Dickson Carriers Pty Ltd v Chief Commissioner of State Revenue
[2008] NSWADT 64
•28 February 2008
CITATION: Dickson Carriers Pty Ltd and anor v Chief Commissioner of State Revenue [2008] NSWADT 64 DIVISION: Revenue Division PARTIES: FIRST APPLICANT
Dickson Carriers Pty LtdSECOND APPLICANT
RESPONDENT
Hughes Transport Pty Ltd
Chief Commissioner of State RevenueFILE NUMBER: 066130 HEARING DATES: 7 and 22 February 2008 SUBMISSIONS CLOSED: 22 February 2008
DATE OF DECISION:
28 February 2008BEFORE: Block J - ADCJ (Judicial Member) CATCHWORDS: Jurisdiction MATTER FOR DECISION: Preliminary matter LEGISLATION CITED: Payroll Tax Act 2007
Taxation Administration Act 1996CASES CITED: Boyded (Holdings) Pty Limited v Federal Chief Commissioner of Taxation 82 ATC 4236
FCT v ANZ Savings Bank Ltd (1993) 181 CLR 466
FCT v Dalco (1990) 168 CLR 614
FCT v Hoffnung & Company Ltd (1929) 42 CLR 39FCT v Stokes 97 ATC 4001
Federal Chief Commissioner of Taxation v Mantle Traders Pty Limited 80 ATC 4588
Fletcher & Dunlop v FCT82 ATC 4834
Reynolds v FCT (1981) 34 ALR 463
Telstra Corporation Limited v Chief Commissioner of State Revenue [2004] NSWADT 190
Transport Accident Commission v Bausch (1998) 4 VR 249
Wade v FCT (1951) 84 CLR 105REPRESENTATION: APPLICANTS
RESPONDENT
I Kalaf, solicitor
I Young, barristerORDERS: 1.The Tribunal does have jurisdiction
2. The Respondent is entitled to rely on the grounds specified in the additional issue (as defined in these reasons).
REASONS FOR DECISION
Part A Preliminary and background
1 There are two matters of a preliminary nature to be decided by the Tribunal and for this purpose argument was heard on two days, and being 7 February 2008 and 22nd of February 2008.
2 The first issue relates to jurisdiction. The Respondent has raised the question of whether or not the Tribunal had jurisdiction to hear the substantive application. It is relevant to note that Mr Young, on behalf of the Respondent, did not contend that the Tribunal does not have jurisdiction; he made it clear that the issue was raised by him (and not in a partisan manner) as one to be decided by the Tribunal. It is the view of the Tribunal that the issue was correctly and properly raised by the Respondent. This issue is referred to in these reasons as "the jurisdiction issue".
3 The second issue which is relevant, and which arises only if the Tribunal resolves the jurisdiction issue on the basis that it does have jurisdiction, is as to whether the Respondent is entitled to raise and rely upon grounds, additional to or alternatively to the grounds which were relied upon by him when he issued the assessments or when he determined the objection. This issue is referred to in these reasons as the "alternative or additional grounds issue" or more briefly as "the additional issue".
4 The documentation before the Tribunal is large consisting as it does of the (voluminous) documents lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997 and in addition lengthy submissions by the parties. It is however unnecessary for the Tribunal to refer, otherwise than in brief terms, to that material. The Respondent in respect of the issues referred to previously in clauses 2 and 3 furnished a submission entitled "Respondent’s Written Submissions on Jurisdiction" which is referred to in brief in these reasons as "RSJ". The Tribunal found RSJ of particular assistance and has drawn on it to some considerable extent in these reasons; parts of RSJ utilised in these reasons have been edited so as to remove footnote references and to insert case references in the body of that material.
5 On the 21st of December 2005 payroll tax assessments were issued against the Applicants for the 2004 and 2005 tax years (collectively "the relevant years") and whereby the Applicants, Dickson Carriers Pty Limited, (separately where relevant referred to as “Dickson Carriers”) and Hughes Transport Pty Ltd, (separately and where relevant referred to as "Hughes Transport") were grouped on the basis that they had directors in common with the requisite statutory voting power under sections 106I(1) and 106I(2)(c)(i)) of the Taxation Administration Act 1996 ("TAA"). It is relevant to note that although assessments were issued against both of the Applicants, and both of the Applicants objected, only one of the Applicants (Dickson Carriers) sought the review of the disallowance of the objections. In November 2007 the other Applicant, Hughes Transport was, by consent, joined as an Applicant.
6 By letters dated 16 February 2006 and 14 March 2006 the Applicants objected to the assessments.
7 In response to the objections by the Applicant the Respondent wrote a letter dated 23 October 2006 (referred to in these reasons as the “relevant letter") reading as follows:
8 The further relevant facts (about which there does not appear to be any dispute) contained in clause was 7 to 12 of RSJ reading as follows:
“I refer to your objection letter of 16 February 2006 and subsequent submission of 14 March 2006. In addition we met on 15 September 2006 when you were able to provide additional clarification in respect of the above matter. During our meeting you indicated that you have not been adequately advised of the reasons behind this Office’s decision to group the above companies. I am now pleased to attach documents that provide sufficient explanation as to why this Office believes that the above companies should be grouped. However, if the basis on which this Office made its decision were (sic) inaccurate, please do advise me in a short submission on your views by 15 November 2006 so that I can give further consideration to your objection. If the outcome were to change in accordance with the grouping provisions under the payroll tax legislation, then necessary amendments could be made to the assessments. However, if you wish to take this matter further outside this office’s area of responsibilities, then, the Taxation Administration Act 1996 allows you to lodge an appeal to the Administrative Decisions Tribunal or the Supreme Court if you are dissatisfied with the decision. Your appeal should be lodged within sixty (60) (sic) of the date of this letter but the Tribunal or the Court may allow further time to lodge the appeal. Information on the appeal process is available from the Registrar of the Tribunal …”
9 Although it is neither necessary nor desirable for the Tribunal to deal in any detail with the substantive application, it is necessary in relation to the additional issue to refer in brief terms to the nature of the application.
7. By letter dated 15 November 2006 the Applicant provided further information and submissions.
8. The Applicant did not wait for the Chief Commissioner’s “further consideration” of this material. By application dated 13 November 2006, but filed on 17 November 2006, the Applicant filed an application with the Tribunal to review the Chief Commissioner’s decision on objection. The decision was particularized as the “decision” of 23 October 2006.
9. By its conduct the Applicant has assumed the letter of 23 October 2006 was a determination of its objection.
10. By the application the Applicant conceded that 14 days notice to determine the objection had not been given, notwithstanding the lapse of 90 days after lodgement of the objection.
11. By letter dated 29 June 2007 the Chief Commissioner foreshadowed additional/alternative grounds in support of the assessments. In summary form, the alternative grounds involved grouping each of Hughes Transport Pty Ltd and Dickson Carriers Pty Ltd with SJGJ Pty Ltd as trustee of the Dickson Family Trust.
12. The matter has had several directions hearings in the Tribunal in the period from 24 January 2007 to 3 October 2007. On 3 October 2007 the matter was listed for hearing on the Alternative/Additional Grounds Issue. However, the jurisdiction of the Tribunal ab initio must first be resolved.
10 The assessments against which the Applicants have objected relate, as set out previously to the relevant years. The Applicants were grouped in respect of the relevant years for the purpose of payroll tax on the basis that they had directors in common who were entitled to exercise more than 50 percent of the voting power meetings of directors. The two directors who are relevant in this regard are Graham Dickson (“Dickson”) and Janice Maddalena (“Maddalena”) who at all relevant times were directors of both Applicants. It is also relevant to note that Dickson and Maddalena are siblings. Their mother, Joyce Dickson, was a director of Dickson Carriers but she ceased to be a director of that Applicant in October 2004.
11 In relation to the additional issue SJGC Pty Limited (referred to as the “Trustee”) was at all relevant times the trustee of the Dickson Family Trust. (the “Trust”). At all relevant times Dickson and Maddalena were directors of the Trustee, and Joyce Dickson was also but previously a director of the Trustee.
12 The basis (as the Tribunal understood Mr Kalaf who appeared for the Applicant) on which the Applicant objected to the grouping, and thus the assessments, is that although in respect of the relevant years the Applicants did have common directors, Maddalena was a non-executive director of one Applicant while Dickson was a non-executive director of the other Applicant. Put in other words and in relation to the relevant years and the two persons mentioned, each was an executive director of one of the Applicants and a non-executive director of the other of the Applicants.
13 Mr Kalaf argued that the position of a non-executive director in relation to a company is that he or she holds that position in order to give advice and counsel but not to vote and the fact that a non-executive director does in law have the power to vote is not relevant. As he put it, it is necessary to have regard to the duties of directors of a company rather than to their powers. He said that one has only to have regard to the web in order to note that there are many companies (and he was presumably preferring to listed companies), which have non-executive directors who occupy those positions in order to give advice to the companies of which they are directors. The validity of this argument, as I indicated at the hearing, appears to the Tribunal to be at best problematical. The Payroll Tax Act in this context appears to be concerned with voting power and as a matter of law, directors whether executive directors or non-executive directors are charged with fiduciary duties to the company of which there are directors, and they all have the right to vote at meetings of directors.
Part B The jurisdiction issue
14 The jurisdictional issue turns squarely on the question of whether or not the relevant letter quoted in full earlier in his reasons can be said to have determined the objection. If the answer is in the affirmative the Tribunal has jurisdiction and if the answer is in the negative, the Tribunal does not. The Tribunal agrees with clauses 15 and 16 of RSJ reading as follows:
15 It is convenient at this juncture to draw on RSJ in order to set out in detail the relevant legislative provisions; they are contained in particular in clauses 17 to 24 of RSJ reading as follows:
15. Two matters are clear. No matter that jurisdiction may be the outcome “desired” by both parties, it is not open to the parties by conduct, agreement, omission, error, neglect, or otherwise, to confer jurisdiction on the Tribunal if none exists at law: see Boyded (Holdings) Pty Limited v Federal Chief Commissioner of Taxation 82 ATC 4236 and Federal Chief Commissioner of Taxation v Mantle Traders Pty. Limited 80 ATC 4588 .
16. Second, the Tribunal is a creation of statute. It only has the jurisdiction the Parliament has given it. It has no inherent jurisdiction. Its jurisdiction is limited to the review of the Chief Commissioner’s decision on determination of the Applicant’s objection. If there is no relevant “decision” of the Chief Commissioner then the Tribunal has no jurisdiction and the Tribunal has, on occasions, so held that the Chief Commissioner has not made a reviewable “decision”. See Telstra Corporation Limited v Chief Commissioner of State Revenue [2004] NSWADT 190. The relevant question is whether the Tribunal is itself satisfied that it has jurisdiction.
16 The crisp question before the Tribunal then is as to whether the relevant letter did indeed constitute a determination as required by TAA.
17. By section 86(1)(a) of the Taxation Administration Act 1996 (NSW) (the “TAA”) a taxpayer dissatisfied with an assessment may lodge a written objection with the Chief Commissioner.
18. By section 91(1) of the TAA, the Chief Commissioner is obliged to consider that objection. It is instructive to set the section out in full so as to ascertain the precise scope of the Chief Commissioner’s responsibilities as follows:
(1) The Chief Commissioner must consider an objection and either allow the objection in whole or in part or disallow the objection.
19. The obligation on the Chief Commissioner under section 91(1) is mandatory. He must consider the objection and he must do one of three (3) things, namely, either:
Note: The Chief Commissioner should endeavour to determine the objection within 90 days after it is received. Failure to make a determination within the 90-day period is a ground for review under Division 2. (Emphasis added)
(a) Wholly allow the objection;
(b) Partly allow the objection; or
(c) Disallow the objection in full
20. Following on from his consideration of the objection and his decision thereon, section 93 of the TAA prescribes how and in what manner the Chief Commissioner is to give effect to the decision he has made under section 91(1). That section provides as follows:
93 Notice of determination
(1) The Chief Commissioner must give notice to the objector of the determination of the objection.
(2) The Chief Commissioner must, in the notice, give the reasons for disallowing an objection or for allowing an objection in part only.
(2A) The reasons for a determination of an objection in respect of an assessment or other decision that the Administrative Decisions Tribunal has jurisdiction under Division 2 to review must set out the matters referred to in section 49(3) of the Administrative Decisions Tribunal Act 1997 in respect of the determination.
(2B) The notice must also inform the objector of the objector’s right to make an application for review under Division 2 in the case of a determination to disallow the objection or to allow the objection in part only.
(3) The notice is to be in a form approved by the Chief Commissioner.
21. The notice of determination of objection is the gateway through which a taxpayer has review rights at the Tribunal. Section 96(1) provides as follows:
(1) A taxpayer may apply to the Administrative Decisions Tribunal for a review of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if:
(a) the taxpayer is dissatisfied with the Chief Commissioner’s determination of the taxpayer’s objection, or
(b) 90 days (not including any period of suspension under section 92) have passed since the taxpayer’s objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection.
23. In this case more than 90 days had lapsed after lodgement of the objection and prima facie the review right accorded by section 96(1)(b) TAA has been triggered. But that section is subject to section 100(1) of the TAA, which provides:
(1) An application for review following a failure of the Chief Commissioner to determine an objection cannot be made unless the Applicant has given written notice of the proposed application to the Chief Commissioner not less than 14 days before it is made.
23. Here the Applicant has not given any notice under section 100(1) so as to enliven the review right under that section.
(ii) The Chief Commissioner’s letter and section 93 TAA
24. The Chief Commissioner must “determine” the objection in one of the three ways specified in section 91(1) of the TAA. He must wholly allow it, allow it in part, or disallow it. And he must give notice of that “determination”, in the “approved” form, which determination has certain legal consequences.
17 One of the leading cases in this area is FCT v Hoffnung & Company Ltd (1929) 42 CLR 39 (referred to henceforth as “Hoffnung”) even though that case was concerned with an assessment rather than a determination. In Hoffnung Isaacs J at page 55 observed that an assessment that fixes “the taxpayer with liability for a Crown debt carrying interest and penalties must be definite and certain”.
18 The Tribunal agrees with the Respondent's contention that the word "determination" ordinarily means a binding, conclusive, definite decision which give rise to certain legal consequences. Notices of assessment, which are expressed on their face to be tentative, provisional, contingent, under consideration or "subject to further revision or … to be finalised" are neither "definitive" nor relevantly a "decision".
19 In FCT v Stokes 97 ATC 4001 the Full Federal Court summarised the effect of the decision in Hoffnung as follows: "(this) case provides the origin of the phrase "definitive assessment" is a phrase used in many later authorities to emphasise that the act requires a definitive determination of the taxpayer’s liability to tax.
20 The decision in Hoffnung as to what constitutes a notice of assessment applies, in the view of the Tribunal, with equal force to a determination of an objection where that decision, if adverse, in turn gives rise to rights of appeal. A decision which is said to be "tentative" "provisional" or subject to further revision and finalisation" would not be a "determination" of that objection.
21 The Respondent contended that the relevant letter could be construed objectively as follows:
22 The Respondent then went on to contend that the reference in the relevant letter to "the decision" might be read as referring to is the ultimate decision following on from the "further consideration to your objection".
(a) You [the Applicant] say you do not understand the basis for the assessments;
(b) Enclosed is a document that provides “sufficient explanation” of the basis of assessment and grouping;
(c) If you are of the opinion the OSR is incorrect, please provide a short submission by 15 November 2006;
(d) Such submission is for the purpose “so that I can give further consideration to your objection”;
(d) If, as a result of that submission, the basis of assessment is wrong then “necessary amendments” could be made to the assessments; and
(e) If the Applicant wishes to take the matter “outside [OSR’s] area of responsibilities” it has appeal rights if it is “dissatisfied with the decision”.
23 The Tribunal does not agree with the submission contained in the preceding clause. It considers that the Respondent in referring to "the decision" was referring to the decision set out in the relevant letter.
24 It cannot be denied that the relevant letter does in certain respects admit of some degree of uncertainty or ambiguity. It could be interpreted in the manner set out in clause 21; it could also however be construed as a determination of the objection; in this latter context the relevant letter could be construed on the basis that the Respondent was informing the Applicants that he had determined the objection against the Applicants but that he would nonetheless be prepared to give the matter further consideration if additional evidence was provided. Put in colloquial terms the Respondent might have been saying something along these lines: "I have decided that your objection cannot stand but my door is open and you are welcome to endeavour to persuade me that my determination is wrong."
25 Although accepting that the matter is not free of doubt, the Tribunal prefers the interpretation set out in the preceding clause and accordingly holds that it does have jurisdiction.
Part C The additional issue
26 The objections were disallowed on the basis that the Applicants had directors in common and that those directors had the requisite statutory voting power. The additional grounds on which the Respondent seeks to rely involve the grouping of the Applicants with the Trustee ...
27 The Respondent referred to the fact that TAA was drafted having regard to the Income Tax Assessment Act 1936 (“the ITAA 1936”) and in particular the manner in which it has been judicially interpreted ... He went on to set out the basis on which relevant case authority in respect of the Tax Act was relevant also in relation to the Administrative Decisions Tribunal Act. Clauses 33 to 46 of RSJ, with which the Tribunal agrees, are set out in full as follows:
28 On the second of the two hearing days, argument was heard in the main, on the additional issue, the Tribunal having asked the parties to assume by way of hypothesis, that the jurisdiction issue would be decided on the basis that the Tribunal does have jurisdiction.
33. Relevantly, as enacted, there were three (3) pillars of the ITAA 1936. First, the taxpayer bore the onus of proving that the amount of the assessment was excessive and by how much. Second, the taxpayer was limited to the grounds stated in his objection, though the Court or AAT can now, by leave allow extension of the grounds of objection. Third, the due making of the assessment was conclusively presumed in all Courts and proceedings and the amount and particulars of the assessment were similarly conclusively presumed except in taxation appeal proceedings.
34. These provisions were considered by the High Court in the leading decision of FCT v Dalco (1990) and were described by Toohey J. as a “concatenation of sections”. Toohey J continued:
35. In those taxation objection and appeal proceedings the Commissioner “is entitled to rely upon any deficiency in proof of the excessiveness of the amount assessed to uphold the assessment”.
“the task for the taxpayer, upon an appeal or a review under Pt V of the Act, is to show that the amount of money for which tax is levied by a particular notice of assessment exceeds the actual substantive liability of the taxpayer.”
36. It is, and always has been the case under the ITAA 1936 that the Commissioner is entitled to rely upon any ground whatsoever to uphold the assessment, irrespective of whether the Commissioner relied upon that ground, at the time of either raising the assessment or, alternatively, in determining the objection. Thus for example, in Wade v FCT (1951) 84 CLR 105 a dairy farmer received compensation consequent upon the destruction of part of his herd, being trading stock as defined. He purchased replacement animals. The compensation moneys were assessed by the Commissioner as income under the trading stock provisions (sections 28 – 31 of the ITAA 1936). On assessment, the Commissioner did not refer to, or rely upon section 26(j) which taxed amounts “received by way of ... indemnity ... in respect of any loss of trading stock which would have been taken into account in computing taxable income”. In a celebrated passage, Kitto J, in the High Court said:
37. In Reynolds v FCT (1981) 34 ALR 463 the Commissioner assessed a taxpayer on a profit specifically under section 26AAA (purchase and sale within 12 months) and did not assess under, or refer to, the general income provision in section 25(1), which was raised for the first time on appeal. The Court held the erroneous reliance by the Commissioner on the wrong section did not affect the correctness or otherwise of the assessment and the Commissioner was entitled to change his ground.
“ If the £2,016 formed part of the taxpayer's assessable income by reason of section 26(j), as I think it did, its inclusion in his assessable income in the course of making the assessment was right, whether or not the Commissioner referred to section 26(j), and even though he described the amount inaccurately . No conduct on the part of the Commissioner could operate as an estoppel against the operation of the Act . ” (Emphasis added)
38. The decisions in Reynolds and Wade were expressly approved by the joint judgment of Brennan Deane Dawson and Toohey JJ in FCT v ANZ Savings Bank Ltd (1993) 181 CLR 466 as follows:
39. Moreover, it is open to the Administrative Appeals Tribunal, standing in the shoes of the Commissioner, provided it accords natural justice to the taxpayer, to decide a case on a ground not in fact relied upon by the Commissioner at any time, that is, on assessment, or on determination of objection, or indeed in argument before the Tribunal. In Fletcher & Dunlop v FCT 82 ATC 4834 the Commissioner did not at any time rely upon the general anti avoidance provision in the ITAA 1936, including in submissions to the AAT. The Full Federal Court upheld the right of the AAT, of its own volition, to make a Part IVA determination, because in determining the objection:
“In several decisions it has been held that the Commissioner may support the amount of the assessment on a ground not taken into account at the time the assessment was made. [Citations omitted] The Commissioner will be required to give proper notice to the taxpayer and, where appropriate, will be directed to furnish particulars. But, as Kitto J observed in Federal Commissioner of Taxation v Wade: "No conduct on the part of the commissioner could operate as an estoppel against the operation of the Act."” (Emphasis added)
40. The corresponding “ concatenation of sections ” appears in the TAA (NSW). Thus the conclusive evidence provision is section 119 as follows:
“the Commissioner would have been free to exercise a discretion under section 177F of the [ITAA 1936], it follows that, in reviewing the Commissioner's decision under section 186, the Tribunal is free to exercise that same discretion if, upon the material then before it, it seems proper to take that course.”
Production of a notice of assessment, or of a document signed by the Chief Commissioner purporting to be a copy of a notice of assessment, is:
41. More importantly, section 100(2) and (3) provide as follows:
(a) conclusive evidence of the due making of the assessment, and
(b) conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only.
(2) The Applicant’s and Respondent’s cases on an application for review are not limited to the grounds of the objection.
(3) The Applicant has the onus of proving the Applicant’s case in an application for review.
42. Section 100(2) TAA, enacted in 1997 is a direct recognition and legislative codification of the position prevailing under the decisions in Wade, Reynolds and ANZ Savings Bank. The Chief Commissioner’s case on an application for review is not limited to being responsive to the taxpayer’s grounds of objection. The Chief Commissioner can defend his assessment and his decision on objection on any ground whatsoever, that is, the Chief Commissioner can rely on any deficiency in proof of the Applicant’s case.
43. The Applicant here, so it seems, relies upon section 96(5) of the TAA which section is expressed to modify the operation of section 58(1)(a) of the Administrative Decisions Tribunal Act 1997 in a similar manner as the taxation administration provisions modify section 37 of the Administrative Appeals Tribunal Act 1975 (Cth). The ambit, scope and purpose of the corresponding provision of the Victorian Administrative Appeals Tribunal Act 1984 (Vic) was described by Tadgell JA in Transport Accident Commission v Bausch (1998) 4 VR 249 in the following terms:
44. That is plainly the purpose of section 58 of the ADT Act. All that section 96(5) does is to modify section 58 to accommodate the obligations otherwise imposed on the Chief Commissioner by the operation of section 93. In that manner duplication and overlap is avoided. But the purpose of section 96(5) remains unaltered, namely, to facilitate and assist primarily the Tribunal to understand the decision the subject of the pending review.
The scheme necessarily carries with it an entitlement on the part of a disappointed claimant to have an administrative decision by the Commission properly reviewed by the Tribunal. That entitlement carries, of course, a corresponding obligation on the part of the Commission, as the primary administrative decision-making body, to assist the Tribunal in making the review: [Citations omitted]. The review is in no sense to be treated as raising a lis (sic) or amounting to an adversarial contest in which the Commission is entitled to engage in curial tactics. That is not to say that there can not be disputed issues between the parties raised for resolution, or that the Commission may not seek actively to support before the Tribunal its decision which is under review. If it does seek to do so, however, it is a fortiori imperative that its reasons for its decision, and the material that it considered in making it, should be squarely and unequivocally revealed to the Tribunal. … [And] the Tribunal is obliged to ensure that each party to a proceeding before it is given a reasonable opportunity to present the case: section 44 of the Tribunal Act. The obligations imposed on the Commission by section 36(1) of the Tribunal Act are obviously designed to assist the Tribunal to understand how the decision under review was made and the reasons for its making . (Emphasis added)
45. Section 96(5) is not a sword in the taxpayer’s armoury, as this Applicant seemingly contends, to excise sections 100(2) and 100(3) TAA and deprive or limit the Chief Commissioner from relying on additional grounds in support of the assessment and decision on objection.
46. Moreover, not only can the Chief Commissioner rely on additional or alternative grounds, but he is not limited to the evidence or material in existence before him at the time of assessment or decision on objection. That follows from section 100(2) and the decision in Fletcher & Dunlop where the Full Court stated:
“In exercising those powers and discretions the Tribunal was bound to consider the facts as they were proved in evidence before the Tribunal, making the decision which, upon that evidence and at that time, was the correct or preferable decision to be made in considering the objection. The Tribunal was not confined either to the material which was before the Commissioner, as primary decision maker, or the events which had occurred up to that time .” (Emphasis added)
29 Before proceeding to the additional issue Mr Kalaf was asked to remind the Tribunal as to the exact position of Dickson and Maddalena as directors of the Applicants. He said that in relation to Dickson Carriers, Dickson is a voting director while Maddalena is a non-executive director (and he added that as such she is not entitled to vote at meetings of directors). He said also that as regards Hughes Transport Maddalena is a voting director and Dickson is a non-executive director. (The basis upon which a non-executive director of a company is not entitled to vote at meetings of directors was not explained.)
30 The Applicants dispute the Respondent’s contention that he is entitled to raise the additional issue. Put in specific terms the Applicants object to the Respondent relying on the grounds specified in the additional issue, either in addition to or alternatively to the grounds upon which the objections were disallowed. Accordingly the Applicants object to the inclusion in the section 58 documents of material referable to the additional issue; the Applicants referred in this context in particular but not only, the material contained in tab 25 of the section 58 documents.
31 Mr Kalaf said that the objection of the Applicants was based on what he described as "due process" and "procedural fairness". If the Applicants and the Trustee are grouped the Trustee might become subject to a liability for the tax and in circumstances where it had received no assessment, was not a party to these proceedings, and had not been afforded an opportunity to seek its exclusion from that group.
32 Mr Young explained to the payroll tax is a tax levied on each company, which has employees, and in this case assessments were made against the Applicants who have employees. He explained also that the additional issue seeks to include the Trustee in the group on the basis that if it is a member of the group, that factor would constitute the "glue" which results in the grouping of the Applicants. On this basis the trustee might become liable for the tax on a secondary basis, in manner akin to that of a guarantor (and if the Applicants do not make payment of the tax) but that the Trustee would such event have rights of indemnity against the Applicants and in any event might be able to procure its exclusion from the group. Mr Young also made it clear that having regard to the fact that the directors of the trustee are Dickson and Maddalena and that the Trustees is the trustee of the Trust it, the Trustee is hardly a stranger to the Applicants.
33 Mr Kalaf contended that if the Trustee would incur a liability there might be prejudice the beneficiaries of the Trust. When asked whether the Trustee would like to be joined as an applicant he replied in the negative.
34 Notice as to the additional issue was given in mid 2007 and so that the Applicants cannot claim that they are not aware of the additional issue. Reference was made in particular to Fletcher v Dunlop (supra); it is clear as a matter of law that a tribunal could not validly make a finding in relation to a new ground in the absence of any notice to the parties as to the fact that such new ground was under consideration. In this case of course notice has been given.
35 That a party is not limited as to the grounds on which it may rely it is clear from the terms of section 100(2) of TAA. Mr Kalaf contended that section 100(2) must be read subject to section 100(1) of TAA. That contention is incorrect. Section 100 contains four subsections each of which serves an entirely separate and distinct function and so that section 100(1) is not in any way subject to section 100(2).
36 The arguments on behalf on the Applicants as to due process and procedural fairness appear to the Tribunal to be misconceived. The additional issue relates to the question of whether the Respondent is entitled to raise it and to rely on it, or more accurately whether the Applicants are entitled to an order that the Respondent is not entitled to do so. The Tribunal is not required to decide whether the additional issue will be successful but merely whether the Applicants are entitled to claim that the Respondent is barred or estopped from raising and relying on it and there can be no doubt that the Respondent is entitled to do so. The application by the Applicants in this regard cannot succeed.
37 It is relevant to note that, as set out previously, Mr Kalaf was invited to have the Trustee joined as an applicant and that he refused.
38 It is also relevant to note that payroll tax is (as is the case with certain other taxes) a tax to which self-assessment applies and so that is the obligation of the Applicants and also, if applicable the Trustee, to furnish their returns in the appropriate manner, and in accordance with law ...
39 Mr Kalaf argued that to involve the Trustee in this manner would be unfair in that the Trustee might wish to seek independent legal advice more particularly in order to protect the interests of the beneficiaries. This too is not in fact to the point. If the Trustee wishes to obtain independent advice there is nothing to prevent it from doing so.
Part D Summary and conclusion
40 As to the jurisdiction issue the relevant letter could have been written in a manner which is rather clearer but on balance the Tribunal considers that it does constitute a disallowance of the objections and so that the Tribunal does have jurisdiction.
41 As to the additional issue the Tribunal considers that much of the argument advanced on behalf of the Applicants was misconceived. The Tribunal is not here concerned with any dispute between the parties as to whether the Applicants were correctly grouped or whether they could be grouped if the Trustee were a member of the group. The Tribunal is concerned only with the question of whether the Respondent should be barred from raising and relying on the grounds specified in the additional issue. The law as detailed previously in these reasons (and see in particular section 100(2) of TAA and Fletcher and Dunlop (supra)) makes it clear that the Respondent should not be barred from doing so.
Orders
1.The Tribunal does have jurisdiction
2. The Respondent is entitled to rely on the grounds specified in the additional issue (as defined in these reasons).
5
2