FEDERAL COURT OF AUSTRALIA 005 542 512 Pty Ltd (Controller Appointed) v Commissioner of Taxation [2007] FCA 861 TAXATION – Commissioner's power to remit superannuation guarantee charge PRACTICE AND PROCEDURE – application for extension of time to file and serve notice of appeal from Tribunal decision Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 referred to Ergon Energy Ltd v Commissioner of Taxation (2006) 153 FCR 551 referred to Comcare v Etheridge (2006) 149 FCR 522 referred to Re Jarra Hills Pty Ltd and the Federal Commissioner of Taxation (1997) 37 ATR 1022 referred to Re Truelove and the Commissioner of Taxation [200] AATA 276 referred to Re Kancroft (acting as trustee for the Robertson Family Trust) and Commissioner of Taxation [2004] AATA 113 referred to Iwec Pty Ltd v Commissioner of Taxation [2007] AATA 1051 referred to Victorian Patient Transport Pty Ltd v Commissioner of Taxation [2007] AATA 1239 referred to Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985 referred to 005 542 512 PTY LTD (CONTROLLER APPOINTED) v COMMISSIONER OF TAXATION VID 1339 OF 2006 KENNY J 5 JUNE 2007 MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1339 OF 2006 BETWEEN: 005 542 512 PTY LTD (CONTROLLER APPOINTED) Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: KENNY J DATE OF ORDER: 5 JUNE 2007 WHERE MADE: MELBOURNE THE COURT ORDERS THAT: 1. Mr Howard Bellin have leave to represent the applicant for the purpose, and only for the purpose, of the application for an extension of time in which to appeal. 2. The application for an extension of time in which to appeal be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VID 1339 OF 2006 BETWEEN: 005 542 512 PTY LTD (CONTROLLER APPOINTED) Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE: KENNY J DATE: 5 JUNE 2007 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is an application for an extension of time to file and serve a notice of appeal from a decision of the Administrative Appeals Tribunal ("the Tribunal") made on 10 November 2006 affirming the respondent's decision not to remit all or part of a superannuation guarantee charge ("SGC"). 2 In 1992, the Commonwealth Parliament enacted the Superannuation Guarantee (Charge) Act 1992 (Cth) ("SGC Act") and the Superannuation Guarantee (Administration) Act 1992 (Cth) ("SGA Act"). An Explanatory Memorandum circulated with the Bills for the Acts stated, amongst other things, that the scheme was intended to encourage employers to provide a minimum level of superannuation support for employees. Under the scheme, a tax was imposed on an employer who provided superannuation support to employees below a minimum level. 3 The SGC Act imposes a charge on any superannuation guarantee shortfall of an employer in a year: see s 5 of the SGC Act. The charge is the amount of the shortfall: see s 6 of the SGC Act. The SGA Act provides that a superannuation guarantee charge imposed on an employer's shortfall for a year is payable by the employer: see s 16 of the SGA Act. According to s 17 of the SGA Act (as at the relevant time) a superannuation guarantee shortfall for a year is worked out by adding together: (1) the total of the employer's individual superannuation guarantee shortfalls for the year; (2) the employer's nominal interest component for the year; and (3) the employer's administrative component for the year. Provision is made in s 19 of the SGA Act for the calculation of the amount of the shortfall. Provision is made in s 31 of the SGA Act for the calculation for the nominal interest component. Provision is made in s 32 of the SGA Act for the calculation of an employer's administrative component. It is unnecessary to refer to the details of these calculations here. 4 At the relevant time, the SGA Act required an "employer", who had a superannuation guarantee shortfall in a year, to lodge with the Commissioner a "superannuation guarantee statement" on or before 14 August in the following year, or any later day allowed by the Commissioner: see s 33 of the SGA Act (as it then stood). This "statement" in effect acted as a self assessment of the liability of the employer to pay a charge to the Commissioner for the year concerned: see s 35 of the SGA Act. The SGA Act permitted an employer to reduce the amount of the shortfall to nil, but to do so, the employer was required to make superannuation contributions for employees at the prescribed rate based on the appropriate earnings base to a complying superannuation fund by 28 July in the year following the year of income: see s 23(6A) of the SGA Act (as it stood at the relevant time). 5 The Tribunal recorded the salient and undisputed facts in its reasons for decision. In the financial year ending 30 June 2003, the applicant was an employer, for the purposes of the SGC Act and the SGA Act and, as such, was obliged to provide superannuation support for its eligible employees. The applicant made superannuation contributions for employees on 31 July 2003, and not 28 July as provided in s 23(6A) of the SGA Act. 6 The respondent Commissioner issued an SGC assessment pursuant to s 36 of the SGA in the following amounts: Total individual shortfalls $27,735.71 Nominal Interest $8,267.51 Administrative component $200.00 7 The applicant also became liable to an assessment of penalty pursuant to Pt 7 of the SGA Act. A penalty was imposed and subsequently remitted upon the basis that the applicant had made its superannuation contribution only three days late. 8 Before the Tribunal, the applicant, who appeared by its director, contested the SGC on the grounds that the assessment required the applicant to pay again the amount of the superannuation contributions and gave an unexpected and unmerited windfall to the employees in question. This was unfair, so the applicant said, because the delay in payment was immaterial. The applicant informed the Tribunal that s 117(3) of the Superannuation Industry (Supervision) Act 1993 (Cth) precluded it from recouping the overpaid amounts directly from the relevant superannuation fund and that the overpayments could not be applied to the subsequent financial year because the applicant had ceased to trade. 9 In the Tribunal, the respondent argued that there was no power to remit all or part of the SGC, nominal interest or administrative component. 10 The Tribunal held that the respondent had no discretion to remit the SGC and no discretion to remit or waive the nominal interest or the administrative component. It followed that the Tribunal too was unable to remit the impost, nominal interest or administrative component. The Tribunal acknowledged that this result was not without its difficulties and would "serve only to unduly penalise the employer for a relatively minor administrative oversight". 11 The applicant wishes to appeal, out of time, against this decision. 12 Section 44(1) of the Administrative Appeals Tribunal Act 1975 (Cth) ("AAT Act") provides that a person such as the applicant may appeal to this Court "on a question of law" from any decision of the Tribunal. The AAT Act provides that such an appeal is to be instituted not later than 28 days after "a document setting out the terms of the decision of the Tribunal is given to the person or within such further time as the [Court] allows": see s 44(2A) of the AAT Act. Where a person makes an application to institute an appeal out of time, the Court will consider the relevant factors, including any explanation the applicant may advance for the delay and the applicant's prospects on the appeal, if leave were granted: see, for example, Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-349 per Wilcox J. There may be other matters too, such as the prejudice to the applicant, or the respondent. 13 It is not suggested that the respondent would suffer any prejudice by reason of the applicant's delay in instituting the appeal if leave were granted. The Tribunal gave its decision on 10 November 2006 and emailed a copy of the decision to the applicant's accountant the same day. The delay in instituting this application on 11 December 2006 is insignificant. Unsurprisingly, the respondent neither consents to nor opposes the application for an extension of time. 14 If there were merit in the appeal, then a refusal to grant leave would plainly prejudice the applicant. 15 The applicant's explanation for the delay is straightforward enough. Its director, Mr Howard Bellin, appeared before the Tribunal and has taken responsibility for the late institution of the appeal. He deposed that: "It was my understanding that the time for an appeal would start to run from the receipt by me of a hard copy of the Tribunal's decision which I received on or about December 6 2006. In this regard, I assumed the decision would come to me and not to my accountants, for the reason that I appeared at the Tribunal on the applicant's behalf." 16 These considerations militate in favour of a grant of an extension of time. 17 However, having considered the applicant's draft notice of appeal and the issues it wishes to agitate, I would refuse the application. I turn to the factors that militate against the applicant. 18 First, the notice of appeal as presently drafted does not state a ground of appeal that this Court can hear and determine. Under s 44(1) of the AAT Act, the subject matter of an appeal from the Tribunal is the question of law that is raised by the appeal: see Ergon Energy Corporation Ltd v Commissioner of Taxation (2006) 153 FCR 551 at 572 per Gyles J (dissenting in the application of the principle) and Comcare v Etheridge (2006) 149 FCR 522 at 527 per Branson J. 19 The applicant's draft notice of appeal, filed on 30 March 2007, stated: "The questions raised on appeal: The decision of the AAT is harsh, unconscionable and contrary to the public interest. The decision of the AAT is a denial of natural justice bearing in mind that the superannuation contributions in question were only 3 days late. Please see below for comments on the merits of the two previous statements. The assessment for the superannuation payments which were paid 3 days late was not issued until 2 years after the event. Had the assessment been made in a timely manner, the superannuation payments could have been made and accounted for in a future period as the company did not, at that time, have a controller appointed. Subsequent to the late payment, the Superannuation Guarantee (Administration) Act 1992 was changed to allow an additional 28 days for payment. Section 62(3) of the act says: The Commissioner may remit all or part of the additional superannuation guarantee charge payable by an employer under this Part, but for the purposes…" 20 In written submissions filed on 19 April 2007, the applicant further stated: "Additional explanation as to the appellant's merits of the appeal The decision by the Administrative Appeals Tribunal rewards the appellant's ex-employees by forcing the appellant to pay the appellant's required superannuation payments twice. There is nowhere in the Western World's firmament of law where third parties are rewarded when a federal, state or local law is breached. Western natural justice usually requires that a penalty be paid to the state or that those aggrieved are recompensed. In this case, all ex-employees had their superannuation payments made by the appellant, albeit three days late. No one suffered or was disadvantaged. Such a situation is bad law and clearly fits the social, if not the legal, interpretation of a harsh and unconscionable action. The Australian government admitted the Super Guarantee (Administration) Act 1992 was flawed by altering the act to allow an additional 28 days for payment. The appellant was put into administration on February 2 2004. The late payment was for the period to June 20 2003. Prompt action by the Australian Tax Office would have allowed the appellant to make up payments on a monthly basis and also to consult with its employees, an option not available once a creditor was appointed. All insurance companies with which the appellant's ex-employees have superannuation accounts have advised that they cannot, by law, refund any double payments made. Should the ATO win the case and exercise its rights to liquidate the appellant, it is difficult to see who benefits. Taxpayers will pay for a vindictive action and the courts will support what has been acknowledged as bad law by the Australian Parliament." 21 I accept that, as the respondent argued in written submissions, the applicant's draft notice of appeal does not raise any question of law. I make the observation, not by way of criticism but by way of explanation: the applicant's written reply and oral presentation this morning did not effectively address this point. What is meant by "a question of law" is often and understandably a matter of some difficulty, especially for non-lawyers. 22 In his written response, the applicant said, amongst other things: "Decisions which are harsh, unconscionable and contrary to the public interest are matters of law under other jurisdictions including the Industrial Arbitration Court of New South Wales. … Being forced to make duplicate payments to individuals that have not been disadvantaged is a clear denial of natural justice. Had the respondent advised of the deficient payment in a timely manner, the payment would have been made before the company had a controller appointed. The change in the law acknowledges that the previous law was bad. Why would the respondent want to support bad law? Who benefits? … The respondent is pursuing payments on behalf of third parties which the appellant cannot currently make and, in all likelihood, will not be able to make in the future. The question as to who benefits from the current action must be asked. Does it serve justice for the respondent, a government body, to reward the appellant's ex-employees by double paying their superannuation contributions? While the law may require payment, there is clearly nothing in law or in natural justice that required the respondent to pursue that payment." 23 Mr Bellin, who represented the applicant this morning, drew attention to the fact that the Parliament had amended the legislation in recognition of the fact that it had operated unjustly. He submitted that enforcement of the assessment would not advantage anyone. He also referred to the circumstances, which he said had led to the assessment being made, although there was, I observe, no evidence before me of these latter matters. 24 I turn to the first ground of the applicant's draft notice of appeal. It is irrelevant that, under different statutory regimes, appeals are permitted on the ground that a decision under appeal is "harsh, unconscionable and contrary to the public interest". The proper focus is the nature of the appeal permitted by s 44 of the AAT Act, being the statutory provision that governs appeals from the Tribunal to this Court. The first ground simply does not disclose a question of law. Rather, it would have the Court make a value judgment about the merits of the Tribunal's decision, alternatively, about the operation of the SGC Act and the SGA Act. 25 The second ground of the draft notice is without substance. The common law principles of natural justice, otherwise known as procedural fairness, concern the decision-making procedure or the impartiality of the decision-maker. Common law natural justice, which the applicant invokes, is not concerned with the merits of a decision, as the applicant would have it. There is no suggestion that the Tribunal breached any aspect of the rules of natural justice in making the decision the applicant seeks to appeal. 26 The applicant's third ground also discloses no question of law. Rather, it is an attack on the respondent's delay in making the primary decision. This matter is immaterial to the issue whether the decision-maker had power to remit or waive some part of the impost, although it goes some way to explaining the applicant's dissatisfaction. In particular, this ground does not identify any source of power for remitting the SGC, nominal interest or administrative component. In any case, as counsel for the respondent pointed out this morning, the applicant may have been in a better position had it lodged a superannuation guarantee statement pursuant to s 33 of the SGA Act, because it may then have been in a position to offset the payments it made against a future year's contribution. Time passed by because the applicant defaulted in making such a statement. 27 The fourth ground is apparently a reference to s 23A of the SGA Act. This provision was introduced by the Tax Laws Amendment (Loss Recoupment Rules and Other Measures) Act 2005 (Cth), with effect from 14 December 2005. Section 23A has effect for contributions made on or after 1 January 2006 in respect of the quarter ended 31 December 2005 and subsequent quarters. Section 23A of the SGA Act is therefore of no assistance to the applicant. 28 The fifth ground of appeal is also unhelpful. Section 62 of the SGA Act, which the applicant invokes, relates to additional superannuation guarantee charge under Pt 7. The nature of additionalsuperannuation guarantee charge is clear from the SGA Act. Additionalsuperannuation guarantee charge is imposed for failing to provide a superannuation guarantee statement or other relevant information: see s 59 of the SGA Act. In the applicant's case, this has in fact been remitted. 29 The applicant's submissions, both written and oral, disclose that the proposed appeal would in substance be an attack on the wisdom and justice of the law that the Parliament has made and that the respondent has applied. Members of the community frequently differ about the wisdom and justice of legislation. This is a very good thing. The courts are bound, however, to uphold a constitutionally valid law of the Parliament. If such a law is to be altered, then it must be done by the Parliament itself. 30 For these reasons, I accept that the draft notice of appeal does not raise any question of law, which the Court might address. 31 Moreover, even if the applicant were able to formulate a question of law raising the issues considered by the Tribunal in this case, it is unlikely that error would be shown in the Tribunal's decision. Section 37 of the SGA Act does provide for the amendment of assessments but it was not suggested, and the circumstances do not indicate, that the power to amend might properly have been exercised in the case of the applicant. As the Tribunal noted, there would appear to be no legislative provision that would accord a decision-maker the power to remit all or part of the SGC, or nominal interest and administrative component: see, in this regard, the discussions in Re Jarra Hills Pty Ltd and the Federal Commissioner of Taxation (1997) 37 ATR 1022; Re Truelove and the Commissioner of Taxation [2000] AATA 276; Re Kancroft (acting as trustee for the Roberson Family Trust) and Commissioner of Taxation [2004] AATA 113; Iwec Pty Ltd v Commissioner of Taxation [2007] AATA 1051; and Victorian Patient Transport Pty Ltd v Commissioner of Taxation [2007] AATA 1239. Certainly, the applicant has been unable to refer me to a source of power to do so. It seems to me, therefore, that not only is the draft notice of appeal fundamentally defective, but any possible appeal has little prospect of success. 32 I would therefore refuse the application for an extension of time in which to appeal. 33 Almost by way of postscript, I note that the applicant was not legally represented on this application. Order 4 r 14(2) of the Federal Court Rules provides that "except as provided by or under any Act, a corporation may not, without the leave of the Court, commence or carry on any proceeding otherwise than by a solicitor". Mr Bellin sought leave to represent the applicant on the basis that: (1) he is the sole director of the applicant; (2) he has represented the applicant in the Tribunal and, to date, in this Court; and (3) the applicant does not have sufficient funds to pay a legal practitioner. 34 The respondent submitted that Mr Bellin had given no good reason why leave should be granted to him to represent the applicant and that he had provided no supporting evidence. 35 The Court's discretion to grant leave to a company to carry on proceedings other than by a solicitor has been considered from time to time. Recently, Bennett J commented in Cytel Pty Ltd v Peoplebank Recruitment Pty Ltd [2006] FCA 985 at [6] that such discretion must be exercised judicially according to the requirements of justice and in favour of the company where sufficient reason is demonstrated. 36 I accept that, as the respondent argued, Mr Bellin produced very little evidence in support of his application to represent the applicant. In other circumstances, this would be reason enough to decline the leave that has been sought. It would appear, however, that a controller has been appointed to the applicant. Given the nature of the application and the particular circumstances of the case, including Mr Bellin's familiarity with the matter, I would grant Mr Bellin the leave he seeks solely for the purposes of my hearing and determining this application. I certify that the preceding thirty-six (36) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Kenny. Associate: Dated: 5 June 2007 Counsel for the Applicant: The applicant was represented by its director, Mr H. Bellin Solicitor for the Respondent: Mr S. Linden of the Australian Government Solicitor Date of Hearing: 5 June 2007 Date of Judgment: 5 June 2007