Spencer and Commissioner of Taxation
[2007] AATA 1194
•30 March 2007
CATCHWORDS – PRACTICE AND PROCEDURE – extension of time – extension refused in relation to 2002 assessment and granted in relation to 2006 assessment.
Administrative Appeals Tribunal Act ss 29(2), 29(7), 29(8), 30(1A)
Administrative Decisions (Judicial Review) Act 1977, s 11
Income Tax Assessment Act 1936 ss 27A to 27H,
Income Tax Assessment Act 1997 ss 4-10, 4-15, 6-1, 6-5, 6-10, 6-20, 6-23, 11-5,
11-10, 11-15
Taxation Administration Act 1953 ss 14ZQ, 14ZZC, 14ZZ
Termination Payments Tax (Assessment and Collection) Act 1997 ss 5, 7(2), 11, 11A, 31
Trade Practices Act 1974 s 84(2)
Victorian Civil and Administrative Tribunal Act 1998 s 120
Brisbane South Regional Health Authority v Taylor (1996) 186 CLR 541; 139 ALR 1
Chalk v Commissioner for Superannuation (1994) 50 FCR 150; 33 ALD 420
Chumbairux v Minister for Immigration and Ethnic Affairs (1986) 74 ALR 480
Comcare v A’Hearn (1993) 119 ALR 85
Commissioner of Taxation v Brown [1999] ATC 4852
Dibb v Commissioner of Taxation [2004] FCAFC 126; (2004) 207 ALR 151
Hoare v Deputy Commissioner of Taxation (Vic) (1987) 14 ALD 476
Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315
Le Grand v Federal Commissioner of Taxation (2002) 195 ALR 194
McIntosh v Federal Commissioner of Taxation [1] (1970) 25 ALR 557; 45 FLR 279
Mulheron v Australian Telecommunications Corporation (1991) 23 ALD 309
NMFM Property Pty Ltd v Citibank (No 10) (2000) 107 FCR 270; 186 ALR 442
Pacific Carriers Ltd v Banque Nationale de Paris [2001] NSWSC 900
R v Portus; Ex parte Federated Clerks Union of Australia
Re Bell and Australian Telecommunications Corporation (1983) 5 ALN N186
Re Bogaards and Commonwealth of Australia (1987) 13 ALD 578
Re Bonavia and Secretary, Department of Social Security (1985) 9 ALD 97
Re Pepper-Clayton and Australian Telecommunications (1985) 7 ALD 508
Reseck v Commissioner of Taxation (1975) 133 CLR 45; 6 ALR 642
Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628; 75 ALR 513
Windshuttle v Deputy Federal Commissioner of Taxation (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88
Zizza v Commissioner of Taxation [1999] FCA 37
DECISION AND REASONS FOR DECISION [2007] AATA 1194
ADMINISTRATIVE APPEALS TRIBUNAL )
) VT2006/325-326
TAXATION APPEALS DIVISION )
Re MAHULCHANDRAN SPENCER
Applicant
AndCOMMISSIONER OF TAXATION
Respondent
DECISION
Tribunal: Deputy President S A Forgie
Date: 30 March 2007
Place: Melbourne
Decision:The Tribunal decides to:
1.refuse to extend the time within which the applicant may lodge an application to review the objection decision made by the respondent on 25 June 2002; and
2.grant an extension of the time within which the applicant may lodge an application to review the objection decision made by the respondent on 28 June 2006.
S A FORGIE
Deputy President
REASONS FOR DECISION
The applicant, Mr Mahuchandran Spencer, seeks and extension of the time within which he may lodge an application for review of two objection decisions made by delegates of the respondent, the Commissioner of Taxation (Commissioner). He was advised of the earlier decision in a letter dated 25 June 2002 (2002 objection decision[1]) and of the latter in a letter dated 28 June 2006 (2006 objection decision[2]). In summary, the 2002 objection decision was to disallow in full Mr Spencer’s objection to the Commissioner’s earlier decision to include two Eligible Termination Payments (ETPs) in his assessable income for the year ended 30 June 2001. The 2006 objection decision was to disallow his objection to an assessment issued in relation to the same financial year and relating to Termination Payments Tax (TPT).
[1] Tribunal No. VT2006/325
[2] Tribunal No. VT2006/326
Initially, the Commissioner opposed both applications for extension of time but has since withdrawn his opposition in relation to the 2006 objection decision. In light of that and having regard to the substantive issues that are raised and the short period of delay in lodging the application, I have decided to extend the time within which Mr Spencer may lodge an application to review the 2006 objection decision to 14 September 2006.
In relation to Mr Spencer’s application to extend the time within which he may apply to review the 2002 objection decision, I have decided to refuse to extend the time. I set out my reasons below.
BACKGROUND
Events relating to the payment of ETPs
The findings that I have made under this heading are based on Mr Spencer’s affidavit filed in these proceedings. No evidence was produced to contradict its contents and the Commissioner did not seek to cross-examine him. My findings are made solely for the purposes of determining the extension of time applications. As the solicitors whom Mr Spencer has named have not had an opportunity to give an account of their view of what happened, I have not identified them by name. To do so in the circumstances would be unfair.
In January 2000, Mr Spencer was employed by Telstra Corporation Limited (Telstra) when he lodged a complaint with the Victorian Equal Opportunity Commission (VEOC) alleging discrimination in his employment. In July 2000, VEOC referred his complaint to the Victorian Civil and Administrative Tribunal (VCAT). VCAT made various directions during August and October 2000.
In November 2000, Mr Spencer made a second application to the VEOC alleging discrimination in his employment by Telstra.
Also in November 2000, VCAT held mediation proceedings in relation to his first complaint. Following the proceedings, Telstra’s solicitors sent a draft settlement agreement to Mr Spencer’s counsel. That draft settlement agreement attached an amended settlement and release agreement, a draft letter of service and a draft letter of resignation.
After reciting that Mr Spencer had been employed by Telstra, that he had instituted proceedings in VCAT alleging discrimination and that Telstra denied that it had unlawfully discriminated against him, the settlement and release agreement noted that the parties had agreed to settle the proceedings and their differences. Clause 1 went on to provide:
“Telstra will pay to … [Mr Spencer’s Solicitor] the sum of:
(a)$158,000 personal wrong and damage; and
(b)the sum of $22,000 subject to tax as required by law; and
(Settlement Sums), within 14 days of the date on which Telstra’s solicitors receive a medical report of Spencer’s medical practitioner detailing the medical condition of Spencer as a result of the discrimination alleged by him.”
Mr Spencer acknowledged that Telstra would pay the Settlement Sums in full settlement of all claims against Telstra arising from the proceedings and released Telstra from all claims and the like in relation to the alleged discrimination. He was also required to withdraw and discontinue the complaint.
On 6 December 2000, Telstra’s solicitors sent Mr Spencer’s solicitor, whom I will call Ms Solicitor, a statement of Mr Spencer’s service with the company. They also asked her to confirm that Mr Spencer’s letter of resignation had been delivered to VCAT. Telstra’s solicitors again wrote to Ms Solicitor in the same terms on 11 December 2000.
On 12 December 2000, Mr Spencer told VCAT that there was no agreement and that he wanted to reconvene the mediation. He also told VCAT that Ms Solicitor was no longer representing him. A few days later, on 15 December 2000, he sent Ms Solicitor an email to the same effect and telling her that he would be representing himself.
Mr Spencer obtained the following letter from his general practitioner dated 16 December 2000:
“To whom it may concern,
Mr Spencer has been my patient since 25/12/1998. His medical illnesses include the following:
1) Severe hayfever
2) Wheezy Bronchitis and Asthma
3) Hypertension
4) Dyslipidaemia
5) Severe anxiety
6) Severe Depression
The aetiology of Mr Spencer’s severe anxiety and depression dates back to 1990 when he states that he was discriminated against at his workplace on the basis of his ethnicity. This has manifested somatically as disturbances of sleep, sensations of tightness in scalp, loss of appetite and self-esteem and exacerbations of his asthma. In summary, he has suffered immense emotional trauma due to the alleged discrimination and subsequent litigation. I understand the litigation has been resolved, having reached a reasonable outcome of Mr Spencer.
I do feel that this longstanding work-related stress is a strong contributing factor to the hypertension that Mr Spencer suffers from. I feel that he should not be further subject to stressors arising from settlement and monitory disbursement.”
On 18 December 2000, Telstra’s solicitors wrote to Ms Solicitor saying that Mr Spencer’s counsel had told them that she had two documents signed by him. They copied the letter to VCAT, Ms Solicitor sent the letter of resignation to VCAT and the member indicated that he had no further role to play. Ms Solicitor sent Telstra’s solicitors the settlement agreement.
Mr Spencer wrote to the then Chief Executive Officer of Telstra stating that the settlement agreement was not valid. That was on 22 December 2000. On 1 January 2001, he wrote to VCAT advising that Ms Solicitor no longer represented him and that he disputed the validity of the settlement agreement. VCAT replied on 12 January 2001 to the effect that the matter had concluded. On 16 January 2001, VCAT wrote to Telstra’s solicitors attaching a copy of Mr Spencer’s resignation letter and stating that it appeared that he had dispensed with Ms Owen’s services.
VCAT wrote to Telstra’s solicitors on 16 January 2001 advising them of the commencement of proceedings No. A6/2001. On 29 January 2001, Telstra’s solicitors wrote to Ms Solicitor and enclosed two cheques for amounts from which taxation had been deducted: $123,334.00 and $18,370.00. They did so on the basis that the payment of $159,000.00 or $158,000.00[3] made to Mr Spencer by Telstra was an ETP. Ms Solicitor banked both cheques.
[3] Mr Spencer referred to it as $159,000.00 in his affidavit at [2] and Telstra’s solicitors’ letter to Ms Solicitor dated 29 January 2001 referred to it as $158,000.00.
Telstra’s solicitors wrote to VCAT stating that they held a release in relation to both sets of proceedings, asking that the tribunal take no further action in relation to them and advising that Ms Solicitor would forward a Notice of Discontinuance to the tribunal in relation to them.
Mr Spencer wrote an email to VCAT on 19 February 2001 and copied it to Telstra’s solicitors. In it, he protested what had happened and lamented that VCAT had not replied to his correspondence of 12 and 14 December 2000. Telstra’s solicitors sent VCAT the executed settlement and release agreement on 8 March 2001.
VCAT wrote to both parties on 15 March 2001 advising that it had listed a hearing on 22 March 2001 to determine whether the proceedings should be dismissed as being frivolous, vexatious or an abuse of process. Mr Spencer replied by letter on 20 March 2001. VCAT held the hearing and ordered that both applications be struck out. It wrote to Mr Spencer on the same day advising him of that fact.
Mr Spencer’s attempts to set aside VCAT’s order
On the basis of the reasons for decision given by Deputy President McKenzie of VCAT, I find that Mr Spencer unsuccessfully sought leave of the Supreme Court of Victoria to extend the time within which he might apply for leave to appeal against VCAT’s decision to strike out the applications. In December 2005, Master Efthim refused to grant leave.
In March 2006, Mr Spencer applied to VCAT under s 120 of the Victorian Civil and Administrative Tribunal Act 1998 to review and revoke the order it had made in March 2001 to strike out the applications. Such an application had to be made within fourteen days of the order but VCAT could extend that time. Deputy President McKenzie refused to extend that time and dismissed his application. She did so in reasons delivered on 28 July 2006.[4]
[4] [2006] VCAT 1550
The 2002 objection and objection decision
The earlier 2002 objection decision, disallowed in full Mr Spencer’s objection to the assessment issued by the Commissioner in respect of the year ended 30 June 2001. The Commissioner advised Mr Spencer of the objection decision by letter dated 25 June 2002. Mr Spencer’s objection was to the effect that Eligible Termination Payments paid by Telstra to him should not have been included in his assessable income for that year. It should not have been included, he contended, because he had disputed the amounts and not received them, his solicitors had withheld certain amounts from the amounts and Telstra’s solicitors had described the amounts as death benefits. The objection was disallowed on the basis that the ETP was not ordinary income but was statutory income and so assessable income within the meaning of s 6-10(2) of the Income Tax Assessment Act 1997 (1997 ITAA).
The 2006 objection and objection decision
The later 2006 objection also relates to the year ended 30 June 2001 but was made on 4 June 2006. The Commissioner’s objection decision dated 28 June 2006 disallowed the objection. The Commissioner summarised the grounds of Mr Spencer’s objection:
“You have been in legal proceedings with your former employer Telstra Corporation Limited, since your employment was terminated.
Telstra made payment of two eligible termination payments (ETPs) to your solicitor, who then passed on the payment to you after deducting her legal fees.
You did not negotiate the cheque received from your solicitor for a period of 51 months. You state that the cheque was honoured on 16 May 2005.
Your made a contribution to Asgard Superannuation from part of the proceeds of the ETPs. You provided a copy of a letter from Asgard confirming receipt of your contribution dated 15 September 2005.
You contend that you retained an amount of $7,061.00 to help cover your legal fees.
You contend that the Tax Office is limited to a period of four years in which to issue a tax assessment.
You contend that it is unfair to request payment of this assessment as you have been on a low income health care card for more than 5 years.
In these circumstances, you request the Commissioner remit in full the Termination Payments Tax (TPT) assessment issued for the year ended 30 June 2001, or alternatively assess the TPT on the reduced amount of ETP of $7,061.00.”[5]
[5] Statement of Reasons, 28 June 2006
The Commissioner disallowed the objection on the basis that the amount of the TPT had been correctly assessed under s 11 of the Termination Payments Tax (Assessment and Collection) Act 1997 (TPTAC Act). Although four years had passed since the conclusion of the financial year ended 30 June 2001, there was no time limit within which an assessment of TPT could be made. The limit set out in s 11A applies only to an amendment of an assessment but there was no such amendment in this instance. In so far as remission of the TPT was concerned, the Commissioner decided that he did not have any discretion to remit the surcharge liability that had been assessed under s 11 of that Act.
LEGISLATIVE BACKGROUND
The Tribunal’s power to extend time
If a person is dissatisfied with the Commissioner’s objection decision the person may apply to the Tribunal for review of that decision if it is a reviewable objection decision.[6] That is an objection decision that is not an ineligible income tax remission decision.[7] Therefore, the 2002 objection decision is a decision that may be reviewed by the Tribunal.
[6] Taxation Administration Act 1953 (TAA), s 14ZZ(a)(i) and (b)
[7] TAA, s 14ZQ
Under s 29(2) of the Administrative Appeals Tribunal Act 1975 (AAT Act) and unless varied by another enactment, a person has 28 days within which to apply for review of a decision. There has been a variation of the time period in this case to 60 days after the person making the application is served with notice of a reviewable objection decision[8]. A person may apply for an extension of the time allowed to lodge an application in accordance with s 29(7) of the AAT Act and may do so even though the time for an application has expired.[9]
[8] TAA, s 14ZZC
[9] Administrative Appeals Tribunal Act 1975, s 29(8)
An outline of the relevant provisions of the 1997 ITAA relating to ETPs
Under the 1997 ITAA, a person must pay income tax for each financial year ending on 30 June.[10] A person’s income tax is worked out by first working out that person’s taxable income and then multiplying it by the income tax rate that is applicable before deducting any tax offsets.[11]
[10] 1997 ITAA, s 4-10(1)
[11] 1997 ITAA, s 4-10(3)
The starting point then is a person’s taxable income. “Taxable income” is assessable income less any deductions.[12] What is meant by “assessable income” is the subject of Division 6 of Part 1-3 of the 1997 ITAA. In determining what is assessable income, five concepts are important and are set out in s 6-1:
“6-1(1) Assessable income consists of ordinary income and statutory income.
6-1(2)Some ordinary income, and some statutory income, is exempt income.
6-1(3)Exempt income is not assessable income.
6-1(4)Some ordinary income, and some statutory income, is neither assessable income nor exempt income.
6-1(5)An amount of ordinary income or statutory income can have only one status (that is, assessable income, exempt income or non-assessable non-exempt income) in the hands of a particular entity.”
[12] 1997 ITAA, s 4-15(1)
“Statutory income” and not “ordinary income” is relevant in this case. “Statutory income” includes amounts that are not income according to ordinary concepts and so “ordinary income”[13] but are included in a person’s assessable income by virtue of a statutory provision.[14] Those sections are summarised in s 10-5, which specifies ss 27A to 27H of the Income Tax Assessment Act 1936 (1936 ITAA) as providing for amounts that are included in assessable income even though they are not ordinary income.
[13] 1997 ITAA, s 6-5(1)
[14] 1997 ITAA, s 6-10(1)
Subdivision AA of Division 2 of Part III of the 1936 ITAA is concerned with superannuation, termination of employment and kindred payments. What is meant by an ETP in relation to a taxpayer is the subject of an extensive definition in s 27A(1). In very general terms but sufficient for this matter, an ETP is “… any payment made in respect of the taxpayer in consequence of the termination of any employment of the taxpayer, other than …” certain payments that are specified in the definition of the term in s 27A(1). The definition is broadly drafted and includes payments made in consequence of resignation, retirement, death, redundancy or invalidity, superannuation fund payments (unless, for example, the fund has never been entitled to any concessional tax treatment or the benefit is paid as a pension), retirement savings accounts and approved deposit funds.
The definition also excludes a number of payments from its ambit. Among them is:
“consideration of a capital nature for, or in respect of, personal injury to the taxpayer, to the extent to which the amount or value of the consideration is, in the opinion of the Commissioner, reasonable having regard to the nature of the personal injury and its likely effect on the capacity of the taxpayer to derive income from personal exertion”.[15]
[15] 1936 ITAA, s 27A(1)(n)
Section 6-10(3) provides for a situation in which an amount would be statutory income but the person has yet to receive it. That section provides:
“If an amount would be statutory income apart from the fact that you have not received it, it becomes statutory income as soon as it is applied or dealt with in a way on your behalf or as you direct.”
“Exempt income” is an amount of ordinary income or of statutory income if it has been exempted from income tax by a statutory provision.[16] Those provisions are listed in ss 11-5, 11-10 and 11-15 of the 1997 ITAA. Provisions relating to ETPs are not listed among those sections.
[16] 1997 ITAA, s 6-20(1) and see also s 6-20(3)
A provision of a statute may state that statutory income is non-assessable non-exempt income.[17] They are referred to in Sub-division 11-B of the 1997 ITAA but again no reference is made to ETPs.
[17] 1997 ITAA, s 6-23
An outline of the relevant provisions of the TPTAC Act
The TPTAC Act provides for the assessment and collection of the termination payments surcharge. That surcharge, s 5 provides, is:
“…payable on payments of kinds commonly known as golden handshakes that are made to high-income taxpayers in consequence of the termination of their employment.”
In general terms, a “termination payment” is a payment made after 20 August 1996 and before 1 July 2005 and is the retained amount of an ETP because of paragraph (a) of the definition of an ETP in s 27A(1) of the 1936 ITAA.[18]
[18] TPTAC Act, ss 31 and 7(2)
Section 11(1) provides that:
“For each financial year (being a financial year that ends before 1 July 2005) in which termination payments are made to or for a taxpayer, the Commissioner must make an assessment that:
(a)calculates the taxpayer’s adjusted taxable income; and
(b)if the adjusted taxable income is greater than the surcharge threshold:
(i)calculates the termination payments; and
(ii)calculates the rate of surcharge that applies to the taxpayer; and
(iii)specifies the amount of the surcharge payable or, if no surcharge is payable, states that a nil amount of surcharge is payable; and
(c)if the adjusted taxable income is equal to or less than the surcharge threshold – states that a nil amount of surcharge is payable.”
The surcharge is payable within one month after the day on which the assessment is made.[19] Section 11 does not specify the time within which the assessment must be made although s 11A specifies a time limit within which an assessment may be amended.
[19] TPTAC Act, s 11(2)
The surcharge is assessed after the Commissioner has calculated the taxpayer’s adjusted taxable income. If that income is greater than the surcharge threshold, the Commissioner must calculate the termination payments, the rate of surcharge that is applicable to the taxpayer and specify the amount of surcharge that is payable.[20]
CONSIDERATION
[20] TPTAC Act, s 11(1)
The principles that guide my decision
In considering the manner in which the discretion to grant an extension should be exercised, regard is frequently paid to the principles set out by Wilcox J in Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment.[21] In that case Wilcox J considered an application for extension of time pursuant to s 11 of the Administrative Decisions (Judicial Review) Act 1977 (“ADJR Act”) rather than s 29 of the AAT Act. After noting that s 11 does not set out any criteria to be followed in exercising the Court’s discretion and noting that there had been a number of decisions of judges of the Federal Court all sitting at first instance, he said, in part:
“... I venture to suggest that from them may be distilled the following principles to guide, not in any exhaustive manner, the exercise of the court’s discretion:
(a) Although the section does not, in terms, place any onus of proof upon an applicant for extension, an application has to be made. Special circumstances need not be shown, but the court will not grant the application unless positively satisfied that it is proper so to do. The ‘prescribed method’ of 28 days is not to be ignored …: Ralkon v Aboriginal Development Commission (1982) 43 ALR 535 at 550. Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained: Lucic v Nolan (1982) 45 ALR 411 at 416. It is a pre-condition to the exercise of discretion in his favour that the applicant for extension show an ‘acceptable explanation of the delay’ and that it is ‘fair and equitable in the circumstances’ to extend time: Duff v Freijah (1982) 43 ALR 479 at 485; Chapman v Reilly (Neaves J, 9 December 1983, unreported, at p7).
(b) Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not ‘rested on his rights’: per Fisher J in Doyle v Chief of General Staff (1982) 42 ALR 283 at 287) and a case where the decision-maker was allowed to believe that the matter was finally concluded. Compare Doyle, Chapman, Ralkon, and Douglas v Allen (Morling J, 3 April 1984, unreported, at p18 of the transcript) with Lucic at 414–5 and Hickey v Australian Telecommunications Commission (1983) 47 ALR 517 at 519. The reasons for this distinction are not only the ‘need for finality in disputes’ (see Lucic at 410) but also the ‘fading from memory’ problem referred to in Wedesweiller v Cole (1983) 47 ALR 528.
(c) Any prejudice to the respondent, including any prejudice in defending the proceedings occasioned by the delay, is a material factor militating against the grant of an extension: see Doyle at p287; Duff at pp484–5; Hickey at pp525–7 and Wedesweiller at pp533–4.
(d) However, the mere absence of prejudice is not enough to justify the grant of an extension: Douglas at p18; Lucic at p416; Hickey at p523. In this context, public considerations often intrude: Lucic, Hickey. A delay which may result, if the application is successful, in the unsettling of other people (Ralkon at p550; Becerra v Fowell (Morling J, 18 February 1983, unreported, at 12– 13)) or of established practices (Douglas at 19) is likely to prove fatal to the application.
(e) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted: Lucic at p417; Chapman at p6.
(f) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court’s discretion: Wedesweiller at pp534–5.”[22]
[21] (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315
[22] (1984) 3 FCR 344; 58 ALR 305; 7 ALD 315 at 348-349; 310-311; 320
The Hunter Valley case has since been cited with approval and applied by the Federal Court in relation to applications for judicial review under the ADJR Act e.g. Burchett J in Chumbairux v Minister for Immigration and Ethnic Affairs[23] and Northrop J in Hoare v Deputy Commissioner of Taxation (Vic).[24] It has also been followed in reported decisions of this tribunal such as Re Bonavia and Secretary, Department of Social Security,[25] Re Bogaards and Commonwealth of Australia[26] and Mulheron v Australian Telecommunications Corporation.[27] Similar principles were applied by Mr R K Todd, Deputy President, in the case of Re Bell and Australian Telecommunications Corporation,[28] which pre-dated the decision in Hunter Valley, and in Re Pepper-Clayton and Australian Telecommunications,[29] which post-dated it but made no reference to it.
[23] (1986) 74 ALR 480
[24] (1987) 14 ALD 476
[25] (1985) 9 ALD 97
[26] (1987) 13 ALD 578
[27] (1991) 23 ALD 309 at 314
[28] (1983) 5 ALN N186
[29] (1985) 7 ALD 508
The Federal Court has also expanded upon the principles in subsequent cases. In Windshuttle v Deputy Federal Commissioner of Taxation,[30] von Doussa J considered an appeal from the Tribunal’s decision to refuse to extend the time within which Mrs Windshuttle might seek review of an objection decision on her objection to her taxation assessment. The Tribunal had held that:
“Turning now to any prejudice which may be caused to the respondent were I to grant the application, I am unable to find any. The area of dispute between the parties is documented and is not particularly dependant upon memories which may fail over time. On the evidence I have, I find that the Commissioner was not aware that the assessment was disputed after judgement was entered in September 1991 until action was taken to have the judgement set aside in December 1991 but I am satisfied that he was not prejudiced in this regard or by subsequent delays.”
Von Doussa J said:
[32]“The kind of prejudice which is relevant is prejudice that could arise to the opposing party in properly and fairly dealing with the subject matter of the dispute that will require determination if the extension of time is granted. Relevant matters will be whether witnesses have disappeared or their recollections have faded (provided of course that the evidence of the witnesses would have been material: Ulowski v Miller [1968] SASR 277 at 283-284 and cannot be refreshed Wedesweiller and Others v Cole and Others (1983) 47 ALR 528 at 534); whether avenues of useful enquiry have dried up or become difficult to pursue; and whether material documents have been destroyed. In a case like the present it may be open to the party potentially entitled to recover money to establish that by reason of the delay, the financial resources of the applicant have so altered for the worse that the chance of recovery of whatever sum is ultimately found to be due has seriously diminished. But as Bray CJ observed in Ulowski v Miller, at 284 and also in Victa Limited v Johnson (1975) 10 SASR 496 at 504, a court (or tribunal) should be slow to infer something to the existence of which the party asserting it is unwilling to depose. So, if a party against whom an extension of time is sought, intends to oppose that extension on the ground of prejudice, that party should adduce evidence which shows the nature and extent of that prejudice. In the present case no cause for prejudice beyond those matters listed above was asserted or deposed to.”
[30] (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88
In Windshuttle, von Doussa J also expanded upon what Wilcox J meant by taking proper account of the substantial merits of the case:
“The issue which the AAT was required to consider was whether, for the purposes of the exercise of the discretion under s 188A [of the Income Tax Assessment Act 1936], the applicant's case had prospects of success, and what those prospects were. It is sufficient for that purpose, if the parties chose to so argue their case, to merely identify the factual assertions which the applicant made in the objection, and then to consider whether the application of the law to those assertions would bring about the result for which the applicant contends. In other words the assertions can, if the parties so choose, be treated as pleadings are treated where an application is made to strike out an action on the ground that the pleadings disclose no cause of action. On an application of that kind the true existence of the facts alleged in the pleadings is not explored by evidence. That is left for the trial if there is an arguable case on the pleadings. It would, of course, have been open before the AAT for the Commissioner to attack the history of the transaction asserted by the applicant. If it could have been demonstrated that an essential part of that history was wrong, that would go directly to the prospects of success to the objection. However the Commissioner chose not to [attack] the veracity of the facts alleged by the applicant, and this is understandable having regard to judicial pronouncements to the effect that where the issue is whether leave should be given to extend time it is inappropriate for the tribunal concerned to embark on a full scale trial of the merits of the underlying question which will be agitated only if time is extended. See Barrett v Minister for Immigration, Local Government and Ethnic Affairs (1989) 18 ALD 129 at 130, Repatriation Commission v Tuite (1992) 37 FCR 571 at 577. It would not be appropriate on an application to extend time to seek to attack the facts alleged on the ground that the credit of the applicant, or that of supporting witnesses, should not be accepted. Arguments of that kind are best left for later consideration if and when an extension of time is granted. Only where there is some obvious and easily demonstrated flaw in the applicant's case would it be appropriate to challenge the factual basis for the asserted claim on an application to extend time.”[33]
[33] (1993) 46 FCR 251; 93 ATC 4992; 27 ATR 88 at 243-244; 4999 and 95 and approved by Commissioner of Taxation v Brown [1999] FCA 1198 at [12] per Drummond, Sackville and Hely JJ
In Commissioner of Taxation v Brown[34] Drummond, Sackville and Hely JJ summarised the essential principles in considering the substantial merits of the application:
“ It is important to appreciate the limits of the Commissioner's argument. Mr Bevan, who appeared with Mr Iuliano for the Commissioner, explicitly (and properly) made the following concessions:
(i) In determining whether a taxpayer seeking an extension of time in which to lodge an objection has prospects of success, the test to be applied is whether the objection arguably has merit.
(ii) The arguable merits test requires the taxpayer's case to be assessed at its highest.
(iii) It follows that, in applying the arguable merits test, findings of credit have no place. In other words, it is an error of law for the AAT to decide that the taxpayer’s objection has no arguable merits on the basis that the taxpayer's evidence is not worthy of belief.(iv) Ordinarily, it is inappropriate for the AAT to permit or to engage in cross-examination of the taxpayer’s witnesses with the view to testing the veracity of their evidence so far as the merits of the objection were concerned. Mr Bevan specifically conceded that it was ‘inappropriate’ for the AAT Member to have cross-examined the taxpayer as to the truth of his claim that the unit was an unsolicited gift offered by Mr Ray.”[35][34] [1999] ATC 4852 at 4856
[35] [1999] ATC 4852 at 4858
In applying the guidelines set out in the Hunter Valley case, I have also kept in mind that it was stated in that case, and has been consistently stated in decisions of the Federal Court since then, that they are not exhaustive. The Full Court of the Federal Court has also said that there is no precondition that there must be an acceptable explanation of the delay before an application for an extension of time can be successful. While there is no pre-condition it is, however, to be expected that such an explanation will normally be given as a relevant matter to be considered.[36] Where that explanation involves delays by a solicitor, those delays are not visited upon the client.[37]
[36] Comcare v A’Hearn (1993) 119 ALR 85 at 88
[37] Comcare v A’Hearn (1993) 119 ALR 85 at 88
In Chalk v Commissioner for Superannuation,[38] Davies J, with whom Black CJ agreed, went beyond a description of particular factors to which regard should be had to an explanation of, as it were, the spirit in which an application for extension should be approached. He said:
“ Most provisions which authorise an extension of time are instances of beneficial legislation which, accordingly, should be applied beneficially. With respect to such discretions in rules of court, Reynolds, Hutley and Bowen JJA said, in Outboard Marine Australia Pty Ltd v. Byrnes: Bauknecht [1974] 1 NSWLR 27 at 30:-
‘We appreciate that the rules of court, particularly those relating to time, should never be allowed to be an instrument of tyranny. They do, however, have purposes, one of which is that the parties may know where they stand and regulate their affairs accordingly. It is also appreciated that where genuine issues ought to be litigated, if such can be done with fairness to all concerned, it is appropriate to take a benign view of applications to extend time.’
Those remarks indicate the importance of forming a view as to whether it is in the interests of justice that time be extended.”[39]
[38] (1994) 50 FCR 150; 33 ALD 420
[39] (1994) 50 FCR 150; 33 ALD 420 at 155; 425
Similar sentiments were expressed by McHugh J in the High Court in Brisbane South Regional Health Authority v Taylor:[40]
“Even where the cause of action relates to personal injuries …, it will be often just as unfair to make the shareholders, ratepayers or taxpayers of today ultimately liable for a wrong of the distant past, as it is to refuse a plaintiff the right to reinstate a spent action arising from that wrong. The final rationale for limitation periods is that the public interest requires that disputes be settled as quickly as possible …
In enacting limitation periods, legislatures have regard to all these rationales. A limitation period should not be seen therefore as an arbitrary cut-off point unrelated to the demands of justice or the general welfare of society. It represents the legislature’s judgment that the welfare of society is best served by causes of action being litigated within the limitation period, notwithstanding that the enactment of that period may often result in a good cause of action being defeated. Against this background, I do not see any warrant for treating provisions that provide for an extension of time for commencing an action as having a standing equal to or greater than those provisions that enact limitation periods. A limitation provision is the general rule; an extension provision is the exception to it. The extension provision is a legislative recognition that general conceptions of what justice requires in particular categories of cases may sometimes be overridden by the facts of an individual case. The purpose of a provision such as s 31 is ‘to eliminate the injustice a prospective plaintiff might suffer by reason of the imposition of a rigid time limit within which an action was to be commenced.’ [[41]] But whether injustice has occurred must be evaluated by reference to the rationales of the limitation period that has barred the action. The discretion to extend should therefore be seen as requiring the applicant to show that his or her case is a justifiable exception to the rule that the welfare of the State is best served by the limitation period in question. Accordingly, when an applicant seeks an extension of time to commence an action after a limitation period has expired, he or she has the positive burden of demonstrating that the justice of the case requires that extension.”[42]
Should the time within which Mr Spencer may apply to review the 2002 objection decision be extended?
[40] (1996) 186 CLR 541; 139 ALR 1
[41] Sola Optical Australia Pty Ltd v Mills (1987) 163 CLR 628; 75 ALR 513 at 635; 518
[42] (1996) 186 CLR 541; 139 ALR 1 at 553-554; 9-10
In his affidavit, Mr Spencer said that, between 2001 and 2006, he was obsessed with what had happened in VCAT. During those years, he pursued two avenues that he saw open to him in relation to the VCAT proceedings. I accept his evidence and also his evidence that his health suffered during this period. While he was pursuing those avenues, he could not address his taxation matters with the Australian Taxation Office (ATO). His financial resources permitted him to have only a limited amount of access to legal advice. Otherwise, he pursued the matters by representing himself in his attempts to have the settlement in the VCAT proceedings set aside. Given that Mr Spencer was unrepresented and given the effect that the whole matter has had on his health, his delay in pursuing his right to have the 2002 objection decision reviewed is understandable.
Approximately five months after he received the Commissioner’s advice of the 2002 objection decision, he wrote to the ATO on 10 November 2003. He took issue with the Commissioner’s reasons given in his letter to Mr Spencer and dated 25 June 2002. Among other matters, he complained to the Commissioner that he had not been asked for further evidence relating to his written submissions and the terminating Ms Solicitor’s services. He also alleged that it had been immoral for Telstra and VCAT to pay whatever was due to him “… however illegally terrorised and forced the so-called settlement was.”[43] At the end of 2003, therefore, I find that the Commissioner would have been well aware that Mr Spencer was not happy with the objection decision. He would not have known, though, that he continued with his wish to challenge his decision in the subsequent years and as late as 2006.
[43] Affidavit of Mr Spencer sworn 27 October 2006, Exhibit “B”
Mr Spencer openly admits that he received the payment under the terms of settlement lodged with VCAT but makes several points in relation to them. First, he points out that they were not received or banked by him until 2005. Second, he disputes the nature of the payment he received. That has two aspects. One is that Mr Spencer says that there was no settlement because he had terminated his instructions to Ms Solicitor. She had sent the settlement papers to Telstra’s solicitors without his instructions. Another, Mr Spencer puts forward is that, even though the settlement was entered without his instructions, the payment was in settlement of the discrimination proceedings in VCAT and not an ETP. Telstra’s solicitors had classified the payment as an ETP simply because he had failed to provide a medical certificate referred to in the settlement.
I do not need to undertake a detailed analysis of the merits of the case. I do need to decide whether, at its highest and on the view of the facts put forward by Mr Spencer, his case arguably has merits. In doing so, I have considered various the facets of his case individually.
His assertion that there was no settlement is not a matter that can be explored by the Tribunal. It is a matter entirely within the jurisdiction of a Victorian tribunal, VCAT, and, on any appeal, by the Supreme Court. Mr Spencer has been unsuccessful in his attempt to have VCAT and the Supreme Court to reopen the matter. The Tribunal cannot review their decisions in any way. It must take the facts as they occurred and not as, perhaps or perhaps not, they should have occurred.
The payment remains a payment paid under the settlement. There then arises a question whether it was paid “in consequence of the termination” of Mr Spencer’s employment. In Reseck v Commissioner of Taxation,[44] the High Court considered the expression in the context of s 26(d) of the 1936 ITAA. Gibbs J concluded that:
“… Within the ordinary meaning of the words a sum is paid in consequence of the termination of employment when the payment follows as an effect or result of the termination. … It is not in my opinion necessary that the termination of the services should be the dominant cause of the payment. …”[45]
Jacobs J said:
“… It was submitted that the words ‘in consequence of’ import a concept that the termination of employment was the dominant cause of payment. This cannot be so. A consequence in this context is not the same as a result. It does not import causation but rather a ‘following on’.”[46]
[44] (1975) 133 CLR 45; 6 ALR 642
[45] (1975) 133 CLR 45; 6 ALR 642 at 51; 646
[46] (1975) 133 CLR 45; 6 ALR 642 at 56; 650
Reseck was analysed by the Full Court of the Federal Court in McIntosh v Federal Commissioner of Taxation[47] and both were analysed by Goldberg J in Le Grand v Federal Commissioner of Taxation.[48]His Honour concluded:
“[33] I do not consider that the issue can simply be determined by seeking to identify the ‘occasion’ for the payment. The thrust of the judgments in Reseck and McIntosh is rather to the effect that a payment is made ‘in consequence’ of a particular circumstance when the payment follows on from, and is an effect or result, in a causal sense, of that circumstance. The passages in the judgments to which I referred earlier make this clear. They also make it clear that there need not be identified only one circumstance which gives rise to a payment before it can be said that the payment is made ‘in consequence’ of that circumstance. The passages to which I have referred make it clear that it can be said that a payment may be made in consequence of a number of circumstances and that, for present purposes, it is not necessary that the termination of the employment be the dominant cause of the payment so long as the payment follows, in the causal sense referred to in those judgments, as an effect or result of the termination.”[49]
[47] (1970) 25 ALR 557; 45 FLR 279
[48] (2002) 195 ALR 194
[49] (2002) 195 ALR 194 at 199-203; [25]-[34]
In the case before him, Mr Le Grand’s employment had been terminated before he brought legal proceedings contending that it had been wrongfully terminated. Goldberg J said:
“ I am satisfied that there is a sufficient connection between the termination of the applicant’s employment and the payment to warrant the finding that the payment was made ‘in consequence of the termination’ of the applicant’s employment. I am satisfied that the payment was an effect or result of that termination in the sense that there was a sequence of events following the termination of the employment which had a relationship and connection which ultimately led to the payment. True it is that the payment was made not only to settle the applicant’s claim for common law damages for breach of the employment agreement but also for statutory damages pursuant to the provisions of the Trade Practices Act and the Fair Trading Act in respect of the claims for misleading and deceptive conduct. But, as is pointed out in the judgments to which I have referred, it is not necessary for the termination of the employment to be the dominant cause of the payment.
Although the claims in the proceeding for misleading and deceptive conduct related to representations which had occurred prior to the termination of the employment and, indeed, prior to the making of the employment agreement and are conceptually separate causes of action, the claim that the representations were untrue was, in part, based upon the fact that the applicant’s employment was terminated on 23 February 1998 and that by reason of that termination he was unable to receive his remuneration package and had suffered loss and damage. Thus the fact of the termination of the applicant’s employment was interwoven, and intertwined, with the claims for misleading and deceptive conduct. I do not consider that the claims for misleading and deceptive conduct and the settlement of those claims insofar as they were settled by the acceptance of the offer of compromise broke the causal relationship which existed between the termination of the applicant’s employment and the payment of the offer of the compromised amount. The fact that the offer was made by both defendants in the proceeding and not just the employer does not detract from the characterisation of the payment that it was related to, and was an effect or follow on from, the termination of the applicant’s employment.”[50]
[50] (2002) 195 ALR 194 at 203-204; [35]-[36]
In Mr Spencer’s view of the facts, the deed of settlement and release, the draft letter of service and the draft letter of resignation were sent to his counsel at the same time. Telstra’s solicitors checked that the letter of resignation had been sent to VCAT and that occurred before they sent the cheques to Ms Solicitor. Accepting all of Mr Spencer’s evidence and taking his case at his highest, the termination of his employment by virtue of his resignation and the settlement were so intertwined and interwoven that there was a causal relationship between the termination and the payment of the amount referred to in the deed of settlement and release. Using Goldberg J’s words, the “characterisation of the payment is that it is related to, and was an effect or follow on from, the termination of …” Mr Spencer’s employment. On Mr Spencer’s view of the facts, there is no reasonably arguable case that this was not the proper characterisation and so no reasonably arguable case that it is not an ETP.
On the view of the law that has been taken by the High Court and the Federal Court, the fact that Mr Spencer had failed to provide a medical certificate referred to in the settlement does not alter my view of the merits of his case. It does not alter the characterisation of the payment. Furthermore, it does not, on the law, bring the payment within the exception in s 27A(1)(n) of the 1936 ITAA. That exception excludes from the compass of the definition of an ETP any consideration of a capital nature in respect of personal injury to Mr Spencer but only to the extent to which the amount of that consideration is reasonable having regard to the nature of the personal injury and its likely effect on his capacity to derive income from his personal exertion.
The settlement and release agreement did not include any acknowledgment by Telstra that it had discriminated against Mr Spencer. Rather, it denied that it had unlawfully discriminated against him but designated part of the payment, $158,000, for personal wrong and damage. Assuming that this part of the payment or any part of the rest of the payment could be described as relating to personal injury, could it be said to be in respect of personal injury given Telstra’s denial of liability. A very similar question was considered by the Full Court of the Federal Court in Dibb v Commissioner of Taxation.[51] The trial Judge had found:
“‘[32] Before the Commissioner on the objection hearing were two medical certificates dated respectively 21 July 1997 and 19 December 2002 from Dr Jim Ryan of Wishart, Queensland. In the first of these reports Dr Ryan stated:
“This is to certify that I have been treating Mr Dibb for Anxiety/Depression since September 1996. This I believe has come about I believe as a result of losing his job. Currently he takes anti depressant medication with a gradually increasing dosage. He received a medical certificate excusing him from Jury Duty partly because of his serious condition.”
[33] In the second certificate Dr Ryan stated:
“This is to certify that I am treating this (patient/man) for dermatitis, hypertension, gastrointestinal disorder and depression.”
[34] Counsel for the Commissioner accepted that, in an appropriate case, a single payment made in consequence of the termination of employment of a taxpayer may be apportioned amongst several heads to which it relates. One of those heads could be consideration in respect to personal injury within the meaning of s 27A(1)(n). To that extent the payment may be treated as not being an ETP.
[35] ‘Personal injury’ encompasses injury or disease of a physical or psychological nature. However it would not extend to anguish, distress or embarrassment of the kind traditionally taken into account in assessing damages for defamation: Federal Commissioner of Taxation v Scully (2000) 201 CLR 148 at [28], Graham v Robinson [1992] VR 279. However, even accepting that some of the complaints of damage the applicant raised in the Federal Court proceeding consisted of anxiety and depression and thus ‘personal injury’, the Commissioner was correct in concluding there was no way of dissecting the total settlement sum to include an amount for such a payment: McLaurin v Federal Commissioner of Taxation (1960-1961) 184 CLR 391.’”[52]
[51] [2004] FCAFC 126; (2004) 207 ALR 151
[52] [2004] FCAFC 126; (2004) 207 ALR 151 at 167-168; [45]
The Full Court of the Federal Court decided:
“46 The last sentence of [35] of the primary Judge’s reasons contains a premise with which we agree. The occasion for apportionment pursuant to par 27A(1)(n) only arises if there can be said to be ‘consideration of a capital nature for, or in respect of, personal injury to the taxpayer ...’. Here, it is impossible to say whether there was or was not personal injury. AVCO denied it. The section does not provide for ‘consideration ... of, or in respect of, allegations of personal injury.’ As can be seen from the description of the allegations in the Federal Court proceedings and the terms of the deed, there was no agreement between the parties that Mr Dibb had suffered personal injury. It was submitted on his behalf (as it had to be) that the respondent was obliged to sit, in effect, as a tribunal to decide whether he suffered personal injury and if so, the amount of a reasonable payment therefor. We disagree. The respondent was correct, as was his Honour, in concluding that it was impossible to identify any part of the total sum of $788,544 as consideration for, or in respect of personal injury.”
The situation in this case is substantively the same in this case. In view of Telstra’s denial of liability, all that Mr Spencer received was a payment relating to an allegation of discrimination. It cannot be put any higher than that and there is no obligation on the Commissioner, and so no obligation on the Tribunal, to conduct an enquiry and make a determination whether Mr Spencer suffered discrimination and, if so, the amount of the payment that was reasonable for that discrimination. There is no obligation even on the assumption that a payment for discrimination can be regarded as a payment for personal injury. Therefore, Mr Spencer’s case that the payment is not an ETP on the basis that it comes within s 27A(1)(n) of 1936 ITAA is without merit.
I have also considered Mr Spencer’s argument that he did not present the cheque that he had received from Ms Solicitor for 51 months. I understand him to be arguing that he could not have been said to have received it in relation to the 2001 year of income. I must, however, have regard to s 6-10(3) of the 1997 ITAA. Its effect is that an amount does not necessarily have to pass through the taxpayer’s hands in order to be regarded as that person’s statutory income. It is enough that it is applied or dealt with on the taxpayer’s behalf or as the taxpayer directs. On Mr Spencer’s view of the facts, Ms Solicitor banked the two cheques she received from Telstra’s solicitors. She deducted an amount for her costs and sent the balance to Mr Spencer. I do not see an argument that can be raised that she had not applied or dealt with it on his behalf even though it would clearly not have been at his direction. The expression used in s 6-10(3) is “on your behalf”. I am not aware of any authorities that have considered that expression although many have considered the expression “on behalf of”. It seems to me that the latter expression is the same as the former. The only difference is that it is the expression chosen when writing in the third person whereas the former is chosen when writing in the first person.
Lindgren J considered it in the context of s 84(2) of the Trade Practices Act 1974 (TPC). That section requires a consideration of whether misleading and deceptive statements have been made on behalf of an alleged corporate principal. His Honour did so in NMFM Property Pty Ltd v Citibank (No 10)[53] when he summarised some of the authorities:
[53] (2000) 107 FCR 270; 186 ALR 442
1239 I will turn first to question (A). What is the meaning of the expression ‘on behalf of’ in the opening words of s 84(2)?
1240 In R v Portus; Ex parte Federated Clerks Union of Australia (1949) 79 CLR 428 at 435, Latham CJ observed that the phrase ‘“on behalf of” is not an
expression which has a strict legal meaning’. In R v Toohey; Ex parte
Attorney-General (NT) (1980) 145 CLR 374, in a joint judgment Stephen,Mason, Murphy and Aickin JJ said of the expression (at 386):
‘‘. . . it bears no single and constant significance. Instead it may be used in
conjunction with a wide range of relationships, all however in some way
concerned with the standing of one person as auxiliary to or representativeof another person or thing.’
The expression was considered more recently by Kirby P in the New South
Wales Court of Appeal in Citizens Airport Environment Association Inc v
Maritime Services Board (1993) 30 NSWLR 207, esp at 221-223, but as his
Honour recognised, since the meaning of the expression is influenced so much
by the statutory context in which it appears, authorities relating to a differentstatutory context afford little guidance.
1241 It has been accepted that s 84(2) is an enlarging provision, that is, one that is intended to make proof of corporate responsibility for conduct easier than it is at common law by providing additional means of proving that matter: compare Trade Practices Commission v Queensland Aggregates Pty Ltd (No 3) (1982) 61 FLR 52 at 66 (Morling J); Trade Practices Commission v Tubemakers of Australia Ltd (1983) 76 FLR 455 at 474-475; 47 ALR 719 at 739 (FCA/Toohey J); Walplan Pty Ltd v Wallace (1985) 8 FCR 27 at 36-37, 38 (FC); J-Corp Pty Ltd v Australian Builders Labourers Federated Union of
Workers (WA Branch) (1992) 46 IR 263 at 291-292; 111 ALR 502 at 531-532(FCA/French J).
1242 In Walplan Pty Ltd v Wallace Lockhart J (with whom Sweeney and
Neaves JJ agreed) stated (at 37):
‘The phrase “on behalf of” is not one with a strict legal meaning and it
is used in a wide range of relationships. The words are not used in any
definitive sense capable of general application to all circumstances which
may arise and to which the subsection has application. This must depend
upon the circumstances of the particular case, but some statements as to
the meaning and operation of the subsection may be made. In the context
of s 84(2) the phrase suggests some involvement by the person concerned
with the activities of the company. The words convey a meaning similar to
the phrase ‘in the course of the body corporate’s affairs or activities’ . . .
Section 84(2) refers to conduct by directors and agents of a body corporate
as well as its servants. Also, the second limb of the subsection extends the
corporation’s responsibility to the conduct of other persons who act at the
behest of a director, agent or servant of the corporation. Hence the phrase
‘on behalf of’ casts a much wider net than conduct by servants in the
course of their employment, although it includes it.’’1243 I accept that it is neither necessary nor sufficient that the person whose
conduct is in question (the actor) intended his or her conduct to be for the
benefit of the corporation, let alone that it in fact be for its benefit: compareWalplan Pty Ltd v Wallace at 38.
1244 It seems to me that an act is done ‘on behalf of’ a corporation for the
purpose of s 84(2) if either one of two conditions is satisfied: that the actor
engaged in the conduct intending to do so ‘as representative of’ or ‘for’ the
corporation, or that the actor engaged in the conduct in the course of thecorporation’s business, affairs or activities. This view accords with what Kiefel J said in Lisciandro v Official Trustee in Bankruptcy [1995] ATPR ¶41- 436 at 40,903-40,904.”[54]
[54] (2000) 107 FCR 270; 186 ALR 442 at 549-550; 701-702
More recently, Hunter J made a similar analysis in Pacific Carriers Ltd v Banque Nationale de Paris.[55]He referred also to the passage from Latham CJ’s judgment in R v Portus; Ex parte Federated Clerks Union of Australia[56] and gave some additional examples of the breadth of the expression “on behalf of”:
“In what is perhaps its least specific use, ‘on behalf of’ may be applied to someone who does no more than express support for persons or for a cause, as with one who speaks on behalf of the poor or on behalf of tolerance. It may be used when speaking of an agency relationship, but also of some quite ephemeral relationships, such as that which exists between a party to litigation and the witness he calls, a witness ‘on behalf of’ the defence. Again, it may, as the Northern Territory here contends, be used where the relationship is that of trustee and cestui que trust. It was of such a use that Lord Cairns LC spoke when he said, in Gillespie v City of Glasgow Bank (1879) 4 App. Cas. 632, at p640, that the phrase could describe a relationship of trustee and cestui que trust ‘if the circumstances of the case are consistent with that interpretation’. Context will always determine to which of the many possible relationships the phrase ‘on behalf of’ is in a particular case being applied; ‘the context and subject matter’ (per Dixon J in the [R v Portus; Ex parte] Federated Clerks' Case (1949) 79 CLR, at p438) will be determinative.”[57]
[55] [2001] NSWSC 900
[56] (1949) 79 CLR 428
[57] [2001] NSWSC 900 at [285]
Whichever of these meanings is applied to the expression “on behalf of” in s 6-10(3) of the 1997 ITAA, it will capture the amount paid by Telstra’s solicitors to Ms Solicitor. On Mr Spencer’s evidence, he had withdrawn his instructions by then. Even so, Ms Solicitor still held the money in trust for him. Ms Solicitor put some of the money aside to meet her costs. Those costs were no doubt claimed by her as having been incurred in performing work on Mr Spencer’s instructions. It was a debt that he owed and so the money she held back was applied to discharging that debt. Therefore, that part of the amount paid by Telstra’s solicitors was applied on his behalf. As for the remainder of the amount, Ms Solicitor sent it to him in a cheque, which he chose not to negotiate for 51 months. She might not have acted on his instructions but she did apply or deal with all of the payment for his benefit and so on his behalf within the meaning of s 6-10(3). Given that Mr Spencer did not negotiate the cheque for 51 months, that means that he received it in or about the month of February 2001. It does not matter that he did not cash the cheque as it remains money applied on his behalf. Therefore, that becomes statutory income from that time and so assessable income in the financial year ending 30 June 2001.
In view of these matters, I do not consider that the case put forward by Mr Spencer is one of merit. Despite the fact that I am not satisfied that there would be undue prejudice to the Commissioner if I were to extend time and I find Mr Spencer’s delay is understandable, I do not consider that justice requires that I extend the time to permit him to lodge an application. Although Mr Spencer would not agree, I do not consider that there are genuine issues between Mr Spencer and the Commissioner that merit consideration almost five years after the Commissioner’s assessment and after he had an opportunity to seek its review within the time allowed by the AAT Act. The matter has been settled, tax paid and the parties and Telstra made its arrangements accordingly.
Should the time within which Mr Spencer may apply to review the 2006 objection decision be extended?
I have noted that the Commissioner has already indicated that he does not oppose the extension of time being granted in relation to the 2006 objection decision. It seems to me that it is appropriate to extend the time. Mr Spencer lodged his application less than a month out of time. He could no longer be said to be caught up in pursuing his matters through VCAT and the Supreme Court but, in the scheme of things, that is only a very short delay. The Commissioner will not be prejudiced as he has only relatively recently issued the assessment. The merits of the case are unknown to me. Ultimately, the outcome will hinge upon the identification of the termination payment part of the ETP and various calculations. There is nothing on the face of the material that I have that suggests that a reworking of those matters is without merit and that Mr Spencer cannot have any hope of succeeding. The justice of the situation favours his being given an opportunity to raise his arguments and to have them considered by the Tribunal.
For the reasons that I have given, I:
1.refuse to extend the time within which the applicant may lodge an application to review the objection decision made by the respondent on 25 June 2002; and
2.grant an extension of the time within which the applicant may lodge an application to review the objection decision made by the respondent on 28 June 2006.
I certify that the sixty four preceding paragraphs are a true copy of the reasons for the decision herein of
Deputy President S A Forgie
Signed: ...............................................................
Jayne Rathjen Associate
Date of Hearing 27 October 2006
Date of Decision 30 March 2007
Representative for the Applicant Mr Ajai Thapliyal
Challenge Legal Lawyers
Solicitor for the Respondent Ms Elizabeth Lee and Ms Elizabeth Saltnes
ATO Legal Services Branch
[31] (1993) 46 FCR 235; 93 ATC 4992; 27 ATR 88 at 249; 5003 and 100
[32] (1993) 46 FCR 251; 93 ATC 4992; 27 ATR 88 at 249-250; 5003-5004 and 100-101 and subsequently approved by Katz J in Zizza v Commissioner of Taxation [1999] FCA 37 at [38]
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