LVR (WA) PTY LTD CZ HOLDINGS PTY LTD and COMMISSIONER OF TAXATION
[2010] AATA 570
•30 July 2010
Administrative Appeals Tribunal
DECISION AND REASONS FOR DECISION [2010] AATA 570
ADMINISTRATIVE APPEALS TRIBUNAL )
) No 2007/4254-4258
TAXATION APPEALS DIVISION ) No 2007/4272-4275
Re LVR (WA) PTY LTD
CZ HOLDINGS PTY LTDApplicants
And
COMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal Mr A Sweidan, Senior Member Date30 July 2010
PlacePerth
Decision The Tribunal dismisses the above applications under s42A(5)(b) of the Administrative Appeals Tribunal Act 1975
..........sgd A Sweidan.........
Senior Member
CATCHWORDS
Practice and Procedure - failure to comply with directions - applications dismissed
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth) s42A(5)(b)
CASES
Guse v Comcare (1997) 49 ALD 288; (1997) FCA 140
Karakus v Comcare [2001] AATA 588
Katterns v Comcare [2002] FCA 1366
Wilson and Commissioner of Taxation [2007] AATA 1721REASONS FOR DECISION
30 July 2010 Mr A Sweidan, Senior Member Background
1.The Tribunal made directions on 26 August 2009 in the same terms in relation to each of the above named applications [“the Relevant Directions”]. It should be noted that there is a typographical error in paragraph 4(b) of the Relevant Directions where the reference to “paragraph 1” should be a reference to paragraph 2. The Relevant Directions were varied by the Tribunal on 20 November 2009 by extending the time for filing. The Relevant Directions related to the manner in which the applicants’ voluminous evidence including witness statements should be (re)filed. This was to be the third time the applicants’ evidentiary material would be filed. Previously filed evidence had been substantially uplifted by the applicants because it did not comply with earlier directions.
2.The applicants filed 77 lever arch files of documents in response to the Relevant Directions in December 2009 and January 2010 [“the Relevant Documents”]. At the same time and also in response to the Relevant Directions the applicants filed 2 witness statements in addition to those previously filed. The witness statements on which the applicants rely are listed at the Schokker “Master Index” being HBS2 of 3 May 2010 witness statement of Hank Schokker [“the Relevant Witness Statements”].
3.At a Directions Hearing on 19 March 2010 the respondent asked the Tribunal to set the matter down for a Dismissal Hearing on the grounds that the applicants had failed to comply with the Relevant Directions. The Tribunal then made directions for filing of affidavits by the parties prior to the Dismissal Hearing.
History of the Applications
4.On 30 August 2007, the solicitor for both applicants (who has acted for them throughout these proceedings) filed with the Tribunal applications for review of decision for each applicant seeking a review of the respondent's decisions to disallow their objections.
5.The respondent had previously sent notices to the applicants of his decisions on their objections. Each of the notices was dated 2 July 2007. The accompanying reasons for decision refer to the issues in dispute in the applications:
5.1.for CZ the respondent commenced a review of the activities of the applicant in May 2005; at the conclusion of the review the respondent:
5.1.1.determined that CZ was not registered for GST despite carrying on an enterprise of subdivision and sale of land which exceeded the $50,000 registration threshold;
5.1.2.identified sales of land by CZ totalling approximately $11 million in the years ended 30 June 2003-2005 and calculated GST payable on the sales of approximately $1 million;
5.1.3.imposed an administrative penalty on CZ for failing to provide a return, notice or document under subsection 284-75(3) of Schedule 1 to the Taxation Administration Act 1953 at the rate of 75%.
5.2.for LVR the respondent commenced a review of the activities of the applicant in October 2004; at the conclusion of the review the respondent:
5.2.1.determined that LVR had not lodged income tax returns for the years ended 30 June 2001-2004; subsequently LVR lodged returns for 2001-2003 years; on 10 January 2006 the respondent issued a notice of assessment under section 167 of the Income Tax Assessment Act 1936 for the income year ended 30 June 2004 assessing taxable income of approximately $11 million.
5.2.2.determined that LVR was not registered for GST despite carrying on an enterprise of subdivision and sale of land which exceeded the $50,000 registration threshold;
5.2.3.identified sales of land by LVR totalling approximately $46 million in the years ended 30 June 2001-2005 and calculated GST payable on the sales of approximately $4 million;
5.2.4.imposed an administrative penalty on LVR for failing to provide a return, notice or document under subsection 284-75(3) of Schedule 1 to the Taxation Administration Act 1953 at the rate of 75%.
Chronology Relevant to Directions of the Tribunal
6.The relevant chronology is set out in some detail in affidavits filed by the respondent in support of the dismissal applications being:
6.1.affidavit dated 12 April 2010 of Julie Coates, a Principal Litigator in the Legal Services Branch of the Law & Practice business line of the Australian Taxation Office, who is responsible for managing the applications for the respondent.
6.2.affidavit dated 12 April 2010 of Sandro Mancini, a Senior Auditor in the Complex Audit area of GST business line in the Australian Taxation Office, who is the team leader of the audit team which conducted the relevant audits on the applicants.
6.3.a further affidavit dated 31 May 2010 of Sandro Mancini.
7.Ms Coates’ affidavit sets out a number of the following relevant matters in the history of the proceedings. The Tribunal has had regard particularly to Annexure 1 to her affidavit which is a letter from the respondent to the Tribunal dated 23 July 2009 which sets out in Appendix D to the letter a chronology of the repeated lack of compliance with the Tribunal’s Directions by the applicants between January 2008 and May 2009.
8.Relevant correspondence between the parties and the Tribunal, and the most recent filed material, postdates Ms Coates’ affidavit and is also referred to below.
9.The following is a brief chronology of the filing of the applicants’ evidence since the filing of the applications in 2007:
9.1.On 29 January 2008 the applicants’ solicitor advised the Tribunal that he expected to be able to provide the information requested by the respondent within four weeks but that he would need to take instructions;
9.2.On 25 March 2008 the solicitor advised the Tribunal at a Directions Hearing that the Commissioner’s representatives had attended the applicants’ premises to view documents and that information was being photocopied to be provided within two weeks. The Tribunal directed the applicants to file their evidence by 8 July 2008.
9.3.The time for the filing of the evidence of the applicants was varied on 15 July 2008 as a result of requests by both parties and further extended by a request on 7 July 2008 of the applicants to 15 August 2008.
9.4.At a directions hearing on 28 August 2008 the Tribunal listed the applications for a Dismissal Hearing on 29 October 2008. On that date the matter was not dismissed and directions were made that the applicants should file and serve copies of their source documents by 17 November 2008.
9.5.On 17 November 2008 63 files of documents were served on the respondent by the applicants. Two of the respondent’s officers each subsequently spent 5 hours reviewing the files and were unable to substantiate any of the contentions of the applicants from the documents.
9.6.On 16 December 2008 the respondent wrote to the Tribunal and to the applicants advising that the 63 files of documents did not comply with the directions of the Tribunal for the detailed reasons specified in that letter.
9.7.On 23 December 2008 the applicants’ solicitor wrote to the Tribunal stating that the applicants had complied with the Tribunal’s directions but that since those documents had been filed and served further documents had been found. The applicants requested a further directions hearing.
9.8.A directions hearing was held on 12 January 2009 and directions were made by the Tribunal extending the time to 16 February 2009 for the applicants to file and serve:
9.8.1.all further source documents;
9.8.2.a schedule of the source documents which identified the source documents relevant to the matters in issue in the applications;
9.8.3.an index to the source documents;
9.8.4.that all source documents be filed in a format to be agreed between the applicants and the respondent;
9.8.5.the source documents already filed and those to be filed be put into order in a format to be agreed between the applicants and the respondents.
9.9.On 16 January 2009 the respondent wrote to the applicants confirming that the 63 files of documents had been returned to them on 13 January 2009.
9.10.On 10 February 2009 the respondent wrote to the applicants seeking a response about the conferral which the Tribunal had directed should take place between the parties on the order of the documents to be filed and served.
9.11.On 16 February 2009 the applicants’ solicitor wrote to the respondent seeking an extension of time for filing the documents and stating that a bookkeeper Hank Schokker who had knowledge of the documents had retired and in any event had been unable to assist the applicants due to surgery.
9.12.On 24 February 2009 the respondent wrote to the applicants and agreed not to oppose a request to further extend the time for filing and serving the documents. As a result the Tribunal extended the time to 31 March 2009 for the filing of the documents.
9.13.On 27 March 2009 the applicants faxed copies of “draft indexes” to the respondent inviting the respondent to make “comments so that the parties can work towards agreement as required by the directions”.
9.14.Also on 27 March 2009 the applicants served on the respondent about 60 further files and a different version of the index to the one already supplied to the respondent by fax on the same day.
9.15.On 6 April 2009 the respondent sent the applicants a detailed letter setting out the basis for the respondent’s view that the service of the documents did not comply with the directions of the Tribunal. The letter relied on detailed advice from one of the respondent’s audit officers who had spent two days reviewing the documents served on the respondent.
9.16.At paragraph 8(a) of her affidavit Ms Coates sets out the details of the non-compliance referred to in her 6 April 2009 letter [at Annexure 2]:
9.16.1.there were many inconsistencies between the indexes and the documents;
9.16.2.not all files listed on the indexes were filed;
9.16.3.the description on the spine of the files did not always match the contents;
9.16.4.the files were not consistently in any particular order;
9.16.5.there appeared to be a significant number of relevant source documents which were not included;
9.16.6.there were a large number of irrelevant documents in the files; and
9.16.7.many documents were provided in draft or unsigned form.
9.17.On 22 April 2009 the applicants’ solicitor wrote to the respondent again claiming that the applicants had complied with the directions of the Tribunal and sought additional time to file the witness statements then due on 28 April 2009.
9.18.On 24 April 2009 the applicants’ solicitor requested a further extension of time to 1 May 2009 to file witness statements and any other evidentiary material. This was granted by the Tribunal.
9.19.At paragraph 8(b) of her affidavit Ms Coates refers to a phone conversation she had with applicant’s solicitor Mr Romano detailing examples of difficulties she had with the documents and index filed for CZ. She said that Mr Romano advised her that his client had prepared the documents. The examples Ms Coates referred to were that:
9.19.1.the descriptions in the index of the CZ files did not match the “spine” descriptions on the outside of the CZ files and in fact there was little correlation between the contents of the files and the spine descriptions [paragraph 8(c) and document 2 in Annexure 2 of her affidavit];
9.19.2.the index referred to numbered files and the files themselves were either not numbered or the numbers did not match the files.
9.20.At paragraph 8(c) of her affidavit Ms Coates refers to a letter dated 6 May 2009 from the applicants’ solicitor to the Tribunal advising that an unspecified number of witness statements would be relied on by the applicants [document 3 in Annexure 2 of her affidavit].
9.21.At paragraph 8(d) of her affidavit Ms Coates refers to a letter dated 13 May 2009 from the respondent to the applicants setting out in detail why the respondent contended that the applicants had not complied with the prior directions of the Tribunal in relation to the filing of witness statements [document 4 in Annexure 2 of her affidavit] for reasons including:
9.21.1.the incomplete service of witness statements and evidence on the respondent;
9.21.2.those annexures to witness statements served on the respondent which were not marked with annexure references or with incorrect references;
9.21.3.the uncertainty as to whether further witness statements and evidence were to be filed and served by the applicants and when this might occur;
9.21.4.the uncertainty as to which witness statements would be relied on at the hearing by the applicants;
9.21.5.the uncertainty as to which documents in the 77 unindexed and unpaginated files of documents referred to in the witness statement of Hank Schokker of 1 May 2009 would be relied on by the applicants at the hearing.
9.21.6.the uncertainty about how any reference could be made to unpaginated documents at a future hearing.
9.22.On 27 May 2009 additional files of documents were filed by the applicants.
9.23.The applicants wrote to the respondent on 5 June 2009 in response to the letter of 13 May 2009 suggesting that some of the respondent’s concerns would be attended to [document 5 in Annexure 2 of Coates affidavit].
9.24.On 26 June 2009 the Tribunal made directions that the respondent should file and serve “draft directions” in relation to the manner of filing documents by the Applicants by 3 July 2009 and on which the applicants should file and serve a response by 10 July 2009 [Annexure 3].
9.25.On 2 July 2009 the respondent wrote to the applicants’ solicitor annexing “draft directions” and setting out a summary of the reasoning behind the directions proposed [paragraph 8(h) of Coates affidavit and document 6 in Annexure 2 to affidavit]. The proposed directions required the applicants to uplift and refile the documents in a manner specified in some detail.
9.26.On 10 July 2009 the applicants’ solicitor wrote to the respondent stating that the view of the applicants was that they had complied with the Tribunal’s “previous” but unspecified directions [document 7 in Annexure 2 to affidavit]. The solicitor also advised that the applicants were of the view that the draft directions proposed by the respondent were onerous and cost prohibitive. He also stated that the proposed directions were inconsistent with the statutory obligation of the respondent to assist the Tribunal. The solicitor requested a directions hearing to discuss the proposed directions.
9.27.On 23 July 2009 the respondent sent a very detailed letter to the Tribunal (copied to the applicants) in response to the solicitor’s assertions [paragraph 8(j) and (k) of the Coates affidavit and document 8 in Annexure 2]. The respondent’s letter stated that any delays or inefficiencies in the progress towards hearing of the applications were caused by repeated failures and delays by the applicants to comply with the Tribunal’s directions.
9.28.At a directions hearing on 26 August 2009 and after hearing submissions from the parties the Tribunal made the Relevant Directions which were substantially in accordance with the draft directions proposed by the respondent [Annexure 4 to the Coates affidavit]. The Relevant Directions required the applicants to refile their documents in accordance with the directions by 28 October 2009 [nine weeks from the date of the Relevant Directions].
9.29.On 28 October 2009 the solicitor for the applicants filed witness statements of Allen Caratti a Director of the applicants in relation to each application [Annexure 5]. The witness statements were in identical terms and each indicated at paragraph 4.6 that preparation would commence on 2 November 2009. The applicants requested a further six weeks to file and serve the documents.
9.30.On 30 October 2009 the respondent wrote a detailed letter requesting the Tribunal to dismiss the applications under section 42A(5) of the Administrative Appeals Tribunal Act 1975 for failing to comply within a reasonable time with directions of the Tribunal. The letter referred to “entirely inadequate” reasons in the Caratti statements for requesting additional time and the lack of a proper explanation for “the continuing delay in filing, the significant extra time requested or why the solicitor had apparently not been instructed to comply with the Tribunal’s directions”.
9.31.On 20 November 2009 the Tribunal extended the time for filing the documents to 23 December 2009 for LVR and to 22 January 2010 for CZ.
9.32.On 14 December 2009 the date for LVR to file was further extended to 22 January 2010.
9.33.On 23 December 2009 LVR filed 55 files of documents and a witness statement of Hank Schokker.
9.34.On 21 January 2010 CZ filed 23 files of documents, a witness statement of Hank Schokker and a “document list” [Annexure 6 to Coates affidavit].
9.35.On 10 February 2010 the respondent again wrote to the applicants’ solicitor setting out in detail why the respondent said that the documents filed did not comply with the Relevant Directions of the Tribunal [paragraphs 26 and 27 of Coates affidavit and Annexure 7]. The respondent’s letter advised that if the applicants had not fully complied with the Directions by 26 February 2010 the respondent would write to the Tribunal seeking a further Directions Hearing.
9.36.On 8 March 2010 the respondent wrote to the Tribunal seeking a further directions hearing as the applicants had not responded to the letter of 10 February 2010.
9.37.On 10 March 2010 the solicitor for the applicants wrote to the respondent [Annexure 8 to Coates affidavit]. The letter said the solicitor was “currently obtaining” the applicants’ instructions on how to respond to the letter of 8 March 2010. The letter said it was the applicants’ “preliminary position” that they have fully complied with the Tribunal’s directions.
9.38.On 3 May 2010 the solicitor for the applicants filed “the Applicants’ Master Index” and a witness statement of Hank Schokker also dated 3 May 2010. The witness statement of Mr Schokker states at paragraph 3 that the applicants had not previously provided a “Master Index” (as required in the Tribunal’s directions of 26 August 2009) and that a “Master Index” was annexed to the witness statement at HBS2 [the Schokker “Master Index”]. The witness statement also stated at paragraph 4 that “every other direction of the Tribunal” had been complied with by the applicants.
9.39.On 14 May 2010 the applicants filed an affidavit from Mr Schokker which confirmed his witness statement of 3 May 2010.
9.40.On 2 June 2010 the respondent filed a further affidavit of Sandro Mancini sworn on 31 May 2010 which responded in detail to the 3 May 2010 witness statement of Hank Schokker in which Mr Shokker denied “that any other direction of the Tribunal has not been complied with”. Mr Mancini’s affidavit sets out numerous instances of non-compliance – see further below in this regard.
Statutory Scheme
10.Under section 14ZZK of Taxation Administration Act 1953 the applicant has the burden of proving that an assessment is excessive or the taxation decision should have been made differently:
Grounds of objection and burden of proof
14ZZK On an application for review of a reviewable objection decision:
(a) the applicant is, unless the Tribunal orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and
(b) the applicant has the burden of proving that:
(i) if the taxation decision concerned is an assessment (other than a franking assessment)--the assessment is excessive; or
(ii) if the taxation decision concerned is a franking assessment--the assessment is incorrect; or
(iii) in any other case--the taxation decision concerned should not have been made or should have been made differently.
11.The objectives of the Tribunal are set out in section 2A of the Administrative Appeals Tribunal Act 1975 [the Act]:
2A In carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick.
12.Procedure of the Tribunal is set out in section 33 and provides a broad discretion to the Tribunal. The scheme of the Act urges as much expedition and informality as the requirements of the Act and other relevant Acts and a proper consideration of the matters before the Tribunal permit:
Procedure of Tribunal
33(1) In a proceeding before the Tribunal:
(a) the procedure of the Tribunal is, subject to this Act and the regulations and to any other enactment, within the discretion of the Tribunal;
(b) the proceeding shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and a proper consideration of the matters before the Tribunal permit; and
(c) the Tribunal is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate.
……….
Types of directions
33(2A) Without limiting the operation of this section, a direction as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may:
(a) require any person who is a party to the proceeding to provide further information in relation to the proceeding; or
(b) require the person who made the decision to provide a statement of the grounds on which the application will be resisted at the hearing; or
(c) require any person who is a party to the proceeding to provide a statement of matters or contentions upon which reliance is intended to be placed at the hearing.
…………..
13.The Act requires the Tribunal to ensure that every party to a proceeding is given a reasonable opportunity to present their case, and to inspect and make submissions in respect of documents [section 39(1)]:
Opportunity to make submissions concerning evidence
39(1) Subject to sections 35, 36 and 36B, the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case and, in particular, to inspect any documents to which the Tribunal proposes to have regard in reaching a decision in the proceeding and to make submissions in relation to those documents.
14.Section 42A(5) of the Act permits the Tribunal to dismiss an application without proceeding to review the relevant decision if the applicant fails to proceed or comply with the Tribunal’s direction within a reasonable time:
Dismissal if applicant fails to proceed or fails to comply with Tribunal's direction
42A(5) If an applicant for a review of a decision fails within a reasonable time:
(a) to proceed with the application; or
(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.
15.Where a proceeding is dismissed under the Act, the proceedings are concluded unless they are reinstated under subsections 42A(9) or (10):
Dismissed application taken to be concluded
42A(6) If, under this Act, the Tribunal dismisses an application or an application is dismissed on its behalf, the proceeding to which the application relates, unless it is reinstated under subsection (9) or (10), is taken to be concluded.
16.The Tribunal may under subsections 42A(9) or (10) reinstate an application if it considers it appropriate to do so or if it appears the Tribunal that it has been dismissed in error.
contentions of the respondent in support of dismissal
17.The applicants have not complied with the Relevant Directions of the Tribunal made on 26 August 2009 (see below as to the details of the failure to comply).
18.The applicants have already had a reasonable time to remedy the non-compliance.
19.The applicants have a history of non-compliance with the directions of the Tribunal and they and their solicitor have repeatedly been made aware by the Tribunal that their continued failure to comply with its directions was likely to result in a dismissal of the applications.
20.The effect of the non-compliance of the applicants with the directions is that a hearing of the substantive issues in dispute on the basis of the documents which have been filed by the applicants would severely impede both the ability of the Tribunal to review the issues in dispute and the ability of the respondent to prepare for, and respond to, matters arising at the hearing. The non-compliance is also likely to radically extend the length of a hearing.
Applicants’ Contentions
21.Applicants contend that they have complied with the Relevant Directions.
22.Applicants assert in their written submissions that “this application has proceeded on the basis, during the respondent’s oral arguments to the Tribunal that the respondent believes that the applicants have not sufficiently complied with the directions”.
23.Although not expressly stated by the applicants, it is implicit in their submissions that they are in fact asserting that they have sufficiently complied with the Relevant Directions.
24.Further, the applicants assert that the prejudice which the applicants will suffer if the applications are dismissed outweighs any prejudice suffered by the respondent by proceeding to a review on the basis of the documents which have been put before the Tribunal.
25.The applicants’ submissions do not challenge specific points made in the evidence and submissions of the respondent as to the elements of their non-compliance with the Relevant Directions. Nor do they attempt any point by point response. The submissions merely contend that the applicants have complied with the Relevant Directions.
26.The respondent’s submissions set out (at paragraph 54) the effect of the non-compliance on any substantive hearing. The applicants’ submissions do not substantively address these issues.
27.The respondent’s submissions also set out (at paragraphs 68-79) the prejudice to the respondent arising from the applicants’ non-compliance with the Relevant Directions. The applicants’ submissions do not substantively address these issues.
Tribunal’s Findings
whether the applicants have complied with the directions of the tribunal
Dismissal – General Principles – Legislation and Case Law
28.Section 42A empowers the Tribunal to dismiss an application “without proceeding to review the decision" and each of the subparagraphs has its own precondition or "trigger" which must be satisfied.
29.The pre-condition to any operation of sub-paragraphs 42A(5)(a) or (b) is a failure "within a reasonable time" to do either of the things specified in sub-paragraphs (a) or (b).
30.After the lapse of that reasonable time and if there has been a continuing failure to proceed with the application or "to comply with a direction by the Tribunal” then, and only then, the application may be dismissed without proceeding to review the decision. In an appeal against the dismissal of an application by the Tribunal, Justice Burchett of the federal Court in Guse v Comcare (1997) 49 ALD 288 considered the power of the Tribunal to dismiss an application under section 42A(5) for non-compliance with a direction. The decision of Burchett J was appealed by Guse in what the Full Court described as “unusual” and “misconceived” as it sought to appeal against the decision of Burchett J which had allowed Guse’s earlier appeal. The Full Court concluded that there was no error in the decision of Burchett J [Guse v Comcare (1997) FCA 1406].
31.Burchett J at p.291 clarifies the requirement as follows:
“The very nature of the discretion seems to me to demand that the Tribunal consider, after the default has occurred, whether in the circumstances then obtaining, "a reasonable time" has elapsed and whether the 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…..
Furthermore, s 42A(5)(b) cannot, consistently with the observance of the principle of natural justice, be implemented upon an ex parte statement that an applicant has not complied with a direction, without giving the applicant any opportunity to explain, or advance reasons why the matter should nevertheless proceed, It stands to reason that, whatever the merits of Mr Guse’s objections to the direction in the first place, some supervening circumstance might have occurred to justify, or at least palliate, the eventual non-compliance…..”
32.The facts in Guse were very different to those in the present applications where the applicants conduct enterprises with significant business interests and in which they have at all relevant times been represented by solicitors. In that case Mr Guse, a pianist, sought compensation for a whiplash injury [at page 289]:
Apart from the irregularity of the summons, Mr Guse relied on arguments about the relevance of the documents, which were simply wrong. Unfortunately, although at times he had legal advice, at other times Mr Guse appeared for himself. His intelligence and articulateness do not compensate for lack of understanding of the legal issues involved.
33.Clearly the power with respect to sub-section (5)(b) is a failure within a reasonable time to comply with a "direction" of the Tribunal. Section 33(2) of the Act defines a direction as meaning " a direction as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal ":
34.If, for any reason a proceeding is dismissed under section 42A(I), (2), (4) or (5)(a) or (b) then the proceeding is "concluded" by section 42A(6).
35.The effect of an order under section 42A(5) was considered by Deputy President Wright of the Tribunal in Karakus v Comcare [2001] AATA 588 at paragraph 7 in the context of an application for reinstatement under section 42A(10):
“7. In Guse, Burchett J plainly expressly the view that s.42A(5)(b) of the Act does not contemplate the automatic dismissal of a defaulting party's substantive application without first giving that party an opportunity to explain the apparent delinquency. Although it was strongly urged upon me by counsel for the respondent that Guse was either wrongly decided or distinguishable from the present case, I have no need to deal with either of these questions, except to say that in my respectful opinion, it can scarcely be doubted that a default order effectively robbing an applicant of the opportunity to test the merits of a regularly instituted proceeding seeking substantial compensation or other relief, should not be made without due notice of such proposed termination being given to relevant parties..”
36.A similar view on the requirement that the Tribunal give notice to the applicant prior to dismissing proceedings was taken by Dowsett J in Katterns v Comcare [2002] FCA 1366 also in the context of an application for reinstatement under s42A(10) following dismissal under section 42A(5) for failing to comply with directions [and followed by Deputy President Forgie in Wilson and Commissioner of Taxation [2007] AATA 1721]:
37.In the present applications the Tribunal is of the view that every requirement of procedural fairness has been followed. The applicants have had every opportunity to remedy the non-compliance, they have been granted more than a reasonable time including numerous extensions of time to do so, and have also been granted an opportunity to provide evidence in affidavit form as to why the applications should not be dismissed.
38.Whether the Tribunal should dismiss the applications under section 42A must be determined on the facts and circumstances relevant to these proceedings.
39.The Tribunal is mindful that dismissal for failure to comply with a direction denies applicants a hearing on the merits in proceedings and it has the effect that the debt to the Commissioner becomes final and recoverable. This means that the power should be exercised sparingly. This is made clear by the decision of Burchett J in Guse at 291 where specifically in relation to section 42A(5)(b) his Honour said:
“This is plainly a valuable discretionary power. But paragraph (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.
40.For the reasons which follow the Tribunal finds that the applicants have not complied with the Relevant Directions within a reasonable time and that the circumstances make this an appropriate case for the Tribunal to exercise its discretion to dismiss.
The Relevant Directions
41.The Relevant Directions [Annexure 4 Coates affidavit] were made in accordance with the Tribunal’s view as to what was necessary for the Tribunal to be able to make a “proper consideration” of the matters before it. This was done after consideration of the history of the applications and after hearing submissions by both parties.
42.A summary of the requirements of the Relevant Directions is set out in Coates’ Affidavit at paragraph 8(h)(ii):
42.1.a single set of documents be filed for each applicant;
42.2.the documents be arranged in groups and sub-groups and each of the groups be numbered and described;
42.3.each of the documents be numbered, paginated and arranged in chronological order within the groups;
42.4.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.
43.The Chronology above demonstrates that well prior to the Relevant Directions the issue of the filing of the evidence on which the applicants propose to rely at the hearing, including any witness statements, had previously been the subject of numerous directions hearings and directions, as well as a previous Dismissal Hearing on 29 October 2008.
44.The applicants had twice previously filed the applicants’ documents in a manner which did not allow the Tribunal or the respondent to properly review or respond to the material. Each of those versions of the documents was later uplifted at the direction of the Tribunal:
44.1.on 17 November 2008 the applicants filed 63 files of documents;
44.2.on 27 March 2009 60 files of documents were filed by the applicants’.
45.Documents (the Relevant Documents) purporting to comply with the Relevant Directions [77 files] were subsequently filed in December 2009 and January 2010 [Coates affidavit paragraph 17]. The numbering on the applicants’ files of documents indicates that LVR served on the Respondent 60 files and CZ 27 files. However a detailed reading of paragraph 4 of Schokker’s LVR 23 December 2009 witness statement and a review of the numbered files served on the respondent seems to show that for undisclosed reasons LVR files 27, 28, 30, 31 and 32 were not provided to the respondent. The position is a little clearer in paragraph 4 of Schokker’s 21 January 2010 CZ witness statement which states at paragraphs 4.1.8 and 4.1.10 that files 16 and 18-21 were not provided to the respondent. The basis for using a numbering system for the files to be served on the respondent which was not consecutive has not been explained and the effect thereof is to further confuse an already confused situation.
46.Prior to the filing of the Relevant Documents, the applicants had also filed:
46.1.1 witness statements of Hank Schokker and 2 witness statements of Daniel Romano their solicitor [listed at paragraph 4 Mancini affidavit of 31 May 2010];
46.2.2 witness statements of Allen Caratti [listed at attachment HBS2 to Schokker witness statement 3 May 2010].
47.Several of the prior Schokker witness statements had very extensive attachments, but all of the attachments were uplifted from the respondent by the applicants prior to filing the Relevant Documents in December 2009 and January 2010 in purported compliance with the Relevant Directions.
48.The chronology above and Coates’ affidavit makes very clear the extensive detail provided by the respondent to the applicants in writing on several occasions as to why the documents in the form in which they were filed in November 2008 and March 2009 were not able to be reviewed and the effect that would have on a future hearing [see for example Coates’ affidavit paragraph 8(h)].
The Relevant Documents and the Relevant Witness Statements
49.At paragraphs 18-19 of her affidavit Ms Coates briefly particularises her view that the Relevant Documents were not filed in accordance with the Relevant Directions. At Annexure 7 to her affidavit is a letter dated 10 February 2010 from the respondent to the applicants’ solicitor which sets out in more detail the bases on which the respondent contends the Relevant Documents have not been filed in accordance with the Relevant Directions:
49.1.there was no “Master Index” as required in the Tribunal’s directions which identified which witness statements would be relied on at the hearing;
49.2.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;
49.3.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;
49.4.the documents were not numbered and the documents were not arranged in groups in accordance with the Relevant Directions;
50.The affidavit of 31 May 2010 of Mr Mancini refers to and reviews the Schokker witness statement of 3 May 2010 in respect of the applications of both applicants. Mr Mancini further sets out the basis for the respondent’s contention that the applicants have not complied with the Relevant Directions. Mr Schokker purports to attach a “Master Index” at attachment HBS2 in the form required by the Tribunal and set out at paragraph 4 of the Relevant Directions. Paragraph 4(b) of the Relevant Directions requires each witness to identify from the list of documents [required by paragraph 2(a) of the Directions] the particular documents or groups of documents they will rely on by reference to the relevant document numbers. Paragraph 2(a) requires the documents relied on to be numbered, paginated, described and arranged in groups according to listed categories. The categories relate to the categories of claims made by the applicants in their objections/amended objections.
51.At paragraphs 13-23 of his affidavit Mr Mancini particularises why HBS2 does not comply with the Relevant Directions requiring a Master Index:
51.1.HBS2 purports to rely on annexures to witness statements which have been uplifted and not refiled;
51.2.there is no list of documents and the documents filed are not numbered;
51.3.the documents or groups of documents to be relied on by each witness are not identified, the list merely says all documents will be relied on by Mr Schokker;
51.4.the documents are not filed in the groups specified in the Relevant Directions;
51.5.the documents include duplicated and irrelevant material;
51.6.the documents are not consistently in chronological order and not all are paginated;
51.7.contrary to the assertions of Mr Schokker the documents are not arranged in the groups described in his 3 May witness statement [paragraph 41 Mancini affidavit].
52.The Tribunal finds that the Relevant Documents do not comply with the Relevant Directions.
53.Mr Schokker’s affidavit sworn on 13 May and filed 14 May 2010 confirmed the contents of his witness statement of 3 May 2010 and annexed an identical annexure to HBS2 [the Schokker “Master Index”] as annexure HBS2A. The Schokker “Master Index” does not refer to any witness statement or affidavit of Mr Schokker after 21 January 2010. The effect is that applicants are saying that they do not intend to rely on any of these witness statements or affidavits at a substantive hearing.
54.Despite the [re]filing of the applicants’ documents [for the third time] in December 2009/ January 2010 and the filing of the Schokker “Master Index” the respondent and the Tribunal are in no better position than the first time the documents were filed to know which documents will be relied on by each witness in each witness statement in relation to each issue.
55.This is best illustrated by way of an example using the applicant LVR. A witness statement of Schokker on 23 December 2009 was filed in support of this application:
55.1.paragraph 2(b) of the Relevant Directions requires the applicant to provide a Master Index which, in respect of each witness statement, lists every document or group of documents on which the witness intends to rely in respect of the claims in its amended objection relating to:
“Net amounts in Business Activity Statements [amended objection:…LVR second paragraph] - the applicant’s calculations of each item in each relevant BAS”.
55.2.The Schokker “Master Index” lists the witness statement of Mr Schokker dated 23 December 2009 and states that in respect of “all paragraphs” of that witness statement Mr Schokker will rely on “all documents” in files 1-26, 29, and files 33-60 [which is the whole of every one of the 54 files of documents for LVR].
55.3.The effect of this assertion in the Schokker “Master Index” is that in respect of that witness statement Mr Schokker will rely on all the filed documents in respect of each and every paragraph contained in his statement. This is an unacceptable proposition.
Effect of non-compliance on substantive hearing
56.The Tribunal finds that, as contended by the respondent, the effect of the applicants’ non-compliance with the Relevant Directions o is that a proper review at a substantive hearing is made extremely difficult, or in some cases impossible, because of the manner of filing the documents. This, coupled with the absence of a Master Index which complies with the Relevant Directions also means that the non-compliance will radically extend the length of any hearing.
57.The Tribunal also notes that the audits by the respondent showed that the applicants had largely ignored their income tax and GST obligations over a number of years. The payment of the substantial debt to the revenue, which already dates back as far as 2001, is further delayed because of the manner in which the applicants have responded to the directions of the Tribunal including the Relevant Directions.
Procedural Fairness
The Tribunal notes that:
58.1The applicants have at all times been represented by solicitors. The applicants and their solicitors have been well aware of the Tribunal’s power to dismiss the applications without proceeding to a hearing if they do not comply with the directions of the Tribunal within a reasonable time.
58.2The Chronology demonstrates that the first Dismissal Hearing in these applications was held on 28 August 2008. The respondent did not press for dismissal on that occasion.
58.3The “Notes to Direction” at the end of every Direction made by the Tribunal in these applications, including the Relevant Directions, have put the applicants on notice that:
“The Tribunal can dismiss an application if an applicant fails within a reasonable time to comply with a direction made by the Tribunal. This power is set out in section 42A(5)(b) of the Administrative Appeals Tribunal Act 1975”.
Decision
59.The Tribunal concludes that having regard to the long history of persistent non-compliance by the applicants with the Tribunal's directions (as summarised above) and the continuing non-compliance with the Relevant Directions, the application should be dismissed under S 42 A(5)(b) of the Act.
I certify that the 59 preceding paragraphs are a true copy of the reasons for the decision herein of Mr A Sweidan
Signed: ........sgd T Freeman.........
AssociateDate/s of Hearing 24 June 2010
Date of Final Submissions 15 July 2010
Date of Decision 30 July 2010
Counsel for the Applicant Mr D Romano
Solicitor for the Applicant Wilson & Atkinson
Counsel for the Respondent Mr S Owen-Conway QC
Solicitor for the Respondent Ms J Coates
Australian Taxation Office
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