FEDERAL COURT OF AUSTRALIA Nugawela v Deputy Commissioner of Taxation [2016] FCAFC 164 Appeal from: Nugawela v Deputy Commissioner of Taxation [2016] FCA 578 File numbers: WAD 253 of 2016 Judges: NORTH, DOWSETT AND EDELMAN JJ Date of judgment: 7 December 2016 Catchwords: BANKRUPTCY – appeal from orders dismissing an application to set aside orders of a Registrar – Registrar did not set aside bankruptcy notice or extend time for compliance – no counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable – no error in the failure to "go behind" the judgment debt – no error in the failure to exercise discretion to grant extension of time. Legislation: Bankruptcy Act 1966 (Cth) ss 40(1)(g), 41, 41(5), 41(6), 41(6C), 41(6C)(a), 41(6C)(b) Taxation Administration Act 1953 (Cth) ss 14ZZM, 14ZZR, 350-10 of Sch 1 Federal Court (Bankruptcy) Rules 2005 (Cth) rr 3.02(2), 3.02(3) Federal Court (Bankruptcy) Rules 2016 (Cth) r 3.03 Cases cited: Corney v Brien [1951] HCA 31; (1951) 84 CLR 343 Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473 Deputy Commissioner of Taxation v Nugawela [2015] WASC 468 House v The King [1936] HCA 40; (1936) 55 CLR 499 Mavaddat v HSBC Bank Australia Ltd [2015] WASCA 205 Nugawela v Deputy Commissioner of Taxation [2016] FCA 578 Olivieri v Stafford (1989) 24 FCR 413 Patane v Asteron Life Ltd (formerly Royal & Sun Alliance Financial Services Ltd) (ACN 001 698 228) [2004] FCA 232 Re DCT (WA); Ex Parte Briggs (1986) 17 ATR 1031 Re Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 17 ATR 1031 Re Walsh (1982) 65 FLR 87 Ridge v Baldwin [1964] AC 40 Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337 Date of hearing: 25 November 2016 Registry: Western Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 43 Counsel for the Appellant: The Appellant appeared in person Counsel for the Respondent: Mr CM Slater Solicitor for the Respondent: Jackson McDonald ORDERS WAD 253 of 2016 BETWEEN: PATRICK NUGAWELA Appellant AND: DEPUTY COMMISSIONER OF TAXATION Respondent JUDGES: NORTH, DOWSETT AND EDELMAN JJ DATE OF ORDER: 7 December 2016 THE COURT ORDERS THAT: 1. The appeal be dismissed. 2. The appellant pay the costs of the respondent to be taxed if not agreed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT THE COURT: Introduction 1 The appellant, Dr Nugawela, appeals from a decision of the primary judge to dismiss an application to set aside orders of a Deputy District Registrar. The Registrar had dismissed Dr Nugawela's applications to (i) set aside a bankruptcy notice with which he had been served, and (ii) extend time for compliance with the bankruptcy notice. For convenience we will follow the convention adopted by the primary judge of referring to the application before the Registrar as the Original Application and the de novo application before the primary judge of this Court to set aside the Registrar's orders as the Application. 2 Although Dr Nugawela filed both an interlocutory application and a notice of appeal seeking the same relief, the parties proceeded on the basis that this matter was properly constituted as an appeal and that all of the relief sought in the interlocutory application was available on the appeal without leave. Background chronology 3 The factual background is set out in the reasons for decision of the primary judge and the exhibits. It can be summarised as follows. (1) On 9 December 2014, the Deputy Commissioner of Taxation (the Commissioner) commenced an action in the Supreme Court of Western Australia to recover unpaid tax in default assessments for the years ended 30 June 2003 until 30 June 2010. (2) On 19 August 2015, the summary judgment application was heard by Kenneth Martin J in the Supreme Court of Western Australia. Dr Nugawela was legally represented and his solicitor made submissions. Justice Kenneth Martin granted summary judgment to the Commissioner against Dr Nugawela for $1,668,164.16 based on an assessed tax liability (Deputy Commissioner of Taxation v Nugawela [2015] WASC 468). (3) Dr Nugawela did not appeal the order for summary judgment within the time for appeal. Nor did he seek a stay of its enforcement. However, as we explain below, much later, in April 2016, he sought leave to appeal (out of time) from the order for summary judgment. (4) On 20 August 2015, Dr Nugawela lodged objections with respect to the assessments for the years ended 30 June 2007 and 30 June 2008. (5) On 9 December 2015, Dr Nugawela's objections were granted in part and rejected in part. (6) On 18 January 2016, the Commissioner issued a bankruptcy notice based on the summary judgment order but giving $238,378.83 credit for the revised assessments. The total debt in the notice was $1,464,167.06. The bankruptcy notice provided that Dr Nugawela had 21 days from the date he was served with the notice either to pay the debt or to make arrangements with the Commissioner for settlement of the debt. The bankruptcy notice said that bankruptcy proceedings may be taken against Dr Nugawela if he failed to comply with the notice. The bankruptcy notice also provided instructions on how to apply to extend the time for compliance with the notice, and how to apply to set it aside. It was clearly provided that any application to extend time or set aside the notice must be made within 21 days of service. (7) On 23 January 2016, the bankruptcy notice was served on Dr Nugawela. (8) On 8 February 2016, Dr Nugawela filed an application in the Administrative Appeals Tribunal (AAT) to review the Commissioner's decision to partially reject his objection to the assessments for the years ended 30 June 2007 and 30 June 2008. In his AAT application, Dr Nugawela described the reasons for the application as follows: Failure to take into account personal illness and status as sole bread-winner; 60% Garnishee on Medicare has placed an onerous burden on my wholly bulk-billing medical practice; this was increased to 100% in December 2015 – preventing me from being able to obtain professional advice on my rights and obligations and manage my business properly; failure to take into account the undesirable effects of the severe penalties and interest (which are now more than double the base tax debt); refusal to consider security for the debt in the interim; some documents not examined due to initial unavailability. (9) On 12 February 2016, Dr Nugawela wrote to the Australian Taxation Office (ATO) disputing the amount claimed in the bankruptcy notice. (10) On 15 February 2016 at 4.39pm, Dr Nugawela lodged the Original Application to set aside the bankruptcy notice. In Dr Nugawela's Original Application before the Registrar, he sought to raise essentially the same substantive matters as those which had been raised before Kenneth Martin J. (11) On 1 March 2016, the matter was heard and the Original Application was dismissed. Dr Nugawela did not appear at the hearing of the Original Application before the Registrar. (12) In March 2016, the Commissioner filed a creditor's petition in the Federal Circuit Court. This is opposed by Dr Nugawela. (13) On 22 March 2016, Dr Nugawela filed the Application to review the Registrar's decision in this Court. (14) On 18 April 2016, Dr Nugawela filed an application for leave to appeal from the summary judgment decision in the Supreme Court of Western Australia. (15) On 25 May 2016, Dr Nugawela's Application in this Court was dismissed with costs by the primary judge: Nugawela v Deputy Commissioner of Taxation [2016] FCA 578. (16) Counsel for the Commissioner submitted on this appeal, consistently with affidavit evidence from Dr Nugawela, that the Western Australian Court of Appeal had made a self-executing order that Dr Nugawela's application for leave to appeal be dismissed if he did not comply with various steps in a timetable for his application for leave to appeal. This order has taken effect. The Court of Appeal has listed a hearing in December of an application by Dr Nugawela to reinstate his application for leave to appeal. (17) Counsel for the Commissioner also informed this Court, again without demur, that: (a) there has been directions hearings in the AAT proceedings although no hearing date has been set; and (b) the creditor's petition has been deferred pending the determination of this appeal and will not be heard before February 2017. The hearing before the primary judge and his reasons The issues before the primary judge 4 In the Application before the primary judge, it was common ground that the hearing was de novo. As the primary judge explained, the issues before him were as follows ([11]): (1) whether Dr Nugawela's Original Application to set aside the bankruptcy notice was made within the 21 day period for compliance with the bankruptcy notice. If it was not, the Commissioner said the Application ought be dismissed immediately. If it was within the 21 day period, then the issues in (2) and (3) would arise for consideration; (2) the consequences of Dr Nugawela's non-appearance and the consequences of Dr Nugawela's failure to file an affidavit in compliance with r 3.02(2) of the Federal Court (Bankruptcy) Rules 2005 (Cth) (Bankruptcy Rules) and failure to serve the Original Application in accordance with r 3.02(3) of the Bankruptcy Rules; and (3) whether any of the matters raised by Dr Nugawela would give rise to any ground on which to set aside the bankruptcy notice. 5 The primary judge discussed in some detail the submissions concerning (1) above (whether Dr Nugawela's Original Application to set aside the bankruptcy notice was made within time). However, his Honour did not ultimately resolve that issue because he concluded, on the merits, that even if the Original Application had been within time it could not have succeeded ([5]). Since the timing point was not resolved by the primary judge, and since there was no notice of contention, it is unnecessary to say anything further about it. 6 The primary judge also did not determine the Application on the basis of (2). His Honour accepted Dr Nugawela's explanation that he failed to attend the hearing of the Original Application before the Registrar because he was unfamiliar with the form and procedure of eLodgment ([41]). His Honour also said that he would put to one side questions of non-service and issues concerning a defective affidavit. Again, none of these matters is in issue on this appeal. 7 Before the primary judge, Dr Nugawela made various submissions concerning why the Application should be determined on the merits. The section below explains the way in which the primary judge determined the matter, on the basis of the issues in (3) above. The primary judge's decision on the merits 8 As the primary judge observed, s 40(1)(g) of the Bankruptcy Act 1966 (Cth) provides that an act of bankruptcy occurs: if a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed, has served on the debtor in Australia or, by leave of the Court, elsewhere, a bankruptcy notice under this Act and the debtor does not: (i) where the notice was served in Australia—within the time specified in the notice; or (ii) where the notice was served elsewhere—within the time fixed for the purpose by the order giving leave to effect the service; comply with the requirements of the notice or satisfy the Court that he or she has a counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he or she could not have set up in the action or proceeding in which the judgment or order was obtained… 9 Section 41 of the Bankruptcy Act relevantly provides (repeating the emphasis of the primary judge): 41 Bankruptcy notices … (3) A bankruptcy notice shall not be issued in relation to a debtor: (a) except on the application of a creditor who has obtained against the debtor a final judgment or final order within the meaning of paragraph 40(1)(g) or a person who, by virtue of paragraph 40(3)(d), is to be deemed to be such a creditor; [or] (b) if, at the time of the application for the issue of the bankruptcy notice, execution of a judgment or order to which it relates has been stayed; or … (5) A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. (6) Where the amount specified in a bankruptcy notice exceeds the amount in fact due and the debtor does not give notice to the creditor in accordance with subsection (5), he or she shall be deemed to have complied with the notice if, within the time allowed for payment, he or she takes such action as would have constituted compliance with the notice if the amount due had been correctly specified in it. (6A) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice: (a) proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; or (b) an application has been made to the Court to set aside the bankruptcy notice; the Court may, subject to subsection (6C), extend the time for compliance with the bankruptcy notice. (6C) Where: (a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; and (b) the Court is of the opinion that the proceedings to set aside the judgment or order: (i) have not been instituted bona fide; or (ii) are not being prosecuted with due diligence; the Court shall not extend the time for compliance with the bankruptcy notice. (7) Where, before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice, the debtor has applied to the Court for an order setting aside the bankruptcy notice on the ground that the debtor has such a counter-claim, set-off or cross demand as is referred to in paragraph 40(1)(g), and the Court has not, before the expiration of that time, determined whether it is satisfied that the debtor has such a counter-claim, set-off or cross demand, that time shall be deemed to have been extended, immediately before its expiration, until and including the day on which the Court determines whether it is so satisfied. (Emphasis added.) 10 The primary judge held at [61] that the act of bankruptcy under s 40(1)(g) of the Bankruptcy Act occurred on 15 February 2016. At that time: (i) the Commissioner had obtained a final judgment against Dr Nugawela; (ii) the Commissioner had served a bankruptcy notice on Dr Nugawela; and (iii) Dr Nugawela had not applied to set aside the bankruptcy notice within the time specified in the notice or satisfied the Court that he had a counter-claim, set-off, or costs demand equal to or exceeding the amount of the judgment debt. The primary judge said that arguments about the amount that might be owing are a different matter. 11 The primary judge explained at [11(c)] that the key question in the Application on the merits was whether under s 40(1)(g) of the Bankruptcy Act there was any counter-claim, set-off or cross demand equal to or exceeding the amount of the Supreme Court judgment debt that Dr Nugawela could not have set up in the action or proceeding in which the judgment was obtained. 12 The primary judge referred, at [57], to the exception to non-compliance with a bankruptcy notice under s 40(1)(g) of the Bankruptcy Act in relation to counter-claims, set-offs, and cross-demands. His Honour said that the exception is limited to: (1) applications equal to or exceeding the amount of the judgment debt; that (2) an applicant "could not have set up in the action or proceeding in which the judgment or order was obtained". 13 As to (1), his Honour held that Dr Nugawela had pointed only to some credit adjustments as to his liability and that there was substantial remaining unmet liability ([57]). 14 As to (2), the primary judge held that Dr Nugawela had not shown that it was not open to him, as a matter of law, to raise the matters which he wished to rely upon in the Application to set aside the bankruptcy notice; to the contrary, the primary judge said that in fact Dr Nugawela wished to raise precisely the same issues ([68]). 15 The primary judge also dismissed an interlocutory application by Dr Nugawela to adjourn the Application until after determination by the AAT of an application concerning the correctness of the amount that he was said to owe to the Commissioner ([70]). Dr Nugawela's additional evidence on this appeal 16 Dr Nugawela filed a lengthy affidavit on this appeal. Counsel for the Commissioner initially raised some cosmetic objections but, ultimately, these were not pressed. 17 Much of Dr Nugawela's affidavit was concerned with his personal circumstances. He explained that he had not filed tax returns or paid tax since 2000 because of difficulties he faced with the introduction of the GST, followed in later years by procrastination, family difficulties, and panic. Dr Nugawela then described the burdens imposed on him and his medical practice following an ATO audit in 2011. He explained the difficulties that he, and his accountants, had with resurrecting a decade of tax records. He described the medical treatment he sought during this period and default assessments issued by the Commissioner together with pressure, expense, and mental strain of completing his missing tax returns. He explained his attempts to rebuild his medical practice subject to a garnishee order issued by the Commissioner, residential tenancy litigation, his accountants ceasing to act, and flood damage from a burst pipe to his medical premises which impaired many records. He described his deteriorating mental state and his lawyers ceasing to act for a period in 2015. He explained that he had been able to function sporadically whilst under medical care. 18 Dr Nugawela's affidavit provided tables which set out the Commissioner's claims for base tax, interest, and penalties. Those tables were complemented by information provided in an exhibit from the Commissioner as follows: Taxation and penalties after credits as at 30/4/2015 Dr Nugawela's estimate at 22/11/2016 Year ended Tax in WA Supreme Court General interest charge on tax in WA Supreme Court Credit in WA Supreme Court Penalty in WA Supreme Court General interest charge on penalty Tax (excluding general interest charge and penalty) 2003 $47,323.35 $77,766.30 -$47,807.17 - - - 2004 $48,912.05 $101,079.93 -$18,716.59 - - - 2005 $60,371.20 $120,604.63 - - - $48,792.20 2006 $61,064.75 $100,061.10 - - - $45,370.85 2007 $122,600.40 $160,323.49 - - - $55,947.30 2008 $211,813.95 $211,374.84 - - - $1,380.40 2009 $104,100.50 $82,062.29 - - - -$2,018.00 2010 $118,441.80 $70,875.50 - - - -$840.39 2011 - - - $550.00 $185.02 - 2012 - - - $670.00 $97.54 - 2013 - - - $850.00 $90.07 - Totals $774,628.00 $924,148.08 -$66,523.76 $2,070.00 $372.63 - Totals - - - - $1,634,694.95 $148,632.36 19 The Commissioner submitted that Dr Nugawela (i) admitted debt in the Part IVC process of $148,632.36; (ii) did not, and does not, challenge the tax assessment for the years 2003 and 2004, which amounts to $29,711.64; and (iii) has not challenged the general interest charges and penalties of $926,590.71. 20 Accordingly, the Commissioner said that the amount that Dr Nugawela either admits or does not challenge totals $1,104,934.71. However, the Commissioner properly accepted that if the challenges were successful and the general interest charges and penalties were reduced by the proportionate challenge to tax, this would amount to $165,026.03. The amount that Dr Nugawela would then admit as owed with this proportionate reduction would be $343,370.03. The grounds of appeal 21 Dr Nugawela's grounds of appeal to this Full Court were as follows: 1. The primary judge erred in failing to address several issues of misstatement raised by the appellant. Notice was given to the respondent disputing the validity of the notice under s 41(5) of the Bankruptcy Act 1966. s 41(5) of the Bankruptcy Act 1966 states: A bankruptcy notice is not invalidated by reason only that the sum specified in the notice as the amount due to the creditor exceeds the amount in fact due, unless the debtor, within the time allowed for payment, gives notice to the creditor that he or she disputes the validity of the notice on the ground of the misstatement. 2. The primary judge erred in failing to 'go behind' the judgement relied on to found the bankruptcy notice to establish its validity. The primary judge failed to give regard to a relevant consideration that the respondent's misleading 2007 and 2008 default assessments were not made on any 'intelligible basis even as an approximation' as the appellant had evidenced. Trautwein v Federal Commissioner of Taxation (1936) 56 CLR 63 at 88: It is not enough show that the assessment is wrong ‐ a taxpayer "must go further and show ... positively what correction should be made in order to make it right or more nearly right" or establish that it "had been made upon no intelligible basis even as an approximation." A valid assessment requires that the respondent make a genuine attempt to determine a taxpayer's taxable income. The High Court established in Trautwein v FCT (1936) 56 CLR 63 that the estimation process may go close to guesswork and yet be lawful. However, a figure cannot simply be 'plucked from the air' (Re DCT (WA); Ex Parte Briggs (1986) 17 ATR 1031) or an estimate 'made upon no intelligible basis' (Trautwein v FCT (1936) 56 CLR 63). The primary requirement is that the judgment of a taxpayer's taxable income is based on some reasonable or rational grounds. Where this occurs the assessment is defensible from challenge on the basis that the assessment was arbitrary, lacked rational foundation and was therefore not a bona fide exercise of power. The primary judge failed to 'go behind' the judgement debt to examine if the making of the respondent's assessment of the judgement debt was so fundamentally flawed that no assessment exists. 3. The primary judge failed to allow an extension of time for the appellant to establish further misleading misstatements in the bankruptcy notice. The appellant requested extension of time which the respondent disallowed even though it would have been consistent with the respondent's Model Litigant obligations without prejudice to the longer‐term interests of the respondent to resolve the disputed assessments. Given more time to incorporate further adjustments as well as respondent's omissions and errors, it would have been a more economical, fair, just and preferable approach to resolution rather than reliance on the technical letter of the law to pursue an unjustifiable misleading debt derived from unfair and disproportionate assessments, not remotely reflective of a genuine estimate of the amount of the appellant's alleged debt. 4. The primary judge erred in refusing to grant an extension of time for compliance under s 41(6C)(a) of the Bankruptcy Act 1966. s 41(6C)(a) a debtor applies to the Court for an extension of the time for complying with a bankruptcy notice on the ground that proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor; The appellant is appealing the Summary Judgement debt of Martin J which forms the basis for the Bankruptcy Notice judgement. Proceedings had been instituted to set aside the summary judgement in respect of which the bankruptcy notice was issued and duly served to the respondent {see para 38 and 39 of affidavit Form 59 Rule 29.02(1) submitted by appellant}. The Supreme Court accepted the appeal (CACV 29/2016) which is currently on foot. S 41(6C)(a) of the Bankruptcy Act 1966 does not contain any time specification for instituting proceedings. The formalities for applying for an extension of time under Rule 3.03 of the Federal Court (Bankruptcy) Rules 2016 do not limit recognition of proceedings instituted well after the time of the Original Application. Hence the primary judge erred in stating that s 41(6C) could not be satisfied merely because the proceedings were instituted well after the time of the Original Application {see para 56 of McKerracher}. 5. The primary judge failed to provide any substantial reasons, justification or authority for extension of time for compliance regarding the proceedings as not being bona fide or not being prosecuted with due diligence under s 41(6C)(b) of the Bankruptcy Act 1966. s 41(6C)(b) the Court is of the opinion that the proceedings to set aside the judgment or order: (i) have not been instituted bona fide; or (ii) are not being prosecuted with due diligence; the Court shall not extend the time for compliance with the bankruptcy notice. 6. The primary judge failed to give sufficient weight to a relevant consideration necessary to preserve the integrity of the appeals at hand and whether a refusal of extension of time to comply could create practical difficulties in respect of the relief which may be granted on appeal. Tradesman Technologies Pty Ltd v Ameduri [2012] WASCA 168 [22], cited in Mavaddat v HSBC Bank Australia Ltd [2015] WASCA 205 [20]. 7. The primary judge failed to give sufficient weight to the relevant consideration that the challenges against the Summary Judgement debt in appeals to both the Supreme Court as well as the Administrative Appeal Tribunal had a 'real chance of success'. Hence the primary judge failed to consider that an extension of time for compliance could evidence a significant reduction of debt and consider options which the appellant could not have set‐up in the actions in which the judgement debt or order was obtained.{see McKerracher para 62}. 8. The primary judge failed to give sufficient weight to a relevant consideration in allowing an extension of time for compliance to resolve the respondent's misleading misstatements on the grounds that a person affected by the decision has an interest which needs protection. The decision of Ridge v Baldwin [1964] AC 40, confirms the view that where a decision affects the employment prospects of a person and therefore, the person's livelihood, the decision‐making process must afford a right to be heard. 9. The primary judge failed to distinguish the differences and draw relevant distinctions between the arguments presented in this application to set aside the Bankruptcy Notice and those advanced in the Summary Judgement hearing. 10. The primary judge failed to give sufficient to a relevant consideration of conscious maladministration by the respondent in pursuing a debt which contradicts the Model Litigant obligation to not contest liability if the Commonwealth or the agency knows that the dispute is really about quantum. 11. The primary judge failed to give sufficient weight to a relevant consideration of the respondent's abuse of power. The respondent pursued Summary Judgement and obtained it. The respondent has pursued Bankruptcy proceedings despite unresolved issues about the quantum in dispute and the manner in which assessments have been made. It would appear that litigation and the full weight of Summary Judgement and Bankruptcy is the preferred approach the respondent has adopted despite Model Litigant obligations of endeavouring to avoid, prevent and limit the scope of legal proceedings wherever possible, including by giving consideration in all cases to alternative dispute resolution before initiating legal proceedings and by participating in alternative dispute resolution processes where appropriate. 12. The primary Judge should have made the following findings: That the Bankruptcy Notice was invalid on the grounds of misleading misstatement under s 41(5) of the Bankruptcy Act 1966; or alternatively 13. That an extension of time for compliance be granted on the grounds of s 41(6C) respecting the integrity of appeals at hand; or alternatively 14. That an extension of time for compliance be granted to redress the respondent's several failures, conscious maladministration and abuse of power to comply with legitimate expectations created under its Model Litigant obligations; or alternatively 15. That an extension of time for compliance be granted to protect persons affected by the decision with an interest which needs protection. (Emphasis in original.) The reasons why the grounds of appeal must be dismissed 22 In written submissions, the Commissioner submitted that the grounds of appeal can be broadly divided into two categories. The same approach was taken by Dr Nugawela in oral submissions (ts 2) and it is convenient to follow that approach to the grounds of appeal: (1) Was there an error in failing to set aside the bankruptcy notice due to the matters in s 41(5) of the Bankruptcy Act (grounds 1 and 12) or failing "to 'go behind' the judgment debt to examine if the making of the respondent's assessment of the judgment debt was so fundamentally flawed that no assessment exists" (ground 2)? (2) Was there any error in failing to exercise discretion to grant an extension of time (the remaining grounds of appeal)? No error in the failure to "go behind the summary judgment" 23 At the date of issue of the bankruptcy notice there was no challenge to the summary judgment decision of Kenneth Martin J. The summary judgment matter had been fully argued and, at the date of issue of the bankruptcy notice, no appeal had been brought from that decision. The orders of Kenneth Martin J thus stood as unimpeached orders, obtained after a contested matter (including where Dr Nugawela was legally represented). And, as we have explained, the bankruptcy notice that was issued gave credit to Dr Nugawela for the revised assessments in his favour. The first group of grounds of appeal nevertheless sought to relitigate matters raised before Kenneth Martin J. The primary judge had concluded at [61] that there "was not the slightest doubt" that Kenneth Martin J was required to proceed as he did. 24 It is necessary to proceed with three observations about the manner in which this appeal was argued. First, it was argued on the basis that s 41(5) of the Bankruptcy Act is the source by which a bankruptcy notice might be set aside for misstatements. Section 41(5) is not the source of the power to set aside bankruptcy notices for misdescription. In Re Walsh (1982) 65 FLR 87, 91-92 Lockhart J said, in relation to ss 41(5) and (6) of the Bankruptcy Act: These subsections are taken from s. 53 of the Bankruptcy Act 1924 which in turn was reproduced from the English Bankruptcy Act, 1914 and its predecessor the Bankruptcy and Deeds of Arrangement Act, 1913. It has been said that these provisions were enacted to overcome the judgment in Re A Debtor, 478 of 1908. Plainly enough, as long ago as 1913 the predecessors of s. 41 (5) and (6) were intended to ensure that, when courts would otherwise hold bankruptcy notices invalid on the ground of overstatement of the amount due, the consequence of invalidity was not to follow unless the debtor gave the requisite notice under s. 41 (5) or its then equivalent. They are ameliorating provisions. They do not either in terms or in substance themselves invalidate anything. They save some bankruptcy notices from what otherwise would be invalidity, but the subsections are not based on an assumption that overstatement necessarily leads in every case to invalidity of the bankruptcy notice. This was endorsed by Gummow J in Olivieri v Stafford (1989) 24 FCR 413, 428. 25 Secondly, despite various of Dr Nugawela's submissions it is important to reiterate that the date at which the amount in the bankruptcy notice is determined to be excessive or not is the date of issue of the notice: Walsh v Deputy Commissioner of Taxation [1984] HCA 33; (1984) 156 CLR 337. In that case, Gibbs CJ said (at 340; Mason, Brennan, Deane and Dawson JJ agreeing): In form the notice speaks as at the date which it bears, that is the date of its issue, and although service is essential to make non-compliance an act of bankruptcy, and although the time fixed for compliance runs from the date of service, the notice must be understood as speaking as at the date of its issue and the requirements of the notice, for the purposes of s. 40(1)(g) of the Bankruptcy Act, must be ascertained in that context. This reinforces the view that the amount which must be correctly stated is the amount of the judgment debt owing at the date of issue. 26 Thirdly, the Commissioner did not dispute on this appeal that it was possible to "go behind" the judgment of Kenneth Martin J and the orders made against Dr Nugawela. As Fullagar J said in Corney v Brien [1951] HCA 31; (1951) 84 CLR 343, 353-354, although a judgment at law for a sum of money creates an obligation of its own force, it has "been well settled for very many years that in a court having jurisdiction in bankruptcy a judgment has no such conclusive effect. The court will in many cases, as it is commonly said, 'go behind' the judgment and inquire into the existence of the debt upon which it is said to be founded". 27 The grounds of appeal concerning a failure to "go behind" the summary judgment orders of Kenneth Martin J fail because there is nothing in the submissions before us that causes us to doubt the correctness of the orders of Martin J. 28 There is no misstatement or misdescription in the bankruptcy notice simply because AAT proceedings are on foot. Section 350-10 in Sch 1 to the Taxation Administration Act 1953 (Cth) provides that the production of a notice of assessment under a taxation law is conclusive evidence that: (a) the assessment or declaration was properly made, or the notice was properly given; and (b) except in proceedings under Part IVC of this Act on a review or appeal relating to the assessment, declaration or notice–the amounts and particulars of the assessment, declaration or notice are correct. 29 Section 14ZZM of the Taxation Administration Act provides: Pending review not to affect implementation of taxation decisions The fact that a review is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no review were pending. 30 Section 14ZZR of the Taxation Administration Act provides: Pending appeal not to affect implementation of taxation decisions The fact that an appeal is pending in relation to a taxation decision does not in the meantime interfere with, or affect, the decision and any tax, additional tax or other amount may be recovered as if no appeal were pending. 31 Dr Nugawela cannot go behind the summary judgment decision, coupled with the interim conclusive effect of the Commissioner's assessments, merely by asserting that there is a dispute concerning the calculations. Nor can he establish, as he submitted, that this case is anything like the circumstances in Re Deputy Commissioner of Taxation (WA); Ex parte Briggs (1986) 17 ATR 1031. In that case, the Full Court of the Federal Court held that tax assessments had not been validly issued. The Deputy Commissioner of Taxation had conceded that neither he nor his officers had made any attempt to ascertain the taxpayer's taxable income. They conceded that the notices of assessment were issued for the purpose of forcing the taxpayer to consult with the Deputy Commissioner or his officers. There is no basis for any conclusion in this case other than that the Commissioner in this case has made a genuine attempt to calculate Dr Nugawela's assessments. On 7 April 2011, the Commissioner commenced an audit of Dr Nugawela's financial circumstances based on estimates of income. In a letter sent from the Commissioner to Dr Nugawela on 4 April 2011, the Commissioner explained that the audit would initially cover the tax period 1 July 2009 to 30 June 2010, but was not limited to that period. It appears from the Commissioner's response to Dr Nugawela's later objections that an assessment for these years that the audit was substantially expanded to cover the financial years from 30 June 2000 to 30 June 2011 (inclusive). The notices of assessment were issued to Dr Nugawela by the Commissioner on 30 November 2011 and 8 December 2011. Further consideration, following the objections by Dr Nugawela, led the Commissioner to provide the credits described above at [3(5)-(6)]. The lack of error in the failure to exercise discretion to grant an extension of time 32 These grounds of appeal effectively alleged errors by the primary judge in failing to extend time to comply with the bankruptcy notice or failing to grant a stay of enforcement of the bankruptcy notice. 33 The decision by the primary judge to refuse to extend time to comply with the bankruptcy notice was a discretionary decision. The well-known principles for appeals from discretionary decisions derive from House v The King [1936] HCA 40; (1936) 55 CLR 499, 504-505, where Dixon, Evatt and McTiernan JJ explained the need to show error by the primary judge in the exercise of discretion, including where upon the facts the result is unreasonable or plainly unjust so that the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. 34 The primary judge relied upon various matters in his refusal to extend time to comply with the bankruptcy notice. One of these was (at [69]) the absence of any prospects that Dr Nugawela had of demonstrating that he has a valid counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt under s 40(1)(g) of the Bankruptcy Act. Another (at [68]) was the failure of Dr Nugawela to demonstrate any counter-claim, set-off or cross demand was one that he could not have set up in the summary judgment action. 35 As to ground 3, the essence of this ground is an assertion that "further misleading misstatements" exist. There was no sufficient evidence before the primary judge or before this Court, from which the Court could assess the likelihood or existence of any such misstatements. 36 As to grounds 4 and 5, these involve a misunderstanding by Dr Nugawela of s 41(6C) of the Bankruptcy Act. That subsection does not provide a positive basis to extend time. It is a restriction on the power to extend time under s 41(6A). 37 As to grounds 6 and 8, the primary judge did consider the practical consequences of his refusal to extend time and the "interest" of Dr Nugawela. He observed that the issues of quantum that Dr Nugawela raises may well be relevant in the creditor's petition and the sequestration order being sought in the Federal Circuit Court of Australia. As Lander J said in Patane v Asteron Life Ltd (formerly Royal & Sun Alliance Financial Services Ltd) (ACN 001 698 228) [2004] FCA 232 [101], "[t]he debtor can still satisfy the Court that he or she is able to pay his or her debts (s 50(2)) at the hearing of the judgment debtor's petition". 38 As to ground 7, the primary judge did not fail to "give sufficient weight to the relevant consideration that the challenges against the Summary Judgement [sic] debt in appeals to both the Supreme Court as well as the Administrative Appeal Tribunal had a 'real chance of success'". The primary judge did consider these matters and correctly concluded that there was no basis from which it could be concluded that those challenges had a real chance of success. 39 As to ground 9, the primary judge did not fail to distinguish the differences and draw relevant distinctions between the arguments presented in this application to set aside the bankruptcy notice and those advanced in the summary judgment hearing. The primary judge correctly concluded that the substance of the arguments made on each occasion was the same. 40 As to grounds 10 and 11, there was no evidence to support any conclusion of conscious maladministration or abuse of power. As the primary judge correctly observed, there is a strong legislative policy manifested in the recovery of tax debts to protect the revenue, pursuant to s 14ZZM of the Taxation Administration Act. In Deputy Commissioner of Taxation v Broadbeach Properties Pty Ltd [2008] HCA 41; (2008) 237 CLR 473, 492 [44] Gummow ACJ, Heydon, Crennan and Kiefel JJ said of ss 14ZZM and 14ZZR of the Taxation Administration Act: But harsh though the operation of these provisions may be, they implement a long-standing legislative policy to protect the interests of the revenue. In Deputy Commissioner of Taxation v Niblett [(1965) 83 WN (Pt I) (NSW) 405 at 411], Asprey J struck out pleas of non-liability to a recovery action instituted by the Deputy Commissioner in the Supreme Court of New South Wales while objections were pending under what was then s 185 of the Assessment Act. His Honour observed: "It may be thought to be a hardship that a taxpayer should have to pay the tax assessed when an objection to the assessment has not been decided upon but there are obvious financial considerations of high policy that must be weighed in the balance against cases of individual hardship with which the Commissioner through the appropriate use of his powers under [the Assessment Act] can cope ... Where the meaning of the words of a statute is clear 'it is not open to the Court to narrow or whittle down the operation of the Act by seeming considerations of hardship or of business convenience or the like' - Attorney-General v Carlton Bank [[1899] 2 QB 158 at 164]." 41 The dismissal of grounds 1 to 11 requires that grounds 12 to 15 also be dismissed as they simply assert an entitlement to the orders sought. 42 Finally, even if there had been an error by the primary judge (which there was not) in the re-exercise of discretion, we would not extend time within which to set aside the bankruptcy notice or stay any action upon it. Particular discretionary factors in this case include the very lengthy period of lack of compliance from 2000 onwards, during a period when Dr Nugawela had access to lawyers and accountants sporadically. And although we take into account the stress upon Dr Nugawela and his mental state, his affidavit evidence and conduct of this appeal demonstrates that he is well capable of making decisions in what he perceives to be his interests. Finally, although Dr Nugawela filed a lengthy affidavit, he did not depose to the extent of his net assets. It is possible that he has sufficient resources to contest the creditor's petition which he opposes and the AAT proceedings. He is able to contest these proceedings in the absence of an extension of time or a stay. Conclusion 43 The appeal must be dismissed with costs. I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justices North, Dowsett and Edelman. Associate: Dated: 7 December 2016