time they would be allowable. The Tribunal referred to submissions made by the parties. It held that s 82(1) of the Fringe Benefits Tax Assessment Act gave it a discretion in deciding whether to treat the company's objections as duly lodged. It rejected an argument advanced for the company that there was no residual discretion. After considering the terms of ss 74, 80 and 136 of the Fringe Benefits Tax Assessment Act the Tribunal held that the scheme of the Act in relation to the recovery of overpaid fringe benefits tax was intended to be exhaustive and that common law restitutionary principles were inapplicable. The Tribunal considered whether it was appropriate to exercise its discretion under s 82 to extend time for the lodging of objections. It set out a list of relevant factors derived from the judgment of Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344. These were: (a) Whether there was an exceptional explanation of the delay and that it would be "fair and equitable in the circumstances" to extend time. (b) Any action taken by the company to make the decision-maker aware that the finality of its decision was being contested. (c) Any prejudice to the respondent which may have resulted from the delay. (d) Any unsettling of people other than the respondent or of established practices. (e) The merits of the substantial application; and (f) Considerations of fairness as between the company and other persons in like positions.

On the matter of delay, the Tribunal found insufficient evidence to justify a conclusion that the delay in lodgment of the objections and applications was due to a belief that the board meals were assessable or that such a belief was based upon any representations by the Commissioner. In any event ignorance of the law was not a valid excuse. Moreover the law as explained in the Commissioner's booklet was correct. The Tribunal held, however, that an acceptable explanation for delay was not an essential pre-condition for the exercise of the discretion. As to action taken by the company to make the decision-maker aware that the finality of its decision was being contested, the Tribunal found that the respondent first became aware that the company was contesting the assessments when it lodged the notices of objection. The Tribunal concluded that the company rested on its rights and took no steps to make the decision-maker aware that it was contesting the finality of the decision. On the question of prejudice the Tribunal found that the respondent would not be prejudiced if an extension of time were granted. The company would clearly be prejudiced if no extension were granted because it would not be able to recover the fringe benefits tax overpaid in 1988 and 1989. On the question of unsettling of other persons and disruption to established practices, the Tribunal took the view that if the application to extend time were granted on the grounds of common law principles and unjust enrichment despite the limitations imposed by the statute it would create massive disruption in the administration of the scheme regarding overpayments. A proper administration of the statutory provisions, however, would not unsettle others or cause disruption. The merits of the substantive application were conceded by the respondent which had agreed that if the extension of time were granted to lodge the objections to the assessments the respondent would allow the substantive claim. Finally, the Tribunal had regard to considerations of fairness and the position of other persons similarly placed. It held that the fact that an extension of time was granted or not granted would depend on the factual circumstances of the particular case. Thus the only consequence of a decision to refuse an extension of time would be to deny the company taxation benefits it would otherwise have obtained. It would not be conclusive against other applicants who might rely on different factual circumstances. Considerations of fairness to others would not be raised by the decision. On that basis the Tribunal found that considerations of fairness to others would not support the granting of an extension of time. Subsequent discussion by the Tribunal was brief. It quoted a statement of one of its senior members in another case which was referred to in Case 26/95 reported at 95 ATC 269: "Limitation periods in statutes are not to be ignored and the policy behind this is clear; it works to the advantage of all parties concerned in litigation that matters are brought speedily to their conclusion, and limitation periods ensure that applicants commence actions promptly. But the discretion to extend time limits envisages that other matters may be relevant in fixing the period in which an applicant ought to be able to begin proceedings, and the strict enforcement of statutory time frames may be an anathema to the process of merit and judicial review which leads ultimately to what is just and equitable between the parties." Having quoted that passage the Tribunal concluded at par 44: "This is a commercial case involving an applicant who had the benefit of professional advice and assistance in the preparation and lodgment of the income tax returns in the years in question. The Tribunal considers that, on all the evidence before it and in light of the principles in Hunter Valley, it is not appropriate to grant the extension of time sought by the applicant." For the preceding reasons the Tribunal affirmed the decision of the respondent. GROUNDS OF APPEAL The Notice of Appeal from the decision of the Administrative Appeals Tribunal raises a number of grounds which are as follows: "4.1 The Tribunal erred in law in finding that it was lawful to exclude from evidence substantial parts of Mr Moltoni's Affidavit, on the basis that such parts were either inadmissible, not relevant, inadmissible opinion, assumption or hearsay when, as a matter of law, such evidence was relevant and admissible in relation to - 4.1.1 the explanation for delay; 4.1.2 the Respondent's awareness that the assessment was contested; 4.1.3 the matter of prejudice; 4.1.4 the question whether allowing the extension would unsettle other persons or disrupt established practices; and 4.1.5 established that the Applicant would suffer a grave injustice were it not allowed to proceed with its objections. 4.2 The Tribunal erred in law in finding that the legislative scheme in the FBTAA in relation to recovery of overpaid fringe benefits tax is exhaustive, and that common law restitutionary principles do not apply. 4.3 The Tribunal erred in law in finding, on the basis of the guidelines stated in Hunter Valley Developments Pty Ltd and Others v Minister for Home Affairs and Environment (1984) 58 ALR 305 at 310-12; 7 ALD 315 at 319-21 and subsequent authorities that it was not appropriate to grant the extension of time sought by the Applicant where, as a matter of fact - 4.3.1 the Applicant's objections would be allowed as a matter of law if the Applicant were entitled to proceed with such objections; 4.3.2 the Applicant has suffered and will suffer grave injustice if it is not permitted to recover the tax which it has overpaid; 4.3.3 the Respondent would not be prejudiced if an extension of time were granted; 4.3.4 the evidence of Mr Moltoni established that the Commissioner does not have an established practice which would be unsettled or disrupted; 4.3.5 the Respondent was, at all material times, aware that the assessment was contested; 4.3.6 there is, to the extent an explanation is required, a satisfactory explanation in law for the delay in lodging the objections." EXCLUSION OF EVIDENCE The company sought to put in evidence before the Tribunal a witness statement of Peter Moltoni. Certain paragraphs of the statement were not admitted in evidence. The company submits that the Tribunal erred in law in excluding substantial parts of the statement when it was relevant and admissible to a number of matters set out in ground 4.1 of the Grounds of Appeal (supra). The paragraphs excluded comprise the following: (i) Paragraph 10 - quoting par 69 of the FBT booklet and providing an interpretation. (ii) Part par 11 - offering an interpretation of Commissioner's Ruling MT2030. (iii) Paragraphs 13-15 - referring to the view in Professional Literature and the Commissioner's booklet that board meals were assessable and the witness' opinion to the contrary. (iv) Part par 16 - offering argument by the witness about the Commissioner's public position on the assessability of board meals. (v) Paragraphs 19 and 20 - asserting that the mistake as to assessability was mutual and that employers were coerced into paying the tax by the risk of significant penalties. (vi) Paragraphs 21 to 26 - recounting prior experience of the witness with the Commissioner's administration of the FBTAA in respect of other taxpayers. (vii) Paragraph 28 - recounting prior experience of the witness with respect to the company's 1990 and 1991 objections. (viii) Paragraph 30 - recounting advice by the Australian Taxation Office of its intention to deny applications and attempted discussion of IT2455. (ix) Paragraphs 31 to 47 - recounting experience of the witness with lodgment of objections for a company related to Mt Gibson Manger Pty Ltd. (x) Paragraphs 48 to 56 - offering argumentative material in relation to the statement by the Commissioner in his s 37 statement. The exclusion of these paragraphs does not require detailed review here. They were variously irrelevant and argumentative or lacking probative value. If relevant, they were marginally so and in any event, in my opinion, would have made no difference to the Tribunal's decision. Submissions made on behalf of the company referred to the provisions of s 33(1) of the Administrative Appeals Tribunal Act 1975 which is in the following terms: "33(1) In a proceeding before the Tribunal- (a) the procedure of the Tribunal is, subject to this Act and the regulations and to any other enactment, within the discretion of the Tribunal; (b) the proceeding shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and a proper consideration of the matters before the Tribunal permit; and (c) the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate." Section 33(1)(c) is facultative but constrained in its application by the general requirements of relevance and procedural fairness - see Re Pochi (1979) 26 ALR 247 at 256-257 per Brennan J. It does not require the Tribunal to have regard to material which is irrelevant or where to do so would give rise to procedural unfairness. Nor is it required to accept material which, while strictly relevant, is of little or no probative value. It was submitted for the company that in review proceedings the Tribunal stands in the shoes of the decision-maker and must properly have regard to all of the material available to the decision-maker. Such material would, it was said, have included the material from Mr Moltoni relating to corresponding applications by companies related to the taxpayer. But the Tribunal is entitled, just as is the decision-maker, to be selective about the quality and quantity of material it will consider in any case. In so doing it exercises a discretion as to its procedures which is informed by the statutory mandate to conduct proceedings before it with as little formality and technicality and with as much expedition as a proper consideration of the matters before it permit. There is nothing on the evidence before me to indicate that the Tribunal in excluding the paragraphs of Mr Moltoni's statement which have already been identified failed to properly exercise its discretion. The first ground of appeal fails. APPLICATION OF COMMON LAW RESTITUTIONARY PRINCIPLES It was contended for the company that the principles of the general law of restitution continued to apply notwithstanding the statutory scheme for dealing with late objections. The Commissioner, it was said, was unjustly enriched at the expense of the company. It would be unjust if he were to be allowed to retain amounts paid under a mistake which would be recoverable under the general law of restitution. Both the payment of the fringe benefits tax and its receipt were said to have been made under a mutual mistake of law and thus to be recoverable. The Commissioner relied upon the reasoning of the Full Federal Court in Chippendale Printing Co. Pty Ltd v Commissioner of Taxation (1996) 62 FCR 347. That was a recovery action by a taxpayer for overpaid sales tax. It failed on the basis that the statutory regime in place for repayment of overpaid sales tax is exhaustive and precludes recovery under the general law. A similar view had been expressed in Otto Australia Pty Ltd v Commissioner of Taxation (1991) 28 FCR 477 at 480-481 and 483.

The formulation of this ground of appeal and the submission made in relation to it gave the impression that the company wished to pursue a recovery action of the kind which the Federal Court was considering in Chippendale (supra). As was pointed out by counsel for the Commissioner if it be the case, as the company contends, that the statutory scheme is not exhaustive of recovery under the general law, then the company is free to pursue that recovery. To find that the scheme is not exhaustive is no answer to the Tribunal's decision which has to do with the Commissioner's disallowance of the application to lodge objections out of time. In my opinion however the statutory scheme is exhaustive. The means of redress for which it provides is lodgment of an objection within sixty days after the assessment and application for amendment of an assessment within three years of its date (ss 80 and 74 of the Fringe Benefits Tax Assessment Act 1986). I accept the submission of the Commissioner that these provisions reflect the legislative intention for finality in the assessment and objection process for fringe benefits tax. Were the scheme not exhaustive then there might be an argument along the lines of that accepted in Commissioner of State Revenue v Royal Insurance Australia Ltd (1994) 182 CLR 51 that where there is a legal liability to pay, the discretion to refund an overpayment must be exercised to meet the liability. That case dealt with the discretion conferred by s 111(1) of the Stamps Act 1958 (Vic) upon the Comptroller of Stamps to refund overpaid duty. It did not involve consideration of a statutory scheme analogous to that before the Court in this case. Moreover the decision under consideration in this case is a decision whether to allow an application to extend time for lodging an objection. It is a discretion at one remove, and attracting different considerations from the discretion to allow an objection to amend an assessment. In my opinion this ground of appeal cannot succeed. ERROR OF LAW IN THE EXERCISE OF DISCRETION The third ground of the company's appeal was said to raise two questions of law. The first question was whether, given that the objection would be allowed if treated as lodged within time, the Tribunal erred in finding that the various matters it referred to were sufficient reasons not to allow the grant of an extension of time. It was submitted on this limb of the argument that the discretion to extend time conferred by s 83 is limited only by the subject matter, scope and purpose of the statute. Reference was made to comments of Von Doussa J in Windshuttle v Commissioner of Taxation (1993) 46 FCR 225 concerning ss 188 and 188A of the Income Tax Assessment Act, similar in terms to ss 82 and 83 of the Fringe Benefits Tax Assessment Act. His Honour described s 188A of the Income Tax Assessment Act as conferring a discretion "unconfined in its terms upon the Commissioner". He quoted the observations of Gummow J in Bond Corporation Holdings Ltd v Australian Broadcasting Tribunal (1988) 84 ALR 669 at 680 where he said of 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 there 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: R v Australian Broadcasting Tribunal; Ex parte 2HD Pty Ltd (1979) 144 CLR 45 at 49-50." Those observations apply to s 83. It was further submitted that there had been a "mutual mistake" of law between the company and the Commissioner which caused the overpayment. The applicant was prejudiced but there was no evidence of prejudice to the Commissioner. It was submitted that the Tribunal was required to consider whether the applicant's case had a prospect of success. It is to be noted however that the Tribunal accepted that if the extension of time were granted the objections would be allowed. These submissions generally identified no error of law on the part of the Tribunal. The other limb of the argument went to the question whether the Tribunal had erred in finding that the discretion conferred on it to extend time for the lodging of objections should not be exercised in favour of the applicant having regard to the guidelines stated in Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 58 ALR 305. The submission in this respect again did not identify any specific error of reasoning behind the Tribunal's conclusion on the question of extension. What seems to have been attacked is the conclusion itself. After referring to various factual aspects of the case which have already been canvassed, the company submitted: "9.7 It is proper in this case and fair and reasonable, to allow the late lodgment of the objection because of the decision in Royal Insurance and in David Securities 9.8 The Respondent has allowed similar applications: see for example decision in Pitstop Sales Pty Ltd v Commissioner of Taxation VT 95/307-311, at present unreported." The Royal Insurance case has already been referred to. David Securities Pty Ltd v Commonwealth Bank of Australia (1992) 175 CLR 353 concerned the recoverability of moneys paid under a mistake of law. The applicability of these cases to the exercise of the Commissioner's discretion is negated to the extent that the statutory scheme excludes legal liability for recovery. Whether or not such a legal liability could subsist prior to the expiry of the time limits for which ss 80 and 74 provide it does not, consistently with the statutory scheme, survive those limits. The fact that absent the statutory scheme, a legal liability might have existed is not a matter that the Tribunal is required to take into account. Indeed, it would be arguable that such a consideration is irrelevant and contrary to the legislative intent. The Tribunal is of course entitled and required to take into account the possibility of the success of the objection if time were extended and, in this case, it did so. In the event there is nothing that has been put on behalf of the applicant company to demonstrate an error in the way in which the Tribunal exercised its discretion and the application will be dismissed. I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice French

Counsel for the Respondent: Mr S. Owen-Conway QC

Solicitor for the Respondent: Australian Government Solicitor

Stamps Act 1958(Vic)

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