Bilquip Pty Ltd, Illmat Pty Ltd, Holibass Pty Ltd v Chief Commissioner of State Revenue (NSW) (Rd)
[2013] NSWADTAP 36
•30 July 2013
Administrative Decisions Tribunal
New South Wales
Case Title: Bilquip Pty Ltd, Illmat Pty Ltd, Holibass Pty Ltd v Chief Commissioner of State Revenue (NSW) (RD) Medium Neutral Citation: [2013] NSWADTAP 36 Hearing Date(s): 27 and 28 June 2013 Decision Date: 30 July 2013 Jurisdiction: Appeal Panel - Internal Before: RL Seiden, Deputy President
GD Walker, Judicial Member
C Bennett, Non Judicial MemberDecision: Appeal dismissed
Catchwords: Payroll tax - grouping provisions - companies with common controlling interest - ASIC certificates - whether individuals were validly appointed directors - de facto directors - errors of law - leave to extend appeal to the merits - unfair or unorthodox treatment of evidence Legislation Cited: Administrative Decisions Tribunal Act 1997 (NSW)
Corporations Act 2001 (Cth)
Taxation Administration Act 1996Cases Cited: Building Professionals Board v Hans (GD) [2008] NSWADTAP 13
Carpathian Resources Ltd v Hendriks [2012] FCA 496
Cornish Investments Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 25
Forkserve Pty Ltd v Jack (2001) 19 ACLC 299; [2000] NSWSC 1064
Hope v Bathurst City Council (1980) 144 CLR 1
IS v Public Guardian & Ors [2009] NSWADTAP 24
Jones v Dunkel (1959) 101 CLR 298
JT v Protective Commissioner [2004] NSWADTAP 13
K v K [2000] NSWSC 1052
Laycock v Commissioner of Police, NSW Police [2007] NSWADTAP 34
Lloyd v Veterinary Surgeons Investigating Committee (2005) 65 NSWLR 245
Lo v Chief Commissioner of State Revenue [2012] NSWADTAP 12
Lo v Chief Commissioner of State Revenue [2013] NSWCA 180
McGuirk v Director General, Attorney General's Department (GD) [2007] NSWADTAP 38
McGuirk (GD) v University of New South Wales [2007] NSWADTAP 65
Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259
Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145
The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126
TNT Skypak v FCT (1988) 82 ALR 175
World Best Holdings Limited v Sarker & Anor [2004] NSWSC 935Category: Principal judgment Parties: Bilquip Pty Ltd, Illmat Pty Ltd, Holibass Pty Ltd (Appellants)
Chief Commissioner of State Revenue (Respondent)Representation - Counsel: Counsel
S Kaur-Bains (Respondent)- Solicitors: Robinson Legal (Appellants)
Crown Solicitor's Office (Respondent)File Number(s): 129028 Decision Under Appeal - Before: Revenue Division - Date of Decision: 02 August 2012 - Citation: Bilquip Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 151 - Court File Number(s): 106089
REASONS FOR DECISION
The underlying issue in this case is whether the Appellants were correctly grouped for payroll tax purposes, due to the common controlling interest of the directors. The questions are whether:
(a) Illmat Pty Ltd (Illmat) and Bilquip Pty Ltd (Bilquip) should be grouped for the period 1 July 2004 to 30 June 2008; and
(b) Illmat, Bilquip and Holibass Pty Ltd (Holibass) should be grouped for the period 22 August 2005 to 30 June 2008.
The case for question (a) turns on whether both Mr John Florent and Mrs Julie Florent were directors of Bilquip for the period 1 July 2004 to 30 June 2008. The case for question (b) turns on whether Mrs Julie Florent was a director of Holibass for the period 22 August 2005 to 30 June 2008. In Bilquip Pty Ltd v Chief Commissioner of State Revenue [2012] NSWADT 151 (the Decision) Judicial Member Verick held that the then applicants were correctly grouped by the Chief Commissioner.
On 2 August 2012 the application was dismissed subject to final orders. Final orders were made on 14 December 2012 affirming the assessments subject to certain adjustments. The Appellants appeal on questions of law and seek leave to extend the appeal to the merits.
The decision below
The case below was put on two fronts. The first contention was that certificates from the Australian Securities and Investment Commission (the ASIC certificates) provided prima facie evidence which was sufficient to discharge the burden of proof, that Mr and Mrs Florent were directors at the relevant times: s 1274C of the Corporations Act 2001 (Cth) (Corporations Act).
Section 1274C of the Corporations Act relevantly provides as follows:
ASIC certificate
ASIC may certify that a person was a director or secretary of a company at a particular time or during a particular period. In the absence of evidence to the contrary, a certificate is proof of the matters stated in it.The second contention was that the whole of the evidence demonstrated that Mr and Mrs Florent were de facto directors, as contemplated by paragraph (b) in the definition of "director" in s 9 of the Corporations Act. The definition of "director" is relevantly as follows:
"director" of a company or other body means:
(a) a person who:
(i)is appointed to the position of a director; or
(ii)is appointed to the position of an alternate director and is acting in that capacity;
regardless of the name that is given to their position; and
(b)unless the contrary intention appears, a person who is not validly appointed as a director if:
(i) they act in the position of a director; or
(ii) the directors of the company or body are accustomed to act in accordance with the person's instructions or wishes.
Subparagraph (b)(ii) does not apply merely because the directors act on advice given by the person in the proper performance of functions attaching to the person's professional capacity, or the person's business relationship with the directors or the company or body.
In relation to the first issue, the Tribunal held that the presumption created by s 1274C of the Corporations Act was rebutted and rejected the contention that the ASIC certificates constituted probative evidence of the asserted facts that Mr and Mrs Florent were validly appointed directors. At paragraph 40 of the decision below Judicial Member Verick said:
I agree with the submissions made by the Chief Commissioner's counsel that the 'retrospective' action to change the information set out in ASIC database in relation to both Bilquip and Holibass merely created a presumption. The evidence, that is not disputed, clearly indicates that in the relevant grouping periods, the Florents were not recorded as directors of Bilquip and Mrs Florent was also not a director of Holibass. The 'retrospective' action does not therefore assist the Applicants nor is the back-dating action an issue in this matter.
It was not contended below that the Tribunal should be satisfied, on the whole of the evidence, that Mr and Mrs Florent were directors. In other words, the case below for the proposition that Mr and Mrs Florent were validly appointed as directors, relied solely upon the acceptance of the ASIC certificates as proof of the matters stated in them.
Accordingly, the Tribunal having found that there was evidence to contradict the ASIC certificates, turned to the second issue: the question of whether the Applicants had discharged their burden of proof in relation to their contention that Mr and Mrs Florent were de facto directors.
Consideration of that issue is found at paragraphs 43 through to 63 of the Decision. The Tribunal was ultimately not satisfied that Mr and Mrs Florent were de facto directors.
The notice of appeal
The grounds of appeal were separated into two sections: questions of law; and the appellants' reasons for asking the Tribunal to extend the appeal to the merits. These are dealt with in turn.
Questions of law
The grounds of appeal concerning the questions of law provided as follows:
1.The Tribunal Member erred in his interpretation of 1274B of the Corporations Act.
2.The Tribunal Member erred in his interpretation of 1274C of the Corporations Act.
3.The Tribunal Member erred in his interpretation of section 9 of the Corporations Act and Austin's Case [DCT v Austin (1998) 16 ACLC 1555] concerning the duties of a de facto director.
4.The Tribunal Member erred in his interpretation of the above sections of the Corporations Act (2001) in accepting the Respondents submission that the evidence to the contrary to the Prima facie record in the register, is the fact that that the "ASIC data base for Bilquip was only amended retrospectively on 18 August 2008." This fact does not rebut the presumption [t]hat John and Julie Florent were directors at the relevant time and lodged documents with ASIC noting they were directors contemporaneously with their disputed directorship.
5. The Tribunal member erred in his application of the evidence to the test of a de facto director in that he has created a distinction on what duties of a director would fall [within] the test as stipulated by Austin.
There was no real debate between the parties that grounds 1 and 2 involved issues of statutory construction and therefore expressed questions of law: Norrie v NSW Registrar of Births, Deaths and Marriages [2013] NSWCA 145, see in particular Beazley ACJ, at [55] to [63]; and Preston CJ of LEC at [303] - [304]. Nevertheless, the Respondent highlighted that question 1 concerned the interpretation of s 1274B of the Corporations Act, which concerns evidence in a court. As the Corporations Act does not have an expanded definition of "court" which includes the Administrative Decisions Tribunal, s 1274B could not be and was not relevant in these proceedings. Therefore ground 1 was not a question of law arising in the appeal. This was not contested by the Appellants.
With respect to ground 3, the Appellants accepted that the Tribunal had applied the correct test for determining when someone was a de facto director under s 9 of the Corporations Act and therefore question 3 was at best a mixed question of fact and law. It was not contended that the facts as found must inescapably lead to the conclusion that Mr and Mrs Florent were de facto directors. Therefore, ground 3 did not raise a question of law: see The Australian Gas Light Company v Valuer-General (1940) 40 SR (NSW) 126 at 138.5. The choice between two conclusions open on the evidence is a question of fact: The Australian Gas Light Company at 138.6; Hope v Bathurst City Council (1980) 144 CLR 1 at 7; TNT Skypak v FCT (1988) 82 ALR 175 at 182 . Ground 3 therefore was not pressed as a question of law.
As to ground 4, the Respondent accepted that the question whether the facts as found were capable of being "evidence" to contradict the ASIC certificates raised a question of law.
In relation to ground 5 the Respondent submitted that if the question is whether the facts were capable of satisfying the test, then that raised a question of law, but if it was a challenge to the factual findings, or a choice between different conclusions, then that was a question of fact and not of law. It was not contended that the facts as found are necessarily within the definition of de facto director: The Australian Gas Light Company at 138.5.
We are satisfied that:
(a) Ground 1 does not arise in these proceedings;
(b) Grounds 2 and 4 raise questions of law that arise in these proceedings; and
(c) Grounds 3 and 5 are at best mixed questions of fact and law.
Errors of law
Grounds 2 and 4 substantially deal with the same issue: whether the Judicial Member erred in holding that for the purposes of s 1274C of the Corporations Act there was evidence to the contrary of the matters contained in the ASIC certificates. The certificates referred to the status of Mr and Mrs Florent as directors throughout the relevant period. As disclosed in paragraph 40 of the Decision (extracted above) the Tribunal held that the evidence that contradicted the certificates was that during the relevant grouping periods Mr and Mrs Florent "were not recorded as directors of Bilquip and Mrs Florent was also not a director of Holibass" (the Contrary Evidence Finding).
In the absence of evidence to the contrary a Court (or Tribunal) may act on the prima facie evidence of the matters referred to in the ASIC certificates: Forkserve Pty Ltd v Jack (2001) 19 ACLC 299; [2000] NSWSC 1064 at [21] (Forkserve). In the absence of evidence to the contrary, litigants may avoid the necessity of being put to the proof of matters that are normally contained in the ASIC registers. The question for the Appeal Panel is whether or not it is necessary to weigh any evidence to the contrary against other competing evidence or to make any finding on the balance of probabilities as to whether the evidence countermands the matters stated in the ASIC certificates.
The submissions on errors of law
The Respondent submitted that all that was necessary was to point to some evidence that was contrary to the matters in the ASIC certificates. The Respondent contended that the Contrary Evidence Finding was open on the evidence: ASIC records existed showing, at the relevant times, that the Florents were not directors; there was evidence of backdating (i.e., the company records at ASIC were amended retrospectively); and in any event, the finding was not disputed by the Appellants.
On the other hand, the Appellants submitted that it was necessary for the Tribunal to view the so called contradictory evidence in the context of the case as a whole, in order to determine whether the evidence was in fact contradictory.
The Appellant contended that if the Respondent's argument is accepted and it is sufficient to merely point to a period when a person claiming to be a director is not recorded as being a director, then no ASIC record could ever be evidence of the time when a director was appointed. As a matter of logic, the ASIC register would always be updated sometime after the appointment. This is necessarily so because it takes time for the information to be received by ASIC and it takes time for ASIC to upload the data. The Appellants submit that the "contrary evidence" must be extrinsic evidence: i.e., evidence other than the mere fact that at a certain point in time the register did not record the relevant persons as being directors.
It was contended that there was an explanation for why Mr and Mrs Florent were not, continuously throughout the relevant period, recorded as directors of the relevant companies. Accordingly, it was not apposite to describe the evidence that they were not recorded as being contradictory to the matters in the ASIC certificates. The Appellants submitted therefore that the Tribunal ought to have made findings about whether the explanations were accepted and in particular made findings about when certain documents were executed and why. It was submitted that this was necessary before the Tribunal could be in a position to decide whether or not the mere fact that Mr and Mrs Florent were not recorded as directors, was contradictory to the ASIC certificates. The Appellants' submission was that the Tribunal failed to make mandatory findings in relation to the explanations.
The Respondent, whilst denying that it was necessary for the Tribunal to form a conclusion as to whether the explanations were accepted submitted that, in any event, the explanations were rejected by the Tribunal.
Consideration of errors of law
A review of the cases where either s 1274C or s 1274B (a provision relating to ASIC documents more generally) were considered, reveals little guidance about what might constitute "evidence to the contrary" of the matters in an ASIC certificate. In Forkserve at [23] it was noted that rebuttal evidence may be found either expressly or by necessary implication, from conduct.
In Carpathian Resources Ltd v Hendriks [2012] FCA 496 McKerracher J referred to the fact that, in the case before his Honour, there were ASIC certificates constituting evidence of directorships. However, his Honour dismissed those as being incidental (at [27]). There was evidence that opposition to the directorships had been conveyed to ASIC.
ASIC certificates are an evidentiary aid. In the event that there is evidence to the contrary of the matters stated in the ASIC certificates, this renders otiose the certificates, but it does not, in the ordinary case, bring an end to the enquiry about whether the matters referred to in the certificates are found to be facts. If the presumption is rebutted, the litigant may then prove the matters asserted in the ordinary fashion.
In a practical sense the rebuttal of the presumption, in this case, did lead to the end of the factual enquiry, but only because the then applicants did not seek to establish by other evidence that the Florents had been validly appointed directors.
It was not necessary for the Judicial Member to weigh the rebuttal evidence against the ASIC certificates and arrive at a conclusion as to which is to be preferred, in order to determine whether the evidence was in fact contradictory. It was sufficient that the evidence, on its face, contradicted the matters adverted to in the certificates. The Tribunal held that the fact that for many years Mr and Mrs Florent were not recorded as directors in the records of ASIC (a fact which was accepted) was enough to contradict the ASIC certificate. It was not necessary for the Tribunal to be satisfied that there was no explanation or no good reason why they were not recorded in the ASIC records as directors, in order to determine whether the evidence was contradictory. The evidence per se was contradictory. The delay was approximately eight years, not mere weeks or months. The Appellants' submission that delay could not constitute evidence to the contrary does not hold when the delay is as extreme as it is here. The Tribunal therefore did not err in disregarding the ASIC certificates as being probative evidence of whether or not Mr and Mrs Florent were validly appointed as directors.
In any event, the Tribunal went the next step that the Appellants contend is necessary and considered whether the explanations for the apparent contradiction were to be accepted: they were not. In relation to Mr Florent, the Appellants' explanation was that he had been erroneously removed as a director from ASIC's records concerning Bilquip as at July 2000, because a form (the 304 form) was mistakenly sent to ASIC. Subsequently, repeated attempts to rectify the mistake by sending further correspondence to ASIC had been unsuccessful. The Appellants pointed to evidence that ASIC had received certain correspondence, but had failed to "data capture" it.
The Judicial Member rejected the explanation that the 304 form had been erroneously sent. This is apparent from paragraph 57 of the Decision which includes the following:
The only inference the Tribunal is able to make in the circumstances is that the Form [304 form] was sent because it was required to be sent to ASIC.
Whilst this paragraph forms part of the Tribunal's reasoning in relation to the second issue in the case (the de facto directorship) it is apparent that the conclusion applies equally to the first issue.
With respect to the failure of Mrs Florent to be recorded as a director of Holibass in a timely fashion, the Appellants point to the fact that the form notifying ASIC of her appointment as a director was sent, not by her, but by Mr McGilray and so was out of her control. However, Mr McGilvray who was still involved in running Holibass at the time of the hearing, was not called as a witness to explain the delay. Further, the Judicial Member, in relation to whether Mr McGilvray's evidence would have assisted on the second aspect of the case (the de facto director issue) drew an adverse inference from his absence: see at [63] of the Decision.
In relation to the explanation given by Mrs Florent, there was nothing for the Tribunal to accept. The reason for the delay could only have been explained by Mr McGilvray and he was not called. To the extent an explanation was proffered, it was rejected by the Tribunal.
Conclusion on errors of law
The evidence pointed to by the Tribunal at [40] (the Contrary Evidence Finding) was capable of constituting evidence to the contrary of the matters stated in the ASIC certificates. The presumption arising from the matters stated in the ASIC certificates was therefore rebutted. If we are wrong in this and it was necessary for the Tribunal to make findings about the reasons for the delay, the Tribunal rejected the explanations for the inconsistencies.
There is accordingly no error of law.
Whether the appeal ought to be extended to the merits
Pursuant to s 113(2)(b) of the Administrative Decisions Tribunal Act 1997 (the ADT Act) the Appellant may, with leave, extend the appeal to the merits.
It is not necessary, to the grant of leave to extend an appeal to the merits, for the Appeal Panel to find there has been an error of law: Lloyd v Veterinary Surgeons Investigating Committee (2005) 65 NSWLR 245 at [57] - [58], [61] and [63] per Tobias JA and per Spigelman CJ at [14]. Accordingly, the fact that we have concluded that there was no error of law does not dispose of the appeal.
Nevertheless, we must be satisfied that there is some warrant for the granting of leave. The requirement for leave acts as a control filter: World Best Holdings Limited v Sarker & Anor [2004] NSWSC 935 at [25]. Amongst the circumstances where leave would be justified is where there has been unfair or unorthodox treatment of the evidence: K v K [2000] NSWSC 1052 at [10] to [15]. Leave is also warranted where there is a "blatant and important error of fact" which, in the interests of justice, calls for remedy: Building Professionals Board v Hans(GD) [2008] NSWADTAP 13.
The alleged errors are discussed in turn below. The substance of the Appellants' submission was that it could be discerned from the Tribunal's reasons that there had been unfair treatment of the evidence which had led to an injustice. The unfair treatment could be discerned, inter alia, from ascribing too little weight to corroborative evidence and the Tribunal's lack of reference to certain evidence, corroborative of the Appellants' case.
In JT v Protective Commissioner [2004] NSWADTAP 13 (JT) the Appeal Panel said at [33]:
The fact that the Tribunal did not attempt to justify that finding in the light of contrary evidence is not a flaw which relates to the fact finding process. ... Although the appellants disagree with the Tribunal's decision, there is nothing from either a procedural or substantive point of view that persuades us that we should grant leave to review the merits of the decision.
Where it is not doubted that the Tribunal considered the evidence and submissions, the fact that a party does not agree with the conclusions does not give rise to unfairness or injustice: McGuirk v Director General, Attorney General's Department (GD) [2007] NSWADTAP 38 at [62]. It was relevant in McGuirk, that both parties had been given a reasonable opportunity to present their evidence and also that the Tribunal's findings were open to it on the basis of that evidence.
In Laycock v Commissioner of Police, NSW Police [2007] NSWADTAP 34 leave to appeal on the merits was not granted because, inter alia, both parties had been given a reasonable opportunity to present their evidence and the Tribunal's findings were open to it. On the other hand, in McGuirk (GD) v University of New South Wales [2007] NSWADTAP 65 leave to extend the appeal to the merits was granted in respect of one issue, where there had been a change in perception of the law since the hearing at first instance thus warranting revisiting the merits: [49] - [50].
In Lo v Chief Commissioner of State Revenue [2012] NSWADTAP 12 (Lo) the Appeal Panel granted leave to extend an appeal to the merits because the Tribunal had failed to consider time spent by the Applicant in Sydney during a calendar year relevant to the tax years in dispute. That failure was capable of affecting the outcome: at [73] - [74]. This was, in the circumstances of Lo, a significant failure (and may in any event have constituted an error of law).
In IS v Public Guardian [2009] NSWADTAP 24 leave to extend to the merits was granted on the basis that the Tribunal had failed in its fact finding task by making a finding without requesting financial records to corroborate it. Whilst that did not constitute an error of law, it was regarded as "an omission of sufficient significance to justify extending the appeal to the merits of the Tribunal's decision": at [77]. This decision was influenced by the fact that the decision was of the Guardianship Tribunal and that there had been serious allegations of impropriety. In the circumstances the Tribunal should have obtained the best evidence possible.
What can be seen from this brief and non-exhaustive review of the decisions of the Appeal Panel, is that in order to grant leave it must be possible to point to some unfair or unorthodox treatment of the evidence, or some other factor warranting the appeal passing through the filter set by s 113(2)(b) of the ADT Act. The mere fact that evidence, contrary to a finding, is not referred to is not sufficient to warrant the grant of leave to extend the appeal to the merits.
It was here not suggested that mandatory considerations were not referred to (which would in any event constitute error of law: see Lo v Chief Commissioner of State Revenue [2013] NSWCA 180 at [10] per Basten JA). It was also not contended that the material had been ignored (as was the case in Lo). Also, it was not contended that there had been a breach of procedural fairness. It was not said that the Appellants had not been given a reasonable opportunity to present their evidence. The failure to refer to evidence capable of supporting the Appellants' case, in circumstances where there was no breach of procedural fairness and no contention the evidence had been ignored, would not ordinarily warrant the grant of leave to appeal.
However, a systematic failure to refer to material evidence supportive of a party's case or to consistently dismiss corroborative material, may be indicative of unfair treatment of the evidence, which would occasion leave being granted. Accordingly, we have carefully reviewed the evidence in light of the grounds and the submissions in order to determine whether unfair or unorthodox treatment of the evidence is discernible.
Grounds to extend appeal to merits
The Appellants contended that the matters referred to under the heading "Appellants reason for asking the Tribunal to extend the appeal to the merits" indicated that the Tribunal adopted an unfair approach to the evidence which ultimately led to an injustice. The grounds are addressed in turn.
1a. In paragraph 46, the Tribunal Member erred in concluding he cannot accept Mr Florent's testimony that he wanted to retire in July 2000 because of illness.
At paragraph 46 of the decision below the Judicial Member expressed reservations about Mr Florent's claim that he became seriously ill in July 2000 and thought he could not continue as a director, because at the same time his evidence was that he was making a serious business decision on behalf of his wife (the acquisition of the shares in Bilquip). The Appellant claimed that that business decision was made six months earlier than July. Further, the Appellant submits that the Tribunal conflated two separate decisions. The first was the purchase of the business which was a one off decision and the second, a decision not to continue as a director. The Appellants highlight that the second decision concerned his ongoing ability to continue, which self-evidently could be affected by health concerns. The Respondent on the other hand highlights that these were matters open to the Tribunal and the Judicial Member was simply saying that he was having difficulty accepting the evidence.
Viewed in context, this factor had little significance to the overall Decision.
1b. In paragraph 49, the Tribunal Member erred in his interpretation of evidence given by Mr Spychala.
This ground was not pressed.
1c. In paragraph 55, the Tribunal Member erred in finding no explanation was given for the ownership structure of Bilquip Pty Limited. Further, the Tribunal Member erred in the conclusion he drew as to the reason for the ownership structure of Bilquip Pty Limited.
At paragraph 55 of the decision below, the Tribunal concluded that no proper explanation was given for the change of ownership of Bilquip and that the arrangement was to, inter alia, overcome the payroll tax grouping provisions. The Appellants' submission originally extended to the proposition that before 2004 no similar payroll tax grouping provisions applied and therefore the Tribunal's finding was not open. However, this was subsequently not pressed after the Respondent confirmed that such provisions existed before 2004. The Appellant pressed a submission that the explanation for the transaction was that Mrs Florent was to acquire the business which was itself a proper explanation for the transaction. Also, it was relevant that there had been a notification of the change of shareholding to ASIC and the evidence of purchase was not disputed at the hearing. The company was purchased for good consideration and the ownership structure reflected that fact.
The Appellant contended that this was significant. If the reason for the transfer was to allow Mrs Florent to own the business, then there was an inference open that she was a director, because it would be expected she would want to maintain control of her business. Further, it was also relevant to the question of whether Mr Florent was acting merely as an accountant or whether he was acting as an owner/director and running the company.
The Respondent countered with the submission that it was not necessary to infer that the owner of the business must act as a director because shareholders have, in any event, power to control the company through their actions at shareholders' meetings including appointing and removing directors.
Mere ownership of a business does not lead inexorably to a conclusion that the owner exercises the type of control directors exercise. Failure to refer to the evidence, even undisputed evidence, that such a sale occurred, was therefore not material. The Tribunal did not conclude that the sale had not occurred. The Tribunal concluded merely that it did not explain the whole transaction. This does not warrant opening the appeal up on the merits.
1d. In paragraph 56, the Tribunal Member erred in the weight accorded to the witness statements of the Applicants.
The Appellant submits, in particular, that the Tribunal ought to have given greater weight to the "independent evidence" of employees seeking to establish that the Florents held themselves out as and acted as de facto directors. The Respondent pointed to problems with the so-called independent witnesses' evidence. Mr Parsons was neither an employee of Bilquip nor Holibass and therefore his evidence was of little assistance. Amanda Stewart had been employed by Bilquip but there were inconsistencies in her evidence: for instance, she was told that Mr Florent was a shareholder in a business run by Bilquip (Taree Nissan) but it is claimed by the Appellants that Mr Florent was not a shareholder. It was Mrs Florent that was the shareholder. And finally, in relation to Shane Fiegl, he had been employed by Bilquip, but only dealt with the Florents in relation to wages and therefore his evidence was not of terribly much assistance.
The evidence pointed to by the Appellants is not highly significant. The Tribunal was justified in ascribing little weight to it.
1e. In paragraph 57, the Tribunal Member erred in drawing an inference regarding the evidence of the daughter of Mr Florent.
At paragraph 57 the Tribunal makes the finding referred to above, that the 304 form was sent because it was required to be sent to ASIC. In forming that conclusion the Tribunal took into account that the daughters of Mr and Mrs Florent, who assisted in the home office, were not called to give evidence to explain what they knew about the 304 form being sent to ASIC. The Appellants complain that no adverse inference could have been drawn in the circumstances. An adverse inference, in accordance with Jones v Dunkel (1959) 101 CLR 298, is that the evidence would not have assisted, but it is not an inference that can fill gaps or plug evidentiary holes. The Appellants submitted that there was no evidence as to how ASIC got the 304 form other than Mr Florent's evidence that it must have been a mistake. Mrs Florent knew nothing about it. In light of that, the Appellants submitted it had not been possible to come to a positive conclusion that the form was sent because it was required to be sent.
The Respondent submitted that there were two inferences open from the evidence that ASIC had received the 304 form: either the form was sent by mistake, or it was intentionally sent because it was required to be sent.
The unexplained failure to call a witness can lead to an inference, otherwise available on the evidence, being more readily drawn. Contrary to the Appellants' submissions, there was evidence from which the inferences could be drawn: the 304 form was received by ASIC. The Tribunal followed an orthodox path in reaching its conclusion that the 304 form was, in effect, intentionally sent.
1f. In paragraph 58, the Tribunal Member erred in drawing an adverse inference against the applicants regarding the provision of documentary material.
At paragraph 58 the Judicial Member notes that the books and records provided to the Tribunal were incomplete. The Applicants submitted that a thorough and complete explanation for the failure to account for the materials had been provided to the Tribunal. The Respondent however highlighted that the explanation proffered did not suffice. The Tribunal was ultimately not satisfied with the explanation.
The explanation given was that Mr Florent had been ill and there had been several break-ins at Mr Florent's office. However, the break-ins ceased by 2006 and yet there was still an absence of original documents for the later years: documents which had been repeatedly sought by the Respondent. The submission by the Respondent was that the Judicial Member had been invited to give the documents very little weight, in light of the failure to explain why complete and proper records had not been produced. It was highlighted that no originals were produced for the years after the disturbances. No records at all for Holibass were produced.
The Tribunal concluded that the documents had not been produced because "they would have been clearly adverse to the Applicant's case". The Appellants contend that such an inference was not open.
The Appellants also point to the fact that no reference is made to the documents that clearly supported the Appellants' case. We were taken to several Bilquip documents (the Bilquip Documents) including directors' reports, statements by directors, minutes of meeting of directors and notices of meetings signed by either or both Mr and Mrs Florent, as director. Other business documents including offers of employment were signed by J Florent and there were documents giving notice of redundancy to employees and documents sent to NRMA concerning workers' compensation signed by them.
It was not contended that no regard had been paid to the Bilquip Documents. The issue raised by the Appellants was that the documents were material and the failure to mention them disclosed an error in reasoning or treatment of the evidence.
On the one hand, the explanation as to the lack of records is not a complete answer. Why no originals could be located for the years after the break-ins is not satisfactorily explained by reference to Mr Florent's health, or mere poor recordkeeping. On the other hand, the Bilquip Documents such as minutes of directors' meetings, particularly for the years ended 30 June 2005 and 2006, were material. These documents predate the Respondent's audit activity that led to the issuing of the assessments the subject of these proceedings. Nevertheless, it was open to the Tribunal to be dissatisfied with the explanation as to why complete records were not produced and why no original documents were produced. Even if the adverse inference was wrong (no error of law was alleged with respect to this ground) and the missing documents were not damaging (as the Tribunal concluded), the Appellants were required to discharge their burden of proof: s 100(3) of the Taxation Administration Act 1996 (TAA) and see Cornish Investments Pty Limited v Chief Commissioner of State Revenue [2013] NSWADTAP 25 (Cornish) at [35]. The Appellants were required to produce evidence to move the Tribunal to accept their case. The evidence that was produced included the Bilquip Documents, but it was open to the Tribunal to give those documents little weight, on the basis that there was not a comprehensive set of documents and they could not therefore be considered in context. No error is disclosed in failing to refer to documents to which little if any weight was justifiably given.
It is not sufficient for the granting of leave merely that the Appeal Panel might be persuaded to give the Bilquip Documents more weight than the Tribunal apparently did. There must be some injustice or unfairness arising from the treatment of the evidence. We are not satisfied that the failure of the Tribunal to refer to the Bilquip Documents discloses, in the circumstances described, unfair or unorthodox treatment of the evidence. We are not satisfied that paying more regard to the Bilquip Documents would have tipped the balance. Furthermore, as emphasised by the Tribunal, the Appellants bore the onus of proof: s 100(3) TAA. The Tribunal was plainly not satisfied that the incomplete set of documents were sufficient to satisfy the onus. We agree with that conclusion.
1g. In paragraph 59, the Tribunal Member erred in his interpretation of the evidence of Julie Florent regarding her duties for Holibass Pty Limited.
At paragraph 59, the Judicial Member noted that Mrs Florent's activities did not alter in the period before and after she was allegedly appointed a director, or allegedly took on the role of a de facto director. The Appellants contend that this displays an error in treatment of the evidence. The question was not whether her activities changed but whether she was performing activities of a de facto director. On a fair reading of paragraph 59, the Tribunal analysed her duties and determined they failed to satisfy the test of a de facto director. The right question was considered by the Tribunal.
1h. In paragraph 63, the Tribunal Member erred in drawing an adverse inference against the Applicants for failing to call evidence of Adam McGilvray.
At paragraph 63 of the decision the Tribunal considered whether it was necessary for Mr McGilvray to give evidence. His role in the Holibass organisation included management and appointment of directors. The Appellants contend that it was not open to the Tribunal to form an adverse inference from his absence. The Respondent highlights that his evidence would have been relevant to two matters. First, an explanation as to why the ASIC form allegedly appointing Mrs Florent as a director was not sent in a timely manner and secondly, he could have given evidence relevant to the question of whether she was acting in a capacity of de facto director.
As no explanation was given for why he was not called and there was evidence that he was currently involved in the management of Holibass, the Tribunal was entitled to infer his evidence would not have assisted. Accordingly, the Tribunal was entitled to more confidently infer Mrs Florent was not acting as a de facto director, from the other available evidence. The Appellants did not contend the finding was not open on the evidence. No unfair or unorthodox treatment is disclosed.
2a. The Tribunal Member erred in failing to give any consideration to the materials put before Tribunal regarding minutes of company meetings.
The Appellants submit that the Tribunal failed to give due weight to the Bilquip Documents. The Appellants submitted that by failing to give weight to the documents produced, evidence was discounted that should not have been discounted. The submission was not advanced that this constituted an error of law by failure to have regard to mandatory considerations, or by acting unreasonably (or otherwise). We have already said, in relation to ground 1(f), why no error in treatment of the Bilquip Documents is disclosed.
2b. The Tribunal Member erred in failing to reach a conclusion on the evidence before him of the date ASIC documents were completed by the parties.
Primarily this contention relates to the questions of law referred to above. We have already concluded that the explanations, as to why for many years, Mr and Mrs Florent were not recorded as directors, were rejected. We have explained why the findings were open to the Tribunal: at [29] to [34] above. Implicitly, at least, the Judicial Member concluded the ASIC records did not assist.
In any event, whilst findings as to when certain ASIC documents were executed, could conceivably have informed a decision concerning whether explanations as to inconsistency in the register could be explained and informed a decision about whether Mr and Mrs Florent were holding themselves out as directors, the ASIC records are not so coherent that the documents could tip the balance. The ASIC records simply do not portray a cohesive picture. The onus was on the Appellants. That onus is not discharged by pointing merely to contradictory and inconclusive ASIC documents. Accordingly, this ground does not warrant a reopening on the merits.
2c. The Tribunal Member erred in failing to consider the previous finding of the Respondent in 2001 that John and Julie Florent were directors of Bilquip Pty Limited.
In 2001 the Commissioner audited the Appellants for grouping purposes. A document styled "Compliance Investigation Report" indicates that, at the time, the Commissioner accepted that Mr and Mrs Florent were directors of Bilquip. Commencing at page 537 of the documents filed in accordance with s 58 of the ADT Act, is the Compliance Investigation Report. At page 538 is a statement that "there was no common control through directorship or shareholder grouping". The Appellants referred to this as a "finding" or "admission" by the Respondent. The Appeal Panel was taken to parts of the Transcript where the Compliance Investigation Report was drawn to the attention of the Tribunal. It was not contended that it was ignored or failed to be taken into account. The submission was that it ought to have been referred to by the Tribunal and the fact that it was not, indicated it was not accorded proper weight.
The Respondent submitted that any previously held views of the Commissioner were irrelevant and refuted the possibility the Compliance Investigation Report contained an admission (which was the only basis upon which it was relied below).
The Appellant highlighted that it was open for the Tribunal to infer that the "finding" of the Commissioner had been made after a proper investigation. Further, it was submitted that the "finding" was relevant, at the very least, to the fact that Mr and Mrs Florent were holding themselves out as directors (a test that is relevant to the question of whether or not they were de facto directors).
The fact that the Tribunal did not refer in the decision to this document does not disclose an error in treatment of the evidence that warrants the granting of leave. It is of such marginal significance that it would not tip the scales in favour of finding a de facto directorship. What the Commissioner might have thought about the position several years ago was not material.
The Tribunal was justified in giving this so little weight on the question the Tribunal had to decide itself, on the material before it, that it did not warrant mention.
2d. The Tribunal Member erred in failing to consider the confirmation from ASIC that it had erred in failing to data capture attempts to amend the register prior to 2005.
This issue relates to the fact that ASIC confirmed in an email that certain documents had in fact been received several years ago but had not been "data captured". Its relevance is to whether the explanation given, for why the register for many years did not disclose that Mr and Mrs Florent were directors of Bilquip, ought to have been accepted. For the reason that we have concluded that the Contrary Evidence Finding was evidence to the contrary of the matters in the ASIC certificates, the primary significance of this ground has been diminished. Further, for the reasons we have given in relation to ground 2b we are of the view that a failure to refer to the fact that ASIC acknowledged some records were not "data captured" does not warrant leave being granted to extend the appeal to merits.
Summary of grounds relating to merits
In summary, it was contended that when one considered the absence of reference to the Commissioner's view after the 2001 audit expressed in the Compliance Investigation Report, the absence of any apparent weight being given to the Bilquip Documents, the absence of reference to the fact that valuable consideration was paid for Bilquip by Mrs Florent and the other indicia that supported the Appellants' case that they were de facto directors, including the evidence that ASIC failed to process certain documents it received and the evidence that attempts were made to correct the register from as early as 2001, that it is discernible there has been unfair treatment of the evidence. It was alleged that the Tribunal failed to make findings in relation to the material which supported the Appellants' contentions and it was submitted this showed a systematic dismissal of all material that was in the Appellants' favour. The failure to refer to the evidence, it is submitted, indicates a failure to interpret the evidence in a fair manner. There were multiple instances where the Appellants' theory and contentions were supported by evidence. Had any weight been given to them, so it was submitted, the conclusion may well have been to the contrary of what was ultimately found by the Tribunal. The Appellants contend that the weight and the interpretation given to the evidence by the Tribunal was so far against the evidence that it caused an injustice and for that reason leave to appeal on the merits ought to be granted.
However, we have been through each of the grounds and are not satisfied the conclusions were against the evidence.
Conclusions on leave to extend appeal to the merits
We are mindful that it is not necessary for the Appellant to point to an error of law in order for leave to be granted to extend the appeal to the merits. The category of cases for which leave may be granted are not closed and they are not fully explored in the extracts and cases referred to above. Nevertheless, some warrant for the leave must be pointed to.
It would have been preferable had the Tribunal referred expressly to the Bilquip Documents and in particular to minutes of directors' meetings in which Mr and Mrs Florent signed as directors and to refer to the other evidence and indicia that supported the Appellants' case (a similar statement appears in JT at [30]). However, that is not enough. It was not submitted that the Judicial Member ignored that evidence. It was also not submitted that the Appellants had not been given an adequate opportunity to put their case.
As is apparent from JT, the fact that evidence to the contrary of the Tribunal's conclusions is not referred to and the fact that the Tribunal did not justify its conclusions in light of that evidence, does not of itself warrant the granting of leave. Something more must be pointed to: some unfair or unorthodox treatment.
A systematic dismissal of evidence that could assist the Appellants' case, could justify leave being given. However there was no systematic failure here.
As is stated in Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 272:
[T]he reasons of an administrative decision-maker are meant to inform and not to be scrutinised upon over-zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed.
Read fairly, the Judicial Member's approach was to refer to the main reasons why he disagreed with the Appellants' contentions. Whilst express reference was not given to all the evidence, it is nevertheless apparent, from reading the reasons as a whole, that materials were not ignored. The evidence simply did not satisfy the Appellants' onus to prove that Mr and Mrs Florent were de facto directors: s 100(3) of the ADT Act and see Cornish at [35].
The fact that the Judicial Member failed to refer to evidence that contradicts his findings is not in our view sufficient to lead us to extend the appeal to the merits in circumstances where there was no suggestion that the Judicial Member's findings were not open and no suggestion that he ignored the evidence. Nevertheless, the absence of reference to some of the material that supported the then applicant's case was curious and we think took this case very close to the line in terms of whether leave to extend the appeal to the merits ought to be granted. For this reason we have carefully reviewed the grounds relied upon in the event that leave to appeal was extended to the merits and have come to the conclusion that, either together or separately, the grounds do not reflect unfair or unorthodox treatment of the evidence by the Judicial Member. Further, we are of the view that we have not been taken to anything which would lead us to interfere with the Tribunal's conclusions. So in the event that we are wrong and leave to appeal on the merits ought to have been granted we are not satisfied that it would have led to an interference with the Tribunal's decision below. Accordingly, there is no warrant for extending leave to appeal on the merits.
Orders
The decision of the Tribunal as originally constituted is affirmed. The appeal is dismissed.
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