Re De Simone and Commissioner of Taxation
[2017] AATA 1005
•29 June 2017
De Simone and Commissioner of Taxation [2017] AATA 1005 (29 June 2017)
Division:TAXATION AND COMMERCIAL DIVISION
File Number(s): 2014/3948
Re:Giuseppe De Simone
APPLICANT
Commissioner of TaxationAnd
RESPONDENT
DECISION
Tribunal:F D O’Loughlin, Senior Member
Date:29 June 2017
Place:Melbourne
The Tribunal affirms dismissal of the application without reinstatement.
........................................................................
F D O’Loughlin, Senior Member
REVIEW OF INCOME TAX OBJECTION
Tribunal procedural powers – whether failure to observe a self-executing direction dismissed an application for review - whether self-executing direction can be made - powers of reinstatement.
Cases
Carey and the Commissioner of Taxation (2014) 145 ALD 236.
Berry v Commissioner of Taxation [2015] FCA 1244.
Brehoi v Minister for Immigration & Multicultural Affairs [1999] FCA 772.
Goldie V Minister for Immigration & Multicultural Affairs [2002] FCAFC 367.
Myers and Federal Commissioner of Taxation [2004] AATA 1337
Taxpayer and Federal Commissioner of Taxation [2002] AATA 523
Wicke-Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 811
Legislation
Administrative Appeals Tribunal Act 1975 (Cth), ss 33, 42A
REASONS FOR DECISION
F D O'Loughlin, Senior Member
29 June 2017
THE APPLICATION
The Applicant contends that his substantive application[1] for review of an objection decision concerning an income tax assessment has not been dismissed, because the Tribunal had no power to make the direction it did, or because he should be taken to have complied with the direction made. In the alternative, the Applicant contends that the Tribunal has power to reinstate his application pursuant to either s 42A(9) or s 42A(10) of the Act[2] and that the Tribunal should exercise that power.
[1]An application for review of an objection decision concerning an income tax assessment in which losses claimed as part of a participation in a retirement village development collective investment scheme were disallowed.
[2]Administrative Appeals Tribunal Act 1975.
Conversely, the Respondent Commissioner contends that the substantive application was validly dismissed by reason of what has been described in the present matter as a self-executing direction that was not complied with, that the Tribunal has the power to make such a direction and there are now no means by which the effect of that direction can be changed by the Tribunal.
For the reasons that follow the dismissal is confirmed and the substantive application cannot be reinstated by the Tribunal.
THE FACTS
Among other directions, on 26 November 2015, 12 April 2016, 13 May 2016, 14 June 2016, 6 July 2016 and 19 August 2016 the Tribunal directed the Applicant to prepare and file documents with the Tribunal. The 6 July 2016 and 19 August 2016 directions were self-executing directions, that were made after the Tribunal rejected the Respondent’s submission that the Applicant’s substantive application ought be dismissed pursuant to s 42A(5) of the Act. The Applicant has not observed the 26 November 2015, 12 April 2016, 13 May 2016, 14 June 2016, and 6 July 2016 directions, and whether he observed the 19 August 2016 direction is in issue.
The relevant parts of the 6 July 2016 self-executing direction were in the following terms:
The Tribunal DIRECTS:
1.The Tribunal vacates the Directions 2, 3 and 4 made in this matter on 14 June and replaces them with the following:
2.....
3.On or before 4:00pm on 19 August 2016, the Applicant shall lodge with the Tribunal and serve on the Respondent:
a.witness statements setting out the evidence of the Applicant, his brother Mr Serafino De Simone, Mr Jurblum, Mr Lustig and any other witness proposed to be called at the Hearing other than Mr Hall;
b.a list identifying each document, if any, on which witnesses rely in support of each fact asserted in their witness statements substantially in the form of Table 1;
Table 1
Document #
Document identification
Fact supported by document
Witness
Witness statement paragraph
c.a copy of any document identified included in Table 1 that is not included in the documents lodged by the Respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the Act) as a tender bundle;
d.a list of questions proposed to be put to Mr Hall substantially in the form of Table 2;
Table 2
Question #
Question
Fact sought to be established
e.A list of documents he intends to put to Mr Hall or about which he proposes to ask Mr Hall questions in the form of Table 3;
Table 3
Document #
Document identification
Question # for which the document is relevant
f.a copy of any document identified included in Table 3 that is not included in the documents lodged by the Respondent pursuant to s 37 of the Act as a tender bundle;
g.a revised Statement of Facts, Issues and Contentions:
i.setting out the facts as the Applicant perceives them or as he contends they occurred;
ii.identifying:
(A)the evidence on which he relies to show those facts occurred; or
(B)identifying other facts from which facts to inferred from which facts contended can be incurred;
iii.stating the issues in the proceeding as he perceives them to be; and
iv.stating the contentions which he advances regarding conclusions to be reached as to facts to be drawn and the law to be applied.
4......
5.......
6.If the Applicant fails to comply with direction number 3 without being allowed an extension of time to do so by either the Respondent or the Tribunal, or without being excused for the need for compliance, the Applications are dismissed in accordance with s 42A(5) of the Act.
On 19 August 2016 the Applicant requested an extension of time to comply with the 6 July 2016 directions. That request was provided to the Respondent, but in the time available to consider the Applicant’s request before the dismissal aspect of the 6 July 2016 direction would have become effective, the Respondent did not express any view as to whether an extension ought be granted. Before the dismissal aspect of the 6 July 2016 direction would have become effective, the Tribunal allowed the extension sought without hearing from the Respondent on the question. As a consequence, on 19 August 2016, in terms as to dates as sought by the Applicant, the Tribunal made a further direction, the relevant parts were in the following terms:
The Tribunal DIRECTS:
1.The Tribunal vacates the Directions made in this matter on 6 July 2016 and replaces them with the following:
2......
3.On or before 4:00pm on 31 August 2016, the Applicant shall lodge with the Tribunal and serve on the Respondent:
a.witness statements setting out the evidence of the Applicant, his brother Mr Serafino De Simone, Mr Jurblum, Mr Lustig and any other witness proposed to be called at the Hearing other than Mr Hall;
b.a list identifying each document, if any, on which witnesses rely in support of each fact asserted in their witness statements substantially in the form of Table 1;
Table 1
Document #
Document identification
Fact supported by document
Witness
Witness statement paragraph
c.a copy of any document identified included in Table 1 that is not included in the documents lodged by the Respondent pursuant to s 37 of the Administrative Appeals Tribunal Act 1975 (the Act) as a tender bundle;
d.a list of questions proposed to be put to Mr Hall substantially in the form of Table 2;
Table 2
Question #
Question
Fact sought to be established
e.A list of documents he intends to put to Mr Hall or about which he proposes to ask Mr Hall questions in the form of Table 3;
Table 3
Document #
Document identification
Question # for which the document is relevant
f.a copy of any document identified included in Table 3 that is not included in the documents lodged by the Respondent pursuant to s 37 of the Act as a tender bundle;
g.a revised Statement of Facts, Issues and Contentions:
i.setting out the facts as the Applicant perceives them or as he contends they occurred;
ii.identifying:
(C)the evidence on which he relies to show those facts occurred; or
(D)identifying other facts from which facts to inferred from which facts contended can be incurred;
iii.stating the issues in the proceeding as he perceives them to be; and
iv.stating the contentions which he advances regarding conclusions to be reached as to facts to be drawn and the law to be applied.
4.....
5......
6.If the Applicant fails to comply with direction number 3 without being allowed an extension of time to do so by either the Respondent or the Tribunal, or without being excused for the need for compliance, the Applications are dismissed in accordance with s 42A(5) of the Act.
Not all of the materials meeting the terms of the 19 August 2016 direction were received from the Applicant by 4.00 pm on 31 August 2016. Some were filed and served later that day, others the following day and yet further documents were filed on 3 September 2016.
The legislation
Sections 33 and 42A of the Act are the focus of attention. Those sections are in the following terms:
SECT 33
Procedure of Tribunal
(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;
….
Who may give directions
(2)For the purposes of subsection (1), directions as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may be given:
(a)where the hearing of the proceeding has not commenced--by a person holding a directions hearing in relation to the proceeding, by the President, by an authorised member or by an authorised officer; and
Types of directions
(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; or
(d)limit the number of witnesses who may be called to give evidence (either generally or on a specified matter); or
(e)require witnesses to give evidence at the same time; or
(f)limit the time for giving evidence or making oral submissions; or
(g)limit the length of written submissions.
SECT 42A
Discontinuance, dismissal, reinstatement etc. of application
Dismissal if parties consent
(1)Where all the parties to an application before the Tribunal for a review of a decision consent, the Tribunal may dismiss the application without proceeding to review the decision or, if the Tribunal has commenced to review the decision, without completing the review.
(1AAA)For the purposes of subsection (1), the consent of the agency party to a proceeding in the Social Services and Child Support Division is not required.
Deemed dismissal--applicant discontinues or withdraws 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.
(1AA)If a proceeding is in the Social Services and Child Support Division and is not a child support first review, the person may notify the Tribunal orally of the withdrawal or discontinuance. The person who receives the notification must make a written record of the day of receipt.
(1B)If notification is given in accordance with subsection (1A) or (1AA), the Tribunal is taken to have dismissed the application without proceeding to review the decision.
Dismissal if party fails to appear
(2)If a party to a proceeding before the Tribunal in respect of an application for the review of a decision (not being the person who made the decision) fails either to appear in person or to appear by a representative at a directions hearing, or an alternative dispute resolution process under Division 3, held in relation to the application, or at the hearing of the proceeding, the Tribunal may:
(a)if the person who failed to appear is the applicant--dismiss the application without proceeding to review the decision; or
(b)in any other case--direct that the person who failed to appear shall cease to be a party to the proceeding.
Dismissal if decision is not reviewable
(4)The Tribunal may dismiss an application without proceeding to review the decision if the Tribunal is satisfied that the decision is not reviewable by the Tribunal.
Dismissal if applicant fails to proceed or fails to comply with Tribunal's direction
(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.
Dismissal if party fails to appear--giving of appropriate notice
(7)Before exercising its powers under subsection (2), the Tribunal must be satisfied that appropriate notice was given to the person who failed to appear of the time and place of the directions hearing, alternative dispute resolution process or hearing, as the case may be.
Reinstatement of application
(8)If the Tribunal is taken to have dismissed an application under subsection (1B), a party to the proceeding (other than the applicant) may, within the period referred to in subsection (8B), apply to the Tribunal for reinstatement of the application.
(8A)If the Tribunal dismisses an application under subsection (2) (other than an application in respect of a proceeding in which an order has been made under subsection 41(2)), a party to the proceeding may, within the period referred to in subsection (8B), apply to the Tribunal for reinstatement of the application.
(8B)For the purposes of subsections (8) and (8A), the period is:
(a)28 days after the party receives notification that the application has been dismissed; or
(b)if the party requests an extension--such longer period as the Tribunal, in special circumstances, allows.
(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.
Dismissal - s 42(5)
The scope and purpose of s 42A(5) was relatively recently addressed in Berry[3] by Davies J where her Honour said:
[3]Berry v Commissioner of Taxation [2015] FCA 1244 at [35] to [38].
35.The starting point for consideration is the scope and purpose of s 42A(5) of the AAT Act. That section confers a discretionary power on the Tribunal to dismiss an application for review of a decision without proceeding to review that decision if the applicant fails within a reasonable time to proceed with the application or to comply with a direction by the Tribunal in relation to the application. That power is in aid of the objective in s 2A of the AAT Act. Section 2A provides:
In carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that:
(a) is accessible; and
(b) is fair, just, economical, informal and quick; and
(c) is proportionate to the importance and complexity of the matter; and
(d) promotes public trust and confidence in the decision-making of the Tribunal.
36.Section 33 is also relevant. Section 33(1)(b) relevantly provides that in a proceeding before the Tribunal:
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.
For the purposes of s 33(1), the Tribunal may give directions as to the procedure to be followed at or in connection with the hearing of a proceeding: s 33(2). Section 33(2A) sets out the types of directions that the Tribunal may make, which include requiring any person who is a party to the proceeding to provide further information in relation to the proceeding (s 33(2A)(a)) and requiring 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 (s 33(2A)(c)). Section 33(1AB) provides that a party to a proceeding before the Tribunal and any person representing such a party must use his or her best endeavours to assist the Tribunal to fulfil the objective in s 2A of the AAT Act.
37.The power to dismiss under s 42A(5) is “plainly a valuable discretionary power”, as Burchett J observed in Guse v Comcare (1997) 49 ALD 288; [1997] FCA 140, 291 (ALD). Where the provision is engaged, the exercise of that power to dismiss summarily aids the Tribunal in fulfilling the objective in s 2A. The consequence of a failure by an applicant either to proceed with the application or to comply with a direction by the Tribunal in relation to the application within a “reasonable time” is that the applicant is liable to have his or her application dismissed without a hearing on the merits. Such an outcome may seem harsh but because the outcome is specifically provided for by the legislation, that outcome, in itself, is not one that is unreasonable in the legal sense. Thus, I do not accept the submission for Mr Berry that the exercise of power was unreasonable in the legal sense because it closed all avenues of review of the objection decision to Mr Berry.
38.I also do not accept the submission for Mr Berry that the exercise of power was unreasonable in the legal sense because the Tribunal had other options available to it other than dismissal. This submission drew upon the observation of Burchett J in Guse v Comcare at 291 that:
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 direction to secure compliance –
and the further statement by Burchett J that the power should be used “very sparingly and only...as a decision of last resort”: Guse v Comcare [1997] FCA 140; (1997) 49 ALD 288, 291.
Section 42A(5) plainly compliments the Tribunal’s s 33 powers to regulate the conduct of an application to the Tribunal. Section 42A(5) affords a process for dealing with non-compliance with directions designed to cause:
(a)the issues in dispute to be identified; and
(b)gathering or preparation of evidence directed to the facts that bear upon the issues in dispute,
both for the purposes of assisting the parties to prepare their cases and assisting the Tribunal in discharging its review responsibilities. An applicant who fails or refuses to participate in the processes directed by the Tribunal does so at the peril of the application being dismissed. In the present matter, as noted above, the Applicant has repeatedly failed to meet directions made for the purposes of preparation of his case. Accordingly, the Applicant was at risk of the Tribunal exercising its powers under s 42A(5) and dismissing his application.
In the present circumstances the 19 August 2016 direction that enlivened s 42A(5) took the form of a self-executing direction.
Self-executing directions, or guillotine directions, are a permissible way to manage applications to the Tribunal in some circumstances.[4]
[4]See Carey and the Commissioner of Taxation (2014) 145 ALD 236 at [22].
The present circumstances permit such a direction. Having been put on notice that the Respondent thought the substantive application ought be dismissed for failure to comply with the directions of 6 July 2016, a further chance was afforded to the Applicant to meet the procedural requirements of the Tribunal and the form of direction was that the s 42A(5) power would be activated automatically if there was a further non-compliance. Such an approach obviates the need for further procedural hearings in appropriate cases. The present was such a case. It is not apparent that the Applicant did not understand the significance of the nature of the direction. He sought a variation of the first self-executing direction very shortly before the dismissal aspect of it would have become operative.
The self-executing direction was not complied with. Partial compliance with such a direction, as has occurred in the present circumstances, is not full compliance and full compliance is required to avoid the dismissal effect of the direction. Missing the stipulated time by one minute is sufficient to attract the s 42A(5) effect of the direction. Whether there was a reason for missing the stipulated time is not to the point: to avoid the effect of the direction the Applicant needed to obtain an extension, just as he had done in relation to the 6 July 2016 direction.
By reason of non-compliance with the 19 August 2016 direction, the Applicant’s application was dismissed.
Reinstatement – ss 42A(9) and (10)
There are only two powers to reinstate a dismissed application to the Tribunal provided in the Act: ss 42A(9) and (10).
The history to ss 42A(9) and (10) shows that s 42A(9) compliments s 42A(8) and that s 42A(10) is to afford the Tribunal a power to reinstate an application that has been dismissed through administrative error of the Tribunal. That history was noted in Brehoi[5] where the Court said:
[5]Brehoi v Minister for Immigration & Multicultural Affairs [1999] FCA 772, Whitlam, Moore & Katz JJ at [22] to [29]. See also Goldie V Minister for Immigration & Multicultural Affairs [2002] FCAFC 367 at [24] Wilcox and Downes JJ and [81] Carr J.
22. Before concluding these reasons for judgment, there is one further matter which emerged from the materials before the Court and which was raised by the Court itself during the course of argument. It is a procedural matter of some importance that we consider we should advert to in these reasons.
23. Section 42A of the AAT Act, under subs (2) of which the Tribunal acted when dismissing Mr Brehoi's application to it, contains provisions in subss (8) to (10) thereof which enable the reinstatement by the Tribunal of an application it has dismissed under that section. Those provisions are (relevantly) as follows:
"(8) If the Tribunal, under subsection (2), has dismissed an application ..., 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....
(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...."
24. It will be noticed that, although subs 42A(8) deals only with dismissals under subs 42A(2), subs 42A(10) is not so limited. It therefore applies to dismissals, not only under subs 42A(2), but also under subss 42A(1), (4) and (5).
25. The three provisions which we have set out in par 23 above were inserted into the AAT Act in 1993 by the Administrative Appeals Tribunal Amendment Act 1993 (Cth). As was made plain by the Attorney-General at the time (see, for example, p 2 of the Senate Explanatory Memorandum for the Bill which became the 1993 Act), most of the provisions to be inserted by the amending Act (including the ones presently under discussion) were being enacted in direction to give effect to the recommendations of the Report of the Review of the Administrative Appeals Tribunal, which report had been presented to both the Attorney-General and the President of the Tribunal in November 1991.
26. In that Report, what became subss 42A(8) and (9) had been dealt with together and what became subs 42A(10) had been dealt with separately.
27. As to what became subss 42A(8) and (9), the report had identified as a problem (see App 9, Proposal 28) the following: "An application which has been dismissed for failure to appear cannot at present be reinstated although such failure is found to be excusable". Its proposed amendments to overcome that problem had been to provide (relevantly): first, that "the applicant may apply to the Tribunal within 28 days of receipt of notification of dismissal for a direction that the dismissal be vacated"; and, secondly, that "if the Tribunal is satisfied that it is appropriate to do so, it may so direct".
28. As to what became subs 42A(10), the report had identified as a problem (see App 9, Proposal 29) the following:
"The amendment proposed by Proposal 28 would deal with the situation of vacation of a dismissal after failure to appear, and that failure is later found to have been excusable. There remains a need, both generally and if Proposal 23 [which was that an applicant be permitted to `discontinue' an application in writing] be enacted, for there to be a power to vacate a dismissal where the application has been dismissed by administrative error on the part of the AAT."
In other words, the problem identified was the absence of a "slip" rule. The report's proposed amendment to overcome that problem had been to provide that "the Tribunal may vacate the dismissal of any application for review where such dismissal has occurred through administrative error on the part of the Tribunal".
29. The Senate Explanatory Memorandum for the Bill which became the 1993 Act, in explaining the clause which became, without debate or amendment, subs 42A(10), adopted (at p 11) the language which had been used in the report, saying that the clause provided for the Tribunal "to reinstate an application which has been dismissed through administrative error on the part of the Tribunal".
The text of the Act is consistent with such a construction.
A consistent line of decisions of this Tribunal has adopted the same approach, to the effect that s 42A(9) compliments s 42A(8).[6]
[6]See Myers and Federal Commissioner of Taxation [2004] AATA 1337 at [8], Taxpayer and Federal Commissioner of Taxation [2002] AATA 523 at [5(d)], Wicke-Fitzgerald and Secretary, Department of Education, Employment and Workplace Relations [2008] AATA 811 at [16]
Contrary to the Applicant’s contentions, s 42A(9) is not a free standing and unlimited discretionary power for the Tribunal to reinstate applications that have been dismissed under s 42A(5). It is a power that compliments ss 42A(8) and (8A), neither of which concern applications dismissed under s 42A(5) for failure to proceed with an application or comply with a direction.
Reinstatement pursuant to s 42A(10) requires an error on part of the Tribunal in dismissing an application. Without an error having been made, the jurisdiction to reinstate is not enlivened.
Here, there has been no error. There has been non-compliance with a direction that was appropriately made. And the consequence of that non-compliance, as contemplated by the Act, has arisen.
CONCLUSION
For the above reasons, the Tribunal affirms that the substantive application was dismissed and that there is no power to reinstate it.
I certify that the preceding 23 (twenty-three) paragraphs are a true copy of the reasons for the decision herein of
Senior Member F D O'Loughlin.........................................................
Associate
Dated 29 June 2017
Date of final submissions: 23 December 2016
The Applicant appeared for himself
Solicitors for the Respondent
ATO Dispute Resolution
Ms S Singh Counsel for the Respondent Mr S Linden
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