LVR (WA) Pty Ltd and Anor and Commissioner of Taxation
[2012] AATA 928
•21 December 2012
[2012] AATA 928
Division TAXATION APPEALS DIVISION File Numbers
2007/4254-4258
2007/4272-4275
Re
LVR (WA) Pty Ltd
CZ Holdings Pty Ltd
APPLICANTS
And
Commissioner of Taxation
RESPONDENT
DECISION
Tribunal The Hon R D Nicholson Deputy President
Date 21 December 2012 Place Perth Decision Summary
1.The application by the respondent is refused.
2.The applications to be set down for directions, including argument concerning the issue of the interpretation of the Relevant Directions referred to in par 17 of the reasons.
....(sgd) R D Nicholson........................
The Hon R D Nicholson Deputy President
Catchwords
APPLICATION FOR DISMISSAL – respondent’s application for dismissal on ground of non-compliance with relevant directions – applicants filing four new witness statements – respondent’s submissions directed to directions concerning document arrangement and master index – no case by respondent otherwise in respect of new evidence – exercise of discretion – past record of non-compliance – weighing of other factors.
Legislation
Administrative Appeals Tribunal Act 1975 (Cth) s42A(5).
Cases
Guse v Comcare (1997) 49 ALD 288; Katterns v Comcare [2002] FCA 1366.
REASONS FOR DECISION
The Hon R D Nicholson Deputy President
21 December 2012
The applicant here is the respondent who seeks to have the application dismissed. The applicants are the respondent to that application and oppose it. I will describe those parties respectively as the applicant respondent and the respondent applicants. So far as there are references solely to the applicant and to the respondent in these reasons they refer to the applicant and the respondent in the litigation and proceedings in which this application arises.
BACKGROUND TO THE DISMISSAL APPLICATION
On 30 August 2007 the solicitor for both respondent applicants filed with the Tribunal applications for review of decisions disallowing a review of the respondent applicants’ objections to notices of income tax assessment and notices of penalty. These liabilities were said to be approximately $24.5 million in the case of LVR and $2.35 million in the case of CZ.
On 26 August 2009 the Tribunal made directions in the same terms in each of the matters (‘the Relevant Directions’). These related to the manner in which the respondent applicants should (re)file their voluminous evidence, including witness statements. As a consequence they filed 77 lever arch files of documents (‘the Relevant Documents’) together with two witness statements in addition to those previously filed.
On 19 March 2010 the applicant respondent asked the Tribunal at a directions hearing to set the matters down for a dismissal hearing on the grounds that the respondent applicants had failed to comply with the Relevant Directions. Directions were then made for filing of affidavits by the parties prior to the dismissal hearing.
On 3 May 2010 the respondent applicants filed and served a ‘Master Index’ and the witness statement of a Mr Schokker. Other documents were filed, including the Schokker affidavit on 21 June 2010.
On 24 June 2010 the Tribunal hearing took place.
On 30 July 2010 a Senior Member of the Tribunal issued the decision that the applications for review be dismissed under s 42A(5)(b) of the Administrative Appeals Tribunal Act 1975 (Cth).
The respondent applicants then sought judicial review of the Tribunal which resulted in a decision by Gilmour J on 6 October 2011 dismissing the application for review.
On appeal by the respondent applicants the Full Court of the Federal Court (North, Logan and Robertson JJ) allowed the appeal on 22 June 2012, set aside the orders of Gilmour J and his decision and ordered that the matters to which the decision relates be referred for further consideration by the Tribunal. The ground on which the appeal succeeded was that the primary judge had not given proper consideration to the Schokker affidavit.
When the matters were relisted before the Tribunal for reconsideration, it was anticipated by the applicant respondent in its written submission that argument would focus on the proper consideration of the Schokker affidavit.
However, on 12 and 13 September 2012 the respondent applicants filed and served three witness statements of Mr Schokker. Initially the applicant respondent gave notice of his intention to oppose the consideration of these new statements. That opposition was withdrawn shortly before the hearing.
In each of the new witness statements Mr Schokker states that he makes the statements in replacement of all his previous ‘statements’ filed in these proceedings. That is a statement referable to previous statements but not expressly to affidavits. The applicant respondent submits that it leaves the Schokker affidavit arguably alive for consideration. However, the respondent applicants presented their case on the basis that what now was relevant to determining whether there had been non-compliance with the Relevant Directions were the three new statements by Mr Schokker and a statement of Mr Caratti filed at the same time.
THE NATURE OF THE APPLICANTS’ BUSINESS
In both his first and second statement Mr Schokker describes in detail the nature of the involvement of each of the applicants in business activities. In the case of applicant LVR, it entered into contracts to purchase 15 parcels of land for $21 926 884. After subdivision into residential lots they were sold during the period 1 April 2001 to 30 June 2005 for a total consideration of $46 876 930. In the case of applicant CZ, it purchased 3 lots for $3 935 000. After subdivision into residential lots and sale between 30 June 2002 and 2005, a total consideration of $11 272 450 was realised.
In his witness statement Mr Allen Caratti states that the applicants borrowed the moneys required to purchase the land from financial institutions and Mammoth Investments Pty Ltd (‘Mammoth Investments’). This was the operating entity for the group, in succession to Robinswood Pty Ltd which went into liquidation. To that end, each applicant encumbered the land. Funds were provided by Mammoth Investments on the basis they would be repaid, including the interest accrued thereon, as and when the cash flow of the development allowed. Mammoth Investments was also engaged by them to undertake development work or to contract it out. Standard terms were agreed between these parties orally.
THE RELEVANT DIRECTIONS
The Relevant Directions appear in Annexure 4 to an affidavit of Julie Coates, a Principal Litigator employed by the respondent in the Legal Services Branch of the Law & Practice business line of the Australian Taxation Office.In her affidavit she summarises the contents of the Directions as requiring:
(a)A single set of documents to be filed for each applicant;
(b)The documents to be arranged in groups and sub-groups and each of the groups to be numbered and described;
(c)Each of the documents to be numbered, paginated and arranged in chronological order within the groups;
(d)There be a Master Index of all witness statements which should identify each of the documents or groups of documents each witness would adduce into evidence.
The detailed requirements of the directions are set out below.
The respondent applicants contend that it is important that some of the Relevant Directions are expressed by use of the words ‘should be.’ They appear to suggest that such language does not attract mandatory compliance. I do not accept this submission. It ignores the fact that the Relevant Directions were given with their knowledge in the course of proceedings initiated by them. It would open the exercise of the direction making power to unwarranted intrusion to impart a discretionary character to parts of the directions and not to others. The direction is made as a direction and requires compliance.
The respondent applicants also contend that the Relevant Directions do not require the Master Index to list the documents on which a witness will rely in relation to each of the categories of documents listed in par 2b. This was not argued on the hearing of this application but I will have it in mind when addressing relevant contentions. It is an unresolved issue concerning the interpretation of the directions.
PRIOR NON-COMPLIANCES WITH THE RELEVANT DIRECTIONS
The case for the applicant respondent is that the non-compliances with the relevant directions as found by the Tribunal in its decision of 30 July 2010 still exist and that the new evidence of Mr Schokker and Mr Caratti does not change that position. The case for the respondent applicants is that the new evidence overcomes what are said to have been the prior non-compliances.
Ms Coates states in paragraphs 18-19 of her affidavit the following as reasons why the Relevant Documents have not been filed in accordance with the Relevant Directions:
(a)There was no Master Index;
(b)The applicants did not provide any information to the respondent about which documents would be relied on by which witnesses and in respect of which issue;
(c)The applicants did not advise whether all or some of the documents and witness statements previously filed with the Tribunal had been uplifted from the Tribunal;
(d)The documents were not numbered and the documents were not arranged in groups in accordance with the Relevant Directions.
In an affidavit sworn on 31 May 2010, Mr Mancini, an Audit Leader/Senior Auditor employed by the respondent in the Complex Audit area of the Compliance Section in the Goods & Services Tax business line of the Australian Taxation Office, was of the view that a document described as HBS2 did not comply with the Relevant directions requiring a Master Index:
(a)HBS2 purports to rely on annexures to witness statements which have been uplifted and not refiled;
(b)There is no list of documents and the documents filed are no numbered;
(c)The documents or groups of documents to be relied on by each witness are not identified, the list merely saying all documents will be relied on by Mr Schokker;
(d)The documents are not filed in the groups specified in the Relevant Directions;
(e)The documents include duplicated and irrelevant material;
(f)The documents are not consistently in chronological order and not all are paginated;
(g)Contrary to the assertions of Mr Schokker the documents are not arranged in the groups described in his 3 May witness statement.
I was left in no doubt from the nature of the case of the respondent applicants that these non-compliances would continue to exist except where the new evidence of Mr Schokker and Mr Caratti demonstrated that such was not the case. The principal submission of the respondent applicants was that the new evidence would establish that the non-compliances had been totally or very largely cured. The applicant respondent disputed such a conclusion was open. It therefore is important for the Tribunal to now examine the new evidence and to assess its effect. The best way to do this would appear to me to be to work through the directions and refer to the statements so far as they impact on what the directions require.
THE REQUIREMENTS OF THE RELEVANT DIRECTIONS
DOCUMENTS
The directions require:
“On or before 28 October 2009 the applicants must file with the Tribunal and serve on the respondent a copy of every document they propose to adduce in evidence at the hearing, to establish that the assessments of income tax, GST and penalty are excessive in the manner and form specified below:
·a. A list of documents should be prepared in which:
i. documents should be numbered and specifically described or arranged in groups and sub-groups with a number and description for each group and sub-group.
ii. each document in a group or sub-group or documents should be arranged in chronological order an paginated;
iii. page number references should be given for each document and a range of page numbers for each group and sub-group;
iv. The groups should include the categories listed below;”
The first Schokker statement relates to the applicant LVR. It firstly annexes HBS1 as a true copy of the index of the files. It marks as ‘shaded’ documents considered by applicant LVR to be peripheral to the accounting records. It secondly annexes HBS2 as a true copy of the list of documents similarly shaded. Mr Schokker states that in response to a letter of the respondent dated 30 January 2008 all the documents of the applicant LVR were copied and provided to the respondent. It is said that ‘in order that the documents be made acceptable for interpretation they needed to be recalled, indexed and numbered in accordance with the respondent’s demand and the Tribunal directions.’ That statement appears to be an admission of non-compliance. However, it appears that groups are delineated by lines and sub-groups indicated by names. The evidence of the respondent applicants is that the documents in each file have been arranged in chronological order (unless being undated) and paginated: see third Schokker statement
In his first statement Mr Schokker states:
“On revisiting the taxation position of the Applicants and knowing the matter was to go before the Tribunal I considered that the former group’s consolidating accounting system unstoppable with:-
·GST Invoices for work done among the many developments to be in a common name (e.g. Mammoth Investments.)
·The arbitrary allocation of the expense and GST credit to various company entities could not be supported in law.
·Bank loan and interest expenses had been omitted and not accounted for.”
He states that he then determined that to correctly reflect the income and expenses of applicant LVR he reached the view that the accounts had to be completely reprocessed by reliance on the business records of the applicant. He therefore prepared a spreadsheet of all the sales and related disbursements to ensure all the sub-divided lots were accounted for and prepared appropriate cash books. He further states the sale details of each block are listed at documents file 29/96-112 under a range of 24 headings to provide the basis to calculate both the Gross GST collected and the taxable income for income tax purposes. Further, that the comprehensive schedule has also been reprinted in lot number format to assist in the confirmation that each and every parcel of land from the sub-divided blocks has been correctly accounted for. Finally he identifies the files where the bank statements for applicant LVR can be found.
The second statement of Mr Schokker relates to the applicant CZ. It is in the same form as his first statement. It attaches HBS4 with shaded portions. Mr Schokker again makes the statement that in order for the documents to accord with the Tribunal directions, they would need to be recalled, indexed and numbered.
Mr Schokker also states again that the accounts had to be completely reprocessed but that, due to time constraints, he had prepared a spreadsheet of all sales under 22 headings and cash books. He identifies the documents files in which these outcomes appear. He identifies the files where the bank statements for applicant CZ can be found.
It is apparent that the respondent applicants have not complied with this direction relating to the manner in which the documents are to be organised. At the core of the problem with the submissions for the respondent applicants is that they have never arranged the documents as directed. As has been seen, there was good reason for the formulation of the direction by the Tribunal: it would have enabled the Tribunal to deal with each of the areas of complaint in the respondent applicants’ objections to the assessments against them.
In their written submissions the respondent applicants state they have filed their evidence predominately on the basis of parent lots ‘but within that scheme have adopted many of the groups and sub-groups recommended by the Relevant Directions.’ They do not assert that all such groups and sub-groups have been adopted. They go on to state that given the applicant respondent has conceded the applicants had provided documents under certain categories specified in the Relevant Directions, the documents may well sustain the applications for review, ‘at least in part.’
It is helpful to cite the manner in which the respondent applicants have now filed a list of documents. It appears, referably to applicant LVR, as HBS2 to the first witness statement of Mr Schokker and, referably to applicant CZ, as HBS4 to the second witness statement of Mr Schokker. The following are first few lines in HBS2:
LVR (WA) Pty Ltd LIST OF DOCUMENTS
File Page Description Purchaser Date Parent Lot1 1-6 LVR Sale contract Richard Thomas LVR 1
1 7-12 LVR Sale contract Alan Lucas LVR 5
As appears in this extract, the documents are numbered and specifically described. The direction then required that they be ‘specifically described or arranged in groups and sub-groups’ but this has not occurred. It is the case that the lists have shaded files considered by the respondent applicants as not centrally relevant but that is not a compliance with the direction. Files are distinguished from previous files by lines ruled across the list but that is also not grouping as directed. The requirement for arrangement in chronological order and pagination (direction 2a(ii)) applies also to groups or sub-groups. The ‘date’ of each document does not appear in HBS2. However, in HBS4, the date is listed but not universally in chronological order. Page number references appear as a reference to the total number of pages in a document.
That leaves a question over Relevant Direction 2a(iv) which states that ‘the groups should include the categories listed below.’ It is apparent that the respondent applicants have addressed these categories and so evidenced their acceptance of them.
As far as the lists of documents are concerned, I find that they do not wholly comply with Relevant Direction 2a. Importantly for the management of the litigation, they do not describe or arrange the documents in groups or sub-groups.
GST-NET AMOUNTS IN BAS
The directions seek the net amounts in Business Activity Statements being the applicants’ calculations of each item in each relevant BAS.
In his first statement Mr Schokker states how he recalculated the applicant LVR’s GST debt. He attaches a schedule (HBS 3) showing his calculations of the amount of the GST that should have been paid each reporting quarter.
The paragraphs in the second statement for CZ are in the same form and to the same effect. That annexes HBS5 showing the recalculation of the GST for CZ.
Par 47 of the third statement by Mr Schokker, for both of the applicants, states that each applicant has determined the gross amount of GST for each relevant period and provided calculations for each item in each relevant BAS and sets out the files and pages where this is to be found.
The applicant respondent submitted subsequent to the hearing the information referred to in pars 47.2 and 47.3 of the third witness statement of Mr Schokker. In par 47.2 this was referred to as ‘LVR BAS calculations or each relevant period are provided in File 17 at pages 1-6.’ In par 47.3 the reference was to ‘CZ net amount of GST for each relevant period is provided in File 17 at page 58.’ I accept the submission of the respondent applicants that the content of those documents support the nature of the information described.
GST-INPUT TAX CREDITS
The direction requires on this topic:
c. Input tax credits…–
i. A list of the input tax credits claimed on acquisitions made by the applicants in the course of developing and subdividing the land. Supporting documents for each acquisition include a copy of the tax invoice and relevant bank statement showing the date of payment of each invoice (or other proof of payment).
ii. Development expenses Mammoth … – A list of the tax input credits claimed on acquisitions and by the applicants from Mammoth Investments Pty Ltd in the course of developing and subdividing the land including a detailed breakdown of the supplies provided. Supporting documents to include:
1. the tax invoices for each service provided
2. the relevant bank statement (or other proof of payment of each invoice)
3. the original tender document submitted by Mammoth Investments Pty Ltd as head contractor for the development projects
4. 3rd party certifications/authorisations for progress payments to mammoth Investments Pty Ltd or Mammoth Nominees Pty Ltd
5. Any other relevant documentation.
In the third Schokker statement Mr Schokker states that each applicant has provided a list of the input tax credits claimed on acquisitions made in the course of developing and subdividing the land together with the supporting documents for each acquisition and states the location of the information and supporting documents.
In the same statement he states that each applicant has provided a list of the input tax credits claimed on acquisitions made by each applicant from Mammoth Investments in the course of developing and sub-dividing the land including a detailed breakdown of the supplies provided together with supporting documents. He identifies the files where this is provided and states it is broken up into each stage of the development for each parent lot.
In each of his first and second statements Mr Schokker states that the respondent has the misconception that the valid invoices issued to the applicant from Mammoth Investments (File 47 and included in Files 54 to 59) do not relate to any services provided. That is an issue for future contention, if relevant.
GST-LAND PURCHASES
The direction reads:
d. land purchases … – supporting documents include copies of the relevant contracts of sale, settlement, statements, elections to use the margin scheme or other supporting information demonstrating an intention to use the margin scheme.
In his third statement Mr Schokker states that each applicant has provided supporting documents including copies of the relevant contracts of sale, settlement statements, elections to use the margin scheme and other supporting information in relation to land purchases and identifies the files in which that information is to be found.
GST-LOANS FOR EACH PURCHASE
The directions require that the applicants provide supporting documents including copies of loan agreements, copies of loan statements showing amounts of interest paid.
The third statement asserts that each applicant has provided supporting documents for each loan and identifies the file or files in which these are located.
GST-SHORTFALL AMOUNTS
The direction calls for supporting documents including a list identifying the amount of each shortfall payment, to whom it was paid and what the payment was for, as well as copies of bank statements showing the payment of the shortfall amounts.
Mr Schokker’s third statement states each applicant has provided supporting documents for any shortfall amounts to settle the purchases of land and identifies the files where these are contained.
GST-LAND SALES
The directions require a list of land sales including the name of purchaser, date property sold, amount sold for, contracts of sale, whether margin scheme applied, calculation of GST liability.
The third statement states each applicant has provided supporting documents for all land sales and identifies the files where these are contained.
GST-PROCEEDS FROM LAND SALES
The directions seek supporting information in respect of each sale, including settlement statements, relevant bank statements identifying receipt of settlement proceeds and relevant bank statements identifying date and amount of repayment of relevant loan.
Again in the third statement Mr Schokker states that each applicant has provided supporting documents for all proceeds of land sales and identifies where these are provided.
GST-INDEBTEDNESS TO MAMMOTH INVESTMENTS
The directions seek a table demonstrating the calculation of the debt and the date and amount of the reduction of the debt by the application of the proceeds of land sales, relevant bank statements of the applicant and Mammoth Investments Pty Ltd [and Mammoth Nominees Pty Ltd] showing payments of amounts owing or transfer of net balances, copies of relevant pages of accounting ledgers of the applicants and each of the Mammoth companies demonstrating the indebtedness.
The third statement points to the provision of this information in respect of Mammoth Investments and identifies the location of it. No reference is made to Mammoth Nominees Pty Ltd in the relevant paragraph of that statement.
INCOME TAX- ‘INCOME’
The directions require in respect of each year of income supporting documents to include each applicant’s calculation of the income, any additional bank statements or other documents verifying the receipt of income it not provided above.
The third statement states that each applicant has provided supporting documents for all income and identifies its location in files.
The first and second statements describe with regard to each of the applicants how its profits and losses were calculated.
INCOME TAX- COST OF GOODS SOLD
Here the directions seek supporting documents including each applicant’s calculations of the cost and identification of the goods sold in each year.
The third statement states each applicant has provided supporting documents for all costs of goods sold and identifies the files where it is contained.
INCOME TAX- DEVELOPMENT EXPENSES
The directions seek these expenses for each year of income together with supporting documents including each applicant’s calculation of the development expenses, any additional invoices and relevant pages of bank statements showing payment if not provided above.
Again, in the third statement Mr Schokker states that each applicant has provided supporting documents for all development expenses and identifies the location of this information.
INCOME TAX-INTEREST AND FEES
The directions seek in respect of each year of income supporting documents including each applicant’s calculation of the amount claimed, any additional statements or invoices and relevant pages of bank statements showing payment if not provided above.
Mr Schokker states in his third witness statement that each applicant has provided supporting documents for all interest and fees as set out in a file which is identified in each case.
INCOME TAX-DEVELOPMENT EXPENSES MAMMOTH
Here supporting documents for each year of income are sought, including each applicant’s calculation of the development expenses, any additional invoices and relevant pages of bank statements showing payment if not provided above.
The third statement contains Mr Schokker’s statement that each applicant has provided supporting documents for these and identifies the file location of that identification.
MASTER INDEX
The direction requires:
4. On or before 28 October 2009 the applicants must file with the Tribunal and serve a copy on the respondent a master index listing all the witness statements they intend to rely on at the hearing including the following:
a. in respect of each witness statement the name of the applicant in respect of which the statement is filed, the name of the witness and the date of the statement;
b. each witness must identify from a list of documents referred to at paragraph 2 above the particular documents or groups of documents the witness will rely on by referring to the relevant document numbers.
The ‘updated’ Master Index is attached as HBS8 to the third witness statement of Mr Schokker. It states that the first witness statement of Mr Schokker (with Annexures HBS1 to HBS3) and the witness statement of Allen Caratti (dated 12 September 2012 and 1 May 2009) together with some accounting records and ‘identified peripheral supporting documents’ will be relied upon in relation to applicant LVR. In the case of applicant CZ it states reliance will be placed on the second witness statement of Mr Schokker (with Annexures HBS4 to HBS5) and the same statements of Mr Allen Caratti and certain identified accounting records and supporting documents.
In his third witness statement Mr Schokker expressly accepts that the original filing of the Master Index was not in compliance with the directions of the Tribunal. The updated Index is clearly not filed by the date referred to in the direction. No objection is made to the acceptance of the ‘updated’ document for the purposes of resolving the outstanding issues on the ground of the date of the updated Master Index.
It may assist consideration of the arguments concerning the Master List to set out the form in which the first entry in it appears:
Witness Statement
Date
Paragraphs
Documents
Witness Statement of Hank Bernard Schokker with Annexures
Signed 12 September 2012
All paragraphs and annexures
Accounting records in Files 11-20, 22, 24-26, 29, 34-36, 38-39, 42-44, 47-49, 57 AND 60 with peripheral supporting documents in Files 1-10, 21, 23-26, 33-46, 49-59.
The applicant respondent submits that the observations of Mr Mancini in his affidavit of 31 May 2010 at paragraphs 13-23 apply equally to the Updated Master Index and statements. The following are the issues raised by Mr Mancini in the above-numbered paragraphs:
(a)under the columnar heading ‘paragraphs’ reference is made in relation to each of the respondent applicants to ‘annexures.’ Mr Mancini’s affidavit states that he has reviewed all of the files of documents served on the applicant respondent and has not seen any replacement annexures to the witness statements. Further that Ms Coates, an Executive Level 2 Principal Litigator employed by the respondent in the Legal Services Branch of the Law & Practice business line of the Australian Taxation Office Perth, had informed him that no replacement annexures had been filed to the witness statements. It is apparent that there are annexures to the three new witness statements filed by Mr Schokker.
(b) in relation to the reference in the updated Master Index in the column headed ‘documents,’ Mr Mancini stated the direction was unsatisfied as the respondent applicants have not provided a list of documents and not numbered the documents. There is a list of documents for each applicant in which each document is numbered.
(c) the respondent applicants had not met the requirements of par 4(b) of the directions which requires each witness to identify the particular documents or group of documents that they will rely on by referring to the relevant document numbers. However he accepts that none of the documents filed had been given document numbers although the files of documents are numbered and most of the documents within each file were paginated.
(d)examination of the documents referred to in the case of the each respondent applicant discloses that there are 13 142 pages in the files referred to in respect of applicant LVR and 4 945 in the case of applicant CZ. Mr Mancini states that there is no further reference in the previous Master Index or the HBS material in the third statement of Mr Schokker that will assist the Tribunal in determining the relevance of any of these documents at all or to the particular subject groups listed in the Tribunal’s directions.
(e) the very large numbers of documents provided by each applicant are not arranged in the particular groups required by the Tribunal at paragraphs 2(b)-(n) of the directions. Those groups listed in those paragraphs align with the contentions of the respondent applicants in their amended objections.
(f) he had found it difficult to review the documents in the applicants files of documents not only because there are so many documents but also because of the way they are presented, which makes it difficult to identify which relevant and necessary documents are not provided. This difficulty is now assisted by the shading of peripheral documents.
The observations of Mr Mancini must be understood against the submissions of the applicant respondent that:
‘the Relevant Directions mandate that there be a single set of documents filed for each applicant and that the documents be arranged in groups and sub-groups each being numbered and described for each group and sub-group. Each of the documents must be numbered and paginated and arranged in chronological order within the groups and the Master Index must identify which of the documents or groups of documents each witness will adduce in evidence.’
The respondent applicants submit that the directions require the Master List to list the documents or groups of documents on which the witness will rely. That overlooks the balance of paragraph b of the directions where it continues with the words ‘by referring to the relevant document numbers’ referred to in paragraph 2.
The submissions for the applicant respondent must be understood in the context of the following consideration:
‘There are over 23,000 pages of documents in the 78 files and yet Mr Schokker is still saying that he will rely upon every filed documents and each and every paragraph of them, along with the annexures (with no exclusions), with respect to each of the claims in the amended assessments as identified in each of the groups and sub-groups. …This is of course unacceptable and makes the conduct of the proceedings before the Tribunal unworkable from the point of view of the Tribunal and counsel for the [applicant respondent].’
The fact that the directions are so fundamentally focussed on the issues raised by the respondent applicants in their objections shows the centrality of them, in that they have mandated requirements to facilitate the resolution of the issues raised by the respondent applicants.
The applicant respondent submits that the Tribunal is in no better position today than the first time the documents were filed to know which documents will be relied upon by each witness in relation to each issue. As they submit, this will make a proper review at a substantive hearing extremely difficult, or arguably impossible.
For these reasons I find that the respondent applicants have failed to comply with the directions in relation to the Master Index, even though the updated Master Index has in part improved the position.
THE EXERCISE OF DISCRETION
Section 42A(5) of the Administrative Appeals Tribunal Act 1975 (Cth) provides:
If an applicant for a review of a decision fails within a reasonable time:
(a)…
(b) to comply with a direction by the Tribunal in relation to the application;
the Tribunal may dismiss the application without proceeding to review the decision.
In Guse v Comcare (1997) 49 ALD 288 at 291 Burchett J said:
This is plainly a valuable discretionary power. But para (b) does involve denying an applicant a hearing of the merits of his application. That should be done very sparingly, and only I think, as a decision of last resort. …The very nature of the discretion seems to me to demand that the tribunal consider, after the default has occurred, whether proper remedy is dismissal of the application, or the taking of some other course, such as adjourning the proceeding or making some other order to secure compliance.
Cf Katterns v Comcare [2002] FCA 1366.
In their submissions the respondent applicants address the issue of the discretion arising in the Tribunal under this provision. In their first submission they submit that to the extent there are any minor non-compliances with the Relevant directions, the Tribunal should exercise its discretion to allow the applications for review to be heard on their merits. They contend that this is particularly the case where the respondent has conceded certain documents have been provided, which documents may well reduce the respondent’s assessments. Further, that the respondent applicants have endeavoured to ensure the Tribunal can follow their own calculation of their taxation position and proceed to determine the applications of review with relative ease. Also that the majority of their outstanding liabilities comprise additional tax by way of penalty and the general interest charge accrued on the assessments. In relation to these the respondent applicants contend that the assessments are excessive to the extent that the tax payable on the assessments total no more than about $5m, which has been paid by them.
In response the applicant respondent states that payments made by both applicants totals approximately $1.5m, comprising $537, 256.84 paid by applicant CZ and $1, 044, 503.39 paid by applicant LVR. He states that the outstanding liabilities are $32, 737, 762.14 for applicant LVR and $3, 214, 433.99 for applicant CZ.
In reply the respondent applicants state that the failure by the applicant respondent to address the substantive matters in the further evidence filed on behalf of the applicants should persuade the Tribunal to exercise its discretion in their favour. They assert they are prepared for a hearing on the substantive issues.
Not to be overlooked is the history of the proceeding. In a letter dated 10 February 2010 from Bronwyn Simmonds, Assistant Commissioner, Litigation, Southern Region, Legal Services Branch of the respondent to the solicitors for the applicants sets out some of those circumstances. She states that there was a third occasion when the respondent’s officers had undertaken the resource intensive review of the very large quantity of documents filed in relation the applications. Additionally she refers to repeated delays and non-compliance with the directions of the Tribunal since the applications were made in 2007. Reference is made by her to advice from the respondent’s senior counsel that he expects the non-compliance to radically extend the length of any hearing. I am left in no doubt that, unless dismissed, the applications require effective hearing without delay and subject to clarification of the directions.
Another feature of the facts is the large amount at issue. That amount has been known to the respondent applicants throughout. Yet, whatever aspects require further fact finding, it is clear that the bulk of the sums at issue arise from liability in respect of GST and penalties. As the respondent applicants submit, any change in the base of their liability will have a consequence for the calculation of GST and penalties.
It is also apparent that the respondent applicants, while failing to comply fully with the directions concerning the arrangement of documents and the Master List, have complied with the directions in relation to the pars 2b-n. That is, they have ordered their evidence in some significant new way which is facilitating of a hearing.
The case brought in support of dismissal by the applicant respondent focuses on the arrangement of the documents and the content of the Master List. It is the case that the applicant respondent has not directed argument to the remainder of the substantive matters arising in evidence on which the respondent applicants appear to have filed new and well arranged (in the sense of being readily retrievable) evidence. That weighs significantly for me. It has the consequence that the applicant respondent has not advanced a case against acceptance of the new evidence brought by the respondent applicants save so far as it is outside the arrangement of the documents and the compilation of the Master List.
Additionally there are issues of interpretation of the Relevant Directions which may need argument and determination promptly.
Having weighed these matters I am persuaded that this is not presently an appropriate occasion in which to dismiss the application for non-compliance. The respondent applicants have shown their ability to improve the presentation of their evidence and cannot therefore be thought incapable of remedying any remaining defects in a timely fashion.
CONCLUSION
For these reasons I consider that the application for dismissal by the respondent applicant should not be granted and so should be refused.
For the same reasons I will direct that the applications by the respondent applicants be set down for further directions, including argument on the issue of the interpretation of the Relevant Directions referred to in par 17 of the reasons.
I certify that the preceding 87 (eighty seven) paragraphs are a true copy of the reasons for the decision herein of ....(sgd) T Freeman).....................
Associate
Dated 21 December 2012
Date(s) of hearing 3 December 2012 Counsel for the Applicant Ms R J Lee Solicitors for the Applicant Wilson & Atkinson Counsel for the Respondent Mr S Owen-Conway Solicitors for the Respondent ATO Legal Services Branch
Key Legal Topics
Areas of Law
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Administrative Law
Legal Concepts
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Jurisdiction
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Standing
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Discovery & Disclosure
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Abuse of Process
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