Myers and Commissioner of Taxation

[2004] AATA 1337

Administrative

Appeals

Tribunal

 

DECISION AND REASONS FOR DECISION [2004] AATA 1337

ADMINISTRATIVE APPEALS TRIBUNAL

TAXATION APPEALS DIVISION            NT2001/817- 820    NT2004/158- 161                

Re: Melvyn Myers

Applicant

And:COMMISSIONER of TAXATION

Respondent

DECISION

Tribunal:      P.J. Lindsay, Senior Member

Date:             15 December 2004

Place:           Sydney

Decision:     The Tribunal orders the reinstatement of the applications in NT2001/817 - 820. The applications in NT 2004/158 -161 are dismissed.

. . . . . . . . . . . . . . . . . . . . . . . .

P. J. Lindsay, Senior Member

©        Commonwealth of Australia          (2004)

CATCHWORDS

TAXATION – application for review of objection decision – application withdrawn by applicant and dismissed by Tribunal – application for re-instatement – alternative application for extension of time to make an application for review – application for review dismissed in error – discretion to reinstate exercised - application reinstated

Taxation Administration Act 1953 s.14ZZC

Administrative Appeals Tribunal Act 1975 ss.29, 42A

AAT Case 523 (2002) 50 ATR 1,038

Brehoi v Minister for Immigration and Multicultural Affairs (1999) 58 ALD 385

Goldie v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 121 FCR 383

Lower v Comcare (2002) 36 AAR 220

Re Oates and Secretary, Department of Social Security (1994) 37 ALD 241

AAT Case 12,330 (1997-1998) 37 ATR 1,120

Reid v London & North Staffordshire Fire Insurance Co (1883) 49 LT 468

Re Mulheron and Australian Telecommunications Corporation (1991) 23 ALD 309

Brown v Commissioner of Taxation 99 ATC 4,516

Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344

Commissioner of Taxation v Brown (1999) 42 ATR 672  

REASONS FOR DECISION

P.J. Lindsay, Senior Member

1.      On 9 November 2001 Melvyn Myers (the Applicant) filed an application for review by the Tribunal of an objection decision of the Commissioner of Taxation dated 5 September 2001. The objections related to amended assessments for the years of income ended 30 June 1995, 1996, 1997 and 1998 wherein, among other things, deductions for certain expenses and carried forward losses were disallowed due to deficiencies in substantiation. The application was listed for hearing on 10 June 2003 but on that day, the Applicant’s solicitor sought an adjournment because the Applicant was unable to attend due to a dental problem. The matter was adjourned and at a subsequent callover, the parties agreed to a hearing on 4 September 2003.

background

2.      Mr Myers, a self-employed accountant, faxed a letter (exhibit A1) addressed to the Tribunal and dated 3 September 2003, to explain why he was withdrawing his application. It appears that the letter was received by the registry around 5.18 pm on 3 September 2003. Later on 3 September 2003 another copy of the letter was faxed to the Tribunal by the Australian Taxation Office. 

3.      Mr Myers’ letter reads as follows:

Dear Registrar,

I refer to my telephone discussion with one of your staff on Monday 1 September 2003 wherein I confirmed that I would be proceeding with my appeal on Thursday 4 September 2003.

Certain circumstances, which I am unable to disclose at this stage, have recently arisen that could seriously prejudice some clients should this matter proceed tomorrow. Naturally, I am not prepared to expose any client to suffer prejudice as a consequence of proceedings related to me.

In addition, as a consequence of the above circumstances, I have suffered a severe loss of time and, indeed, financially, due to the time that I have had to devote to such matters. Added to some personal difficulties that I have endured for the last few months, which I am continuing to endure, I would not be doing justice to myself or my clients by continuing with my proceedings.

I have tried, through my solicitor, to have the ATO understand that I operated two offices with all the necessary services … which, during a set up phase of the business, caused me to incur substantial losses due to the low income I received. …

I have produced to the ATO copies of my general ledger entries containing each transaction, with identifying cheque number, in support of each deductions yet the ATO  refuse to accept this as substantiation of my expenses. After a period of some 14 years I just do not have all these records, which the ATO insist I should have not lost or mislaid if I wanted to carry forward losses in subsequent years. …

I presently attend my mother’s bedside daily to give her company and support in hospital, where she has been for over 4 months. She has lost both her legs and her mobility is severely restricted. Whilst this has been an enormous drain on my time, and financially burdensome, I will never resile from supporting her in her present predicament. My problems with the ATO simply pale in relation to hers.

In view of the above, I must reluctantly withdraw my appeal, and now formally advise you of such discontinuance.

Should the Tribunal decide to dismiss my appeal, rather than accept this discontinuance, I shall understand such a decision – given that the Tribunal had previously granted me an adjournment due to medical conditions beyond my control.

In withdrawing my appeal, however, I trust that the solicitor of the Australian Taxation Office will, nonetheless, provide my solicitor with every assistance to have this matter resolved commercially and reasonably outside this Tribunal. In consideration for this assistance, I am prepared to meet the reasonable costs incurred by the ATO in these proceedings.

…

4.      The registry wrote to Mr Myers on 4 September 2003 informing him that his “ … request pursuant to section 42A(1A) of the Administrative Appeals Tribunal Act 1975 …” had been received and that under “ … section 42A(1B) of the AAT Act the effect of the notification is that the Tribunal has dismissed the application without proceeding to review the decision”. Subsequently, the Applicant sought to reinstate the application by relying on s.42A(9) and s.42A(10) of the AAT Act. In the alternative, he sought an extension of time to make an application for review pursuant to subsection 29(7) of the AAT Act being proceedings NT 2004/158-161.  The respondent submitted that the application for an extension of time was not competent.

applicable legislation

Section 42A

Discontinuance, dismissal, reinstatement etc. of application

…

(1A)     A person who has made an application to the Tribunal for a review of a decision may, in writing lodged with the Tribunal, at any time notify the Tribunal to the effect that the application is discontinued or withdrawn.

(1B)     If notification is so given, the Tribunal is taken to have dismissed the application without proceeding to review the decision.

5.      The provisions in s.42A referring to reinstatement of an application that are relevant to this matter as follows:

(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.

…

(8)       If the Tribunal, under subsection (2), has dismissed an application (other than an application in respect of a proceeding in which an order has been made under subsection 41(2)), the person who made the application may, within 28 days after receiving notification that the application has been dismissed, apply to the Tribunal for reinstatement of the application.

(9)       If it considers it appropriate to do so, the Tribunal may reinstate the application and give such directions as appear to it to be appropriate in the circumstances.

(10)     If it appears to the Tribunal that an application has been dismissed in error, the Tribunal may, on the application of a party to the proceeding or on its own initiative, reinstate the application and give such directions as appear to it to be appropriate in the circumstances.

Subsection 42A(2) is not relevant here because the application was not dismissed for failure on the part of the applicant or a representative to appear at the hearing.

6. Regarding the extension of time application, it should be noted that s.14ZZC of the Taxation Administration Act 1953 (the Administration Act) amends s.29 of the AAT Act as follows:

Modification of section 29 of the AAT Act

Section 29 of the AAT Act applies in relation to a reviewable objection decision as if subsections (1) to (6) (inclusive) of that section were omitted and the following subsection were substituted:

"(1) An application to the Tribunal for a review of a decision:

(a) must be in writing; and

(b) may be made in accordance with the prescribed form; and

(c) must set out a statement of the reasons for the application; and

(d) must be lodged with the Tribunal within 60 days after the person making         the application is served with notice of the decision.".

Pursuant to s.29(7) of the AAT Act, the Tribunal at its discretion may extend time for the making of an application for a review of a decision; ss.29(7) and (8) provide:

(7) The Tribunal may, upon application in writing by a person, extend the time for the making by that person of an application to the Tribunal for a review of a decision (including a decision made before the commencement of this section).

(8) The time for making an application to the Tribunal for a review of a decision may be extended under subsection (7) although that time has expired.

consideration and findings

7.      Dealing firstly with the application for reinstatement, the Applicant addressed the proper construction of s.42A(9) of the AAT Act. Mr Mendel, counsel for the Applicant, submitted that s.42A(9) is not restricted to the circumstances covered by s.42A(8) but extends to dismissal under s.42A(1B). Support for this submission was drawn from AAT Case 523 (2002) 50 ATR 1,038, where Deputy President Block decided that s.42A(9) does not have an operation independent of s.42A(8) and cited the following passage from the decision:

The word "the" before the word "application" in subsection (9) of section 42A of the Act (rather than the word "an") indicates, in my view, having regard in particular to the position of subsection (9) in the section, an intention to refer to a particular application (which can only be one to which subsection (8) refers) rather than any application; the use of the definite article is significant. If there is any doubt, that doubt is resolved by reference to the Explanatory Memorandum and the report, which preceded it. (at 1,051)

The argument then proceeded to point out that s.42A(1B) also referred to ‘the application’. Consequently, s.42A(9)’s operation was not limited to the circumstances covered by s.42A(8) but extended to a dismissal of the application under that s.42A(1B). Furthermore, the Applicant argued that s.42A(6) supported his submission that s.42A(9) can apply to dismissal under s.42A(1B), as s.42A(6) declares with some finality, that unless reinstated under ss.42A(9) or (10), proceedings are taken to have been concluded if the related application for review is dismissed.  The Respondent submitted that s.42A(9) does not apply unless s.42A(8) is engaged. The context and language of s.42A(9) demonstrates its evident purpose of conferring discretion on the Tribunal to reinstate applications for review only where the application to reinstate has been made under s.42A(8). And as Mr Myers’ application for review was taken to have been dismissed under s.42A(1B) and not s.42A(2), he is unable to apply for reinstatement under s.42A(8).

8.      Deputy President Block’s decision in AAT Case 523 traced the introduction of ss.42A(8) and (9) back to the Report of the Review of the Administrative Appeals Tribunal which examined gaps in the AAT Act concerning dismissal of applications for failure to appear. Deputy President Block followed the Full Federal Court’s judgment in Brehoi v Minister for Immigration and Multicultural Affairs (1999) 58 ALD 385 in concluding that s.42A(9) is linked exclusively to s.42A(8), given subsection (9)’s reference to ‘the application’. Since Brehoi, another Full Court judgment, Goldie v Minister for Immigration and Multicultural and Indigenous Affairs (2002) 121 FCR 383 inferentially supports the conclusion regarding the limited scope of s.42A(9) (at [24]). Applying those authorities, the Tribunal finds that the power in s.42A(9) is not available because Mr Myers’ application for review was not dismissed pursuant to s.42A(2), rather the Tribunal is taken to have dismissed the application under s.42A(1B).

9.      Can the Tribunal reinstate the application for review pursuant to s.42A(10)? That subsection was also introduced into the AAT Act in response to the Report (see Brehoi at [26]). Before exercising the discretion in s.42A(10) to reinstate an application, the Tribunal must find that the application was dismissed in error. The joint judgment of Wilcox and Downes JJ in Goldie at 388 states that the only limitations in s.42A(10) are “(i) that the Tribunal has dismissed the application; and (ii) that the act of dismissal was attended with error.”  In deciding not to follow Brehoi, an earlier decision of the Full Court that had held that the error referred to in s.42A(10) must be an administrative error, their Honours noted that the language of the provision differed from that employed in the Explanatory Memorandum circulated at the time that s.42A(10) was introduced, and said:

We do not think it is necessary, in order to enliven the Tribunal's power under s.42A(10), that the Tribunal, or a member or employee of the Tribunal, should have been at fault in relation to the dismissal. The fault may have lain elsewhere, provided it induced the error. For example, because of a mistake as to his or her instructions, a solicitor or other representative of a party might have wrongly consented to a dismissal order or filed a notice of discontinuance. No fault would attach to the Tribunal; but, if the solicitor's mistake induced the dismissal of the action, it could properly be said the application had been "dismissed in error". (at 388)

On this point Carr J agreed with the joint judgment, though supporting his opinion on broader grounds:

In my view, there is a significant degree of desirability of persons being able to rely on the ordinary meaning conveyed by the word "error". More importantly, s 42A(10) provides a mechanism of avoiding prolonging legal or other proceedings without compensating advantage. The mechanism is a relatively informal method of bringing a matter back to the Tribunal for reconsideration with a view to it being considered on the merits. It can be seen as a convenient, prompt and inexpensive means whereby errors which may have occurred in the exercise of the Tribunal's default jurisdiction can be rectified. That is, any sort of error in dismissing an application summarily, whether the error be administrative error or any other error. (at 398)

10.     It was submitted that the Tribunal was in error in treating Mr Myers’ letter of 3 September 2003 as a withdrawal of the application.  The letter set out the Applicant’s current personal circumstances as well noting the concerns he had in relation to clients whose interests he feared would be prejudiced if the hearing went ahead. Accordingly, he wrote “In view of the above, I must reluctantly withdraw my appeal, and now formally advise you of such discontinuance. Should the Tribunal decide to dismiss my appeal, rather than accept this discontinuance, I shall understand such a decision – given the Tribunal had previously granted me an adjournment due to a medical condition beyond my control.” It was submitted that instead of adjourning the hearing to enable Mr Myers to pursue his application, the Tribunal chose to dismiss it. Although it was open to the Tribunal to dismiss the application under s.42A(1B), in the Applicant’s submission it could be inferred from the content of his letter that he was not going ahead because of significant personal circumstances and therefore in the absence of demonstrable prejudice, the alternative approach of an adjournment would have been appropriate.

11.     As an additional basis for finding that the application was dismissed in error, it was submitted that Mr Myers was so overborne with the matters that he referred to in his letter of 3 September 2003, that he could not cope with the hearing at that time. Mr Myers gave evidence about a number of things that played a part in his decision to withdraw his application for review.

12.     First of all, Mr Myers described the emotional stress and drain on his time that he was experiencing from daily visits to his mother in hospital. Around the end of April 2003, his mother was admitted to hospital suffering from skin complaints, swelling of the eyes and build up of fluid under the eyes.  He said he would spend in total about 3 to 4 hours a day at the hospital with his mother and on the round trip from home to hospital.  Mr Myers explained that this was not the first time that his business as a self-employed accountant and his family life as a married man with six children, had been disrupted in such a manner. He followed a similar, daily routine in September 2002 when his mother had the second amputation surgery. As had happened on that earlier occasion, the hospital began to exert considerable pressure on him to find his mother a place in a nursing home.  This pressure culminated in a letter from Westmead Health on 22 August 2003 advising that the hospital would discharge his mother to a facility of its choice, if the family did not find her a suitable place within three weeks (exhibit A3).  As his sister worked too far away, Mr Myers had again to take on the responsibility of inspecting nursing homes and evaluating the options. This time he said the task of finding a suitable nursing home was harder than in the previous year. It was not a straightforward task given his mother’s immobility, which required special equipment and specialist staff to care for her, and her skin condition which had not resolved. In the event, his mother remained at the hospital until around the end of September 2003, before she went into an aged care facility.

13.     Mr Myers estimated that the time spent visiting his mother reduced his working week to around thirty hours, but after receiving the hospital’s letter in August 2003, that fell to around twenty hours due to visiting nursing homes and, as he put it,  “fighting with bureaucrats”. The consequent reduction in income meant he was going to represent himself at the Tribunal’s hearing in September 2003.

14.     Mr Myers gave evidence also about his apprehension in attending the Tribunal hearing set for 4 September 2003 without legal representation, which he implied he could not afford due to the constraints on his fee earning time. There was another significant stressor in appearing at the hearing. One of his major clients, Mr James Soong and group of associated companies, had been investigated by the Australian Taxation Office. Subsequently, there was an audit into Mr Myers’ taxation affairs. Mr Myers was concerned that he might be compelled to answer questions that could seriously prejudice Mr Soong who at the time was facing a committal hearing. Mr Myers said he had never appeared at the Tribunal, was unfamiliar with its procedures and had no experience in participating in hearings. Without legal representation, he felt he was in a predicament. Due to his strained mental state from the pressure of having to spend so much time visiting and caring for his mother, and dealing with the hospital’s demands, he was confused about what to do. This situation led him to withdraw. 

15.     Counsel for the Applicant submitted that the combination of the matters that were placing great stress on Mr Myers, leading him to re-order his priories, could be characterised as an error in determining a process that he ought to follow.

16.     For the Respondent it was submitted that Mr Myers’ letter of 3 September 2003 was a very clear, rational communication that used language identifiable with s.42A(1A): ‘withdraw’ and ‘discontinuance’. It was further submitted that it would have been entirely inappropriate for the Tribunal to have acted in any manner not in accordance with the applicant’s request. Contrary to what the Applicant has contended, the Tribunal did not choose to dismiss the application, it was dismissed by operation of the AAT Act. Mr Quinn, the Respondent’s counsel, submitted that there was no error vitiating the decision to dismiss. In counsel’s submission the letter of 3 September 2003 did not suggest an inability by the applicant to cope mentally with the pressures and in any event such an inability is not an error of the kind contemplated by s.42A(10). An excuse, such as a confused state of mind, volunteered in seeking relief under s.42A(10) was not embraced by the expression ‘an application has been dismissed in error’. If it were so, in the Respondent’s submission, the meaning of ‘error’ would potentially be so wide as to rob the word of its actual meaning. 

17.     The language of the Applicant’s letter of 3 September 2003 refers to formally advising of ‘discontinuance’. However, it goes on to say that should the Tribunal decide to dismiss his appeal, “ … rather than accept this discontinuance …”, he would understand such a decision by the Tribunal given that he had previously been granted an adjournment. The Applicant thereby demonstrates that he thought the Tribunal could adjourn the hearing but may at its discretion decide not to do so having regard to the events of 10 June 2003. It is considered that there remains a degree of equivocation in the Applicant’s expression, suggestive of uncertainty as to the Tribunal’s response to his letter, be it suspension or termination of his application. He has misapprehended the effect of s.42A(1B), by which the Tribunal is deemed to have dismissed an application for review upon its withdrawal. There is no role for the Tribunal to play where an application is withdrawn. It would be terminated, not suspended or adjourned. As well as this error on the Applicant’s part, there is the contribution made by the Tribunal to the final outcome as communicated in the Tribunal’s letter to him dated 4 September 2003, through not clarifying with him whether he wished to have the application automatically dismissed or whether he required some consideration to be given to the circumstances he wrote about, in effect applying for an adjournment. 

18.     There is also the Applicant’s evidence, which the Tribunal accepts, of his lack of knowledge regarding the Tribunal’s procedures that he thought could lead to him, as an unrepresented person, having to give evidence that might prejudice his client’s interests, including at the committal hearing. By deciding to “ … reluctantly withdraw my appeal ... ” he was putting the client’s interest ahead of his own, on the basis of his misapprehension regarding the scope of questions that could be put to him at the hearing which would have to be relevant to his own assessment and the objection decision. The Tribunal accepts that the Applicant’s personal circumstances in having to cope with his mother’s ill health and finding appropriate care for her in atmosphere of perceived duress, were stressors that placed him in a situation where he reluctantly re-ordered his priorities. It was a mistake on his part to write his letter of 3 September 2003 on the basis that the Tribunal could have regard to the problems he was having to face and allow him to resume his application at a later date. Applying the test in Goldie, the Tribunal finds that there has been a summary dismissal of the application in circumstances attended with error or misapprehension on the Applicant’s part and also administrative error on the part of the Tribunal through treating the applicant’s letter as notification of withdrawal. The error so described induced the dismissal of the application.

19.     Under the general law, the withdrawal of a proceeding does not generally affect the person’s right to start new proceedings against the same opponent based on the same allegations (refer to Lower v Comcare (2002) 36 AAR 220 at 223). What principles should be followed in considering whether to exercise the discretion to reinstate under s.42A(10)? In Re Oates and Secretary, Department of Social Security (1994) 37 ALD 241 the applicant had failed to appear at the hearing and in consequence the application was dismissed pursuant to s.42A(2) of the AAT Act. Deputy President Forgie considered that an application to reinstate was analogous to an application for a court to set aside a judgment entered against a party for failing to take appropriate action in the proceedings. A different approach was taken in AAT Case 12,330 (1997-1998) 37 ATR 1,120, which concerned a dismissal order that was made under s.42A(5) due to non compliance with directions. In considering whether to exercise the discretion in s.42A(10) Senior Member Block, as he then was, followed the guidelines applicable to applications for an extension of time under s.29(7) of the AAT Act. On the facts of the present application concerning as they do a withdrawal of an application, there is little similarity to a dismissal due to a party’s default. However, timeliness of the commencement of subsequent proceedings has been held to be a relevant defence in the subsequent proceedings (Reid v London & North Staffordshire Fire Insurance Co (1883) 49 LT 468, cited in Ritchie’s Supreme Court Procedure in New South Wales, Part 21 - Withdrawal and Discontinuance, rule 7 - Effect of Discontinuance). The Tribunal considers, therefore, that the guidelines in the authorities dealing with applications for extension of time to lodge an application for review (such as Re Mulheron and Australian Telecommunications Corporation (1991) 23 ALD 309) are relevant to deciding whether to exercise the discretion.

Did Mr Myers rest on his rights?

20.     Mr Myers’ letter of 3 September 2003 expressed an intention for discussions with the Australian Taxation Office for a commercial resolution of his dispute. He went so far as to offer to pay their costs of the proceedings. His evidence was that he heard nothing from them. Damien Ong, an officer from the Australian Taxation Office, gave evidence that a settlement was considered unlikely as negotiations prior to the aborted hearing in June 2003 had come to a stalemate and that he recommended that the costs not be pursued.  He said there was no contact at all with the Applicant or his solicitor at any time between 3 September 2003 and 4 March 2004 when the solicitors requested reinstatement. The tribunal notes that the Applicant said his mother went into a nursing home around the end of September 2003.  She has remained in that facility and it can be inferred that the strain of having to deal with what was referred to as the hospital’s eviction notice no longer distracted him from his business and personal affairs, including the finalisation of his tax dispute.

21.     Under cross-examination the Applicant agreed that he initiated the application for reinstatement on being served with a bankruptcy notice by the respondent on 3 February 2004. He added that he had not paid the tax in dispute because the matter was the subject of proceedings before the Tribunal. The application for review having been dismissed, this is not an entirely satisfactory explanation. On balance, despite the Applicant’s letter leaving open the prospect of future negotiations, he did not again raise the matter with the respondent until receiving the bankruptcy notice and the respondent could reasonably conclude that the negotiated settlement trail had gone cold.

Prejudice to the respondent from a reinstatement

22.     It is plain that this matter favours the Applicant. There was no evidence that the passage of time would present  evidentiary obstacles to the Respondent’s due preparation of the case. It was submitted, however, that if reinstatement is granted, as a practical matter the Respondent will be unable to recover tax amounting at 30 April 2004 to $252,183.69 and in the interim, there would be a risk of diminution of funds. In light of the following passage from the judgment of Hill J in Brown v Commissioner of Taxation 99 ATC 4,561, however, the Tribunal considers this factor as having slight relevance to the question whether the discretion to reinstate should be exercised:

Except where the effluxion of time may affect adversely the ability of the Commissioner to defend an assessment, it is hard to see what prejudice there could be to the Commissioner in a case such as the present, or indeed in like cases, other than administrative inconvenience. The Commissioner is entitled to collect tax due under an assessment whether or not there is an objection. He is obliged to collect tax in accordance with a correct assessment, that is to say, to collect the correct amount of tax, no more and no less. If an assessment is excessive it would be improper for the Commissioner to seek to collect tax payable under it. (at 4,526)

The Tribunal’s power under s.42A(10) authorises the giving of such directions as appear appropriate in the circumstances. Directions could be made that would attempt to limit any prejudice to the Respondent from the future conduct of the matter that could arise from action or inaction by an applicant, including Mr Myers.

Any wider prejudice to the public from disruption to established practices

23.     Absence of prejudice is not enough to warrant granting an extension of time (Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344) nor should it be in an application for a reinstatement. But in determining the correctness or otherwise of income tax assessments, as distinct from other areas of public administration and decision-making, it has been held that matters of public policy and interest do not intrude so far, if at all. Hill J in Brown held that the significance of this factor to taxation disputes is less than in others, stating as follows: “It would be more desirable if, under this head, the Commissioner or the Tribunal took into account against the absence of prejudice to the Commissioner, the considerable prejudice to a taxpayer who is otherwise denied a right of independent review of an assessment which he or she claims to be excessive.” (at 4,526)

The merits of the substantial application

24.     In a matter such as this, it is not appropriate to embark on a trial of the merits. The Full Federal Court in Brown, on appeal from the judgment of Hill J, has held that it is enough if the Applicant’s case, taken at its highest, is arguable (Commissioner of Taxation v Brown (1999) 42 ATR 672). The Respondent submitted that the Applicant faces an insuperable hurdle in discharging the onus of proof (s.14ZZK(b) of the Administration Act) given the gaps in the documentation required to substantiate claims for certain deductions, the fact that some of the documentation that has been produced is not in the name of the Applicant, and that he has not sufficiently explained his claim that certain income was derived not by him but by an undisclosed person.

25.     Mr Myers gave evidence that he has completed his search and has provided the Respondent with all the documents that he could locate and he is ready to proceed with an application for review of the objection decision. It was his evidence that the documents most recently produced regarding the principal deductions support his argument for an adjustment to be made to the amended assessments. There is, of course, the need to have regard to any relevant oral evidence that may be given by him or other witnesses he may wish to call at the substantive hearing, that could assist in discharging the onus. The Respondent submitted that the Applicant’s evidence at the reinstatement hearing suggests he is not to be believed  in relation to the derivation of income issue.  But it would be wrong to embark upon an assessment of the merits and to make findings about the Applicant’s credit. Whether or not the Applicant would ultimately succeed is not to be decided at this juncture.  Suffice to say he appears to have an arguable case at its highest and this consideration favours the reinstatement of the application. Again the Tribunal notes the following words of Hill J in Brown, which were not diminished in any sense by the Full Court’s judgment:

No doubt if the objection on the face of it is one which is frivolous or bound to fail as a matter of law it would be a futility to permit an extension of time to enable it to be considered. But this points to quite a low threshold. What is involved is whether the objection on its face discloses a case which is arguable, not whether having regard to other matters, including evidence which may not even be known to the taxpayer at the time of making the application, the case is one that the taxpayer will or will probably lose.  (at 4,527)

Fairness of granting a reinstatement as between the Applicant and other persons in a like position

26.     Those who have also had applications for review dismissed in error under s.42A can also apply for reinstatement. In the context of income tax, if they succeed with such application but ultimately it is decided on review that they must pay the proper amount of tax due, Mr Myers will not have received any advantage and they will not have been treated unfairly. All would have received consistent treatment. This consideration favours the exercise of the discretion.

27.     In summary, the Tribunal has taken into account the guidelines applicable to extension of time applications and found that preponderantly, these favour the exercise of the discretion. Moreover, the Tribunal considers that on balance, given the absence of prejudice to the respondent and in the interests of fairness, it is a proper case to exercise the discretion to reinstate the application to give the Applicant the opportunity for merits review of the objection decision. It is, therefore, unnecessary to consider the alternative application for an extension of time. Pursuant to s.42A(10) the Tribunal orders the reinstatement of the application in NT2001/817-820. The applications in NT2004/158-161 are dismissed. The Tribunal considers it appropriate in this matter to direct the Applicant to file and serve an updated statement of facts, issues and contentions, and witness statements (including a witness statement by Mr Myers) by all witnesses it is intended to call at the hearing, on or before 17 January 2005. The matter is to be listed for callover on 25 January 2005.

I certify that the 27 preceding paragraphs are a true copy of the reasons for the decision herein of P.J. Lindsay, Senior Member

Signed:         .....................................................................................
  Associate

Hearing  19 May 2004
Final submissions received            16 June 2004
Decision   15 December 2004
Applicant’s counsel  J Mendel 

Respondent’s counsel  R Quinn