MedAid Pty Ltd and Commissioner of Taxation (Taxation)

[2018] AATA 170

MedAid Pty Ltd and Commissioner of Taxation (Taxation) [2018] AATA 170 (12 February 2018)

Division:TAXATION & COMMERCIAL DIVISION

File Numbers:         2012/4210; 2013/0002

Re:MedAid Pty Ltd

APPLICANT

AndCommissioner of Taxation

RESPONDENT

DECISION

Tribunal:Deputy President Bernard J McCabe

Date:12 February 2018

Place:Sydney

The order made on 30 October 2017 dismissing MedAid’s proceedings should take effect on publication of these reasons. The application for joinder is refused.

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Deputy President Bernard J McCabe

CATCHWORDS

TAXPAYER COMPANY DEREGISTERED – joinder application to continue proceedings – person whose interests are affected –interests as a creditor – indirect interests in a company – power to determine where interests affected

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) – ss 30, 30(1), 30(1A), 31

Income Tax Assessment Act 1936 (Cth)

Taxation Administration Act 1953 (Cth) – ss 14ZZ, 14ZZD

CASES

Macaura v Northern Assurance Co Ltd [1925] AC 619

REASONS FOR DECISION

Deputy President Bernard J McCabe

12 February 2018

INTRODUCTION

1. These reasons address an application made by Mr Stephen Arnold to be joined as a party to review proceedings commenced by MedAid Pty Ltd. I have decided Mr Arnold’s application should be rejected.

   The proceedings commenced by MedAid and the application for joinder

2. MedAid commenced two separate proceedings in the Tribunal on 19 September 2012 and 2 January 2013 seeking a review of objection decisions made by the Commissioner of Taxation in relation to MedAid’s affairs. MedAid was subsequently deregistered as a company on 2 August 2015. At a hearing on 30 October 2017, the Commissioner asked that the Tribunal proceedings be dismissed because the taxpayer had ceased to exist. Mr Arnold purported to represent MedAid at that hearing. In written reasons dated 13 November 2017, I explained I was satisfied MedAid’s proceedings should be dismissed. However, I agreed to consider whether Mr Arnold should be joined as a party to the proceedings (and thereafter carry on the proceedings, effectively replacing MedAid) on the basis that his interests were affected by the decision under review within the meaning of s 30 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act).

3. Both Mr Arnold and the Commissioner filed written submissions about the joinder issue. The question of joinder was considered at a hearing on 2 February 2018.

   The parties to the proceeding and the power of joinder

4. Section 30(1) of the AAT Act says the parties to proceedings include:

   (1)…

   (a)any person who, being entitled to do so, has duly applied to the Tribunal for a review of the decision;

   (b)the person who made the decision;

   (c)if the Attorney-General intervenes in the proceeding under section 30A – the Attorney-General; and

   (d)any other person who has been made a party to the proceeding by the Tribunal on application by the person in accordance with subsection (1A).

5. There is no doubt MedAid is properly a party to the proceeding because it was entitled to apply for a review of the objection decision. That entitlement arises out of s 14ZZ of the Taxation Administration Act 1953 (Cth)(the TAA) which says a person who is dissatisfied with the Commissioner’s reviewable objection decision may make an application to the Tribunal or the Federal Court for review. Elsewhere in the taxation legislation, it is made clear that the entitlement to object – and thus the entitlement to seek a review – is limited to the taxpayer whose affairs are the subject of the objection decision.

6. Mr Arnold wants to be joined as a party to the proceedings pursuant to s 30(1A) of the AAT Act. But s 14ZZD of the TAA modifies the wording of s 30(1A) in tax applications. For present purposes, s 30(1A) as modified by the TAA reads:

   If an application has been made by a person to the Tribunal for the review of a reviewable objection decision or an extension of time refusal decision:

   (a)any other person whose interests are affected by the decision may apply, in writing, to the Tribunal to be made a party to the proceeding; and

   (b)the Tribunal may, in its discretion, by order, if it is satisfied that the person making the application consents to the order, make that person a party to the proceeding.

7. The Commissioner says Mr Arnold’s application for joinder must fail because (a) his interests are not affected by the decision in the sense intended by the legislation; and (b) the applicant cannot obtain the consent from MedAid that is required pursuant to (the modified) s 30(1A)(b). For good measure, the Commissioner adds I should not exercise the discretion in Mr Arnold’s favour even if I accept I have the power to make the orders he seeks.

   Are Mr Arnold’s interests affected by the decision under review?

8. Section 31 of the AAT Act gives the Tribunal the power to determine whether somebody’s interests are affected by a particular decision. Mr Arnold’s interests are essentially economic. He says those interests arise out of the fact he is a creditor of MedAid, and a member.

9. Mr Arnold claims he is a creditor of MedAid after having done a good deal of work for the company. He says he has not been paid for that work. He worries that he will not be able to recover his debt if the Commissioner’s objection decision is not contested. Mr Walsh, who appeared for the Commissioner, pointed out the invoice recording the amount owing in respect of services rendered is dated January 2018. The Commissioner doubts whether the debt is real. He says the documents are self-serving, and that I should disregard them.

10. Even if I accept the debt is real, I am not satisfied the economic interest of a creditor in Mr Arnold’s position is the sort of interest that was sufficiently distinguishable from the interests of other individuals for the purposes of s 30(1A)(a). Companies routinely have creditors; larger companies might have tens of thousands of them. I am not satisfied the interest of a mere creditor would rise to the level of an interest that would be recognised for the purposes of s 30(1A)(a). I would add there is some doubt over the integrity of Mr Arnold’s argument that he fears not being paid if the objection decision stands. The company has been deregistered and Mr Arnold has already failed in an attempt to have the Federal Court order that the company’s registration be restored. The company will not be in a position to pay any of its debts if it remains deregistered regardless of what happens to the objection decisions.

11. Mr Arnold also claims to have an interest in his capacity as a member. There is some conflict in the evidence on this point. It appears Mr Arnold did hold 100 shares in the company at some point, albeit the shares were not held beneficially. Mr Walsh pointed out the company extract provided in evidence suggests those shares were conveyed to another company in which Mr Arnold is a member. The other company is the holding company of MedAid. Mr Arnold says that, in either event, he has at least an indirect interest in MedAid, and thus an interest that is affected by the decision.

12. I am not satisfied the interests flowing from membership in a company in the present circumstances would rise to the level where an order could be made under s 30(1A). Companies may have many members. Those members have an entirely separate existence from the company. It has long been acknowledged that members do not have any interest in the property of the company: see Macaura v Northern Assurance Co Ltd [1925] AC 619. The existence of a separate legal entity means members are insulated against liability for the company’s obligations and misdeeds. By design, a member’s interest in any decision affecting the company is limited. That interest is even more remote when the member does not hold the shares beneficially, or merely holds shares in a holding company. At worst, a member stands to lose the value of his or her shares, and to miss out on any distribution that would occur upon liquidation.

13. I am not satisfied Mr Arnold’s interests are affected by the decision in the relevant sense.

    Does Mr Arnold have the consent of the taxpayer?

14. Section 30(1A) of the AAT Act as amended by s 14ZZD of the TAA is drafted inelegantly. At first glance, there must be some doubt as to whose consent is required if Mr Arnold is to be joined to the proceedings. Section 30(1A)(b) uses the word ‘person’ confusingly. Does it refer to the person who brought the substantive application for review (i.e. the taxpayer) or the person who has applied to be joined to those proceedings? That confusion resolves if one has regard to the legislative scheme which surrounds the taxation appeals process. Mr Walsh pointed out the various provisions in the TAA and the Income Tax Assessment Act 1936 (Cth) which describe the objection process all refer to ‘a person’ when they mean ‘the taxpayer’. The reference in s 30(1A)(b) to a ‘person’ giving consent must be understood in that context. That interpretation is consistent with the legislative policy which suggests the parliament intended taxpayers should be afforded more privacy in relation to their taxation affairs than other litigants might enjoy before the Tribunal. That preference for enhanced privacy in tax matters is consistent with the notion the taxpayer would effectively have a right of veto over the joinder of other parties.

15. The taxpayer no longer exists because it has been deregistered. It is legally dead. It cannot give its consent to the joinder in those circumstances. That means Mr Arnold is unable to satisfy the criterion in s 30(1A)(b). His joinder application must fail.

    CONCLUSION

16. The power to order that Mr Arnold be joined to these proceedings is not available. There is no point discussing how the discretion would be exercised if, hypothetically, that power was available to me in the circumstances.

17. The order made on 30 October 2017 dismissing MedAid’s proceedings should take effect on publication of these reasons. The application for joinder is refused.

I certify that the preceding 17 (seventeen) paragraphs are a true copy of the reasons for the decision herein of Deputy President Bernard J McCabe

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Associate

Dated: 12 February 2018

Date of hearing:	12 February 2018
Advocate for the Applicant:	Stephen Arnold
Solicitors for the Respondent:	Australian Government Solicitor
Other Party:	By phone