FEDERAL COURT OF AUSTRALIA Hanna v Deputy Commissioner of Taxation [2020] FCA 1021 File number: NSD 1493 of 2019 Judge: JAGOT J Date of judgment: 21 July 2020 Catchwords: PRACTICE AND PROCEDURE – application for extension of time to review decisions of the Australian Taxation Office – applicant an undischarged bankrupt – applicant lacks standing to bring substantive application – applicant not a "person aggrieved" for the purposes of the Administrative Decisions (Judicial Review) Act 1977 (Cth) – proposed application lacks merit – application refused Legislation: Administrative Decisions (Judicial Review) Act 1977 (Cth) Bankruptcy Act 1966 (Cth) Federal Court Rules 2011 (Cth) Tax Administration Act 1953 (Cth) Cases cited: Arnoya Holdings Pty Ltd v Metway Leasing Ltd [1999] NSWCA 120 Bryant v Commonwealth Bank of Australia [1997] FCA 582; (1997) 75 FCR 545 Civitereale and, Department of Family and Community Services [1999] AATA 486 Cole v Challenge Bank Ltd [2002] FCAFC 200 Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 Heath v Tang [1993] 1 WLR 1421 Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344 Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 Kalanje v Minister for Immigration and Multicultural Affairs [2006] FCA 1618 McCallum v Commissioner of Taxation [1997] FCA 533; (1997) 75 FCR 458 Parker v The Queen [2002] FCAFC 133 Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 Singh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 850 Date of hearing: Determined on the papers Date of last submissions: Applicant: 12 June 2020 Respondent: 30 March 2020 Registry: New South Wales Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 38 Counsel for the Applicant: The applicant appeared in person Counsel for the Respondent: Mr G O'Mahoney Solicitor for the Respondent: Australian Government Solicitor ORDERS NSD 1493 of 2019 BETWEEN: JOHN M HANNA Applicant AND: DEPUTY COMMISSIONER OF TAXATION Respondent JUDGE: JAGOT J DATE OF ORDER: 21 July 2020 THE COURT ORDERS THAT: 1. The application dated 13 September 2019 be dismissed. 2. The applicant pay the respondent's costs as agreed or taxed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT JAGOT J: The proceedings 1 This is an application for an extension of time to allow the applicant to lodge an application for judicial review (the substantive application) of (I infer) two decisions of the respondent. The substantive application is 8 days out of time. 2 The decisions which appear to be the subject of the substantive application are refusals of the applicant's requests for remission of general interest charges accrued to the applicant's tax activity statement account (the GIC); and penalties imposed due to the applicant's failure to lodge income tax returns on time (the FTL penalties). Although this is also not specified in the originating application or submissions, the substantive application is apparently made under s 5 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (the ADJR Act). 3 For the reasons that follow, the applicant's application for an extension of time is refused. Background 4 The GIC and FTL penalties were initially imposed after an audit conducted by the Australian Taxation Office (ATO) in respect of the applicant's business activity during the period 2009–2014 (the audit period). As a consequence of this audit: (1) the applicant's GST registration, which the applicant had cancelled in 2009, was reinstated; (2) the applicant was required to submit quarterly Business Activity Statements (BAS) which had not been paid during the audit period; (3) GIC accrued on the applicant's activity statement account (and has continued to accrue); and (4) the FTL penalties were imposed as a consequence of the applicant's failure to lodge income tax returns on time. 5 On 11 July 2017, the applicant was declared bankrupt pursuant to a creditor's petition lodged by Scahill & Co Pty Limited, the applicant's former accountant, and was notified of the appointment of a trustee of bankruptcy over his bankrupt estate on or around 13 July 2017. 6 In July 2018, the applicant's wife wrote to the ATO Commissioner on the applicant's behalf, requesting that $96,932.10 in accrued GIC and $4,370.00 in FTL penalties be remitted to the applicant. The letter stated that the applicant's wife and son would support the applicant's payment of the remaining amount owed by the applicant to the ATO, which was stated to be $126,435.73, and advised that the applicant's lawyer was seeking an annulment of the applicant's bankruptcy. The applicant's wife sought advice in relation to this request from the ATO by telephone on several occasions in July 2018. The applicant's written submissions state that this request was refused by the ATO in or around September 2018. 7 On 20 September 2018 the applicant's trustee in bankruptcy provided a report to creditors which stated that the applicant intended to annul the bankruptcy, that the trustee had "requested details of the third-party source of these funds" and that "no response, or any proceeds, have been provided to date". 8 On 26 February 2019 the applicant through his registered tax agent lodged an objection with the ATO Commissioner concerning an amended assessment and simultaneously requested that the GIC and FTL penalties be remitted (the remission requests). 9 On 8 April 2019 the respondent provided the applicant's trustee in bankruptcy a proof of debt in the amount of $298,990.38, comprising $295,520.38 in accrued GIC and $4,370.00 in FTL penalties. 10 The respondent refused the remission requests (remission decisions) and notified the applicant of the outcome of each request in separate letters, both dated 8 August 2019 (8 August letters). The 8 August letters each stated that "consideration has been given to your request" and set out the respondent's reasons for deciding that the applicant's circumstances did not warrant remission in either case. The 8 August letters noted that the total amount of unremitted GIC on the applicant's account at that time totalled $122,152.55. 11 The 8 August letters advised the applicant that any application for review of the remission decisions were required to be lodged in the Federal Court within 28 days of the date of each letter (ie, by 5 September 2019) or an extension of time would be required. The applicant's extension of time application was made on 13 September 2019. 12 The ATO Commissioner conducted a search of the National Personal Insolvency Index (maintained by the Australian Financial Security Authority) on 19 November 2019 which showed that the applicant remained, at that date, an undischarged bankrupt. The applicant has not provided any evidence to indicate that his status as an undischarged bankrupt has changed since 19 November 2019. Extension of time 13 The respondent made the remission decisions under s 8AAG in relation to the GIC, and Sch 1, s 298-20(1) in relation to the FTL penalties, of the Tax Administration Act 1953 (Cth) (the TAA). The remission decisions are decisions to which the ADJR Act applies. 14 Sections 11(1)(c) and (3) of the ADJR Act determine the circumstances in which an application such as the substantive application may be lodged. Section 11(1)(c) provides that, where a decision has been made, and the terms of this decision have been recorded in writing and set out in a document furnished to the applicant, any application for review of that decision must be lodged with the registry of the relevant court within the "prescribed period" or "such further time as the court concerned … allows". 15 Section 11(3)(a) of the ADJR Act provides that the prescribed period for the purposes of s 11(1)(c), where the decision sets out the findings on material questions of fact, refers to the evidence or other material on which those findings were based, and gives the reasons for the decision, is 28 days after "a document setting out the terms of the decision is furnished to the applicant". Section 2(6) of the ADJR Act provides that document is "furnished" where it has been posted to the relevant person at the address the person has provided, or where no such address has been provided, to the person's last known place of residence. 16 Accordingly, the substantive application should have been filed by 5 September 2019, which is 28 days after the 8 August letters were posted to the applicant's last known address. Principles 17 The principles applicable to the exercise of the Court's discretion to grant an extension of time were set out in Hunter Valley Developments Pty Ltd v Cohen [1984] FCA 176; (1984) 3 FCR 344 at 348–9, and adopted by the Full Federal Court in Parker v The Queen [2002] FCAFC 133 at [6]: 1. applications for an extension of time are not to be granted unless it is proper to do so; the legislated time limits are not to be ignored. The applicant must show an "acceptable explanation for the delay"; it must be "fair and equitable in the circumstances" to extend time; 2. action taken by the applicant, other than by way of making an application for review, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished; 3. any prejudice to the respondent in defending the proceedings that is caused by the delay is a material factor militating against the grant of an extension; 4. however, the mere absence of prejudice is not enough to justify the grant of an extension; and 5. the merits of the substantial application are to be taken into account in considering whether an extension of time should be granted. 18 In respect of this last principle, subsequent case law has stated that an extension of time will not be granted where the substantive application is without merit: Kalanje v Minister for Immigration and Multicultural Affairs [2006] FCA 1618 at [5]. Further, in making an assessment, the Court is not required to go into too great a detail, but is to "assess the merits in a fairly rough and ready way": Jackamarra v Krakouer [1998] HCA 27; (1998) 195 CLR 516 at [7]–[9]. Discussion 19 The respondent's written submissions focused on the applicant's status as an undischarged bankrupt. The respondent submitted that the application should be dismissed on the basis that the applicant did not have standing to bring the substantive application. These submissions were as follows: (a) By reason of s 58 of the Bankruptcy Act 1966 (Cth), the property of the Applicant vested in the trustee in bankruptcy on the day of the trustee's appointment (that is, 11 July 2017)…; (b) "Property" for present purposes is defined in s 5 as follows: real or personal property of every description, whether situated in Australia or elsewhere, and includes and estate, interest or profit, whether present or future, vested or contingent, arising out of or incidental to any such real or personal property. (c) Section 153 of the Act, under the heading "Effect of discharge", provides that where a bankrupt person is discharged from bankruptcy, that discharge operates so as to release him or her from all debts provable in the bankruptcy (s 153(1)). There are a number of exceptions to this position (see, for example, s 153(2)) but none of them are enlivened presently, where it is not in dispute that the Applicant remains an undischarged bankrupt; (d) Section 60(2) of the Act provides that an action commenced by a person who subsequently becomes bankrupt is stayed unless the trustee elects to prosecute or discontinue it. Exceptions to this position are set out at s 60(4) but, once again, they do not arise presently; (e) Section 116 of the Act permits recovery of property but provides that, if recovered, such property is divisible amongst creditors. In such a matter, the proper applicant would be the trustee who is vested with the property; (f) The applicant is not a "person aggrieved" by a decision which enlivens the Court's jurisdiction under the ADJR Act … prior to his being declared bankrupt … [the applicant] would have been a person aggrieved by the decisions apparently in issue … However, on his becoming bankrupt, the Applicant ceased to be personally liable for the amount of the GIC and/or FTL penalties where they became a debt provable in his estate … [and] is not (and has not been at any relevant time) a person aggrieved by the either of the two decisions which the Commissioner understands to be the subject of these proceedings. 20 The respondent referred to various cases supporting the proposition that an undischarged bankrupt is not a "person aggrieved" for the purposes of the ADJR Act in connection with decisions concerning the bankrupt estate and thus does not have standing to make an application such as the substantive application. 21 In Cummings v Claremont Petroleum NL [1996] HCA 19; (1996) 185 CLR 124 (Cummings), the majority (Brennan CJ, Dawson and McHugh JJ) explained at 137–139: …the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts … A bankrupt's contingent interest in a surplus does not give him an interest which would allow him to sue to enforce proprietary rights and, that being so, it cannot give him an interest to appeal to minimise liabilities … So far as a judgment entered in an action against a bankrupt creates or evidences a provable debt … the bankrupt has no financial interest which would confer locus standi to appeal in his own name against the judgment. That is because it is fundamental to the law of bankruptcy that the bankrupt is divested of both his interest in his property and liability for his provable debts. (Citations omitted). 22 In support of this conclusion, the majority in Cummings explained the correspondingly broad administrative powers of a trustee of bankruptcy under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act), at 138: The powers of a trustee are defined by s 134. By subsection 1(j), the trustee is authorised to 'bring, institute or defend any action or other legal proceeding relating to the administration of [the bankrupt's] estate.' That is ample power to permit the trustee to institute an appeal against a judgment entered against a bankrupt that affects the administration of his estate. 23 In their agreeing minority judgment in Cummings at 148, Dawson and Toohey JJ endorsed the similar conclusion of Hoffmann J in Heath v Tang [1993] 1 WLR 1421 at 1425 that, "in principle a bankrupt cannot in his own name appeal from a judgment against him which is enforceable only against the estate vested in his trustee." 24 The principles in Cummings have been widely followed, for example, in McCallum v Commissioner of Taxation [1997] FCA 533;(1997) 75 FCR 458 (McCallum) at 475E, where Lehane J (Whitlam J agreeing) held that, while a trustee in bankruptcy had standing to bring an application to the Administrative Appeals Tribunal to review an objection decision of the ATO, a bankrupt "will not have standing merely because, for example, a successful challenge to the objection decision may result in a surplus in his bankrupt estate". 25 The reason for a bankrupt's lack of standing was explained by Carr J in Robertson v Deputy Commissioner of Taxation [2003] FCA 944; (2003) 23 ATR 824 at [23]: It is quite clear from the High Court's decision in Cummings and the majority judgments in McCallum that the reason why the bankrupt loses standing is because the debt concerned is payable solely out of the bankrupt's estate, and is no longer otherwise recoverable from the debtor. (Citations omitted). 26 The authorities relied on by the respondent do not state that an undischarged bankrupt will never have standing to bring an application such as the substantive application. For example, in McCallum Lehane J (Whitlam J agreeing) said at 462 that it was conceivable that an undischarged bankrupt would have standing in limited circumstances such as where "an objection decision in relation to a particular assessment will have consequences in relation to tax payable … in years following discharge from bankruptcy, for which [the bankrupt] will be personally liable". However, his Honour did not express any opinion about this possibility, and the applicant has made no submissions relating to any future interest of the kind adverted to by Lehane J. 27 The respondent's written submissions also referred to a number of cases considering s 60(2) of the Bankruptcy Act, which provides that an "action" commenced by a person who then becomes bankrupt is stayed upon his or her becoming bankrupt "until the trustee makes election, in writing, to prosecute or discontinue the action". The mechanism in s 60(2) reinforces the conclusion that a bankrupt does not have standing to bring an application such as the substantive application. 28 The respondent submitted that an appeal constitutes an "action" for the purposes of s 60(2) of the Bankruptcy Act, relying on Kirby P's statement in Daemar v Industrial Commission of New South Wales (1988) 12 NSWLR 45 at 54 that the term "action" in s 60(2) is "given an extremely wide definition to embrace 'any civil proceeding, whether at law or in equity'". 29 Justice Young endorsed Kirby P's statement in Savage v Australian Unity Funds Management Ltd [2011] NSWCA 270 at [15], and also stated that there are "a number of authorities that support the proposition that an appeal is within the term 'action'", including Cummings, Arnoya Holdings Pty Ltd v Metway Leasing Ltd [1999] NSWCA 120 at [14], Bryant v Commonwealth Bank of Australia [1997] FCA 582; (1997) 75 FCR 545 at 547 and Cole v Challenge Bank Ltd [2002] FCAFC 200 at [11]. 30 The respondent referred to a number of decisions in administrative review contexts which relied on the reasoning that a bankrupt lacks standing to bring an action in respect of the bankrupt estate when he or she does not have an interest in that estate. For example, in Civitereale and, Department of Family and Community Services [1999] AATA 486 at [83]–[84], the Administrative Appeals Tribunal found that it had jurisdiction because the applicant's interest in the review of the relevant decision "extend[ed] beyond the immediate effect of his bankruptcy to his future financial interests once he has been discharged from bankruptcy". Similarly, in Singh and Secretary, Department of Families, Housing, Community Services and Indigenous Affairs [2009] AATA 850 at [24], Member Handley stated that "the applicant, as a bankrupt is not who has an interest which is affected by a decision that he would want to review … Any interest he might have had, but for the bankruptcy, can only be pursued, if at all, by his Trustee and then, for the benefit of creditors." 31 I accept these submissions. The authority referred to above clearly supports the proposition that a person such as the applicant has no proprietary interest in the bankrupt estate, and is therefore not a "person aggrieved" by the remission decisions for the purposes of the ADJR Act. Although the cases referred to by the respondent qualify that an undischarged bankrupt may have standing where the relevant decision affects some future interest that exists after he or she has been discharged from bankruptcy, no submissions to this effect were put by the applicant. 32 It necessarily follows that the application is without merit, leading to the conclusion that the application for an extension of time should be dismissed. 33 The respondent also submitted that: …the materials relied on by the Applicant (including the application, the supporting affidavits and written submissions) do not, with any clarity or cogency, identify with precision the nature of the application which the Applicant seeks leave to file. 34 In this respect, the respondent pointed to parts of the application which seek relief which this Court cannot provide: There is reason for thinking – having regard to the Hanna Affidavit which was filed in support of the Application – that the relief sought presently goes beyond the jurisdiction of the Court. For example, paragraph 55 of the Hanna Affidavit reads as follows: As a commercial reality I beg the court to ask the ATO to accept a 100 cents [sic] in a dollar of the original amount which pays for social securities [sic] and hospitals and other community services. … In your hand, I surrender my request. … The Applicant's submissions appear to culminate in a "PROPOSAL" which again goes beyond the Court's jurisdiction presently … that is, for example, he … is seeking a "bankruptcy composition…such that he wishes to put forward a proposal to his trustee in bankruptcy in satisfaction of his debts" … [and] outlines the importance of the Commissioner "voting in favour of such an arrangement". 35 I agree also with this submission. The relief which the applicant seeks is unclear. I have taken it to be judicial review of the remission decisions which is suggested by the terms of the applicant's submissions and the context. 36 In relation to the other extension of time considerations, I note that the applicant's delay was minimal, being a period of only 5 days. 37 No submissions were made regarding any prejudice to the respondent should the extension of time be granted. 38 Weighing all the factors referred to above, I consider that the extension of time should be refused. Although the applicant's delay in bringing the application is minimal, the applicant is an undischarged bankrupt and as such does not have standing to make the substantive application. Accordingly, the application for an extension of time should be dismissed. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Jagot. Associate: Dated: 21 July 2020