Federal Court of Australia

Commissioner of Taxation v Bazzo (No 2) [2024] FCA 560

ORDERS

THE COURT ORDERS THAT:

1.    The decision of the Administrative Appeals Tribunal dated 13 February 2023 is set aside in part and only as to the extent provided for by these orders.

2.    The matter of the following issues together with the consequences for the outcome of the application before the Tribunal of the further consideration of those issues is remitted to the Tribunal for determination according to law, namely:

(a)    Whether and, if so, to what extent the respondent discharged her onus to show that the 'Other Accounts Amount' (as that term is defined in the Court's reasons at [69]) was included in the respondent's assessable income in each of the income years ended 30 June 2009 to 2011.

(b)    Whether the Tribunal is satisfied that there was fraud or evasion for the purposes of item 5 of the table in s 170(1) of the Income Tax Assessment Act 1936 (Cth) for the income year ended 30 June 2009 or for the income year ended 30 June 2010.

(c)    Whether and, if so, to what extent the respondent was subject to penalties pursuant to s 284-75 of Schedule 1 to the Taxation Administration Act 1953 (Cth) for each of the income years ended 30 June 2009 to 2011.

(d)    Whether and, if so, to what extent the uplift applicable under s 284-220(1)(c) of Schedule 1 to the Taxation Administration Act should be remitted under s 298-20 of Schedule 1 to the Taxation Administration Act for each of the income years ended 30 June 2010 and 2011.

3.    The matter is remitted on the basis that it be heard and determined on the evidence which was before the Tribunal on the previous hearing with such further evidence as the Tribunal directs be adduced as to

(a)    the synthesising of the material before the Tribunal concerning the 'Other Accounts Amount'; or

(b)    as to issues (b) or (c) set out in order 2 of these orders

from the witnesses who gave evidence before the Tribunal on the previous hearing.

4.    The applicant pay 75% of the respondent's costs of and incidental to the appeal, including any reserved costs, such costs to be taxed if not agreed.

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

REASONS FOR JUDGMENT

COLVIN J:

1    Ms Tina Bazzo objected to various notices of assessment of taxation. Her objection was disallowed in part by the Commissioner. Ms Bazzo sought review in the Administrative Appeals Tribunal. The Tribunal determined that the objection decision should be varied in certain respects. The Commissioner appealed to this Court pursuant to s 44 of the Administrative Appeals Tribunal Act 1975 (Cth) (AAT Act). Ms Bazzo brought a cross-appeal. It was determined that the appeal should be dismissed and that the cross-appeal should be allowed as to some of the grounds raised: Commissioner of Taxation v Bazzo [2024] FCA 452. The Court must now determine the appropriate relief to be granted on the cross-appeal and the terms of appropriate cost orders.

2    Save for some minor drafting issues, the four discrete or limited substantive issues that should be remitted to the Tribunal by way of orders on the cross-appeal (having regard to the Court's reasoning) are agreed. Otherwise, the outstanding issues between the parties are:

(1)    Whether the decision of the Tribunal should be set aside in its entirety?

(2)    Whether the remitter should be on terms that further evidence may be received by the Tribunal?

(3)    What is the appropriate percentage of Ms Bazzo's costs that the Commissioner should be ordered to pay?

Issue (1): The terms of the set aside order

3    The Commissioner proposes an order setting aside the Tribunal's decision with a separate order that the proceedings be remitted for determination of the four issues. Ms Bazzo proposes that any order setting aside the Tribunal's decision be expressed as setting aside the decision in part only. Ms Bazzo says that the Court has power under s 44 of the AAT Act to make an order of that kind. She refers to the reasoning in Civil Aviation Safety Authority v Central Aviation Pty Limited [2009] FCAFC 137 at [55] (Bennett, Flick and McKerracher JJ) to support that submission.

4    It has been determined that, where legal error is demonstrated on a statutory appeal under the AAT Act, the Court can make an order remitting the decision or part of it for rehearing according to law and, if appropriate, can make orders dictating the manner in which any rehearing is to be conducted. Further, the scope of remittal in a particular case would depend upon what 'matter' warranted rehearing. The limitation upon the remitter may be express or implied from the Court's reasoning on the appeal. As to these matters see Lim v Comcare [2019] FCAFC 104 at [32]-[34] (and cases there cited) (McKerracher, Markovic and Snaden JJ); Repatriation Commission v Nation (1995) 57 FCR 25 at 33-34 (Beamont J, Black CJ and Jenkinson J agreeing); and Peacock v Repatriation Commission [2007] FCAFC 156; (2007) 161 FCR 256 at [18]-[20] (Downes, Lander and Buchanan JJ).

5    In the present case, it is common ground that the errors of law in the Tribunal's reasoning that have been upheld on the cross-appeal are confined to the four issues. In those circumstances, the appropriate order is to set aside the decision of the Tribunal in part and to remit to the Tribunal the matter of the four issues and the consequences for the outcome of the application before the Tribunal of the further consideration of those four issues for determination according to law.

Issue (2): Evidence on remitter

6    Ms Bazzo submits that the Court should order that further evidence may be received on remitter. It is not suggested that the demonstrated errors of law by the Tribunal involved some form of procedural error which meant that the Tribunal did not receive evidence that it ought to have received. Rather, it is submitted that the Tribunal would be aided by receipt of further evidence in considering whether the deposits that comprised the 'Other Accounts Amount' (as described in this Court's reasons on the appeal) were assessable income. This is said to be justified by the fact that it would assist in synthesising material in circumstances where such matters were not the primary focus of the Tribunal. It is not said that there was any misunderstanding or misapprehension of the issues that resulted in the proposed further evidence not being led before the Tribunal at the initial hearing. These are matters that stand against allowing further evidence as to this aspect. However, on the other hand, what is proposed is a synthesis of material already before the Tribunal that would be of assistance to the Tribunal.

7    It is also said that Ms Bazzo should be given an opportunity to adduce further evidence relevant to the fraud or evasion issue and the penalties issue. As to this aspect, Ms Bazzo relies upon the demonstration of factual error which was not ultimately found to be an error of law. It is said that the relevant findings were fairly emphatic criticisms founded on an entirely false premise. In effect, as a matter of fairness, it is said that Ms Bazzo should have an opportunity to adduce further evidence by way of explanation and context for these omissions. These matters appear to support evidence as to that aspect.

8    However, the Tribunal will be in a better position to form a view as to whether it would be fair or appropriate to adduce additional evidence as to these two aspects. It was not suggested that there should be a general opportunity to adduce further evidence.

9    In those circumstances, I propose to order that the proceedings be remitted on the basis that they be heard and determined on the evidence which was before the Tribunal with such further evidence as the Tribunal directs be adduced as to the two topics identified by Ms Bazzo but limited to evidence from the witnesses who had given evidence before the Tribunal.

Issue (3): Percentage of costs

10    It is common ground that the appropriate costs order is that the Commissioner should be ordered to pay the costs of and incidental to the appeal. Ms Bazzo says that the order should be as to 90% of those costs. The Commissioner says that it should be as to 60%.

11    Cost orders usually follow the outcome of the appeal: see Firebird Global Master Fund II Ltd v Republic of Nauru (No 2) [2015] HCA 53 at [6] (French CJ, Kiefel, Nettle and Gordon JJ); and Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 at [66]-[68]. Where there has been partial success as to the outcome, it may be appropriate for the order to reflect the extent of overall substantive success, taking account of the extent to which there were discrete issues on which the party did not succeed: Queensland North Australia Pty Ltd v Takeovers Panel (No 2) [2015] FCAFC 128; (2015) 236 FCR 370 at [11] (Dowsett, Middleton and Gilmour JJ).

12    The Commissioner was entirely unsuccessful on the appeal grounds he advanced. A considerable amount of the written submissions (and time in the oral hearing) was devoted to the Commissioner's appeal. Ms Bazzo had a considerable measure of success on her cross-appeal.

13    The Court takes a broad brush in making such assessments. In my view, the appropriate percentage is 75%. Those costs should be assessed on the basis that they include the costs of the whole proceedings, including costs incurred by Ms Bazzo in dealing with the Commissioner's amendment to the notice of appeal.

The terms of the description of the issues for remitter

14    In my assessment, the terms proposed by Ms Bazzo as to the expression of the issues to be remitted have the benefit of greater precision having regard to the matters that the Tribunal was required to determine given the relevant statutory language. For that reason, I propose to express the orders substantially in those terms.

Associate:

Dated:    27 May 2024