Pickering v Deputy Commissioner of Taxation

[1999] FCA 1295

FEDERAL COURT OF AUSTRALIA

Pickering v Deputy Commissioner of Taxation [1999] FCA 1295

MELANIE A PICKERING v DEPUTY COMMISSIONER OF TAXATION
QG 155 OF 1998

JAMIESON L PICKERING v DEPUTY COMMISSIONER OF TAXATION
QG 160 OF 1998

DOWSETT J
13 SEPTEMBER 1999
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 155 OF 1998

BETWEEN:	MELANIE A PICKERING Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 160 OF 1998

BETWEEN:	JAMIESON L PICKERING Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent

JUDGE:	DOWSETT J
DATE OF ORDER:	13 SEPTEMBER 1999
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.        The applications be dismissed.

2.        The applicants’ pay the respondent’s costs of the applications.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 155 OF 1998

BETWEEN:	MELANIE A PICKERING Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 160 OF 1998

BETWEEN:	JAMIESON L PICKERING Applicant
AND:	DEPUTY COMMISSIONER OF TAXATION Respondent

JUDGE:	DOWSETT J
DATE:	13 SEPTEMBER 1999
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. I am presently entertaining two applications for judicial review of decisions by the Commissioner of Taxation declining to make determinations pursuant to subs 5(4) of the Taxation (Unpaid Company Tax) Assessment Act 1982 (the “TUCT Act”).  The circumstances out of which the applications arise appear sufficiently from reasons for judgment previously published by me in this matter on 30 September 1998.  Anybody who wishes to understand them further may do so by reference to that decision.  It is sufficient to say that the decisions in question were made and communicated to the present applicants in February 1996.  The communication was dated 2 February 1996.  No judicial challenge to the decisions was made until December of that year, when applications were made pursuant to the Judiciary Act 1903 (Cth). Those proceedings came on before Cooper J as appears from my earlier reasons. As a result of those proceedings, the present applications pursuant to the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the “ADJR Act”) were made in October, 1997.  The applicants were then out of time to make such applications.  See ADJR Act sub-par 11(3)(b)(iii).  It is common ground as I understand it that these applications ought to have been made within 28 days after 2 February 1996.  Even if one takes the view that the earlier applications under the Judiciary Act should have put the respondent on notice of the applicants’ complaints and treats the present applications as having been made in December 1996, the applicants were well out of time. 

2. The applicants apply to extend time pursuant to par 11(1)(c) of the ADJR Act.  They advance one substantial explanation of their failure to make the applications in accordance with the provisions of the Act.  It is that during 1996, they left the matter in the hands of advisers retained by their father.  It is at this stage appropriate to say a little more about the circumstances in which the decisions in question arose.  It would seem, as I have outlined in my earlier decision, that the applicants’ father entered into tax minimisation arrangements in the 1970s or 1980s involving corporate structures in which the applicants were shareholders, directors or both.  The result was that they have incurred tax liabilities pursuant to the provisions of the TUCT Act.  According to their own material, they first became aware that they had such liabilities to the Commissioner in 1988.  They were aware, early in 1995, that they were being sued for the relevant debts in the District Court of New South Wales.  At that time, they swore affidavits to justify their defences in those proceedings.  Melanie was born on 2 April 1970, and Jamieson was born on 23 May 1964 so that they were both either of age or, in Melanie's case, almost of age, throughout 1988.

3. In those circumstances, if they left their affairs in the hands of their father's advisers, they must take the consequences of that decision.  They were aware that they faced problems and as adults, could reasonably have been expected to take whatever steps were, in their respective views, best calculated to protect their interests.  I do not consider that a decision taken at that time to leave the matter in the hands of their father's legal advisers, or the decisions subsequently taken by those advisers, can justify an extension of time.  This is not a case of inadvertence.  There is no suggestion that the advisers failed to do what they considered to be appropriate.  Indeed, they took the steps which led to the decisions presently under review.  This is a case in which a deliberate decision was made to conduct the matter in a particular way.  A party should normally be held to the consequences of such a decision.

4. It is not entirely clear that the Commissioner suffered prejudice as a result of the delay in seeking to overturn his decisions, but given that it was a deliberate decision, prejudice is not as important as it might be in the case of inadvertence.  However it appears at least possible that there has been prejudice.  The Commissioner says that at some time, probably before the commencement of proceedings at the end of 1996, the relevant documentation relating to the various assessments was destroyed.  It is not clear whether this occurred after notification of the decisions.

5. There is, in any event, another basis upon which I would refuse the applications. They do not offer any substantial prospects of success. The applicants assert an entitlement to review decisions by the Commissioner denying them favourable treatment pursuant to the provisions of subs 5(4) of the TUCT Act. The only criticism of the decisions is that two of their siblings, Stephanie and Toni, approached the Commissioner in 1989 or 1990 and somehow convinced him that he should exercise his discretion pursuant to subs 5(4) in their favour. This decision was made in late 1994 or early 1995. On 23 January 1995, I infer as a result of the favourable treatment extended to Toni and Stephanie, an accountant called Huntington wrote to the Commissioner on behalf of Melanie in the following terms:-

   I refer to the notices of assessment issued for the years ended 30 June 1977, 30 June 1978, 30 June 1979 and 30 June 1980 to the above taxpayer showing an amount payable of $228,660.45 assessed under the Taxation (Unpaid Company Tax) Assessment Act 1982.

   The taxpayer's case is identical to that of Stephanie Burgess nee Pickering and Toni Cummings nee Pickering whose assessments have been amended to nil.

   It is formally requested that the same consideration now be applied to the taxpayer and that the assessment issued to her under the Taxation (Unpaid Company Tax) Assessment Act be reduced to nil.

6. A similar letter was written in the case of Jamieson.  The Commissioner replied by letter dated 1 February 1995.  The response was in two parts.  The first was as follows:-

   Reference is made to your letters dated 23 January 1995.

   In respect of your client's request for release from payment under section 265 of the Income Tax Assessment Act 1936, please ensure your client completes the enclosed application form and returns it to this office within 14 days from the date of this letter.  Your client should also supply a telephone number for contact during business hours.  Any further information which may be required should be supplied promptly when requested.  This will allow proper consideration to be given to your client's application.

7. As I understand it, the reference to s 265 relates to an alternative basis of assessment pursuant to the Income Tax Assessment Act 1936 (Cth). This is not relevant for present purposes.

8. The second part of the response was as follows:-

   In respect of your request for amendment to your client's assessments raised pursuant to the Taxation (Unpaid Company Tax) Assessment Act 1982 (hereafter referred to as the TUCT Act) for the years ended 30 June 1977 to 1980, you are advised that the time period for lodging such a request has lapsed.  However, your client is in fact applying for the tax raised under the TUCT Act to be waived under subsection 5(4) of that Act.  This request will be passed on to the appropriate section to be considered.

   In respect of your request for deferral of recovery action against your client, you are advised that such action will be delayed until your client's application for release is received in this office.  Further consideration will be given to this request upon receipt of that application.

9. On 2 February 1996, as I have said, the Commissioner wrote to Mr Huntington with respect to the TUCT Act assessments, saying:-

   Reference is made to your letter dated 23 January 1995 in which you requested an amendment to your client's vendor recoupment tax assessments for the years ended 30 June 1977, '78, '79 and '80.  You were advised by letter dated 1 February 1995 that the time period for lodging a request for amendment had lapsed but your client's request would be treated as a request for waiver under subsection 5.4 of the Taxation (Unpaid Company Tax) Assessment Act 1982.  You were further advised that this request would be dealt with by the appropriate section.  Consideration has now been given to your request and the Commissioner has decided that a waiver of tax under subsection 5.4 will not be granted.

10. The applicants did not seek reasons for this decision within the time prescribed by the ADJR Act, and no such reasons were ever given.  However, in the course of discovery, as I assume, an internal memorandum was disclosed which recites:-

    Pickering's TUCT Matters

    Jamieson Pickering, Melanie Pickering, Lawrence Pickering, Carmel Pickering, Stephanie Pickering.

    The above taxpayers have VRAs issued which resulted in individual TUCT liabilities.  Objections were lodged and subsequently, after proper consideration, disallowed.  The taxpayers received formal notice of these decisions but no appeals were lodged.  To date no payments have been received.

    The taxpayers have now applied for a reduction of their liabilities to nil.  The applications called for the Commissioner to exercise discretion in terms of subsection 5(4) of the TUCT Act.

    The only basis advanced for the exercise of this discretion is that two other family members have been released from their liabilities.  Whilst this is correct, it is not something which can be confirmed with these taxpayers because of the requirements of section 16 which secrecy requirements were imported into the TUCT Act.

    In addition, these taxpayers stated that their circumstances are the same as those advanced by the two family members who have already been released from their liability.  This assertion is highly unlikely given the particular circumstances of the successful applicants and it is unlikely that these taxpayers would know the full details submitted by these successful applicants.  In any event, the taxpayers have not particularised any circumstances which would justify the favourable exercise of a discretion.  To the contrary, no details at all have been provided.

    Therefore, I have decided that these taxpayers will not have section 5(4) apply to reduce their individual liabilities. 

11. The reference in the heading to Stephanie Pickering is erroneous because she was one of the two family members who had received a favourable determination pursuant to s 5(4). I do not, however, infer from this that the Commissioner in any way misconstrued the factual basis of the applications. He understood that the applicants were asserting that two members of the family had been treated in a particular way and that they should receive similar treatment.

12. For present purposes, I accept that it is at least arguable that apparent inequality of treatment in circumstances such as these might found a basis for challenge to an administrative decision. The thrust of the applicants' submissions, however, is that the Commissioner ought not to have decided the applications for indulgence contained in the letter of 23 January 1995 without giving them an opportunity to put further material before him. I cannot see that there was any reasonable basis for such an expectation. The letters of 23 January 1995, as I read them, put their case for favourable treatment pursuant to subs 5(4). The Commissioner's responses of 1 February 1995 seeking further information with respect to the s 265 matter, but not with respect to the application under the TUCT Act, seem to suggest an intention to proceed to consider the latter applications on the material as it was presently before him.  Had the applicants, at that time, expected or required a further opportunity to state their cases, one would have expected them to have done so by offering such further information as might be required.

13. I construe the letters of 23 January 1995 as invitations to the Commissioner to exercise his discretion pursuant to subs 5(4) upon the basis of the assertion that the two taxpayers, Melanie and Jamieson, were in positions which were "identical" to that of Stephanie and Toni. The Commissioner was obliged to determine the matter as it was put to him in the applications. Clearly, that involved an assessment of the assertions made. The applicants do not submit that he was obliged to give them notice of intention to reject those assertions. The Commissioner declined to accept that the applicants were in the same position as Stephanie and Toni, and that is in no sense surprising. After all, they had approached him in 1989 or 1990 and had, in one way or another, satisfied him in interviews that they should have the benefit of favourable determinations pursuant to subs 5(4). I can see no reason why he should be expected to deal in the same way with persons who, in 1995, merely asserted an entitlement to be treated in the same way. The lapse of time alone made the circumstances different. This is not a case of merits review. It is only the process which is open to consideration, and I cannot see how the Commissioner’s treatment of the matter bespeaks any absence of procedural fairness.

14. The position may have been otherwise had the Commissioner been deciding a matter once and for all.  However these proceedings have been conducted on the basis that it would have been open to the applicants to make further applications on different material had they chosen to do so.  Indeed, the Commissioner has subsequently invited them to proceed in that way.  The importance to be attached to procedure must, to some extent, depend upon whether or not the decision maker is to decide finally or only in respect of the matter as then raised for consideration.  I cannot see any procedural unfairness in the Commissioner's treating the applications at face value and deciding them on the material put before him.  In those circumstances, it seems to me that the applicants would not be successful, even if time were extended.  I decline to extend time.

15. The applications will be dismissed with costs.

I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate:

Dated:             15 September 1999

Counsel for the Applicant:	Mr J C Bell QC Mr P Woods
Solicitor for the Applicant:	McLaughlins
Counsel for the Respondent:	Mr A Robertson SC Mr M Brabazon
Solicitor for the Respondent:	Australian Government Solicitor
Date of Hearing:	13 September 1999
Date of Judgment:	13 September 1999