Finerty v Deputy Commissioner of Taxation [2008] FCA 1136

FEDERAL COURT OF AUSTRALIA

Finerty v Deputy Commissioner of Taxation [2008] FCA 1136

GREGORY WILLIAM FINERTY v DEPUTY COMMISSIONER OF TAXATION

QUD 289 OF 2007

SPENDER J

23 JULY 2008

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 289 OF 2007

BETWEEN: GREGORY WILLIAM FINERTY

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: SPENDER J

DATE OF ORDER: 23 JULY 2008

WHERE MADE: BRISBANE

THE COURT ORDERS THAT:

1. The objection decision under review is set aside in respect of the assessment for the year ended 30 June 2000 to the extent of the assessment by the Commissioner of $52,797.89 for understatement penalty, and is to be remitted to the Commissioner for reconsideration according to law. 2. Otherwise, the objection decision, and in particular the objection decision insofar as it relates to the assessment for the year ended 30 June 2001, the assessment for the year ended 30 June 2002, and the assessment for the year ended 30 June 2003, is affirmed. 3. The applicant pay the respondent's costs of and incidental to the proceedings, to be taxed if not agreed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY QUD 289 OF 2007

BETWEEN: GREGORY WILLIAM FINERTY

Applicant

AND: DEPUTY COMMISSIONER OF TAXATION

Respondent

JUDGE: SPENDER J

DATE: 23 JULY 2008

PLACE: BRISBANE

REASONS FOR JUDGMENT 1 On 7 September 2007, Gregory William Finerty (the applicant) appealed to the Federal Court against what was said to be an appealable objection decision made by the respondent, seeking to have that decision set aside or varied in the matter set out in his application. 2 The objection decision, so-called, related to four notices of assessment for the year ended 30 June 2000, the year ended 30 June 2001, the year ended 30 June 2002, and the year ended June 2003. In a single document, the Australian Taxation Office indicated that it had considered "the objection" dated 9 March 2007 against the notices of assessment for those four years and disallowed "your objection." That decision was accompanied by a document headed Reasons for Decision. Paragraph 8 of those reasons is as follows: On objection, a request for further information was forwarded to you, the detail of which would have assisted in determining if the Commissioner was in error determining the taxable income as assessed for each of the 1999-00, 2000-01, 2001-02 and 2002-03 income years. This information was not provided. 3 On considering the objection, the Commissioner decided that additional information was required in order to clarify and determine whether the taxable incomes for the periods under review were incorrect. Further information was requested on 17 May 2007 to support the applicant's claims that the assessment should be reduced to nil. No response was received by 14 June 2007. A reminder letter issued on 15 June 2007 granting a further 14 days to respond; no response was received. 4 In an affidavit in support of the application to the Federal Court Mr Finerty said: My Accountants did make several attempts to contact me in May and June 2007, but were unable to do so due to my exceptional circumstances at that time. During May, June and early July I was working nights from 11 pm till 6 am at Main Beach Gold Coast and then travelling to the North Side of Brisbane each day to care for my partner Madonna Healy who was dying from Bowel and Liver cancer and in the Palliative Care unit at The Prince Charles Hospital in Chermside Brisbane. Madonna passed away on Fri 20th July 2007. I had previously made the Federal Magistrates Court and the Taxation office aware of Madonna's condition. 5 Paragraph 2 of that affidavit says: Due to my commitments with work, caring for my invalid Mother and also caring for Madonna I was difficult to contact and therefore not aware that my Accountants required this additional information. 6 Paragraph 3 says: I am now in a position to provide this information to either the Australian Taxation Office or The Federal Court and would like to do so if I am granted this appeal. 7 Paragraph 4: I received all relevant Australian Taxation Office correspondence from my accountant on Fri 17th August and wrote to Mr Steve Dhillon of Legal Services Branch, Australian Taxation Office on Monday 20th August. See Annexure A. 8 As that affidavit indicates, all the relevant correspondence from the Australian Taxation Office was received from Mr Finerty's accountant by him on Friday 17 August 2007. There is also in that affidavit the claim, which Mr Finerty today says is not accurate, that he was in a position then, on 7 September 2007, to provide the additional information to either the Australian Taxation Office or the Federal Court. 9 This matter has been set down for trial for today and tomorrow. Yesterday, Mr Finerty wrote a six-page letter to the Deputy District Registrar, the main parts of which were copied to the Australian Government Solicitor, in which he sought an adjournment. 10 The Registrar, on my direction, replied by facsimile to Mr Finerty, indicating that the extensions sought and the vacation of the trial dates sought would not be granted on the papers and that Mr Finerty should, if he wished, seek the adjournment of the trial today. That is what he has done. 11 The application for an adjournment of the trial is the second such application that has been made by the applicant and the present application was foreshadowed only the day before the trial was due to commence. 12 For the following reasons, I decline to vary any of the orders that have been previously made. In particular, I decline to vacate the trial dates for this matter. That decision has to be viewed in the context of the following. 13 Mr Finerty did not file income tax returns for the 2000, 2001, 2002 and 2003 income tax years when those returns ought to have been filed. As a consequence, the ATO issued default assessments for those years. An objection decision dated 10 July 2007 was then made disallowing Mr Finerty's objections against the default assessments which had been issued for those four tax years. 14 Section 14ZZ of Taxation Administration Act 1953 provides: 14ZZ Person may seek review of, or appeal against, Commissioner's decision If the person is dissatisfied with the Commissioner's objection decision (including a decision under paragraph 14ZY(1A)(b) to make a different private ruling), the person may: (a) if the decision is both a reviewable objection decision and an appealable objection decision—either: (i) apply to the Tribunal for review of the decision; or (ii) appeal to the Federal Court against the decision; or (b) if the decision is a reviewable objection decision (other than an appealable objection decision)—apply to the Tribunal for review of the decision; or (c) if the decision is an appealable objection decision (other than a reviewable objection decision)—appeal to the Federal Court against the decision. Section 14ZZO provides: 14ZZO Grounds of objection and burden of proof In proceedings on an appeal under section 14ZZ to the Federal Court against an appealable objection decision: (a) the appellant is, unless the Court orders otherwise, limited to the grounds stated in the taxation objection to which the decision relates; and (b) the appellant has the burden of proving that: (i) if the taxation decision concerned is an assessment (other than a franking assessment)—the assessment is excessive; or (ii) if the taxation decision concerned is a franking assessment—the assessment is incorrect; or (iii) in any other case—the taxation decision should not have been made or should have been made differently. 15 As indicated, the respondent issued default assessments pursuant to s 167 of the Income Tax Assessment Act 1936 (ITTA) following the applicant's failure to lodge taxation returns for the years in dispute. At the material times, the applicant was the sole director and shareholder of two companies: GWF Trading Pty Ltd and Lynx Equity Trading Pty Ltd. 16 The respondent said that it demanded the outstanding returns from the applicant by letter dated 12 May 2004. No return was received. On 17 November 2004, the respondent issued default assessments and on the basis of those assessments, the respondent imposed penalties on the applicant by notice of assessment of penalty dated 22 November 2004. 17 On 9 March 2007, the applicant objected to the assessment of the penalties. The respondent says that by letter dated 17 May 2007 it sought more information from the applicant in support of his objection, but no response was forthcoming. Accordingly, on 10 July 2007, it disallowed the objections, and by the application dated 7 September 2007, the applicant applied to this Court for review. 18 As the affidavit of Mr Finerty of 7 September 2007 makes plain, he had received all relevant correspondence from his accountant on Friday 17 August 2007. The applicant's claim is that when all the relevant information is properly considered, the assessments of the respondent are manifestly excessive. Indeed, he argues that his tax should be assessed as nil. 19 The position, however, is as follows. On 21 December 2007, I made directions concerning the conduct of this matter. Those were as follows: 1. The applicant file and serve a statement of facts issues and contentions by 15 February 2008. 2. The applicant file and serve any affidavits upon which he intends to rely at the hearing of the appeal by 7 March 2008. 3. The respondent file and serve any affidavits upon which he intends to rely at the hearing of the appeal by 28 March 2008. 4. The applicant file and serve any affidavits in reply by 11 April 2008. 5. The parties are to give notice in writing of any intention to cross examine any deponent of any affidavit filed herein, not later than fourteen (14) days prior to the date set for the hearing. 6. The matter be listed for trial for 2 days on 22nd and 23rd April 2008, commencing at 10.15 am. 7. The parties have liberty to apply on the giving of two (2) days notice in writing. 8. Costs be reserved. 20 In a letter to the Court dated 7 March 2008, Mr Finerty asked the Court for those orders to be varied. He asked that the time within which he was to file and serve any affidavits upon which he intended to rely at the hearing of the appeal be extended to 16 May 2008; that the respondent have until 6 June 2008 to file its material in response, and the material by the applicant in reply be extended to 20 June 2008; and as to a trial date, he asked that the trial dates be vacated and the matter be re-listed for hearing on a date after 30 June 2008. 21 Having regard to the attitude of the respondent to that application for variation of the directions that I had given and the vacation of the trial dates which I had set down, I made the orders that Mr Finerty then sought. 22 Yesterday, Mr Finerty wrote to the Deputy Commissioner of Taxation seeking that the order relating to the filing of any affidavits on which he intended to rely be extended to Friday 31 October 2008, and after dealing with the times in which material for the respondent is to be filed, that the trials dates be vacated, and the matter be re-listed for hearing on a date after Friday 19 December 2008. That letter also included the grounds upon which Mr Finerty sought those changes. I have admitted into evidence the letter sent yesterday to the Deputy Registrar. That letter will be marked Exhibit 1 on this application for an adjournment. 23 It is unnecessary to set out in full the contents of that letter, but the grounds essentially are that because of difficulties of a serious kind with the health of his mother and his present fiancée, because of having to move his house, his office, and the house of his invalid mother twice, because of the difficulties of trading as a trader and fund manager specialising in the United States market which calls for evening work, and his mother's ill health and the difficulties associated with the various moves that he has made, Mr Finerty has not been in a position to comply with the directions which I made, at his request, in March 2008. 24 In particular, Mr Finerty has not filed any affidavits in respect of the matters on which he wishes to rely on this appeal. In the letter to the District Registrar, Mr Finerty says that his largest client, one Mario Ferns, had closed his brokerage accounts which Mr Finerty was trading on his behalf and said: e) So now my immediate focus has to be on getting the new company up and running, securing shareholders and the funds to trade. This will provide me with the required income to support my business, myself, my Mother and my Fiancé. … With the company fully funded, trading profitably and paying myself a regular wage I will be in a position to take care of the financial needs of my Mother, my fiancé and myself. I am confident this will all be achieved by the end of September 2008. f) This will then allow me all of October to sort through the remaining boxes, assemble the required documentation, get the necessary legal and accounting advice and submit the necessary affidavits by the 31st October 2008 as I have indicated I would do above and assuming the court grants me the extension of time I have requested. 25 The fact of the matter is, therefore, that for the reasons which he has advanced, there has been absolutely no compliance with the initial directions to file the affidavits upon which he wished to rely, or the extended period granted by the Court within which to comply with that request, and on the day before the trial is due to commence, Mr Finerty seeks that that direction be extended until 31 October 2008. 26 Given the history of the matter and the lateness of the application for an adjournment, I am in no doubt at all that the interests of justice require that the application for an adjournment be refused. 27 The chronology of events and the history of the litigation in this Court, the vacation of the first trial dates, and the application on the day preceding the first of the two adjourned trial dates, indicates that Mr Finerty's statement in his affidavit of 7 September 2007, that he is now in a position to provide the necessary information to support his claim, was wrong when it was made, and nothing has been done to rectify it since 10 July 2007. 28 I do not want it to be understood that I am unaware or unsympathetic to the personal circumstances that have attended Mr Finerty at least since 10 July 2007, which he has referred to extensively in the letter to the Deputy Registrar. However, the fact of the matter is that none of that can justify the failure to prepare any information or make an earlier application for the adjournment of the trial for the reasons which he now relies on. 29 I am conscious of the observations of the High Court on the right of a party to be heard in State of Queensland v JL Holdings Pty Ltd (1997) 189 CLR 146. In this particular case, as the history shows, there have been two trial dates allocated. 30 The first was vacated by an application made in a timely way in March 2008 in respect of a trial listed for 22 and 23 April. In respect of the trial that was listed for hearing today and tomorrow, the application for an adjournment was made, and notice of the application given to the respondent, only the day before the trial. The inability to comply with the directions to prepare for trial, an inability which has clearly been well known to Mr Finerty for months, was also not advanced to either the Court or to the Australian Taxation Office, or the Australian Government Solicitor until yesterday. 31 In those circumstances the application for an adjournment is refused. 32 In relation to the appeal itself, the position shortly put is this: the onus which is imposed on the applicant by section 14ZZO of the ITAA has not been discharged, except as to the amount of $52,797.89, as conceded by Counsel for the Deputy Commissioner of Taxation. The reasons for the inability to put material to discharge that onus before me are those claimed by Mr Finerty in his letter to the Deputy Registrar yesterday. 33 Those reasons, while they might have a relevance to the failure to provide evidence to discharge the onus, are not a substitute for that evidence. Essentially, Mr Finerty today sought an extension of time until the end of October to be able to trawl through material to be able to substantiate, if possible, the claim that he makes. However, there is nothing to indicate that that aim is achievable. Rather, it is the hope or expectation that that would be the result of going through the documents. There is simply no evidence properly before the Court to establish that the assessments are excessive, except as to the amount that I have indicated the Deputy Commissioner concedes is improperly included in respect of the assessment for the 2000 tax year. 34 In those circumstances I make the following orders: 1. The objection decision under review is set aside in respect of the assessment for the year ended 30 June 2000 to the extent of the assessment by the Commissioner of $52,797.89 for understatement penalty. That matter is remitted to the Commissioner for reconsideration according to law. 2. Otherwise, the objection decision, and in particular the objection decision insofar as it relates to the assessment for the year ended 30 June 2001, and to the assessment for the year ended 30 June 2002, and for the assessment for the year ended 30 June 2003, is affirmed. 3. The applicant should pay the respondent's costs of the proceedings, to be taxed if not agreed. I certify that the preceding thirty-four (34) numbered paragraphs is a true copy of the Reasons for Judgment herein of the Honourable Justice Spender.