Re Henry Victor Winter v Deputy Commissioner of Taxation [1987] FCA 28 (10 February 1987)

FEDERAL COURT OF AUSTRALIA

Re: HENRY VICTOR WINTER
And: DEPUTY COMMISSIONER OF TAXATION
No. G490 of 1986
Administrative Law

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Burchett J.

CATCHWORDS

Administrative Law - extension of time to bring application for review under ADJR Act - Application relating to inconsistent assessments against several parties involving the same income - Whether barred by Schedule 1(e) of the ADJR Act - Effect of s.177 of the Income Tax Assessment Act 1936 - Discretion to extend time - Effect of failure of legal advisers as ground for extension of time.

Administrative Decisions (Judicial Review) Act 1977

Income Tax Assessment Act 1936, s.177

Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (1984) 84 ATC 4912

F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360

Briggs v. Deputy Federal Commissioner of Taxation (1986) 86 ATC 4748

Briggs v. Deputy Commissioner of Taxation; Ex parte Briggs (1986) 86 ATC 4779

Commissioner of Taxation v. Goldspink (1985) 82 FLR 21

Hunter Valley Developments Pty. Ltd. v. Minister for Home Affairs and Environment (1984) 3 F.C.R. 344

Pozniak v. Minister for Health, unreported, Burchett J., 14 March 1986

Duff v. Freijah (1982) 43 ALR 479

Sandery v. Commissioner of Police (1986) 65 ALR 181

Martin v. Nominal Defendant (1954) 74 W.N.(NSW) 121

Jess v. Scott, unreported, Lockhart, Sheppard and Burchett JJ., 4 November 1986

Hickey v. Australian Telecommunications Commission (1983) 47 A.L.R. 517

HEARING

SYDNEY
10:2:1987

Counsel for the Applicant: Dr. G. Flick

Solicitors for the Applicant: Clayton Utz Solicitors

Counsel for the Respondent: Mr N.R. Burns

Solicitors for the Respondent: Australian Government Solicitor

ORDER

That the time within which the applicant may bring an application for review of the decisions referred to in the amended application for an order of review filed on his behalf be extended up to and including the date when that amended application was filed and that the said amended application be deemed to have been filed within time.

That the respondent's motion to strike out the amended application be dismissed.

That the costs of the application for extension of time and of the application to strike out the amended application for review be the respondent's costs in the application for review.

NOTE: Settlement and entry of orders is dealt with in Order 36

of the Federal Court Rules.

DECISION

I have before me Notices of Motion, on behalf of the respondent seeking the striking out of an amended application for an order of review under the Administrative Decisions (Judicial Review) Act 1977 (the Judicial Review Act), and on behalf of the applicant for extension of time to enable that amended application to be pursued. It is convenient first to consider whether time ought to be extended.

2. The amended application for review seeks review of the following decisions relating to alleged liabilities to income tax:

"1. The decision to issue a Notice of
Assessment No. 226350/001 dated 27 May
1985 in the sum of $248,682 against
Vimair Pty Limited as trustee of the
Vimair No. 1 Trust.

2. The decision to issue a Notice of
Assessment No. 226350/002 dated 27 May
1985 in the sum of $448,736.40 against
Ilerace Pty Limited as trustee of the
Ilerace No. 1 Trust.

3. The decision to issue Mr Henry Victor
Winter with Notice of Amended Assessment
No. 388219 dated 2 August 1985 in the
total sum of $1,362,347.38.

4. The decision taken on or about 11 June
1986 to commence proceedings No. 16020 in
the Common Law Division of the Supreme
Court of New South Wales.

5. The decision taken on or about 11 June
1986 to seek in the Supreme Court of New
South Wales summary judgment in the sum
of $1,362,347.38."

3. In resisting the application for extension of time, and in supporting the motion to strike out the amended application (which counsel contended should succeed even if an extension of time were granted), counsel for the respondent expressly refrained from contesting the standing of the applicant to seek review of each of these decisions. But he argued that the first three decisions sought to be reviewed were excluded by Schedule 1(e) of the Judicial Review Act, and were in any case unassailable (by virtue of s.177 of the Income Tax Assessment Act 1936) by any proceeding other than an appeal against an assessment brought under that Act. It was said that to grant an extension of time would be a futility. So far as the decisions referred to in paragraphs 4 and 5 are concerned, the respondent's contention is that the issues sought to be raised in connection with those decisions can be raised at the hearing of the application for summary judgment in the Supreme Court, which has been fixed for later in this month, and that accordingly, as a matter of discretion, an extension of time should not be granted. In any case, it was submitted that in all of the circumstances I should not be satisfied that the case is one in which it is appropriate to exercise a discretion to extend time.

4. For the applicant, reliance was placed on the decision of Shepherdson J. in Deputy Federal Commissioner of Taxation v. Truhold Benefit Pty. Ltd. (1984) 84 ATC 4912, in which an application to enter summary judgment against a taxpayer was rejected on the basis that, despite the terms of s.177 of the Income Tax Assessment Act, it was arguable that there had not been in law an assessment capable of attracting the conclusive force of the section. This was because, for each of the relevant years of income, there were mutually contradictory assessments in respect of the same income. The argument was that they could not both be correct, and that if the plaintiff were entitled, by virtue of s.177, to insist upon his right to judgment in respect of the one upon which he chose to sue, he could equally at a later stage pursue the other to an inconsistent judgment. Shepherdson J. thought that in this situation the decision of the High Court in F.J. Bloemen Pty. Ltd. v. Federal Commissioner of Taxation [1981] HCA 27; (1981) 147 CLR 360 should be distinguished.

5. Since the decision in the Truhold Benefit case, a Full Court of this Court has unanimously held in Briggs v. Deputy Federal Commissioner of Taxation (1986) 86 ATC 4748 that an assessment issued as an "ambit" claim with a view to the establishment in due course of a definitive assessment, being tentative and provisional, cannot attract the force of s.177(1). In that case there was no question of mutually inconsistent assessments, but the applicant here contends that the decision fully supports the view of Shepherdson J. in the earlier case, on the basis that each of mutually inconsistent assessments, such as were there involved, must be regarded as tentative and provisional since both cannot be intended to stand. Following the decision of the Full Court, Toohey J. in Briggs v. Deputy Commissioner of Taxation; Ex parte Briggs (1986) 86 ATC 4779 refused to set aside a bankruptcy notice based on a judgment for the claimed tax, but extended the time for compliance until further order to enable the liability to the tax to be challenged by a proceeding to quash the assessment, and stood over the application to set aside the bankruptcy notice to a date to be fixed.

6. The respondent referred, as tending in the opposite direction, to observations of Lusher J. in Commissioner of Taxation v. Goldspink (1985) 82 FLR 21 at 28, but that was a Mareva injunction case in which the issue did not directly arise since the validity of a judgment for tax, previously obtained, was assumed, and the Truhold Benefit case was not cited. In any event, I am bound by the later statement of the law in the Full Court.

7. In the present case, it is conceded that there is "a duplication of assessments such that portions of the same income have been attributed to more than one taxpayer and notices of assessments issued accordingly". The respondent has not disputed the contention of counsel for the applicant that, in the particular circumstances, that so called "duplication" (it in fact relates to more than two assessments) is of such a kind that the assessments cannot all stand together. The respondent has referred to the difficulty of ascertaining with certainty to whom the income should be attributed, and has repeated the argument that was put to Shepherdson J. that judgment has only in fact been sought upon one of the assessments. Like Shepherdson J., I think it is reasonably arguable that that is no answer since other writs could be taken out at any time. Furthermore it is reasonably arguable, having regard to the decision of the Full Court in Briggs's case, that each of the assessments in question falls short of being an "ascertainment of the amount of taxable income and of the tax payable thereon" within the meaning of s.6(1) of the Income Tax Assessment Act, and does not constitute "an assessment of the amount of the taxable income of any taxpayer, and of the tax payable thereon" within the meaning of s.166 of the Act. If that be so, it seems to me it must be arguable also that the decisions referred to in paragraphs 1, 2 and 3 of the amended application do not fall within Schedule 1(e) of the Judicial Review Act.

8. It is not necessary, nor is it desirable, that I should reach a conclusion, one way or the other, upon the correctness of these arguments or upon the prospects of success of the applicant. It is sufficient that there is an arguable case.

9. The question then becomes whether I should exercise my discretion in favour of the applicant. The respondent says I should not, both because of the delay and the inadequacies said to mar the explanation given of that delay, and also because, it is argued, the applicant already has an appropriate remedy in his ability to plead defences in the Supreme Court, and seek in that Court a stay of proceedings pending his appeal to the Administrative Appeals Tribunal. There was discussion concerning the appropriate court to decide whether the Supreme Court proceedings should be stayed, but I think counsel for the applicant was correct in his submission that the discussion was premature, since any application in this Court to restrain the respondent from continuing with those proceedings can only be launched if an extension of time is granted. But even if no restraint results, it cannot be said the application must be futile: it would allow a comprehensive review of the legality of the decisions challenged, under the procedures and in the exercise of the powers provided by the Judicial Review Act. Such a review is not possible in the Supreme Court, and its availability in this Court may not be regarded as relevant to an application for summary judgment in the Supreme Court: cf. the Truhold Benefit case, supra, at 4918-4919. Moreover, to the extent that the Supreme Court has relevant powers and discretions, the limitations imposed by s.9 of the Judicial Review Act should not be overlooked. By contrast, this Court is not limited to the exercise of jurisdiction under the Judicial Review Act, but may also assert that conferred by s.39B of the Judiciary Act, 1903.

10. Whatever the position may be if the application for summary judgment is permitted to proceed, and does proceed, I cannot at this stage regard the application under the Judicial Review Act as bound to prove either unnecessary or futile.

11. The application is however out of time. The applicant's initial reaction to the assessments was to lodge objections, and these were lodged by the required dates. There was then a delay approaching a year before the objections were disallowed. Two of the assessments were referred to the Administrative Appeals Tribunal on 22 April 1986, and one on 11 September 1986. The last mentioned was the assessment relating to the applicant himself. In those circumstances, it can fairly be said that there was some reason for the applicant to defer incurring substantial legal costs pending determination of all the objections. It is reasonable to infer from the lengthy period of consideration devoted to the objections that the issues were regarded as complex, and certainly the legal principles on which the applicant now relies involve difficulties the ramifications of which have not yet been authoritatively explored. This also is a factor to be taken into account when evaluating the effect which should be given to the applicant's delay. Furthermore, the objections must have made it clear to the decision-maker that the matter was not finally concluded - a consideration treated as of some importance by Wilcox J. in Hunter Valley Developments Pty. Ltd. v. Minister for Home Affairs and Environment (1984) 3 FCR 344 and by me in Pozniak v. Minister for Health (unreported, 14 March 1986). On 3 July 1986 (when the last objection was still undetermined) the Australian Government Solicitor was notified in writing that an application was to be made.

12. It was not suggested that an order extending time would involve any prejudice to the respondent, or to any public or other interest, within the meaning of the authorities. As I said in Pozniak's case:

"Although absence of prejudice is not in
itself sufficient, it will often be a
powerful factor when other considerations
come to be weighed."

(See also Duff v. Freijah (1982) 43 ALR 479; and Sandery v. Commissioner of Police (1986) 65 ALR 181.) In the present case, there may be added, to the negative consideration of lack of prejudice, the positive one that the cases referred to above in respect of the applicant's contentions show that the issues sought to be litigated are live issues of some public importance in the administration of the taxation laws.

13. The respondent argued that nevertheless the onus is upon the applicant to justify the extension of time he seeks, which is correct, and that the delay which occurred between counsel's advice to institute proceedings under the Judicial Review Act, in late June 1986, and the filing of the proceedings in October, a period of some four months, is insufficiently accounted for. I think the evidence shows that this delay was due, at least to a substantial degree, to difficulties encountered by the applicant's solicitors in persuading the Registry of the Court to accept an application (first attempted to be filed early in July) which did contain some features exhibiting a degree of novelty. Even if the delay be regarded as largely attributable to failures on the part of the applicant's legal advisers, this would be by no means fatal to the application. In Pozniak's case, I cited a number of decisions which justify the proposition that, while there is no invariable rule, "a failure by a solicitor to take the proper steps could itself be regarded as establishing sufficient cause for an extension of time" (per Walsh J. in Martin v. Nominal Defendant (1954) 74 WN(NSW) 121 at 125). In the joint judgment of the Full Court in Jess v. Scott (Lockhart, Sheppard and Burchett JJ., 4 November 1986) this was described at page 8 as "the modern view". As that judgment demonstrates, a similar approach has been adopted towards applications for extension of time, resulting from defaults of solicitors, in respect of the lodgment of appeals.

14. In the end, as Lockhart J. emphasised in Hickey v. Australian Telecommunications Commission (1983) 47 ALR 517, the Court has to exercise a discretion as to whether, on the evidence, enlargement of time should be granted, and that discretion is not constrained. The principles upon which it should be exercised have been stated in the cases to which I have already made reference and in numerous authorities there cited. In all the circumstances of the present application, and having regard to those principles, I have concluded that the applicant has shown that the justice of the case requires the making of an order in his favour. Accordingly, I order that the time within which the applicant may bring an application for review of the decisions referred to in the amended application for an order of review filed on his behalf be extended, up to and including the date when that amended application was filed, and that it be deemed to have been filed within time.

15. Having regard to that order and to the matters discussed in relation to the respondent's argument that the amended application must be futile, I consider also that the respondent's motion to strike out the amended application should be dismissed, and I so order.

16. As to the costs, the applicant has obtained an indulgence, but the respondent, in relation to his motion to strike out the amended application for review, argued issues going beyond the question of extension of time. I think the appropriate order, in the particular circumstances of this case, is that the costs of each motion be the respondent's costs in the application for review. I so order.