KW and KM Quinn Investments Pty Ltd as Trustee for the Quinn Family Trust and Commissioner of Taxation

[2004] AATA 1190

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1190

ADMINISTRATIVE APPEALS TRIBUNAL      )

)          No QT2003/342

TAXATION APPEALS DIVISION		)
Re		KW AND KM QUINN INVESTMENTS PTY LTD as Trustee for the QUINN FAMILY TRUST

Applicant

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 lodgement of the application for review to 8 August 2003.

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

K L Beddoe

Senior Member

CATCHWORDS

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

Administrative Appeals Tribunal Act 1975

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 applicant applied for review of a decision of the respondent in respect of the year of income ended 30 June 1998.

2.      The decision sought to be reviewed is an objection decision notified on 13 September 2002.  The application for review and accompanying application for an extension of time were lodged in this Tribunal on 8 August 2003. That is over eight months after the sixtieth day from service of the objection decision.

3.      The respondent says it neither consents nor objects to the grant of an extension of time.

4.      This matter was listed for hearing after a differently constituted Tribunal had heard a series of cases involving what might be described as the “Northbourne Matters”.  They are relevant to the present matter in so far as there is an issue here about appointment of income by the applicant and a related investment in relation to the Northbourne Holdings Unit Trust (“Northbourne”).

5.      At the hearing Mr Bickford appeared for the applicant and Mr Hack SC appeared for the respondent.

6.The following documents were marked as exhibits:

Exhibit A                   Affidavit of Kevin William Quinn

Exhibit B                   Affidavit of Kathleen Mary Quinn

Exhibit C                   Affidavit of John Damien Andrews

Exhibit D                   further Affidavit of John Damien Andrews

Exhibit E                   further Affidavit of John Damien Andrews

Exhibit F  Affidavit of Ross McSwain

Exhibit G                   Affidavit of Alan Powrie

Exhibit H                   Documents marked JDA-A to JDA-G

Exhibit 1  Copy of fax coversheet

7.Oral evidence was given by Mr McSwain.

8.Taking all the relevant material into account, I am satisfied that the application for review has been lodged out of time and will only be a valid application if the Tribunal extends time pursuant to section 29(7) of the Administrative Appeals Tribunal Act 1975 (“the AAT Act”).

9.      The Directors of the applicant have relied on Mr McSwain to protect the company’s interest following the collapse of Harts Accounting Group.  However they only seem to have become aware of the company’s position in relation to assessment of income tax arising from the Northbourne transactions after the respondent made a statutory demand for payment of assessed income tax by the company as Trustee.

10.     The application for review was lodged in the Tribunal on the same day as the applicant applied to the Supreme Court of Queensland to set aside the Creditors Statutory Demand.

11.     Having read exhibits A and B, I am satisfied that the directors of the applicant took no interest in the fiscal obligations of the applicant unless they were prompted to do so by either their accountants or the Australian Taxation Office.  In the light of Exhibit C, I am also satisfied that the directors have adopted the same attitude to their personal income tax affairs.  In particular, I do not accept that the directors can deny they have been advised of any action taken by the respondent on the grounds that service has been effected at the company’s address rather than the address of the directors personally.

12.     My view is reinforced by the document JDA7 in Exhibit C which is a copy of a letter by Mr McSwain to the directors (dated 20 May 2002) enclosing copies of amended assessments and other relevant documents, and suggesting Mr Powrie be engaged to prepare objections against the assessments.

13.     It seems little happened until August 2003 when the directors were finally motivated by the statutory demand and the proceedings in the Supreme Court.  Exhibit 1 seems to confirm this.

14.     In the circumstances of this case, I am satisfied there was significant ineptitude on the part of the directors and a lack of co-ordination between McSwain and Powrie although it could also be the case that they failed to get instructions to act from the directors.

15.     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)

16.     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.

17.     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.”

18.     Like other Northbourne cases there is likely to be a double assessing of income in this case.  It would always be the case that in those circumstances the respondent could reasonably expect there would be an objection against such an amended assessment and an appeal if the objection was disallowed.

19. I am satisfied in this case, taking into account the material before me and also taking into account that I have found in favour of the Trustees in a number of apparently similar cases involving family trusts which entered into the Northbourne arrangements, that the justice of the matter requires that the application for extension of time be allowed in accordance with sub-section 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.