FEDERAL COURT OF AUSTRALIA

Caporale v Commissioner of Taxation [2012] FCA 86

THE COURT ORDERS THAT:

1.    The appeal be dismissed with costs.

2.    The decision of the Tribunal be affirmed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011

REASONS FOR JUDGMENT

Introduction

1    This is an appeal from the Administrative Appeals Tribunal ("the Tribunal") which, on 2 August 2011, affirmed the Commissioner's objection decisions dated 24 December 2003 in respect of the years ended 30 June 1996 to 30 June 2000.

2    The appeal is brought under s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (the AAT Act) and is therefore on and limited to a question of law.

3    The substance of the matters raised in the notice of appeal is that the Tribunal erred in law by denying procedural fairness to the applicants in refusing their solicitor's application for an adjournment of the hearing on 2 August 2011. Having refused the adjournment, the Tribunal decided that the applicants had failed to discharge their burden of proof under s 14ZZK of the Taxation Administration Act 1953 (Cth) (the Administration Act) and affirmed the Commissioner's objection decisions.

4    The respondent Commissioner accepted that the appeal fell within s 44 of the AAT Act.

5    Section 39 of the AAT Act provides that, subject to ss 35, 36 and 36B, the Tribunal shall ensure that every party to a proceeding before the Tribunal is given a reasonable opportunity to present his or her case: see Sullivan v Department of Transport (1978) 20 ALR 323 at 342, per Deane J.

6    The evidence before the Court was a folder of directions, letters and emails which were said to have been before the Tribunal when the Senior Member made his decision, and transcript of the hearings before the Tribunal on 31 May, 1 June and 2 August 2011. No affidavit evidence was before me.

The procedural history

7    A summary of the procedural history before the Tribunal is as follows.

8    The applications to review the objection decisions made by the Commissioner on 24 December 2003 in respect of the years ended 30 June 1996 to 30 June 2000 were lodged with the Tribunal in February 2004. The applications were put to one side for some years as the parties' energies were spent on dealing with other applications made by other members of the Caporale family at around the same time.

9    On 5 October 2010, the Tribunal made a direction that the applicants lodge with the Tribunal and serve on the respondent Commissioner the applicants' witness statements and a statement of facts, issues and contentions by 29 October 2010. That direction was not complied with. As a consequence, the matter was listed for a non-compliance directions hearing on 11 November 2010. By this time, if not earlier, Ms Rosa Caporale was involved in the applicants' applications. Ms Caporale is the applicants' daughter.

10    On 11 November 2010, the earlier direction was vacated and the Tribunal substituted a direction that the applicants file and serve a statement of facts and contentions and all evidence on which they intended to rely by 16 December 2010. The direction stated that in default the matter was dismissed. There was also a direction that any evidence served or filed by the applicants after 16 December 2010 was not admissible in the proceedings.

11    On 15 December 2010, the day before the last day for filing documents, Ms Caporale sent an email to the Tribunal indicating that the applicants' then solicitors would no longer be acting for the applicants and that instead she would be representing her parents.

12    Another directions hearing was held on 16 December 2010. On that occasion, the Tribunal vacated the directions of 11 November 2010 and instead directed that the applicants file and serve a statement of facts and contentions and all evidence on which they intended to rely by 9 February 2011.

13    This further revised timetable was not adhered to. On 10 February 2011 the Tribunal granted further time to the applicants to file and serve their statement of facts and contentions and evidence. This time the applicants were allowed until 4 March 2011 and again the Tribunal’s direction stated that in default the matter would be dismissed.

14    On 4 March 2011 the Tribunal received from the applicants "a staggering volume of documents, some of them in boxes and others contained in a folder." There was no explanation of them, and no summary of what they represented, although in some cases a monetary figure was handwritten on the covering page of the bundle. There was no spreadsheet or calculation sheet to enable that possibility to be checked.

15    One week late, on 11 March 2011, the applicants filed and served a two-page document styled "G & D Caporale Statement of Facts".

16    On 14 March 2011 the District Registrar set the matter down for hearing, readiness for hearing certificates having been filed on behalf of the applicants and the respondent dated 11 March 2011. The hearing dates were fixed for 31 May and 1 June 2011.

17    Ms Caporale then applied on several occasions to have those hearing dates vacated. On 25 April 2011 she noted in an email to the Tribunal that she had been served with a summons, on the respondent Commissioner's application, to produce certain documents to the Tribunal by 28 April 2011. Ms Caporale's email to the Tribunal asked if she could appear to produce the requested documents at the Tribunal on 2 June 2011. She also asked that given the amount of detail that the respondent Commissioner had now requested to be produced, the hearing dates of 31 May 2011 and 1 June 2011 be adjourned and relisted to a date after 2 June 2011.

18    The respondent Commissioner wrote to the Tribunal on 27 April 2011 and said he was prepared to extend the time for compliance with the summons to 5 May 2011. He also wrote that because of the hearing dates of 31 May and 1 June 2011 the summons would be of no effect if it was delayed until 2 June 2011.

19    On 29 April 2011 the Tribunal gave notice of a directions hearing on 10 May 2011. On 10 May 2011, after hearing from the parties the Tribunal refused to vacate the hearing dates. The Tribunal indicated to Ms Caporale that the hearing would proceed on the dates set down. In refusing the application the Tribunal was mindful of the Tribunal's Listing and Adjournment Practice Direction which stated at [3] and [4]:

3.    Matters are fixed for hearing on the basis that the hearing will proceed on the day fixed.

4.    An application for an adjournment will not be granted unless there are good reasons to justify the adjournment.

20    On 17 May 2011 Ms Caporale made a further application to vacate the hearing dates. She said that she needed more time to comply with the summons and that the documents were "crucial" to the proceedings, although she had not previously produced them on her parents' behalf. The respondent Commissioner opposed the application by letter dated 20 May 2011 to the Tribunal, copied to the applicants. There was a further email, with attached documents, sent by Ms Caporale in support of the application for an adjournment sent on 22 May 2011. A letter in response from the respondent Commissioner dated 23 May 2011 said that the attached documents were not relevant to the proceedings and opposed the applicants' vacation request. The adjournment application was again refused; the refusal being communicated by letter from the Tribunal on 24 May 2011.

21    A further application for an adjournment was made, by email, on the same day. The email included the following in relation to the respondent Commissioner's summons to produce documents:

[T]his is crucial evidence that must be collated and incorporated to defend the claims of the ATO.

The email also said that the hearing certificate had been filed before the summons was received. The email continued:

[I]n addition [I] received confirmation yesterday that [I] have to appear before the magistrates court in relation to the bankruptcy notice that the ATO has issued on the 31st May 2011. It is imperative that [I] appear to contest the application.

22    The respondent Commissioner opposed that adjournment application by letter dated 25 May 2011. The respondent Commissioner said he would not call on the summons and would consent to the Federal Magistrates Court matter being adjourned. The letter also said that the respondent Commissioner understood that the 31 May 2011 date for the Federal Magistrates Court proceedings was specifically sought by the applicants' representative at the time of filing her application in that Court on 24 May 2011 and this must have been at a time when the applicants' representative was fully aware that such a return date would conflict with the date set down for the commencement of the Tribunal proceedings.

23    The Tribunal sent an email to Ms Caporale on 30 May 2011 drawing attention to the 25 May 2011 correspondence from the respondent Commissioner and stating that Ms Caporale was expected at the hearing the next morning before the Tribunal. Ms Caporale sent a reply email on 30 May 2011 saying that she could appear at the Tribunal but the ATO would have to add up and calculate thousands of pages and she doubted whether they would be able to do this in the hearing. She again sought to vacate the hearing dates of 31 May and 1 June 2011.

24    On the first day of the hearing, before Senior Member Frost, there was no appearance by or on behalf of the applicants at 10.00 am. Enquiries undertaken by the respondent Commissioner revealed that Ms Caporale had chosen to attend the Federal Magistrates Court to appear on behalf of her parents in relation to the application to set aside the bankruptcy notice. The Tribunal said "it was curious that she had chosen to do that since the Tax Office (defending that application in the Federal Magistrates Court) had indicated to her that their representatives were prepared to mention her appearance before that court (listed for 9.45am) and have the matter stood over, by consent, for two weeks." The Tribunal added that it was curious that Ms Caporale had accepted the listing of the matter before the Federal Magistrates Court on 31 May when she knew full well that her parents' applications were listed for hearing in the Tribunal on the same day. In any event, the Tribunal said, the listing in the Federal Magistrates Court provided no justification for the vacation of the hearing dates in the Tribunal, although an application for a brief postponement (until, say, 10.30 am) might well have been entertained.

25    Ms Caporale arrived at the Tribunal at about 10.30 am on 31 May 2011 to conduct her parents' applications.

26    Very little progress was made with the applications on that day. By lunchtime it was clear that very little could be achieved in the afternoon and the Tribunal granted an adjournment to enable Ms Caporale to do some work overnight so that she could present her parents' case the following day.

27    When the hearing resumed on the following day, 1 June 2011, it became clear that "the case would fall short" unless the parents gave evidence. The Tribunal invited Ms Caporale to have her parents attend to give oral evidence so that they could be given every reasonable opportunity to present their case. Senior Member Frost was mindful of the fact that neither parent had made a witness statement (despite the fact that directions had been made for the filing and service of all evidence much earlier in the proceedings) but he considered that it would be unjust if they were not given that opportunity. Ms Caporale arranged for her parents to attend the Tribunal that day, and her father gave oral evidence and was cross-examined by counsel for the Commissioner.

28    By the end of the day counsel for the Commissioner submitted to the Tribunal that, given the state of the evidence, the Tribunal should resolve the dispute in the Commissioner's favour. Despite the force of those submissions, the Tribunal considered that in the interests of justice the taxpayers should be granted one further indulgence. The transcript shows the following was said by the Tribunal:

But I am going to give you an opportunity and I am going to give you a very short timeframe to do it, and it is going to be in circumstances where the Commonwealth doesn't need to spend any more resources on it. What I'm going to give you the opportunity of doing within a fortnight is presenting to me a methodology. You need to be able to satisfy me that there is a methodology that will establish a satisfactory taxable income figure for your parents.

. . . And if you can't present a methodology within two weeks – and there is going to be no extension to that, under any circumstance – if you can't present a methodology then I'm going to make the decision of the Tribunal on the basis of what is before me. You ought to be able to gather what that decision is going to be.

. . .

This is a two-week window to provide some meaningful alternative method for making an assessment. If it falls short at the two weeks then I've got no choice. On the basis of what I've got I will affirm the decision. But if it comes in and it passes muster then the next step will be – what I have in mind, but I will hear you on this if you want to say anything – what I have in mind is, okay. That's a good methodology. Do it for 1996. You have got two weeks, and present the results of your methodology together with all the supporting information, cross-referenced, so that we can have a look at it. And if it is acceptable then that will dispose of ’96 and then you will have time to do the next year. It doesn't finalise things today.

. . . But what I have in mind is a short timeframe for each step. Missing any one of the deadlines means it's all over.

. . .

No extensions of time. No exceptions to that. There will be no circumstances in which you get an extension of time and if we do it – if the methodology is acceptable and the opportunity is given for the first year, if it is not done within the timeframe, all years fail.

. . .

That's the end. If you get up on the first one and you are late for the second one, the second and third and fourth and fifth fail.

29    Senior Member Frost adjourned the matter, indicating to the parties that he would draft a direction to give effect to his decision. After input from the parties in relation to the draft direction, he made the following direction on 3 June 2011:

Pursuant to section 33 of the Administrative Appeals Tribunal Act 1975, the Tribunal directs:

1. The Applicants to propose, by 17 June 2011, for the Tribunal’s consideration, a detailed methodology by which the Applicants’ taxable income for each of the years in dispute (that is, the years ended 30 June 1996, 30 June 1997, 30 June 1998, 30 June 1999 and 30 June 2000) may be calculated.

The methodology must deal separately with each of the two businesses carried on by the partnership, namely the Service Station business and the Rental business.

In relation to the Service Station business the methodology must:

(a) specify, in detail, the source materials on which the Applicants propose to rely for each year in dispute; and

(b) address all relevant aspects of the calculation of the net income of the partnership (to the extent that it relates to the Service Station business), including (but without limiting the generality of the foregoing):

(i)    how cash takings are to be quantified;

(ii)    how expenses (other than interest expenses) are to be identified and quantified; and

(iii)    how interest expenses are to identified and quantified.

In relation to the Rental business the methodology must:

(c) specify, in detail, the source materials on which the Applicants propose to rely for each year in dispute; and

(d) address all relevant aspects of the calculation of the net income of the partnership (to the extent that it relates to the Rental business), including (but without limiting the generality of the foregoing):

(iv)     how rent receipts are to be quantified;

(v)     how expenses (other than interest expenses) are to be identified and quantified; and

(vi)     how interest expenses are to identified and quantified.

30    Ms Caporale produced a methodology within the time specified in the direction. By email dated 21 June 2011, the respondent Commissioner noted some concerns with the proposed methodology. That email also suggested that the Tribunal nominate one of the income years only and make a direction requiring the applicants to file and serve their calculation of the taxable income and supporting source documents within two weeks of the Tribunal's direction. This email reflected what had been said on the second day of the hearing on 1 June 2011. The respondent Commissioner's memorandum, which was attached to the email, also said that at the adjourned hearing the respondent would seek dismissal of the review by the Tribunal if the exercise undertaken by the applicants fell short of the methodology. A major concern of the respondent Commissioner, the memorandum continued, was that the applicants:

will not be able to produce the documentation that they purport to possess and referred to in their letter. Of course if the Respondent is satisfied with what has been supplied the Respondent may be willing to consent to orders being made for a short timetable for the remaining years of income to be dealt with.

31    Senior Member Frost then made a further direction on 24 June 2011, which, after noting the concerns of the respondent Commissioner in relation to the applicants' proposed methodology, required the following:

1.    The Applicants are to file with the Tribunal and serve on the Respondent, after properly taking into account the concerns raised by the Respondent and noted above, a calculation of the taxable income of the partnership, supported by all relevant supporting source documents and “summary” work sheets (all of which must also be provided) in relation to the 1996 income year (that is 1 July 1995 – 30 June 1996), by 15 July 2011.

2.    The matters are to be listed for a Resumed Hearing of 3 hours on 2 August 2011 at 10:00AM.

32    By email on Friday 15 July 2011 at 5.45 pm Ms Caporale applied for an extension of time to "finalize the copying, to collate the documents in the order required and to summarize the figures for each of the year." The email referred to Ms Caporale "organizing the documents in relation to the G & D Caporale matters for the tax years 1996-2000 inclusive." The email referred to the photocopying company having not yet completed photocopying "as the books are bound and cannot be fed through the machines."

33    An email on 25 July 2011 at 2.53 pm asked to extend the hearing time for 6 weeks from 2 August 2011. The Associate to Senior Member Frost emailed the respondent Commissioner on 25 July 2011 at 3.03 pm asking for a preliminary comment. If there was a comment it is not in the bundle of material before the Court.

34    By email on 26 July 2011 at 8.53 am Ms Caporale was notified that the application for an adjournment had been refused and the resumed hearing was to proceed as scheduled on 2 August 2011.

35    The hearing resumed on 2 August 2011, but the material contemplated by the direction of 24 June 2011 had still not been provided to the Tribunal. Mr Papadopoulos, solicitor, appeared for the applicants and applied for an adjournment of the hearing to allow the applicants one final opportunity to put forward the information that would prove their case. When his attention was drawn to the 24 June 2011 direction, Mr Papadopoulos submitted at page 6 of the transcript:

The understanding, I think, of the client was that critically, a failure to understand that we are only talking about one year that you have indicated, being the 1996 year…I think that was misunderstood and it appears as though the information relating to all the assessment years was pursued; that that is a critical failure on the part of them, in terms of a misunderstanding.

Mr Papadopoulos submitted that Ms Caporale had brought material with her and wanted a further two weeks to collate it and present it. Senior Member Frost inferred from the fact that she still required further time to collate the material that it was still not in a form that was contemplated by the direction (which had been made five and a half weeks earlier).

36    Counsel for the respondent reminded the Tribunal of the respondent Commissioner's letter of response to the applicants' methodology. He submitted that there was no misunderstanding but that Ms Caporale had decided unilaterally to do all the years while realising that the direction was for one year.

37    Senior Member Frost refused the request for an adjournment. He rejected the claim as to a misunderstanding. He said the direction itself was clear in requiring "a calculation of the taxable income of the partnership, supported by all relevant supporting source documents and 'summary' work sheets (all of which must also be provided) in relation to the 1996 income year (that is 1 July 1995 – 30 June 1996)." Moreover, Senior Member Frost said, the direction was consistent with what he had indicated to Ms Caporale on the second day of the hearing, on 1 June 2011, in particular the following:

MR FROST: Right. This is a two-week window to provide some meaningful alternative method for making an assessment. If it falls short at the two weeks then I’ve got no choice. On the basis of what I’ve got I will affirm the decision. But if it comes in and it passes muster then the next step will be – what I have in mind, but I will hear you on this if you want to say anything – what I have in mind is, okay. That’s a good methodology. Do it for 1996. You have got two weeks, and present the results of your methodology together with all the supporting information, cross-referenced, so that we can have a look at it. And if it is acceptable then that will dispose of ’96 and then you will have time to do the next year.

38    Senior Member Frost said the only way in which the 24 June 2011 direction differed from what he had discussed on 1 June 2011 in the hearing was that he eventually allowed three weeks, rather than two, to provide the material for the 1996 year.

39    The Tribunal said the applicants were expected to present their case on 31 May and 1 June 2011. They were granted a number of indulgences on those days, culminating in the direction dated 3 June 2011. The further direction dated 24 June 2011, contemplated in the hearing on 1 June 2011, was not complied with by the due date of 15 July. While Ms Caporale may well have been able to present material to the Tribunal when the hearing resumed on 2 August, there was no indication that she could present the "calculation of the taxable income of the partnership ..." for 1996, as required by the direction.

40    The Tribunal continued by saying that a critical issue in the case was the amount of assessable income derived by the partnership in conducting the activities of the service station at Gymea and the investment property in Helensburgh. Mr Caporale gave evidence that not all proceeds of either activity were banked, and so there was an element of cash dealing that had to be factored into the calculation of the net income of the partnership. That is why the "calculation of the taxable income of the partnership" required by the direction of 24 June 2011 was so important. In a case like this, the Tribunal said, it could not simply be assumed that the paperwork itself (even if all of it was produced) provided the entire answer. The Tribunal said it was quite clear that the applicants had not confronted that reality.

41    Finally the Tribunal said that "[i]n the circumstances, after all the delays, all the extensions of time, and all the excuses, the applicants had failed, despite having been given ample opportunity, to discharge the burden of proof under s 14ZZK of the Administration Act. They had proposed no intelligible basis on which their taxable income for the relevant years might be arrived at, and as a result there was no prospect whatever of a finding that the Commissioner's assessments were excessive." Accordingly the Tribunal affirmed the objection decisions.

Consideration

42    There is no doubt that the Tribunal is bound to afford procedural fairness to those appearing before it.

43    There is also no doubt that a failure to accede to a reasonable request for an adjournment can constitute procedural unfairness. In Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at [40], Gaudron and Gummow JJ said:

[40] Procedural fairness, which is one aspect of the rules of natural justice, requires that a person who may be affected by a decision be informed of the case against him or her and that he or she be given an opportunity to answer it. The opportunity to answer must be a reasonable opportunity. Thus, a failure to accede to a reasonable request for an adjournment can constitute procedural unfairness. (citations omitted)

44    The Australian cases their Honours referred to in relation to the last proposition included Sullivan v Department of Transport (above) at 343, where Deane J said:

A refusal to grant an adjournment can constitute a failure to give a party to proceedings the opportunity of adequately presenting his case. . . . In this regard, however, it is important to remember that the relevant duty of the Tribunal is to ensure that a party is given a reasonable opportunity to present his case. Neither the Act nor the common law imposes upon the Tribunal the impossible task of ensuring that a party takes the best advantage of the opportunity to which he is entitled. (original emphasis)

45    More recently, in Kenso Marketing (M) SDN BHD v Chief Executive Officer of Customs [2011] FCAFC 26, Kenso submitted that the Tribunal erred by denying procedural fairness to it when the Tribunal refused to require the production of documents and when it disallowed the use of documents disclosed by another party when cross-examining that party’s witness. The Full Court said, at [45]:

Section 39 of the AAT Act requires that a party be given a “reasonable opportunity to present his or her case”. It is well settled by authority that s 39 does not require the Tribunal to ensure that “a party takes the best advantage of the opportunity to which he [or she] is entitled.” (Sullivan v Dept of Transport (1978) 20 ALR 323 at 343; Minister for Immigration and Multicultural Affairs v Bhardwaj (2002) 209 CLR 597 at 611; De Simone v Commissioner of Taxation (2009) 51 AAR 161; (2009) 77 ATR 936; [2009] FCAFC 181 at [15]–[18]).

The Full Court added, at [48],

As the procedural history which we have set out shows, Kenso had ample opportunity to prepare and present its case. Any deficit in that case did not result from a denial of procedural fairness, but from the failure by Kenso and its advisers over the months before the Tribunal hearing to comply with directions, the propriety of which they never disputed even as they failed to obey them.

The authorities were collected in Bufalo v Official Trustee in Bankruptcy [2011] FCAFC 111 at [51].

46    It was common ground before me that the task of the Court was to review the material which was before the Tribunal and to assess whether or not there was a denial of procedural fairness. The ultimate issue, in the circumstances of this case, was whether the Tribunal had given a reasonable opportunity to the applicants to present their case.

47    In Ali v Minister for Immigration and Multicultural and Indigenous Affairs [2005] FCA 1415; (2005) 41 AAR 410 Lindgren J was considering an appeal from a decision of the Administrative Appeals Tribunal on the ground that the Tribunal's refusal to grant Mr Ali's application for an adjournment amounted to a failure to accord procedural fairness. His Honour said at [27] that "[u]ltimately each complaint of a failure to accord procedural fairness by reason of the refusal of an adjournment turns on its own facts. Whether an adjournment should be granted is a matter within the discretion of the trial Judge (or Tribunal), to be resolved according to the overall requirements of justice in the particular circumstances".

48    Lindgren J went on to say, at [29], that it had been recognised in the authorities that a decision on an adjournment application may involve:

•    the assessment of competing claims by litigants in other cases awaiting hearing;

•    knowledge of the working of the listing system of the particular court or tribunal; and

•    awareness of the importance to the proper working of that system of adherence to dates fixed for hearings.

49    Beyond what can be seen from the AAT Act and the Tribunal's Listing and Adjournment Practice Direction to which the Tribunal referred, this Court is not in a position to assess the matters enumerated by Lindgren J with any accuracy. Put differently, the Tribunal has a much keener appreciation of those matters than does the Court. It follows that the evaluation by the Court of the Tribunal's decision must have regard to these differences.

50    As will be seen, the applicants' appeal turned in large part on some aspects of the Tribunal’s fact-finding. Here again, at least in the present case, the Court is at a disadvantage. The major complaint made by the applicants was in relation to the Tribunal's rejection of the submission that Ms Caporale had misunderstood the relevant direction of the Tribunal. Part of the Tribunal's evaluation of that submission must have involved, at least implicitly, the Tribunal's appreciation of Ms Caporale's level of understanding in the course of the hearings in which she had represented the applicants. I do not share that advantage. Ms Caporale did not give evidence before me.

51    This leads to the question of the possible bases on which the Court should review the Tribunal's fact finding. Expressed shortly, where there is no evidence tendered in the Court which was not before the Tribunal, the possibilities include:

(i)    the Court should find the facts for itself, allowing for any position of advantage of the Tribunal in respect of particular facts;

(ii)    the Court should ask only whether a finding of fact was open to the Tribunal;

(iii)    the Court should examine only whether there was any evidence to support a finding of fact or otherwise examine the finding for extreme irrationality or illogicality.

52    In the view I take of the material before me I do not have to resolve the question of which basis of review is applicable. I shall apply the basis most favourable to the applicants which is (i) above.

53    In their submissions, the applicants accepted Ms Caporale did not prepare adequately for the hearing listed for 31 May to 1 June 2011; she did not file evidence or arguments capable of proving the assessments were incorrect. Senior Member Frost invited the applicants to attend in person and give oral evidence, which they did. Senior Member Frost decided to adjourn the hearing, make directions for the applicants to file proper material addressing the real issues, and then to list the case for resumed hearing.

54    The applicants also accepted in their submissions that Ms Caporale did not comply fully with these directions.

55    Before me, the applicants submitted certain matters "in mitigation" to displace an impression that Ms Caporale did not take the Tribunal's directions seriously, or was stalling for time. The applicants, in their submissions, accepted that on 11 March 2011 Ms Caporale filed a hearing certificate notifying her readiness for hearing but, they submitted, "properly advised, she would not have done so as she was not ready." This was not a matter put to the Tribunal or the subject of evidence before me.

56    The submissions also made reference to the respondent Commissioner's summons to produce documents but that matter is of little present relevance. In fact the summons to produce documents was not called on and so much was indicated in the letter from the respondent Commissioner to the Senior Member's Associate dated 25 May 2011. It was common ground before me that a copy of the respondent Commissioner 's letter had also been sent to Ms Caporale at or about that time.

57    It was put on behalf of the applicants that the Tribunal had implicitly made an adverse finding on the reasonableness and credibility of Ms Caporale and thus taken that matter into account as an indication of the unreasonableness of the application for vacation of the hearing date.

58    In my view however this material was recited as part of the history of the matter and it did not found any conclusion about Ms Caporale's reasonableness or credibility. The fact was that Ms Caporale, on behalf of the applicants, had notified their readiness for a final hearing but had then sought to have those hearing dates vacated by reason of the respondent Commissioner's summons to produce documents.

59    The applicants in their submissions accepted the account of events at the hearing on 31 May and 1 June 2011 subject to one point which centred on the question of whether Ms Caporale knew on 14 March 2011, when the Tribunal date was taken, that the bankruptcy matter was already listed on 31 May 2011 and the inference, so it was submitted, that the Tribunal found that Ms Caporale was reckless. Attention was drawn to an email dated 24 May 2011 at 4.59 pm from Ms Caporale to the Tribunal and to the respondent Commissioner to the effect that she received confirmation "yesterday" that she had to appear before the Federal Magistrates Court in relation to the bankruptcy notice the respondent Commissioner had issued on 31 May 2011.

60    As I understand the Tribunal's reasons, the inference was not as submitted on behalf of the applicants. Rather than the inference being that Ms Caporale knew on 14 March 2011, when the Tribunal hearing date was taken, that the bankruptcy matter was already listed on 31 May 2011, in my view the inference drawn by the Tribunal was that Ms Caporale took the return date of the bankruptcy matter knowing that that date, 31 May 2011, was the date on which her parents' application had been set down for final hearing in the Tribunal.

61    However, this matter seems to me to be of little significance as there is no indication that the appearance in the Federal Magistrates Court required the vacation of the hearing dates. Further, there was a letter dated 25 May 2011 from the respondent Commissioner in response to Ms Caporale’s email dated 24 May 2011 stating that the respondent Commissioner would agree to the Federal Magistrates Court proceedings being stood over for two weeks by consent and to mention the matter in the Federal Magistrates Court on behalf of the applicants. An email from the Tribunal drew Ms Caporale's attention to that agreement and proposal. The respondent Commissioner also pointed out in his letter dated 25 May 2011 that it was his understanding that the date of 31 May 2011 was specifically sought by the applicant's representative at the time of filing the application on 24 May 2011 when the applicants' representative was fully aware that such a return date would conflict with the date set down for the commencement of the Tribunal proceedings.

62    I do not understand the Tribunal to have been implying that Ms Caporale was reckless. The Tribunal recited the history as consistent with the applicants' overall approach which indicated that they had continually failed to confront what they needed to do to succeed in their application to the Tribunal.

63    Next it was submitted in the applicants' submissions that Ms Caporale misunderstood the direction made on 3 June 2011. I accept that Ms Caporale sent an email on 15 July 2011 at 5.45 pm requesting an extension of time to finalise the copying, to collect the documents in the order required and to summarise the figures for each of the years 1996 to 2000 inclusive.

64    That application for an adjournment was refused on 26 July 2011 after it had been made clear by Ms Caporale by email dated the 25 July 2011 that the applicants were seeking to extend the hearing time for six weeks from 2 August 2011 to 13 September 2011. That email at 2.53 pm on 25 July 2011 said that the photocopying should be completed "by the end of the week". There is then reference to compiling “one set in the (sic) order of all documents and mark each as page numbers so [I] can then reference the page numbers into the spreadsheets and summaries”.

65    It is correct to say that the Tribunal rejected the claim as to a misunderstanding but on the basis that the direction itself was clear, in requiring "a calculation of the taxable income of the partnership, supported by all relevant supporting source documents and 'summary' work sheets (all of which must also be provided) in relation to the 1996 income year (that is 1 July 1995 – 30 June 1996)". Moreover, the Tribunal said, the direction was consistent with what it had indicated to Ms Caporale on the second day of the hearing, on 1 June 2011 (see above).

66    However, contrary to the applicants' submissions, I do not accept that this was a finding adverse to the honesty of Ms Caporale or that that adverse finding "obviously played a crucial role in the decision to refuse any adjournment". As to the former, in my view the Tribunal was referring to whether there was any objective basis for such a misunderstanding. There was no express reference to Ms Caporale's honesty and I would not infer that that was intended. Ms Caporale did not give evidence. As to the latter, it was the fact that the hearing could not proceed because the direction had not been complied with which was the important factor.

67    Part of this contention was that the submission made by Mr Papadopoulos as to Ms Caporale's misunderstanding tallied with the terms of Ms Caporale's email of 25 July 2011; the Tribunal had not referred in its reasons to that email; and the Court should conclude that there was a genuine misunderstanding.

68    In the alternative to contending that the Tribunal had found Ms Caporale to be dishonest, the applicants contended that if the Tribunal misunderstood the fact of Ms Caporale's alleged misunderstanding then the validity of the Tribunal's rejection of the application was undermined: because that error in fact finding preceded the exercise of the Tribunal's discretion and because the errors were material the Court should consider for itself the correct exercise of the discretion on the true facts.

69    As I have said, I do not construe the Tribunal's reasons as involving any finding of dishonesty. A submission of a misunderstanding was made by Mr Papadopoulos on 2 August 2011 once the Tribunal had referred to the terms of the direction of 24 June 2011. Mr Papadopoulos did not in his application for an adjournment refer to the terms of Ms Caporale's email and there was therefore no reason for the Tribunal to refer to it. In addition, the Tribunal's reasons were given ex tempore. Further, the email did not in terms refer to or establish that there was a misunderstanding by Ms Caporale. In any event I do not see why the Tribunal should be required to take as fact the contents of an email sent to it.

70    For the same reasons I also reject the alternative submission, that the Tribunal, although not finding dishonesty, misunderstood the fact of Ms Caporale's misunderstanding and thus erred in its fact-finding in that respect.

71    In short, there was an unsupported “explanation” of misunderstanding and I see no error in the Tribunal been unpersuaded by it.

72    It was conceded before me by the applicants that their conduct of the case up to 2 August 2011 was unacceptable but it was put that the Tribunal was wrong to refuse or erred in law in refusing the adjournment application in circumstances where provided that Mr Papadopoulos was given adequate time there was a reasonable prospect that the matter could be brought forward thereafter.

73    The adjournment application made by Mr Papadopoulos was supported by no persuasive explanation: it contained no detail as to the alleged misunderstanding. There was no material before the Tribunal establishing the time the alleged misunderstanding arose, the basis of it, the objective reasonableness of it, or the consequences of it in terms of the preparation that had been done or the preparation that remained to be done. Similarly, in relation to Mr Papadopoulos' own position, the adjournment application was supported by no detail as to when he was retained, his familiarity with the case or his capacity to progress the matter to an early and final resumption of the adjourned hearing. Thus I reject the submission that, in those circumstances, the Tribunal erred in failing to take into account that there was a new solicitor in the matter on behalf of the applicants.

74    The applicants' submissions proceeded by reference to the position of Ms Caporale or indeed Mr Papadopoulos. In my view this is not the correct perspective. The issue is whether the applicants were given a reasonable opportunity to present their case.

75    Further I do not accept that the Tribunal overlooked the fact that this conduct was not by the applicants but by their representative Ms Caporale. That is not how I read the concluding paragraphs of the Tribunal's reasons.

76    I also do not accept that the Tribunal had only to weigh the prejudice suffered by the applicants against that suffered by the respondent Commissioner in the sense that because the tax debt remained fully enforceable while the Tribunal review was pending the respondent suffered no prejudice. For many years the conduct of litigation has not been merely a matter for the parties and their interests: see for example Sali v SPC Ltd (1993) 67 ALJR 841 at 849 cited with approval in Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 (Aon) at [93]-[95].

77    The question is whether the applicants were given a reasonable opportunity to present their case. The relevant prejudice to the respondent was not limited to whether the tax debt was or was not enforceable but included the matters referred to by Lindgren J in Ali and also included the different perspective required by Aon. In terms of its overall decision, the Tribunal exercised its discretion in light of the Tribunal's statutory objectives in s 2A of the AAT Act: see Aon at [114]. Section 2A provides that, in carrying out its functions, the Tribunal must pursue the objective of providing a mechanism of review that is fair, just, economical, informal and quick.

78    In my view a very significant matter was the generality and vagueness with which the claim of misunderstanding of the direction was put. There was no material advanced in support of it. There was no detail in relation to the claimed misunderstanding or its basis. The application for a further adjournment called for an explanation and an explanation which was persuasive in terms of its detail, its coherence and its basis in fact: see Aon at [5] and [102]-[103]. None of this was forthcoming.

79    In addition, the Tribunal was offered no timetable for the completion of the hearing. In that respect I also note in the present appeal the following submission by the applicants:

It is not now argued that the Member could on 2 August positively have found that, if an adjournment to a further hearing in two weeks had been given full compliance would have occurred by that date. Rather, the Member should have concluded that, with the intervention, now, of a legal practitioner, there was sufficient assurance that after two weeks, there would be, if not full compliance, a reliable indication of how and when full compliance would be achieved, in aiding the case to go forward on a date to be fixed.

80    I do not accept that, in the circumstances, the mere fact that a solicitor appeared at the resumed hearing should have persuaded the Tribunal to grant the further adjournment. As I have said, there was no detail. It was by no means self-evident that the applicants had given timely or full instructions to the solicitor.

81    For these reasons I reject the submission that the Tribunal denied procedural fairness to the applicants when it refused the application made by their solicitor on 2 August 2011 for a further adjournment. I see no error in the Tribunal's fact finding or in its overall decision.

82    Evaluating the material for myself, I would have made the same findings of fact and I also would have refused the adjournment application.

83    I also note the applicants' submission that the decision to dismiss the application on its merits, as opposed to dismissal for procedural non-compliance under s 42A(5) of the AAT Act, was unjustified. The submission continued that the decision to dismiss on the merits made it practically impossible for the applicants to reagitate the correctness of the assessments in the Tribunal or any other forum.

84    Section 42A(5) is in the following terms:

(5) If an applicant for a review of a decision fails within a reasonable time:

(a) to proceed with the application; or

(b) to comply with a direction by the Tribunal in relation to the application;

the Tribunal may dismiss the application without proceeding to review the decision.

85    This provision confers a discretion. It was not suggested that it was not open to the Tribunal to act under s 43(1) as a matter of substance.

86    I see no difference for present purposes in the consequences of the Tribunal acting under s 42A(5) rather than under s 43(1). Ultimately, counsel for the applicants accepted that if the applicants did not succeed on the procedural fairness ground they could not succeed on this ground.

Orders

87    I conclude that the Tribunal gave the applicants a reasonable opportunity to present their case. The applicants have not established a denial of procedural fairness. I therefore dismiss the application to this Court with costs. I affirm the decision of the Tribunal.

Associate:

Dated:    17 February 2012