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Case U175

Members:
PM Roach SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 15 September 1987.

P.M. Roach (Senior Member)

These reasons for decision relate to the sixth of eight applications for extension of time within which to request reference to this Tribunal which have been referred to me for determination. It is the first of those applications to have been opposed by the Commissioner. Rather than following the normal practice of the courts and of this Tribunal and deciding such applications summarily by the application of widely known and commonly accepted standards, I reserved my decision.

2. I did so for several reasons. First, because the possibility of such applications being made on behalf of taxpayers only arose with the passage of the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986. Secondly because, as a result, the applications raise novel issues for those whose experience of litigation has been substantially confined to tax; and who may not be aware of procedural standards in most areas of the law. To those who have known no other procedural standards than those previously set by Parliament for tax disputes, those standards must have seemed normal. Those with broader litigious experiences recognise them as quite exceptional. It is therefore appropriate to consider the principles to be applied in the exercise of the relevant discretion and to do so in the context of the totality of the litigious system established for the resolution of disputes within the community. In that wider context applications for extension of time are quite common and damages claims flowing from failure to institute legal proceedings, whether as of right or by leave, are a major problem for professional indemnity insurers. Thirdly, I have placed the applications in a context rarely referred to by the courts when dealing with such applications when they are presented by those whose professional expertise is litigation. I have done so because so much tax litigation is conducted on both sides by persons who claim no expertise in litigious practice or procedure.

3. As to delay in litigation generally, the background was set recently by McHugh J.A. (with whom Street C.J. and Priestley J.A. agreed) in the decision of the Court of Appeal, Supreme Court of New South Wales in
Gill v. McGregor & Ors, Herron v. McGregor & Ors (unreported) when his Honour said:

"Throughout its history the common law has recognised the importance of the speedy trial of both civil and criminal proceedings. The importance of the speedy hearing of cases was expressly recognised in sec. 40 of Magna Charta (1215). In Volume 1 of his First Institute Coke declared (at p. 22) that Magna Charta was `but a confirmation or restitution of the common law'. The importance attached to speedy justice had also been shown at an earlier period by sec. 4 and 6 of the Assize of Clarendon 1166 which required the sheriff to bring persons accused as robbers, murderers and thieves

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`and receivers of them' before the justices `immediately and without delay'. Magna Charta and the common law principles are the source of the U.S. Constitution's Sixth Amendment right to a speedy trial:
Klopfer v. North Carolina 386 U.S. 213 (1967)."

4. Unfortunately, from the early 1970s, that sense of urgency came to be quite ineffective in ensuring the prompt determination of tax disputes between individual citizens and the community, even though very prompt action continued to be required of anyone who sought to challenge any imposition of tax by the Commissioner. To some extent those problems have been alleviated with the assumption of responsibility for the determination of tax disputes by this Tribunal with its more efficient and economical procedures: something made possible by the passage of the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 ("the Transfer of Jurisdiction Act"). Hopefully, in future, requests for independent review will be promptly transmitted instead of being delayed for periods of two and three years, or more - in one recent case nearly nine years and in another more than nine years; and the Tribunal will have the resources to determine them. I venture the prediction that, when requests for independent review of carefully considered decisions come to be promptly transmitted and are then promptly decided, the volume of tax litigation - and the cost to the community of such litigation - will fall.

5. The Income Tax Assessment Act 1936 ("the Tax Act") now makes express provision - where previously there was none - for extensions of time at the two levels in the objection and review process which were major stumbling blocks for taxpayers. Applications for extension of time at other, higher levels in the litigious process have always been determined according to the procedural rules of the relevant courts. In all courts it is normal for such a power to extend time to be expressly provided for. A similar power was conferred on this Tribunal from its inception. (Administrative Appeals Tribunal Act 1975 - sec. 29.)

6. The notions of time limitations, and the problems occasioned by delay, have long been known to the legal system. They have worked to deny relief to those who are too dilatory in instituting proceedings; to those who fail to prosecute with due diligence the proceedings they have instituted; and to those who fail to exercise due diligence in defending proceedings brought against them. As to the institution of proceedings, control has been most obviously exercised by the provisions of Limitations Acts of general application (e.g. Limitations Act, 1623 (U.K.), and the statutes which have succeeded it). By the present century, and before individuals could sue the Crown as of right, such Acts for the most part stipulated that all right to seek relief would be lost if proceedings were not instituted within six years of the cause of action arising. The rules so established by the Limitations Acts were subordinated to the prescription of shorter limitation periods in many statutes, particularly those in which governmental and semi-governmental institutions were concerned; those in which a plaintiff might have an election between a statutory remedy and a common law remedy (e.g. the Workers' Compensation Acts); and legislation such as that providing for compensation for personal injury arising out of motor vehicle accidents, especially claims in more recent times against the nominal defendant. Under the pressure of those rules of increasingly common application there followed a pressure to shorten the period of six years generally allowed by the Limitations Acts. That has commonly resulted in the limitation period for the institution of proceedings by persons seeking the assistance of the legal system being reduced to three years.

7. One result is that over a long period of change, the maximum period commonly permitted for the institution of proceedings (six years) has been displaced in favour of shorter periods (generally three years and, in particular cases, lesser periods such as one year). At the same time, whereas the period of six years was in most circumstances absolute, it has been a general practice of Parliaments that, when any shorter period has been stipulated, it has been subject to a power to extend time in favour of the person seeking relief. The objective has usually been to provide a procedural structure which will promote the due administration of the law in order to provide all relief due to those who reasonably conduct themselves in seeking it.

8. Barwick C.J. in his decision in
Hall v. Nominal Defendant (1966) 117 C.L.R. 423 at p. 434 expressed his general view as to extension of limitation periods in the context of

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personal injury claims against the Nominal Defendant when he said of the power to extend time:

"It is important, when considering the propriety of an exercise of the discretion given by s. 65A of the Act, to have regard to the general purpose of the section. It is designed to provide a remedy for persons suffering personal injury by the negligent driving or management of an unidentified motor vehicle. Its emphasis and policy is that personal injuries in such circumstances should not go without compensation. By its very nature, however, the action against a nominal defendant given by the Act in such circumstances requires that there be prompt notification of the occurrence out of which the action is to arise and the commencement of proceedings within a stated time. The first provision will enable the nominal defendant to follow up any scent there may be whilst it is warm and the second will assist to prevent the nominal defendant being embarrassed by long outstanding claims. But the ends which the section seeks to serve require that the time limitation shall not stand in the path of justice. A very short time is set by the statute within which an action against the nominal defendant may be brought, and therefore a power to extend that time is given to a court of law so that justice may be done according to the circumstances. No doubt this extension of time is not as of course. Some acceptable explanation for the failure of the appellant to sue in time must be given before the court is required to consider the substantial question whether it would be just to grant the extension. The door, as it were, must first be opened."

What his Honour was referring to as "a very short time" was six months.

9. Control of time factors in relation to the commencement of proceedings is not the only time consideration of concern to the courts. Even when proceedings are instituted within time, delay can result in an applicant being denied equitable relief and delay in prosecuting proceedings after they had been instituted within time can result in dismissal for want of prosecution.

10. Another aspect of concern involving time embraces the intervals to be allowed for performance of the different steps in the litigious process once proceedings have been instituted. If an appearance is not entered, or a defence delivered, to a writ of summons within the time allowed, the plaintiff may proceed in default; if a step directed to be taken within a specified period is not taken, sanctions appropriate to the default may be imposed. The final sanction may be the refusal to adjudicate upon the issue on its merits. The plaintiff's claim might be dismissed for want of prosecution, just as the defence of a defendant might be struck out. Similar problems can and do arise before the courts and this Tribunal in relation to tax litigation as well as other litigation. Further, before the courts at least, a procedure was available to prevent litigants occasioning delay and expense by insisting on a trial for unmeritorious claims or defences.

11. However, until recent times, the principle that procedural rules should be made and administered to promote the just determination of disputes was not followed in the procedural rules set by statute for the determination of income tax disputes. It seems that the need for taxation revenue to flow in predictable amounts according to projections as to cash flow have been considered to be such that disputes as to the claims made by the community upon individuals for payment of tax have been treated as quite unlike any other classes of dispute within the community. Under the Tax Act the quantum of liability to pay is determined by the unilateral action of the Commissioner in issuing an assessment at a time chosen by the Commissioner (sec. 166 and 174). Upon the issue of the assessment the tax becomes due and payable on the date specified (sec. 204), which will ordinarily be 30 days after service (sec. 204), but may be earlier (sec. 205). As soon as the tax becomes due and payable, it is a debt due to the Commonwealth (sec. 208) and may be sued for and recovered immediately (sec. 209). Without recourse to legal process, the Commissioner may recover the tax by collecting from third parties moneys owing to the taxpayer (sec. 218) and the fact that an appeal or reference is pending is not of itself sufficient reason to delay the payment of tax (sec. 201). The provisions of Div. 1A (Collection by Instalments of Tax on Companies); Div. 2 (Collection by Instalments of Tax on Persons other than Companies); Div. 3 (Provisional Tax); and Div. 3A (Collection of

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Tax in respect of certain Payments for Work) of Pt VI (Collection and Recovery of Tax) are such that in many instances the Commissioner already holds the disputed tax at the time he issues the assessment.

12. One result of the operation of those provisions is that the process of tax litigation between the Commissioner (as creditor) and the taxpayer (as debtor) is quite unlike the ordinary civil process of the law. There is no time limit restricting the period in which the Commissioner may issue an original assessment (cf. sec. 170), although there are limits on his power to issue amended assessments (ibid.). On the other hand, until 1 July 1986 the taxpayer had only 60 days (as defined) within which to mount a challenge by lodging an objection to the assessment (sec. 185). The Commissioner might take as long as he pleased in the making of a decision on the objection (cf. sec. 186), although he would be in breach of his statutory duty if he failed to determine an objection within "a reasonable time" (
Re O'Reilly: Ex parte Australena Investments Pty. Ltd. & Ors 83 ATC 4807). However, a taxpayer dissatisfied with the decision had only 60 days (as defined) within which to further protest the assessment by either requesting a review or instituting an appeal (sec. 187).

13. From 1915, when the Commonwealth first legislated to impose an income tax, until 30 June 1986, the procedural rules controlling tax litigation were abnormal by comparison with the rules for determination of other disputes. I refer not only to the shortness of the limitation period for objecting (60 days); to the shortness of the period within which to request reference for review or by way of appeal (60 days); and to the absence of any power to extend those periods under any circumstances whatsoever; but also to the absence of any power to permit a taxpayer to amend his grounds of objection so as to procure the determination of the substantive issue between the taxpayer and the community. Together those rules worked to deny to many taxpayers a fair adjudication on matters in dispute, and all too often resulted in the payment of more in tax than was payable under the substantive provisions of the Tax Act. (If the last day for objecting or for requesting review fell before 1 July 1986, the old rules can still work injustice as the recent decision of this Tribunal (Decision No. 3156, January 1987) illustrates. In that case, assessments were upheld in one year because the evidence established that the claims were only allowable in another, later year. By then it was too late for the taxpayer to initiate an objection in relation to the later year and, three years having passed, it was beyond the Commissioner's power to amend in the exercise of his discretion pursuant to sec. 170(4).)

14. As of 1 July 1986, the harshness of those provisions has been eased in that, at the discretion of the court or Tribunal (as appropriate), a taxpayer is no longer necessarily bound to the grounds of his objection: and furthermore, provided that the last day for objecting or for requesting reference for review or upon appeal fell on or after 1 July 1986, the period within which objection may be made or the request for reference for review or upon appeal may be extended.

The relevant sections provide as follows:

"185(1) A taxpayer dissatisfied with any assessment under this Act may, within 60 days after service of the notice of assessment, lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies:

...

186 The Commissioner shall consider the objection, and may either disallow it, or allow it either wholly or in part, and shall serve the taxpayer by post or otherwise with written notice of his decision.

187 A taxpayer who is dissatisfied with a decision under section 186 on an objection by the taxpayer may, within 60 days after service on the taxpayer of notice of the decision, lodge with the Commissioner, in writing, either -

  • (a) a request to refer the decision to the Tribunal; or
  • (b) a request to refer the decision to a specified Supreme Court.

188(1) Where the period for the lodgment by a taxpayer of an objection against an assessment has ended, the taxpayer may, notwithstanding that the period has ended, send the objection to the Commissioner together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged.

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(2) Where the period for the lodgment by the taxpayer of a request under section 187 has ended, the taxpayer may, notwithstanding that the period has ended, send the request to the Commissioner together with an application in writing asking that the request be treated as having been duly lodged.

(3) An application under sub-section (1) or (2) shall state fully and in detail the circumstances concerning, and the reasons for, the failure by the taxpayer to lodge the objection or request as required by this Act.

188A(1) The Commissioner shall consider each application made under sub-section 188(1) and may grant or refuse the application.

(2) The Commissioner shall give to the taxpayer who made the application notice in writing of the decision on the application.

(3) A taxpayer who is dissatisfied with a decision under sub-section (1) in respect of an application made by the taxpayer may apply to the Tribunal for review of the decision.

(4) Where an application under sub-section 188(1) has been granted, the taxpayer who made the application shall, for the purposes of this Part, be treated as having duly lodged the objection to which the application relates.

188B(1) Where the Commissioner receives an application under sub-section 188(2), the Commissioner shall, as soon as practicable -

  • (a) if the application relates to a request to refer a decision to the Tribunal - send the application to the Tribunal; or
  • (b) if the application relates to a request to refer a decision to a specified Supreme Court - send the application to that Supreme Court.

(2) The sending of an application to the Tribunal under paragraph (1)(a) shall, for the purposes of the Administrative Appeals Tribunal Act 1975, be deemed to constitute the making by the taxpayer concerned of an application to the Tribunal to extend the time within which the request may be lodged with the Commissioner.

(3) The sending of an application to a Supreme Court under paragraph (1)(b) constitutes the making by the taxpayer concerned of an application to that Court to extend the time within which the request may be lodged with the Commissioner and the application shall be heard by that Court constituted by a single Judge.

(4) The Tribunal or the Supreme Court, as the case may be, may grant or refuse the application.

(5) Where an application under sub-section 188(2) has been granted, the taxpayer shall, for the purposes of this Part, be treated as having duly lodged the request to which the application relates.

189(1) Where a taxpayer duly lodges, or is to be treated as having duly lodged, a request under section 187, the Commissioner shall comply with the request.

(2) The referral of a decision on an objection to the Tribunal shall, for the purposes of the Administrative Appeals Tribunal Act 1975, be deemed to constitute the making by the taxpayer of an application to the Tribunal for review of the decision.

..."

15. For the sake of completion I mention that from 1 March 1987 - a date after the applications here in question were made - reg. 19 of the Administrative Appeals Tribunal Regulations came into force requiring that a fee of $200 be paid on EACH such application to the Tribunal. Contemporaneously, the Taxation Administration Act 1953 was amended by the insertion of Pt IVAB - Requests for Reference (sec. 14ZAB-14ZAE). It requires that any application for review before the Tribunal be accompanied by "the required fee" (currently $200 for EACH application); and further provides:

"If the request is not accompanied by the required fee, then, notwithstanding any provision to the contrary contained in the relevant enactment, a request will be taken not to have been lodged with or sent to the Commissioner"

(sec. 14ZAC(2))

As the present applications relate to delay at the second stage of failing to duly request the review within time, I shall hereafter speak only of applications to extend time for that purpose.

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16. Clearly sec. 188(2) calls for the preparation and presentation to the Commissioner of two documents: the first, a request for reference in conventional form; and, secondly, an application for extension of time. It is necessary that that application be in writing and that it should ask that the request for reference which it accompanies should be treated as having been duly lodged (sec. 188(2)). Furthermore, the application must "state fully and in detail":

  • (a) "the circumstances concerning... the failure by the taxpayer to lodge the... request as required by this Act" (sec. 188(3)); and
  • (b) "... the reasons for..." such failure (ibid.).

17. When the Commissioner receives an application such as is referred to in sec. 188(2), it is his obligation to send that application to the Tribunal (sec. 188B(1)(a)) and to do so "as soon as practicable" (ibid.).

18. In each of the eight matters assigned to me by the Registry, the Commissioner did refer the matters, but not in most cases "as soon as practicable". However, in all eight cases in so far as he did no more than "send the application to the Tribunal" under cover of his own letter, the documents received by the Tribunal were virtually useless. The point is illustrated by the first of those cases. The Commissioner received a letter from a taxpayer requesting an extension of time within which "to appeal". (Despite a reference to "appeal" - a term relevant only to proceedings before the Court - the Commissioner treated it as relating to a request for reference to the Tribunal.) The Commissioner forwarded it to the Tribunal stating that the Commissioner "in the particular circumstances of this case... will not seek to oppose the application". The taxpayer's letter read:

"With reference to my desire to appeal against the Commissioner's decision to grant me a 50% rebate instead of 100%, I wish to ask for a slight extension of the 60 day period."

"I have recently been treated for high blood pressure and my memory often fails me. I lost your letter and only recalled the matter after finding it. At 73, this is a common occurrence."

19. As that application was communicated to the Registry it gave no indication at all as to what assessment had been issued or when; or as to what aspect of it was objected to and why; or when, and to what extent, the objection had been disallowed. I mean no criticism of that individual when I express the hope that applicants in presenting applications in future will annex to their detailed applications copies of:

  • (a) the assessments in question;
  • (b) the adjustment sheets (if any) attending such assessments;
  • (c) the objections; and
  • (d) the notice of disallowance of the objections attended by any explanatory memoranda and/or amended assessments issued with the notice by the Commissioner.

20. I also hope that, should applicants fail to do so - as no doubt they sometimes will - in appropriate cases the Commissioner will provide that information for the Tribunal when to do so is likely to facilitate the efficient and just determination of the applications with no more expense to the community or the taxpayer than is warranted.

21. In the matters which came before me the requests for reference were communicated to the Tribunal from three different offices of the Commissioner. At the time of forwarding the references, one office gave no indication to the Tribunal as to the Commissioner's attitude to the particular applications. In the case of the third office (dealing with the sixth, seventh and eighth matters), the Commissioner in referring the matter advised the Tribunal - but not the applicants - that the applications would be opposed.

22. In all eight instances, rather than initially request either the applicant or the Commissioner to attend in person (or by representative) before the Tribunal, the Registry gave notice for directions hearings to be held by telephone. When the first telephone directions hearing relating to the first application was held, the applicant withdrew his application as soon as he became aware that the issue he sought to raise had been consistently decided in favour of the Commissioner over many years. As a result, it was unnecessary to consider whether his prospects of success were so remote that, for

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that reason alone, the extension of time should have been refused. Despite the fact that the Commissioner had advised that the application would not be opposed, it was not granted. Before the second application could be considered the Commissioner wrote to the Tribunal advising that a request for reference had been located by the Commissioner where it had been misplaced. It had been delivered within the time allowed. Accordingly, it became unnecessary to proceed with the application for extension of time and the matter was removed from the list.

23. Before the directions hearings relating to the next three matters could be held, the particular office of the Commissioner concerned advised the Tribunal in writing that the applications would "not be opposed". The hearings proceeded and the applications were granted, despite the limited information available as to the dispute to which the request related; and as to the reasons why there had been a failure to request the reference within the time allowed. That result accords with the usual practice of the Tribunal in other Divisions when such applications are "not opposed". However, having regard to the result of the first application, some further consideration of the "merits" may have been more appropriate.

24. When the sixth matter was called on, the Commissioner by his representative expressed opposition to the application "as a matter of principle". In consequence I adjourned the matter to enable the parties to appear before the Tribunal. On the telephone directions hearings relating to the seventh and eighth matters held immediately following the adjournment of that matter, the Commissioner again confirmed his opposition to those applications, and those matters were adjourned to await the outcome of the sixth application.

25. Of the courses followed by the three offices of the Commissioner in communicating the requests for reference to the Tribunal, that followed by the third-mentioned office in positively stating which position was adopted was the most helpful. I hope that it is a practice which will be followed by other offices of the Commissioner. However, as the Commissioner advised only the Tribunal of opposition to the applications, it was only when the matters came on for hearing that the applicants learned for the first time that their applications were to be opposed by the Commissioner. It would be helpful if, when referring such applications as this to the Tribunal, the Commissioner could send a copy of his letter to the Tribunal to the applicant.

26. Accordingly, the course I recommend is that:

  • (a) applicants ensure that their applications incorporate all necessary information, annexing copies of all relevant documents;
  • (b) the Commissioner refers on all applications "as soon as practicable" and that, in doing so, he sends to the applicant a copy of his letter to the Tribunal; and
  • (c) that, where practicable, the Commissioner incorporates in that letter advice as to whether the application is to be opposed; or consented to.

If those things can occur, the Tribunal on receiving the application will be armed with some information as to the nature and importance of the issue; as to the extent of delay; and as to the Commissioner's attitude to the application.

27. I now proceed to a consideration of the two requests made for the taxpayer in the sixth case. They relate to the years of income ended 30 June 1982 and 1983 respectively. As they are identical in form, I shall refer only to the documents relating to the former year.

28. On 8 December 1986 the applicant's accountant wrote to the Commissioner in the following terms:

"We refer to your letter of 16 September 1986 wherein you advised that the objection for the year ended 30 June 1982 has been considered and has been disallowed.

Please take notice that the abovenamed taxpayer is dissatisfied with your decision and requests that your decision be referred to the Administrative Appeals Tribunal for further review.

Please find enclosed the sum of $2.00 representing the prescribed fee in respect of this matter."

As to the requests for reference, I merely observe that any need to pay a $2 fee on a request for reference had been abolished under the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 as from 1 July 1986. (However, it should be remembered that from 1

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March 1987, despite the fact that since 1 July 1986 the costs of providing for administrative review of decisions on tax objections have been reduced, the fee for instituting any application to this Tribunal has now been set at $200 for EACH application: for this applicant the figure would have been $400. For others it could have been much higher. Already at least one applicant has been notified that to pursue his applications for extension of time requires that fees of $1,000 be paid - only refundable if his applications succeed.)

29. On the same date the applicant's accountant presented an application in the following terms:

"APPLICATION BY... UNDER SECTION 188(2) OF THE INCOME TAX ASSESSMENT ACT 1936 (`THE ACT') TO TREAT REQUEST FOR REFERENCE AS DULY LODGED.

Assessment No:........ File No.:........

1. Notice of the Commissioner's decision on my objection to the above amended assessment for the year of income ended 30 June 1982 was served on me on 16 Sep 1986 and the period prescribed by section 187 of the Act for the lodgement of a request for a reference of the decision on the objection expired on 17 Nov 1986.

2. A request for a reference to the Administrative Appeals Tribunal is enclosed with this application and a copy of the request is attached.

3. The circumstances concerning, and the reasons for, my failure to lodge the request within the prescribed period are as follows:

  • (a) The Commissioner's decision was misplaced and was not retrieved until 5 December 1986.
  • (b) Upon retrieval the appropriate request for a reference was prepared on 8 December 1986.

I hereby make application pursuant to Section 188(2) of the Act that my request for a reference referred to in 2 be treated as having been duly lodged."

30. On 10 June 1987 - six months later - the Commissioner wrote to the Tribunal stating in relation to the two requests (formal parts omitted):

"Forwarded herewith is an application for an extension of time to lodge a request for reference in respect of the abovementioned years.

The Commissioner wishes to oppose the application."

31. The foregoing was all the information available to the Tribunal when it had to determine how to proceed about the determination of the application. Despite the paucity of information, a telephone directions hearing was chosen as the most appropriate method to adopt in the first instance.

32. When the Commissioner's representative confirmed that the application was opposed "in principle" and it was determined to reconvene the directions hearing, a request was made that the Commissioner should provide the information not then available which would establish what the issue was.

33. That information was promptly and helpfully provided. It then appeared that on 16 February 1983 the Commissioner had issued notice of assessment against the applicant as having derived a taxable income of $4,773 for the year of income ended 30 June 1982. Tax was assessed at $184.96. On 12 October 1983 the applicant objected claiming additional concessional expenditure and that objection was in due course allowed. Subsequently, by notice of amended assessment of 18 October 1985, the assessment of taxable income was increased to $5,635 by adding "omitted interest of $862". Additional tax for an incorrect return was levied at $168. The increase in taxable income and the imposition of additional tax were objected to, and it was further contended that the Commissioner had no power to issue the amended assessment. By a notice posted 12 September 1986 to the applicant at his address for service, the objection was wholly disallowed. (The only material difference in relation to the following year was that the amount of taxable income was $6,093; omitted interest $989; and additional tax $172.) At the hearing it appeared that similar amended assessments adding "omitted interest" had issued against the applicant's wife. Her objections were disallowed at an earlier date and requests for reference were duly made.

34. Upon the directions hearing the accountant for the applicant explained what had

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occasioned the delay and his explanation was in all respects accepted as being factually accurate. What had happened was that, upon receiving notice of the disallowance, the accountant conferred on or about 18 September 1986 with his client and received instructions to proceed with requests for reference, just as he had done with the similar issues relating to the wife of the applicant. He then placed the notices of disallowance on the outside of the applicant's file with a view to preparing the requests for reference. These things occurred at a time when the office of the accountant was being reorganized. In the course of that reorganization, the file of the applicant, together with approximately 50 other files, was temporarily misplaced. Without the file being before him as a reminder of what needed to be done, the matter passed from the mind of the accountant until it was brought to his attention after the misplaced files had been located and identified as such. Thereon he immediately prepared the documents of 8 December 1986 which have been quoted. As an honourable accountant, he accepts full responsibility for his omission.

35. The Commissioner's representative supports opposition to the granting of the extension of time by contending:

  • • that the only relevant factors that the Tribunal may consider are those relating to the non-lodgment of the request (under sec. 187) within the prescribed period and that all other factors, including "the merits of the substantive issue", are irrelevant;
  • • that it is not open for the applicant to blame his agent for failure to act as the tax agent's neglect as against the Commissioner becomes the applicant's neglect;
  • • that the extension of time provisions of Pt V of the Act are not intended to overcome taxpayer neglect;
  • • that the discretion should only be exercised when there is something in the nature of physical incapacity to meet the time limit prescribed, for example, taxpayer illness or absence overseas, postal delays, etc.;
  • • that "with respect to taxation laws, it is in the public interest in protecting revenue that there be finality in decision-making" and that matters should not be reopened except in special circumstances;
  • • that the granting of the applications would prejudice the respondent in that, should the applicant ultimately be successful on the substantive issue to be reviewed, the respondent would be liable to pay interest to the applicant on the overpayment of tax pursuant to sec. 9 of the Taxation (Interest on Overpayments) Act 1983;
  • • that there will be no injustice to the applicant should his applications be refused by the Tribunal as he is still entitled to request the Commissioner to issue a reduced assessment pursuant to sec. 170(4) and, alternatively, he is entitled to be indemnified by his agent for breach of duty.

36. The legal system aspires to provide for the regulation of a society conducting its affairs in accordance with just laws. Courts and tribunals exist within that system in order to justly determine disputes which arise within the community as to the application of those laws. The litigious system has an obligation to do justice not only between citizen and citizen in accordance with the law enacted by the Parliament, but also between the individual citizen and the community, whether identified as the Crown or as represented by its statutory officers, such as the Commissioner of Taxation.

37. Subject to such restrictions as are provided for by Statute, the object in exercising any discretion to grant or refuse an application for extension of time, whether to institute proceedings or to take a step in the litigious process, is to avoid injustice (cf. Hall v. Nominal Defendant (ante); adopted by a Full Court of the Federal Court in
Turner v. Nominal Defendant (1981) 51 F.L.R. 342;
Hughes v. National Trustees Executors & Agency Co. of Australasia Ltd. (1978) V.R. 257).

38. Some of the principles established by decided cases are:

  • • There is no automatic right to an extension of time.
  • • It is for the applicant to establish that it is just to extend time (
    Sophron v. Nominal Defendant (1957) 96 C.L.R. 469; Hall v. Nominal Defendant - ante).
  • • If an extension of time would cause undue prejudice to the respondent, and that prejudice cannot be satisfactorily compensated for, that is a substantial reason for not extending time.

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  • • The fact that delay is occasioned by the neglect of a solicitor or other agent does not automatically entitle an applicant to additional time (Sophron - ante; Hall - ante).
  • • But an extension of time is not to be automatically denied because delay was occasioned by "neglect", whether of an applicant or his solicitor (
    Hall - ante; Jess v. Scott (1986) 70 A.L.R. 185, Full Court; and Winter v. D.C. of T., Burchett J., unreported).
  • • An extension of time is more likely to be granted to enable an applicant to have a hearing on the merits than to enable an appeal to be heard (
    Ratnam v. Cumarasamy (1965) 1 W.L.R. 8).

39. The last-mentioned point is quite significant. In the past the Commissioner, when he has failed to institute an appeal within time, has sometimes sought further time within time, has sometimes sought further time within which to appeal. Further, some such applications have been successful (e.g.
F.C. of T. v. Curtin 80 ATC 4654), just as similar applications for taxpayers have been successful (e.g.
Boyded (Holdings) Pty. Ltd. v. F.C. of T. 82 ATC 4236). Those applications were granted even though the time restrictions - applicable only to taxpayers - for objecting to assessments and for requesting independent review were inflexible.

40. In my view when the Parliament enacted the Taxation Boards of Review (Transfer of Jurisdiction) Act 1986 and made provision for the enlargement of time for objecting (sec. 188(1)) and for requesting reference for review (sec. 188(2)) and conferred authority on this Tribunal to grant such extensions of time, the Parliament intended that those powers should be exercised consonantly with the exercise of similar powers by the courts and consistently with the exercise of similar powers by the Tribunal in other jurisdictions (sec. 29 of the Administrative Appeals Tribunal Act 1975). Those powers are quite frequently exercised by the Tribunal (cf.
Re Bonavia and Secretary, Department of Social Security (1985) 9 ALD 97 where the Tribunal applied principles stated to be those applicable in addressing similar questions under the Administrative Decisions (Judicial Review) Act 1977
Hunter Valley Developments Pty. Ltd. v. Cohen (1984) 3 F.C.R. 344); and cf. also Nolan and Minister for Immigration and Ethnic Affairs (Decision No. 3557, 29 April 1987);
Oldfield v. Secretary to the Department of Primary Industry (Decision No. 3575, 13 May 1987);
Tully Partners v. Australian Apple and Pear Corporation (Decision No. 3555, 12 June 1987); and
Babiker v. Minister for Immigration and Ethnic Affairs (Decision No. 3608, 26 June 1987)).

41. At this point it is convenient to comment on two arguments before the Commissioner which specially apply in relation to taxation matters. The first is that "the public interest in protecting revenue" is such that there should be "finality in decision-making" and that matters should not be reopened except in special circumstances. In all probability, the reference to "protecting revenue" flows from no less authoritative a source than the High Court of Australia constituted by Latham C.J., Rich and Starke JJ. (
Molloy v. F.C. of Land Tax (1938) 59 C.L.R. 608) where the Court, on speaking of the question as to whether a taxpayer should be limited to the grounds set out in his objection to assessment, said (at p. 610):

"Section 44M(3) is a positive statutory provision that upon appeal the taxpayer is limited to the grounds set out in the notice of objection. This we regard as an imperative direction to the court, not as a provision merely for the benefit of the Commissioner which he is in a position to waive. The provision is made for the purpose of protecting public revenue, and the court is bound to give effect to it. The strictly limited time period allowed for lodging an objection or for requesting a reference for independent review was always similarly regarded. [sic]"

For myself, I confess that I have never understood what their Honours meant in the passage cited. After all, if an assessment to tax is in fact excessive, then refusal of an extension of time or of amendment of grounds of objection (as appropriate) would not have the effect of "protecting public revenue" against the improper or unlawful demands of a taxpayer so much as deny the citizen protection against the unjustifiable demands of the revenue. The question at issue is not whether the public revenue should be "protected" in holding on to that which it may or may not have been entitled to, but rather only whether an independent determination is to be made as

ATC 1018

to whether the claims which have been made by the Commissioner are excessive.

The second submission is that refusal of the applications will involve "no injustice to the applicant" because he will still be entitled to request the Commissioner to issue a reduced assessment. In my view there is little merit in that argument. If it happens that the assessments in question are excessive as a matter of substantive law, and there has been no unreasonable delay, it should be open to the taxpayer to have them set aside as of right and not as an act of indulgence arising in the exercise of the discretion of the Commissioner. Citizens should not be forced into the role of mendicants seeking favours, when on any reasonable view they are pressing claims as a matter of right.

42. No one should think that extensions of time will be granted almost as a matter of course. That needs to be emphasized. Persons who fail to act diligently, and who, by doing so, allow the defined period to pass, do so at their peril. I draw attention to the warning expressed in the decision in Hunter Valley Developments (ante) that, in cases involving public administration, the public interest may well dictate refusal of an extension after only a short delay. At the same time, I acknowledge that there may be cases in which lengthy delays may be excusable and, furthermore, such that an extension of time ought in justice be granted (e.g. the circumstances in Decision No. 3156 - para. 13).

43. I also express the view that unless the applicant establishes "an arguable case" an extension of time should not be granted. I have in mind cases where the issue is without merit (e.g. the claim for a deduction for "inflation": Case R112,
84 ATC 741), and others such as those in civil litigation inter partes in which a party would be allowed to enter up judgment against his opponent without having to undergo the expense and inconvenience of a trial because, on the facts and the law, there is no reasonably arguable issue.

44. At the end of the day the question as to whether an extension of time should be granted is one calling for a responsible exercise of discretion guided by a concern to provide for the fair resolution of legitimate disputes and a recognition (inter alia) that citizens should not be denied a right to and independent review of the Commissioner's decisions only because of some oversight or omission reflecting nothing more than the fact that people are rarely perfect in what they do.

45. As to the substantive matters in dispute, I am satisfied that there is an "arguable case". In so finding I mean no more than that. I am not making any observations as to the merits, or as to the prospects of success of either side. As to the omission to request the reference within time, I am satisfied that it was occasioned by nothing more than an excusable oversight, such as most persons experience from time to time. As to prejudice to the respondent, I reject the contention that the prospect of having to refund with interest such tax as might be found to have been overpaid constitutes "prejudice" to the Commissioner. As it was not suggested that the delay, slight as it was, will make the task of the Commissioner more difficult or expensive than it would have been had the request been made within time, I find that there will be no "prejudice" in any relevant sense.

46. In my view justice requires that time be extended. Accordingly, I will so order.


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