CASE 2/94
Members:RD Fayle SM
Tribunal:
Administrative Appeals Tribunal
Associate Professor RD Fayle (Senior Member)
On 15 July 1993 the applicant lodged notices of objection against amended assessments issued by the respondent on 9 June 1992, in relation to the years of income ended 30 June 1985, 1986 and 1987. By letter of 25
ATC 107
August 1993 the respondent treated each of these objections as being out of time. On 15 July 1993 the taxpayer requested the respondent to treat the objections as having been lodged within the prescribed time limit and that request was refused. It is that decision which has come to this Tribunal for review. However, at the hearing the respondent submitted that as the applicant is a bankrupt whose financial affairs are under the control of his trustee, he has no standing. The Tribunal ruled that it would hear the preliminary issue on standing before proceeding to review the substantive issue relating to the decision not to grant an extension of time.2. At the hearing the applicant was represented by Mr PJ Hannan (instructed by Mony De Kerloy) and assisted by Mr B Hoey, whilst the respondent was represented by Mr F Maloney, a departmental officer.
3. The facts were not in dispute and so far as they relate to the preliminary issue are that:
- - On or about 9 June 1992, the applicant was issued with notices of amended assessment for each of the years mentioned.
- - A Supreme Court of Western Australia writ of summons in respect of the amended assessments mentioned and for the following financial year ended 30 June 1988 was issued on 24 September 1992.
- - A judgment in default of appearance to that writ was entered in the Supreme Court on 24 November 1992.
- - A bankruptcy notice dated 27 May 1993 was issued by the respondent in respect of that default judgment.
- - The applicant, through his tax agent Roper Hoey, lodged objections with the respondent against the amended assessments for each of the years ended 30 June 1985, 1986 and 1987, by way of a letter dated 15 July 1993. The letter included a request pursuant to s. 14ZW(2) of the Taxation Administration Act 1953, asking the respondent to deal with the objections as if they had been lodged within the prescribed time.
- - The respondent issued a creditor's petition out of the Federal Court of Australia dated 20 July 1993 in respect of the non- compliance with the bankruptcy notice referred to above. The return day of the petition was 7 September 1993.
- - On 24 August 1993, the respondent decided to disallow the applicant's request to treat the objections as having been lodged within the prescribed time and notified the applicant's tax agent of this decision, in writing, on 7 September 1993.
- - On 8 September 1993 the applicant requested this Tribunal to review the respondent's extension of time refusal decision.
- - The Federal Court made a sequestration order against the estate of the applicant on 7 September 1993.
4. This application is made under s. 14ZZA of the Taxation Administration Act 1953 which provides:
``14ZZA. The Administrative Appeals Tribunal Act 1975 (`the AAT Act') applies in relation to:
- (a) the review of reviewable objection decisions; and
- (b) the review of extension of time refusal decisions; and
- (c) AAT extension application;
subject to the modifications set out in this Division.''
5. Subsection 14ZQ(1) defines an ``extension of time refusal decision'' as meaning a decision of the Commissioner under subsection 14ZX(1) to refuse a request by a person.
6. Subsection 14ZX(1) states ``After considering the request, the Commissioner must decide whether to agree to it or to refuse it''. The request in question, to allow the applicant further time in which to lodge a notice of objection under s. 14ZW, was made by the applicant and refused by the respondent.
7. Subsection 60(2) of the Bankruptcy Act 1966 states:
``An action commenced by a person who subsequently becomes bankrupt is, upon his becoming a bankrupt, stayed until the trustee makes election, in writing, to prosecute or discontinue the action.''
8. Subsection 60(5) states:
``In this section, `action' means any civil proceeding, whether at law or in equity.''
9. A relevant question for this Tribunal is whether the request to it pursuant to s. 14ZZA of the Taxation Administration Act 1953 and s.
ATC 108
27 of the AAT Act is an ``action'' within the meaning of s. 60(5) of the Bankruptcy Act 1966.10. Senior Member P Roach, in Case X18,
90 ATC 219, expressed the view that the term ``action'' as defined above ``... is a term appropriate to identify proceedings before this Tribunal constituted in consequence of a competent request for reference for independent review by this Tribunal''. If this interpretation is the only one open to the Tribunal then that would be the end of this matter.
11. Some support for Mr Roach's opinion, that ``action'' means ``any civil proceeding whether at law or in equity'' is found in Halsbury's Laws of England. However, Halsbury's does not support the conclusion that proceedings before the Tribunal are ``actions'' as contemplated. Indeed, the opposite view is evident.
12. Although the term ``civil proceedings'' is not specifically defined, the word ``proceedings'' is analysed. Halsbury's states that the word ``proceedings'' is used both to describe an action or cause of action, or matter or to denote a step in an action, cause or matter. ``Action'' is then defined to mean ``any civil proceeding commenced by writ or in any other manner prescribed by rules of court''. The authors state that this definition includes any civil proceeding in which there is a plaintiff who sues, and a defendant who is sued, in respect of some cause of action, as contrasted with proceedings, such as statutory proceedings, which are embraced in the word ``matter''.
13. Pausing there for a moment, one could not conclude on that alone that ``civil proceedings'' necessarily includes an administrative review of the kind undertaken by the Tribunal under the AAT Act. Proceedings before the Tribunal, at least in this instance, have neither been commenced by writ nor in a manner prescribed by rules of court. The CCH Macquarie Concise Dictionary of Modern Law defines ``plaintiff'' as one who brings a civil action. However, whilst that word may be used, in a sense, to describe an applicant in proceedings before the Tribunal, the proceedings have not been instigated by the suing of a defendant (the respondent). The proceedings are in relation to a request for administrative review.
14. Halsbury's defines ``matter'' to mean ``any proceedings in court not in a cause'' and ``cause'' to mean any action or any criminal proceedings; (see
Johnson v Refuge Assurance Co Ltd [1913] 1 KB 259).
15. The footnotes to the definition of ``action'' in Halsbury's state that ``action'' does not include proceedings the manner of commencement of which is prescribed by statute and not by rules of court. Accordingly, matters that come before the Tribunal cannot be described as ``actions'' in this context. In this regard reference is made to the English Court of Appeal decision in
Mersey Docks and Harbour Board v West Derby Assessment Committee and Bottomley [1932] 1 KB 40, which concerned an objection to a rating assessment. In that case Scrutton LJ held that whilst an objection to a rating assessment, from which there was a right of appeal to quarter sessions under statutory rules, is a civil proceeding, it is not an action because the assessment proceedings were not begun under rules of court. The relevant extract from Scrutton LJ at page 104 states:
``(1). In my opinion it was a civil proceeding; it was to ascertain the civil liabilities of a citizen; it was certainly not a criminal proceeding. (2) In my opinion the proceeding was commenced when the objector called upon the Assessment Committee to hear him and his witnesses and to give a `decision' from which he could appeal. In my opinion the Assessment Committee could be ordered by mandamus to hear and determine. The prerogative writs will run to a body which is not `a Court', and it may be that like some kinds of Licensing Justices the Assessment Committee is not `a Court'; it does not hear evidence on oath and has no particular rules of procedure, though it acts under a statutory duty and authority (see decision of Avory J as to Licensing Justices: Attwood v Chapman (1)).''
16. That description of the review process in place in England in the 1930s is distinguishable from a general description of proceedings before this Tribunal only in the matter of witnesses giving evidence under oath (s. 40(1)(a) of the AAT Act). In other respects it is decidedly similar.
17. Whilst s. 44 of the AAT Act provides for an appeal to the Federal Court of Australia on a question of law, the proceedings before the Tribunal are not begun under rules of court.
ATC 109
18. The above analysis lends support to the view that ``action'', as defined in s. 60 of the Bankruptcy Act 1966, is distinguishable from a request pursuant to s. 14ZZA of the Taxation Administration Act 1953 with s. 27 of the AAT Act.
19. In any event as the proceedings in question were commenced after the applicant became bankrupt then the provisions of s. 60(2) have no effect. The question therefore, is whether the applicant, a bankrupt, is competent to pursue administrative review of the objection decisions in his own right whilst a bankrupt. The submissions of the parties were confined to this issue.
20. Mr Hannan submitted that the right to object against a notice of assessment is a personal right and, as such, not property of the applicant as defined in s. 5 of the Bankruptcy Act 1966. Therefore, he argued, s. 58 of the Bankruptcy Act 1966, which transfers all property rights in equity to the trustee of a bankrupt, does not impinge on a right of a bankrupt to request to this Tribunal to review either an objection decision or an extension of time refusal decision. The preliminary issue relates to the right to have reviewed de novo an extension of time refusal decision.
21. Section 5 of the Bankruptcy Act 1966 defines ``the property of the bankrupt'' in relation to a bankrupt, insofar as it is relevant to these proceedings, to mean:
``(a) except in subsections 58(3) and (4):
- (i) the property divisible among the bankrupt's creditors; and
- (ii) any rights and powers in relation to that property that would have been exercisable by the bankrupt if he or she had not become a bankrupt;...''
Neither subsections 58(3) nor (4) have any relevance to the instant case.
22. Mr Maloney, for the respondent, relied on a decision of a Master of the Supreme Court of Western Australia involving the very same parties to this reference. That decision concerned, in essence, whether the defendant (the applicant in this case) had standing to bring application by reason of his bankruptcy. The defendant in that case was seeking to have the default judgment, mentioned above, set aside. The plaintiff was the respondent in this case.
23. Because of the relevance to this matter it is appropriate to cite the reasons of the Master insofar as they relate to his ruling on whether the defendant had standing:
``Standing
I now turn to the question whether the defendant has any standing to bring this application. Counsel for the plaintiff, Mr Corbould, submitted that as the defendant is presently a bankrupt all of his rights in respect of that action, including the right to set aside the judgment, are `the property of the bankrupt' which under s. 58 of the Bankruptcy Act 1966 vest in his trustee in bankruptcy who in this case is the official trustee.
Section 5 of the Bankruptcy Act defines `property' and `the property of the bankrupt' in extremely wide terms.
It has been held that the definition of property in s. 5 is wide enough to encompass choses in action and that subject to certain exceptions the choses in action belonging to a bankrupt will be notionally assigned to and vest in the trustee by force of s. 58 (Bride v Australian Bank Ltd, unreported; Federal Court of Australia, No. WAG 62 of 1987; French J; 26 July 1988). It has also been held that the principle of these exceptions is that where the primary and substantial right of action is direct pecuniary loss to the property or estate of the bankrupt then the right to sue passes to the trustee. However, where the essential cause of action is the personal injury done to the person or feelings of the bankrupt, the right to sue remains with the bankrupt. (See
Faulkner v Bluett (1981) 52 FLR 115 at 119; per Lockhart J.)In my opinion, the defendant's right to apply to set aside the monetary judgment against him falls within the definition of `property' in s. 5, it is a matter which impacts upon the estate of the bankrupt and is not merely something relating to the person or feelings of the bankrupt.
Indeed, the point was decided in
W.R. Henry & Son v Hodge [1963] VR 111 following the earlier English decision of
Boaler v Power [1910] 2 KB 229. Both of those decisions were cited with approval by French J in Bride's case (supra) and I propose to accept them as good authority.
ATC 110
In my view, the overwhelming weight of authority is in favour of the proposition that the right to apply to set aside this default judgment is property vested in the official trustee and that therefore the defendant has no standing to bring this application.''
24. Mr Hannan, for the applicant, argued that the right to contest an income tax assessment is neither a chose in action nor ``property'' as defined in s. 5 nor as contemplated in s. 58 of the Bankruptcy Act 1966. He submitted that the right to pursue administrative review of an objection decision or of an extension of time decision relates, not to property but to a liability of the applicant. That liability, the antithesis of property, is a debt to the Commonwealth by force of s. 177 of the Income Tax Assessment Act 1936. He submitted that the applicant's right to challenge the correctness of such a liability is a right to reduce a liability which runs to the very source of the applicant's bankruptcy, since it was these debts to the Commonwealth which resulted in the sequestration order mentioned. Mr Hannan's further submission in this regard was to suggest that to argue, as would appear to be implicit in the respondent's submission, that any matter affecting the available property of the bankrupt is matter concerning that property, is too remote. Objectively, the issue of contesting an income tax assessment is one concerning a liability and not directly affecting property of the bankrupt. To eliminate a liability is not to increase the property available to creditors but merely to reduce the amount of debts owed and increase the prospect of repayment to creditors.
25. Mr Hannan did not develop his argument that the right to contest an income tax assessment is not a chose in action.
26. The CCH Macquarie Concise Dictionary of Modern Law defines ``chose in action'' as ``an incorporeal or intangible personal property right, incapable of being taken into physical possession, but susceptible to enforcement by legal or equitable action, and including debts, shares, intellectual property, contractual rights, beneficiaries' rights, and equitable securities''.
27. The Tribunal, noting the comments of the Master, merely observes that the definition of ``chose in action'' does not lend itself easily to identify with a statutory right to contest an objection decision under administrative law.
28. French J, in the Federal Court of Australia, in
FC of T v Salenger 88 ATC 4449; (1988) 81 ALR 25 observed at ATC page 4456; ALR page 34:
``I should add, with the greatest of respect to the [Administrative Appeals Tribunal], that it is difficult to see how it is open to a Senior Member to form the view that a decision of the Supreme Court of a State which is on the very point before the Tribunal is incorrect and not to be followed.... Ordinarily, Senior Members of the Tribunal should apply the law as stated by the judges of this Court or by judges of the Supreme Courts of the States.''
29. Assuming that what his Honour said there is equally applicable to a Master of the Supreme Court as it would be to a judge. The question for this Tribunal is whether what the Master decided is on the very point before this Tribunal.
30. The Master was dealing with an application to the Supreme Court of Western Australia to set aside a previous judgment in a civil action for recovery of a debt. This case is dealing with an application under administrative law for a review of a decision of a Commonwealth decision-maker, the Commissioner of Taxation. The CCH Macquarie Concise Dictionary of Modern Law defines ``civil law'' as:
```civil law' 1. law pertaining to matters between private citizens (as distinct from criminal law , administrative law or industrial law ) as in civil proceeding; civil remedy; civil wrong...''
And ``administrative law'' is defined as:
```administrative law' the branch of law dealing with the judicial and extra-judicial review of the administrative actions of government and non-governmental bodies.''
31. On those definitions, civil law and administrative law are exclusive branches of law. Therefore, as this case concerns administrative law and the proceedings before the Supreme Court concerned civil law then this case is not on the very point before the Master.[1]
32. In the opinion of this Tribunal, and in due deference to the Supreme Court of Western Australia, the right of a taxpayer to apply, pursuant to s. 14ZZA of the Taxation Administration Act 1953, to the Administrative Appeals Tribunal under s. 27 of the AAT Act is neither an ``action'' as contemplated by s.
ATC 111
60(5), nor ``property'' as defined in s. 5 of the Bankruptcy Act 1966. Therefore, the applicant is not precluded by either s. 60 or s. 58 of the Bankruptcy Act 1966 from proceeding to administrative review.The decision
33. For the above reasons the Tribunal decides that the applicant has standing and his application to review the extension of time may proceed.
Footnotes
[1]This information is provided by CCH Australia Limited Link opens in new window. View the disclaimer and notice of copyright.