Devereaux, S. v Commissioner of Taxation

. = C r = t , y ?

L i r <

Bdcl:;.r:ra':i'Je

Declslcn:

( Ju? l l c l a l lieview)

~ml.-&.=-A--

_ _ -

Act - Income Tax Assessrent P.,:t - reqistration of applicant as group employer - escort agency - appllcatlon for extension of time

to lodge application

for

judlclal revlew - whether there exists a

serious matter to be tried - whether delay excusable

- whether

extension will prejudice	the	parties	- delay of solicitors
consldered.

Income Tax Assessment Act 1936

sub-ss.221A and 221F(3); s.264

Taxation Administration Act 1953

s.8C

Administrative Decisions (Judicial Review) Act	1977 33.11 and 15
Cases:

Hickev and Others

v. Australian Telecommunications Commission

(1982-1983) 47 ALR 5 1 7

v. Nolan and Others

(1982-1983) 45 ALR 411

Duff and Others v. Freiiah and Others

(1982) 43 ALR 479

Wedesweiller and Others

v. Cole and Others

(1982-1983) 47 ALR 528

Sophron v. Nominal Defendant (1957) 96 CLR 469

Davies v. Pasett (Federal Court	- unreported - 10 April 1986 - NT
G18 OF 1985

SUSANNE DEVEREAUX v. THE DEPUTY COMMISSIONER OF TAXATION

No. WA G26 of 1986

MUIRHEAD J.

PERTH

6 JUNE 1986

IN THE FEDERAL COURT	)
OF AUSTRALIA	)

WESTERN

AUSTRALIA

)

No. WA G26 of 1986

DISTRICT

REGISTRY

)

GENERAL

DIVISION

)

B E T W E E N :

SUSANNE DEVEREAUX

Applicant

and

THE DEPUTY COMMISSIONER

OF TAXATION

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:	MUIRHEAD J.
DATE OF ORDER:	6 June 1986
hIHERE MADE:	Perth

THE COURT ORDERS THAT:

1. The time for lodging of the application for review' shall be

extended until

April 1986, the date the application

was

filed.

2 .

There

be a stay of proceedings

and

suspension

of the

operation of the decision or decisions.

3 .

The applicant must pay her

own costs of and incidental to

this application.

2 .

The question as

to the respondent's entitlement to his costs

of this

application

from

the

applicant

reserved

for

consideration by the court which determines the review.

Note: Settlement and entry

of orders is dealt

with in Order 36 of the Federal Court

Rules.

, .. ,

IN THE FEDERAL COURT

)

OF AUSTRALIA

)

WESTERN AUSTRALIA

)	No. WA G26 of 1986

DISTRICT REGISTRY

)

GENERAL

DIVISION

)

B E T W E E N :

SUSANNE DEVEREAUX

Applicant

and

THE DEPUTY COMMISSIONER

OF TAXATION

Respondent

:	-	C	MUIRHEAD J.
6 June 1986

REASONS FOR

JUDGMENT

This is an application for extension

of time t o lodge an

application for judicial review

of a decision of the respondent.

On about 19 April 1985 an officer of the respondent directed that the applicant be registered

as a

group employer

under the provisions of sub-s.221F(3)

of the Income

Tax Assessment

1936. At or about the same time the officer directed that

notices should be issued to the applicant pursuant to

s.264 of the

Act requiring her to remit tax instalment deductions in respect of

the months

of February and March

1985 and thereafter that such

notices should be issued each month. It was further directed that

the applicant's failure to comply should result in prosecution

pursuant

to s.8C of

the

Taxation

Administration

Act

1953.

Primarily it is the decision

as to registration of the applicant

as a srnup employer

which rev1cw is sought. although the other

directions and some of the consequences which have followed may be

reviewable decisions. At this stage it suffices to state that the

respondent has implemented the decision with some vigour. The

applicant's failure to comply with the notices resulted in three

separate convictions upon ex parte hearings in the Court of Petty

Sessions in Perth

in May 1985 when substantial fines were imposed.

Other complaints have been laid and currently await hearing.

Further complaints are under consideration.

The application for

an order of review was not lodged by

the applicant's solicitors until 3 April 1986, over eleven months

from the date

of the decision.

Section 11 of the Administrative Decisions (Judicial

Review) Act 1977 sets out the manner of making applications and

sub-8.3

requires that it shall be lodged "within the prescribed

period or within such further time

as the Court (whether before or

after the expiration

the prescribed period) allows". Here

there was -no

request for reasons for decision or other material

under s.13 of that Act. Accordingly

a prerequisite to review

the application for review was required by statute to be lodged by

at least the 20 May 1985. It is well out of time.

Upon the hearing of the application many affidavits were

tendered

and

most,

not

all

the

deponents

were

cross-examined. In fact. the evidence

I heard went at least in

some measure to matters which would be the subject of inquiry upon

review itself.

heard detailed evidence from the applicant

3 .

herself. f r m

persons

who

were

invqlved

wlth

her

actlvitles. from solicitors and from

varlous

officers from the

Australian

Taxation

Office.

Factually

there

was

much

common

around and credibility

not much in issue. The evidence was

called by the applicant's counsel not only by way of history but

in large measure to demonstrate

"merit" m the applicatlon for

review

itself,

undoubtedly

matter

some

relevance.

The

evidence adduced by the respondent tended to show that neither the

applicant nor her solicitors had approached the review with

energy. To

use the words of Lockhart J. in Hickey v. Australian

Telecommunications Commission (1982-1983) 47 ALR 517 at 524 there

was "a very leisured approach to litigation". The lack of precise

positive correspondence or early action on the part

of the

applicant's solicitors undoubtedly caused some confusion in the

minds of departmental officers and has made my task

no easier. Be

that as

it may as

I have decided to extend time and bearing in

mind the wide discretions and powers available to this court upon

review itself I have decided that in these reasons I should not

set out my views upon the evidence in much detail. I will deal

with the law

and facts only in a manner sufficient to explain

reasons for exercising my discretion

in favour of the applicant.

The background is a little unusual.

The

applicant at

times material carried on business, and continues to do

so as

proprietor of

an escort agency which trades under the style of

Stardust Elegant Companions. It

is probably only in recent years

that such operations have been broadly acceptable, although the

applicant's evidence suggests that she is not free from the

attention of law enforcement suthorlties. Be that as

it may the

4 .

bu-ine;: is reqistered and th? availabllltp of women assoclaced.

with I t s

activities is openly advertised. It

is the appllcant's

contention that she

is not and never has been an employer of these

women wlthin the meaning

the law relating to master and

servant. principal or agent or within the meaning of 'employer' as

defined in sub-s.221A

the Income Tax Assessment

Act.

She

maintams that she has not paid salary

or wages to them as defined

in sub-s.221A and that the decision to register her as an employer is inappropriate and wrong in law. She relies not only upon her

own evidence

establishing

these

facts.

Two

other

women

associated with the agency also gave evidence.

I see no reason at

this stage to reject the evidence which was led relating to the operation of the agency or the applicant's testimony as to her relationship and arrangements with the 'working girls' concerned.

It seems to

me there is a very live issue of

law to be determined.

As I	have pointed out the consequences of the decision and her

liability to prosecution thereunder are very live matters. It is

not a case such as in Hickev's case (above) where the decision and

its consequences were very much things of the past and where there

was really little to be achieved in re-examining the issues

which

surrounded it.

I am satisfied the application for review

has

merit in that there

is substantial matter for review or to use

phrase more appropriate to injunctive relief,

a serious matter to

be tried. The decision has undoubted and continuing importance to

the applicant and perhaps to the respondent. If the registration

was wrong in

law

the applicant has suffered and continues to

suffer injustice. under circumstances where relief in any other

forum is problematical.

I also observe at

this stage that

I do

not find that the respondent will be prejudiced in an appreciable

medJure h-J the dela:{ which ~>cCUKKcd

p r l w to the lodsln? of the

application.

The srcrument zi11 be larcrely :I

question of law and

the respondent‘s files will suffice

enable his counsel to

adequately deal with factual matters. whlch from the affidavits

filed appear to be pretty

well documented.

I conclude this aspect

bp observinq that if the

applicant’s evidence as to her past

relationship with her ‘workinq

girls‘

correct

may

impossible for her to comply with the requirements the decision

places upon her and thus her vulnerability to prosecution is

perpetuated. It is simple to say that such a business should be

abandoned, but as a matter of justice it is desirable that the

applicant should have the opportunity of seeking a review by this

court of a decision which has already resulted in

three quasi

criminal convictions, the imposition of serious penalties and

pursuant to which she remains

at risk save by abandonment of her

activities which the law rightly or wrongly	appears	to
countenance.

I turn now to the question of delay which

has indeed

been serious.

In April 1985 the applicant received notice from

the respondent that she had been resistered as a group employer in

accordance with the provisions of

sub-s.221F(3) of the Income Tax

Assessment Act effective from February 1985 and this was followed by regular final notices requiring remittance of tax instalments

deducted from the salary

or wages of employees and the furnishing

of written information.

The applicant did not comply with the

notices. Her case

that she could not

so as the women

working under the auspices of the service were not employees. were

paid neither salary nor waqes and in some cases were not known to

her

:ave by7

.I flrst

n.me (often f a l s e )

and a telephone number

throuTh whlch appolntments with men were arranged. The applicant

had previously been served with such notices in connection with

her association

with

her

escort

service

'Peppers'.

Complaints were later laid. as I have said, charging her with

offences under s.8C

of the Taxation Administration Act in respect

of her failure to comply with the respondent's requirements.	A
table of final notices and prosecutions is exhibited to the

affidavit of Mr Sydney Jenkins,

an officer of the department filed

in this matter (Exhibit

STJ-2).

The applicant has sworn that she

"did not know that

I had a defence of any sort, nor that there was

any means

of setting aside the determination" of the respondent.

I am satisfied that the applicant had sought advice and had in

fact conferred with the respondent concerning other tax matters.

She seems to have taken the view there was nothing she could

about her registration

as a group employer and its consequences

she had previously advised the department that she was

not an

employer. Early

in August

1985 Mrs Whitney took over the running

of Stardust Elegant Companions and

she received similar notices

from the respondent.

August 1985 both

Mrs Whitney and the

applicant sought advice from the applicant's solicitors and a

decision seems to have

been arrived at that as Mrs

Whitney was

actually running the agency at the time steps should first be

taken on her behalf.

By a comprehensive letter dated 30 August

and written

on behalf of Mrs Whitney their solicitors wrote to the

respondent setting out in some detail the basis of their argument.

The letter

concluded "In the

circumstance we ask

that

you

reconsider

your

decision to register our client as a group

employer and we ask that you cancel that registration forthwith.

Yhould VDU decline t o effect cmrellatlon as requested we zhall advise our client of the leual remedies available to her". I am

satisfied that the solicitors decided to await

a response to that

letter before taking further steps on behalf

either

the

applicant or Mrs Whitney.

This was perhaps understandable. It was

a reasoned letter and included submissions which called for

consideration and reply. Be that as it may, assuming those

solicitors had in mind judicial review as one of the legal

remedies.

prudence

required

that

least

preliminary

application for review and extension of time should have been

filed forthwith. This was not done and primary responsibility for

the

subsequent

delay

must

attributed

the

applicant's

advisers,

Unfortunately the respondent did not reply to the letter

which apparently was under consideration in the department for a

long time. Later there were telephone conversations between the

solicitors and officers of the department, most of whom appear to

have been members of the prosecution section, relating to the

final notices and complaints.

do not propose to detail the

evidence as

to those conversations. References

were made to the

Federal Court, but due, I believe, to a lack of precision on the

part of the solicitors the officers concerned believed they had in

mind appeals to this court from the Court of Petty Sessions which

are not of course authorised

by law. This added to the confusion.

letter dated

October the solicitors again wrote to the

respondent in the following terms:

8 .

"Dear S l r ,

GAIL J WHITNEY TRADING

STARDTJST ELEGANT COMPANIONS

GROUP EMPLOYER

REGISTRATION NO. 33376634

We refer to recent discussions between Mr Prlce and

Fletcher of

this

offlce wherein it

was sucrgested

that while you are deliberating on the submission made

to you on

30 Auuust 1985

by ourselves in connection

with

your

registration

our

client

group

employer, she should in the meantime comply with the

requirements imposed upon a group employer and in

particular should commence to make deductions of tax

instalments to be remitted to the Commissioner.

It was

pointed out to us that failure to

so would render

her liable to prosecution under Section

2 2 1 EAA.

We wish to advise that our client is quite simply

not in any position to make such deductions

as she does

not have employees and consequently pays no salary or

wages

from

which

deductions

could

made.

Notwithstanding the erroneous registration of her as a

group employer she is not,

fact, an

employer.

Neither Section

221 C nor 221

EAA or indeed any part of

the division two has any application to our client. your requirements would be vigorously defended."

the meantime the applicant had been advised

to await the

respondent's response, the same agency and modus operandi being concerned, and it was not until October 1985 that the applicant was informed she should consider an application for review to this

court. Another member of the firm took over the handling of the

matter on behalf of the applicant and in January

1986 he spoke to

an officer of the department when a further adjournment of charges against the applicant was agreed. On 7 January the applicant and

Mrs

Whitney attended their solicitors and the applicant

was

advised to take further steps, primarily to obtain corroboration

of her instructions concerning the relationship between the agency

and

t.he

women concerned in its activities. Again there was a

serious delay, exacerbated by the killing of a person who worked

under

the .au<<plcE's G C the aqcncy: but the clrcurnstances cannot

really excuse the continuinq failure to lodge the application.

In the background

of this matter

I take into account

that during

1985 and

the

early

part

1986 the applicant

experienced many worries. Her affairs which appear complicated

(the escort agency being only one of her apparent businesses) were

in the hands of

trustee in bankruptcy, she had other litigation

to attend to and obviously her personal taxation affairs were

complicated. She had some domestic and health problems; possibly

the price of engaging in the business

an escort agency, but

nevertheless real problems. It will only be in rare circumstances

that a delay of the nature here experienced will be excused by the

granting of an extension of time.

The discretion vested in this

court to extend time is untramelled by the statute, there are no

criteria

such

as special

reasons

or circumstances,

but

nevertheless the discretion must be exercised judicially, not

arbitrarily, with a steady eye on the very precise provisions of

the legislation

to time for lodging

an application and the

obvious

policy

matters

that

require

prompt

review of

administrative decisions. With those matters in mind	I	turn
briefly to the authorities.

In Lucic v. -

Nolan (1982-1983) 45 ALR 411 Fitzgerald

dealt with the issues in detail and his judgment has frequently

been cited with approval in subsequent judgments of this court.

His Honour stated

(at p.416):

"The

legislation

contains various mechanisms

to allow

these different policy considerations to be balanced.

Ihuc, For example, qmc of the fmtures of the Adminlstrati.ve Decxsxnns r ; I ~ ~ d l c x a l Pe-new, Act is that

lt contains limitations with respect to

the

time for

the

commencement of proceedings.

Where

specific

periods are fixed, thev are quite short.

That carries

obvious

implications.

However.

the

time

limitations

are not absolute. In this.

as In other matters arisins

under the Act, eq In respect of the relief

which may be

granted under

S 16, the court is given a discretion.

None the less, it must, in my opinion. be accepted that

It has dellberately been made

the prima facie rule that

proceedings

not

commenced

time should

not

entertained.

this

respect.

there

obvious

contrast

between

the

terms

sub-s.ll(3)

which

provides a pre-emptive

fixed

period

subject

discretionary power of extension, and the provisions

like that of s.11(4) which do not fix any particular

period but refer merely to	what	is in the court's
opinion "reasonable".

I do not think that the court, in exercising its

power

to make exceptions in appropriate cases, should confine

its attention to the consequences to the applicant of

refusal to extend time.

Justice, as the ultimate

object

obtained

the

exercise

the

discretion. seems to me to require that regard be

had

to broader considerations than merely the interests of

the applicant. Further, whilst there

will

be some

matters which

are relevant to the question whether time

should

extended

(in ordinary

litigation

inter

partes) which are also relevant in this context, it

seems to me likely that the overlap

is only partial and

that different emphasis is appropriate to some

of the

common

factors.

may

that

exceptional

circumstances need not always be shown before time can

be extended. However, I consider that an applicant for

an extension of time maintains thoughout the burden of

showing why, in all the circumstances. the extension of

time should be granted.

do not think that, given

proof

certain

matters

an applicant,

eg an

explanation

for his delay in making application, an

evidentiary onus shifts to the respondents to establish

that prejudice will

result if the extension is granted;

nor, in my opinion, if the delay is explained and there

will be

no personal prejudice to the named respondents,

should an extension always be granted. All else aside,

there will often be no question of prejudice to	a
respondent decision-maker.''

Hickev

(supra)

Lockhart

J. referred

earlier

authorities of this court pointing

out

"that

differences

approach

are

discernable

those

cases,

generally

being

differences as

to the emphasis which should be placed on various

11.

matters In decldinu Twhhether to ailqx an extension gf time in a

partlcular case".

respectfully agree with these observations

which apply generally to khose matters where

the discretionary

exercise of indulgence depends not on fixed criteria but upon

variable circumstances whlch must be applied to the provislons and

intent of

the legislation. After expressins agreement with

the

approach of Fitzgerald J.	in L	&	v. Nolan (above) His Honour
observed:

"Although 5.11 does not in terms place

an onus on

applicant seeking an

allowance for further time within

which to lodge an application for an order of review,

it is nevertheless incumbent upon him to satisfy the

court that an extension of time should be granted. It

is not

for

the decision-maker to establish that the

applicant does not have

a case for an extension of

time.

The applicant seeks an indulgence.

It is for

him to prove that he is entitled to it. But the court should not surround the exercise of its discretion with

unnecessary constraints such as

requirement that

there be special circumstances

considerations of

that kind. The statute does not require them.

Nor

should the courts. It is best left to the good sense

of the judge hearing each case to determine whether, on

the evidence before him, the court's discretion should

be exercised in favour of granting

enlargement of

time to bring

an application for

an order of review."

I have been particularly concerned in this matter by the

delay experienced between August 1985, when the applicant put the

matter in the hands

her solicitors and April 1986 when the

application was lodged.

I accept they awaited in good faith

reply from the respondent to their letter of

30 August, perhaps

hoping for

litigation pending such possible resolution. But the legislation

speaks cosently of the dangers of such delay and they should have

resolution

discussion

and

anxious

avoid

realised

their

client's

interests

required

an immediate

application to be lodged.

In Ijllff

V. Frexiah ( 1 9 8 2 )

4 3 ALR 479,

a case in

which

the delay of an association

not

sollcitor

was

under

consideration. Northrop J. commented "It is well established that

delays by a solicitor are visited upon the client when those

delays are relevant to limitation periods or matters involving

want of prosecution".

Wedesweiller

(1982-1983) 47 ALR 528 at 531

Sheppard J. commented upon this passage and observed "That is

not,

with great respect, a proposition which I would accept as having general application. It will be so in some cases, but it may not

be so

in others". He referred to the observations of the High

Court in Sophron v. Nominal Defendant (1957) 96 CLR 469 at p.475

which included the following "No one, of course, doubts that such

a consideration as to the blamelessness of the claimant and the

responsibility of his solicitor is very material. But every case

must be determined on its

own facts. Fixed formulae cannot be

substituted for the wide words of the sub-section, . . . . . ' I . (See also Martin v The Nominal Defendant (1954) 74 WN(NSW) 121 per Walsh J. at 124.

I refer in conclusion to the recent remarks of Morling,

Beaumont

and

Wilcox

JJ recently

against

very

different

background in Davies v. Paqett (Federal Court -

unreported - 10

April 1986 -

NT G18 OF 1985).

The primary judge had refused to

set aside interlocutory judgments entered in default of defence.

The default

was

due

the

negligence

the

defendant's

solicitors which

their Honours agreed was "gross and inexcusable".

The appeal was allowed and the judgment was set aside.

Their Honours stated:

"It is, however, another question whether concern about

the extent of

delays, either in

a particular case

generally, should, in the absence of

prejudice in the

particular case. be taken into account in exercising

discretion to set aside

default judgment.

The

fundamental duty of

the Court is to do justice between

the parties.

is, in turn, fundamental to that duty

that the parties should each be allowed a proper

opportunity to put their cases upon the merits of the

matter.

Any limitation upon that opportunity will

generally be justified only by the necessity to avoid

prejudice

the

interests

some

other

party.

occasioned by misconduct, in the case, of the party

upon whom the limitation is sought to be imposed. The

temptation to impose a limitation through motives

professional

discipline

general

deterrence

readily understandable:

but, in our opinion

is an

erroneous exercise of the relevant discretion to yield

to that temptation.

I do	not suggest that the principles involved were the same but

mention

this

only

illustrating

the

modern

tendency

examination of discretionary issues to seek to obtain justice for

an individual on the merits, a goal, when discretion is at large,

which is not totally irrelevant. This case is not one where the

solicitors sat back and did nothing. They may

have erred but they

promptly put Mrs Whitney's situation and comprehensive argument to

the respondent. They would have been well advised to have done	so
specifically on behalf of the applicant, but there is evidence

that the respondent was aware of the identification	of	the
agencies and the issues which were precisely the same. The

respondent was aware

of those submissions, of their importance and

of the arguments adduced in seeking withdrawal	of the registration
whlch applied to the agency.

14.

I am persuaded that despite the

overall delay I should

exercise my dlscretion and extend tlme.

I summarise my reasons:

There

probably a real and

important issue to be

considered.

2 .

is a live issue in the sense that its consequences

continue to flow. The decision has involved and may continue

involve

the

applicant

quasi

criminal

proceedings

involving substantial penalties.

3 .

The prejudice to the respondent cannot be rated

as other than

minimal.

The issues which will be involved upon review were

put to the respondent in correspondence in August last.

4.	The prejudice suffered by the applicant	if	time is	not
extended may be substantial.

In support of

the application for extension the applicant

tendered

substantial

evidence.

Once

initiated

the

application was presented with thoroughness

a contrast to

the

situation

some

of the

authorities

cited

where

extensions have been denied.

6 . It is in the interests of iustice that the declsion should be examined.

Pursuant to

s.11 there will be an order that the time

for lodging of the application for review shall be extended until

3 April 1986, the date the application was filed.

Pursuant to

s.15 and upon the applicant, by her counsel,

undertaking to take immediate steps to obtain from the Deputy

Registrar of this Court

early date for the

hearing

of the

substantive application

I suspend the operation

of the decision or

decisions and order a stay of proceedings thereunder.

In these

reasons reference has been made to a decision

or decisions and there has been no argument that whatever was

determined by the respondent was not

a decision to which the Act

applies. I merely stress that	I have made no determination	on this
issue.

I also direct that the substantive application should be

heard by another judge of this court. The applicant must pay her

own costs

of and incidental to this application. The respondent

acted perfectly reasonably in opposing

it.

I reserve the question

. ’

- .

c e r t l f y t h a t

t h l s

a n d t h e f l f t e e n

p r e c e d i n g

p a g e s

are

t r u e

c o p y

o f

t h e

R e a s o n s

f o r

J u d g m e n t

h e r e l n

h l s

Honour

M r

J u s t l c e M u l r h e a d .

A s s o c l a t e

Dated:

6 June 1 9 8 6

[1986] FCA 225

6 Jun 1986