FEDERAL COURT OF AUSTRALIA

Harding v Deputy Commissioner of Taxation [2009] FCA 1034

ROBERT HARDING v DEPUTY COMMISSIONER OF TAXATION

NSD 919 of 2009

COWDROY J

18 SEPTEMBER 2009

SYDNEY

THE COURT ORDERS THAT:

1.                  The Application for Extension of Time to File and Serve Notice of Appeal be dismissed.

2.                  The Applicant pay the costs of the Respondent.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using eSearch on the Court’s website.

REASONS FOR JUDGMENT

1                     The applicant applies for an Extension of Time to File and Serve a Notice of Appeal from the decision of Flick J (‘the primary judge’) delivered on 24 December 2008. The application, which was filed on 25 August 2009, attaches a draft notice of appeal. The application is supported by an affidavit of Mr Christie, solicitor for the applicant, sworn on 24 August 2009 (‘24 August affidavit’). At the outset of the hearing, leave was granted to file a further affidavit of Mr Christie sworn 10 September 2009 (‘10 September affidavit’). Both affidavits were defective under the Federal Court Rules in that they were not correctly signed. However, the Court nevertheless allowed the applicant to rely on them.

FACTS

2                     On 9 November 2006 the District Court of New South Wales entered judgment against the applicant in favour of the Deputy Commissioner of Taxation (‘the respondent’) in the amount of $373,772.47. Such sum represented unpaid Goods and Services Tax (‘GST’) including penalties of $143,775.00. In those proceedings the applicant claimed that a Mr Malcolm McClure had arranged for an exemption from GST in respect of the applicant’s business which was concerned with the sale of motor car batteries. The evidence disclosed that Mr McClure was not an employee of the Taxation Department and that no taxation exemption existed in the applicant’s favour. No appeal was instituted against the judgment of the District Court.

3                     A Bankruptcy Notice was served upon the applicant on either on 17 July 2007 or 17 August 2007, the date of service being not finally established. The applicant filed an application to set aside the Bankruptcy Notice in the Federal Court of Australia on 5 September 2007. The applicant applied to have his application to set aside the Bankruptcy Notice heard by a jury but such claim was dismissed: see Harding v Deputy Commissioner of Taxation (2008) 172 FCR 206. The applicant’s application for leave to appeal from the decision refusing a jury trial was dismissed by Moore J: see Harding v Deputy Commissioner of Taxation (2008) 172 FCR 469. The application to set aside the Bankruptcy Notice was heard by the primary judge on 29 and 30 October 2008.

4                     The primary judge delivered judgment on 24 December 2008 in which he concluded that the judgment of the District Court was a final judgment; the applicant had no counter-claim, set-off or cross-demand which could not have been raised in the District Court proceedings; that there was no basis for the applicant’s allegation that the respondent had not raised any cross-claim because of misleading conduct on the part of the respondent’s solicitor; and that the Court did not retain a discretion to set aside a Bankruptcy Notice if it considered that it was ‘just’ to do so if s 40(1)(g) of the Bankruptcy Act 1966 (Cth) (‘the Act’) had not been satisfied. The primary judge accordingly dismissed the application: see Harding v Deputy Commissioner of Taxation (No 2) [2008] FCA 1985.

THE PRESENT APPLICATION

5                     The present application is brought pursuant to O 52 r 15(2) of the Federal Court Rules (‘the Rules’). By O 15 r 1(a)(i) any appeal against the decision of the primary judge was required to be filed and served within 21 days of the date of judgment. Order 52 rule 15(2) provides that despite the requirements of such rule, ‘the Court or a Judge for special reasons may at any time give leave to file and serve a notice of appeal’.

6                     Order 52 rule 15(3) of the Rules specifies the requirements for such an application as follows:

(3)     An application for leave under subrule (2) must:

         (a)   be in accordance with Form 54A; and

         (b)   include a statement indicating whether the applicant wishes to have the application dealt with without an oral hearing; and

         (c)   be accompanied by an affidavit setting out:

                (i)     the nature of the matter; and

                (ii)    the factual and legal issues in dispute; and

                (iii)   the reasons why leave should be given.

Affidavits

7                     The 24 August affidavit states that Mr Christie had a conversation with the applicant following the delivery of judgment on 24 December 2008 in which the applicant stated ‘I cannot even think about law or Judges because my personal affairs are in grave difficulty.
I am depressed’. Only following the service of a Creditor’s Petition on 12 July 2009 did the applicant allegedly seek legal advice. Mr Christie states that the applicant is concerned with the role of Mr McClure in misleading him in relation to his purchase of a supposed GST exemption. Mr Christie also states that he is aware that the applicant experienced ‘serious business development complications’ which have added to his health issues and a work injury which was sustained in October 2008 necessitating him undertaking less than full-time employment. Finally, Mr Christie states:

In addition to his personal problems, Mr. Harding has instructed me in support of two close friends in their personal life-complications as concerning legal issues; both being of non-English-speaking backgrounds; Mr Harding acting as a most necessary communication facilitator.

8                     Attached to the 24 August affidavit is a report of Hamid Reza Dadgostar, psychologist, dated 27 July 2009. Such report was apparently provided in respect of other proceedings as it relates to the impact of weekend detention on the applicant. The report states that the applicant is suffering from depression, anxiety and post traumatic stress disorder. The report observes that the applicant has responded positively to psychotherapy treatment but that the prospect of weekend detention is concerning him, particularly in relation to the impact of that weekend detention upon his business and the possible loss of a contract.

9                     Also annexed to the 24 August affidavit are certificates of Dr Kooi Ang stating that the applicant was receiving ‘medical treatment’ for the period 24 October 2008 to 26 October 2008; 31 October 2008 to 7 November 2008; and 8 November 2008 to 22 November 2008. The nature of the treatment is not described. The certificates each state that the applicant ‘will be unfit to continue his usual occupation or study’. Also annexed to the affidavit are a number of certificates of Dr J C Criticos which certify that the applicant was unfit for work in varying periods commencing on 22 November 2008 to 24 June 2009. The disability is stated to be ‘lumbar spine pain syndrome’. The same disability is referred to in two statements of Dr Peter D Calligeros in respect of the period 21 January 2009 to 3 February 2009.

10                  The 10 September affidavit annexes a Statutory Declaration of the applicant. Such Declaration states that the applicant only became aware of the appeal process on 12 July 2009. It appears that at this time a Creditor’s Petition was served upon him. Four events are advanced which the applicant claims ‘changed the course of my life’ and explain the delay. They are the alleged sexual assault of his son; the fact that the applicant himself was charged with assault against the alleged perpetrator of the sexual assault; the fact that his father who had been residing at a nursing home at Sussex Inlet sustained a fall and was admitted to The Royal Prince Alfred Hospital (‘RPA’) where he was diagnosed with pneumonia and the applicant is often spending time from Friday to Monday attending to him at Sussex Inlet; and that on 23 October 2008 the applicant sustained an injury to his back which he says has resulted in him becoming ‘50% bedridden’. He states:

This period of time was the worst affected period in my life as I was not able to clearly focus on the surroundings and also was not able to focus on the appeal.

11                  Attached to the 10 September affidavit was a statement of Kath Harding, registered nurse, who is the sister of the applicant. Such letter verifies that the applicant attended RPA each day for six weeks whilst his father was admitted there.

12                  Another annexure is the letter from the Commonwealth Attorney-General’s Department dated 31 August 2009 in respect of an application for financial assistance under the Commonwealth Public Interest and Test Cases Scheme. Such letter states that more information would be required before the applicant’s request for assistance could be considered. Finally, there is a letter attached from the New South Wales Legal Aid Review Committee dated 28 August 2009 upholding the rejection of legal aid for the applicant. No submissions were made in respect of such letters.

Draft Notice of Appeal

13                  The grounds of appeal set out in the draft notice of appeal are stated as follows:

1.    The Learned Judge erred in holding that it was not just to determine the Appellant’s claim against the First Respondent prior to the continuation of the bankruptcy proceedings;

2.    The learned Judge erred in holding that the Appellant did not have a counter-claim set off or cross demand with any prospects of success;

3.    The learned Judge erred in holding that such claim could have been set up in the proceedings in the District Court of New South Wales proceedings filed 14 December 2005;

4.    The learned Judge erred in holding that the judgment of the said District Court was relevantly a final judgment;

5.    The learned Judge erred in holding that he had no discretion other than under Bankruptcy Act section 40(1)(g) to set aside the bankruptcy notice.

6.    The Learned Judge erred in failing to hear adequately or at all, the Appellants case re the validity of the underlying debt, including the related cross claim of or concerning the misconduct of the Respondent by its servants or agent in office (including Mr. McClure);

7.    The Learned Judge erred in holding that there was a debt due and owing by the Respondent;

FINDING

14                  In Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348 Wilcox J observed that the applicant is required to satisfy two requirements in order to satisfy the Court that it should grant leave to extend the time for service: firstly a satisfactory explanation for failing to comply with the 21 day time limit in which to appeal and secondly that there is merit to the proposed appeal.

Delay

15                  As to delay, it is essential that the Court be satisfied that there are good reasons to explain the failure to comply with the requirements of O 52 r 15(1)(a) of the Rules. There has been a delay of more than eight months since the decision of the primary judge was given yet it appears that until the applicant was served with a Creditor’s Petition, no steps were taken by him to appeal from the decision of the primary judge.

16                  The applicant advances medical reasons for his delay. The medical certificates provided to the Court do not suggest that the applicant has been unable to attend to his daily affairs. The psychologist report refers to the applicant’s state of depression. The Court accepts that the applicant was distressed by the incident involving his child, but the report does not address the applicant’s capacity to attend to his business affairs. The remaining medical reports relate to the lumbar pain sustained by the applicant, but again do not suggest that the applicant is unable to attend to business matters.

17                  The applicant also relies upon inconvenience resulting from the necessity to spend time on the South Coast with his elderly father. The applicant says he spent around 50% of his time in such visits, and had spent a week there towards the end of January 2009. He said he often visits over the weekend.

18                  Despite these reasons, it is not disputed that the applicant has been able to attend to business related matters. Before the Court Mr Harding gave evidence that he had sold his battery business and had been preparing, since March 2009, a tender or business plan for a government contract relating to an energy saving light bulb project. However, the Court has no information concerning the business and no information concerning the daily occupation of the applicant, nor of his current means of support.

19                  Regardless of this ability to attend to business matters, the Court is prepared to accept that the applicant, because of various extraneous circumstances, has been unable to focus his attention on the serious matter of his own potential bankruptcy. The Court takes into consideration the apparent assault on his child, his own conviction for assault, and the illness of his father. The Court accepts that all of these events have distracted the applicant and the Court is prepared to accept that the applicant has provided adequate reason for the delay.

20                  The respondent has not suggested that it would be unduly prejudiced by the delay.

Merits of proposed appeal

21                  The Court will now address the question whether the applicant has established that he has a bona fide claim to be heard. In Howard v Australian Electoral Commission [2000] FCA 1767 the Court considered an Application for Extension of Time to File and Serve a Notice of Appeal. At [5] Branson J said:

The Full Court gave consideration to the matters necessary to establish the existence of special reasons justifying the grant of leave to appeal out of time in Jess v Scott (1986) 12 FCR 187. At page 195 the Court said:

“What is needed to justify an extension of time is indicated in rule 15(2) by the words ‘for special reasons’. It is that there be shown a special reason why the appeal should be permitted to proceed, though filed after the expiry of twenty-one days. In that context, the expression ‘special reasons’ is intended to distinguish the case from the usual course according to which the time is twenty-one days. But it may be so distinguished (not necessarily will, for the rule gives a discretion) wherever the Court sees a ground which does justify departure from the general rule in the particular case. Such a ground is a special reason because it takes the case out of the ordinary. We do not think the use of the expression `for special reasons' implies something narrower than this.”

22                  Her Honour continued at [7]:

However, even where special reasons can be identified, the Court has a discretion to grant or refuse to grant the extension of time sought. Factors to be taken into account in the exercise of the discretion include the importance of the question sought to be raised by the proposed appeal, the bona fides of the proposed appeal and the prima facie strength of the proposed ground of appeal (Jess v Scott at 188).

23                  The applicant must accordingly demonstrate that there is merit in the application, that is, that there is a claim which is arguable on the merits. This is an essential requirement. In Jeffers v R (1993) 112 ALR 85 at 86 the High Court of Australia, considering a criminal matter, observed as follows:

However, should the appellant be unable to demonstrate any prospect of success in the appeal which he seeks to prosecute he would, for that reason, not be entitled to an extension of time, despite the other circumstances.

24                  Neither the 24 August affidavit nor the 10 September affidavit makes reference to the factual and legal issues alleged to be in dispute other than a vague reference to the fact that the applicant is concerned with the role of a potential defendant, Mr McClure, in an unarticulated cross-claim. The affidavits appear to be almost exclusively focused on providing evidence of the reason for the delay. As mentioned, the evidence does not establish that Mr McClure is at all connected with the respondent. When questioned as to the nature of the cross-claim, its legal basis and its quantum, Mr Christie replied ‘I don’t think we have proceeded to that depth of consideration at this point in time’.

25                  The draft notice of appeal raises seven grounds challenging every finding of the primary judge but without identifying any basis upon which his Honour erred and failing to describe the specific issues to be argued. Merely listing draft grounds of appeal does not satisfy the requirements that a meritorious claim be demonstrated.

26                  The solicitor for the applicant, Mr Christie, was asked during the hearing to provide greater detail of the applicant's draft grounds of appeal. His answers were, to say the least, confusing, and suggested that he himself was not aware of the meaning of the draft grounds of appeal. He stated that such grounds were prepared by the counsel who appeared for the applicant before the primary judge. Such counsel did not appear before this Court.

27                  No evidence has been brought forward on this application from which the Court could be satisfied that there is merit in any of the draft grounds of appeal, nor that the applicant has a prima facie case which has any possibility, let alone probability, of success. No specific legal issue has been raised in sufficient detail from which the Court can conclude that the primary judge erred in making his decision. The Court has read the decision of the primary judge. Such decision considers each aspect of the applicant’s contentions in exhaustive detail and does not appear to contain any error. The requirement that there be merit in the proposed appeal is not met by the draft grounds of appeal.

28                  The Court makes a final observation. The applicant did not provide any affidavit in support of his application. Instead Mr Christie provided two affidavits. To the 10 September affidavit was annexed a Statutory Declaration of the applicant. Such process is, to say the least, puzzling and inappropriate. The applicant could have sworn an affidavit himself, given that it would have taken the same length of time as swearing a statutory declaration. The applicant was granted leave to provide oral evidence during the hearing. Had he not done so, the inference could have been drawn that the applicant was seeking to avoid providing sworn testimony.

29                  For the above reasons the Court is not satisfied that ‘special reasons’ exist sufficient to warrant a grant of extension of time. It follows that the application will be dismissed with costs.

Associate:

Dated:         18 September 2009