Case: Hunter Valley Developments v Cohen (1984) 3 FCR 344
Outcome: cited
Paragraphs 18 to 20, dealing with the exercise of the discretion, under the general heading "Ruling" stated, inter alia: 18. In exercising the discretion under subsection 80G(6A) (paragraph 170-50(2)(d)), the Commissioner is guided by administrative law principles. These include an obligation to identify and consider all factors that may be relevant to the exercise of the discretion and to give them an appropriate weighting. In determining the relevant factors and their weighting, the Commissioner has regard to the policy of section 80G (Subdivision 170-A) and its context within the Act. Although each case must be decided on its merits, this Ruling provides a guide to taxpayers and ATO officers as to what factors may be relevant in the exercise of the discretion. 19. In cases where there has been delay on the part of the relevant companies in effecting an agreement, the principles outlined in Hunter Valley Developments Pty Ltd &amp; Ors v Minister for Home Affairs and Environment ... (1984) 3 FCR 344 ... and subsequent supporting authorities in respect of statutory discretions to extend time, is relevant to the subsection 80G(6A) (paragraph 170-50(2)(d)) discretion. Following Hunter Valley Developments, the statutory time limit is not to be ignored and, prima facie, agreements must be made within time. Therefore, the onus is on the taxpayer to demonstrate to the Commissioner that the case is an appropriate one for the favourable exercise of the discretion. This generally requires the taxpayer to provide an adequate explanation for the delay. 20. In cases where an agreement is sought to be made out of time as a result of an adjustment to the tax position of the company group by the Commissioner, a relevant factor is the conduct giving rise to the adjustment. For example, where there is fraud or evasion, or a scheme to which Part IVA of the Act applies, this factor weighs heavily against a favourable exercise of the discretion. Conversely, where an adjustment stems from conduct which could not be regarded as culpable, this factor would be weighted in favour of the extension of time being granted. 96 Paragraphs 85 through to 90 dealt with non-compliance with the time limit caused by delay of the taxpayer. Paragraph 85 provided: This category encompasses cases where no agreement has been made prior to the date of lodgment of the income company's return or, where an agreement has been made, the group subsequently discovers, for example: (i) there are further losses within the group available for transfer to the income company; or (ii) the income company has additional income against which unused losses within the group can be offset. The relevant principles applied were those in Hunter Valley Developments v Cohen (1984) 3 FCR 344: 86. In these cases, the Commissioner considers that the principles outlined by Wilcox J in Hunter Valley Developments in respect of statutory discretions to extend time are relevant to the subsection 80G(6A) (paragraph 170-50(2)(d)) discretion, although the case was decided in the context of a different statutory provision. 87. The Commissioner also considers these general principles need to be balanced with a consideration of the underlying policy of section 80G (Subdivision 170-A) (to broadly align the treatment of company groups with divisional companies) and the wider consideration of the proper administration of the Act. 88. In Hunter Valley Developments, Wilcox J stated that statutory time limits are not to be ignored and the onus is on the applicant to convince the decision-maker that the case is an appropriate one for a favourable exercise of the discretion. This would generally require the taxpayer to provide an acceptable explanation of the delay. 89. The length of the delay in making an agreement after the prescribed time is relevant to the exercise of the discretion. Generally, the longer the delay, the greater the onus is upon the applicant to demonstrate an acceptable explanation for the delay (see Stergis and Ors v Boucher and Anor (1989) 86 ALR 174; ... Also, it should not be assumed that the Commissioner will automatically exercise this discretion in circumstances where the request is lodged within the objection period relating to assessments. 90. The Commissioner will weigh the explanation of delay with the other relevant factors referred to in Hunter Valley Developments (for example, public interest considerations and the question of prejudice to either party arising from the exercise or non-exercise of the discretion). 112 The principles enunciated by Wilcox J in Hunter Valley Developments Pty Ltd 3 FCR 344 were said by the Commissioner in Taxation Ruling TR 98/12 to be relevant to the exercise of the statutory discretion under subs 80G(6A) of the ITAA 1936. The Ruling also stated that these general principles need to be balanced with a consideration of the underlying policy of s 80G which was identified as broadly aligning the treatment of company groups with divisional companies. 113 Hunter Valley Developments Pty Ltd 3 FCR 344 concerned the circumstances in which an extension of time would be allowed for bringing an application for an order of review of an administrative decision under s 11 of the ADJR Act. Wilcox J outlined a number of positions emerging from the authorities which he suggested could guide, albeit not in any exhaustive manner, the exercise of the Court's discretion. In summary form (omitting authorities) they were as follows: 1. Although the section does not, in terms, place any onus of proof upon an applicant for extension an application has to be made. Special circumstances need not be shown but the Court will not grant the application unless positively satisfied that it is proper so to do. The "prescribed period" of 28 days is not to be ignored. Indeed it is the prima facie rule that proceedings commenced outside that period will not be entertained. It is a precondition to the exercise of discretion in his favour that the applicant for extension show "an acceptable explanation of the delay" and that it is "fair and equitable in the circumstances" to extend time. 2. Action taken by the applicant, other than by making an application for review under the Act, is relevant to the consideration of the question whether an acceptable explanation for the delay has been furnished. A distinction is to be made between the case of a person who, by non-curial means, has continued to make the decision-maker aware that he contests the finality of the decision (who has not "rested on his rights") and a case where the decision-maker was allowed to believe that the matter was finally concluded. The reasons for this distinction are not only "... for finality in disputes" but also the "fading from memory" problem. 3. Any prejudice to the respondent including any prejudice in defending the proceedings occasioned by the delay is a material factor militating against the grant of an extension. 4. The mere absence of prejudice is not enough to justify the grant of an extension. In this context, public considerations often intrude. A delay which may result, if the application is successful, in the unsettling of other people or of established practices is likely to prove fatal to the application. 5. The merits of the substantial application are properly to be taken into account in considering whether an extension of time can be granted. 6. Considerations of fairness as between the applicants and other persons otherwise in a like position are relevant to the manner of exercise of the Court's discretion. 133 In [28] the submission considered what it called "errors of the decision-maker by reference first to the six general principles referred to by Wilcox J in Hunter Valley ". In [29] to [30] it dealt with the subject of delay and in [31] to [39] the imposition of GIC and the alleged culpable behaviour of Development Finance. Paragraphs 40 to 46 dealt with the Asiamet [2004] FCAFC 73 ; 137 FCR 146 decision. Paragraph 47 asserted under the heading "No limitation" that the Commissioner erred in stating that there was nothing in the subject matter, scope and purpose of s 80G which would imply any limitation upon his ability to consider the conduct of a company group giving rise to an adjustment as being a relevant factor to the exercise of the discretion. The final heading "Additional or collateral penalty" complained that the Commissioner erred in treating the refusal of the discretion as reflecting a need to penalise to a greater extent taxpayers involved in serious non-compliance activities.