DFYN and Commissioner of Taxation (Taxation)

[2022] AATA 3991

DFYN and Commissioner of Taxation (Taxation) [2022] AATA 3991 (30 August 2022)

ReviewNumber:       2021/0198

Division:TAXATION AND COMMERCIAL DIVISION

File Number(s):      2021/0198; 2021/0356-0360

Re:DFYN

APPLICANT

AndCommissioner of Taxation

RESPONDENT

Decision

Tribunal:Deputy President Bernard J McCabe

Date:30 August 2022

Place:Brisbane

The application for reinstatement is refused.

........................[SGD]..........................................

Deputy President Bernard J McCabe

Catchwords:

APPLICATION FOR REINSTATEMENT – application dismissed under section 42A(5) – whether power in section 42A(9) enlivened – whether application dismissed in error – application refused 

Legislation

Administrative Appeals Tribunal Act (Cth) ss. 42A(5), 42A(9), 42A(10)

Cases

Brehoi v Minister for Immigration and Multicultural Affairs [1999] FCA 772
Carey and Commissioner of Taxation (2014) 145 ALD 236
De Simone and Commissioner of Taxation [2017] AATA 1005
Goldie v Minister for Immigration and Multicultural Affairs [2002] 121 FCR 383
Myers and Commissioner of Taxation [2004] AATA 1337

Secondary Materials

REASONS FOR DECISION

Deputy President Bernard J McCabe

30 August 2022

1. These reasons deal with an application for reinstatement of review proceedings. The review proceedings were dismissed pursuant to s 42A(5) of the Administrative Appeals Tribunal 1975 (the AAT Act) in March 2022 after the taxpayer failed to comply with directions. The taxpayer says the Tribunal can reinstate the proceedings using powers under either s 42A(9) or (10) of the AAT Act.

2. The Commissioner does not oppose reinstatement because information has now come to light which may explain the taxpayer’s behaviour that ultimately led to the dismissal decision. But there is a problem. The authorities makes clear the Tribunal cannot rely on s 42A(9) to reinstate proceedings that were dismissed under s 42A(5) (as opposed to proceedings dismissed under s 42A(2) where an applicant failed to appear). If the proceedings are to be revived, the taxpayer’s only hope lies in s 42A(10) which enables the Tribunal to reinstate proceedings that were dismissed in error. As I will explain, I am not satisfied there was an error in the relevant sense. It follows the application for reinstatement must be refused.

   Background to the dismissal proceedings

3. The Commissioner provided a timeline which recorded the taxpayer’s history of non-compliance in the review proceedings. The timeline demonstrates she repeatedly failed to comply with directions. She changed solicitor several times, which did not help.

4. The Tribunal had made timetabling directions on 12 November 2021 which required the taxpayer to file with the Tribunal (and provide the respondent) with the following material by 22 December 2021:

   a)an Amended Statement of Facts, Issues and Contentions; and

   b)a witness statement from the Applicant; and

   c)any other evidence upon which she intends to rely.

5. The applicant did not comply with that direction. On 28 January 2022, the Tribunal agreed (with the respondent’s consent that was provided on 25 January 2022) to an extension of time which gave the taxpayer until 1 February 2022 to comply with the direction. But the taxpayer did not comply with that direction either. The member who was managing the proceedings listed a non-compliance directions’ hearing on 10 February 2022 to discuss the way forward. At that non-compliance hearing, the respondent asked the Tribunal to make what are known as ‘guillotine’ orders. The Tribunal made the following orders on that occasion:

   2. This proceeding will stand dismissed unless, on or before close of business, Perth time on 25 March 2022, or such further time as the Tribunal may, before that time, allow, the Applicant files with the Tribunal and serves on the Respondent:

   a)    an Amended Statement of Facts, Issues and Contentions; and

   b)    a witness statement from the Applicant; and

   c)    any other evidence upon which she intends to rely.

   [Emphasis in original]

6. The taxpayer did not seek an extension of time prior to 25 March 2022, and she did not comply with the direction.

7. On 28 March 2022, the Commissioner’s solicitor wrote to the Tribunal asking it to confirm whether the proceedings were dismissed as a consequence of the applicant’s non-compliance with the guillotine order. The taxpayer’s solicitor was copied into that correspondence. The taxpayer’s solicitor emailed the Tribunal and the Commissioner’s solicitor on 29 March. The email from the taxpayer’s solicitor said (relevantly):

   For the avoidance of any doubt, I confirm that neither further evidence nor any amended SFIC have been filed by my client.

   Although I am still seeking final confirmed instructions, my present understanding is that [the taxpayer] is still seeking to liaise with [another individual], either direct or with the assistance of a (lay) third party.

   I do not have confirmed instructions on [the taxpayer’s] intentions regarding these proceedings – in particular whether she would still intend to seek to file further evidence. Whether [the taxpayer] is in any event allowed to file further evidence at any stage is of course a matter in the hands of the Tribunal.

8. That letter does not suggest the taxpayer had abandoned the proceedings altogether, but the solicitor made clear he did not have any proper explanation for the non-compliance. He did not request a further adjournment at that late stage, most obviously because he had no instructions to do so. He did not mention the taxpayer’s circumstances, perhaps because he was not aware of them himself. Later that day, the presiding member published a decision which incorporated a statement of reasons. The text of the decision reads:

   On 14 January 2021, the Applicant lodged an application for review of a decision which have been assigned file numbers 2021/0198, 2021/0356, 2021/0357, 2021/0358, 2021/0359 and 2021/0360. The reviewable decision was made by the Respondent on 16 November 2020 disallowing the Applicant’s objection to income tax and penalty assessments for the years ended 30 June 2010 to 30 June 2015.

   There have been numerous delays in the progression of these files due to a number of changes in relation to representation of the Applicant and the Applicant’s continued failure to comply with directions issued by the Tribunal.

   The Tribunal notes that a full chronology of the procedural history of the application was provided by the Respondent ahead of a telephone directions hearing conducted on 10 February 2022.

   Due to the procedural history of the application the Tribunal conducted a telephone directions hearing to discuss the progression of the matter. At the telephone directions hearing the Tribunal discussed the Applicant’s non-compliance with Tribunal directions. It was clear to the Tribunal that the Applicant’s representative has despite best endeavours been unable to obtain instructions and the required information from their client. The Tribunal discussed with the parties its powers under section 42A(5) of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) to dismiss the application in circumstances where the Applicant fails within a reasonable time to proceed with the application or to comply with a direction by the Tribunal.

   Having taken into consideration the procedural history of this matter, particularly the continued extensions of time granted to the Applicant to comply with Tribunal directions and the Applicant’s continued failure to comply with such directions, at the conclusion of the telephone directions hearing, with the consent of the Respondent and without opposition from the Applicant, the Tribunal made the following the direction:

   2. This proceeding will stand dismissed unless, on or before close of business, Perth time on 25 March 2022, or such further time as the Tribunal may, before that time, allow, the Applicant files with the Tribunal and serves on the Respondent:

   a.    an Amended Statement of Facts, Issues and Contentions; and

   b.    a witness statement from the Applicant; and

   c.     any other evidence upon which she intends to rely.

   The Applicant did not comply with that direction, nor was an extension of time sought to comply. As such the proceedings stand dismissed.

   The Tribunal notes that on 29 March 2022, the Applicant’s representative confirmed that neither further evidence nor any Amended Statement of Facts, Issues and Contentions had been filed on the Applicant’s behalf as they were still seeking final confirmed instructions.

   Accordingly, pursuant to section 45A(5) of the AAT Act the application is dismissed.

9. There is an interesting argument over whether the proceedings were dismissed because of the decision dated 29 March 2022, or whether they had already been dismissed on 25 March 2022 due to the operation of the guillotine order. The whole point of a guillotine order is that it is self-executing, after all. In either event, the taxpayer’s counsel at the reinstatement hearing did not dispute that the proceedings were effectively and lawfully dismissed pursuant to s 42A(5).

10. I should say a word about guillotine orders. Directions of this nature have their place. They can legitimately be made in some cases to underline the consequences of an applicant failing to comply with a direction where there has been a history of non-compliance with directions. They assist the Tribunal in the efficient management of proceedings in accordance with the statutory objective in s 2A of the AAT Act: see De Simone and Commissioner of Taxation [2017] AATA 1005 at [12] per SM O’Loughlin (as he then was); see also Carey and Commissioner of Taxation (2014) 145 ALD 236 at [22]. But guillotine orders must be used with care. They should only be used where the actions required in the direction are clearly defined so there is no doubt whether the applicant has done that which they were directed to do. They would also only be used as a last resort, after other means of securing compliance have been exhausted – and after the consequences of non-compliance have been carefully explained to the applicant. There is also a danger these orders may be unfair if they fail to accommodate the possibility of unanticipated events or circumstances that might provide good reason for an extension of time.

11. In this case, the Commissioner’s decision to seek a guillotine order – and the Tribunal’s decision to make such an order – was unsurprising given the track-record of non-compliance. The taxpayer had filed a statement of facts, issues and contentions but it was thought necessary to provide an amended version together with evidence: hence the directions of 12 November 2021. The Tribunal (and the parties, for that matter) plainly did not regard what had been filed up to that point as sufficient. The taxpayer benefitted from extensions of time after those directions were issued. There does not seem to be any doubt the presiding member adequately explained the consequences of the guillotine order at the time it was made. (I note the taxpayer was legally represented at the time, which no doubt was a source of comfort for the presiding member.) Importantly, the order that was made expressly permitted the applicant to seek an extension provided the request was made in advance of the deadline. I note the taxpayer’s lawyer confirmed after the date of the self-executing order that the material had not been supplied as directed, and there was no request for extension received in advance of the deadline.

12. It seems to me the guillotine order operated according to its terms. It operated to dismiss the proceedings for non-compliance pursuant to s 42A(5) – a conclusion that was confirmed in the decision document published several days later.

    Reinstatement

13. The taxpayer asked the Tribunal to reinstate the proceedings using the power in s 42A(9). But that power is only available where the proceedings were dismissed pursuant to ss 42A(1B) or (2). The power in s 42A(9) is not available where the proceedings were dismissed pursuant to s 42A(5): see Brehoi v Minister for Immigration and Multicultural Affairs [1999] FCA 772 at [24] per Whitlam, Moore and Katz JJ. I do not propose to consider that submission any further.

14. The focus of the taxpayer’s submission was the power, found in s 42A(10), to reinstate proceedings where they were dismissed in error. The concept of error is not well-defined, which is probably just as well. It not limited to classic administrative errors on the part of the Tribunal where a member or registry officer mistakenly dismissed proceedings. I need only be satisfied “the act of dismissal was attended with error”: see Goldie v Minister for Immigration and Multicultural Affairs [2002] 121 FCR 383 at [28] per Wilcox and Downes JJ. In this case, the taxpayer argues the error had its genesis in the fact the taxpayer was labouring under a mental illness. The illness prevented her from properly engaging with the proceedings, most obviously by providing proper instructions. That failure to engage led to the non-compliance, which prompted the issue of the guillotine order and, in due course, the dismissal.

15. I was provided with a report from the taxpayer’s treating psychologist dated 12 May 2022. The psychologist opined:

    [The taxpayer] reported that she has struggled to meet deadlines and prepare paperwork that requires focused attention to stay on task and follow the instructions of her solicitor. Her diminished memory has also impacted on her ability to prepare requested evidence.

16. The psychologist went on to conclude the taxpayer “scored within the extremely severe range of for depression, anxiety, and stress on the DASS-21”. I note the psychologist did not suggest the taxpayer was unable to comprehend what was going on; she was simply unable to act because of her condition.

17. I should say at once I have no doubt the presiding member would have given the taxpayer an extension of time notwithstanding the non-compliance if the taxpayer had provided evidence of her psychological state in advance of 25 March 2022. That evidence casts the non-compliance in a different light.

18. If the test in s 42A(10) permitted me to reinstate in the face of ‘special circumstances’ as that expression is conventionally understood, there would be no difficulty. But that is not the test. I must be satisfied the proceedings were dismissed in error.

19. There have been cases where an applicant who instructed that proceedings be withdrawn while labouring under a mental illness was able to demonstrate to the Tribunal there was an error that justified reinstatement. In Myers and Commissioner of Taxation [2004] AATA 1337, for example, the applicant was found to be so overwhelmed that his letter requesting dismissal effectively misrepresented his considered position. The error which attended the dismissal (to use the language in Goldie) lay in the applicant’s judgment being overborne. The taxpayer in this case relied on Myers and similar cases to argue the dismissal was erroneous insofar as it occurred with reference to behaviour that did not represent the taxpayer’s true intentions. To put it slightly differently: the taxpayer’s mental illness effectively prevented her from progressing the case, which created an erroneous impression in the mind of the respondent and the presiding member about the taxpayer’s commitment to the proceedings.

20. While I can readily accept the non-compliance was caused by the mental illness, I do not think the power in s 42A(10) extends to the circumstances in this case. The guillotine order operated exactly as was intended in the face of non-compliance. The non-compliance could and would have been excused if it had been drawn to the attention of the Tribunal, for sure, but that is not what happened. This is not a case where the taxpayer erroneously communicated an intention to withdraw that prompted dismissal orders; in this case, the taxpayer was debilitated as a consequence of her mental health. She failed to act, albeit for reasons that were entirely understandable. If the taxpayer had clearly brought her condition to the attention of the Tribunal at any time before 25 March, the Tribunal’s dismissal might have been attended by error. But it seems even the taxpayer’s representative was not aware of the extent of her condition.

21. I have every sympathy for the taxpayer’s predicament, and I am reluctant to make her path to an effective review more complicated than necessary. I accept that, at some level, the dismissal occurred following a misunderstanding about her circumstances because those circumstances were not explained. But does that misunderstanding suggest the dismissal was attended by error in the sense intended by s 42A(10)? There was also arguably an error in the taxpayer’s failure to bring her circumstances to the attention of her representative and the Tribunal. But again; was that an error?

22. Section 42A provides for dismissal and reinstatement, but the reinstatement power is limited for a reason. The Tribunal’s review mechanism is provided to improve the quality of decision-making and provide individual relief from administrative injustice. It is incumbent on individuals who seek review to press their case. If somebody does not show up for a hearing or listed event and the matter is dismissed pursuant to s 42A(2), there is a specific power to reinstate available in case the non-attendance was explicable. The power in s 42A(9) is necessary to avoid unfairness. But that power is not available where the dismissal occurs pursuant to s 42A(5) because the applicant has already been accorded procedural fairness. The rules are strict because it is inefficient for the bureaucracy to be tied up in prolonged and meandering review processes. The power to reinstate where the dismissal is attended by error in s 42A(10) provides an exception that is, once again, intended to avoid unfairness. But the language can only stretch so far. In this case, the proceedings were dismissed because the taxpayer did not comply with the directions or make a timely request for an extension in light of her circumstances. It was unfortunate and even understandable that she did not do so, but it is not an error in the relevant sense.

    Conclusion

23. The Commissioner’s representative acknowledged it might be possible for the taxpayer to make a fresh application for review if she were unsuccessful in seeking reinstatement. That may be an option. I regret that it might be necessary, but I do not have the power to do as she asks. The application for reinstatement must be refused.

24.     I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for the decision herein of Deputy President B J McCabe

........................[SGD]........................................

Associate

Dated: 30 August 2022

Date/s of hearing:	11 August 2022
Counsel for the Applicant:	Mr R Blow
Counsel for the Respondent:	Mr V Licciardi