Nathan Carey and Commissioner of Taxation - [2014] AATA 762

[2014] AATA 762

Division	GENERAL ADMINISTRATIVE DIVISION
File Number(s)	2014/4037
Re	Nathan Carey
APPLICANT
And	Commissioner of Taxation
RESPONDENT

DECISION

Tribunal	Senior Member Bernard J McCabe
Date	22 October 2014
Place	Brisbane

The application was dismissed at 4pm on 13 October 2014 pursuant to the direction of the Tribunal dated 9 October 2014.

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Senior Member Bernard J McCabe

CATCHWORDS

INCOME TAX ASSESSMENTS – Appeal against objection decision – Statement of Facts, Issues and Contentions – Repeated non-compliance on part of taxpayer – Failure to conform to General Practice Direction – Effect of ‘guillotine’ order – Application dismissed.

LEGISLATION

Administrative Appeals Tribunal Act 1975 (Cth) ss 2A; 42A(5)(a); 42A(5)(b)

Taxation Administration Act 1953 (Cth) s 14ZZK(b)

SECONDARY MATERIALS

Administrative Appeals Tribunal, General Practice Direction (issued 26 March 2007) cl 2.2

REASONS FOR DECISION

Senior Member Bernard J McCabe

22 October 2014

The taxpayer claimed deductions in respect of travel expenses that he says he incurred in the course of earning assessable income in the financial years ending 30 June 2009, 30 June 2010 and 30 June 2011. The Commissioner rejected the claims and the taxpayer asked the Tribunal to reconsider the objection decision dated 27 June 2014.
The proceedings were commenced in the Tribunal on 1 August 2014.

The taxpayer was represented by a tax agent, Mr Watts of Taxation Guru Pty Ltd.
On 29 August 2014, Deputy President Hack SC made directions in relation to the proceedings. Clause (1) of those directions was in the following terms:
The applicant must lodge and serve any witness statements and other evidence on which he intends to rely at the hearing together with a Statement of Facts, Issues and Contentions by 26 September 2014[.]
The taxpayer did not comply with that direction. Indeed, he had still not complied with the direction when the non-compliance hearing was held on 9 October 2014. Mr Watts, who appeared by telephone for the taxpayer, said he had been overseas. He also said he wanted the matter transferred to the Sydney registry.
After admonishing Mr Watts for his failure to comply with the direction of

29 August 2014 and for his discourtesy in failing to advise the Tribunal and the Commissioner’s representatives of any challenges he faced, I agreed the matter should not be dismissed. I set aside the direction of 29 August 2014 and put in place a new direction that included a revised timetable for the future conduct of the proceedings. Importantly for present purposes, I included what is popularly known as a guillotine order in connection with the requirement that the taxpayer file a statement of facts, issues and contentions together with any witness statements and other material the taxpayer intended to rely upon at the hearing. The direction of 9 October 2014 incorporating the guillotine order read as follows (at clause 2):
This proceeding will stand dismissed unless, on or before 4pm on
13 October 2014, or such further time as the Tribunal may, before that time, allow, the applicant files with the Tribunal and serves on the respondent a Statement of Facts, Issues and Contentions, together with any witness statements and other evidence on which he intends to rely at the hearing[.]
I told Mr Watts at the non-compliance hearing on 9 October 2014 that the proceedings would be automatically dismissed if he failed to comply with

clause 2 of the direction. He said he understood and agreed he would file the material by 4pm on 13 October 2014.
Mr Watts did not file any witness statements by the deadline imposed in the direction of 9 October 2014. The one document he did file was titled:
“Applicants’ written submissions pursuant to the direction of the Administrative Appeals Tribunal of 29 August 2014 by Deputy President P E Hack SC”.
The document did not refer to my direction of 9 October 2014.
The Commissioner says the document that was lodged and served does not comply with the direction to supply a statement of facts, issues and contentions. He also criticised the absence of witness statements and other material – and the suggestion in the applicant’s “submissions” document that the taxpayer reserves the right to produce other material. The Commissioner says all that amounts to non-compliance which justifies the proceedings being dismissed pursuant to

s 42A(5)(a) or (b) of the Administrative Appeals Tribunal Act 1975 (Cth)

(“the AAT Act”).
The matter was listed for a third hearing by telephone on 21 October 2014 to test the respondent’s proposition and to allow the applicant an opportunity to show cause as to why the application should not stand automatically dismissed pursuant to my direction of 9 October 2014.
I will deal firstly with the question of whether the taxpayer has failed to comply with my direction of 9 October 2014 to provide a statement of facts, issues and contentions together with any witness statements and other material to be relied upon at the hearing.
The taxpayer was not obliged to lodge and serve witness statements and other material unless he intended to rely upon them at the hearing. It follows his failure to lodge witness statements and other material does not mean he has failed to comply with the direction of 9 October 2014. A taxpayer does not have to lead evidence in support of his case, although it is hard to see the sense in that strategy given the requirements in s 14ZZK(b) of the Taxation Administration Act 1953 (Cth). Perhaps the taxpayer assumed he could persuade the Tribunal to give leave to introduce further evidence at the hearing if it became apparent further evidence was required.
The question whether the taxpayer’s “submissions” document complied with the direction of 9 October 2014 is more difficult. The statement of facts, issues and contentions (or statement of facts and contentions) is the equivalent of a pleading document in the courts. It is designed to assist the other party and the Tribunal to understand what is being argued. That objective assists the review process in two ways in particular: it ensures each party is aware of the case put against it, which is an essential component of the rules of procedural fairness; and it makes the entire dispute resolution process faster and more efficient because the issues in dispute can be narrowed and clarified at an early point.
The Tribunal’s expectations in relation to the document are set out in the

General Practice Direction issued by the Tribunal on 26 March 2007 at clause 2.2. The General Practice Direction says a statement of facts and contentions:
…must clearly and concisely set out the facts upon which the party relies and any contentions to be drawn from those facts, should include references to relevant legislation and case law and should not be just a repetition of the statement of issues.
The statement of facts and contentions may be particularly important in tax cases. Where an applicant seeks review of an objection decision, s 14ZZK(b) of the Taxation Administration Act 1953 (Cth) effectively requires that the applicant establish a positive case. It is not enough that the applicant demonstrate the impugned assessment is excessive. He must also prove what the assessment should have been. It follows the applicant may need to go further than other applicants before the Tribunal in articulating his case in the statement of facts and contentions.
The “submissions” document filed on behalf of the taxpayer does not answer the description in clause 2.2 of the General Practice Direction. Beyond a few bald assertions, it does not clearly and concisely set out the relevant facts.

The contentions are unclear: the taxpayer’s agent makes a number of allegations about the Commissioner’s supposed failure to comply with the model litigant rules, but he does not clearly explain his case. In particular, he does not explain what work-related travel was undertaken or how any payments he received were calculated, or what precisely those payments were for – he merely annexed a spreadsheet with a series of entries. These concerns were all clearly raised in the objection decision dated 27 June 2014, and they should have been dealt with in the statement of facts and contentions. Mr Watts certainly does not refer to the relevant legislation and the case law. He does mention several Taxation Determinations but there is no reference to s 8-1 of the Income Tax Assessment Act 1997 (Cth) or any other relevant provisions of the taxation law.

Does any of that matter in light of the Tribunal’s statutory objective of “providing a mechanism of review that is fair, just, economical, informal and quick”

(see s 2A of the AAT Act)? Should litigants in proceedings before the Tribunal – which is not bound by the rules of evidence – be required to produce a statement of facts and contentions that conforms precisely to the definition (such as it is) in the General Practice Direction?

I have already explained how a properly articulated statement of facts, issues and contentions might assist the Tribunal to achieve speed and economy and fairness. But what of informality? Does that objective demand a more relaxed approach towards the drafting of Tribunal documents and complying with Tribunal directions?

The reference to providing an “informal” mechanism of review in s 2A of the AAT Act does not require the Tribunal to abandon form and dispense with order. It requires the Tribunal to adapt its procedures to the wide range of cases and parties that come before it. The Tribunal must work out what is required to undertake its review in each case and adapt its procedures accordingly. In some cases, the procedures will be relatively relaxed because that is what the situation demands if the Tribunal is to discharge its statutory function. Sometimes that more relaxed approach is embodied in practice directions, but it is also apparent in the way in which the Tribunal deals with unrepresented applicants in the ordinary course. Tribunal members do not let technical questions or form get in the way of doing justice. But the fact some applicants are afforded significant latitude as they make use of the Tribunal’s processes does not mean every party is entitled to take liberties.

The taxpayer in this case is represented by a professional tax agent. Mr Watts, the agent, says he has appeared before the Tribunal in the past. The Tribunal is entitled to expect more of a professional representative when it comes to meeting deadlines and complying with directions. (I should say the Tribunal is also entitled to expect more courteous behaviour from professional persons who appear before it. Mr Watts accused his opponent at the hearing on

21 October 2014 of lying when there was no basis for making such a serious, scandalous allegation.)

The taxpayer did not comply with the direction of 29 August 2014. Mr Watts failed to ask for an extension in a timely way (or at all) once it became clear he would not be able to comply, which necessitated a non-compliance hearing.

That led to wasted resources and delay. In the circumstances, I decided on

9 October 2014 it was appropriate to impose a greater level of formality on the taxpayer. I decided a stricter approach to the conduct of the proceedings was necessary if the proceedings were to remain on track. All that was explained to the taxpayer’s representative at the non-compliance hearing on 9 October 2014.

Guillotine orders are used sparingly precisely because they are inflexible and carry with them the possibility of unfairness. But they have a role to play.

The order was used in this case as a measured response to the behaviour of the taxpayer’s representative.

I am satisfied the “submissions’ document filed and served by the taxpayer does not comply with the requirements of a statement of facts and contentions – which are, at a minimum, to explain the case which is put against the other party so he can respond. It follows the taxpayer has failed to comply with the direction of

9 October 2014, and the proceedings were dismissed as of 4pm on 13 October 2014 as a consequence of the guillotine order.

If I were in any doubt as to the efficacy of a guillotine order, I would have dismissed the proceedings in any event under s 42A(5)(b) of the AAT Act in light of the taxpayer’s failure to comply with the directions of 29 August 2014 and

9 October 2014. While that power is discretionary, I would exercise the discretion in light of the taxpayer’s persistent failure to comply with the Tribunal’s directions without reasonable explanation.

Given my conclusions, I do not need to address the Commissioner’s other argument in relation to s 42A(5)(a) of the AAT Act.

I certify that the preceding 25 (twenty -five) paragraphs are a true copy of the reasons for the decision herein of Senior Member Bernard J McCabe.

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Associate

Dated 22 October 2014

Date of hearing	21 October 2014
Advocate for the Applicant	Mr Gambhir Watts Taxation Guru Pty Ltd
Solicitors for the Respondent	Scott Turner Australian Taxation Office