J Block SM

Administrative Appeals Tribunal

Decision date: 2 December 1997

J Block (Senior Member)

This is an application by the Applicant for an extension of time within which to refer an objection decision to this Tribunal. The objection decision in question relates to the year ended 30 June 1995 (``1995 year'') in which the Applicant claimed a deduction of $1,200 paid by him in respect of a Westpac Superannuation Policy. An assessment was issued (on 28 September 1995) and in which the claimed deduction was disallowed. The Applicant's objection dated 3 October 1995 was disallowed by notice dated 18 January 1996 on the basis (in broad terms) that during the 1995 year the Applicant was, in relation to Hills Express (referred to in the proceedings as ``Hills Express'' but in one of the exhibits as ``Hills Transport'', and in these Reasons as ``Hills Express''), an employee rather than an independent contractor. The Applicant seeks to refer that objection decision to this Tribunal.

2. (a) The Applicant was represented by Mr G.J. Moutzouris, a tax agent of G.J. Moutzouris & Company of Sydney. The Respondent was represented by Mr Ian Marriott of the Australian Taxation Office. No oral evidence was given before the Tribunal. During the course of the proceedings, which were not recorded, and which were conducted informally, statements were made by both representatives, but in particular by Mr Moutzouris. In addition, the Tribunal accepted a number of exhibits as follows:

• Exhibit A1 is a letter dated 27 September 1996 addressed by Mr Moutzouris to the Respondent; in accordance with Exhibit A1, Mr Moutzouris drew the attention of the Respondent to the decision of the New South Wales Appeal Court in
Vabu Pty Limited v FC of T 96 ATC 4898; the Appeal Court found in Vabu that a courier (in the circumstances set out in the Vabu decision) was an independent contractor and not an employee. In Exhibit A1, Mr Moutzouris in effect sought so-to-speak, to ``re-object'' against the assessment referable to the 1995 year. Such a procedure was not, of course, open to him, since the Applicant's objection had previously been made and disallowed; his correct course would have been to refer the objection decision in question to the Tribunal and to seek an extension of time within which to do so.

• Exhibit A2 is a handwritten, largely indecipherable and undated file note by Mr Moutzouris; it serves little evidentiary purpose other than to indicate that at some point in time, Mr Moutzouris was in contact with Carmen Chan, an employee of the Respondent in the Superannuation Division of its Bankstown office. Mr Moutzouris indicated, although this does not appear from Exhibit A2, that he had been in contact with Ms Chan in or about March 1997.

• Exhibit A3 a letter by Mr Moutzouris to the Respondent dated 7 March 1997 enclosing copies ``of all correspondence in relation to the disallowance of superannuation contributions''. Exhibit A3 goes on to state that:

``The taxpayer provided for his own superannuation with Westpac Super- annuation Policy No: 0740885 for the 1995 financial year''

and then further:

``Would your office please attend to this objection and amend the 1995 income tax assessment at your earliest convenience.''

As previously indicated, the relevant objection had previously been disallowed.

• Exhibit A4 is a letter by the Respondent addressed to Mr Moutzouris dated 30 June 1997 enclosing a questionnaire for completion by the Applicant. That questionnaire (``question- naire'') contains 17 questions in 4 pages; each of the pages is headed by an endorsement reading ``Are you an employee?''. The questionnaire attached to Exhibit A4 contains the reference, previously mentioned, to Hills Transport; it also contains handwritten answers (some not clear) to most of the questions.

• Exhibit A5 is a letter dated 14 August 1997 addressed by Mr Moutzouris to the Respondent. The second paragraph reads:

``We have had the questionnaire completed over six weeks ago but Westpac have still not confirmed the notice of our client's intention to claim a deduction for superannuation contributions.''

There is no enclosure identified as such in respect of the letter Exhibit A5 although the left

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hand foot of that letter indicates that there was an enclosure. It would seem that there was in fact an enclosure, and being a blank (ie incomplete) copy of the questionnaire.

• Exhibit R1 is a letter dated 27 October 1997 addressed by the Respondent to the Administrative Appeals Tribunal, and in which the Respondent noted that he wished to oppose this application for the following reasons:

``1. The application does not contain a valid reason for granting an extension of time,

2. There needs to be finality to decision making.''

• Exhibit R2 is a file note prepared by Ms Chan, undated but which must, because of the last entry in it, have been made after 9 September 1997. Exhibit R2 indicates that there was more contact between Mr Moutzouris and the Respondent than was indicated by Mr Moutzouris; Exhibit R2 reads as follows:

``A.C.M.S. CASE TYPE:Y(Unassigned)

Case# 24021

Client TFN [not reproduced]



- required further info

- was advised by Bruce Haine (SG tech adviser) to hold onto these type of cases until National office directions, because of Vabu.

- rang Audit on 21/2/97 and was advised that there is no audit report.

- rang agent to obtain more facts on 28/02/97. Agent advised he will fax requested info soon.

- I was on leave from 28/04/97 to 12/05/97

- received agent's letter on 10/03/97 in response to my phone request on 28/02/97. Agent still have not provided the requested facts to determine amendment. He only provided copies of letters and APRE report, which I already have on file.

- awaiting N.O advice when to send questionnaire (24/06)

- sent questionnaire on 30/06/97

- sent reminder letter 4/08/97 and waiting reply by 20/08/97.

- I was on leave from 18/08/97 week.

- received agent's response to my 30/06/97 (questionnaire letter) on 18/08/97 week. Agent advised that they have filled out the questionnaire but is still waiting for the super fund's reply.

- rang agent on 29/08/97, he advised that he will fax the questionnaire next week he now has all the info.

- rang agent again on 03/09/97 for the requested questionnaire and left message for him to call back.

- checked on 09/09/97 still no mail and fax sent by agent.''

• Exhibit R3 is the questionnaire in the form in which it was received by the Respondent, that is, without answers to the questions. Mr Moutzouris explained that he had filled in the answers to the questions in the questionnaire in his possession but that his staff had mistakenly failed to insert those answers in the questionnaire which was sent to the Respondent, and that is why the Respondent received, in answer to the letter dated 30 June 1997 (Exhibit A4) a blank questionnaire.

(b) The Tribunal file in this matter contains inter alia:

3. (a) Mr Marriott aptly characterised the period from the disallowance of the objection until this application as falling within two periods; the first period relates to the period from 18 January 1996 and being the date on which notification of disallowance of the objection dated 3 October 1995 was given, until 27 September 1996, and being the date on which Mr Moutzouris wrote to the Respondent referring him to the Vabu decision; the second period in turn relates to the period thereafter.

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(b) Mr Moutzouris said that after the disallowance of the objection, he conferred with his client. At that time the Small Taxation Claims Tribunal did not exist and the fee for a referral to the Administrative Appeals Tribunal in the ordinary course was either $300 or $500; he was not sure which precise amount was correct at that particular time. It may be noted that in January 1996, the position of the Applicant as a courier in relation to Hills Express (and whether employee or independent contractor) was not clear. The value of the deduction was calculated by Mr Moutzouris at $462. In the circumstances, the Applicant decided that the costs involved in respect of a referral were simply uneconomic in relation to the deduction benefit obtainable, more particularly, as at that time, the Applicant's prospects of success in respect of such a referral were perceived as being uncertain.

The Tribunal notes at this juncture, in the light of the relevant criteria to be considered (dealt with more fully later in these Reasons) that it considers that this explanation was rational, and in all the circumstances a reasonable decision at the time. To embark upon proceedings before the Administrative Appeals Tribunal for a possible benefit of $462, at a cost which must have been (inclusive of the Administrative Appeals Tribunal fee) considerably greater than $462, and in particular where the prospects of success were uncertain, would have been ill-advised. It must be noted on the other hand that, at least during the first period, the Applicant undoubtedly ``rested upon his rights'' within another of the relevant criteria.

(c) It is relevant at this point to note that the nature of the Applicant's position with Hills Express was not disputed before the Tribunal. He was (and is) a courier. He supplies his own transport (a utility), pays all costs referable to it, and undertakes deliveries at the request of Hills Express. He could work as hard as he pleased, subject always of course to the available work flow, and there are no contractual limits. Mr Moutzouris advised the Tribunal that in the 1995 year, the Applicant grossed over $55,000 and worked more than 40 hours per week. It would appear that the Applicant may be able to establish that, having regard to the decision in Vabu, his position with Hills Express in the 1995 year was aptly characterised as that of an independent contractor. That the Applicant has an arguable case on the merits appears to be undisputed. Indeed Mr Marriott indicated that if this application went against the Applicant, the Respondent would be prepared to entertain the possibility of an amended assessment under section 170 of the Income Tax Assessment Act, and which would in such event give the Applicant the relief he seeks. While, as Mr Marriott correctly contended in argument, this factor is irrelevant to the question before the Tribunal, it does tend to indicate that the Respondent accepted that the Applicant has an arguable case on the merits.

(d) The second period is rather more difficult. Having written Exhibit A1, seeking in effect to re-object against the assessment for the 1995 year, Mr Moutzouris does not appear to have done anything more for some months. That there was contact between him and Ms Chan is accepted, although the nature and extent of that contact is somewhat unclear. See in this context Exhibits A2 and R2; Exhibit R2 probably correctly records the extent of the contact between Mr Moutzouris and the Respondent.

But certainly by March 1997 some (limited) progress was being made; see Exhibit A3. And Exhibit A4 indicates that the matter was still alive at the end of June 1997 when the Respondent sent the questionnaire to Mr Moutzouris. And it was also alive thereafter as indicated by Exhibit A5 when Mr Moutzouris sent (in consequence of the error in his office) the blank questionnaire to the Respondent.

But there was also some delay, during the second period, on the part of the Respondent. Exhibit A4 contains an apology for the delay; Mr Marriott explained that the Vabu decision had the effect that matters such as this had to be considered by senior officers in Canberra, and that a decision as to how to deal with the letter Exhibit A1 had to await a decision from above. (There is an indication of the fact that National office directions were awaited in Exhibit R2.)

Mr Marriott argued that during both periods there was no acceptable explanation for the delay. The Tribunal considers that there was an acceptable (and rational) explanation (on the basis indicated earlier in these Reasons) of the delay in respect of the first period. And while there was undoubtedly considerable delay during the second period, and while furthermore the explanation for that delay was by no means altogether clear, it did nonetheless, in my view, constitute an explanation. It must

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be said that the handling of the matter by Mr Moutzouris during the second period was (as the exhibits demonstrate) rather less efficient than might have been desirable. But his conduct, however dilatory, was at least to some extent explicable (although this is an inference on the part of the Tribunal since there was no statement by Mr Moutzouris to this effect) on the basis that he was hoping for a solution without recourse to legal proceedings.

It must also be said that during the second period, the Applicant did not ``rest on his rights'', although it also cannot be said that those rights were pursued either vigorously or even correctly, but recent case authority (and see in this context the authorities cited in
Mansour & Australia Post [1996] 44 ALD 771) indicates that modern practice will not visit upon an applicant errors made by his advisers.

4. I turn now to consider the law:

(a) I commence by noting that Mr David Phillips of Greenwoods & Freehills has been kind enough to make available to me a copy of his June 1996 Taxation of Laws essay (submitted in lieu of an examination) in the course in Tax Administration undertaken by him towards a Master of Taxation Degree at Sydney University. That essay (``Phillips Essay'') contains, in the view of the Tribunal, a good summary of the general principles and case authorities which are relevant in a matter such as this. With the consent of Mr Phillips I reproduce a part of paragraph 2 of the Phillips Essay as follows:

``2 The exercise of discretions - general principles:


It is submitted that the Commissioner's discretion must be exercised in accordance with the principles applied by the Courts and Tribunals in the exercise of similar powers.


General principles used by the Courts

There are a number of principles relevant to the exercise of discretions generally (not necessarily tax specific) which, at the outset, are worth noting.

Lighthouse Philatelics Pty Limited v FC of T (91 ATC 4942) it was held that a provision allowing for time to be extended is a remedial provision which should be interpreted remedially and beneficially.

In Case W23,
89 ATC 253 it was stated that a discretion to extend time is a procedural rule, the object of which is to ameliorate the harshness of the 60 day rule.

In Case U189,
87 ATC 1082 P.M. Roach (Senior Member), in considering the relationship between substantive law and procedural rules held that the objective of all procedural rules, in tax litigation as in every other type of litigation, ought to assist in providing for all who act reasonably in seeking it.

Hall v Nominal Defendant (1966) 117 CLR 423 the Full High Court was asked to consider the exercise of a discretion to bring an action against a nominal defendant. In this case they recognised that a power to extend time limits was granted `so that justice may be done according to the circumstances' - whilst accepting that the extension of time should not be granted as a matter of course. The Court also acknowledged that in some but not all circumstances a client may be saddled with the responsibility of his solicitor's actions.

FC of T v Curtin 80 ATC 4654 Kelly J specifically referred to the justice of the situation as of particular relevance in exercising discretions to extend time. At page 4657 he stated `... the discretion reposed in the Court is a discretion to extend the time with the view to the avoidance of an injustice'. In this he relied on the decision in
Ratnam v Cumarasamy (1965) 1 WLR 8 in which the Court held that `... the power is exercisable, even after the expiration of the time appointed, on such terms as the justice of the case may require'.

In Case U175,
87 ATC 1007 the Commissioner put forward a number of strong arguments why the extension of time for lodging an application for review should not be granted, not the least of which that it was 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. In concluding that an extension should in fact be granted, P.M. Roach (Senior Member) held that the litigious system has an obligation to do justice not only between

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citizen and citizen in accordance with the law enacted by 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. Roach went on to state that the object in exercising any discretion to grant or refuse an application for extension of time... is to avoid injustice.

Hunter Valley Developments Pty Limited v Cohen (1984) 7 ALD 315 the Court concluded that whilst the Commissioner may properly have regard to the circumstances concerning, and the reasons for, the failure by a taxpayer to complete a loss transfer within the relevant time, the discretion to extend time is unfettered and unconstrained - there is no requirement for `special circumstances' or `special reasons' to exist.

Bond Corporation Holdings Limited v Australian Broadcasting Tribunal (1988) 84 ALR 669, Gummow J was of the opinion that where a statute confers a discretion which in its terms is unconfined, the factors that may be taken into account in the exercise of discretion are similarly unconfined, except in so far as there may be found in the subject matters, scope and purpose of the statute some implied limitation to the factors to which the decision maker may legitimately have regard. This principle is supported by the High Court in
R v Australian Broadcasting Tribunal; Ex Parte 2HD Pty Limited (1979) 144 CLR 45. In this case the issue for consideration was the failure of the Australian Broadcasting Tribunal to consent to the transfer of a television licence. It was acknowledged by the Court that the discretion must be exercised within the proper limits [Reg. v Anderson; Ex Parte Ipec-Air Ltd (1965) 113 CLR 177, at p. 189], but that the problem lies in ascertaining what those limits are.

Numerous cases have held that delay in lodging a loss transfer agreement, including the length of the delay are not by themselves fatal to any application to extend time. In Case X52,
90 ATC 406 Gray J (Presidential Member) stated that `obviously delay is not an automatic bar, or there would be no point in the existence of a statutory discretion to allow the doing of an act outside the statutory time limit'.

In this respect the Court in
Ulowski v Miller [1968] SASR 277, held that the discretion at issue ought not to be fettered by any absolute or inflexible rules and that five paramount matters to be considered are the length of the delay, the explanation for the delay, the hardship to the plaintiff if the action is dismissed and the cause of action left statute-barred, the prejudice to the defendant if the action is allowed to proceed notwithstanding the delay, and the conduct of the defendant in the litigation.

Prejudice has also been a common theme in decisions of this kind. In Ulowski Bray CJ stated that although the delay was very long (some 5 years) and the explanation perfunctory in the extreme, the absence of any prejudice to the appellant allowed the court to grant the extension of time. Bray CJ made similar comments in
Lovett v Le Gall (1975) 10 SASR 479, in particular, he stated that if the defendant has suffered no prejudice, as one who is well aware within the limitation period of the plaintiff's claim, or where the excess period of time is small, or where he cannot show that he has lost anything by reason of the delay, it may well be that the court will not find it difficult to come to the conclusion that it is fair and equitable in the circumstances to grant the extension. He went on to state that `there is now a tendency abroad in many fields of procedural law... to relax the rigidity of time limits when that causes no injustice, prejudice or hardship to other parties'.

This passage has been cited with approval in a number of cases dealing with the exercise of discretions, the most relevant of which would appear to be Hunter Valley Developments [also refer
Doyle v Chief of General Staff (1982) 42 ALR 283 and
Duff v Freijah (1982) 5 ALD 16].

Considerations of private versus public interest are also relevant in exercising discretions (refer
Lucic v Nolan (1982) 45 ALR 411). Particular mention in this case was made of the importance of the finality in disputes.

In Hunter Valley Developments Pty Limited v Cohen the issue before the Court was an application for an extension of time under

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Section 11 of the ADJR Act. Wilcox J set out a number of non-exhaustive guiding principles which should be considered in the exercise of discretions in these circumstances. These are reproduced in full.

`(a) Special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper so to do... Indeed, it is the prima facie rule that proceedings commenced outside that period will not be entertained (
Lucic v Nolan (1982) 45 ALR 411 at 416). It is a pre-condition to the exercise of discretion in his favour that the applicant for an extension show an ``acceptable explanation of the delay'' and that it is ``fair and equitable in the circumstances'' to extend time (Duff at 485; Chapman v Reilly (unreported) Neaves J, 9 December 1982, at 7). (Emphasis added by the Tribunal)

(b)... A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision...: per Fisher J in
Doyle v Chief of [General] Staff (1982) 42 ALR 283 at 287 and a case where the decision-maker was allowed to believe that the matter was finally concluded.

(c) Any prejudice to the respondent including any prejudice in defending proceedings occasioned by the delay is a material factor militating against the grant of an extension; see
Doyle v Chief of General Staff (1982) 42 ALR 283.

(d) However, the mere absence of prejudice is not enough to justify the grant of an extension... In this context public considerations often intrude (Lucic, Hickey). A delay which may result, if the application is successful, in the unsettling of other people (Ralkon at 550, Becerra at 12-13) or of established practices (Douglas at 19) is likely to prove fatal to the application.

(e) The merits of the substantial application are properly to be taken into account in considering whether an extension should be granted (Lucic at 417, Chapman at 6).

(f) Considerations of fairness between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court's discretion (Wedesweiller at 534-535).'

Wilcox J also held that `the adequacy of an explanation for delay is intimately related to the nature of the case. The distinction drawn in Wedesweiller between a case which is merely inter-parties and a case involving elements of public interest in relation to other people, practices or the need for finality is here relevant. The point goes beyond absence of prejudice. An applicant concerned to challenge a decision which has implications for other people or for day to day public administration may properly be regarded as being under a heavier duty to act expeditiously than is an applicant who is aware that his case has no such implications'. He then went on to state that `in contrast to most of the cases which have arisen in the court and which predominantly involve employment or industrial decisions there is here no suggestion that any other person is affected, for good or ill, by the decision which has been made. The only consequence of the decisions to refuse the final certificate is to deny the applicants the taxation benefits which they would otherwise have obtained. The only implications of the case are, therefore, the extent of their taxation liabilities. Although the relevant decision is a ministerial decision made under a statutory authority, this is a case very similar to inter-parties private litigation, involving no other persons'.

The Full Federal Court decision in Lighthouse Philatelics Pty Limited v FC of T concerned the power of the Tribunal to allow the taxpayer to amend its grounds of objection to admit a new ground of relief. The Court in this instance stated a number of important and relevant principles:

  • `The decision to allow an amendment of the grounds of objection ought to be made on the same considerations of justice upon which such decisions are regularly made in litigation. An amendment under sec 190 should not be considered with reluctance, but on its merits.'
  • `The amendment to s. 190(a) introduced by Act No. 48 of 1986 was of a remedial

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    kind and thus must be construed in accordance with well established principles relating to ameliorating legislation.' [sic]

The above cases, and the principles enunciated therein, provide a broad outline of the general rules which should be taken into consideration in the exercise of a discretion granted to a statutory authority. It is submitted that these principles are entirely relevant for the exercise of a discretion involving a loss transfer agreement out of time.

Specific taxation decisions involving discretions

The above mentioned principles have been applied by the Administrative Appeals Tribunal (`AAT') and the Courts in reviewing the exercise of the Commissioner's discretion to extend time for procedural matters in certain circumstances. A number of these decisions are discussed below.

Case U175, 87 ATC 1007

In this case P.M. Roach (Senior Member) considered the relevant case law in the area of discretions and made the following comments:

  • `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; adopted by the Full Federal Court in
    Turner v Nominal Defendant (1981) 51 FLR 342;
    Hughes v National Trustees Executors & Agency Co. of Australasia Ltd (1978) V.R. 257).'
  • `An extension of time is not to be automatically denied because delay was occasioned by ``neglect'' whether of an applicant or his solicitor (Hall).'

Roach also held that:

  • `After all, if an assessment to tax is in fact excessive, then refusal of an extension of time or of an 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 to whether the claims which have been made by the Commissioner are excessive.'

Case W23, 89 ATC 253

This case concerned the failure to lodge an objection within the required time limits. In deciding for the taxpayer, Dr P. Gerber (Deputy President) held, amongst other things:

  • `Sections 188 and 188A were inserted by Parliament to ameliorate the harshness of the ``60 day'' rule. It is a remedial provision and should be interpreted remedially.'
  • `... the time limit should... rarely [be strictly applied] where the Commissioner is not taken by surprise and suffers no prejudice.'

Case X52, 90 ATC 406

This case concerned the discretion to amend the taxpayer's grounds of objection. In allowing the amendment, Gray J (Presidential Member) held that:

  • `Obviously, delay is not an automatic bar, or there would be no point in the existence of a statutory discretion to allow the doing of an act outside the statutory time limit.'

The AAT also held that a `grave injustice' would be done to the applicant if his case is correct and the time not extended.

Lighthouse Philatelics Pty Limited v FC of T

In this case the Full Federal Court noted that the Commissioner's task in administering the Act is `to ensure that the correct amount of tax is paid, ``not a penny more, not a penny less''' and that the discretion (in this case to allow an amendment to the grounds of objection) is not to be exercised unjustly to prevent the correct application of the substantive provisions of the law to a taxpayer's circumstances. (Emphasis added by the Tribunal)

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More recent decisions in the area of discretions

There are also a number of recent decisions of note that should be mentioned.

Windshuttle v DFC of T 93 ATC 499

This case concerned an application for an extension of time within which to lodge an objection under Section 188A. In that case the Commissioner alleged that the AAT erred in finding that the Commissioner had suffered no prejudice by reason of the applicant's delay in filing her objection, and in seeking an extension of time. In deciding for the taxpayer Von Doussa J held:

  • `The kind of prejudice which is relevant is prejudice that could arise to the opposing party in properly and fairly dealing with the subject matter of the dispute that will require determination if the extension of time is granted.'
  • `The mere fact that money payable under the notice of assessment, the subject of the proposed challenge, has not been recovered is not, in my view, a relevant consideration.'

Comcare v A'Hearn (1993) 45 FCR 441

In this case the Full Federal Court considered an application for an extension of time to review a claim made under the Commonwealth Employees' Rehabilitation and Compensation Act 1988 (Cth).

The Court disagreed with the earlier AAT decision and concluded that:

  • `the tribunal used language that might be taken to suggest that it is a pre-condition for success in such an application that an acceptable explanation for the delay must be given. Although it is to be expected that such an explanation will normally be given, as a relevant matter to be considered, there is no rule that such an explanation is an essential pre-condition: see
    Dix v Crimes Compensation Tribunal [1993] 1 VR 297 at 302 per Brooking J, with whom Fullagar and Tadgell JJ agreed; cf
    Hunter Valley Developments Pty Limited v Cohen (1984) 3 FCR 344 at 348 and
    Maric v Comcare (1993) 40 FCR 244 at 247-249.' (Emphasis added by the Tribunal)


The above principles provide strong incentive for the conclusion that even if no acceptable explanation can be given regarding the delay in making a loss transfer agreement, and the period of delay is not unacceptable, the question arises as to whether the interests of justice require an extension of time for the making of the loss transfer agreement. Further, on the basis that it will be difficult for the Commissioner to show that such an extension will result in prejudice, in the relevant sense, if the applicant has an arguable case and if the merits of the applicant's argument are made out, then it is submitted that the discretion should be exercised in the favour of the taxpayer, and to not do so would be an injustice of the kind oft referred to in the case law.


(b) Mr Marriott referred the Tribunal specifically to the decision of Senior Member Fayle in Case 18/94,
94 ATC 204, a case not canvassed in the Phillips Essay. In that case Senior Member Fayle dealt with each of the criteria to be considered in a matter such as this; those criteria are set out at page 206 as follows:

  • ``(i) prima facie, proceedings commenced outside the prescribed period will not be entertained. An extension of time will be granted, however, if it is proper to do so;
  • (ii) it is relevant whether the applicant rested on his rights or took action to make the decision-maker aware that the decision was being contested;
  • (iii) any prejudice to the respondent that would be caused by granting the extension of time is relevant;
  • (iv) any wider prejudice to the general public in terms of disruption to established practices is relevant;
  • (v) the merits of the substantial application are relevant; and
  • (vi) fairness of granting the extension of time as between the applicant and other persons in a like position is relevant...''

(c) The decision of Deputy President McMahon in Case 15/96,
96 ATC 220 (also not dealt with in the Phillips Essay) is also of assistance. After dealing in some detail with the

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relevant criteria, Deputy President McMahon said in clause 40:

``40. Considerations of fairness as between the applicant and other persons in a similar position are relevant to the manner of exercise of discretion. It does not appear to me that there are any aspects of the applicant's case that, if successful, would give it an unfair advantage over other persons `otherwise in a like position' (presumably life insurance companies). The attitude of the courts to amendments of this nature has been considerably liberalised in recent years. In Comcare v A'Hearn 45 FCR 441 the court even went so far as to say that a lack of an acceptable explanation for delay was not necessarily fatal. The circumstances of this case, however, indicate to me such an acceptable explanation. The objection is complicated, coming as it does in 10 parts relating to various methods of treatment of many diverse items. Looked at as a whole, it is not unreasonable to expect a lengthy span of time for its compilation.''

(Emphasis added by the Tribunal)

(d) (1) At the end of the hearing, and while arguing the law, Mr Marriott informed the Tribunal that he intended to send the Tribunal a reference to another case which was, in his view, relevant. That case was not in terms argued by Mr Marriott in his argument, and so there was thus no opportunity at the hearing for Mr Moutzouris to deal with it, although it is fair to note that Mr Moutzouris did not submit any arguments as to the law, and more particularly, the decided cases.

(2) Mr Marriott subsequently informed the Tribunal that the relevant case was Case 33/93,
93 ATC 371, a decision of Senior Member Hallowes. The headnote to that decision reads as follows:

``In March 1988, the taxpayer received a payment on termination of his employment in consideration of a restrictive covenant agreement he entered into with his employer. The Commissioner, in reliance on sec 160M(6) or (7), included that payment in an assessment for the 1987/88 year issued to the taxpayer on 19 May 1989.

In October 1991, the taxpayer became aware of the High Court's decision in Hepples v FC of T 91 ATC 4808 (delivered on 3 October 1991) and lodged an application for extension of time to lodge an objection. He argued that the circumstances of his restrictive covenant were on all fours with those in Hepples' case. Alternatively, in the event that the Commissioner refused to treat the objection as duly lodged, the taxpayer sought an amendment under sec 170(4).

In February 1992, the Commissioner notified the taxpayer that he considered that there was not an acceptable explanation of the delay in lodging an objection. In December 1992, the Commissioner advised that he did not consider that the taxpayer's case was on all fours with Hepples' case and refused to amend the assessment. In January 1993, the taxpayer applied to the Tribunal to extend the time for lodgment of an application for review of the Commissioner's decisions refusing to treat the objection as duly lodged.

Held: application dismissed.

In the interests of fairness and equity between the parties, the taxpayer should not have the opportunity to seek another assessment. It was also not in the public interest to extend the time taking into account the overall delay. The taxpayer had an opportunity to dispute the assessment when he first received it but rested on his rights. It would unsettle other people, not just those taxpayers who may consider that their circumstances may have been similar to Mr Hepples, but also those taxpayers where a fresh interpretation of legislation may call into question earlier decision- making.''

(3) Clauses 25 and 26 of the decision in Case 33/93 read [at 378-379]:

``25. The delay in lodging the objection to the assessment has been explained in terms of the fact that Hepples' case did not exist until October 1991. Hepples' case was therefore not the cause of the initial delay, for at that time, the taxpayer did not perceive any delay. The Tribunal therefore finds that Hepples' case was not the cause of any delay between July 1989 and October 1991. The taxpayer did not alert the respondent to the fact that the matter was not finally concluded because the taxpayer himself considered that it was concluded until he read Hepples' case and lodged his

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objection on 14 October 1991 some 29 months after paying his tax as assessed. Whether or not the taxpayer's circumstances are on all fours with Hepples' case is now an issue between the parties. However, the taxpayer had an opportunity to dispute his assessment and to challenge the respondent's interpretation of sub-sections 160M(6) and (7) when he first received his assessment. He chose not to do so.

26. A taxpayer should, within the time allowed, decide whether or not to challenge the prevailing interpretation of legislation if that interpretation goes against him. The Tribunal is not deciding whether the merit of the taxpayer's case is such that there should be leave to appeal. The issue is whether a statutory time limit should be extended. There have been two periods of delay in this application. The question before the Tribunal is the delay in lodging the application with the Tribunal. I am satisfied that it is not in the public interest to extend time taking into account the length of the overall delay and my finding that the taxpayer did not alert the respondent to the possibility he would challenge the respondent's interpretation of section 160M if the respondent did not amend his assessment under sub-section 170(4) of the Act. In coming to this decision I find that no prejudice to the respondent has been demonstrated, apart from the need for finality with respect to carrying out the respondent's duties under the Act. I also note the amendments to sub-section 160M(6) and (7) by the Taxation Laws Amendment Act (No. 4) 1992 and the taxpayer's contention that the `floodgates' would not open were the Tribunal to extend time. It is the principle of further interpretation and its effect on finality in decision-making, rather than consideration of the number of cases which may arise should time be extended in this instance, which I have considered important in exercising my discretion.''

(e) In the view of this Tribunal, Case 33/93 is distinguishable (notwithstanding that there are some factual similarities) in the following significant respects:

5. (a) I turn now to deal with the criteria. The first is that as to an acceptable explanation. Some of the earlier authority referred to in clause 4(a) suggests that it is a precondition to the exercise of a discretion in his favour that the Applicant for an extension show an ``acceptable explanation of the delay'' and that it is ``fair and equitable in the circumstances'' to extend time (see in this context in particular Hunter Valley Developments Pty Limited, Lucic v Nolan, Duff's Case and Chapman v Reilly). But this has been expressly doubted and indeed rejected in later authority; see in particular Comcare v A'Hearn, Windshuttle's case, Case 15/96 and Case 33/93.

I find, in this particular instance and notwithstanding Mr Marriott's arguments to the contrary, that I have been furnished with an explanation; that explanation was satisfactory in

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respect of the first period; it was perhaps rather less satisfactory in respect of the second period, but nevertheless, and having regard to the circumstances, an adequate explanation. I consider, as set out previously, that mistakes and delays on the part of the Applicant's tax agent should not be held to the account of the Applicant.

I note in conclusion on this aspect that even if the explanation given were not an adequate explanation, I would not (having regard to the later case authority) be inclined to hold that it is, in these circumstances, an essential pre- condition to the consideration of the other criteria.

(b) The Applicant undoubtedly rested on his rights during the first period but not during the second period. This is a factor against the Applicant, to be weighed in the balance, but it is not a determinative factor.

(c) Mr Marriott very fairly and properly accepted that there was no prejudice to the Respondent; indeed the objection made it clear to the Respondent that the Applicant disputed the disallowance of the claimed deduction.

There was no specific argument before me as to prejudice to the public at large or as to the effect on other taxpayers (if any) in the same position. However, Exhibit R1 raises the issue of finality in decision-making which is of course always desirable.

I consider that it is appropriate to distinguish between a taxpayer who (as occurred with the taxpayer in Case 33/93) simply paid his assessment and sought to have it reversed only after the handing down of what he perceived as favourable to him, and a person in the position of the Applicant who did object. Senior Member Hallowes pointed in Case 33/93 to the need for finality, and this Tribunal agrees that taxpayers should not generally be able, years after the event, to seek to reopen old assessments simply because of an arguably different interpretation of the law. There may be other couriers who received assessments on the basis that they were employees and who did not object, and who may now be precluded from doing so. But it is important to emphasise that the Applicant in this case did object against his assessment. There was no evidence before me as to whether there are in fact other taxpayers in the same position as that of the Applicant.

In any event, and notwithstanding the distinction drawn in the preceding paragraph, the period involved in this matter is not unduly long.

(d) The merits are undoubtedly important and arguably deserve particular weight. The Tribunal notes in this context the reference to the Full Federal Court's decision in the Lighthouse Philatelics case that the Commissioner's task in administering the Income Tax Assessment Act is ``to ensure that the correct amount of tax is paid, `not a penny more, not a penny less'''. It would seem that, in this matter, the Applicant may have (and as set out previously) a good case on the merits.

(e) Although there are some factual similarities (which are in fact on close analysis more superficial than real) between this case and those of Case 33/93 (and leaving aside the fact that Case 33/93 was not dealt with in argument before me) there are also, in my view, important distinguishing features. I note also and in particular that having regard to the decision in Lighthouse Philatelics I am concerned with a remedial provision which should be interpreted remedially and beneficially.

6. I have, therefore, come to the conclusion that this is a proper case for the exercise by the Tribunal of its discretion in favour of the Applicant. Accordingly, the Applicant's application for an extension of time is granted on the basis that the extension runs until the date on which his application to refer the objection decision to this Tribunal was made.


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