CASE 8/98

Members:
J Block SM

Tribunal:
Administrative Appeals Tribunal

Decision date: 9 April 1998

J Block (Senior Member)

This is an application by the Applicant for an extension of time within which to refer 11 objection decisions (collectively the ``objection

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decisions'' and each an ``objection decision'') to this Tribunal. The objection decisions relate to the successive 11 years of tax which commence with the year ending 30 June 1978 and end with the year ended 30 June 1988 (the ``relevant years'' and each a ``relevant year''). On 9 October 1989 the Respondent issued amended assessments against the Applicant in respect of each of the relevant years; the amended assessments were issued as betterment assessments pursuant to section 167 of the Income Tax Assessment Act as amended. The Applicant objected to the relevant assessments in accordance with objections dated 11 December 1989.

On 5 June 1992 the Respondent wrote to the Applicant's solicitors, Bowen & Gerathy, disallowing the Applicant's objections. The Respondent in addition, and in respect of each relevant year, and by notice of the same date, 5 June 1992, notified the Applicant (by letter addressed to his solicitors Bowen & Gerathy) that it had been decided to disallow his objection in full. The second paragraph of each letter as aforesaid reads:

``Your objection has been disallowed for the following reasons:

(i) refer to attached explanation.''

Each such letter then goes on under the heading ``New Appeal Provisions'' to notify the Applicant as to his rights arising from the decision to disallow his objection and specifies that if dissatisfied, he was entitled to apply either to this Tribunal for review of the decision or to appeal to the Federal Court against that decision.

2. On 26 November 1997 the Applicant submitted, in respect of each of the relevant years, an application for the review of the decisions by the Respondent disallowing the objections and an application for an extension of time within which to lodge the application.

3. This hearing took place on two days, namely 19 January 1998 and 12 February 1998; on the first day, the Applicant was represented by Mr John McAuley, a chartered accountant, and on the second day by Mr C.J. Bevan of Counsel, instructed by Bowen & Gerathy, solicitors of Sydney. The Respondent was represented by Mr Roger Gormley, an officer of the Respondent.

4. Oral evidence was given only by the Applicant. The Tribunal received into evidence a number of exhibits as follows:

• Exhibit A1 is a batch of correspondence; the Tribunal does not propose to detail each and every letter which forms part of Exhibit A1, more particularly because many of the letters included in Exhibit A1 were attached to the statement by the Applicant's solicitors which is Exhibit A16. Where necessary, specific references will be made to letters forming part of either or both of Exhibit A1 and Exhibit A16.
• Exhibit A2 is a statement entitled ``Asset Betterment Statement'' which appears to have been prepared on 9 October 1989 and which sets out, in respect of each of the relevant years, the Applicant's assets and liabilities.
• Exhibit A3 is a document prepared by the Respondent entitled ``Supplementary Report''.
• Exhibit A4 is a document entitled ``Alterations or Additions to Assessments or Returns'', again referable to the relevant years and which sets out in respect of each of the relevant years the Respondent's assessment of the Applicant's taxable net income.
• Exhibit A5 is a document which might aptly be described as a ``Betterment Summary'', again referable to the relevant years.
• Exhibit A6 is a chronology of events prepared by the Applicant's Counsel and which covers the period 9 October 1989 to 23 July 1997.
• Exhibit A7 is a Contract for the Sale of Land dated 23 May 1978 in respect of the sale of certain property in Moore Park by the vendors named as such therein to the Applicant's then accountant.
• Exhibit A8 is a Contract for the Sale of Land dated 1 July 1980 in respect of certain property in Randwick, between the vendor named as such therein and the Applicant.
• Exhibit A9 is an undated copy of a report, and which was referred to as a ``Supplementary Report''; it may be noted parts of Exhibit A9 were tendered separately as Exhibits A3 and A4.

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• Exhibit A10 consists of a series of trust account cards by Bowen & Gerathy in respect of R Pty Limited.
• Exhibit A11 consists of a series of trust account cards issued by Bowen & Gerathy in respect of the Applicant.
• Exhibit A12 consists of the Applicant's letters of objection in respect of the relevant years.
• Exhibit A13 is a Statement of Claim filed by the Respondent in the Supreme Court of New South Wales in 1992.
• Exhibit A14 is a Statement of Claim filed by the Respondent in the Supreme Court of New South Wales in 1996.
• Exhibit A15 consists of correspondence during the period 11 December 1991 to 30 August 1995 involving in particular the New South Wales Crime Commission (the ``Commission'') and the Applicant or one or other of his representatives.
• Exhibit A16 is a statement dated 12 February 1988 by Mr J.B. Gerathy of Bowen & Gerathy; that statement was accepted by the Respondent, and accordingly Mr Gerathy was not required to give oral evidence.

Transcript references will be referred to by the abbreviation ``TS'' preceded by a number which refers to the date on which that Transcript was recorded, while the number after each reference to TS is a reference to the relevant page of the transcript. For example, ``19/1/98TS10'' refers to page 10 of the Transcript for 19 January 1998.

5. In respect of all of the relevant years, the Applicant was uncertain as to whether returns were ever filed; the Applicant said in evidence that returns were prepared by his accountants, but that there were mistakes in them, and that accordingly no returns were submitted by him (19/1/98TS10-11; 12/2/98TS3-9). The Applicant did not explain what errors were referred to or for that matter why those errors could not be corrected, and in particular why returns in relation to all 11 years were not, according to his evidence, filed by him.

Although no tax returns by the Applicant in respect of any of the relevant years were produced to the Tribunal, Exhibit A3 and Exhibit A12 would tend to indicate that some returns were filed. The first two pages of Exhibit A3, edited only to preserve the Applicant's anonymity are set out in full as follows:

``This case was commenced in October 1983 as a result of a referral from the then Investigation Section. [The Applicant] was the owner of a property that had been declared a disorderly house by the Vice Squad. When the audit commenced, [the Applicant] had lodged tax returns only up to 1980, & all but 1980 were non taxable.
History of Taxpayer
... he has acquired a reasonably impressive property portfolio, mainly in the Sydney metropolitan area, but including a farm at [ MM] near Gosford. In October 1986 he acquired, thru his company [R P/L], the leasehold of the [TA Hotel] at [East Sydney].
Audit Coverage
A letter was sent to [the Applicant] in November 1983 requesting his attendance at an interview. For the first of many times, [ the Applicant] failed to attend, but his accountant [Mr R] of [H&Co.] and [the Applicant's] associate [Mrs W] did attend. At this interview the discussions centred on the properties owned by [the Applicant] at that time & his outstanding tax returns. A list of questions was submitted to [Mr R].
Numerous subsequent interviews were held with [Mr R], and in November 1985 tax returns for 1981 to 1984 were received. By this stage and to cover [the Applicant's] own affairs up to 30/06/86.

Due to [the Applicant's] continual non- attendance at interviews, information had to be obtained from numerous outside sources, which caused significant delays to the audit. These sources of information included:

Tax agent               Local Councils
CRAA                    Builders
Banks                   Dept of Motor Transport
Building Societies      Sydney County Council
Insurance Companies     Water Board
Motor Vehicle dealers   Maritime Services Board
Police                  Corporate Affairs Commission
Liquor Admin Board      Tooth & Co Ltd

Originally it was proposed to prepare T Accounts, but eventually this was considered impractical, & in early 1986 preparation of an Asset Betterment (AB) schedule was commenced.
Completion of the AB was delayed due to (i) previously unknown assets being discovered & (ii) the sheer volume of information.
The Asset Betterment Schedule was completed for the period 01/07/77 to 30/06/86, and it was presented to [Mr R] on 4 May 1988. Eventually, on 23/08/88, [the Applicant] did attend an interview to discuss the AB.
Several adjustments were made to the calculations, mainly to reduce the discrepancies, & in some instances accepting unverified statements in order to gain agreement on the overall net discrepancies. There were several further interviews & telephone conversations with [ Mr R] to discuss further adjustments as a result of new information obtained. The final Asset Betterment Schedule covering the period 01/07/77 to 30/06/87 is at folio 6 of the Administration File.

Below is a table of the understatements as at the significant dates of interviews:

         Original AB                     Figures after    Final
       understatements  Understatements    Agreement     Figures
Year      04/05/88         25/10/88        12/09/89      29/09/89

1978          8928             8928            8928          8928
1979          9891             9891            9891          9891
1980         14068            11068           11068         11068
1981         21204             3204            3204          3204
1982         75212            44812           44812         44812
1983         51133            43960           47479         47479
1984        332563           144430           52430         63670
1985        174537            97669           59539        104463
1986        119563            91017           74236         82551
1987                                          88933         88933
1988                                          25273         25273
            ------           ------          ------        ------
            307099           454979          435793        471453
            ------           ------          ------        ------

Various compromises were discussed until on 12/09/89 a formula was agreed upon whereby the incomes for 1978 to 1984 & 1987 were as per the AB, & the 1985 & 1986 incomes were to be calculated as a `step up' basis using the 1984 & 1987 incomes as parameters. Also, as part of this agreement, the 1985 and 1988 returns would be regarded as having been lodged within the period of the General Amnesty & thus free from any late lodgement penalty. In reality, these returns were lodged on 1?/07/89, outside the period of the Amnesty, but the concessional treatment was offered as an incentive for [the Applicant] to accept the overall income adjustments & tax payable. The agent [Mr R] was inclined to accept this arrangement; however, [the Applicant] refused to attend the Tax Office in the week ending 29/09/89 to sign the unissued tax returns & sign a letter of acceptance of all adjustments. Accordingly, it was decided to issue the assessments for all years without [the Applicant's] agreement: this meant issuing the years 1985 to 1988 as section 167 assessments.
Findings
The tax returns for 1976 to 1984 inclusive disclose either low incomes or losses. In that period [the Applicant] accumulated a series

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of assets, and that process has continued up to the end of the audit coverage at 30/06/87. Reference to the working Papers shows the numerous interviews with solicitors and searches conducted of insurance companies, local councils, the Department of Motor Transport, the Maritime Services Board, etc, that were necessary to locate & value the assets & liabilities shown on the Asset Betterment Schedule.''

6. As appears, in particular from Exhibit A3, the Applicant was the subject of a long-running audit by the Respondent which commenced in October 1983. An asset betterment schedule in respect of the period 1 July 1977 to 30 June 1986 was presented to the Applicant's then accountant on 4 May 1988.

7. As set out previously in these Reasons, the Applicant objected to the betterment assessments in respect of the relevant years by objections dated 9 December 1989. Each objection refers in its terms to the amount included in the Applicant's relevant return as income; the Applicant in his evidence agreed that his accountants had been furnished with an assessment betterment schedule in respect of the relevant years:

``Mr McAuley: Now did you have any statements like the ones that have been tendered as Exhibit A2? - The Applicant: No, I will bring you the exhibit in which it is different to that one, I will bring you the sheet.

Mr McAuley: Can you describe what it was that you were given? - The Applicant: I was given that in computer form, in a computer print out form, but not that particular one, similar to that.

Mr McAuley: But when were you given that? - The Applicant: I was given those when we were having discussions with the Taxation Department and its investigators in the office of [H & Co] and so I was working off those sheets, not the ones we see there.

Mr McAuley: Not the final ones? - The Applicant: No, that is the first - the first time I have seen those are when we obtained them under the Freedom of Information....

Mr McAuley: So what you are saying though is that prior to issuing the assessments for the 11 years in question the Commissioner did give you or supply to you some worksheets that he -? - The Applicant: Yes, yes.''

(19/1/98TS15, In 2-19)

The worksheets to which the Applicant refers above were tendered as Exhibit A5 and described by the Applicant as ``the document that we were working on prior to the ATO issuing their assessment'' (19/1/98TS46, In 8-9).

It would appear that following the issue of the amended assessments in October 1989, the Applicant must have been provided with a betterment schedule (presumably Exhibit A5) and in addition other written information, probably in the form of worksheets, and used by the Respondent to calculate those assessments. Indeed, the objections (Exhibit A12) indicate that the Applicant was working from information supplied by, or obtained from, the Respondent. Neither Exhibit A2 nor Exhibit A5 includes any reference to amounts of additional taxes imposed upon the Applicant for incorrect returns, whereas each of the objections for the relevant years includes a paragraph specifically objecting to such additional taxes, and stating the amount imposed for each year. It seems however that the asset betterment statement which is Exhibit A2 was obtained at a later date, after the Applicant made an application under the Freedom of Information Act. Exhibit A2 may indeed, as the Applicant states, differ from a prior asset betterment statement or prior asset betterment statements obtained by him or his representatives from the Respondent, but the Applicant is not entitled to contend that he did not, until 1996, receive any asset betterment statement.

8. The period from the notices of objection, 11 December 1989, until the date of notification of disallowance of those objections, 5 June 1992, is a period of approximately two and a half years. The Exhibits and evidence indicate that during that period, there were negotiations and discussions between the Applicant and his then accountants and the Respondent; the Exhibits indicate furthermore a lack of co- operation on the part of the Applicant in that he failed on various occasions to attend meetings which had been arranged between himself and officers of the Respondent. It seems clear that that period was one involving some degree of frustration for the Respondent. That period is no longer relevant except insofar as it indicates, as

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did his failure to file returns, a general disinclination on the part of the Applicant to comply with his taxation obligations.

9. The letters by the Respondent dated 5 June 1992 were the cause of some considerable discussion. The formal letters disallowing the objections refer to an annexure, and the parties did not agree as to whether the short accompanying letter (the ``accompanying letter'') dated 5 June 1992 is in fact that annexure. The accompanying letter, which forms part of Exhibit A15, reads as follows:

``Consideration has been given to your objections dated 11 December 1989 for review of the assessments for the years ended 30 June 1978 to 1988. It has been decided to disallow the objections and formal notices of decision are enclosed.

Repeated failure to supply requested documentation and information resulted in the disallowance of your objections. As further action was dependant on this documentation the review of your assessments was limited to the information already contained within this office.

Accordingly, your assessments are confirmed.''

It appears to the Tribunal that the accompanying letter, which offers an explanation that expressly applies to all the relevant years, may in fact be the ``attached explanation'' referred to in each of the separate Notices of Objection Decision. The Tribunal is however prepared, in this particular context, to accept that in the mind of the Applicant the annexure referred to as such in the disallowance letters may not have been the enclosure to those letters. The statement by Mr Gerathy (Exhibit A16) sets out that the objections were not then referred to this Tribunal within the period of 60 days permitted by section 29 of the Administrative Appeals Tribunal Act as modified by section 14ZZC of the Taxation Administration Act, precisely because the Applicant's advisers wished to obtain that annexure. In fact, and as the Applicant's solicitors should have appreciated, the annexure was not a prerequisite to the Applicant's obligation if he desired to object to the relevant assessments. The briefest of research by the Applicant's solicitors would have made them aware of the fact that the omission, if omission there was, of the annexure referred to in the disallowance letters dated 5 June 1992 did not absolve the Applicant of his obligation to object if he wished to do so.

10. In 1991 the New South Wales Crimes Commission commenced an investigation of the Applicant's affairs based on information anonymously provided (as appears from Exhibit A6) and inter alia froze his assets and bank accounts. The investigations by the Commission endured until 29 August 1995 when the Commission discontinued any further investigations and unfroze the Applicant's assets.

11. Although the Tribunal is prepared to accept that the Applicant was handicapped in respect of the proper handling of his affairs up to and including August 1995, when the Commission discontinued its investigations and unfroze his assets, it is relevant to note that following its letters dated 5 June 1992, the Respondent warned the Applicant as to the need for review (if so advised) on a number of occasions. In this regard:

(a) By letter dated 28 September 1993, the Respondent wrote to Bowen & Gerathy (a letter which is annexed to Exhibit A16), the third and fourth paragraphs of that letter reading as follows:

``Once again, you are advised that these decisions may only now be reviewed by reference of the matter to the Administrative Appeals Tribunal or the Federal Court.

The decisions on objection and notification of the decisions were made in accordance with Division 3 of Part 4C of the Taxation Administration Act.''

(b) On 24 November 1993, also an annexure to Exhibit A16, the Respondent wrote to Bowen & Gerathy, the second paragraph reading as follows:

``Notify in writing if the matter is being referred to the Administrative Appeals Tribunal for further action or will payment be received to clear the taxation liability.''

(c) The Tribunal also refers in this context to a letter dated 29 November 1993 addressed by Bowen & Gerathy to the Respondent, reading as follows:

``We refer to your letter dated 24 November 1993 and advise that we have instructions to refer this matter to the Administrative Appeals Tribunal.

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We confirm our previous advice that the various Notices of Objection Decision which were forwarded to our client on or about 5 June 1992 did not enclose the reasons for decisions. The decisions contained a statement that our client should `refer to attached explanation'. However, no explanation was attached. Would you please provide us with copies of the explanations as a matter of urgency to enable us to properly advise our client on this matter.''

(d) On 21 March 1996 Bowen & Gerathy wrote to Mr B. Payne of the debt collection section of the Respondent, another annexure to Exhibit A16; the second and third paragraphs of that letter reading as follows:

``On 11 December 1989 our office lodged at the Australian Taxation Office, Sydney 11 objections on assessments for the years 1978 to 1988 to which substantive determinations have never been made.

Until such time that the objections are dealt with in accordance with the Act no tax should be due or payable by our client for the respective years.''

(e) Perhaps the most important letter in this context is that by the Respondent to Bowen & Gerathy dated 10 April 1996 which is set out in full in these Reasons as follows:

``Reference is made to previous correspondence in this matter, and in particular your letter of 21 March 1996.

This office has previously explained that your client's objections against the assessments for the years ended 30 June 1978 to 30 June 1988 have been determined in accordance with the Income Tax Assessment Act and the Taxation Administration Act.

Your contention throughout your correspondence is the fact that although eleven (11) formal notices of decision dated 5 June 1992 were received by your client, there was only one covering letter giving a reason for the disallowance of the objection. You therefore allege that no substantive determination of each objection has been made.

Whether a covering letter was or was not attached to each formal notice of decision is of no consequence, as the Commissioner is under no legal obligation to give particulars to the taxpayer of the reasons for disallowing the objection. (Robinson v DFC of T 84 ATC 4277)

Note that, if a taxpayer applies to the Administrative Appeals Tribunal for review of a decision, the Commissioner is then required to lodge with the Tribunal a statement giving the reasons for the decision (section 14ZZF(1) of the Taxation Administration Act). Where the taxpayer appeals to the Federal Court against an objection decision the Commissioner is required to file a statement outlining the contentions and the facts and issues in the appeal.

Your client has always had the option of applying for a review of the Commissioner's decision pursuant to section 14AA of the Taxation Administration Act, although he will now be required to also make an application for an extension of time to lodge the request for a review of the objection decisions.

The Commissioner's right to recover tax is not suspended while an objection against the relevant assessment is considered. The Commissioner's policy on collection and recovery of tax in disputed assessment cases is stated in Taxation Ruling 2569.

This office did allow a Supreme Court action to lapse some years ago, but again this is of no consequence. The non-payment of the assessments and the resultant additional tax for late payment cannot continue. Accordingly, unless payment in full is made within fourteen days of the date of this letter, legal action will be taken without further notice.''

12. The statement by Mr Gerathy (Exhibit A16) does not in the opinion of the Tribunal deal with the letter dated 10 April 1996. Even if, as may have been the case, Bowen & Gerathy considered, at any prior time that the Applicant was entitled to refrain from referring his objections to this Tribunal until the relevant annexure had been furnished, that misapprehension must have, or should have, disappeared at the time of receipt of the letter dated 10 April 1996. That letter sets out in the clearest possible terms, that whether or not a missing annexure or covering letter had been attached, the Respondent was under no legal obligation to give reasons for the disallowance

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of the objections and went on to repeat that the Applicant must, if so advised, refer the matter on appeal to the Administrative Appeals Tribunal. Whatever confusion there might have been in the minds of the Applicant's solicitors or the Applicant at any period prior to April 1996 must have been eliminated by the letter dated 10 April 1996. Bowen & Gerathy should have been aware that their client was obliged if so advised to refer the matters to the Tribunal regardless of the fact that there may not have been particulars as referred to in the correspondence and these Reasons. Importantly however, Mr Gerathy in his statement (Exhibit A16) does not say that he or his firm was in error, or that he misconstrued the letter dated 10 April 1996.

13. The Applicant sought certain information under the Freedom of Information Act in March 1997, some 8 months after the discontinuance of the proceedings by the Commission. Exhibits A2, A3, A4 and A9 were obtained by the Applicant under the provisions of that Act; the information was obtained on 4 June 1997 as appears from Exhibit A16. It was not until November 1997 that the Applicant made the application which is before the Tribunal in these proceedings.

14. The evidence of the Applicant was in general terms unsatisfactory. He was evasive and the Tribunal does not feel that it can rely on his evidence. It may be noted that his evidence differed quite markedly as between the two days of the hearing perhaps, because on the second day, his evidence was presented in rather different fashion.

15. As regards the merits, the Applicant's evidence may conveniently be summarised as follows:

(a) In respect of R Pty Limited, the Respondent had in Exhibit A10 taken the view that R Pty Limited was an alter ego for the Applicant; the Commission found that in fact in their view R Pty Limited was not an alter ego for the Applicant and evidence was given by the Applicant to the effect that R Pty Limited is half owned by a trust for his children. No trust deed was produced; while R Pty Limited is undoubtedly connected with the Applicant it is conceivable that it is in fact not an alter ego for the Applicant.

(b) The Applicant gave evidence as to borrowings on a come-and-go basis from clients of his solicitors, and that Exhibit A11 on a careful examination would indicate that some amounts considered to be income of the Applicant were in fact borrowings.

(c) The Applicant conceded in respect of a number of relevant years that there were amounts which should properly be brought to tax; in respect of other and substantial amounts, his evidence was that he could not remember. It is important in this context to note that the Applicant said that he has no books and records of any kind in respect of the relevant years, and moreover that he had agreed to be assessed on an asset betterment basis:

``Mr Block: You were working for yourself renovating properties? - The Applicant: Yes.

Mr Block: So you were a self-employed person? - The Applicant: Yes.

Mr Block: Therefore there was no PAYE tax being deducted from you? - The Applicant: No, in those years there was no tax deductions, everything used to work cash. Every - we could talk about 1978/79....

Mr McAuley: ... over this 11 year period [H & Co] prepared income tax returns? - The Applicant: Mm.

Mr McAuley: Now some of those returns you accepted? - The Applicant: Accepted.

Mr McAuley: And some of those returns you did not agree with? - The Applicant: They were wrong.

Mr McAuley: Were they amended and then lodged, the ones you disagreed with? - The Applicant: No, that is when the Taxation Department came here and said why don't we do it this way, it is all explained in their running sheets.

Mr McAuley: Did you agree to this method of assessing? - The Applicant: Yes, I had had enough to talk to accountants, the way they explained it to me, he said we'll put the value of the property, we will find out how much you spent on it, when you pay - I said okay and they started producing these sheets. Every time they would produce a sheet we'd sit down, there'd be amounts that they couldn't pin point and I would explain to them and that - they'd alter the sheet and it would alter the sheet.

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Mr McAuley: So you are telling the Tribunal then that for the 11 years that we are looking at here in some years you lodged returns, in other years you didn't, but you did agree with the Commissioner that you would accept an asset betterment assessment for the 11 year stretch? - The Applicant: Yes.''

(19/1/TS18 In 14-18, 20 In 20-21 In 8)

The Tribunal considers that in the absence of proper books and records, the Applicant may find it difficult, if not impossible, to discharge any relevant onus in this regard.

16. In general terms, the Applicant can aptly be characterised as a person who pays little or no regard to his taxation obligations. His failure to render returns over a number of years is indicative of that fact; it is relevant also that in respect of all of the relevant years, and notwithstanding his admission that some taxes are due, he has never made any payments of any kind on account of his taxation obligations.

17. In
Assimakopoulos v FC of T 98 ATC 2037, I included an extract from a paper which, as I said in that case, contains a good summary of the general principles and some of the case authorities which are relevant in a matter such as this. It is not necessary for me to repeat that summary in these Reasons.

18.
Hunter Valley Developments Pty Ltd v Cohen (1984) 7 ALD 315 is generally regarded as one of the leading cases in this area. In that case, the issue before the Court was an application for an extension of time under Section 11 of the Administrative Decisions (Judicial Review) Act 1977. Wilcox J at 320 set out a number of non-exhaustive guiding principles which should be considered in the exercise of discretions in these circumstances; these principles are as follows:

``(a) Special circumstances need not be shown but the court will not grant the application unless positively satisfied that it is proper so to do... Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained. 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) A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision and a case where the decision- maker was allowed to believe that the matter was finally concluded.

(c) Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension.

(d) However, the mere absence of prejudice is not enough to justify the grant of an extension. In this context, public considerations often intrude. A delay which may result, if the application is successful, in the unsettling of other people or of established practices is likely to prove fatal to the application.

(e) The merits of the substantial application are properly to be taken into account in considering whether an extension of time should be granted.

(f) Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the court's discretion.''

(Case references have been omitted)

19. Paragraph (a) of the guiding principles set out in the Hunter Valley case, indicates that it is a precondition to the exercise of a discretion in his favour that the application for an extension be able to show an ``acceptable explanation of the delay''. As Senior Member Ettinger said in Case 36/94,
94 ATC 327 [at 332]:

``... This appears to require the applicant to convince the decision-maker that there are unusual circumstances and that the failure was not due only to inadvertence.''

While later decisions have tended to water down the extent to which this is indeed a precondition, and indeed the decision in
Comcare v A'Hearn (1993) 119 ALR 85 held that it is not always an essential precondition, it is certainly one of the factors to be taken into account and its significance is likely to depend on the circumstances of the case. Given that this case involves a delay of over five years and a taxpayer who does not appear to have ever taken his taxation obligations seriously, an adequate explanation of delay is in this case not a requirement that the Tribunal should lightly forgo. In this particular instance, the delay is

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unacceptable and there is no proper or indeed adequate or, in some respects, any explanation of the delay. In particular in this context, the Applicant should not on any basis have delayed past April 1996; similarly the delay after information was obtained under the Freedom of Information Act in June 1997, and for which there is no explanation at all, is unacceptable. There is only one reasonable inference and that is that the Applicant seeks further delay in respect of these already long-overdue assessments.

It appears to the Tribunal necessary to consider the decision of Hill J in
A'Hearn v Comcare (1993) 18 AAR 22, which was affirmed on appeal by the Full Court of the Federal Court in Comcare v A'Hearn, and which is authority for the proposition that the errors or neglect of an adviser will not be visited on his client. It is to be noted though that there was no argument before the Tribunal or contention on the part of the Applicant that in fact his solicitors were at any time in error; indeed that contention was specifically rejected by the Applicant's counsel (12/2/98TS99).

Though there was no contention to the contrary, it appears from the Applicant's oral evidence that Bowen & Gerathy did at all times act on the Applicant's instructions and that the Applicant was made aware of the contents of the correspondence constituting Exhibit A15; for example:

``Mr Bevan: The letter (dated 5 June 1992) came to your attention at some stage, did it? - The Applicant: Yes.

Mr Bevan: And when was that? - The Applicant: When Mr Gerathy showed it to me.

Mr Bevan: Is that around the date of the letter, is it? - The Applicant: Thereabouts....

Mr Bevan: If you turn to the next document, that is a letter dated 23 December 1992 to the Tax Commissioner from your solicitors? - The Applicant: Yes....

Mr Bevan: That was a letter written on your instructions? - The Applicant: Yes and I was of the belief that disallowance of objection was valid....

Mr Bevan: Your solicitors had shown you that letter (dated 10 April 1996) after they received it, is that right? - The Applicant: Yes.

Mr Bevan: You read that letter? - The Applicant: Yes....

Mr Bevan: When you said you understood a mistake had been made, what did you mean by that? - The Applicant: [The Tax Office] were in the wrong by not giving reasons for disallowing the objections and this went on for years....

The Applicant: We wanted to know what the explanation was. Well, I did. What's the explanation. It referred to a tax explanation. There's no explanation. Are you going to give us an explanation-

Mr Bevan: And is it your evidence that sometime after 10 April 1996 when you read [ the] 10 April letter -? - The Applicant: They tell us that they do not have to give us an explanation.''

(12/2/98TS73-74, In 24-6 & 4-13; 12/2/98TS77-78, In 6-8, 24-6 & 4-10; see also 12/2/98TS64, In 18-23; 12/2/98TS75, In 11-12)

No oral evidence was given before me as to discussions between the solicitor, Mr Gerathy, and the Applicant as to whether or not review by this Tribunal should be sought. The only direct evidence on this issue appears in the letter from Mr Gerathy to the Respondent dated 29 November 1993, still some four years before the application was lodged, in which Mr Gerathy informed the Respondent that he had been instructed to refer the matter to the Administrative Appeals Tribunal. However, there is no acceptable explanation of why no such action was in fact taken. As stated above in paragraphs 9 and 12, the Tribunal is of the view that some delay may have been caused by the solicitors' mistaken belief that the Applicant need not refer the matter to the Tribunal until the relevant annexure had been furnished. However, and assuming that the Applicant in no way contributed to the solicitors' inaction, any misapprehension was cured by the letter dated 10 April 1996 and there is no explanation for the delay thereafter.

This is a commercial case involving an Applicant who was at all times represented by a firm of solicitors who were closely involved in both his legal and commercial affairs. There is no evidence to suggest that this firm would not

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have properly represented their client or that the Applicant has been dissatisfied with them. In these circumstances, the Tribunal should not impute the failure to lodge an application to his advisers merely because the Applicant now regrets that an application was not lodged earlier.

20. In respect of paragraph (b) of the Hunter Valley principles, whether the Applicant rested on his rights may be arguable; the delay is so lengthy that there is a possible inference to this effect, and there were certainly long periods during which there does not appear to have been any correspondence between the parties (for instance between the letters from Bowen & Gerathy to the Respondent dated 8 February 1994 and 21 March 1996). The Respondent may on various occasions have formed the view that the Applicant did not intend to dispute the objection decisions for the relevant years.

21. As to paragraph (c) of the Hunter Valley principles I think that there is a possibility of real prejudice to the Respondent. This audit commenced in November 1983 and extended over a number of years. It is likely, as contended by the Respondent, that those of its officers involved in the audit and investigation of the Applicant may be required to give evidence as to how the amended assessments were finally reached; such evidence may in the light of the delay be less available than it would have been had the review been sought in time.

The Applicant has not been unfairly treated by the Respondent, who repeatedly advised him that if he wished to have the objection decisions reviewed, he should refer the matter to the Administrative Appeals Tribunal or the Federal Court. The Tribunal considers that the length of time which has elapsed would place considerable difficulties in the way of the Applicant discharging the onus of proof in disputing the assessments; this prejudice to the Applicant would affect the merits of the application considered in paragraph 23 below.

22. As to paragraph (d) of the Hunter Valley principles, there is no obvious reason why the grant of an extension of time might result in a prejudice to the general public. There is a possibility that the grant of an extension of time might disrupt established practices by limiting the effective operation of the statutory time period; this consequence is more fully dealt with below in paragraph 24.

23. In relation to paragraph (e) of the Hunter Valley principles, it is possible that there is some argument to be made by the Applicant on the merits in respect at least of some of the amounts claimed by him. I have previously referred to the situation of R Pty Limited and his allegations as to the solicitor's trust account and borrowings; the Applicant in his evidence also said that the Respondent based some of its assessments on development applications which were in reality referable to his own labour. However, the fact that it is conceivable that there is some argument to be made on the merits in favour of the Applicant does not in my view outweigh the other considerations. Merit alone is not a sufficient ground to grant the extension; the Tribunal notes the recent decision of French J in
Mt Gibson Manager Pty Ltd v DFC of T 98 ATC 4012, dismissing an appeal from a decision of the Tribunal in which an extension of time was refused notwithstanding that the merits of the substantive application were conceded by the respondent.

24. In relation to paragraph (f) of the Hunter Valley principles, the Tribunal considers that the grant of an extension in these circumstances might indeed be unfair to other people who have delayed their appeals for lengthy periods and had little or no regard for the statutory time limit. The class of persons affected could be potentially large as it would include any taxpayers who have done nothing more than inform the Commissioner that they do not accept the correctness of their taxation assessments. In this sense, a decision in favour of the Applicant might disrupt established practices because it would seemingly render ineffective the statutory time limit, and would allow taxpayers to engage in lengthy delays.

25. The Tribunal notes that it is not ``critical'' that applications to the Administrative Appeals Tribunal be lodged on time: A'Hearn per Hill J at 27; the primary thrust of any inquiry as to whether to grant or refuse an extension of time is that the Tribunal do what is just and equitable between the parties. Whilst allowing applicants to have their cases heard is imperative, to do so may not always produce a result that is just and equitable between the parties.

The Tribunal notes the comments of Senior Member Fayle in Case 18/94,
94 ATC 204 at 213, regarding the grant of an extension of time

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to an applicant who agreed to the issue of amended assessments and then later sought to object to those assessments after the statutory time limit had expired:

``... It would create arbitrary decision- making in an environment where there is already a statutory time in which to respond. In the interests of both fairness to that class of taxpayer and sensible administrative practice, an extension of time should only be granted in circumstances which predicate both justice to the applicant and the effect of that decision on others, having regard to broader considerations of both prejudice and public interest. In
Hickey & Ors v Australian Telecommunication Commission (1983) 47 ALR 517, Lockhart J said:

`Justice, as the ultimate object to be obtained by the exercise of the discretion, seems to me to require that regard be had to broader considerations than merely the interests of the applicant.... It may be that exceptional circumstances need not always be shown before time can be extended. However, I consider that an applicant for an extension of time maintains throughout the burden of showing why, in all the circumstances, the extension of time should be granted.' (p. 522)''

The delay in this matter is so long and the explanations in respect thereof are so weak (where there are explanations at all) and the evidence of the Applicant himself is so unreliable, that this is not in the view of the Tribunal a proper case for the grant of his application. Accordingly the application is refused.

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