Bazzo and Commissioner of Taxation
[2017] AATA 1592
•29 September 2017
Bazzo and Commissioner of Taxation [2017] AATA 1592 (29 September 2017)
Division:TAXATION & COMMERCIAL DIVISION
File Number(s): 2016/2809 – 11
Re:Tina Bazzo
APPLICANT
AndCommissioner of Taxation
RESPONDENT
DECISION
Tribunal:Deputy President S Boyle
Date:29 September 2017
Place:Perth
The hearing of the substantive application be adjourned and the dates listed for hearing, 9 and 10 October 2017, be vacated.
...........[sgd]........................................................
Deputy President S Boyle
CATCHWORDS
PRACTICE AND PROCEDURE – application for adjournment of substantive application hearing – application granted
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) – ss 2A, 37(1), 39(1), 40(1)
Taxation Administration Act 1953 (Cth) – ss 14ZZK, 284-75
Income Tax Assessment Act 1936 (Cth) – ss 166, 167
CASES
Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175
Cement Australia Pty Ltd and Others v Australian Competition and Consumer Commission [2010] FCAFC 101
Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614
Fiorentino v Companies Auditors and Liquidators Disciplinary Board [2014] FCA 641
Gashi v FCT (2013) 209 FCA 3011
GH1 Pty Ltd, in Liquidation and Commissioner of Taxation [2017] AATA 1063
Graham Docker & Associates Pty Ltd v Federal Commissioner of Taxation [2005] ATC 2404
Haset Sali v SPC Ltd [1993] HCA 47;(1993) 116 ALR;(1993) ALJR 841
Holloway v McFeeters (1956) 94 CLR 470
Ma v Commissioner of Taxation (1992) 37 FCR 225
McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284
Minister for Immigration and Citizenship v Li & Anor (2013) 249 CLR 332
Re Kalafatis and Commissioner of Taxation [2012] AATA 150
Rigoli v FCT [2014] FCAFC 29
SBLF v Minister for Immigration and Citizenship [2008] FCA 1219
Sullivan v Department of Transport (1978) 20 ALR 323
Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63
Vadesz v Commissioner of Taxation [2006] AATA 683
Vu v Federal Commissioner of Taxation [2006] FCA 889
SECONDARY MATERIALS
Tax Laws Amendment (2010 Measures No. 1) Act 2010
General Practice Direction, Direction given under section 18B of the Administrative Appeals Tribunal Act 1975
REASONS FOR DECISION
Deputy President S Boyle
29 September 2017
INTRODUCTION
This is an application by the applicant for the adjournment of the hearing of the substantive application listed for hearing on 9 and 10 October 2017. The application for the adjournment is made pursuant to s 40(1)(c) of the Administrative Appeals Tribunal Act1975 (Cth) (AAT Act).
BACKGROUND
The substantive application by which this matter was commenced was lodged on 27 May 2016 (T1). It is an application for review of a decision (the decision) of the respondent to disallow an objection lodged by the applicant against Income Tax Assessments and Penalty Assessments issued by the respondent (T1). The decision was issued on 4 April 2016 (received by the applicant on 7 April 2016) (T2).
The objections made by the applicant which were the subject of the decision related to the respondent’s amended assessments of the applicant’s taxable income and liability for payment of income tax for the financial years ending June 2009, 2010 and 2011 following an audit of the applicant’s income tax returns for the relevant years (T45). Penalties pursuant to s 284-75(1)[1] of the Taxation Administration Act1953 (Cth) (TAA) were also imposed by the respondent as were interest charges on the assessed tax shortfalls.
[1] This section was repealed by Tax Laws Amendment (2010 Measures No. 1) Act 2010.
The decision allowed some of the objections that had been raised by the applicant and disallowed others. The end result of the decision was:
Details 2009 2010 2011 Taxable Income Prior to Objection $3,774,815 $5,420,274 $4,097,663 Amount Allowed for this Objection $1,287,340 $1,554,850 $32,150 Amended Taxable Income $2,487,475 $3,865,424 $4,065,513
The decision also reduced penalties and interest payable in respect of the tax shortfalls that had been imposed by the respondent commensurately with the reductions in the assessed taxable incomes.
The relevant history of the matter after the lodgement of the application in the Tribunal on 27 May 2016 is:
(a)14 June 2016, directions made by Senior Member Walsh that on or before 26 August 2016 the applicant file and serve her statement of issues, facts and contentions and any evidence on which she intends to rely on at the hearing of the matter and that the respondent do likewise by 7 October 2016;
(b)14 June 2016, Senior Member Walsh, on the application of the respondent, orders that the time for filing of the documents required by s 37(1) of the AAT Act be extended to 15 July 2016;
(c)18 July 2016, by consent, it is ordered that the time for lodgement of the documents required by s 37(1) of the AAT Act be extended to 12 August 2016, the time for the applicant to file her Statement of Facts, Issues and Contentions and any evidence upon which she seeks to rely at the hearing be extended to 23 September 2016 and the time for the respondent to file his Statement of Facts, Issues and Contentions and any evidence be extended to 4 November 2016;
(d)16 August 2016, Senior Member Walsh, on the application of the respondent, orders that the time for filing the documents required by s 37(1) of the AAT Act be extended to 26 August 2016;
(e)16 August 2016, Senior Member Walsh directs that the time for the applicant to file her Statement of Facts, Issues and Contentions and any evidence she intends to rely on at the hearing be extended to 7 October 2016 and that the time for the respondent to file his Statement of Facts, Issues and Contentions and any evidence be extended to 18 November 2016;
(f)26 August 2016, the respondent files the documents required by s 37(1) of the AAT Act;
(g)10 October 2016, Senior Member Walsh directs that the directions made on 16 August 2016 be revoked and that the applicant file her Statement of Facts, Issues and Contentions and any evidence by 21 October 2016 and that the respondent file his Statement of Facts, Issues and Contentions and any evidence by 2 December 2016;
(h)21 October 2016, the applicant files her Statement of Facts, Issues and Contentions;
(i)24 October 2016, Senior Member Walsh directs that the directions made on 10 October 2016 be revoked and that the applicant file her Statement of Facts, Issues and Contentions on or before 21 October 2016 and any evidence upon which she will seek to rely at the hearing on or before 4 November 2016 and that the respondent file his Statement of Facts, Issues and Contentions and any evidence by 16 December 2016;
(j)11 November 2016, the applicant files witness statement of Tina Michelle Bazzo signed 11 November 2016;
(k)16 December 2016, the respondent files his Statement of Facts, Issues and Contentions;
(l)16 February 2017, Conference Registrar Hodgson directs that on or before 28 April 2016 the applicant file and serve all evidence upon which the applicant intends to rely at the hearing including further witness statements and any amended Statement of Facts, Issues and Contentions and that by 8 May 2017 the parties file and exchange hearing certificates addressing any unsuitable dates for a hearing in August, September and October 2017 and that by 23 June 2017 the respondent file any amended Statement of Facts, Issues and Contentions and any evidence upon which he will seek to rely at the hearing;
(m)17 February 2017, the applicant through her solicitors Zafra Legal, applies for the issue of a summons to produce documents addressed to National Australia Bank. Covering letter to the Tribunal states that the documents sought in the summons go “to proof of the matters contained at [39]-[41] of the Applicant’s Statement of Facts, Issues and Contentions”;
(n)17 March 2017, documents the subject of the summons are produced to the Tribunal and orders are made on that date by Deputy President Dr Kendal that the applicant inspect the documents produced beginning 17 March 2017 and the respondent inspect the documents produced commencing 24 March 2017;
(o)3 May 2017, the applicant files witness statement of Tina Michelle Bazzo signed 2 May 2017;
(p)8 May 2017, the respondent files hearing certificate advising unavailable dates for the hearing and advising no witnesses to be called;
(q)11 May 2017, the applicant files hearing certificate advising of unavailable dates for the hearing and advising of one witness to be called, namely the applicant;
(r)11 May 2017, the Tribunal advises the parties of the listing of the matter for hearing on 9 and 10 October 2017;
(s)22 August 2017, the applicant through her lawyers Zafra Legal, makes application by letter to the Tribunal for an adjournment of the hearing of the matter. Witness statement of Daniel Steven Romano signed 22 August 2017 filed in support of the application for adjournment;
(t)19 September 2017, Deputy President Boyle directs respondent to file and serve submissions and any evidence in support of the application for adjournment by 1:00 PM 21 September 2017 and for the respondent to file and serve submissions and any evidence by 4:00 PM on 22 September 2017;
(u)21 September 2017, the applicant files outline of submissions in support of application for adjournment of the hearing and witness statement of Daniel Steven Romano signed 21 September 2017;
(v)22 September 2017, the respondent files submissions in opposition to application for adjournment and affidavit of Cong Thanh Nguyen sworn 22 September 2017;
(w)26 September 2017, the applicant files witness statement of Daniel Steven Romano signed 26 September 2017; and
(x)26 September 2017, the application for adjournment of hearing heard by Deputy President Boyle.
It is relevant to note that at all times the applicant has been legally represented. From the documents before the Tribunal it appears that Wilson & Atkinson represented the applicant in her dealings with the respondent from at least the time that the respondent advised the applicant that a preliminary risk review of the income tax affairs of the applicant and her controlled entities had been conducted. On 19 November 2012, Wilson & Atkinson wrote to the respondent advising that they acted for the applicant and responded to the respondent’s letter to the applicant dated 18 October 2012 (T17). The documents show that thereafter there was extensive correspondence and telephone discussions between officers of the respondent and Wilson & Atkinson relating to the applicant’s tax affairs.
The respondent’s letter containing the decision the subject of this matter was addressed to the applicant care of her solicitors, Wilson and Atkinson (T2). The application which commenced this matter was lodged by the Zafra Legal on behalf of the applicant and that firm has continued to act for the applicant throughout these proceedings. Zafra Legal in their letterhead describe themselves as “Commercial & Taxation Lawyers”.
THE APPLICATION FOR THE ADJOURNMENT
The applicant’s submissions in support of this application identify the basis for an adjournment as being that:
“3. … the Applicant has retained new counsel, as a result of which serious deficiencies in the evidence filed to date have been identified, such that the Applicant cannot on the current evidence discharge the burden of proof under s 14ZZK(b)(i) of the Taxation Administration Act 1953 (Cth) (TAA) to prove that the assessments were excessive. The affidavit (sic) of Daniel Romano signed 21 September 2017 set (sic) out the issues in the proceedings and the evidence filed to date and what further evidence is being prepared….preparation of the further evidence is currently being progressed.
4. If the adjournment is not granted then the Applicant will be denied a reasonable opportunity to present her case. The Applicant also points to s 39(1) of the AAT (sic) which provides that the Tribunal shall ensure that every party to a proceeding before it is given reasonable opportunity to present its case.
…
6. The Respondent is not prejudiced by the Applicant’s (sic) being given a reasonable opportunity on learning that her evidence is inadequate to be given a chance to put on evidence which meets the burden.
The applicant’s submissions refer to s 2A of the AAT Act which is in the following terms:
2A Tribunal's objective
In carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that:
(a) is accessible; and
(b) is fair, just, economical, informal and quick; and
(c) is proportionate to the importance and complexity of the matter; and
(d) promotes public trust and confidence in the decision-making of the Tribunal.
The applicant’s submissions also refer to the Tribunal’s General Practice Direction, Direction given under section 18B of the Administrative Appeals Tribunal Act 1975, which relevantly provides;
Adjournments
4.38We will not adjourn a hearing date unless there are good reasons to justify the adjournment. In general, the following matters are not, of themselves, sufficient reasons for an adjournment to be granted:
(a) the unavailability of counsel; or
(b) the consent of the other party.
4.39Any application for an adjournment must be made at the earliest possible opportunity. It must:
(a) be in writing addressed to the District Registrar;
(b) include the reasons for seeking an adjournment;
(c) be signed by you or the decision-maker; and
(d) be accompanied by any documents that support the application.
Paragraph 10 of the applicant’s submissions asserts that:
10.In addition to the statutory considerations, the Tribunal must also be mindful that the common law hearing rule of procedural fairness applies to the Tribunal’s process for making a decision to grant or refuse an adjournment. In this regard, the question must ultimately turn on whether, by refusing to grant an adjournment, the party seeking the adjournment would be denied as adequate opportunity of presenting his case before the tribunal.
The applicant cites the Minister for Immigration and Citizenship v Li & Anor (2013) 249 CLR 332 at [18] per French CJ and Fiorentino v Companies Auditors and Liquidators Disciplinary Board [2014] FCA 641 at [72] per Wigney J; Sullivan v Department of Transport (1978) 20 ALR 323 (Sullivan) in support of that proposition.
The applicant cites the following passage from Sullivan:
“Section 39 of the Administrative Appeals Tribunal Act provides, for present purposes, that ‘the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his case’. In dealing with an application for review, the Tribunal is plainly under a duty to act judicially, that is to say, with judicial fairness and detachment. In these circumstances, the requirement contained in s 39 that the Tribunal shall ensure that a party to the proceedings before it be given a reasonable opportunity to present his case constitutes statutory recognition of an obligation which the law would, in any event, imply. Where a Tribunal is under a duty to act judicially, the principle that a party must be given a reasonable opportunity to present his case is at the heart of the requirements of natural justice which it is obliged to observe (see R v Moodie (1977) 17 ALR 219 at 225 ). If, in all the circumstances, the failure of the Tribunal to adjourn the matter to enable Dr Evans to be called as a witness or to alert the appellant of his right to apply for such an adjournment constituted a denial to the appellant of a reasonable opportunity of presenting his case, both the common law principles applicable to a tribunal under a duty to act judicially and the specific provisions of s 39 of the Act entitle the appellant to the intervention of this court.”
The applicant also cites the following passage from SBLF v Minister for Immigration and Citizenship [2008] FCA 1219 at [27]:
“a powerful factor in the Appellant’s favour was the Tribunal’s obligation to provide him with the proper opportunity to take advantage of the invitation to a hearing, by giving evidence and presenting arguments about the issues arising in relation to the review of the decision.”
The applicant’s submissions also went to some lengths to go through the requirements of ss 166 and 167 of the Income Tax Assessment Act 1936 (Cth) (ITAA) and s 14ZZK(b) of the TAA, in particular what it is that the applicant is required to prove to discharge her onus of proof under that legislation. In that regard the applicant’s submissions referred to a number of cases including Gashi v FCT (2013) 209 FCA 3011; Ma v Commissioner of Taxation (1992) 37 FCR 225 and Rigoli v FCT [2014] FCAFC 29.
The applicant also referred at some length at the hearing of the application for the adjournment to Cement Australia Pty Ltd and Others v Australian Competition and Consumer Commission [2010] FCAFC 101. Counsel for the applicant took the Tribunal to a number of passages in that decision.
The respondent by his submissions points to the fact that the respondent’s Statement of Facts, Issues and Contentions filed in December 2016 clearly raised the requirements of s 14ZZK of the TAA and s 167 of the ITAA. That is the case. Paragraphs 2, 35 and 36 of the respondent’s Statement of Facts, Issues and Contentions set out the requirements of the legislation. Paragraphs 35 and 36 of the respondent’s Statement of Facts, Issues and Contentions were as follows;
35.Pursuant to s 14ZZK of the TAA the burden of proving that each of the assessments is excessive and what the correct assessment should have been rests with the applicant.
36.A taxpayer assessed under s 167 of the ITAA 1936 must prove the correct amount of the actual taxable income upon which tax should be levied. It is not enough to prove that the respondent erred in the way he calculated the assessed amount.
The Tribunal also notes that in addition to the respondent specifically raising the operation of s 14ZZK of the TAA and s 167 of the ITAA in its Statement of Facts, Issues and Contentions, the operation of these sections had been brought to the applicant’s attention on several previous occasions. At the hearing of this application the Tribunal took the applicant’s counsel to attachment DSR 3 to the witness statement of Mr Romano signed 21 September 2017. DSR 3 is the respondent’s decision dated 4 April 2016 (received 7 April 2016) which gave rise to these proceedings before the Tribunal. That decision is also document T2 in the s 37(1) documents filed in these proceedings by the respondent on 26 August 2016. In particular counsel for the applicant was taken to pages 2 of 15 and 3 of 15 of the reasons for decision (T2 pages 6 and 7). In those pages there is a clear and thorough explanation of the operation of s 14ZZK(b)(i) of the TAA. The explanation contained the following passage (T2 page 6):
Subsection 14ZZK(b)(i) of the TAA 1953 explains that, when applying for a review of an assessment under the Administrative Appeals Tribunal (AAT) Act 1975, the applicant has the burden of proving that the assessment is excessive or otherwise incorrect, and what the assessment should have been. While this section applies to the AAT, the same burden of proof is implied to applicants lodging objections
That explanation set out in the respondent’s decision of April 2016 goes on to advise (T2 page 6):
Where the Commissioner has made an assessment, the onus of proof is on the taxpayer to show that the income has been incorrectly assessed to them In Gauci v Federal Commissioner of Taxation [1975] HCA 54 (1975) 135 CLR 81, Mason J stated:
“The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence”
In Eldridge v Federal Commissioner of Taxation 90 ACT 4907;(1990) 21 ATR 897 (Eldridge), the Federal Court held that the taxpayer had the onus of demonstrating that the Commissioner’s figures were excessive and had to prove a basis for departing from the Commissioner’s figures.
The explanation in the respondent’s decision of the operation of these sections and the relevant law goes on to refer to the cases of Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63; Federal Commissioner of Taxation v Dalco (1990) 168 CLR 614; McCormack v Federal Commissioner of Taxation (1979) 143 CLR 284; Vu v Federal Commissioner of Taxation [2006] FCA 889; Holloway v McFeeters (1956) 94 CLR 470; Rigoli v Commissioner of Taxation [2014] FCAFC 29. These include a number of the cases that the applicant has referred to in her outline of submissions in support of this adjournment application as setting out what it is that the applicant must prove.
The Tribunal also notes that a similar explanation of what is required of the applicant in appealing the respondent’s assessment was set out in the respondent’s letter dated 23 January 2015 by which the respondent advised the applicant of the outcome of the respondent’s audit of the applicant’s tax returns for financial years 2008-2011 (T45 and attachment DSR-1 to the witness statement of Mr Romano signed 21 September 2017). In that letter under the heading Appeals and Reviews of the Commissioners Decisions the respondent advised:
239.Sections 190 of the ITAA 1936 (applying to assessments made prior to 1 March 1992) and 14ZZK and 14ZZO of the TAA (applying to objections of assessments made after 1 March 1992 before the AAT or the Federal Court) require that the applicant of a reviewable decision has the burden of proving, if the taxation decision is regarding an assessment, that the assessment is excessive.
240.Further in Trautwein v FCT (1936) 56 CLR 63 at 87-8, John Tanner Holdings Pty Ltd v FTC (1987) 19 ATR 1640 at 1641-2, the requirements were such that a taxpayer had the onus of proving not only that the assessment was excessive or wrong but generally that must go further and show what the correct assessment should be.
241.The High Court in FC of T v Dalco (1990) 168 CLR 614;ATC 4088 held that the onus is upon the taxpayer to demonstrate that the Commissioner’s figures in relation to taxable income were excessive, by showing the sources of that income year by year and excluding all sources of income other than those which he admits. Where a taxpayer has not proved that his actual taxable income is less than the amount assessed and the court does not know all the material facts it cannot find that the assessment is wrong
The respondent also made submission to the effect that the witness statements of Mr Romano should be given little weight because:
15.1no explanation is proffered for the failure to deal with the NAB documents when returned under the summons in March 2017;
15.2his evidence as to not appreciating that the assessments were issued under section 167 ITAA 1936 cannot be accepted; and
15.3 no indication of who and how many witnesses will be giving evidence.
Reference is also made by the respondent to the fact of the applicant being involved in associated proceedings before the Tribunal on 27 March 2017 regarding GH1 Pty Ltd, of which the applicant was the sole director, secretary and shareholder, and in which the applicant’s lawyers Zafra Legal represented the applicant. The respondent says that in that matter the evidentiary shortcomings of the taxpayer’s case were the subject of considerable discussion (see GH1 Pty Ltd, in Liquidation and Commissioner of Taxation [2017] AATA 1063). The respondent’s submissions filed in that matter on 6 April 2017 (attached to the respondent’s submissions in opposition to the application for the adjournment) did in paragraphs 17 to 22 set out in some detail the relevant law relating to the burden of proof being on the applicant and what it is that the applicant must prove. Those submissions referred to the cases of FCT v Dalco (op. cit); Vadesz v Commissioner of Taxation [2006] AATA 683 at [31]; Gauci & Ors v FCT (op. cit); Gashi v FCT (op. cit) and Graham Docker & Associates Pty Ltd v Federal Commissioner of Taxation [2005] ATC 2404. Again, a number of these cases are referred to in the applicant’s submissions in the present application as establishing what it is the applicant must prove and that the applicant has the burden of proof.
Prejudice if adjournment granted
In relation to the prejudice that the respondent would suffer if an adjournment were granted, the respondent submitted:
As to the question of prejudice, there is a general prejudice in the hearing not proceeding. Counsel have been briefed and are preparing for the hearing based on the evidence filed to date. The applicant now says that she wants until November to file additional evidence, a date which will undoubtedly mean that there will be no hearing in 2017. Additional reading in and getting up will be necessitated as a result of that delay, which is a prejudice to the Commissioner who must bear the costs of this.
The respondent’s submissions also refer to another prejudice to adjournment being that security given by the applicant over various properties “is now valued at substantially less than the amount of $13,000,000 …so that the Commissioner is not secured for the full amount of the tax in issue in these proceedings” (paragraph 18 of the respondent’s submissions).
The applicant identifies the prejudice that she will suffer in paragraphs 3 and 4 of her outline of submissions as quoted in paragraph 9 above.
THE LAW
Significant emphasis was placed by the applicant on the High Court’s decision in Cement Australia Pty Ltd and Others v Australian Competition and Consumer Commission 187 FCR 261 (Cement Australia). Counsel for the applicant took the Tribunal to the following paragraphs of that decision:
[35]In particular, the Cement Australia parties contend that the trial judge erred in adhering to the liberal approach to applications for amendment taken in Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146 at 153–155, and thereby failing to give effect to the more rigorous approach to late applications affirmed in the decision of the High Court in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon Risk) on the basis that the injustice and inconvenience involved in allowing a late amendment cannot be remedied by an adjournment and an order for the payment of the costs thrown away.
…
[38]In Aon Risk, the proceedings were commenced in December 2004 against three insurers for indemnity for loss from fire suffered in January 2003. The broker, Aon Risk Services Australia Ltd, (“Aon”) was joined as a defendant in June 2005. On the third day of the trial, which had been set down for four weeks, the plaintiff sought an adjournment of the trial against Aon and foreshadowed an application for leave to amend its claim to allege a substantially different case. The trial was adjourned, but the application for leave to amend the plaintiff’s claim was not heard until approximately two weeks later in November 2006, and the decision to grant leave was not made until October 2007. The plaintiff, in an affidavit in support of its application for leave to amend “did not offer any explanation for the need to amend”: see Aon Risk 239 CLR 175 at [53]. The learned judge who allowed the amendment, and the majority of the Court of Appeal, considered that the application was to be resolved on the basis that the new allegations raised “real triable issues” and that the case “fell squarely within principles to be drawn from JL Holdings”: see Aon Risk 239 CLR 175 at [62]–[63]. Lander J, who dissented in the Court of Appeal of the ACT, held that “it could be inferred that (the plaintiff) deliberately adopted the course that it did (in not raising the new claim earlier)” and that the plaintiff “should have been required to conduct its case ‘in accordance with the decision it made some years before’”: see Aon Risk 239 CLR 175 at [64].
[39]In Aon Risk 239 CLR 175 at [98], Gummow, Hayne, Crennan, Kiefel and Bell JJ noted that “a just resolution of proceedings remains the paramount purpose” under the rules of court there under consideration; but that “what is a ‘just resolution’ is to be understood in light of the purposes and objectives stated”. Their Honours observed:
Speed and efficiency, in the sense of minimum delay and expense, are seen as essential to a just resolution of proceedings. This should not detract from a proper opportunity being given to the parties to plead their case, but it suggests that limits may be placed upon re pleading, when delay and cost are taken into account. The Rule’s reference to the need to minimise costs implies that an order for costs may not always provide sufficient compensation and therefore achieve a just resolution. It cannot therefore be said that a just resolution requires that a party be permitted to raise any arguable case at any point in the proceedings, on payment of costs.
…
[45]Before turning to the particular grounds of complaint agitated in this court by the Cement Australia parties, we should observe that insofar as the trial judge gave significant weight to the consideration that the achievement of justice in the particular case before him favoured allowing the amendment, that was not contrary to the decision in Aon Risk or anything in ss 37M or 37N of the Federal Court Act. Nothing in Aon Risk or the Federal Court Act suggests that this consideration is not relevant to the exercise of the discretion to permit or refuse an amendment. Rather, the point made in Aon Risk is that this consideration must not be allowed to trump other relevant considerations, including considerations of the kind reflected in ss 37M and 37N of the Federal Court Act.
…
[52]The responsibility as to how the respondent’s case was pleaded, having regard to the available evidence and the applicable law, ultimately belonged to counsel for the respondent. In our opinion, the explanation from them, accepted albeit in the limited sense as it was by senior counsel for the appellants, was in this circumstance a sufficient explanation capable of acceptance by the primary judge. There was no need for an enquiry beyond that given by the counsel whose responsibility it was to plead the ACCC’s case. This is a very different position to that in Aon Risk. There the reason the claim introduced by amendment had not been raised before was the result of a deliberate tactical decision on the part of the ANU: Aon Risk 239 CLR 175 at [4] and [24]. The delay in proposing the amendment in Aon Risk was such as to demand an explanation. As the plurality noted at [106] none was given.
…
[54]In Aon Risk, Gummow, Hayne, Crennan, Kiefel and Bell JJ at 239 CLR 175 [103] and [106], said:
[103] The fact that an explanation had been offered for the delay in raising the defence was regarded as a relevant consideration in JL Holdings. Generally speaking, where a discretion is sought to be exercised in favour of one party, and to the disadvantage of another, an explanation will be called for. The importance attached by r 21 to the factor of delay will require that, in most cases where it is present, a party should explain it. Not only will they need to show that their application is brought in good faith, but they will also need to bring the circumstances giving rise to the amendment to the court’s attention, so that they may be weighed against the effects of any delay and the objectives of the Rules. There can be no doubt that an explanation was required in this case.
[55]It is apparent from these passages that their Honours were more concerned that there be an explanation as to how the late application comes to be made, than the form in which the explanation was proffered. It is apparent from [34] of the reasons of the trial judge (which we have set out at [32] of these reasons) that his Honour was alive to the absence of a sworn affidavit by an officer of the ACCC as to the reason for the late application for an amendment to ACCC’s statement of claim. It is also apparent that his Honour was disposed to accept the explanation proffered by the ACCC’s counsel (to which no objection was taken) as an explanation of how the need for the amendment arose. His Honour was content to regard the reason for the late application as an error of judgment by counsel. That view of the facts of this case distinguishes this case from Aon Risk where the view which prevailed was that the origin of the problem was a deliberate decision on behalf of the plaintiff.
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[67]Importantly, to adapt the joint judgment in Aon Risk at [102] to reflect the relevant statutory provision in the present case, the objectives in s 37M of the Federal Court Act do not require that every application for amendment should be refused because it involves the waste of some costs and some degree of delay, as it inevitably will. Factors such as the nature and importance of the amendment to the party applying cannot be overlooked.
[68]There is nothing in Aon Risk or ss 37M and 37N of the Federal Court Act which would suggest that the consideration that it is desirable that the case be decided on its merits, so as to preserve public confidence in the administration of justice, is a consideration irrelevant to the exercise of his discretion.
The Tribunal also notes a passage in that case which was not referred to by counsel for the applicant, namely paragraph [40] wherein the Court, citing the majority decision in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon Risk) stated:
[40]Their Honours at [111]–[113] rejected the proposition that the powers of a court to allow an amendment to a pleading should, as a general rule, be exercised in favour of allowing the amendment subject only to the payment of costs thrown away as a result. Their Honours said:
An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court’s earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future.
A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
The High Court in Aon Risk allowed the appeal. In that case the majority found that the trial judge had erred in not taking into account relevant considerations in allowing the amendment to the pleadings which caused the trial of the action to be adjourned. In particular the High Court held that insufficient consideration had been given by the trial judge in allowing the amendments to the statement of claim and the adjournment of the trial to the interests of the defendant (see at [114]).
Counsel for the applicant at the hearing sought to distinguish the decision in Aon Risk, where the High Court found that the trial judge had erred in allowing the late amendment and adjournment, from the present case on the basis that the present case and the applicant’s failure to put on sufficient evidence falls more into the category of an “error of judgment” of the type in Cement Australia.
The Tribunal does not accept that argument. The Cement Australia case involved a late amendment to a pleading to address issues with the way that ACCC had pleaded its case into the market for flyash. The pleading issue in that case is described at [56] of the judgment as follows:
[56]In summary on this point, the gravamen of the submission put by the Cement Australia parties under this heading is that those instructing counsel for the ACCC may actually have appreciated that the Cement Australia parties’ case was that only flyash of a fineness of 75% or better was in demand by manufacturers of concrete and deliberately refrained from drawing that appreciation to the attention of counsel for the ACCC. The trial judge was entitled to regard that hypothesis as so far-fetched — especially in the absence of any apparent tactical reason for deliberately taking such a decision — that he could reject it, even in the absence of a sworn denial by an officer of the ACCC. His Honour’s view as to the opacity of the pleadings is also relevant here
The situation in the present case is markedly different to that in Cement Australia. This is not a case of an amendment to a technical pleading in a case involving definition of market, which are in most cases, complex issues. This is also not a case where there can be any speculation as to whether or not those instructing counsel “may actually have appreciated” what their party’s case was or what the requirements for an application were or who carried the burden of proof. These matters had been repeatedly spelt out in detail to the applicant and to her lawyers over a period of two and a half years prior to the current application for an adjournment being made. In that regard the Tribunal refers to the letter from the respondent in January 2015 (T45 which is also attachment DSR -1 to the witness statement of Mr Romano signed 21 September 2017).
The tribunal does not accept that those representing the applicant would not have known exactly what the applicant was required to prove in these proceedings and the evidence that would be required. In that regard the evidence put on by the applicant in support of the present application is vague. The explanation set out in Mr Romano’s witness statement signed 22 August 2017 for the failure by the applicant to put on sufficient evidence is:
6.Zafra Legal did not receive instructions to formally brief Counsel to assist with the preparation of the SFIC. However, the Applicant and entities that she was a director of (at the time) were engaged in other matters involving the Respondent. The Applicant had formally briefed Counsel in respect of those other matters (Previous Counsel).
7.Previous counsel was requested by the Applicant to provide general guidance as to the matters which were required to be proved in order for her to meet her burden of proof in this Application for Review. The general guidance was used to assist in the drafting of the SFIC and to assist in the proofing of the Applicant for the purposes of preparing the Witness Statements.
…
9.The Witness Statements were drafted at a time when the Applicant, and entities that she was a director of (at the time), were committed to a number of matters in the Federal Court of Australia and the Supreme Court of Western Australia. The involvement in these other matters limited the time and resources that the Applicant had been able to direct to the Application for Review.
…
12.The Applicant instructed Zafra Legal to brief Sheila Kaur–Bains as her Counsel to represent her at the hearing, who provided advice that the evidence was insufficient to discharge the onus of proof.
13.The Applicant is now of the view that the evidence filed is not sufficient and that she is required to file and serve further evidence to meet her burden of proof to demonstrate that the assessments are excessive.
The explanation provided by the above statements is far from fulsome and is couched in ambiguous terms. Paragraph 6 basically says what was not done, not what was done and appears to proceed on the premise that only counsel can provide advice on the relevant legislation and the applicant’s obligations. We know from the application as filed by Zafra Legal that Zafra Legal had in May 2016, at the latest, the respondent’s decision of 4 April 2016 (T2) which clearly spelt out what is required of an applicant in making an application to the Tribunal. No explanation is provided as to why Zafra Legal apparently did not understand the law even when it had a copy of the respondent’s clear and thorough summary of the burden of proof and what it is that the applicant is required to prove.
Similarly paragraph 7 of Mr Romano’s witness statement of 22 August 2017 is more notable for what it does not say than what it does. Reference is made to “general guidance”, which is a curious term given the unequivocal burden of proof and what is required to be proved by the relevant legislation. We are not told what the terms of that “general guidance” were but rather that it was “used to assist in the drafting the SFIC and to assist in proofing of the Applicant for the purpose of preparing the Witness Statements”. The Tribunal is left to speculate on what the “general guidance” was.
In the end, the Tribunal does not consider the circumstances put forward by the applicant as giving rise to a need for an adjournment in this matter are of a similar character to those in Cement Australia as submitted by applicant’s counsel at the hearing.
Similarly, the circumstances in the case of Sullivan also cited by the applicant are, in the Tribunal’s view, clearly distinguishable from the present case. In Sullivan’s case an adjournment had been refused when a specialist doctor did not attend the hearing on an application for review of a decision not to renew a pilot’s licence on the basis that the applicant had had a psychotic episode. The applicant was unrepresented and had not appreciated that the respondent authority would not be calling the specialist witness. That case is fundamentally different to the present case in which the applicant has been represented throughout these proceedings.
The applicant asserts that if an adjournment is not granted then the applicant will “be denied a reasonable opportunity to present her case”. The applicant also points to s 39(1) of the AAT Act which provides that the Tribunal shall ensure that “every party to a proceeding before it is given a reasonable opportunity to present its case” (paragraph 4 of the applicant’s submissions).
The Tribunal rejects the suggestion that the applicant has not been given a reasonable opportunity to present her case. The applicant has been given every opportunity to present her case; she has simply, on her story because of defective legal advice, failed to take that opportunity. A failure by the applicant to take the repeated and extended opportunity to present her case is not a denial of a reasonable opportunity to do so.
What emerges from the cases relating to the exercise of a discretion to adjourn or to allow late amendments to pleadings is that the exercise of the discretion involves a balancing of a range of considerations including principles of case management, efficient and cost effective administration of justice, maintenance of public confidence in the judicial process and an assessment of the respective prejudice that each party would suffer depending on which way the discretion is exercised.
A very useful analysis of the law in that regard, particularly in relation to adjournments of hearings in the Tribunal, is set out in the decision of Deputy President Forgie in Re Kalafatis and Commissioner of Taxation [2012] AATA 150. After considering the High Court’s decision in Aon Risk, in relation to the overriding obligation of the court or tribunal to do justice, the learned Deputy President observes at [42]:
42.It is clear from this passage that their Honours saw a just resolution of proceedings as the paramount purpose of Rule 21 but it is equally clear that they recognised that justice does not take a single form. It is to be understood in, and take its form from, what is required to reach a just resolution of the “real issues” in the proceeding and what is required for the timely disposal of the proceedings and of all others. Those objectives are not to be attained at the expense of giving the parties the proper opportunity to present their case but what amounts to a proper opportunity is determined by reference to, among other relevant matters, the speedy and efficient disposition of the matter.
The Deputy President goes on to note at paragraphs [44]-[46] in relation to the High Court’s decision in Haset Sali v SPC Ltd [1993] HCA 47;(1993) 116 ALR;(1993) ALJR 841 that:
44.It is clear from the following passage from the judgment of the majority that the particular circumstances of the case, rather than case management principles and the system of case management used in the court, were the determining factors:
“19. Having regard to the findings of the Full Court, the appellant suffered no injustice when the Court refused to adjourn the hearing for two weeks. It is true that it is only in extraordinary circumstances that the interests of justice will be served by a refusal of an adjournment in a case such as the present where the practical effect of the refusal is to terminate the proceedings. The members of the Full Court were, however, conscious of that fact. Thus, Tadgell J commented that it was, in his experience, ‘unique’ that the Full Court had had to refuse ‘an application for an adjournment of this kind’. Clearly, their Honours considered that the circumstances before them were both extraordinary and extreme. On the findings which they made, they were fully entitled to be of that view. On those findings, the appellant was the author of his own misfortune.”
45.The principle that underlies both Haset Sali and Aon is that issues relating to case management are not deciding factors in any particular case. They are, instead, relevant factors and the weight they are accorded can only be determined when regard is had to all of the factors that are relevant. Those objectives are not to be attained at the expense of giving the parties the proper opportunity to present their case but what amounts to a proper opportunity is determined by reference to, among other relevant matters, the speedy and efficient disposition of the matter.
46.The principle that, consistently with Eshetu, underlies both Haset Sali and Aon is that objectives of the sort set out in s 2A of the AAT Act, and that are applicable in a case management system, must be understood and applied in a particular case in light of the particular circumstances of that case and in light of the Tribunal’s functions and its duties i.e. its duties to act with procedural fairness and to reach the correct or preferable decision.
CONSIDERATION
In the present case there are significant factors that would work against the Tribunal exercising the discretion to allow an adjournment of the hearing. They include:
·the unsatisfactory explanation of the reason for the belated realisation of the inadequacy of the state of the applicant’s evidence;
·the fact that the respondent has repeatedly over a period approaching three years (at least) set out in detail the requirements of the legislation, in particular that the applicant has the burden of proof and what the applicant must establish;
·the fact that the applicant has throughout her dealings with the Commissioner and in these proceedings been represented by a firm that purports to have expertise in taxation law;
·the fact that the applicant is not an unsophisticated individual and has extensive other involvement in matters of tax including multiple other proceedings in this Tribunal;
·that the respondent cannot be compensated for costs thrown away by an adjournment because this is a no-cost jurisdiction;
·the terms of General Practice Direction 4.38 – 4.43;
·the need for this Tribunal’s time to be used efficiently;
·the applicant may have grounds for recourse against those who have been advising her in the substantive application; and
·the public interest in case management and the efficient utilisation of public resources and money.
On the other hand there are a number of factors that work in favour of an exercise of the discretion to grant an adjournment. They are;
·while the respondent will be required to spend additional money in having to read in and get up again, because the material put forward to date by the applicant has been so minimal, the costs thrown away are not likely to be significant when compared to a matter where extensive evidence and materials have been put on;
·while the possibility that the security that the respondent presently has over certain properties may not cover the full amount of the tax claimed, there is no evidence that that position would be any worse in several months if an adjournment were granted;
·irrespective of the reason for it being the case, it does appear that as the evidence presently stands, the “real issues”, as Deputy President Forgie referred to them in Re Kalafatis, will not be agitated if the hearing were to proceed with the evidence as it is; and undoubtedly most important
·the prejudice that the applicant will suffer if the hearing were to proceed on the current evidence significantly outweighs the prejudice that the respondent would suffer if an adjournment were granted. In this regard the Tribunal notes the statement by the High Court in Haset Sali v SPC cited in paragraph 43 above that:
“It is true that it is only in extraordinary circumstances that the interests of justice will be served by a refusal of an adjournment in a case such as the present where the practical effect of the refusal is to terminate the proceedings”.
DECISION
Although it could be considered that the applicant and those who have been advising her have been the sole cause of her misfortune, the prejudice that will be suffered by the applicant, namely the inevitable dismissal of the substantive application because of a lack of evidence, so outweighs the prejudice that would be caused to the respondent if an adjournment were granted that the Tribunal should exercise its discretion in favour of granting an adjournment of the hearing of the matter. The Tribunal therefore orders that the hearing of the substantive application be adjourned and the dates listed for hearing, 9 and 10 October 2017, be vacated.
I certify that the preceding 46 (forty – six) paragraphs are a true copy of the reasons for the decision herein of Deputy President S Boyle
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Administrative Assistant – Legal
Dated: 29 September 2017
Date(s) of hearing: 26 September 2017 Counsel for the Applicant: Ms S Kaur-Bains Advocate for the Applicant: Ms G Bourke Solicitors for the Applicant: Zafra Legal Counsel for the Respondent: Ms C Thompson Advocate for the Respondent: Mr T Burrows Solicitors for the Respondent: Australian Government Solicitor
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