CATCHWORDS

TAXATION - judicial review of application for extension under s. 206 of the Income Tax Assessment Act 1936 - no question of general principle.

Income Tax Assessment Act 1936, s. 206

Ahern v Deputy Federal Commissioner of Taxation [1986] 2 ATC 4023

JOHN HILTON LAWRENCE v. FEDERAL COMMISSIONER OF TAXATION & ORS

NG 872 of 1994

Burchett J.

Sydney

13 January 1995

                NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA)

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NEW SOUTH WALES DISTRICT REGISTRY)    NG 872 of 1994

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GENERAL DIVISION                  )

           BETWEEN:     JOHN HILTON LAWRENCE

                             Applicant

               AND:     FEDERAL COMMISSIONER OF TAXATION

                             First Respondent

                        J.A. SEBERRY

                             Second Respondent

                        COMMONWEALTH OF AUSTRALIA

                             Third Respondent

CORAM: Burchett J.

PLACE: Sydney

DATE : 13 January 1995

                    REASONS FOR JUDGMENT

BURCHETT J.:

     The applicant, John Hilton Lawrence, was the subject of a number of default assessments made on an asset betterment basis, covering the taxation years between 1989 and 1994, in a total sum of $979,378.30.  Section 218 notices were issued under which the sum of $273,047.19, received by the State Bank of New South Wales pursuant to the sale of a residential property of the applicant, was paid to the Commissioner of Taxation.  The evidence before me indicates that in net terms, setting off assets and liabilities, once these assessments issued, and assuming they were correct, the applicant was insolvent by a vast margin.  Still owing the difference between the total of the assessments and the amount paid by the State Bank of New South Wales, the applicant is a man whose present assets and liabilities, according to himself, may be summarised by saying that he owns a property at Sorrento worth $355,000, which is subject to a mortgage in the sum of $355,000, and he owns a motor vehicle he estimates to have a value of $31,000, but he owes the Department of Social Security $38,784. 

     On 25 November 1994, the applicant's solicitors wrote a letter which apparently was regarded as extremely urgent, and was faxed to the Office of the Commissioner of Taxation, but not faxed until 28 November.  That letter stated that the notices of assessment had been served on 31 October 1994, and that:

    "The purpose of this letter is to make an urgent application pursuant to section 206 of the Act to extend the time for payment of the assessments until after my client has had an opportunity to have determined objections which he wishes to lodge to those assessments."

The letter went on to refer to the notice under s. 218 which had procured the abstraction of the sum of $273,047.19 from the account in the  State Bank of New South Wales.  It stated this money was in the account "following my client's recent sale of his home at 12 Noble Street, Rodd Point," and that the money represented "the entirety of his assets and he intended to purchase a new home with it."  It was said that he had
nowhere to live, and no money with which to live.  It was then said that, if the application were granted, a new property would be purchased with the money which would thereafter be offered as security. 

     It will be observed that this last statement, beyond any prevarication or qualification, conveys the clear inference that the application was intended and expected to have the result, if granted, that the $273,000 odd would be refunded to Mr Lawrence.  The letter goes on to state that it was "obvious that your failure to grant this application will cause considerable inconvenience, loss and damage to my client"; and it requests urgent consideration be given "to my client's request."  It also refers to what is described as Mr Lawrence's "desperate position", and seeks, in the event that the application were to be rejected, the provision of written reasons. 

     The Commissioner of Taxation replied with admirable promptness.  A letter of 29 November 1994 referred to the request received by facsimile on the 28th, and continued:

    "Consideration has been given to your request, and it has been decided not to refund the amount of $273,047.19 recovered pursuant to section 218 of the Income Assessment Act.  The appropriate action has been effected, and reversal of this will not be considered."

In a new paragraph, the letter then continues:

    "You have indicated the taxpayer's intention to lodge objections against the assessments in question.  It is strongly recommended that these be lodged with this department as soon as possible, to defer the commencement of legal action to recover the debt.  However, the due date for payment of the amount due remains 30 November 1994, and consequently, additional tax for late payment will accrue from this date.  The lodgement of objections does not excuse the taxpayer from payment of the amount due."

     The present application has been brought as a matter of urgency, and has been accorded a hearing during the vacation on the basis of the financial hardship imposed by the situation upon Mr Lawrence.  By his amended application for an order of review, he seeks review, as an exercise of the Court's powers of judicial review of administrative action, of the decision, which he alleges was made by an officer of the Commissioner of Taxation on 29 November 1994, that the applicant's application for an extension of time to pay income tax made pursuant to s. 206 of the Income Tax Assessment Act 1936 be refused.  Alternatively, the application seeks review of the conduct by which it is alleged that there was a refusal to consider the application.  However, no separate argument was addressed to me under this alternative.  A further alternative referred to failure to decide that the applicant should be given time to pay and that, pending the determination of the applicant's objection, the sum received from the State Bank should be paid to the applicant.  This also was not the subject of separate argument, except that it was indicated that if the alleged decision were set aside the applicant would argue that the money would be refundable. 

     The argument put to me by counsel for the applicant was that a decision was made to reject the application put forward under s. 206 on grounds that were set out in the letter of 29 November 1994, and that those grounds were utterly inadequate.  There was thus, it was said, a failure to take relevant matters into account, and to the extent that a ground was stated, I think the argument amounted to asserting that an irrelevant matter was taken into account.  For what counsel suggested was that the whole of the reasons for the alleged decision were to be found in the first paragraph of the letter, by which it was said that there had been a decision not to refund the sum recovered from the State Bank.  This, it was said, was plainly not an adequate reason for a refusal of the request made under s. 206, which was not a request for a refund, but for an extension of time.

     The argument wears a somewhat pedantic look when it is borne in mind that counsel was also desirous of contending that a right to a refund would automatically follow the moment an extension was granted, but counsel for the Commissioner did not so much attack it on that footing as on the basis that the alleged decision was not the decision that had been taken, and that the reasons expressed in the letter in respect of the application under s. 206 were not in fact to be found in the first paragraph, but in the second paragraph, of the letter.  Mr Gibb's contention was that the first paragraph of the letter took up, not the express request made under s. 206, but the implicit request in the letter of the solicitors for the applicant for a refund of the amount received from the State Bank.  It rejected that implicit request which was, after all, the matter of immediate importance and the fundamental justification for treating the request as one of extreme urgency, for it will be recalled the proposition had been advanced that the applicant was in need and without money.

     Mr Gibb's argument is that it is in the second paragraph of the letter that the express request made under s. 206 is addressed.  Furthermore, he submits that when that paragraph is read with attention it becomes apparent that the important issues in respect of s. 206 were indeed considered, and that what was decided was not to reject finally that application, but to defer it; and there were the strongest reasons to defer it, for the applicant's solicitors had not indicated when the foreshadowed objections were to be lodged, nor had they indicated what the grounds of those objections were intended to be, nor indeed whether any such grounds had as yet been formulated or established in even the broadest terms.  Consequently, what the Commissioner's letter does is to make it plain that the objections, if objections were to be pursued, were required to be lodged with promptness, and it points out that in the meantime the due date remains unaltered, so that additional tax will accrue for any late payment, and that the lodgment of objections would not in itself excuse the tax payer from payment.

     It seems to me that neither the letter of request nor the reply can be regarded as a model of clear and appropriate expression, but it is plain, as I have already pointed out, that there was an implicit request very definitely conveyed in the solicitor's letter for a refund of the amount, and I think it is fair to regard the first paragraph of the Commissioner's reply as dealing with that implicit request.  I certainly do not think it can fairly be regarded as containing the whole of the Commissioner's reasons for any decision against the application.   Furthermore, the Commissioner's letter does not actually say that an extension of time is refused, and it does draw attention to an aspect of the inchoate nature of the application that had been made, namely, that the objections foreshadowed had not yet been lodged.  I think, on balance, the proper construction of the letter is that it does not make or convey the decision alleged to have been made.   One factor to be taken into account, in attempting to construe the true effect of the correspondence, is that, while the letter was indeed an extremely prompt response to the solicitors' letter, it would have been a quite extraordinary thing if an application under s. 206 had been wholly disposed of within 24 hours.

     Furthermore, the situation was that, in fact, all the relevant considerations, which must have been obvious to any officer of the Commissioner dealing with such a matter, had not at the date of this letter yet been elucidated.   It was perfectly plain that, insofar as the request sought an extension, it did so without making any precise offer about payment of any part of the tax, other than the vague indication that security could be furnished over unspecified property at some stage in the future.  At the same time, the request gave no indication of the grounds of the objections proposed to be lodged, or when they would be lodged.  Bearing all that in mind, it seems unlikely that an officer would not have been inclined to defer a decision until receipt of the objections, when at least that aspect of the matter would be clarified.  

     However, even if the matter should be regarded as involving a relevant decision, I would be left in the situation that the alleged errors would not seem to me to be of such a character as, in the circumstances, to enable me to say that the decision itself was in any sense brought about by those errors.   In Ahern v Deputy Federal Commissioner of Taxation [1986] 2 ATC 4023 at 4031, Lockhart J said:

    "(T)he Court generally should not interfere unless it is plain that these matters materially influence the decision ... ."

In Minister for Aboriginal Affairs v Peko-Wallsend Limited (1986) 162 CLR 24 at 40, Mason J. made it clear that a consideration which a decision-maker was bound to take into account but failed to take into account, or an irrelevant consideration which a decision-maker did take into account, need not necessarily result in the setting aside of an impugned decision - because the failure may be such that it could not have materially affected the decision.

     In my opinion, the circumstances put before the Commissioner in this case were quite skeletal, and lacking in any rational tendency to produce the extension actually asked for, which was not an extension for some brief period until the matter could be further elucidated, nor was it an extension to enable any further payments to be made - or any payments at all to be made, if it be borne in mind that the clear understanding implicit in the letter was that even the moneys already paid would be refunded.  Such an application seems to me, in the circumstances that were before the Commissioner, so far as the evidence reveals them, to have been bound to fail, and I do not think it would be a proper exercise of my discretion, even if sufficient had been shown to call for the exercise of that discretion, to set aside this decision and require the reconsideration of the particular application.

     As I understand the provisions of the legislation, there is nothing in the nature of an estoppel to prevent a further application in changed circumstances - and the lodgment of grounds of objection must itself be regarded as a relevant change.  I think the appropriate course for the applicant, if he does have good objections, is to pursue the matter upon a fresh application based, not merely on the bare matters put forward in the letter the basis of the present matter, but based, amongst other things, on the availability to him of whatever those grounds of objection may be.  For these reasons, the application is dismissed with costs. 

     I certify that this and the preceding nine (9) pages are a true copy of the Reasons for Judgment herein of his Honour Justice Burchett.

     Associate:

     Date: 8 February 1995

     Counsel for the Applicant:        Mr L. Aitken

     Solicitors for the Applicant:         David Trodden & Associates

     Counsel for the Respondents:      Mr S.W. Gibb

     Solicitor for the Respondents:    Australian Government        Solicitor

     Date of hearing:                  13 January 1995