Jennings and Commissioner of Taxation

[2004] AATA 1191

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1191

ADMINISTRATIVE APPEALS TRIBUNAL      )

) No   QT2003/350-1,

TAXATION APPEALS DIVISION  )        QT2003/352-3

Re MARTIN JENNINGS
DANIELLE JENNINGS

Applicants

And COMMISSIONER OF TAXATION

Respondent

DECISION

Tribunal Senior Member K L Beddoe

Date11 November 2004  

PlaceBrisbane

Decision The Tribunal decides to extend the time for lodging each application for review to 29 August 2003.

.....[Sgd]......

K L Beddoe

Senior Member

CATCHWORDS

TAXATION – Income Tax – extension of time to lodge application for review – participant in Northbourne arrangements

Income Tax Assessment Act 1936 s100A

Comcare v A’Hearne (1993) 119 ALR 85
Brown v FCT (1999) ATC 4516
Ross Palmer Holdings Pty Ltd and Anor v FCT (2003) ATC 4495

REASONS FOR DECISION

11 November 2004 Senior Member K L Beddoe

1.      The applicants seek an extension of time in respect of applications for review lodged in the Tribunal on 29 August 2003.  Decision in this matter was deferred pending the outcome of related matters before the Tribunal.

2.      Those applications for review sought review of objection decisions notified by the respondent on 10 October 2002 in relation to the years of income ended 30 June 1996 and 30 June 1997.

3.      The notices of decision on the objections dated 10 October 2002 were apparently issued at Penrith and addressed to the address of service of notices, as notified in the notice of objection.  Those notices of decision on the objections should have been received at the address for service of notices not later than 14 October 2002.  The last day for lodgement of the applications for review in the Tribunal was 13 December 2002.  Hence the applications for review before me were over eight months out of time.

4.      Applications to extend time were lodged with each application for review.  The reasons for application were set out in an accompanying letter from the applicants’ then solicitors.  Much of that letter is incomprehensible in the context of the present applications but on the basis of the letter the reason for seeking an extension of time comes down to oversight by someone unnamed.

5.      The respondent advised the Tribunal that it neither opposed nor consented to extending time.

6.      These matters were listed for hearing after a differently constituted Tribunal had heard a series of cases involving what can be described as the “Northbourne matters”.  Those cases are relevant to the present applications only in so far as they also involved appointment of income and an investment arrangement involving the Northbourne Holdings Unit Trust (“Northbourne”).

7.      At the hearing Mr Bickford appeared for the applicants and Mr Hack SC appeared for the respondent.

8.      The following documents were marked as exhibits:

Exhibit A       Affidavit of Ross McSwain

Exhibit B       Affidavit of Martin Jennings

Exhibit C       Affidavit of Danielle Jennings

Exhibit D       Affidavit of John Damien Andrews

Exhibit E       Further Affidavit of John Damien Andrews

Exhibit 1        Copies of notices of objection

Exhibit 2        Affidavit of Linda Gilligan

9.      Oral evidence was given by Mr McSwain.

10.     Taking all the material into account I am satisfied that:

(a)the applications for review have been lodged out of time and will only be valid applications if the Tribunal extends the time for making each application pursuant to section 29(7) Administrative Appeals Tribunal Act 1975 (“the Act”);

(b)there was confusion between the applicants’ tax agent (McSwain) and the solicitor acting on McSwain’s instructions (Powrie) as to whether the applications for review had been lodged in the Tribunal’s Canberra Registry;

(c)The applicants were relying on McSwain to lodge the applications for review on their behalf.  They had no reason to doubt that the applications for review had been lodged and were fortified in their understanding by correspondence from the Australian Taxation Office perceived to be referring to the supposed applications for review;

(d)the respondent was uncertain as to how the provisions of the Income Tax Assessment Act 1936 (“the 1936 Act”) applied in consequence of its view that the Trustee of the Jennings Family Foundation had not made valid appointments of net income to Northbourne and made assessments of income tax in the alternative against the Trustee on the basis that section 100A of the 1936 Act applied and the applicants, as beneficiaries, taking in default of appointment of income under section 97 of the 1936 Act;

(e)the Trustee lodged valid applications for review in respect of the relevant years of income on or about 23 October 2002 by Abbott Tout Solicitors.  It is not explained as to why different firms of solicitors were acting for the Trustee on the one hand and the beneficiaries on the other, except perhaps for Powrie’s advice to keep a distance from the perception which appears to be held “by the Brisbane Registry about the former clients of Harts Accounting” by lodging the applications for review in the Canberra Registry. In any event Powrie did nothing of any relevance to these proceedings.

11.     In the circumstances of these applications I am satisfied there was confusion between McSwain and Powrie as to who was responsible for lodgement of the applications for review and there was a naive belief by the applicants that their interests were being protected.

12.     I am satisfied the correspondence from the Australian Taxation Office lulled the applicants into a false sense that they were in fact disputing the respondent’s section 97 assessment.

13.     In coming to my decision in these matters I have taken into account the following dicta of the Federal Court in Comcare v A’Hearne (1993) 119 ALR 85 where the Court (Black CJ, Gray and Burchett JJ) said at page 88:

“A consistent thread thus revealed in the reasoning is that the tribunal considered that delays by a solicitor were to be visited upon a client.  Thus, despite the inexcusable delay on the solicitors’ part that the tribunal found, it was able to say that there was ‘no acceptable explanation whatsoever’ for the delay.  This approach cannot stand in the light of modern authorities such as Jess v Scott (1986) 12 FCR 187; 70 ALR 185; see also Lighthouse Philatelics Pty Ltd v FCT (1991) 32 FCR148 at 156; 108 ALR 156 at 165.

In our view, therefore, the primary judge was correct in concluding that the tribunal’s reasons did reveal an error of law and he was correct in deciding that the matter ought to be remitted to the tribunal for further consideration according to law.

We note that the tribunal used language that might be taken to suggest that it is a precondition for success in such an application that an acceptable explanation for the delay must be given.  Although it is to be expected that such an explanation will normally be given, as a relevant matter to be considered, there is no rule that such an explanation is an essential precondition: (authorities cited)

14.     I have also taken in account dicta of Hill J in Brown v FCT (1999) ATC 4516 and Spender J in Ross Palmer Holdings Pty Ltd and Anor v FCT (2003) ATC 4495.

15.     In Brown Hill J said at page 4525:

“46      In the context of an application to extend the time for lodging an objection it is clear enough that the circumstances which resulted in the objection not being lodged in time require consideration.  Indeed the taxpayer’s explanation for the delay, while not the sole factor, must clearly be an important factor.  If there were no explanation it would be unusual for an extension of time to be granted.  In some cases the explanation for the delay may be so compelling that it will almost require an extension of time to be granted.  For example, where the assessment did not reach the taxpayer at all within the 60 days from being put into the post it would be rare for an extension of time not to be granted.  Even where there is no particular explanation given for the delay, other than the belief that an objection would b futile, but subsequent to the expiration of time Court interpretations changed so that the possibility of the objection being successful arose, and extension of time would likely be granted.

47While, therefore the explanation for delay in lodging the objection will be an important factor, it is necessary to bear in mind that the decision maker should take into account all the circumstances of the particular case against the background that Parliament has enacted a procedure to permit extensions of time being granted.  An extension should be granted where the justice of the case required, cf Wedesweiller v Cole (1983) 47 ALR 528 at 531 per Sheppard J, cited with approval in the present context by Sweeney J in Fardon v FC of T 92 ATC 4339 at 4348. Neither the Commissioner nor the tribunal on review should approach the question of determining whether an extension of time should be granted on the basis that it will only be in an exceptional case that an extension is granted.”

16.     In this case the applicants were under the misapprehension that their interest had been protected but the respondent was under no misapprehension that its objection decisions had been accepted.

17.     The Trustee had maintained its rights of review and I am satisfied that the respondent thought the applicants had done so.

18.     These cases involve double assessing of income by the respondent so that it cannot be the case that the respondent could not reasonably expect the objection decisions to have been accepted. There is no prejudice to the respondent.  To suggest otherwise is to countenance “double dipping” by the respondent.

19.     I am satisfied that notwithstanding the delay in lodging the applications for review, the justice of the matters requires that I extend time in each application in accordance with subsection 29(7) of the AAT Act. 

I certify that the 19 preceding paragraphs are a true copy of the reasons for the decision herein of Senior Member K L Beddoe

Signed:   T Ritchie

Associate

Date/s of Hearing: 23 October 2003; 17 November 2003
Date of Decision: 11 November 2004.
The applicant was represented by Mr Bickford.
The respondent was represented by Mr Hack SC.