Foreman v. Federal Commissioner of Taxation.

David Hunt J

Supreme Court of New South Wales

Judgment date: Judgment handed down 17 February 1983.

David Hunt J.

This is an application by Mr. Graham Robert Foreman, pursuant to H.C.R. O. 60 r. 6, for an extension of time within which to file an appeal from a decision of Taxation Board of Review No. 1 [Case P60,
82 ATC 287]. His failure the appeal within the time allowed by O.65 r. 13 has been satisfactorily explained by evidence which the Commissioner does not dispute. The sole issue which has been argued upon this application is whether this Court has jurisdiction to hear the appeal if an extension of time were to be granted.

The Income Tax Assessment Act 1936, sec. 196(1) grants to a taxpayer the right to appeal against any decision of a Board of Review ``that involves a question of law''. The Commissioner submits that the decision from which Mr. Foreman wishes to appeal does not involve any question of law and that for that reason alone the application should be refused. The taxpayer accepts that this is the issue which I have to decide.

Notwithstanding this unanimity of approach by the parties, however, I am myself by no means certain that it is correct. In my view, and with due respect to the experienced counsel who appeared before me, this joint approach overlooks the basis circumstance that I am not, in this

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application for an extension of time, hearing the appeal itself; whether there is involved in the decision of the Board of Review a question of law is an issue which, if an extension of time is granted, will have to be determined by the judge who hears that appeal. The merits of the proposed appeal are of course relevant to the exercise of my discretion to grant an extension of time within which the taxpayer may file his appeal, in the sense that no extension would be granted where the proposed appeal itself would obviously be futile or is bound to fail: cf.
Horton v. Jones (No. 2) (1939) 39 S.R. (N.S.W.) 305 at pp. 309-310. The principles upon which amendments to pleadings are granted as stated in that case are, generally, applicable also to the grant of extensions of time:
Saffron v. David Syme & Co. Ltd. (1977) Practice Decision 11.011, Ritchie's Supreme Court Practice (N.S.W.) at p. 12, although an application for an extension of time within which to appeal - as opposed to an application for such an extension in relation to some interlocutory step in the proceedings - requires as well an acceptable explanation for the delay to be given:
Ratnam v. Cumerasamy (1965) 1 W.L.R. 8 at p. 12;
Revici v. Prentice Hall Inc. (1969) 1 W.L.R. 157 at pp. 159-160;
Moi v. Fong (1976) Q.R. 7 at pp. 9-10. In accordance with other well settled principles (once the delay has satisfactorily been explained), it would have to be shown that the appeal was unarguable, or manifestly hopeless, before the extension sought would be refused: cf.
General Steel Industries Inc. v. Commr. for Railways (N.S.W.) (1964) 112 C.L.R. 125 at p. 129.

Nevertheless these principles do not appear to have been followed in the past. For example, in
Boyded (Holdings) Pty. Ltd. v. F.C. of T. 82 ATC 4192; 4236, both Lee J. and the Court of Appeal investigated directly the issue as to whether a question of law was involved, and not merely as to whether one was arguably involved. This approach, with unfeigned respect, appears to me to lead to insoluble problems of precedent and of estoppel. An appeal from my decision in this present application lies to the Court of Appeal of this State, whereas an appeal from the judge who ultimately would hear the taxpayer's appeal from the Board of Review lies to the Full Court of the Federal Court. If I decide that the decision of the Board of Review did involve a question of law (and thus that an appeal lies), and grant an extension of time within which to file that appeal, is the judge who hears the appeal itself (and the Full Court of the Federal Court thereafter) bound by my decision and perhaps also that of the Court of Appeal? The circumstance that the question whether the decision of the Board of Review involves a question of law is itself a question of law does not alter the principles laid down in the General Steel Industries case (supra); this was made clear in
Dey v. Victorian Railway Commrs. (1949) 78 C.L.R. 62 at p. 91, where such principles are said to be applicable:

``... once it appears that there is a real question to be determined whether of fact or law and that the rights of parties depend upon it...''

(my emphasis).

(Quoted by Barwick C.J. in the General Steel Industries case at pp. 129-130.) See also
Morgan v. Odhams Press Ltd. (1971) 1 W.L.R. 1239 at pp. 1241-1242, 1253, 1257-1258, 1263, 1267-1268;
Bik v. Mirror Newspapers Ltd. (1979) 2 N.S.W.L.R. 679n. In
Mirror Newspapers Ltd. v. Singleton (1980) 2 N.S.W.L.R. 129n, the Court of Appeal reaffirmed that questions of law could not be determined before the trial except in accordance with the tests collected in the General Steel Industries case, nothwithstanding the arguments put to the contrary and recorded in
Monte v. Mirror Newspapers Ltd. (1979) 2 N.S.W.L.R. 663 at p. 673.

The point does not appear to have been argued in any reported tax case. It was submitted by the Commissioner that I should decide the issue proffered by the parties because it went to this Court's jurisdiction rather than to the merits of the proposed appeal, and thus was not covered by the principles to which I have referred. I am frankly unimpressed by the distinction which was sought to be made. But, in the light of the joint approach of the parties, I propose to determine the issue so proffered, leaving it to the unsuccessful party, if he wishes, to have this issue determined in the proper forum of appeal.

Is there then a question of law involved in the decision of the Board of Review from which the taxpayer seeks to appeal? As sec. 196(1) is framed, it is the decision of the Board, not the appeal from that decision, which must involve the question of law - so

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that, for example, the question whether there was any evidence to support that decision, although itself a question of law in the appeal, is not one involved in the decision of the Board (and thus within the statute) unless a submission of ``no evidence'' had been made to the Board and ruled upon by it either expressly or by implication:
Lombardo v. F.C. of T. 79 ATC 4542 at pp. 4545-4546. Nor is the requirement of sec. 196(1) satisfied if a principle of law was either merely necessarily applied by the Board in arriving at the particular decision, or merely implicit or assumed in that decision; the question must be one which was actively involved in the Board's decision: Boyded (Holdings) Pty. Ltd. v. F.C. of T. (supra), at p. 4239.

The taxpayer in the present case is a tugboat master specializing in dredging. He has spent most of his working life working out of ports in Australia; he had established a home in a seaside town in Western Australia in which he lived with his wife and family when not working. Due to the unavailability of suitable work in Australian waters, the taxpayer entered into a contract of employment with a company resident in Cyprus to carry out work in Saudi Arabia. He was provided with the return air fare between Australia and Saudi Arabia, and he worked as the master of a hydrographic survey vessel in the waters of the Persian Gulf off Dammam in Saudi Arabia. He was never in Cyprus. The taxpayer was absent from Australia between August 1976 and December 1977. He lived in accommodation provided by his employer in Saudi Arabia except for generous leave allowances (equivalent to 1/3 to ½ of the days he worked) which he spent in Australia with his family. It had been hoped that his family would join him in Saudi Arabia but accommodation for them did not become available. His air fares when taking leave in Australia were also provided by his employer. His wages were paid from Cyprus, where they attracted an income tax at the rate of 5%. No income tax was imposed by Saudi Arabia. The wages were paid at his direction either into his bank in Western Australia or to him personally when he was returning to Australia on leave and when he brought the money back with him.

The taxpayer claimed that his income during this period of employment overseas was exempt either pursuant to sec. 23(r) - because it was derived by him as a non-resident from sources wholly out of Australia - or pursuant to sec. 23(q) - because that income was not exempt from income tax in the country where it was derived and such tax has been paid upon it in that country. The Commissioner rejected the taxpayer's claim for exemption and thus, in order to succeed, the taxpayer had to satisfy the Board of Review either that he was a non-resident or that the source of his income was Cyprus (where tax had been paid) and not Saudi Arabia (where none had been imposed).

The taxpayer argues that there were involved in the Board's decision confirming the Commissioner's assessment (reported as Case P60, 82 ATC 287) three questions of law:

  • (1) the construction of the contract of employment by which the taxpayer took up work overseas;
  • (2) the interpretation of the word ``resident'' as defined for the purposes of sec. 23(r); and
  • (3) the construction of sec. 23(q).

It was submitted that the construction of a contract is always a question of law. Reliance for that submission is placed upon statements in two textbooks when dealing with the basis upon which a party may obtain restitution in relation to money paid under a mistake of fact: Chitty on Contracts, 24th ed., vol. 1, para. 1803; Cheshire & Fifoot, Law of Contracts, 4th Aust. ed., para. 2820. I do not find these textbooks helpful, for what is regarded as a question of law for one purpose is not always a question of law for all purposes. The question of what is the meaning of an ordinary English phrase as used in a statute is one of fact not of law, and the question whether a particular set of facts comes within the description of such a phrase in a statute is also one of fact:
Australian Gas Light Co. v. V.-G. (1940) 40 S.R. (N.S.W.) 126 at pp. 137-138. The position where the document is a contract and not a statute is no different. In the present case, it is argued, the Board had to construe the contract between the taxpayer and his overseas employer in order to determine where it had been made, as one of the matters relevant to ascertaining the source of payment under sec. 23(q):
C. of T. (N.S.W.) v. Cam & Sons Ltd. (1936) 36 S.R. (N.S.W.) 544 at p. 548. But that, in the

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circumstances of this case, was a question based not so much upon the construction of the written document itself as upon an ascertainment of the terms of a contract which was not wholly in writing, which is clearly a question of fact. There was, so far as I read both the transcript of the proceedings before the Board and the reasons for its decision, no dispute as to what the Board had to look for in the resolution of this question, but only as to what it should find. There was, in my view, no question of law actively involved in that decision in the sense described by the Court of Appeal in the Boyded (Holdings) case (supra).

The second question of law is said to be involved in the Board's interpretation of the word ``resident'' as defined for the purposes of sec. 23(r). It is submitted that the facts established and accepted by the Board were such that it necessarily had to hold that the taxpayer was a non-resident of Australia and thus entitled to exemption under sec. 23(r). If this basic submission be correct, then there was indeed a question of law involved in the Board's decision, but if the facts were capable of being regarded as either within or without that definition, according to the relative significance attached to each of those facts, the Board's decision did not involve a question of law: Australian Gas Light Co. case (supra) at p. 138.

According to one member of the Board (Mr. Pape), there was no evidence which could justify a finding that the taxpayer was a non-resident of Australia at the relevant time. It has not been suggested that this statement was an answer to any submission made on behalf of the Commissioner; nor was it necessary for the purposes of the reference before the Board that such a question be decided. Mr. Pape appears to have made this statement simply by way of emphasis when rejecting the taxpayer's claim that he was such a non-resident. Although I do not agree that there was no evidence that could justify a finding in favour of the taxpayer upon this issue, I am quite unable to say that the facts were the reverse: that they were such that the Board was bound to find in favour of the taxpayer as a matter of law. There was no dispute between the parties as to the interpretation of the definition of the word ``resident''; the only dispute was as to its application in the circumstances of this case.

The third question of law upon which the taxpayer relies is said to be involved in the Board's construction of sec. 23(q), under which he argued that the source of his income was Cyprus (where tax had been paid) and not, as the Commissioner contended, Saudi Arabia (where none had been imposed). I am unable to find in the transcript before the Board or in the reasons for its decision any reference to a dispute between the parties as to the relevant principles to be applied in determining the source of income in the situation where a taxpayer is obliged by reason of the nature of his employment to render his services in a place other than that from which the payment is made by his employer for those services. Both parties identified the relevant case to be the decision of the High Court in
F.C. of T. v. Mitchum (1965) 113 C.L.R. 401 in which it was held (at p. 407, quoting from
F.C. of T. v. French (1957) 98 C.L.R. 398 at p. 410) that the identification of the source of income was in each case a conclusion of fact:

``... a practical hard matter of fact... something which a practical man would regard as a real source of income...''

The remainder of the relevant passage in French's case was said by the High Court in Mitchum's case (at p. 408) to be no more than a recognition that, in point of hard practical fact, in a case of wages for work the performance of the work would be the source of the wages.

The taxpayer in the present case (who appeared in person before the Board) spent a considerable amount of time and effort in arguing (very creditably, if I may say so) that the situation of his employment in the present case fell within the facts of the Mitchum case rather than within the facts of the more recent decision by the Full Court of the Federal Court in
F.C. of T. v. Efstathakis 79 ATC 4256. This more recent case did not lay down any principles of law different to those laid down either in French's case or in Mitchum's case; what happened was that the Federal Court came to a particular conclusion upon the facts of that case which differed from the conclusions come to upon the facts in the earlier cases, but it still applied the ``practical hard matter of fact'' test. The members of the Board

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appeared to have been unimpressed by the taxpayer's efforts to fit himself within that different factual situation, and they were clearly enough entitled upon the evidence to find against him on that issue.

The reference by the Chairman (in para. 13 of his reasons) to the ``analysis'' of the principles to be applied - as contained in the judgment of Bowen C.J. in the Efstathakis case - is of no significance when the transcript of the proceedings before the Board is looked at. Nor is the discussion of those principles by Mr. Pape at para. 13 of his reasons of any significance; he was there dealing with a contention (that the source of the taxpayer's income was Australia) which had been put by neither party and which was unnecessary for him to determine.

I do not overlook the fact that the taxpayer was unrepresented before the Board. But, where a taxpayer depends upon a particular matter of law being raised before the Board in order to assert that its decision involved a question of law, that circumstance does not excuse his failure to raise it for decision. Certainly, it cannot be said in the present case that the Board otherwise necessarily had to determine any question of law before coming to the decision which it did upon this issue.

It follows that the taxpayer has failed to demonstrate that any question of law was involved in the decision of the Board of Review from which he wishes to appeal. However, had the issue for my determination been merely that there was arguably a question of law so involved I would have found in his favour.

The application for an extension of time within which to file an appeal is rejected. I order the taxpayer to pay the Commissioner's costs.

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