Benjamin and Commissioner of Taxation (Taxation)
[2015] AATA 923
•30 November 2015
Benjamin and Commissioner of Taxation (Taxation) [2015] AATA 923 (30 November 2015)
Division
TAXATION & COMMERCIAL DIVISION
File Numbers
2015/4322 - 2015/4327
Re
John Benjamin
APPLICANT
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal Egon Fice, Senior Member
Date 30 November 2015 Place Melbourne The Tribunal refuses the application under section 29(7) of the Administrative Appeals Tribunal Act 1975 for an extension of time to lodge this application for review of a decision.
..............................[sgd]..........................................
Egon Fice, Senior Member
Catchwords
ADMINISTRATIVE APPEALS TRIBUNAL – procedure and evidence – applications – time for application – extension of time – objection decision concerned amounts received pursuant to a Deed – delay – unsatisfactory reason for delay – merits – contemporaneous evidence supports objection decision - prejudice to the respondent – relevant documents unable to be located – extension of time refused
Legislation
Acts Interpretation Act 1901 (Cth) s 29
Administrative Appeals Tribunal Act 1975 (Cth) s 29Taxation Administration Act 1953 (Cth) s 14ZZC
Cases
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541
Comcare v A’Hearn (1993) 45 FCR 441
Doyle v Chief of General Staff (1982) 42 ALR 283
Federal Commissioner of Taxation v Brown (1999) 42 ATR 672
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
Kioa v West (1985) 159 CLR 550
Wedesweiller v Cole (1983) 47 ALR 528Windshuttle v Commissioner of Taxation (1993) 46 FCR 235
REASONS FOR DECISION
Egon Fice, Senior Member
30 November 2015
In a letter dated 16 September 2008 the Commissioner of Taxation (the Commissioner) provided Mr John Benjamin with a Notice of Decision on Objection (the Objection Decision). Mr Benjamin’s objection was in respect of assessments or amended assessments made by the Commissioner for the income years 2000 – 2005 inclusive. That letter was addressed to Mr Benjamin, C/- Davey Accounting, PO Box 97, LAUNCESTON TAS 7250.
The Commissioner disallowed Mr Benjamin’s objection in full for each of the income years. That letter also stated the following (emphasis in original):
You may ask the Administrative Appeals Tribunal to have the Small Taxation Claims Tribunal review your case if the amount of tax in dispute is less than $5000.
You have 60 days from the date this notice was served on you to appeal or seek review of this decision.
On 20 August 2015 Mr James D Mapleston, a solicitor acting on Mr Benjamin’s behalf, lodged with the Tribunal an application seeking review of the Commissioner’s Objection Decision in respect of the six income years in question. That application is almost seven years outside of the time permitted by s. 29 of the Administrative Appeals Tribunal Act 1975 (the AAT Act) as modified by s. 14ZZC of the Taxation Administration Act 1953.
Mr Mapleston subsequently lodged an application for an extension of time on
4 September 2015. The Commissioner opposed the application for an extension of time.
Section 29 (7) of the AAT Act makes provision for the extension of time for making an application to the Tribunal. It provides:
The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of a decision (including a decision made before the commencement of this section) if the Tribunal is satisfied that it is reasonable in all the circumstances to do so.
Sections 29 (9) and (10) deal with notification issues where an extension of time is sought by an applicant. In essence, before the Tribunal determines an application for an extension of time, the Tribunal may give notice of the application to any persons who may be affected by the application or require the applicant to give such notice. Importantly, where a person given notice informs the Tribunal that they wish to oppose the application, the Tribunal must not determine the application except after a hearing at which the applicant and any person affected by the application has had a reasonable opportunity of presenting their respective cases.
I held a hearing by telephone on 6 October 2015 at which Mr Benjamin was represented by Mr Mapleston and the Commissioner was represented by Ms A Lee of counsel. While I heard submissions from both parties at that hearing, I also directed that the applicant lodge with the Tribunal and serve on the respondent a statement from Mr Benjamin explaining the reason for the delay in lodging his application. I also directed the respondent to lodge and serve any reply which he wished to make to that statement. On 13 October 2015 the Tribunal received an affidavit sworn by Mr Benjamin on
12 October 2015. Ms Z Harwood, on behalf of the Commissioner, lodged a reply on 19 October 2015. I have taken that material into account in making this decision.
BRIEF BACKGROUND
The Australian Taxation Office (ATO) audited Mr Benjamin in about 2007 following which it issued amended assessments for the income years 2000 – 2005.
On or about 22 April 2008, Mr Ken Davey of Davey Accounting, who at that time was
Mr Benjamin’s tax agent, lodged objections with the ATO in respect of each of those income years.After attempting to obtain further information from Mr Benjamin without success, the Commissioner issued to Mr Benjamin an Objection Decision dated 16 September 2008. That notice was posted to Davey Accounting at PO Box 97, Launceston.
Mr Benjamin claimed he never received that notice as Davey Accounting did not act for him as at 16 September 2008. Mr Benjamin said that he and his wife at that time lived in a unit in St Kilda Road, Melbourne. In any event, he was overseas in the USA and did not receive any material from Davey Accounting in respect of the Objection Decision. According to the Commissioner, the ATO made a number of unsuccessful attempts to contact Mr Benjamin.
On about 6 November 2008 the Commissioner sent to Mr Benjamin, at his residential address which was the unit situated on St Kilda Road, Melbourne, a Notice of Intended Legal Action/Garnishee. That notice stated that the amount outstanding on his taxation accounts was $1,476,917.98. The letter stated that unless payment in full was received by the close of business on 12 November 2008, the Commissioner would commence legal proceedings for recovery.
According to the Commissioner, proceedings were commenced in the County Court of Victoria on 28 May 2013 for the recovery of tax-related liabilities in the amount of $2,449,713.76. Apparently Mr Benjamin did not respond to the claimed service of that writ and on 30 June 2014 the Commissioner obtained judgement in default of an appearance against Mr Benjamin in the amount of $2,734,107.99.
Relying on the default judgement, the Commissioner had the Official Receiver issue a bankruptcy notice on 31 July 2014. The Commissioner obtained, from the Federal Circuit Court, an order for substituted service of the bankruptcy notice on Mr Benjamin, presumably because attempts at service had failed.
On 5 December 2014 Mr Benjamin filed an application in the County Court to set aside the default judgement. That application has not yet been heard. On 9 December 2014
Mr Benjamin filed a further application with the Federal Circuit Court seeking an extension of time to comply with the bankruptcy notice on the ground that he was waiting for his application in the County Court to be heard. That application has also not been heard.Mr Benjamin then lodged his application with the Tribunal on 20 August 2015 seeking a merits review of the Commissioner’s Objection Decision.
EXERCISE OF DISCRETION TO GRANT EXTENSION OF TIME
McHugh J in the High Court of Australia case Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541 explained that for nearly 400 years the policy of the law has been to fix definite time limits for prosecuting civil claims. While an applicant for an extension of time may satisfy conditions for the exercise of discretion, nevertheless, the applicant bears the onus of showing that the justice of the case requires the exercise of the discretion in his or her favour (page 551).
After explaining the rationale behind limitation periods set out in statutes, McHugh J said, at 553-554:
In enacting limitation periods, legislatures have regard to all these rationales. A limitation period should not be seen therefore as an arbitrary cut off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated.… A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case.… The discretion to extend should therefore be seen as requiring the applicant to show that his or her case is a justifiable exception to the rule that the welfare of the State is best served by the limitation period in question. Accordingly, when an applicant seeks an extension of time to commence an action after a limitation period has expired, he or she has the positive burden of demonstrating that the justice of the case requires that extension.
Although the principles and bases upon which the discretion should be exercised are drawn from civil cases heard by the Courts, those principles apply equally to the Tribunal which is required to act judicially.
There are two cases which are generally followed by the Tribunal when considering whether an extension of time should be granted. The first is the Federal Court of Australia decision of Wilcox J in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 (Hunter Valley Developments) and the second, a Full Court of the Federal Court
(Black CJ, Gray and Burchett JJ) decision in Comcare v A’Hearn (1993) 45 FCR 441. The relevant passages in Hunter Valley Developments are found at pages 348-349 where his Honour said:
1.… Special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper so to do. The “prescribed period” of twenty-eight days is not to be ignored (Ralkon Agricultural Co. Pty Ltd v. Aboriginal Development Commission (1982) 43 ALR 535 at 550). Indeed, it is the prima facie rule that proceedings commenced outside that period will not be entertained (Lucic v. Nolan (1982) 45 ALR 411 at 416). It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an “acceptable explanation of the delay” and that it is “fair and equitable in the circumstances” to extend time….
2. Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision… and a case where the decision-maker was allowed to believe that the matter was finally concluded… The reasons for this distinction are not only the “need for finality in disputes” (see Lucic at 410) but also the “fading from memory” problem referred to in Wedesweiller v. Cole (1983) 47 ALR 528.
3. Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension…
4. However, the mere absence of prejudice is not enough to justify the grant of an extension:…
5. The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted,…
6. Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court’s discretion:…
A’Hearn was initially heard in the Tribunal and subsequently went on appeal from a single judge of the Federal Court to the Full Court. The Tribunal refused to grant an extension of time on the basis that there was a total absence of any acceptable explanation for the delay (pages 442 – 443). The Full Court said, at 444:
We note that the Tribunal used language that might be taken to suggest that it is a pre-condition for success in such an application that an acceptable explanation for the delay must be given. Although it is to be expected that such an explanation will normally be given, as a relevant matter to be considered, there is no rule that such an explanation is an essential pre-condition:…
Essentially, the Commissioner’s case opposing the extension of time application was based on delay, merit, fairness and prejudice to the Commissioner. Mr Benjamin’s case was made on the ground that he had no recollection of being served with the Objection Decision until it was brought to his attention when the Bankruptcy Notice was served on him in 2015. Furthermore, as I understood Mr Mapleston’s written submissions, the objections made by Mr Benjamin to the Commissioner’s amended assessments for the years in question were, as he described them, legitimate (which I understood to mean meritorious), and should be considered by the Tribunal as failure to do so would constitute a failure to accord Mr Benjamin natural justice. It may well result in Mr Benjamin being made bankrupt. If that were to occur, serious prejudice would be suffered by Mr Benjamin rather than the Commissioner.
Delay
While an explanation for delay is not a prerequisite or precondition to the grant of an extension of time within which to make an application out of time, given that the delay in this case is about seven years, it is a matter which causes me some concern.
In his affidavit said to have been sworn on 12 September 2015 (although stating, on the first page, that it was sworn on 12 October 2015) and lodged with the Tribunal on
13 October 2015, Mr Benjamin testified that he did not see the letter from the ATO addressed to him dated 16 September 2008 (the Objection Decision) until it was received by Mr Mapleston under the cover of a letter dated 21 September 2015. The first thing I must say about that statement is that it is contradicted by Mr Mapleston in the application for review lodged by him with the Tribunal on 20 August 2015. When referring to the decision to be reviewed, Mr Mapleston said, at page 2:A copy of the undated Notice of Objection Decision made by the Commissioner disallowing the Applicant’s objections (“the reviewable objection decision”), received by Applicant by email on 1 April 2015, is attached.
The next point made by Mr Benjamin regarding delay was that Davey Accounting, to whom the letter of 16 September 2008 was addressed, had ceased to act for him and did not so act as at 16 September 2008. In support of that statement, Mr Benjamin attached to his affidavit an email from Mr Ken Davey to Mr Mapleston dated 12 October 2015 in which Mr Davey said:
I confirm that as at the 16th September 2008 we did not act for John Benjamin however I do not know if the Taxation Office was aware of that fact as we do not usually notify them when a client has left as the incoming accountant usually does that task.
A copy of the letter in question is in our files and it would have been forwarded to the last address we would have for the client. We do not know if the letter was received by Mr Benjamin.
The problem with the statement made by Mr Davey is that there is contemporaneous evidence to the contrary. Attached to the Commissioner’s reply to the submissions made by Mr Mapleston in this application was a Work Management Activity Notes Report which contains the following entry made on 16 December 2008:
I called and asked to speak to Ken Davey, the receptionist – Erica Cleaver – said that he wasn’t available. I advised her that my colleague (Mark Graham) had left 3 messages for him since the 02Dec08 & as he had not returned any of those calls, I asked if I could leave a message for her to pass on to Ken, she agreed and said she would pass the information to him. I then read the CWC script to her for the outstanding 2007-2008 ITR’s and advised her that I will be issuing a final notice to secure lodgment. She repeated the information back to me and said she would pass it on to Ken Davey.
Erica confirmed the mailing address as: Davey Accounting Plus, PO Box 97, Launceston, TAS, 7250.
Erica could not confirm the client’s residential address, but did confirm his mailing address as: PO Box 7316, St Kilda Road, Melbourne, Vic 8004.
As Ms Lee said in the Commissioner’s reply, Ms Cleaver, the receptionist at
Davey Accounting, did not indicate that the firm ceased to act for Mr Benjamin. While I accept it is possible that the receptionist may not have been aware that Davey Accounting had ceased to act for Mr Benjamin, following that conversation, logically, when Mr Davey was made aware of the call from the ATO, there would have been some response to that effect. I did not have any evidence of Mr Davey contacting the ATO to pass on that information.
Ms Lee also put into evidence a note about a telephone call received by the ATO from Kerry Turzaver from Davey Accounting on 24 February 2009. Relevantly, that note states:
Phone call Inbound agent (PC) BENJAMIN, JOHN 24/2/09 – 12.10 pm – POI satisfied Received return call from Kerry Turzaver from Davey Accounting. Kerry advised that the tag Ken Davey had authorised her to contact me re this client. I advised that the final notice issued to their postal address PO box 97
Launcesto [sic]
As Ms Lee submitted, the contradictory contemporaneous records are probably an example of the deterioration in quality of evidence following the passage of substantial time after the event took place. This was one of the reasons pointed out by McHugh J in Brisbane South Regional Health Authority why limitation periods exist. His Honour said, at 551:
The enactment of time limitations has been driven by the general perception that “[w]here there is delay the whole quality of justice deteriorates”. (21) Sometimes the deterioration in quality is palpable, as in the case where a crucial witness is dead or an important document has been destroyed. But sometimes, perhaps more often than we realise, the deterioration in quality is not recognisable even by the parties. Prejudice may exist without the parties or anybody else realising that it exists.
In the Commissioner’s written reply, Ms Lee also referred to the address of
Davey Accounting which was set out in Mr Benjamin’s objection letter dated 22 April 2008. She noted that the Objection Decision dated 16 September 2008 was sent to that address. Ms Lee also noted that in his email of 12 October 2015, Mr Davey said that the letter in question was on the firm’s files and would have been forwarded to the last address the firm had for Mr Benjamin. She submitted that the address given by Davey Accounting in the telephone discussion which took place on 16 December 2008 was identical to that on invoices sent from University of Rochester Medical Centre in the USA to Mr Benjamin in November 2008 and which were attached to Mr Benjamin’s affidavit. Those invoices indicate they were paid in December 2008 and, accordingly, the reasonable inference is that they were received at the address to which they were posted. Therefore, according to Ms Lee, despite Mr Benjamin’s testimony that he was overseas in September 2008, there is no reason why he would not have received a copy of the Objection Decision forwarded by Davey Accounting to him at the PO Box address.
Ms Lee also submitted that it was not in dispute that Mr Benjamin was aware that an objection was lodged on his behalf by Davey Accounting in April 2008. Despite that,
Mr Benjamin’s evidence was that he did not make any contact with any person at the ATO between 16 September 2008 and 8 December 2014 when he received the bankruptcy notice. In her written submissions, Ms Lee pointed out that Mr Benjamin’s then solicitors, Poulton, Elliott & Grey, obtained counsel’s opinion regarding the tax treatment of the transactions in dispute and that advice was forwarded to the Commissioner. The objections were made by his then tax agent, Davey Accounting and that in about 2011
Mr Mapleston, who then acted for Mr Benjamin, contacted the ATO regarding a payment arrangement for a tax-related liability. That request was denied in a letter from the ATO to Mr Benjamin, care of Mr Mapleston, on 24 October 2011. Mr Benjamin’s then tax agent, DA Financial Group, lodged his income tax return for the 2010 income year. The point made by Ms Lee was that throughout the entire period between 2008 and 2014,
Mr Benjamin had tax accountants working for him and he had legal representation. Despite that, Mr Benjamin continued to insist he was unaware of the objection decision made by the Commissioner on 16 December 2008.
Ms Lee also submitted that after the objections had been lodged with the ATO in 2008, the ATO wrote to Mr Benjamin twice in 2008 requesting further information to finalise the objection decision; once in 2008 attaching the Notice of Intended Legal Action/Garnishee; and six times in 2011 and 2012, although to a different PO Box number, nevertheless at St Kilda Road, with Income Tax Account statements of account indicating a large debit balance (being amounts owing to the Commissioner). There was no evidence that any of these documents had not been received by Mr Benjamin.
Ms Lee also pointed out that Mr Benjamin had remained active in business throughout the seven-year period. He held an office in some 11 companies during that period. Given that he was represented by lawyers and tax advisers during the period and that he continued to be involved in business, one would have expected Mr Benjamin to have been aware of and followed up with the Commissioner the status of his objection against the amended assessments even if Davey Accounting had ceased to act for him.
Mr Benjamin raised one other matter which, as I understood it, contributed to the delay. In his affidavit Mr Benjamin testified that his wife, who suffered with cancer, was treated at the Wilmot Cancer Centre in Rochester, New York and the Shands Cancer Centre in Florida in September and October 2008. He attached two invoices from the University of Rochester Medical Centre both of which were dated 6 November 2008. They relate to the period 12 September 2008 to 30 September 2008. For that reason, he said he did not receive the letter from the Commissioner dated 16 September 2008. However, as I have already indicated above, those invoices were addressed to PO Box 7316 St Kilda Road Melbourne which is the same postal address Davey Accounting had for Mr Benjamin in 2008. There is no obvious explanation why invoices sent to that postal address were received but that the Objection Decision was not.
The above evidence discloses a less than satisfactory explanation for the seven year delay in seeking a merits review of the Commissioner’s Objection Decision by the Tribunal. In a hearing of this nature, it is not for me to determine or to speculate as to why that may be the case. It is sufficient for me to simply state that the explanation given was unsatisfactory and it points to Mr Benjamin having rested on his rights or simply ignored his income tax liabilities following issue by the Commissioner of his Objection Decision. It also highlights the evidentiary difficulties which often arise following such a long period of delay. Invariably, memories will be inaccurate and, as is already demonstrated thus far, will be contradicted by contemporaneous objective evidence.
Merits
As Wilcox J said in Hunter Valley Developments, the merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted. However, in doing so, some care must be exercised when undertaking this task. This was explained by von Doussa J in Windshuttle v Commissioner of Taxation (1993) 46 FCR 235, a case which went on appeal to the Federal Court from the Tribunal. His Honour said, at 243-244:
The issue which the AAT was required to consider was whether, for the purposes of the exercise of the discretion under s. 188A, the applicant’s case had prospects of success, and what those prospects were. It is sufficient for that purpose, if the parties chose to so argue their case, to merely identify the factual assertions which the applicant made in the objection, and then to consider whether the application of the law to those assertions would bring about the result for which the applicant contends. In other words the assertions can, if the parties so choose, be treated as pleadings are treated where an application is made to strike out an action on the ground that the pleadings disclose no cause of action. On an application of that kind the true existence of the facts alleged in the pleadings is not explored by evidence. That is left for the trial if there is an arguable case on the pleadings.… It would not be appropriate on an application to extend time to seek to attack the facts alleged on the ground that the credit of the applicant, or that of supporting witnesses, should not be accepted. Arguments of that kind are best left for later consideration if and when an extension of time is granted. Only where there is some obvious and easily demonstrated flaw in the applicant’s case would it be appropriate to challenge the factual basis for the asserted claim on an application to extend time.
The above statement made by von Doussa J was cited with approval by the Full Court of the Federal Court (Drummond, Sackville and Hely JJ) in Federal Commissioner of Taxation v Brown (1999) 42 ATR 672. The Court said, at 679:
[18]
It is important to appreciate the limits of the Commissioner’s argument.
Mr Bevan, who appeared with Mr Iuliano for the Commissioner, explicitly (and properly) made the following concessions:
(i) In determining whether a taxpayer seeking an extension of time in which to lodge an objection has prospects of success, the test to be applied is whether the objection arguably has merit.
(ii) The arguable merits test requires the taxpayer’s case to be assessed at its highest.
(iii) It follows that, in applying the arguable merits test, findings of credit have no place. In other words, it is an error of law for the AAT to decide that the taxpayer’s objection has no arguable merits on the basis that the taxpayer’s evidence is not worthy of belief.
(iv) Ordinarily, it is inappropriate for the AAT to permit or to engage in cross-examination of the taxpayer’s witnesses with the view to testing the veracity of their evidence so far as the merits of the objection were concerned.…
The Commissioner contended that in this case, there was an obvious and easily demonstrated flaw in Mr Benjamin’s case. According to Ms Lee, the substantive dispute between the parties concerned the tax treatment of a number of payments, totalling
$1.5 million made to Mr Benjamin during the relevant years pursuant to a Deed of Settlement (the Deed) dated 29 October 1999. The parties to that Deed are six individuals and four corporate entities. They include Mr Benjamin, his brother, an associate of his brother and their respective spouses and/or associated companies.
The Deed recites that Mr Benjamin’s brother, Mr Terence Benjamin, his spouse and three corporate entities were involved in a property development project in Ballarat. It states that a dispute had arisen, in particular between Mr Benjamin and his late wife on the one hand and his brother, his brother’s spouse, two other individuals and the four corporate entities in relation to the property development. It does not state what the dispute was about, other than that it related to the property development.
By way of settlement of the dispute, it was agreed that one of the corporate entities would deliver to Mr Benjamin an executed transfer of its 25% interest in the property along with some other documents. No consideration was said to be paid for the transfer other than entering into the deed. In addition, Mr Terence Benjamin and three of the corporate entities agreed to pay to Mr Benjamin the total sum of $1,500,000 by way of instalment payments occurring between 20 November 1999 and 22 October 2004.
The Commissioner included the instalment payments made to Mr Benjamin in his assessable income. Mr Benjamin maintained those amounts were not assessable because they related to payments arising from the settlement of a family dispute. In support of his position, Mr Benjamin obtained the advice of counsel, Mr Edward Power. That advice is dated 25 June 2006. In essence, Mr Power was instructed that the $1,500,000 payment and the 25% interest in the property received by Mr Benjamin were offered in negotiations between family members and was not based on anything finite such as profit forgone, rent foregone etc from the development. He determined on that basis that the amount received by Mr Benjamin could not be characterised as a receipt of income. Mr Powell went on to consider whether the capital gains tax provisions applied and concluded that they did not. He described the receipt of the money and the
25% interest in the property as proceeds received from a family settlement.
However, the Commissioner noted, correctly in my opinion, that Mr Power’s advice was provided at short notice as he stated that he was briefed to advise as a matter of some urgency. Mr Power also said that because of the urgency of the matter, he had not had the opportunity to confer with Mr Benjamin and had received instructions from Mr Grey, his instructing solicitor. Accordingly, so the Commissioner submitted, Mr Power was not fully briefed about the circumstances which led to the settlement. Attached to Ms Lee’s submissions was a copy of a letter from Logie-Smith Lanyon Lawyers, dated 19 April 1999 and addressed to Mr Terence Benjamin. Logie-Smith Lanyon acted for the applicant,
Mr Benjamin. The letter stated:
According to our instructions, late last year Mr John Benjamin entered into a joint venture arrangement with you, Mr Terry Benjamin, and Mr Michael J Brooks, to purchase and develop the Lakeside Hospital site in Ballarat, in accordance with a proposal styled as The Domain, Ballarat.
The terms of the joint venture arrangement, which were the subject of discussion at our meeting with you and Mr Selwyn Cohen on 14 January 1999, and our facsimile transmission to you of 15 January 1999, were that the three venturers, or interests associated with them, would share equally in the costs of and profits to be derived from the venture.
We are further instructed that, in accordance with the joint venture arrangement, late last year Mr John Benjamin and you, Mr Terry Benjamin, worked together to prepare and to submit a detailed and far-ranging tender for the purchase of property, which ultimately proved successful. Mr John Benjamin was responsible for bringing together the team of expert consultants whose assistance resulted in the preparation of the detailed tender document that proved to be successful.
In further pursuit of the joint venture, in December 1998 you, Mr Terry Benjamin, arranged for Ben Brook Homes Pty Ltd, to enter into a contract for the purchase of the property at a price of or approximating $1,518,000.00 on behalf of the joint venture.
In January 1999, however, upon the tender by Mr John Benjamin to you of his share of the deposit payable under the contract for the purchase of the property, you, Mr Terry Benjamin, refuted the existence of the joint venture and asserted that you and Mr Brooks will proceed alone with the acquisition and development of the land to the exclusion of Mr John Benjamin.
…
Based upon our instructions, we have expressed the opinion to Mr John Benjamin (which is supported by the opinion of senior counsel) that your actions in refuting the existence of the joint venture and purporting to exclude Mr John Benjamin from further participation in the venture, constitute an actionable repudiation of your obligations under the joint venture and that the land, once acquired, and any profits resulting from the acquisition development or realisation of the land will be held upon constructive trust as to one third for our client, Mr John Benjamin.
…
Unless we have that assurance from you, Mr Terry Benjamin by no later than 4 pm on Tuesday, 20 April 1999, we are instructed to institute proceedings without further notice to you for appropriate declaratory and other relief.
In my opinion, it is sufficiently clear that Mr Power was not fully briefed of the circumstances giving rise to the dispute between Mr Benjamin and his brother. Nor does he mention Mr Benjamin’s claimed interest in the property development as a joint venturer. That much is clear from the Logie-Smith Lanyon letter.
For the purposes of this application, as I have already indicated above, it is not my duty and in fact it would be incorrect for me to make any findings about the facts set out in the documents to which I have referred. However, simply accepting what is set out in the Logie-Smith Lanyon letter and the Deed of Settlement, the application of legal principles to those facts appears to support the Commissioner’s argument. Put at its highest from Mr Benjamin’s viewpoint, his prospects of succeeding in a merits review are not good. Unless the facts are found to be substantially different to those exposed by the documents before me on this application, it cannot be said that Mr Benjamin has an arguable case. In the materials Mr Benjamin lodged with the Tribunal for the purposes of this application for an extension of time, he has produced nothing which counters or which may displace or alter the evidence which was before me.
Prejudice
When referring to prejudice, Wilcox J in Hunter Valley Developments referred only to prejudice to the respondent. In this case, both parties claim there will be prejudice; the applicant if an extension of time were not granted, and the respondent, if an extension of time were granted. It is clear that what Wilcox J had in mind, based on the cases to which he referred, was the prejudice suffered by a party were the extension of time to be granted. I believe it is fair to say that a person or a party to a proceeding suffers prejudice if his or her rights are disregarded. In that sense, it appears that what Wilcox J had in mind was a party’s right to a fair hearing. In this case, the Commissioner has raised that concern.
What was submitted by Mr Mapleston was that Mr Benjamin would suffer prejudice because, if an extension of time were not granted, his right to having the Commissioner’s objection decision reviewed would be lost. As a consequence, he may well be bankrupted on the application of the Commissioner. However, it should be apparent to Mr Benjamin that his right to have the Commissioner’s decision reviewed is a qualified right. He only has such a right, in this case, provided he lodges an application seeking review of that decision within 60 days of the date on which he was given that decision. While I am mindful of the fact that Mr Benjamin said he did not receive the Commissioner’s Objection Decision until September 2015, if the Commissioner were to rely on s. 29 (1) of the Acts Interpretation Act 1901, the Objection Decision would be deemed to have been given to Mr Benjamin at a time when it would have been delivered in the ordinary course of post. It is safe to say that Mr Benjamin lost the right to seek review of the Commissioner’s Objection Decision many years ago. He must now rely on the exercise of the discretion granted to the Tribunal by s. 29(7) of the AAT Act. The Tribunal will only grant that application if it is satisfied that it is reasonable in all the circumstances to do so.
My views regarding the effect of prejudice are supported by what Fisher J said in Doyle v Chief of General Staff (1982) 42 ALR 283 where he said, at 287:
As there is no evidence of any prejudice to the respondent or any other person caused by the delay and it can not be said that Major Doyle rested on his rights, I do not see this as a sound ground for refusing his application. As Bray CJ said in Lovett v Le Gall (1975) 10 SASR 479 at 485: “If the defendant has suffered no prejudice, as when he was well aware within the limitation period of the plaintiff’s claim, or where the excess period of time is small, or where he cannot show that he has lost anything by reason of the delay, it may well be that the court will not find it difficult to come to the conclusion that it is fair and equitable in the circumstances to grant the extension.”
Further support may be obtained from the decision of Sheppard J in Wedesweiller v Cole (1983) 47 ALR 528. In that case, the named respondent was a member of the Public Service Board. His Honour said, at 534:
I do not recount the detail of his evidence in this regard, but it does tend to establish that the incidents in question have faded from the memories of those concerned, or at least a large number of them. On the other hand I must bear in mind that there are departmental records available from which potential witnesses may refresh their recollections and that it is human experience that many persons called upon to recall events which occurred in the past are able to remember a good deal if their minds are applied to the problem properly.… The frailty of human recollection is well known but, generally speaking, reliable evidence of events long since past [sic] is given daily in the courts of this country.
In this case, the Commissioner submitted that he was unable to locate a copy of the tender documents which were considered during the audit and objection. In this regard, I had in evidence an affidavit made by Ms A Vandenhurk, a public servant employed by the ATO.
Ms Vandenhurk testified that she had thoroughly investigated the availability of documents relating to Mr Benjamin’s audit and objection. She said that although she believed she had located most of the necessary documents, she had not been able to locate any tender documents relating to the purchase of the former Lakeside Hospital Site at Ballarat by Benbrook Homes Pty Ltd. She believed that those documents were previously in the possession of the Commissioner but that was no longer the case.
Ms Vandenhurk also testified that having reviewed the Commissioner’s records, she was unable to identify any response from Mr Benjamin to the Commissioner’s request for further information made during the analysis of his objection; or any records of correspondence, telephone calls or other contact regarding the objection between the date on which the objection decision was made and 8 December 2014 when Mr Benjamin served his application to set aside the County Court default judgement. Ms Vandenhurk said that the Commissioner may be prejudiced if Mr Benjamin’s application to extend time were granted. The Commissioner would not be able to provide to the Tribunal all relevant documents on which his decision was based.
In its letter to Mr Terry Benjamin, Logie-Smith Lanyon expressly referred to the submission of a detailed tender for the purchase of the property in question which was said to have been successful. The lawyers also said that Mr Benjamin was responsible for bringing together the team of expert consultants whose assistance resulted in the preparation of the detailed tender document which proved to be successful. It appears to me that the presence of a joint venture arrangement, as claimed by Mr Benjamin, is likely to be a significant issue on a merits review of the Commissioner’s Objection Decision. The tender document is likely to provide evidence of such an arrangement. Accordingly, I accept that the Commissioner will suffer prejudice should an extension of time be granted to Mr Benjamin.
There is one other factor to which both parties referred in their written submissions. That was the issue of fairness. In fact Mr Mapleston submitted that Mr Benjamin’s objections to the commissioner’s amended assessments for the years in question were legitimate and an extension of time should be granted in order to accord natural justice to Mr Benjamin. Mr Mapleston referred to the High Court of Australia (Gibbs CJ, Mason, Wilson, Brennan and Deane JJ) decision in Kioa v West (1985) 159 CLR 550. Mason J said, at 582:
It is a fundamental rule of the common law doctrine of natural justice expressed in traditional terms that, generally speaking, when an order is to be made which will deprive a person of some right or interest or the legitimate expectation of a benefit, he is entitled to know the case sought to be made against him and to be given an opportunity of replying to it:…
His Honour went on to say, at 583-584 (emphasis added):
It has been said on many occasions that natural justice and fairness are to be equated:… And it has been recognised that in the context of administrative decision-making it is more appropriate to speak of a duty to act fairly or to accord procedural fairness.…
The law has now developed to a point where it may be accepted that there is a common law duty to act fairly, in the sense of according procedural fairness, in the making of administrative decisions which affect rights, interests and legitimate expectations, subject only to the clear manifestation of a contrary statutory intention.
As I have already said above, the right sought to be relied on by Mr Benjamin, that is to have the Commissioner’s Objection Decision reviewed, is conditional. That right only exists in circumstances where he has lodged an application seeking a merits review within the statutory time which limits such applications. That right is extinguished if an application is not made within the statutory time limitation and all that remains is the exercise of discretion by the proposed reviewer. The discretion, while not fettered in any particular way, must nevertheless be exercised in accordance with the law. The common law principles regarding the exercise of discretion to extend time for the doing of an act are well and truly accepted and understood. Having made his application some seven years beyond the statutory time limit, Mr Benjamin only has the right to seek a hearing on the exercise of discretion to extend the statutory time period. Mr Benjamin has been given that right including extra time to lodge any further evidentiary material in support of his application. In those circumstances, it cannot be said that he has been denied procedural fairness.
CONCLUSION
I have found that Mr Benjamin has not provided a satisfactory explanation for the seven-year delay in lodging his application with the Tribunal seeking review of the Commissioner’s objection decision made on 16 September 2008. While a satisfactory explanation is not a prerequisite for the grant of an extension of time, it is a factor which I have taken into account when determining whether the Tribunal’s discretion to extend time should be exercised.
As for the merits of his claim, all that Mr Benjamin is required to do is to disclose that he has an arguable case. However, accepting the facts as they are stated in the evidentiary material which was before me on this application, and without making any findings of fact, I have found that Mr Benjamin does not have an arguable case. That is because the evidentiary material points to a commercial settlement and not the settlement of a family dispute as claimed by Mr Benjamin. In those circumstances, it is likely that the monies paid to Mr Benjamin in the resolution of that dispute are subject to taxation.
I have also found that the Commissioner is likely to suffer prejudice because significant relevant documents relating to the basis on which the dispute arose and was subsequently settled are missing. Those documents were used by the Commissioner in making his objection decision. While an applicant in a taxation proceeding of course bears the onus of proving that an assessment is excessive, and the Commissioner is not required to substantiate or prove his assessment, I can foresee evidentiary difficulties arising as a result of the absence of those documents.
Finally, Mr Benjamin expressed concern that if the extension of time were not granted, he would suffer significant detriment because it was quite likely that he would be bankrupted. Although I accept that to be a possibility, the absence of procedural fairness would be the only basis upon which Mr Benjamin might establish that his claim should be heard. In my opinion, Mr Benjamin has been accorded procedural fairness by the Tribunal in dealing with his extension of time application. He has been made aware of the grounds on which the Commissioner opposes an extension of time and he has had adequate time and opportunity to respond to those grounds.
It necessarily follows that, in Mr Benjamin’s circumstances, it is not reasonable to grant an extension of time for making an application to the Tribunal. The extension of time application lodged by Mr Benjamin with the Tribunal on 4 September 2015 is refused.
I certify that the preceding 59 (fifty -nine) paragraphs are a true copy of the reasons for the decision herein of Egon Fice, Senior Member .............................[sgd]...........................................
Associate
Dated 30 November 2015
Date of hearing 6 October 2015 Date final submissions received 19 October 2015 Advocate for the Applicant Mr J Mapleston Solicitors for the Applicant James D. Mapleston Counsel for the Respondent Ms A Lee Advocate for the Respondent Ms Z Harwood Solicitors for the Respondent Australian Taxation Office
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