Northrop J

Lee J
Finn J

Full Federal Court

Judgment date: 3 October 1996

Northrop, Lee and Finn JJ

This is an appeal from a judgment of RD Nicholson J which, in turn, dismissed an appeal by Mr Stuart (the applicant) from a decision of the Administrative Appeals Tribunal of 2 August 1995. The Tribunal's decision affirmed the review of objection decisions made by the Deputy Commissioner of Taxation in relation to Mr Stuart's income tax returns for each of the years ended 30 June 1985, 1986, 1987 and 1988.

Factual Background

This can be put briefly. On 30 October 1991 notices of assessment were issued addressed to Mr Stuart for the financial years 1985 to 1988. Here it is necessary only to refer to the 30 June 1988 assessment. Omitting formal parts it indicated (insofar as presently relevant) that:

         ``Income Tax Assessment Act 1936

                NOTICE OF ASSESSMENT

for the year ending 1988 (or substituted accounting

Your Taxable Income is $37086                  $    c
Tax on Taxable Income             A          11023.14DR
Medicare Levy                     O            463.57DR
Provisional Tax on 1988 Income
+ 12.0% (see note 4)              B          13722.00DR
Additional Tax for Late Return
(see note 6)                      C            656.15DR
Additional Tax for Incorrect
Return (see note 7)               D           4796.00DR
Balance of this Assessment        L          30660.86DR
****** $30660.86 is due for payment ******
******        on 05 DEC 91          ******
Other amount payable (see note 13)           50472.67DR
Amount payable                               81133.53DR''

In December of 1991 Mr Stuart lodged an objection to the assessments. After a sequence of exchanges with the Australian Taxation Office which are of no present relevance the Deputy Commissioner made his decision on the objections on 1 August 1994. It is unnecessary here to detail either the objections themselves or the Deputy Commissioner's decision.

An appeal was lodged with the Tribunal in September of 1994. It was heard on 25 May 1995. At the commencement of the Tribunal's hearing the barrister representing Mr Stuart sought an adjournment on the basis that, as he had only been instructed some two weeks previously, he had not sufficient time to prepare. This adjournment was refused. On receipt of further instructions from his client the barrister then requested the Tribunal that he be excused from appearing for Mr Stuart in the proceedings. This having been agreed to, Mr Stuart in turn applied for an adjournment on the new basis that the matter was a complex one and he lacked legal representation. This application was refused. Mr Stuart then objected to the presiding Member's participation in the hearing on the basis that the presiding Member had conducted such a conference involving Mr Stuart's appeal as fell within the Administrative Appeals Tribunal Act 1975, (``the AAT Act'') s 34.

This sequence of events gave rise to the first of the questions of law raised in the appeal to the Federal Court under the AAT Act, s 644(1). This was that, in failing to grant the adjournment sought by counsel, the Tribunal denied Mr Stuart procedural fairness.

While the Tribunal's hearing of the appeal was still in progress Mr Stuart left the hearing. This occurred shortly after counsel for the Deputy Commissioner began his submissions and, apparently, was for family reasons. The Tribunal made appropriate arrangements for the provision of a transcript of those submissions to Mr Stuart and for his response to them in written submission. Such written submissions were made.

In its reasons the Tribunal indicated that it:

``has considered the applicant's twenty-one page hand written submission and finds that it does not address any of the grounds of objection as set out above, nor indeed any of the respondent's submissions. It neither assists the applicant nor the Tribunal in any respect.''

Mr Stuart's second ground of appeal to the Federal Court alleged an error of law in the Tribunal's failure to consider the written submissions in relation to a provisional tax credit.

The Appeals to the Federal Court and to this Court

Justice Nicholson dismissed Mr Stuart's appeal. As the appeal to this Court is restricted in its scope, it is unnecessary to canvas his Honour's reasons save insofar as they bear upon the grounds of appeal to this Court.

ATC 4963

The first matter to which reference needs be made relates to the manner in which his Honour dealt with a claim by Mr Stuart for the reduction of a penalty tax of $4,101.19 imposed for late payment of the provisional tax (of $13,722.00) notified in the 1988 assessment. This particular issue is said to arise out of the ground of appeal relating to the Tribunal's failure to consider Mr Stuart's written submissions.

Before indicating his Honour's treatment of this matter, it should be noted that (i) Mr Stuart lodged his 1989 income tax return on 5 August 1993; and (ii) the Commissioner later issued a nil tax advice to Mr Stuart in respect of that return. The advice gave a provisional tax credit of $13,722.00.

The penalty tax question was dealt with by his Honour as follows:

``The applicant's further ground seeks a reduction of penalty tax. The applicant was granted a credit for provisional tax of $13,722. The applicant objects to paying penalty tax which includes a penalty for that provisional tax, prior to the receipt of the credit for it. The amount in issue is $4,101.19 being additional tax for late payment pursuant to ITA, s 207 computed from 6 December 1991 (the day after the raising of the assessment for the year ended 30 June 1988) to 5 August 1993 (the date upon which the taxpayer lodged his return showing nil income for the year ended 30 June 1989).

The provisional tax credit was given on 13 September 1995. No additional tax was charged from 5 August 1993 when the taxpayer lodged the relevant return to the date of that credit. In short, the facts disclose that the provisional tax issue was not dealt with at the time of the 1988 return because at that time the taxpayer had not lodged the nil assessment for the relevant year. That was a matter which did not occur until 5 August 1993.''

The first ground of Mr Stuart's notice of appeal is:

``That His Honour erred in finding that the Applicant had to pay $4,101.19 penalty tax, more particularly described as, additional tax for late payment, pursuant to s. 207 of the Income Tax Assessment Act 1938 (Cth) (the `ITA') on provisional tax of $13,722 for the tax year ended 30 June 1988 prior to the receipt of a credit for that provisional tax.''

As we read Nicholson J's reasons, he did not make this alleged finding and, indeed, there was no reason for it to be made. Insofar as reference is made to $4,101.19 in the passage quoted, his Honour was simply narrating what was alleged to be due. He had no need to determine whether it was due or in that amount because the liability to penalty tax under the Income Tax Assessment Act 1936 (the ``Assessment Act''), s 207 arose after the making of the assessment to which Mr Stuart made his objections (see the Assessment Act, s 166 and s 175A) and in respect of which the objection decision were taken.

The initial objections made by Mr Stuart to the 1985 to 1988 assessment did not refer to additional tax or penalties. Nonetheless, the Tribunal gave some consideration to this matter as Mr Stuart's letter to the Tribunal of 25 January 1995 setting out what were then taken to be his objections referred to ``penalty tax''. The Tribunal properly treated this particular objection as referring to penalties by way of additional tax imposed under Part VII of the Assessment Act in respect of the relevant years of income. The 1988 notice of assessment itemises these penalties. They are quite unrelated to the s 207 penalty, the subject of the present ground of appeal.

The Tribunal, no less than the Commissioner when deciding on the objections, did not - and could not - consider the s 207 penalty tax. It was not encompassed by the assessments made for the years 1985 to 1988. It was not the subject of any objection to those assessments. As counsel for the respondent correctly submitted, the question of the s 207 penalty tax simply does not arise for determination in these proceedings, it not having arisen before the Tribunal or, for that matter, before Nicholson J. This ground of appeal must fail for this reason.

The second general ground of appeal to this court is that:

``His Honour erred finding that the Applicant was not denied procedural fairness by the refusal of the adjournment sought on behalf of the Applicant. Upon the refusal of the application for an adjournment the Applicant's counsel refused to continue. The Applicant was forced to continue the hearing without his counsel.''

ATC 4964

Four matters are referred to in the notice of appeal in apparent particularisation of this. These are referred to below.

As to the general ground itself, Nicholson J concluded that:

``there is no substance in the applicant's contention he was denied procedural fairness by the refusal of the adjournment sought by his counsel.''

We are unpersuaded that there was any error in this conclusion or in his Honour's reasons. The decision to refuse the adjournment has not been shown to have been an injustice to Mr Stuart: cf
Bloch v Bloch (1981) 37 ALR 55 at 58-59. As Nicholson J noted, Mr Stuart was a Registered Tax Agent with university qualifications; the issues to be determined by the Tribunal were those raised by him; and he was given more than adequate notice of the hearing and opportunity enough to provide himself with counsel for the occasion. He was, in his Honour's words, ``provided with all the opportunity necessary to satisfy the requirements of procedural fairness''.

The principal matter relied upon before this Court to make out the general claim of denial of procedural fairness was that, in consequence of the adjournment being refused, Mr Stuart had to proceed without legal representation because of the withdrawal of his counsel. As to this matter Nicholson J indicated that:

``the inference from the evidence before the Tribunal is that the applicant instructed his counsel not to continue so that the appearance of the applicant without counsel was as a result of his own doing.''

While Mr Stuart denied the accuracy of this inference in his submissions, he has not been able to show why that inference was not open to the Tribunal or to his Honour. The transcript of the matter supports the inference drawn as the following suggests.

The adjournment submission having been refused, there was a brief adjournment after which Mr Stuart's legal representative made this statement to the Tribunal:

``MR ROSS: Sir, I have received further instructions from my clients and at this particular stage, in light of my earlier submissions, I repectfully request to be excused from appearing for the applicant in these proceedings.''

Mr Stuart did not protest to the Tribunal about Mr Ross' withdrawal. Rather his first observation to the Tribunal was:

``MR STUART: Sir, before proceeding, I would now like to request an adjournment. I now do not have legal representation and there are - I appreciate what you are saying about my experience as a tax agent, however, I am not a qualified legal practitioner and it has been established that there are fairly complex legal issues involved.''

Though the inference drawn was itself fatal to Mr Stuart's claim insofar as it related to his circumstance of being without legal representation, Nicholson J went on to consider Mr Stuart's contention that, as part of procedural fairness, legal representation was required. His Honour made plain that the common law did not recognise such an entitlement. In this he was undoubtedly correct: see
New South Wales v Canellis (1994) 124 ALR 513. The contrary view advanced by Mr Stuart is plainly untenable.

Turning to the four matters particularised under this general ground of appeal, the first - that the issues before the Tribunal were defined by the Tribunal and without the assistance of Mr Stuart's counsel - is factually incorrect. The issues were drawn from Mr Stuart's letter to the Tribunal of 25 January 1995. They were identified by the Tribunal before Mr Stuart's counsel withdrew. There is nothing in this matter to justify challenge to the judgment of Nicholson J.

The second and third matters particularised - both of which relate to the Tribunal's expressed sympathy for a submission of the Commissioner that the adjournment request was but ``another antic'' engaged in by Mr Stuart to delay the matter - are wholly lacking in substance. Justice Nicholson observed of the ``another antic'' reference that, while it might involve a characterisation of Mr Stuart's submissions, it in no way denied his procedural fairness. We agree with his Honour in this.

The fourth particularised matter raises a more substantial issue. The claim made is that:

``His Honour erred in not making the request by the Applicant under s. 34(4) of the Administrative Appeals Act 1975 (Cth) for the presiding Member to exclude himself on the ground that he had presided at a

ATC 4965

previous conference as a circumstance relevant to the ground of procedural fairness.''

To appreciate the significance of this it is necessary to refer to several provisions of the AAT Act. The first is s 33 which deals with the procedure to be followed by the Tribunal. Importantly, it countenances the holding of a directions hearing in relation to a proceeding. Insofar as is relevant for present purposes s 33 provides:

``(1) In a proceeding before the Tribunal:

  • (a) the procedure of the Tribunal is, subject to this Act and the regulations and to any other enactment, within the discretion of the Tribunal;
  • ...

(1A) The President may authorise a member to hold a directions hearing in relation to a proceeding.

(2) For the purposes of subsection (1), directions as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may be given:

  • (a) where the hearing of the proceeding has not commenced - by a person holding directions hearing in relation to the proceeding, by the President or by member authorized by the President to give directions for the purposes of this paragraph;
  • ...

(2A) Without limiting the operation of this section, a direction as to the procedure to be followed at or in connection with the hearing of a proceeding before the Tribunal may:

  • (a) require any person who is a party to the proceeding to provide further information in relation to the proceeding; or
  • (b) require the person who made the decision to provide a statement of the grounds on which the application will be resisted at the hearing; or
  • (c) require any person who is a party to the proceeding to provide a statement of matters or contentions upon which reliance is intended to be placed at the hearing.''

We would note in passing that in its reasons for decision the Tribunal indicated that, on 10 November 1994 in ``preliminary proceedings... pursuant to s 33 of the AAT Act'', directions were given that Mr Stuart file a detailed statement of his grounds of objection.

Turning now to s 34 of the AAT Act, this provision envisages a quite particular type of direction being given by the President of the Tribunal. This is for the holding of a conference of the parties or of their representatives prior to the hearing of an appeal. The terms of the section (omitting sub-section (1A)) are that:

``(1) Where an application is made to the Tribunal for review of a decision, the President may, if he thinks it desirable to do so, direct the holding of a conference of the parties or their representatives presided over by the President or another presidential member, by a non-presidential member assigned to the relevant Division or by an officer of the Tribunal.

(2) The President may also direct that such a conference is to be held in the case of applications made to the Tribunal for a review of a decision of a kind specified in the direction.

(3) At the hearing of a proceeding before the Tribunal, unless the parties otherwise agree, evidence shall not be given, and statements shall not be made, concerning any words spoken or act done at a conference held in accordance with this section.

(4) If:

  • (a) a conference held in accordance with this section in respect of a proceeding is presided over by a member of the Tribunal; and
  • (b) a party to the proceeding who, or a representative of whom, was present at the conference notifies the Tribunal before, or at the commencement of, the hearing that he objects to that member participating in the hearing;

that member is not entitled to be a member of the Tribunal as constituted for the purposes of the proceeding.''

We would note this preliminary conference procedure envisages the possibility of privileged disclosures being made and in consequence it provides a mechanism in s 34(4) for a party to object to the participating

ATC 4966

member's later involvement in the hearing of the appeal. We would emphasise that, where such a conference has been conduced, the participating member has no discretion to exercise if the conditions governing an objection are satisfied. The requirement that that member not then participate in the hearing of the appeal is mandatory.

We have already indicated that in Mr Stuart's case a s 33 directions hearing was conducted. However, it seems to have been assumed by the Tribunal that s 34(4) was of potential relevance in the hearing of Mr Stuart's appeal.

In its reasons the Tribunal indicted that, after Mr Stuart's counsel withdrew, Mr Stuart then sought to object under the AAT Act s 34(4) to Senior Member Fayle hearing the appeal. Having set out the terms of the sub-section the Tribunal continued:

``The Tribunal ruled that this objection, neither having been made `before, or at the commencement of, the hearing' was too late. The hearing at that time had been in progress for over one-hour. The Tribunal observes in this respect that it would be very strange indeed if either party, disenchanted with the way the proceedings were progressing, could use the simple expedient of removing their legal representative and then have the hearing abandoned by dint of s 34(4).''

If this seems to assume that a s 34 conference had been held, there is no evidence before us that the ``conference'' resulting in the objection was other than the hearing which occurred on 10 November 1994. This hearing as we have noted was described by the Tribunal in its reasons as ``preliminary proceedings... pursuant to s 33 of the AAT Act''.

It is the case that, in his appeal to the Federal Court and at a time when he was legally advised, no question of law was raised in relation to the s 34(4) objection. Nonetheless Mr Stuart sought before Nicholson J to have the refusal of his objection taken into account as a circumstance relevant to the refusal to grant an adjournment. His Honour rejected this: the s 34(4) objection was an event subsequent to the refusal of the adjournment. He further indicated that the objection had not been raised in a manner which accorded it any status in relation to the issue of procedural fairness.

The notice of appeal to this Court merely challenges his Honour's view on the relevance of the s 34(4) objection to the issue of procedural fairness. It does not raise directly the question whether the proceedings in the Tribunal were a nullity because a s 34(4) objection was properly and effectively made with the consequence that Senior Member Fayle was unable to hear the appeal.

There is no basis at all in the material before us to question the conclusions arrived at by Nicholson J given the manner in which, and purpose for which, the s 34(4) issue was raised before him. In terms of the notice of appeal the error alleged in para 2(d) has not been made out. We nonetheless have considered it necessary to consider whether leave ought not to be granted to Mr Stuart to amend his notices of appeal so as to allow direct consideration of the question whether Senior Member Fayle's decision was a nullity because Mr Stuart had, in the circumstances, effectively invoked s 34(4). At our invitation Mr Stuart sought such leave. His application was opposed by the Commissioner.

In the event we refuse the application for leave to amend the grounds of appeal. There is no evidence before us that a s 34 conference was held on 10 November 1994 in addition to the s 33 directions hearing of that date. It has not been suggested that a conference occurred on any other day. While it is the case that the Senior Member appears to have assumed that a conference was held, there is nothing before us to indicate that it was actually a conference of the type envisaged by s 34.

It was indicated from the bar table by counsel for the Commissioner that the notice sent to the Commissioner on 25 October 1994 relating to the holding of the 10 November proceeding described the proceeding as ``Conference''. There was no indication given - and none has been drawn to our attention - that this ``conference'' was held in consequence of a specific direction made by the President under the AAT Act, s 34(1) or of a direction referring to a specified kind of decision under s 34(2). In these circumstances, we do not consider that even if the application to amend was granted the matter would be capable of proper resolution on this appeal.

We would, though, add this much. It may well be the case that the use of the term ``conference'' by the Tribunal is itself apt to

ATC 4967

mislead. It is to this matter that we wish specifically to draw attention. On 30 June 1993 the President of the Tribunal issued a ``General Practice Direction'' detailing the procedures which ``are to be adopted for all applications lodged throughout Australia'' with the Tribunal. Paragraph 3 of that Direction deals with conferences. Whether or not these are intended to be such conferences as are envisaged by s 34 is not indicated. What is suggested, at least inferentially in para 3.1, is that the conference procedure is potentially applicable to applications to review decisions of all kinds although a ``conference is not held as a matter of course in all applications'': para 3.1.

We express no opinion on whether the Direction could satisfy the requirements of a direction for the purposes of the AAT Act s 34(2). Its more likely provenance is s 20 of the AAT Act which contemplates the President's giving directions relating (inter alia) to the arrangement of the Tribunal's business and to its procedure generally.

The Direction envisages the possibility of several conferences needing to be held in an application and then in para 3.2 it details what is to occur at the ``First Conference''. It is clear that the matters there listed include matters that one would have thought could or would fall within a s 33 directions hearing. We refer for example to the listed item in para 3.2:

``Any issues regarding the practice and procedure of the Tribunal are dealt with.''

But the paragraph likewise envisages the possibility of negotiation or mediation being engaged in at the conference - activities one would surmise being of the type contemplated for a s 34 conference.

The Direction subsequently makes reference to a ``Second Conference'' and then, quite discretely, refers to ``Directions Hearings'' in the following terms:

``Section 33 of the Administrative Appeals Tribunal Act 1915, permits directions hearings to be held at any stage in a proceeding at the discretion of the Tribunal. The purpose of a directions hearing is to give directions as to the procedures to be followed in preparing an application for hearing (including providing information and statements) and at any hearing. A party who considers a directions hearing is required, should make a request for one at the registry.''

Whether or not such a hearing would or could be described as a ``conference'' is not indicated.

We have referred to the Direction at length because it appears to us that in its terms it may be the cause of confusion and blur the intended operation of s 33 and s 34 of the AAT Act.

For the foregoing reasons the appeal should be dismissed with costs.

This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.