Professional Administration Service Centres Pty Limited v Commissioner of Taxation
Document type: Decision Impact Statement
Venue: Federal Court of Australia (NSD 461 of 2012)
Judgment date: 13 December 2012
Date published: 7 February 2013

Summary of decision:

Overview of facts:
The substantive proceeding was an application by Professional Administration Service Centres Pty Limited (PASC) under Part IVC of the Taxation Administration Act 1953 to appeal to the Federal Court against the ATO's objection decision concerning the disallowance of claims made by PASC for input tax credits. | In mid-2011, PASC filed its evidence in reply which included for the first time a number of tax invoices which appeared to have been altered in some way. | On 12 October 2011, the ATO issued a notice to produce the originals, or any other versions, of a number of those invoices. This notice was not complied with. On 2 November 2011, the Federal Court, amongst other things, gave leave to the ATO to file and serve an application for discovery which the ATO did later that day. | On 9 November 2011, the ATO sought an order for production of certain documents. | PASC initially consented to an order for discovery, subject to minor amendments. However, PASC did not respond to attempts to agree to short minutes reflecting this and on 14 November 2011 contended for the first time that no orders should be made. | On 14 November 2011, the Federal Court ordered both discovery and production. | PASC did not comply with either order and, on 19 January 2012, the ATO applied to have the matter dismissed. | On 2 March 2012, the Federal Court allowed the ATO's application and dismissed the matter. This order was stayed until 9 March 2012 and the Federal Court made further orders directing PASC to take certain steps as a pre-condition to a grant of leave to apply to the Federal Court on 9 March 2012 for the orders to be rescinded. | The Full Court observed at [21] that while PASC had not strictly complied with these orders within the stipulated timeframes, PASC had substantially complied with the orders. | On 9 March 2012, PASC failed to convince the Federal Court to rescind the orders to dismiss the matter. | PASC appealed to the Full Federal Court. | Issues decided by the Full Federal Court | The Full Court held that exercise of the primary judge's discretion to dismiss the proceedings had miscarried and that the orders made were 'unreasonable or unjust' (at [55]). Although the task of showing appealable error from discretionary orders in matters of practice and procedure is 'formidable' (at [36]), the primary judge in this case failed to refer to a number of factors relevant to the exercise of the discretion - Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 applied. This was 'unfortunate' because it left the Full Court at [45] to infer that there had been a failure by the primary judge to properly exercise the discretion - House v The King (1936) 55 CLR 499. | The Full Court outlined a non-exhaustive list of matters to be considered in the exercise of the discretion to dismiss a matter for non-compliance, including the nature and duration of the default and whether that default is continuing. | The Full Court raised a concern over whether the discovery order made on 14 November 2012 should have been made in the circumstances. The Full Court further observed that: • there was no evidence of deliberate conduct by PASC to delay the hearing; • there was no evidence of expense, prejudice or unacceptable burden to the ATO because of the default; • there was nothing to indicate that PASC did not wish the matter to go to trial within a reasonable period; • the proceeding was in a very advanced state; • the ability for an interlocutory order to be set aside is not a relevant consideration; and • there was a substantial amount of tax in dispute. | • there was no evidence of deliberate conduct by PASC to delay the hearing; • there was no evidence of expense, prejudice or unacceptable burden to the ATO because of the default; • there was nothing to indicate that PASC did not wish the matter to go to trial within a reasonable period; • the proceeding was in a very advanced state; • the ability for an interlocutory order to be set aside is not a relevant consideration; and • there was a substantial amount of tax in dispute. | The Full Court concluded that the exercise by the primary Judge of his discretion miscarried and allowed the appeal.

Issues decided:
The Full Court held that exercise of the primary judge's discretion to dismiss the proceedings had miscarried and that the orders made were 'unreasonable or unjust' (at [55]). Although the task of showing appealable error from discretionary orders in matters of practice and procedure is 'formidable' (at [36]), the primary judge in this case failed to refer to a number of factors relevant to the exercise of the discretion - Lenijamar Pty Ltd v AGC (Advances) Ltd (1990) 27 FCR 388 applied. This was 'unfortunate' because it left the Full Court at [45] to infer that there had been a failure by the primary judge to properly exercise the discretion - House v The King (1936) 55 CLR 499. The Full Court outlined a non-exhaustive list of matters to be considered in the exercise of the discretion to dismiss a matter for non-compliance, including the nature and duration of the default and whether that default is continuing. The Full Court raised a concern over whether the discovery order made on 14 November 2012 should have been made in the circumstances. The Full Court further observed that: • there was no evidence of deliberate conduct by PASC to delay the hearing; • there was no evidence of expense, prejudice or unacceptable burden to the ATO because of the default; • there was nothing to indicate that PASC did not wish the matter to go to trial within a reasonable period; • the proceeding was in a very advanced state; • the ability for an interlocutory order to be set aside is not a relevant consideration; and • there was a substantial amount of tax in dispute. • there was no evidence of deliberate conduct by PASC to delay the hearing; • there was no evidence of expense, prejudice or unacceptable burden to the ATO because of the default; • there was nothing to indicate that PASC did not wish the matter to go to trial within a reasonable period; • the proceeding was in a very advanced state; • the ability for an interlocutory order to be set aside is not a relevant consideration; and • there was a substantial amount of tax in dispute. The Full Court concluded that the exercise by the primary Judge of his discretion miscarried and allowed the appeal.

ATO view of decision:
On the facts of this matter, it was open to the Full Court to draw the conclusion that the exercise by the primary judge of his discretion miscarried. The decision by the Full Court has clarified factors to be considered in the exercise of the discretion to dismiss a matter for non-compliance.

Administrative treatment:
Nil | Implications for ATO precedential documents (Public Rulings & Determinations etc) | Nil | Implications for Law Administration Practice Statements | Nil

Legislative references: Federal Court Rules 2011 5.23 20.31(3) 20.35 36.10
Case references: House v The King (1936) 55 CLR 499 Lenijamar Pty Ltd v AGC (Advances) Limited (1990) 27 FCR 388
Subject references: Court practice & procedure Discretion to dismiss proceedings