The Full Federal Court has unanimously allowed a taxpayer’s appeal from the Federal Court decision in Professional Administration Service Centres Pty Limited v DCT [2012] FCA 278 in which the Federal Court summarily dismissed the taxpayer’s appeal against various GST assessments. The matter had been dismissed essentially on the basis there had been “significant default” on the part of the taxpayer regarding compliance with Court directions and in particular, orders for discovery. In doing so, the Federal Court stated that its orders had not been complied with and no satisfactory explanation for the failure to comply had been offered.

In essence, the case concerned the taxpayer’s claims for input tax credits for payments for various legal services claimed to be taxable supplies to the taxpayer acquired in the furtherance of an enterprise of “litigation funding”. During the periods in question (the quarterly periods between 1 July 2004 and 30 December 2006), the Court said numerous solicitors and barristers had represented Mr Nikytas Nicholas Petroulias in defending criminal charges. Many of the tax invoices for performing that work “appear to have been rendered to and paid for” by the taxpayer, the Full Court said. The taxpayer claimed GST refunds during the periods in question. The Commissioner disagreed and issued GST assessments accordingly. The taxpayer’s objection was disallowed and the taxpayer appealed against that objection decision.

On appeal against the above earlier Federal Court decision, the taxpayer argued that the primary judge erred in failing to take into account there was evidence that there had been substantial compliance with orders made (including explanations for the delay and lack of compliance by the taxpayer), there was no evidence to show the Commissioner would suffer any actual prejudice if the orders were rescinded, the taxpayer would be exposed to significant prejudice by failure to rescind the orders given that time had expired to commence any further proceedings, and the dismissal order was not in accordance with Rule 5.23(1) of the Federal Court Rules in that it was not conditional.

In allowing the taxpayer’s appeal, the Full Federal Court said the issue of injustice would generally be the main consideration. However, it also emphasised that it is well-established that the discretion to set aside interlocutory orders once entered should be exercised in a judicial manner and only in exceptional circumstances, and that this guideline was based on the principle of finality of litigation. The Full Court also noted that apart from the nature and duration of the taxpayer’s default, there was no indication that any other matters were taken into account by the primary judge, and there was no evidence that the taxpayer’s failure to seek an extension of time was due to any deliberate conduct to delay the hearing.

(Professional Administration Service Centres Pty Limited v FCT [2012] FCAFC 180, Full Federal Court, Edmonds, McKerracher and Nicholas JJ, 13 December 2012.)

[LTN 244, 17/12]