Robinson v Commissioner of Taxation
[2017] FCA 162
•21 February 2017
FEDERAL COURT OF AUSTRALIA
Robinson v Commissioner of Taxation [2017] FCA 162
File number(s): ACD 73 of 2016 Judge(s): JAGOT J Date of judgment: 21 February 2017 Catchwords: TAXATION –whether in interests of justice to grant extension of time to appeal Tribunal decision – merit of proposed appeal – substantial injustice – application dismissed Legislation: Taxation Administration Act 1953 (Cth) Cases cited: XLPZ and Commissioner of Taxation (Taxation) [2016] AATA 466 Date of hearing: 21 February 2017 Registry: Australian Capital Territory Division: General Division National Practice Area: Taxation Category: Catchwords Number of paragraphs: 16 Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: Ms R Graycar Solicitor for the Respondent: Australian Taxation Office, Review & Dispute Resolution ORDERS
ACD 73 of 2016 BETWEEN: PETER ROBINSON
Applicant
AND: COMMISSIONER OF TAXATION
Respondent
JUDGE:
JAGOT J
DATE OF ORDER:
21 FEBRUARY 2017
THE COURT ORDERS THAT:
1.The interlocutory application filed 23 November 2016 be dismissed.
2.No order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
JAGOT J:
I have before me today an interlocutory application which was filed on 23 November 2016, the effect of which is to seek to set aside my order of 22 September 2016. The order I made on 22 September 2016, on an ex parte basis, was that the application for the extension of time to appeal be dismissed due to the applicant’s failure to appear and to be available on his nominated telephone number for the purpose of the interlocutory hearing.
The application for the extension of time was filed on 2 September 2016 and sought an extension of time to appeal from a decision of the Administrative Appeals Tribunal (the Tribunal) made on 1 July 2016 which affirmed the decision of the Commissioner of Taxation to refuse to exercise a power under s 340-5 of Schedule 1 to the Taxation Administration Act 1953 (Cth) (the Act) (see XLPZ and Commissioner of Taxation (Taxation) [2016] AATA 466). The applicant had lodged an application seeking an exercise of power under that provision. That provision is in the following terms:
340-5Release from particular liabilities in cases of serious hardship
Applying for release
(1)You may apply to the Commissioner to release you, in whole or in part, from a liability of yours if section 340-10 applies to the liability.
(2)The application must be in the *approved form.
(3)The Commissioner may release you, in whole or in part, from the liability if you are an entity specified in the column heading “Entity” of the following table and the condition specified in the column headed “Condition” of the table is satisfied.
Entity and condition Item
Entity
Condition
1
An individual
You would suffer serious hardship if you were required to satisfy the liability
2
A trustee of the estate of a deceased individual
The dependents of the deceased individual would suffer serious hardship if you were required to satisfy the liability
Effect of the Commissioner’s decision
(4)If the Commissioner:
(a) refuses to release you in whole from the liability; or
(b) releases you in part from the liability;
Nothing in this section prevents you from making a further application or applications under subsection (1) in relation to the liability.
Notification of the Commissioner’s decision
(5) The Commissioner must notify you in writing of the Commissioner’s decision within 28 days after making the decision.
(6)A failure to comply with subsection (5) does not affect the validity of the Commissioner’s decision.
Objections against the Commissioner’s decision
(7) If you are dissatisfied with the Commissioner’s decision, you may object against the decision in the manner set out in Part IVC.
The Tribunal, in considering the review application, affirmed the decision subject to review on a number of bases.
First, the Tribunal, at paragraph 31 of its reasons for decision, said this:
31.With respect, it appears that XLPZ is conflating two separate exercises that must be undertaken in assessing the extent to which the tax office debt occasions him with serious hardship. The Tribunal accepts the argument that if he were required to repay the substantial tax office debt in the space of a few years, he would be placed in serious hardship in terms of his day-to-day expenditure. However, the ATO has made it clear that it does not propose to recover the debt at this time, in light of XLPZ’s financial circumstances. The existence of the debt, in notional terms, therefore cannot be said to impose serious hardship on him since he is not presently required to make payments to satisfy it. He is, indeed, able to get by notwithstanding the fact of the debt.
Second, the Tribunal said, at paragraph 32, this:
32.The Commissioner has exercised the discretion not to waive the debt itself, however, which means that it must be accounted for on XLPZ’s personal balance sheet of assets and liabilities. In this sense, too, the fact of the debt cannot be said to place XLPZ in serious hardship, since the waiving of the debt would not restore the health of that balance sheet, i.e. he would still remain heavily in debt even if the tax debt were waived.
Paragraph 32 of the Tribunal’s reasons should be read with paragraph 34, which is in these terms:
34.Although XLPZ is experiencing financial hardship, this is not sufficient to meet the statutory requirement for release under s 340-5(3) of the Act. XLPZ himself recognises that he was experiencing pre-existing financial stress prior to incurring the tax liabilities in question. Accordingly, the financial hardship he is experiencing is independent of the requirement to satisfy his taxation liabilities.
For these reasons, the Tribunal at paragraph 35 concluded that the applicant did not meet the statutory condition of release under s 340-5(3) of the Act, as he will not suffer from serious hardship if required to satisfy the taxation liabilities.
At paragraphs 36 to 42 of its reasons for decision, the Tribunal stated as follows:
Exercise of the discretion
36.The Tribunal does not consider that XLPZ meets the circumstances in Item 1 of s 340-5(3) of the Act, but, for completeness, I will consider whether I would have exercised the discretion under that provision had he done so.
37.The factors that may be relevant to the establishment of the discretion may be wider than those factors that go to the establishment of serious hardship.
38.The PSLA 2011/2017 includes a list of factors relevant to the exercise of the discretion:
Examples of situations in which the ATO may decide against granting release, even though implications of serious hardship may be drawn are:
Ÿwhere it appears that the person has, questionably or otherwise, disposed of funds or assets without making proper provision to meet tax liabilities
Ÿwhere the granting of release would not result in reduction of hardship, such as where the person has other liabilities or creditors to such an extent that release from the tax debt will not relieve hardship
Ÿwhere the person has used available funds to discharge debts due to other private creditors in preference to debts due to the ATO
Ÿwhere the person has used available funds to discharge debts due to other business creditors where those payments are not considered reasonably necessary to maintain the viability of the business and could be considered as unfair preference payments to the detriment of the ATO
Ÿwhere the person, without good reason, has failed to pursue debts due to them, or to seek possible contributions from insurers, or persons with joint responsibilities for debts
Ÿwhere serious hardship is associated with a single event or short term outcome, such as might be encountered in the more speculative or seasonal business undertakings where the effects are likely to be only short term
Ÿwhere the person has a poor compliance history, and
Ÿwhere the person is unable to demonstrate that they have made provision for future debts.
39.Several of the above grounds could be considered relevant to the circumstances in which XLPZ finds himself. Despite him alerting the ATO as to his access of his self-managed superannuation fund, he failed to make provision for the taxation requirements attaching to those funds.
40.The Tribunal finds that the granting of release would not result in a reduction of hardship for XLPZ. As the respondent put to the Tribunal, much of the situation in which XLPZ has found himself has experienced failure of his self-operated business, and termination of his non-replaceable ‘niche’ consultancy work. In addition to this, he has incurred costs in litigation relating to contract with his sons, and has had costs orders made against him in other court proceedings.
41.It is apparent that XLPZ has paid other debts. He has used loans from his father to meet liabilities of Pir Panjal Investments, a company of which he is the sole director and shareholder. XLPZ submitted that the terms of the loan were exclusive to Pir Panjal Investments. The Tribunal notes that the issue of selectively paying other debts has been considered in other cases to militate against the exercise of the discretion.
42.There are no extenuating circumstances that warrant XLPZ being treated preferentially to other taxpayers. Releasing XLPZ from his debt is not appropriate in the circumstances. Even if I had found that XLPZ qualified for consideration of the exercise of the discretion in s 340-5 of the Act, that discretion should not be exercised in XLPZ’s favour.
The respondent, in written submissions opposing the setting aside of the orders of 22 September 2016, made two basic points.
First, the respondent submitted that the appeal itself lacks merit because it is clear from the Tribunal’s reasons that, notwithstanding what was said at paragraph 31 of those reasons, the Tribunal concluded as a matter of fact that the applicant would not suffer serious hardship if he had to pay the taxation liability because he would still remain heavily in debt as a result of liabilities and financial stress which have nothing to do with the tax liability. Further, it is plain from paragraphs 36 to 42 of the Tribunal’s reasons that the Tribunal also considered whether it would exercise the discretion in favour of the applicant if he did satisfy the statutory condition. The Tribunal determined that there were a number of reasons which would mean that even if the applicant qualified for consideration of exercise of the discretion, the discretion should not be exercised in his favour. As the respondent puts it, in these circumstances, it cannot be concluded that the appeal has any real merit in the sense that even if the Tribunal did err in law in the way it approached the statutory test, which the respondent denies, the result would have been the same. That is, the applicant suffers no prejudice whatsoever in these circumstances.
Second, the respondent submitted that apart from the lack of any prejudice to the applicant should the order stand, with the consequential lack of any, let alone substantial, injustice to the applicant, there remains insufficient explanation for his various delays, including the delay in bringing the original application, the delay between the making of the orders on 22 September 2016 and the filing of the interlocutory application to set aside those orders on 23 November 2016, as well as the various delays between dates in which he made affidavits which have been read in support of the application and the date of filing of those affidavits.
As I indicated in discussions with the parties, it does seem to me that there is circularity in the statement which the Tribunal has made at paragraph 31 of its reasons. The Tribunal seems to have considered that as the Australian Taxation Office did not propose to recover the debt at this time, it followed that it could not be said he would suffer serious hardship, as he is not presently required to make payments to satisfy the debt. If that were all that was said in the Tribunal’s reasons, then the case may well be different. This is because it is clear that the statutory test requires the hypothetical to be assumed in favour of the applicant, namely, the assumption to be made is that the applicant is required to satisfy the liability. On that assumption or hypothetical, the question is then asked: would the applicant suffer serious hardship? The reasoning in paragraph 31 does not seem to perform this exercise.
However, that is not all there is in the Tribunal’s reasons. As noted above, the Tribunal found independently of paragraph 31 that if the applicant were required to pay the debt, he would not be placed in serious hardship because, as said in paragraph 32, he would still remain heavily in debt, and, as said in paragraph 34, he would still be suffering from “pre-existing financial stress prior to incurring the tax liabilities in question”. I can see no arguable case to the effect that these considerations were infected by any legal error.
Further, and despite what the applicant has put to me this morning orally, I am unable to discern any possible basis upon which it could be concluded that the exercise of discretion which the Tribunal undertook at paragraphs 36 to 42 of its reasons for decision were in any way affected by the conclusion it reached against the applicant. Indeed, those reasons make clear the considerations which the Tribunal took into account in order to conclude that even if the power were enlivened there remained a discretion which should not be exercised in the applicant’s favour.
For these reasons, I agree with the submissions put for the respondent that it cannot be concluded that the proposed appeal has any merit, nor can it be concluded as a result that the applicant would suffer any injustice, let alone substantial injustice, if the order which I made on 22 September 2016 remains in place. I also accept the respondent’s submission that there is inadequacy of explanation in respect of the various delays. If the delay in bringing the original proceedings had been the only matter in issue, again, matters may have been different. However, the delay has been repeated in terms of the bringing of this interlocutory application, which was not filed until two months after the original order was made dismissing the application.
For these reasons, I am satisfied that it would not be in the interests of justice for the applicant to obtain the relief sought in the interlocutory application filed on 23 November 2016.
I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate:
Dated: 21 February 2017
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