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CIAGLIA v FC of T

Members:
MJ Sassella SM

Tribunal:
Administrative Appeals Tribunal

MEDIA NEUTRAL CITATION: [2002] AATA 323

Decision date: 8 May 2002

MJ Sassella (Senior Member)

Chronology

1. On 13 November 1987 the Commissioner of Taxation (``the respondent'') (``the Commissioner'') issued a taxation assessment (T3) in an amount of $6,632.51 in respect of taxpayer, Mrs ``Lucy Ciaglia''. The tribunal takes this to refer to Ms Lucia Ann Ciaglia (``the applicant''). This was in respect of the financial year ending on 30 June 1986 (T1). The amount was reduced to $3,300.51 as an amount for provisional tax had been included and a firm of accountants arranged for that to be removed (ex L).

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2. On 12 December 2000 Mr B A Simms, a certified practising accountant and tax agent, wrote on the applicant's behalf, to the respondent (T4) enclosing a notice of objection (T5) against the assessment described in paragraph 1 above. He asked that the respondent treat the objection as having been lodged within the time required pursuant to s 14ZW(2) of the Taxation Administration Act 1953. He gave as reasons for the delay in lodging the objection:

  • • During the 1980s the marriage of Ms Ciaglia and her former husband deteriorated. It was dissolved on 24 October 1988.
  • • Late in 1987 or early in 1988 Ms Ciaglia was presented by her then husband with an income tax return for the year ended June 1986. She was asked to sign it. After a delay, and subject to duress by her husband, the applicant signed the return.
  • • The applicant had to rely on charity for her support at that time. She had five children. More recently she had had five children and a disabled aged mother living with her at her home. One son was injured in a motor vehicle accident, sustaining brain damage. The applicant eventually obtained night work as a process worker to help support her family.
  • • Ms Ciaglia lacked the financial resources to obtain professional assistance in disputing the tax assessment.
  • • In the late 1990s Ms Ciaglia approached the Taxation Relief Board (``the TRB'') about the debt. On 27 April 1999 the TRB decided not to grant Ms Ciaglia a release from payment of the debt.

3. Attached to Mr Simms' letter was a copy of a decision of the Family Court of Australia dated 15 August 1990 (T6) in which Cohen J is critical in many respects of Ms Ciaglia's ex- husband.

4. The notice of objection was dated 29 December 2000. It made the following points:

  • • The taxable income taken into account should be reduced to nil by excising from the total (i) $5,000 shown as wages and salary received from Lajido Pty Ltd; and (ii) $11,321 shown as rental income from an address in Chatswood.
  • • Ms Ciaglia was never paid the $5,000 wages and salary. She was not employed by the named company.
  • • Ms Ciaglia had no interest in the Chatswood property and she derived no income from it. Those with interests in the property were her former husband and his brother.

5. On 4 April 2001 a Deputy Commissioner of Taxation wrote to the applicant (T7) refusing her application for an extension of time in lodging her objection. Reasons were provided (T8). These were:

  • (a) Section 185 of the Income Tax Assessment Act 1936 (``the ITAA'') prior to 1992 provided that a taxpayer who was dissatisfied with an assessment might lodge an objection against the assessment with the respondent within 60 days from the date of service of the assessment.
  • (b) Section 188(1) of the ITAA provided that, notwithstanding that the period for lodgment had ended, the taxpayer might lodge the objection together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged. Section 188(3) required the taxpayer to state fully and in detail the circumstances concerning and the reasons for the taxpayer's failure to lodge the objection as required under the ITAA.
  • (c) Sections 185 and 188 appeared in Part V of the ITAA. Part V was replaced by Part IVC, ``Taxation Objections, Reviews and Appeals'' in the Act and was inserted by s 112 of the Taxation Laws Amendment Act 1991 [the tribunal notes that this is not completely correct. The correct Act is the Taxation Laws Amendment Act (No. 3) 1991 (``the Amendment Act''). Section 114 of the Amendment Act provided that the amendments applied to objections where assessments, determinations, notices or decisions to which the objections related were notified, or were first notified, as the case may be, after 1 March 1992. Ms Ciaglia's notice of assessment issued on 13 November 1987. Her application therefore fell to be considered under s 188 of the ITAA.
  • (d) The decision-maker applied the well- known principles relevant to extension of time as laid down by Wilcox J in
    Hunter Valley Developments Pty Ltd v Minister for Home Affairs and Environment (1984) 7 ALD 315.

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  • (e) As regards Ms Ciaglia's explanation for delay, the writer said that this was caused partly by Ms Ciaglia's ignorance of the law. Despite her financial and marital problems she could have contacted the tax office as suggested on the notice of assessment and she would have learned of her right to lodge an objection. In addition, the notice advised of the 60-day time-limit for lodging an objection.
  • (f) As regards whether Ms Ciaglia had informed the Commissioner that the finality of the assessment was questioned, Ms Ciaglia had not made the Commissioner aware of any dispute as to the assessment.
  • (g) As regards potential prejudice to the respondent if an extension is granted, the Commissioner would be prejudiced if the matter were reviewed after 17 years. ``Records are no longer available to confirm or deny the correctness of your claim. Even if [Ms Ciaglia were] correct [the respondent] would be prevented from issuing [a] correct assessment to recover the tax'' (T8/44). [T2 was included in the Section 37 Statement as evidence from the respondent's computer system showing that the 1986 tax return has been destroyed.]
  • (h) As regards the unsettling of people, or established practices the decision-maker wrote (T8/44):
    • ``Time limits are imposed by legislation as there needs to be a time when an assessment is final. Extension of time to object to assessments outside the time limit are [sic] unsettling to others. The community [sic] need to be assured that after a certain time has elapsed, their assessments are final. Extensions of time can only be granted in the exceptional case.''
  • (i) As regards the merits of the substantial application, it was said that the events alleged (ie signature under duress, the use of false figures in the return) occurred almost 15 years before. It would be very difficult to verify the facts stated in the objection. The reasons then said, ``However if you have not earned salary & wage income and the income from the rental property is not yours, they should not be included in your assessable income'' (T8/44).
  • (j) As regards fairness between Ms Ciaglia and others in a like position, it was not suggested that a grant of an extension in the applicant's case would affect others in a similar position.

6. The decision-maker concluded (T8/44):

``Based on the reasons above, it is not proposed to allow your request for an extension of time to lodge the objection. The delay in notifying that the income tax assessments [sic] is subject to a dispute is unreasonable. You have not provided an acceptable explanation why the objection was not made on time.''

7. On 22 May 2001 the applicant filed with the Administrative Appeals Tribunal (``the tribunal'') an application for review of the decision in T8. She gave as reasons for the application:

``Taxpayer requests review of decision. She was left in a difficult position due to her marriage break-up (full particulars made available to Australian Tax Office). She considers decision to be unfair and unreasonable. She is not in a position to pay the balance outstanding in full but has commenced repayment of $500 per month pending your decision in this matter.''

Relevant legislation

8. As identified by the decision-maker, the legislation on time limits for lodging an objection, and on extensions of those time limits, in this case is found in repealed provisions of the ITAA. These are ss 185(1), 188(1), (3), 188A(1), (2), (3).

``INCOME TAX ASSRESSMENT ACT 1936

Objections

185(1) A taxpayer dissatisfied with any assessment under this Act may, within 60 days after service of the notice of assessment, lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies:

...

Applications for extension of time

188(1) Where the period for the lodgment by a taxpayer of an objection against an assessment has ended, the taxpayer may, notwithstanding that the period has ended,

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send the objection to the Commissioner together with an application in writing requesting the Commissioner to treat the objection as having been duly lodged.

...

188(3) An application under sub-section (1)... shall state fully and in detail the circumstances concerning, and the reasons for, the failure by the taxpayer to lodge the objection or request as required by this Act.

Consideration of applications for extension of time for lodging objections

188A(1) The Commissioner shall consider each application made under sub-section 188(1) and may grant or refuse the application.

188A(2) The Commissioner shall give to the taxpayer who made the application notice in writing of the decision on the application.

188A(3) A taxpayer who is dissatisfied with a decision under sub-section (1) in respect of an application made by the taxpayer may apply to the Tribunal for review of the decision.

...''

Hearing and appearances

9. The tribunal convened a hearing in this matter in Sydney on 26 February 2002. Mr B A Simms represented Ms Ciaglia. Mr D Ong of the ATO Legal Practice represented the Commissioner.

10. The tribunal had access to and accepted into evidence the following documentary material:

  • • Exhibit TD1 - Section 37 Statement and associated documents (T1 - T8) provided by the respondent on 26 June 2001.
  • • Exhibit A - Letter dated 7 December 1994 from the respondent to the applicant.
  • • Exhibit B - Letter dated 29 November 1996 from WL English and Company to the respondent.
  • • Exhibit C - Letter dated 24 December 1997 from WL English and Company to the respondent.
  • • Exhibit D - Letter dated 14 May 1999 from WL English and Company to the Hon Ross Cameron MP.
  • • Exhibit E - Letter dated 27 April 1999 from the chairman of the TRB to Ms Ciaglia.
  • • Exhibit F - Letter dated 25 May 1999 from Ross Cameron MP to WL English & Company.
  • • Exhibit G - Letter dated 26 May 1999 from Ross Cameron MP to Senator the Hon Rod Kemp, Assistant Treasurer.
  • • Exhibit HA - Letter dated 19 July 1999 from Ross Cameron MP to WL English & Company.
  • • Exhibit HB - Letter dated 15 July 1999 from Rod Kemp, Assistant Treasurer, to Mr Ross Cameron MP.
  • • Exhibit I - Letter dated 20 February 2002 from Mr BA Simms to the tribunal.
  • • Exhibit J - Statutory declaration of the applicant dated 26 November 1996.
  • • Exhibit K - Questionnaire for applicants for release from taxation liability completed by Ms Ciaglia dated 17 November 1998.
  • • Exhibit L - Bundle of the applicant's tax documentation including correspondence and tax returns from 1986.
  • • Exhibit 1 - Respondent's statement of facts and contentions dated 25 February 2002.
  • • Exhibit 2 - Respondent's outline of submissions dated 26 February 2002.
  • • Exhibit 3 - File note concerning TRB hearing on 19 November 1998.
  • • Exhibit 4 - Letter of demand dated 19 October 2000 from the respondent to the applicant.

Findings on material questions of fact with reference to the evidence and other materials in support of those findings

11. At the hearing Mr Simms said that Mr English, Ms Ciaglia's solicitor, had made various approaches to the tax office over the years but to no avail. He emphasised that Ms Ciaglia had experienced considerable hardship. She had never received the income in question in 1985-1986. The original debt was some $3,000. It had blown out to some $10,000. Ms Ciaglia had lodged income tax returns to 1990. She then did not work until 1996. The returns from 1996 onwards are outstanding at the suggestion of the tax office. Ms Ciaglia wishes to avoid a fine when she lodges these returns.

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12. Mr Ong suggested that the respondent would be prejudiced if the applicant were granted an extension of time for lodgment of her objection. Her 1996 tax return had been destroyed because the respondent had been unaware that the assessment was contested. She had taken insufficient steps to agitate the matter. She had lodged her objection well outside the 60 days allowed. There had not been a sufficient explanation for the delay in objecting.

13. Ms Ciaglia gave oral evidence. She told Mr Simms that she had handed a demand from the tax office for payment to her solicitor. There was no record of action taken by the solicitor. She said that the tax office did not tell her solicitor that she should lodge an objection and her solicitor did not tell Ms Ciaglia of the objection process.

14. Ms Ciaglia phoned the tax office late in 1990 or in 1991. She spoke to a call centre. She was told to rely on her solicitor's advice and assistance. Mr English, the solicitor, dealt with Sue Sherlaw in the tax office by phone.

15. Ms Ciaglia's application to the TRB had been based on hardship criteria. She said this was the wrong ground. The correct basis would have been that she had never received the money in question.

16. Ms Ciaglia provided her tax returns for 1987-1990 financial years to the tax office in about 1991. She has a copy of her 1986 return (ex L).

17. Mr English is no longer Ms Ciaglia's solicitor.

18. When cross-examined by Mr Ong, Ms Ciaglia agreed that she had no proof that the tax office had failed to advise her solicitor that she could lodge an objection. Mr Ong suggested that Ms Ciaglia was told that she could seek an extension of time for her objection at the TRB hearing on 19 November 1998. She lodged no objection until December 2000. Ms Ciaglia said she knew nothing of that. She did as she was advised, whatever that was from time to time.

19. Mr Ong asked the applicant to examine ex 3, a tax officer's notes of the TRB hearing. She agreed that it was an accurate summary. The notes record that Mr English addressed the 60-day objection period, asking rhetorically how his client was expected to know that she had only 60 days in which to object. The notes record that she was told in the assessment notice of the 60-day period. They also record ``[t]hat she was informed that she could request an extension of time to lodge an objection'' (ex 3/1-2). Ms Ciaglia then said that she had thought that Mr English had lodged an extension of time application soon after. However, she said she was aware that Mr English had made constant phone calls and had trouble getting beyond the tax office's answering machines.

20. Mr Ong put to Ms Ciaglia that, on 19 November 1998, she had opted to proceed with her TRB application rather than seek an extension of time for an objection. Ms Ciaglia said that she went ahead at the TRB to take advantage of a response at last from the tax office.

21. Mr Ong then pointed out that Ms Ciaglia had proceeded to make Ministerial representations between May and July 1999 (ex D, F, G, HA and HB). It was not until December 2000 that an objection was pursued.

22. Ms Ciaglia indicated that her ex-husband had lived in Italy since 1991.

23. In considering whether to grant an extension of time the Tribunal applies the principles in the Hunter Valley case (above). There are a number of criteria that arise from that decision. These are most notably:

  • (a) The applicant should provide a reasonable explanation for the delay. As Wilcox J says in his decision (at page 320):
    • ``Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need to be shown but the court will not grant the application unless positively satisfied that it is proper to do so.... It is a pre- condition to the exercise of discretion in his favour that the applicant for extension show an `acceptable explanation of the delay' and that it is `fair and equitable in the circumstances'' to extend time.''
  • (b) The applicant should have taken action other than this application to make the decision-maker aware that he or she contests the finality of the decision.
  • (c) The respondent should not be unduly prejudiced if the time is extended.
  • (d) The merits of the substantive application are properly to be taken into account in

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    considering whether an extension is to be granted.

24. There are some additional matters to note.

  • • In
    Comcare v A'Hearn (1993) 45 FCR 441 the Federal Court pointed out that the lack of a satisfactory explanation for the delay need not be fatal to an application for an extension of time, although such an explanation should usually be given.
  • • In the Hunter Valley case (above) an additional criterion was identified, however, in the current tribunal's view it has relevance in only some situations. This criterion is ``considerations of fairness as between an applicant and other persons otherwise in a like position''. It has no relevance in the present case.
  • • Other cases have laid down principles that are broadly consistent with those in Hunter Valley (above). In
    Re Mulheron and Australian Telecommunications Corporation (1991) 14 AAR 42 President O'Connor said at page 48:
    • ``The principles to be applied in considering an application for extension of time under s 29(7)... are:
      • (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 [or her] 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 an extension of time as between the applicant and other persons in like position is relevant.''

25. The wider prejudice to the general public, as it may be balanced against the interests of the individual applicant receives attention in other cases.

26. In
Brisbane South Regional Health Authority v Taylor (1996) Aust Torts Reports ¶ 81-402; (1996) 186 CLR 541 (High Court) McHugh J discussed the reasons for limitation of actions. At Aust Torts Reports pages 63,634-63,635; CLR pages 551-552 he makes the following comments:

``... The enactment of time limitations has been driven by the general perception that `[w]here there is delay the whole quality of justice deteriorates'.... it must often happen that important, perhaps decisive, evidence has disappeared without anybody now `knowing' that it ever existed.... A verdict may appear well based on the evidence given in the proceedings, but, if the tribunal of fact had all the evidence concerning the matter, an opposite result may have ensued. The longer the delay in commencing proceedings, the more likely it is that the case will be decided on less evidence than was available to the parties at the time that the cause of action arose.

...

The effect of delay on the quality of justice is no doubt one of the most important influences motivating a legislature to enact limitation periods for commencing actions. But it is not the only one. Courts and commentators have perceived four broad rationales for the enactment of limitation periods. First, as time goes by, relevant evidence is likely to be lost. Second, it is oppressive, even `cruel' to a defendant to allow an action to be brought long after the circumstances which gave rise to it have passed. Third, people should be able to arrange their affairs and utilise their resources on the basis that claims can no longer be made against them. Insurers, public institutions and businesses, particularly limited liability companies, have a significant interest in knowing that they have no liabilities beyond a definite period.''

27. In
Re Petrou and Australian Postal Corporation (1992) 25 ALD 407 at 411 the Tribunal cited with approval a comment by Deputy President McMahon in an earlier decision where he said:

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``Any delay, of course, is prejudicial. The more time that elapses between the events to be examined and the date of the hearing, the more difficult it is to present meaningful evidence... Even if this were not so, however, the mere absence of prejudice would not be enough to justify the grant of an extension.''

28. Senior Member McGirr said on the same page:

``Courts and tribunals ought as far as possible to assist litigants and the profession in the timely and efficient disposition of cases. At some point in time parties and their legal representatives ought to be able to consider that a case has been finalised.''

29. However, in the Taylor case (above) Toohey and Gummow JJ state at page 550, ``The real question is whether the delay has made the chances of a fair trial unlikely. If it has not there is no reason why the discretion should not be exercised in favour of the respondent.''

30. Kirby J at page 573 says:

``In judging prejudice, for the purpose of considering the order extending time, the matter to be weighed is the increase of prejudice after the expiry of the ordinary period of limitation. Until that time the law, as expressed in the Act, envisages that the defendant must accept any prejudice or delay without complaint.''

Satisfactory explanation for delay

31. The period of delay in this case is at the extreme end of the spectrum. The applicant should have lodged her objection by about mid- January 1988 in order to do so within the statutory time frame. The objection was lodged in December 2000, almost 13 years outside the statutory period. The explanation for this delay would appear to have shifted as the time passed. In 1988-1990 it appears to have been a combination of marital turmoil and the duties involved in caring for a large family with an element of extended family, given the presence of her mother.

32. In 1990 a son was injured and suffered from brain damage.

33. By 1991 her ex-husband had departed for Italy. This should have provided her with a better opportunity to press her claims.

34. Ms Ciaglia was represented by solicitor, Mr English, from at least as early as late in 1996. The earliest document before the tribunal in which Mr English is mentioned is ex B dated 29 November 1996. This appears to represent the early part of their relationship. In ex I Mr English summarised what had occurred and the letter in ex B is the first item involving him that receives a mention.

35. In oral evidence Ms Ciaglia said that she received a demand for payment of the tax and handed that to her solicitor. That would appear to be the demand in ex A. That was dated 7 December 1994. It seems that Ms Ciaglia took close to two years to do anything in response to this letter. In her evidence she said that she did not work between 1990 and 1996. It would seem that she approached Mr English when she returned to work, perhaps because she then had funds with which to pay him.

36. Mr English appears not to have been aware of the tax objection process. This can be ascertained from ex 3 where, at the TRB, he appeared to be clearly ignorant of the process and of the 60-day time limit. It is conceivable that he thought that the TRB was the only available option whereby Ms Ciaglia might obtain relief. The Federal Court decision in Comcare v A'Hearn (above) would assist Ms Ciaglia once Mr English was retained. The court held that the errors of a solicitor need not be visited on his or her client.

37. Ms Ciaglia eventually approached Mr Simms and the matter seems to have run more efficiently from that time.

38. The tribunal's findings as to the satisfactory nature, or otherwise, of the explanations for delay are as follows, broken into discrete time periods:

  • • 1988-1990: There was no discernible activity by the respondent to gather in the taxation owing by the applicant. The applicant was divorced on 24 October 1988 (ex 1). Her family and marital problems meant that it was understandable that she might not be pursuing the tax office, especially as it was not pursuing her.
  • • 1990: Two major changes occurred in this year for the applicant. Her son, aged seven, was injured, apparently seriously. She also stopped working. She commenced to live on a Sole Parent Pension (ex 3).

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  • • 1991: The applicant's ex-husband left Australia to live in Italy. This could be expected to relieve her of a source of anxiety.
  • • 1990-1994: Life appears to have continued on for the applicant with no fresh developments until the demand in 1994 from the tax office. This demand is ex A. It sought payment of $3,300.50. It appears that to that time there had been no interest raised by the respondent on the overdue amount.
  • • 1994-1996: The applicant was not working but was aware that the tax office wanted her to pay it $3,300.50. She appears to have done nothing about the demand in this period. Her oral evidence was that she passed the demand on to her solicitor. However, as discussed above, he does not seem to have been retained until 1996. The tribunal considers that there is really no satisfactory explanation for this period of delay. By this time the applicant's family arrangements could be expected to have been relatively settled. By this time the situation with her injured son would seem to have stabilised. Certainly the applicant told the tribunal of no fresh problems emerging during this period. She did not suggest that the family situation became worse for any particular reason in this period. She did not suggest to the tribunal that she had acted in any way to address the tax office's demand.
  • • 1996-1998: Mr English commenced to act for the applicant and dealt with the tax office on her behalf. The evidence on the character of those dealings is as follows. He wrote (ex B) on 29 November 1996 to the Commissioner seeking remission of the tax said to be owing. He provided a copy of the Family Court judgment and summarised the central reasons for the objection advanced by Ms Ciaglia. These included that she did not receive the income. She had five children and her mother at home. She had had an operation herself earlier in 1996. Damon, the youngest child, had been in a car accident and had brain damage. She had signed the tax return in 1987 under well- founded fear. At no stage did Mr English use words that might have sent the case into the objection channel in the tax office. On 24 December 1997 he wrote again to the tax office (ex C). He referred to ``previous correspondence and telephone calls concerning the tax claim'' and enclosed an application for release ``duly completed''. He wrote also, ``However the form is strongly related to hardship of the taxpayer may we again point out that in fact the tax was not incurred by Mrs Ciaglia herself. We again refer you to her Statutory Declaration forwarded under cover of letter of 29 November, 1996''. That statutory declaration is ex J. In the declaration she recited many of the facts covered earlier in these reasons, notably that she had not received the income detailed in the tax return. She described the duress situation in paragraphs 7 and 8:
    • ``Sometime in 1987 or early 1988 I was presented with Income Tax Return for year ending 1986 by my former husband to be signed by me. Because of the estrangement and the untruth of the documents I refused to sign. My former husband placed the form in front of me and said `Shut up and sign it, you will not have to pay any tax'. He then threatened me.
    • I was afraid of my former husband as he had been violent to me on occasions. The matter of domestic violence actually later came before the Local Court at Parramatta. Further my former husband was a Karate Student. In the circumstances I was terrified. Under this duress I signed the Returns.''
  • She also provided copious details of her difficult financial position. Her ex-husband had not transferred money to her as required by the Family Court. He had not paid maintenance. His whereabouts were unknown. She was working at night as a process worker. Relief was sought on three grounds: (i) she did not receive the money; (ii) she signed the tax return under severe duress; and (iii) severe financial hardship precluded payment of the tax. Ms Ciaglia told the tribunal that Mr English had had many telephone conversations with tax office staff. There is some vague corroboration of this in Mr English's letter of December 1997 (ex C).
  • • 1998-2000: On 19 November 1998 Mr English was apprised of the need to seek an extension of time for the lodgment of an objection (ex 3). At the TRB hearing it was clarified that the objection channel was the

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    appropriate channel to pursue where a taxpayer wished to raise issues such as Ms Ciaglia's. On 12 December 2000 Mr Simms wrote to lodge an objection. This two-year delay has not been explained. It can be surmised that Mr Simms acted promptly after Ms Ciaglia first saw him. She had dispensed with Mr English's services. The delay would appear to be Ms Ciaglia's.

39. Mr Ong submitted that the delay from 1987 to 1996, nine years, in communicating at all with the tax office was too long. Later, the delay from 1998 to 2000 in lodging the objection was also too long. The Ministerial correspondence (notably ex HB, the letter from the Assistant Treasurer dated 15 July 1999) had, in 1999, reiterated that she should lodge an objection with a request for an extension of time.

40. The tribunal finds that Ms Ciaglia provided a satisfactory explanation for the delay. The tribunal accepts Ms Ciaglia's evidence as regards the matters distracting her from her tax situation in 1987 to 1994, which was the first time the Commissioner again contacted Ms Ciaglia after she had not paid the overdue tax. These matters, largely marital and family upsets and responsibilities, were unavoidable and often distressing in nature. It is believable that her tax debt was not in her consciousness in this period. Of course, the tax office could have been more active itself in pursuing this debt. The documents before the tribunal suggest that the original assessment was on 13 November 1987 (ex L); a demand for payment was made to Mrs Ciaglia's ex- husband's accountants on 25 February 1988 (ex L), what appears to be an amended assessment was provided to the ex-husband's accountants on or about 18 May 1990 (ex L). There was then nothing until a letter of demand to Ms Ciaglia herself on 7 December 1994 (ex A).

41. Mr Ong was correct in suggesting that several lengthy delays require explanation. The first was the delay from 1987 or 1988 until 1994. The tribunal takes into account Ms Ciaglia's extraordinary family situation during that and later periods. She had five children in her care born between 1972 and 1983 (ex K). She had an aged mother (born in 1911) in her care (ex K). Damon, born in 1983, was injured in 1990, suffering permanent brain damage. She had an apparently traumatic divorce. He tribunal notes that the tax office communicated, apparently up to 1994, only with Ms Ciaglia's former husband's accountants and not with her. Those communications appear sparse in any event. However, it is not at all clear when and if these communications reached Ms Ciaglia. The tribunal finds it unsurprising that Ms Ciaglia's mind was not, until 1994, turned towards her outstanding tax liability. He sum total of Ms Ciaglia's circumstances would likely constitute special circumstances in accordance with the requirements for such a description in
Re Beadle and Director-General of Social Security (1984) 6 ALD 1 where Toohey J said at page 3:

``An expression such as `special circumstances' is by its very nature incapable of precise or exhaustive definition. The qualifying adjective looks to circumstances that are unusual, uncommon or exceptional. Whether circumstances answer any of these descriptions must depend on the context in which they occur. For it is the context which allows one to say that the circumstances in one case are markedly different from the usual run of cases. This is not to say that the circumstances must be unique but they must have a particular quality of unusualness that permits them to be described as special.''

This passage was largely endorsed by the full Federal Court in
Beadle v Director-General of Social Security (1985) 7 ALD 670 at 675.

42. The period from 1994 to 1996, that is from when the respondent wrote (ex A) to Ms Ciaglia to when a response was sent on her behalf by Mr English (ex B), is largely unexplained. This was when Ms Ciaglia still had a considerable household, with children aged from 22 to 11 and a mother aged 83, to support on a social security income. At some stage in this period she went to Mr English who eventually wrote to the tax office in November 1996. As suggested earlier, this was likely to have been after she commenced work and, presumably, was in a better financial position. The tribunal considers that there is a stronger argument that Ms Ciaglia should have contacted the tax office in this period but it accepts that, compared to an average taxpayer, her situation was difficult.

43. Ms Ciaglia should perhaps also have acted promptly to seek an extension of time for lodging an objection after late 1998 when she and Mr English were told that this was the appropriate action to take (ex 3). This advice

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was reiterated by the Assistant Treasurer in July 1999 (ex HB). However, the tribunal considers it reasonable for Ms Ciaglia to have relied on Mr English's expertise as a solicitor both then and earlier. The Federal Court in Comcare v A'Hearn (above) has held that delays by a solicitor in commencing proceedings need not be visited on the client. It is noteworthy too that the tax office does not appear to have encouraged Mr English to pursue an out-of-time objection rather than the seeking of tax relief. In ex C (24 December 1997) Mr English wrote to the respondent saying, ``We refer to previous correspondence and telephone calls concerning the tax claim.... We enclose the Application for Release duly completed.'' The applicant, through Mr English, has consistently argued that she did not owe the tax money. Resort to the TRB is more appropriate where relief is sought on hardship grounds. The references to her not owing the money should have alerted the tax office that it ought to advise the lodging of an objection.

44. The upshot of this state of affairs is that the tribunal considers that the applicant was either not at fault for this period of delay, or that the tax office contributed to the total period of delay by not providing appropriate advice on the best way to proceed until November 1998.

45. The tribunal is cognisant of the other principle in Comcare v A'Hearn (above), that a satisfactory explanation is not a necessary precondition to the exercise of the discretion to grant an extension of time. However, for the reasons given above, the tribunal finds that Ms Ciaglia has provided a satisfactory explanation in this case.

Agitation in other forums

46. There was clearly no notice to the respondent of the applicant's disputation of her tax assessment until 29 November 1996 (ex B). However, from that time forward the tax office has been comprehensively aware of her position. She agitated her claim, via Mr English, culminating in recourse to the TRB. The tribunal considers it unfortunate that nothing occurred earlier than this, however it regards the situation as explicable for the same reasons as it found for a satisfactory explanation for the delay. He tribunal finds that the applicant's failure to agitate this matter with the tax office until 1996 should not, of itself, preclude her from the grant of an extension of time.

Prejudice to the respondent

47. Mr Ong suggested two elements of prejudice to the respondent if an extension of time is granted. First, the respondent has destroyed the applicant's 1986 tax return, unaware at the time that she would be challenging the debt raised pursuant to it. Second, the applicant's assertions of signature under duress have become difficult for the respondent to test. The applicant's ex-husband is unapproachable. The recollections of any other witnesses as regards events occurring nearly 20 years ago would have become unreliable.

48. There is some force in these submissions, however each can be answered. First, Ms Ciaglia has provided a copy of her 1986 tax return (ex L). In this regard the tribunal comments that the tax office might consider adopting a practice used by certain other Commonwealth agencies where a client of the agency owes it money. That practice is that the client's files and other relevant documents are not destroyed for so long as the debt remains unpaid.

49. Second, the applicant has provided a copy of the comprehensive Family Court decision of Cohen J dated 15 August 1989 (T6). This provides fairly strong evidence of several matters. One is the respective property interests of the applicant and her ex-husband. The other is the extremely adverse findings as to Mr Ciaglia's credibility, findings amounting to fraudulent behaviour on his part. Cohen J found that Mr Ciaglia utilised certain property for tax avoidance, if not tax evasion.

50. This is not the standard type of case where corroborative evidence regarding events so long ago will be inherently unreliable. The tribunal finds that there is no undue prejudice, in the relevant sense, to the respondent if an extension of time is granted.

Merits of Ms Ciaglia's case

51. Mr Ong referred the tribunal to the decision of Hill J in
Brown v FC of T 99 ATC 4516 where the learned judge said at page 4527:

``58. In summary when a taxpayer seeks an extension of time in which to lodge an objection the following matters will require consideration:

  • ...
  • 3. Whether the objection is one which, on its face, is frivolous or which in law must

    ATC 2077

    fail, or, to the extent that it is indeed a different test, is one in which the taxpayer has no arguable case. This matter will be considered by reference to the objection itself and such other material as the taxpayer puts before the Commissioner. It will seldom, if ever, require the decision maker to consider matters such as credit or endeavour to reconcile the evidence which the taxpayer choses to rely upon with other factual material in the possession of the Commissioner. No doubt the stronger the case the more likely that the discretion would be exercised in favour of taxpayer even where the explanation for delay was thought not to be strong. Whether the converse is also the case need not here be considered.''

The full court upheld this decision in
FC of T v Brown 99 ATC 4852.

52. In the present case it cannot be said that the applicant's objection is frivolous or that it must fail. The tribunal considers that she has an arguable case. The tribunal does not see in this criterion any barrier to the grant of an extension of time.

General considerations of fairness

53. There could be general considerations of fairness in a case such as this militating against the grant of an extension of time. The requirement that a decision-maker must inquire into events alleged to have occurred in 1986-1987 would bring into play the considerations of the High Court in the Taylor case (above). However, for the reasons given in relation to prejudice to the respondent, the tribunal finds that general considerations of fairness do not compel the refusal of an extension of time in this case.

Conclusion

54. The tribunal finds that, on a proper application of the principles in the Cohen case (above), the applicant qualifies for the grant of an extension of time in this case. The respondent should therefore consider the objection on its merits.

Decision

55. The tribunal sets aside the decision of the respondent's delegate dated 4 April 2001 and substitutes its own decision that the time for the lodging of the relevant objection by the applicant is to be extended to 12 December 2000.


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