Tettis v Deputy Commissioner of Taxation
[2013] FCCA 985
•31 July 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TETTIS v DEPUTY COMMISSIONER OF TAXATION | [2013] FCCA 985 |
| Catchwords: ADMINISTRATIVE LAW – Administrative Decisions (Judicial Review) Act 1977 – judicial review sought in relation to two decisions - review of decision to not compromise taxation debts – further review of decision not to remit penalties and interest in relation to taxation debts– both applications for review brought out of time – application for extension of time refused in relation to compromise decision – extension of time in relation to remission decision granted – decision maker’s power to remit penalties and interest made pursuant to subsections 8AAG(3), (4) and (5) of Taxation Administration Act1953 – factors considered – applications for review dismissed. |
| Legislation: Administrative Decision (Judicial Review) Act 1977 |
| Griffith University v Tang (2005) 221 CLR 99 Elias v Commissioner of Taxation (2002) 199 ALR 246 at [78] |
| Applicant: | JUSTIN MARK TETTIS |
| Respondent: | DEPUTY COMMISSIONER OF TAXATION |
| File Number: | ADG 81 of 2012 |
| Judgment of: | Judge Simpson |
| Hearing date: | 4 July 2012 |
| Date of Last Submission: | 4 July 2012 |
| Delivered at: | Adelaide |
| Delivered on: | 31 July 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Cartland |
| Solicitors for the Applicant: | Dr Campbell Rankine |
| Counsel for the Respondent: | Mr S Linden |
| Solicitors for the Respondent: | Australian Taxation Office |
ORDERS
The applicant’s application pursuant to Federal Circuit Court Rule 3.05 for an extension of time in relation to the filing of the application for review of the decision of the Respondent to refuse the applicant’s application for a compromise of a tax debt (“the Compromise Decision”) is refused.
The applicant’s application for review of the Compromise Decision is dismissed.
The applicant’s application pursuant to Federal Circuit Court Rule 3.05 for an extension of time in relation to the filing of an application for review of the decision of the Respondent for remission of penalties and interest (“the GIC Decision”) is granted with time extended to and including 27 April 2012.
The applicant’s application for review of the GIC Decision is dismissed.
The applicant shall forthwith pay the respondent’s costs to be agreed or taxed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 81 of 2012
| JUSTIN MARK TETTIS |
Applicant
And
| DEPUTY COMMISSIONER OF TAXATION |
Respondent
REASONS FOR JUDGMENT
Introduction
I have before me an Application for judicial review of two decisions made by a delegate of the Deputy Commissioner of Taxation (“the respondent”). The applicant seeks the following:
“1.Review the decision (“the GIC Decision”) of the Respondent to refuse the Applicant’s application for the remission of penalties and interest (“GIC Application”);
2.Review the decision (“the Compromise Decision”) of the Respondent to refuse the Applicant’s application for the compromise of a taxation debt (“Compromise Application”);
3.Grant an injunction to stay the Respondent from enforcing the Consent Orders against the Applicant until the Court has heard this Application; and
4.Grant an injunction to stay the Respondent from applying the Consent Orders against the Applicant until the Respondent has properly considered both the GIC Application and the Compromise Application.”
The applicant provides the following details of his claim in the Originating Application:
“The Applicant is aggrieved by the decision (sic) because:
1.The Respondent has refused the GIC Application and the Compromise Application; and
2.The Applicant is required to pay the Respondent an amount of $73,478.65.”
The applicant provides the following grounds of application:
“1.The making of the GIC Decision was an improper exercise of the Respondent’s power under Schedule 1 of the Taxation Administration Act 1953 because the Respondent failed to take relevant considerations into account in the exercise of the power to remit a General Interest Charge;
2.The making of the Compromise Decision was an improper exercise of the Respondent’s power under section 8 of the Income Tax Assessment Act 1936 and sections 44 and 47 of the Financial Management and Accountability 1997 because the Respondent:
a. Failed to take relevant considerations into account; and
b. Took into account irrelevant considerations
in the exercise of the power to compromise the taxation debt;
3.The Respondent was required to observe the rules of natural justice and failed to do so in making the GIC decision because the Respondent failed to fairly or reasonably consider the submissions put by the Applicant; and
4.The Respondent was required to observe the rules of natural justice and failed to do so in making the Compromise Decision because the Respondent failed to fairly or reasonably consider the submissions put by the Applicant.”
The applicant seeks the following orders:
“1.An order that this Honourable Court grant an injunction to stay the Respondent from enforcing the Consent Orders;
2.An order that this Honourable Court quash or set aside the GIC Decision with effect from the date hereof or a later date as this Court thinks appropriate;
3.An order that this Honourable Court quash or set aside the Compromise Decision with effect from the date hereof or a later date as this Court thinks appropriate;
4.An order that the Respondent properly consider the submissions put by the Applicant to remit the General Interest Charge; and
5.An order that the Respondent properly consider the submissions put by the Applicant for the Compromise of Taxation Debt and such other directions as this Honourable Court thinks appropriate.”
The Hearing
The applicant relied upon an affidavit of Adrian Miles Lawrence Cartland, a solicitor for the applicant, affirmed on 27 April 2012. Mr Cartland’s affidavit was put into evidence without the need for cross-examination. Both parties provided written as well as oral submissions.
Background
The applicant’s father, Mr Stan Tettis, was the original owner and operator of a jewellery business. The applicant took over his father’s jewellery business. The applicant allowed his father to continue to manage the financial administration of the business.
The applicant’s father became ill. His illness resulted in him not properly attending to the financial administration of the business. The poor financial administration of the business coincided in a downturn in trading as a result of the global financial crisis.
The business accumulated taxation debts.
Due to the confidence that the applicant held in his father, the applicant believed that the financial affairs of the business were being properly managed. The applicant eventually became aware of the financial mismanagement when unpaid creditors began calling him and the respondent sent correspondence saying that certain agreements had been breached.
In June 2010, the respondent commenced a debt recovery action against the applicant in the South Australian District Court being action number 1407 of 2010. The applicant was served with the summons at the end of July 2010.
At the time of commencement of the action, the applicant as trustee for the JMT Trust, owed the following debts to the respondent:
a.
Running Balance Account (“RBA”) primary tax relating to business activity statement periods from July 2003 to the commencement of the District Court action in the amount of:
$90,202.00
b.
Superannuation Guarantee Charges (“SGC”) for the 3 year period from 1 January 2005 to 31 December 2007 in the amount of:
$36,842.75
c.
RBA penalties in the amount of:
$3,482.25
d.
SGC penalty in the amount of:
$123.94
e.
RBA General Interest Charge (“GIC”) in the amount of:
$47,259.90
f.
SGC GIC in the amount of:
$12,779.57
Total
$190,690.41
On 9 September 2011, the respondent accepted the applicant’s election to have certain Superannuation contributions that were made late taken into account under s.23(7) of the Superannuation Guarantee (Administration) Act 1992 (“SGAA”). As a result, the SGC primary debt, the SGC penalty and the SGC GIC were reduced.
On 19 December 2011 the parties signed a document titled Memorandum of Consent Orders which was intended to resolve the District Court action. The memorandum provided for payment by the applicant of “primary tax” in the sum of $115,059.25. It also set out a timetable for payment of the balance. The memorandum also made provision for the applicant to apply to the respondent for remission and/or compromise of penalties and interest. In accordance with the memorandum, the District Court action was stayed.
On 1 February 2012 the applicant lodged an application for remission of GIC and penalties and an application to compromise tax debts with the respondent.
On 19 March 2012, the respondent issued a letter to the applicant advising that the compromise application had been rejected, and providing brief reasons for the rejection (“the Compromise Decision”).
On 27 March 2012, the respondent issued a letter to the applicant advising that the GIC application had been refused, and providing brief reasons for same (“the GIC Decision”).
On 27 April 2012, the applicant filed the originating application in this Court for judicial review of both the Compromise Decision and the GIC Decision.
On 7 June 2012, the respondent provided the applicant with a statement of reasons for the GIC Decision, setting out the material questions of fact, referring to the evidence or other material on which those findings were based and giving reasons for the decision.
Extension of Time
The respondent submits that the application was lodged out of time in relation to both decisions. The Compromise Decision is out of time by 9 days. The respondent opposes an extension of time in relation to the application for judicial review of the Compromise Decision on the basis that the application is without merit. For reasons that follow I agree that the application in relation to the Compromise Decision is without merit.
The respondent says that in relation to the application for judicial review of the GIC Decision, the application is out of time by 1 day. The respondent says that it does not oppose an extension of time in relation to it.
I propose to allow the extension of time in relation to the GIC Decision and for the reasons given below, to refuse an extension of time in relation to the Compromise Decision on the basis that it is without merit.
Compromise decision
The respondent submits that the Compromise Decision is not amenable to judicial review under the Administrative Decisions (Judicial Review) Act 1977 (“the Judicial Review Act”) as the Judicial Review Act requires that any decision to be challenged has to be a “… decision of an administrative character made … under an enactment …”. [1] The respondent refers to a passage from the decision of the High Court in Griffith University v Tang[2] in which their Honours Gummow, Callinan and Heydon JJ stated:
“The determination of whether a decision is “made … under an enactment” involves two criteria: first, the decision must be expressly or impliedly required or authorised by the enactment; and secondly, the decision must itself confer, alter or otherwise affect legal rights or obligations, and in that sense the decision must derive from the enactment. A decision will only be “made … under an enactment” if both these criteria are met. It should be emphasised that this construction of the statutory definition does not require the relevant decision to affect or alter existing rights or obligations, and it will be sufficient that the enactment requires or authorises decisions from which new rights or obligations arise. Similarly, it is not necessary that the relevantly affected legal rights owe their existence to the enactment in question. Affection of rights or obligations derived from the general law or statute will suffice.”
[1] See definition of “decision to which this Act applies” in s 3 of Judicial Review Act
[2] (2005) 221 CLR 99.
This passage lends support to the conclusion that the Compromise Decision was not expressly or impliedly required or authorised by an enactment. Any potential to bind the parties would come from the general law, not the legislation.
The applicant says in his grounds of application in the originating application, that the respondent has power under s.8 of the Income Tax Assessment Act 1936 and ss.44 and 47 of the Financial Management and Accountability Act 1997 and that the respondent misused these powers in refusing to compromise the debt.
Section 8 of the Income Tax Assessment Act 1936 provides as follows:
8. The Commissioner shall have the general administration of this Act.
Sections 44 and 47 of the Financial Management and Accountability Act 1997 provides as follows:
44(1) A Chief Executive must manage the affairs of the Agency in a way that promotes proper use of the Commonwealth resources for which the Chief Executive is responsible.
(1A) The responsibility conferred on the Chief Executive by subsection (1) includes, and is taken to have included, the power to:
(a) make arrangements, on behalf of the Commonwealth, in relation to the affairs of the Agency; and
(b) vary those arrangements on behalf of the Commonwealth; and
(c) administer those arrangements on behalf of the Commonwealth.
(1B) Subsection (1A) does not authorise the Chief Executive to exercise, on behalf of the Commonwealth, a power conferred on the Commonwealth by section 32B.
(2) In discharging the responsibility, and exercising the power, conferred by this section, the Chief Executive must comply with this Act, the regulations, Finance Minister's Orders, Special Instructions and any other law.
(3) In this section:
"administer" , in relation to an arrangement, includes give effect to.
"arrangement" includes contract, agreement or deed.
"make" , in relation to an arrangement, includes enter into.
"proper use" means efficient, effective, economical and ethical use that is not inconsistent with the policies of the Commonwealth.
47 A Chief Executive must pursue recovery of each debt for which the Chief Executive is responsible unless:
(a) the debt has been written off as authorised by an Act; or
(b) the Chief Executive is satisfied that the debt is not legally recoverable; or
(c) the Chief Executive considers that it is not economical to pursue recovery of the debt.
(2) For the purposes of subsection (1), a Chief Executive is responsible for:
(a) debts owing to the Commonwealth in respect of the operations of the Agency; and
(b) debts owing to the Commonwealth that the Finance Minister has allocated to the Chief Executive.
None of these enactments can be said to expressly or impliedly require or authorise the decision maker to compromise a debt.
No convincing argument was put on behalf of the applicant that the Compromise Decision should be reviewable. It was submitted by the applicant that it would be an “absurd” reading of Judicial Review Act to limit the scope of the Act to such extent that the Compromise Decision could not be dealt with.
It was further submitted that to narrowly define the phrase “under an enactment” with the result that the Compromise Decision could not be reviewed under the Judicial Review Act would allow the respondent to,
“… flaunt conditions of the consent orders (in the District Court proceedings) with no possibility for redress or review. Such a position would prevent the proper function of the Courts and the administration of taxation law…”
I do not agree. Parliament deliberately limits the categories of decisions by administrative bodies that can be reviewed by the Judicial Review Act. This decision to not compromise the debt did not affect or alter existing rights and obligations and should not therefore be reviewable.
The applicant has not (and can not) identify any section of the legislation that gives the applicant any right in relation to a compromise nor any section that imposes an obligation on the respondent to compromise.
I find that the applicant has a weak case in his application for judicial review of the Compromise Decision as, in my view, it is not amenable to review under the Judicial Review Act.
GIC Decision
The applicant’s request for remission of penalties and interest identified two periods during which the liabilities accumulated: before service of the District Court proceedings on the applicant, and after such service. It is submitted by the applicant that the decision maker should have considered both periods but did not do so.
The applicant correctly identifies s.8AAG of the Taxation Administration Act[3] 1953 (“TA Act”) as the legislation giving the decision-maker the power to remit.
[3] Incorrectly referred to in written submissions as the Taxation Admission Act.
Section 8AAG of the TA Act states:
“8AAG Remission of the charge
(1)The Commissioner may remit all or a part of the charge payable by a person.
(2)However, if a person is liable to pay the charge because an amount remains unpaid after the time by which it is due to be paid, the Commissioner may only remit all or a part of the charge in the circumstances set out in subsection (3), (4) or (5).
(3)The Commissioner may remit all or a part of the charge referred to in subsection (2) if the Commissioner is satisfied that:
(a) the circumstances that contributed to the delay in payment were not due to, or caused directly or indirectly by, an act or omission of the person; and
(b) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances.
(4)The Commissioner may remit all or a part of the charge referred to in subsection (2) if the Commissioner is satisfied that:
(a) the circumstances that contributed to the delay in payment were due to, or caused directly or indirectly by, an act or omission of the person; and
(b) the person has taken reasonable action to mitigate, or mitigate the effects of, those circumstances; and
(c) having regard to the nature of those circumstances, it would be fair and reasonable to remit all or a part of the charge.
(5) The Commissioner may remit all or a part of the charge referred to in subsection (2) if the Commissioner is satisfied that:
(a) there are special circumstances because of which it would be fair and reasonable to remit all or a part of the charge; or
(b) it is otherwise appropriate to do so.”
The applicant also submits that the decision-maker considered the applicant’s compliance history but did not consider his father’s illness or the effect of the Global Financial Crisis on the business.
I accept that following propositions made in the respondent’s written submissions:
· The applicant’s ground that the respondent failed to take a relevant consideration into account[4] can only be made out if the applicant can show that the decision-maker failed to take into account a consideration that he is bound to consider;
· What factors the decision-maker is bound to consider in making the decision is determined by construction of the legislation;
· Not every consideration that a decision-maker is bound to take into account but fails to take into account will justify the Court setting aside the impugned decision; and
· The Court has a limited role: it is not to substitute its own decision for that of the decision-maker; in the absence of any statutory indication of the weight to be given to the various considerations, it is generally for the decision-maker and not the Court to determine the appropriate weight to be given.
[4] S.5(2)(b) of the Administrative Decisions (Judicial Review) Act.
The respondent’s power to remit all or part of a charge can only occur in the circumstances set out in subss.8AAG(3), (4) or (5). It will be seen that the decision maker properly addressed the mandatory requirements of each of these subsections.
In relation to subs.8AAG(3), on the evidence it was clearly open to the decision-maker to find that the delay in payment was due to the applicant’s acts and omissions. The decision maker said in his reasons:
“I was not satisfied that the circumstances that contributed to the delay in payment were not due to, or caused directly or indirectly by an act or omission of the taxpayer. He was the sole trustee and it was his responsibility to organise and make sure that the documents were lodged with and the liabilities paid to the ATO by the due date.”
In addition, he had this to say about whether the applicant had taken reasonable action to mitigate, or mitigate the effects of the circumstances that resulted in the delay:
“I was not satisfied that the taxpayer had taken reasonable action to mitigate, or mitigate the effects of, the circumstances that contributed to the delay in payment. Even though the taxpayer knew that his father who was looking after the accounts, had health issues and was making errors, he did not take prompt action to mitigate the circumstances contributing to the late lodgements and payments until after the Summons was served.”
There was clearly no basis for remission pursuant to subsection 8AAG (3).
In relation to subs.8AAG(4), the decision-maker had this to say about whether it would be fair and reasonable to remit the charge or a portion of it:
“I was not satisfied that it would be fair and reasonable to remit all or a part of the GIC. The taxpayer’s compliance history since June 2001 has been poor, illustrated by the following:
· Of the 52 Activity Statements lodged since June 2011, 39 were lodged late, some late by over 12 months;
· The payment arrangement granted on 11 July 2008 was defaulted;
· Payment arrangements were refused on three previous occasions and on each occasion, the reason for refusal was the poor compliance history of the taxpayer; and
· Since July 2003, the Trust’s Running Balance Account has hd a debit balance.
In accordance with ATO Practice Statement PS LA 2011/12 paragraph 24, GIC also serves to compensate the Australian Government for the impact of late payments, as delays in tax receipts mean that government borrowing and interest costs are higher than otherwise need be.”
No criticism can be levelled at the decision maker’s reasoning for not deciding to grant remission in whole or in part pursuant to this subclause.
Finally, the decision-maker provided his reason for not granting remission pursuant to subs.8AAG(5). This subclause requires “special circumstances” that make it “fair and reasonable” to remit. The decision-maker stated:
“GIC may be remitted under s.8AAG(5) of the TAA 1953 if there are special circumstances because of (sic) it would be fair and reasonable to do so or it is otherwise appropriate to do so. I did not consider that there were special circumstances or that it was otherwise appropriate to remit the GIC.
In the request for remission the taxpayer states that, due to the Global Financial Crisis (GFC), the business experienced a severe downturn. Our records show that the taxpayer’s BAS lodgements were consistently late since July 2001. Since 2008 the length of time the BAS were outstanding had decreased, however, the Trust continued to lodge the Activity Statements after the due date.
Further, there were no payment made towards the debt between July 2004 and October 2008. However, between November 2008 and March 2010 there were 18 payments received by the Commissioner, totalling $40,500.
Currently the September 2011, December 2011 and March 2012 BAS lodgement and payments are outstanding.
I considered that under the circumstances the late lodgement and payment during the period of the GFC was not an isolated issue and cannot be considered as special circumstances or an appropriate exercise of the Commissioner’s power to remit the GIC.”
In Elias v Commissioner of Taxation[5] Hely J had this to say about subss.8AAG(5)(a) and (b):
“Whether circumstances are ‘special’ in terms of subss.8AAG(5)(a) or whether it is ‘otherwise appropriate’ to remit the GIC in terms of subss.8AAG(5)(b) are matters which are largely left to the decision-maker to determine, except insofar as there may be found in the subject matter, scope and purpose of the legislation some implied limitation on the factors to which the decision-maker may legitimately have regard, or some implied obligation to take particular factors into account.
The applicant’s submissions that the decision-maker failed to take into account particular matters, or took into account irrelevant matters, pays insufficient regard to the fact that the largely unconfined discretion given to the decision-maker under s.8AAG(5) had the result that it was for the decision-maker to select the matters which he regarded as being relevant to this determination, subject to the limitations earlier referred to.”
[5] (2002) 199 ALR 246 at [78].
There is no reason to believe that the decision maker in the present case did not take into account all of the material that was before him in deciding whether there were special circumstances that justified a compromise of the applicant’s liabilities. The effects of the illness of Mr Tettis senior, the global financial crisis, the requests made of the applicant by the respondent were all matters referred to in the decision maker’s reasons. There is no reason to believe that they were not taken into account.
The decision maker’s extensive reasons make it clear that he also took into account the circumstances that existed throughout the whole time period, both before and after service of the District Court proceedings. It was for the decision maker to exercise his largely unconfined discretion to determine which matters he regarded as relevant to the question of special circumstances and which matters were not.
The above examination of the reasons leads me to conclude that the decision maker’s decision in relation to subsection 8AAG(5) was fair and reasonable and therefore unchallengeable.
For these reasons the applications should be dismissed with costs.
I make the orders to be found at the beginning of these reasons.
I certify that the preceding forty-eight (48) paragraphs are a true copy of the reasons for judgment of Judge Simpson
Associate:
Date: 31 July 2013
Key Legal Topics
Areas of Law
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Tax Law
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Administrative Law
Legal Concepts
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Judicial Review
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Statutory Construction
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Appeal
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Jurisdiction
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