case_text: In Deputy Commissioner of Taxation v Richard Walter Pty Ltd [1995] HCA 23 ; (1995) 183 CLR 168 (" Richard Walter "), in substance the Commissioner made two determinations under s 177F on the same day in respect of the same tax benefit: one that the amount be included in the assessable income of Richard Walter Pty Ltd ("the taxpayer"); and the other that it be included in the assessable income of Morlea Professional Services Pty Ltd ("Morlea"). The taxpayer appealed to this Court against the disallowance of its objection. 123 The Deputy Commissioner sued to recover the unpaid tax in the Supreme Court of New South Wales. The taxpayer sought in this Court an injunction under s 39B of the Judiciary Act 1903 (Cth) ("the Judiciary Act ") restraining him from proceeding with that action. In the s 39B proceeding, the Deputy Commissioner moved for dismissal on the ground that upon production of the notice of the assessment, s 177(1) of the ITAA had the effect that this Court lacked jurisdiction to grant relief under s 39B. The Commissioner's motion was removed to the High Court. 124 In the High Court, upon a stated case, there was reserved for consideration by the Full Court the question raised by the motion. 137 The primary Judge, RD Nicholson, held ( Sleight v Commissioner of Taxation (2003) 53 ATR 667 at (697)) that the making of a s 177F determination was "part of the process of making the assessment ... and not liable to challenge in this proceeding save in respect of matters going to substantive liability: Richard Walter at CLR 178, 203". His Honour held that it followed that any deficiency was validated by s 175. For this last proposition, his Honour referred to Richard Walter at 182, 187-8, 193-5, 196-7, 198-9, 209-211, 222-3 and 240-2. Finally, his Honour noted that no argument had been made that the case fell within "the conditions delineated in R v Hickman ". 139 Hill J, whose eminence in this field is beyond question, delivered the leading judgment. His Honour held that a taxpayer cannot challenge a determination under s 177F on the ground that the Commissioner had erred in the making of the determination, for example, by failing to take into account a relevant consideration. His Honour was clear in his view that ss 175 and 177(1) produced this result. He referred to George at 207 (see [49] above) and Richard Walter at 184 (Mason CJ) (see [128] above). Of the latter passage, Hill J stated (at 237): "In other words, it is not open to a taxpayer to challenge an assessment under Pt IVA by showing some error in the making of that determination." His Honour found support in the fact that in Richard Walter their Honours held that the question in every case was whether there was a tax benefit obtained in connection with a Pt IVA scheme susceptible to cancellation by the Commissioner. Hill J added (at 238): "The question whether the Commissioner's discretion [sic decision] as to whether there was a scheme to which Part IVA applied miscarried is thus not an issue in an appeal. Rather the issue will be, relevant to the present appeal, whether, the determination having been made, there was a scheme to which the provisions of Part IVA applied and if so, whether there was a tax benefit obtained in connection with that scheme. These will be matters of fact and the burden will lie on the taxpayer to show that objectively there was no scheme in connection with which the taxpayer obtained a tax benefit. If the taxpayer satisfies that burden he or she will have shown the assessment was excessive. That will not be shown by the taxpayer demonstrating that the person who made the determination in some way erred in making it so that the discretion conferred upon the Commissioner miscarried." 142 With respect, however, their Honours appear to have found the result to be more clearly dictated by the authorities, and, in particular, by Richard Walter , than I have found it to be. It is not clear to me why the passage from the judgment of Mason CJ in Richard Walter at 184 (set out in [128] above) establishes that in an appeal it is not open to the taxpayer to challenge the making of a determination on judicial review grounds. Moreover, there is no reference to the passage from the judgment of Mason CJ at 187-8 (also set out at [128] above) (the primary Judge, RD Nicholson J, did refer to that passage, but did not discuss it). There is no reference, either, to Gummow J's answer to the second separate question in Jackson (see [104] [106] above) or, admittedly less relevantly, to WA Capital (see [107] [114] above). 143 Hill J also said (at 237) that Richard Walter was consistent with what the High Court said in Peabody at 382 (the passage set out at [119] above). I respectfully agree that that passage in Peabody does favour the view that the only basis on which a determination by the Commissioner under s 177F (and, it would follow, determinations by him under s 136AD) could be challenged, even in an appeal, is the non-fulfilment of the statutorily specified conditions precedent to the enlivening of the discretion (and, I suggest, the Hickman principle). 152 I am concerned with an appeal under Pt IVC of the TAA, that is to say, a proceeding in which production of the Commissioner's notice of assessment is not conclusive evidence as to the amount or particulars of the assessment, yet is conclusive as to the due making of the assessment in other respects. Cases such as FJ Bloemen and Richard Walter are distinguishable on their facts as not being in the nature of appeals. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_outcome: discussed

case_title: Dorney v Commissioner of Taxation & Simons v Commissioner of Taxation [1980] 1 NSWLR 404

case_text: FJ Bloemen Pty Ltd v Commissioner of Taxation [1981] HCA 27 ; (1981) 147 CLR 360 (" FJ Bloemen ") comprised two appeals, heard together, from decisions of the New South Wales Court of Appeal: FJ Bloemen Pty Ltd v Commissioner of Taxation (unreported) and Dorney v Commissioner of Taxation and Simons v Commissioner of Taxation [1980] 1 NSWLR 404 (" Dorney and Simons "). The appeal against the Commissioner's objection decision in the FJ Bloemen proceeding was heard by Rath J: (1978) 36 FLR 191. However, by reason of the judgments which that Court had in meanwhile delivered in the Dorney and Simons appeals, the Court of Appeal dismissed the FJ Bloemen appeal. Thus, the reasons of the Court of Appeal are to be found in the Dorney and Simons appeals.


case_text: In Duggan & Anor v Commissioner of Taxation [1972] HCA 66 ; (1972) 129 CLR 365 (" Duggan "), an appeal to the High Court against objection decisions, Stephen J set aside assessments under s 99A. The Commissioner had informed the taxpayer of the three grounds on which he had relied in thinking it not unreasonable for s 99A to apply. Stephen J held that while the grounds stated relevant considerations, they involved errors of fact, with the result that the Commissioner's opinion ceased to be of any legal effect. His Honour added (at 370): "[i]t is as if he has failed to reach any opinion or has reached it upon the basis of irrelevant facts". 66 Duggan is distinguishable from the present case on two grounds: first, it was a state of mind case, whereas the present case is a Commissioner's determination case; secondly, the Commissioner had positively stated the matters he had taken into account in arriving at his state of mind. 77 The Full Court affirmed his Honour's decision. The majority, Gibbs J and Stephen J, in separate judgments, thought that, although the course of reasoning the Commissioner had followed in reaching the conclusion that he was not satisfied involved errors of law, it was not open to the Court to regard the Commissioner as having had the required state of satisfaction that there was continuity of beneficial ownership. Indeed, their Honours thought that, for other reasons, on the law and the facts he could not properly have been satisfied that there was. On that basis, his state of non-satisfaction and the assessment must stand, and the appeal be dismissed. 93 Both Hutley JA and Mahoney JA made certain observations relevant to the scope of an appeal, then under Pt V of the ITAA, against an objection decision. Hutley JA said (at 411), referring to Duggan and George , that an appeal under Pt V was of "the most comprehensive kind", so that, for example, it could be shown on such an appeal that a belief by the Commissioner as to the existence of certain facts was unsound. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_text: Like Avon Downs , Commissioner of Taxation v Brian Hatch Timber Co (Sales) Pty Ltd [1971] HCA 18 ; (1972) 128 CLR 28 (" Brian Hatch ") concerned the carry forward loss provisions. A necessary condition of deductibility under s 80A of the ITAA was the taxpayer company's satisfying the Commissioner concerning continuity of beneficial ownership a state of mind case. At first instance, Walsh J upheld the taxpayer's appeal, applying the passage from Dixon J's judgment in Avon Downs . The only material before the Commissioner that was before his Honour was the taxpayer's return and a record of interview. In substance, Walsh J held that on this slim material, the Commissioner had not been entitled not to be satisfied of continuity of beneficial ownership. 73 In Brian Hatch , there are fairly clear obiter dicta that upon request, the taxpayer would have been entitled to compel the Commissioner to expose his reasons for his state of mind and to identify all the material that was before him when he disallowed the objection. Again, however, there was no reference to s 177(1) or s 190(b) of the ITAA. 78 Barwick CJ dissented. His Honour said (at 541) that the Commissioner should have recorded "his relevant state of mind and the facts or his view of the facts on which it is based", and that it should not be left to the Court to draw inferences as to whether he had considered a matter. The Chief Justice added, citing his own judgment in Giris , that the Commissioner "must expose to the taxpayer, particularly if so requested , both his state of mind at the relevant time and its basis" (at 541) (emphasis added). Like the majority and Windeyer J in Brian Hatch , his Honour saw the issue as being one of fact: was the Commissioner in fact satisfied at the point of assessment or not? His Honour disagreed with the majority, however, as to the Commissioner's right to support his state of dissatisfaction at the time by a course of reasoning devised later. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_outcome: cited

case_text: Similarly, Kitto J said (at 274-275) that the expression "due making" in s 177(1) covered "all procedural steps, other than those (if any) which go to substantive liability and so contributing to the excessiveness of the assessment" (his Honour also cited George at 207). His Honour added (at 275): "It [the expression 'due making' is s 177(1)] therefore covers the step of forming the opinion that an avoidance of tax is due to fraud or evasion, and the step of thinking that particular alterations or additions are necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of tax. The correctness of these steps may be challenged on a reference to a board of review, for s. 177(1) seems clearly enough to be a provision relating only to evidence in the sense of material to be considered by judicial tribunals. (Doubtless it is for that reason that the words of exception in the sub-section, which refer to proceedings on appeal, make no mention of proceedings on a reference.)" His Honour referred to a statement by Isaacs ACJ in Commissioner of Taxation v Clarke [1927] HCA 49 ; (1927) 40 CLR 246 at 276 that the legislation does not contemplate "a curial diving into the many official and confidential channels of information to which the commissioner may have recourse to protect the Treasury".


case_text: The distinction between state of mind cases and Commissioner's determination cases was referred to by the High Court in Commissioner of Taxation v Peabody [1994] HCA 43 ; (1994) 181 CLR 359 (" Peabody "), a Part IVA case. In a joint judgment, all seven members of the High Court stated (at 382): "Under s. 177F(1), the Commissioner's discretion to cancel a tax benefit extends only to a tax benefit obtained in connexion with a scheme to which Pt IVA applies. The existence of the discretion is not made to depend upon the Commissioner's opinion or satisfaction that there is a tax benefit or that, if there is a tax benefit, it is obtained in connexion with a Pt IVA scheme. Those are posited as objective facts [citing McAndrew at 276-277 (Kitto J), and referring to Avon Downs at 360 (Dixon J)] . The erroneous identification by the Commissioner of a scheme as being one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit with such a scheme will result in the wrongful exercise of the discretion conferred by s. 177F(1) only if in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind, however, may have that result where, for example, it leads to the identification of the wrong taxpayer as the recipient of the tax benefit. But the question in every case must be whether a tax benefit which the Commissioner has purported to cancel is in fact a tax benefit obtained in connexion with a Pt IV A scheme and so susceptible to cancellation at the discretion of the Commissioner" (emphasis added). The "erroneous identification" and "misconception" to which their Honours referred might be compared to an erroneous identification by the Commissioner of the international agreement in question in the present case. The error may or may not vitiate the Commissioner's exercise of his discretion determining that subss 136AD(1) or (2) (as the case may be) is to apply in relation to the Taxpayers in relation to the supply of property. 143 Hill J also said (at 237) that Richard Walter was consistent with what the High Court said in Peabody at 382 (the passage set out at [119] above). I respectfully agree that that passage in Peabody does favour the view that the only basis on which a determination by the Commissioner under s 177F (and, it would follow, determinations by him under s 136AD) could be challenged, even in an appeal, is the non-fulfilment of the statutorily specified conditions precedent to the enlivening of the discretion (and, I suggest, the Hickman principle). 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_text: FJ Bloemen Pty Ltd v Commissioner of Taxation [1981] HCA 27 ; (1981) 147 CLR 360 (" FJ Bloemen ") comprised two appeals, heard together, from decisions of the New South Wales Court of Appeal: FJ Bloemen Pty Ltd v Commissioner of Taxation (unreported) and Dorney v Commissioner of Taxation and Simons v Commissioner of Taxation [1980] 1 NSWLR 404 (" Dorney and Simons "). The appeal against the Commissioner's objection decision in the FJ Bloemen proceeding was heard by Rath J: (1978) 36 FLR 191. However, by reason of the judgments which that Court had in meanwhile delivered in the Dorney and Simons appeals, the Court of Appeal dismissed the FJ Bloemen appeal. Thus, the reasons of the Court of Appeal are to be found in the Dorney and Simons appeals. 95 The question raised on the appeal to the High Court in FJ Bloemen was stated by Mason and Wilson JJ in their Honours' joint judgment to be whether the Supreme Court of New South Wales, in a statutory appeal under the ITAA or in a proceeding for declaratory relief, has jurisdiction to determine that an assessment of the taxpayer to income tax under s 166 of the ITAA is invalid, notwithstanding that a notice of assessment is produced by the Commissioner, and that the notice has the force of conclusive evidence (except in proceedings on appeal against the assessment) under s 177. Their Honours noted (at 365) that the case presented by the taxpayers had been that the Commissioner did not in truth make final assessments, but purported to make assessments which, if made at all, were only tentative or provisional, in neither case being authorised by the ITAA. In the FJ Bloemen case, the taxpayer also contended that the Commissioner had not made his assessments from the return or from any other information in his possession, in accordance with s 166, and that his real purpose was not to assess the amount of taxable income or of the tax payable thereon, but to cause a debt for tax to come into existence so that he could exercise his powers under s 218 of the ITAA (at 365-366). 96 In the High Court, the taxpayers argued that s 177(1) was enlivened only where something amounting to an "assessment" had been made, and that production of a notice of assessment did not preclude inquiry into whether that condition was satisfied. However, the Court unanimously rejected the submission. Mason and Wilson JJ, with whom Stephen J agreed, said that upon production of a notice of assessment that was final and definitive on its face, as distinct from provisional or tentative, the notice was conclusive evidence that an assessment was actually made, not merely conclusive evidence that an assessment, if made, was duly made (at 378). 97 The High Court judgments in FJ Bloemen do not assist greatly in the present appeals. 98 Part IVA was introduced into the ITAA by Act No 110 of 1981, replacing s 260 as the ITAA's general anti-avoidance rule. Div 13's more specific anti-avoidance provision was introduced the following year as complementary to Pt IVA (see [13] above). Part IVA and Div 13 are similarly structured. Unlike the former s 260, they both provide for the making of determinations by the Commissioner as conditions of liability to tax. None of the cases considered above were of such a Commissioner's determination class of case. 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax " (emphasis in original). His Honour referred to the distinction recognised in George , McAndrew , FJ Bloemen and Dalco , between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , FJ Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative régime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added). 152 I am concerned with an appeal under Pt IVC of the TAA, that is to say, a proceeding in which production of the Commissioner's notice of assessment is not conclusive evidence as to the amount or particulars of the assessment, yet is conclusive as to the due making of the assessment in other respects. Cases such as FJ Bloemen and Richard Walter are distinguishable on their facts as not being in the nature of appeals.


case_text: The operation of s 190(b) of the ITAA was explained by Mason J (dissenting) in Gauci v Commissioner of Taxation [1975] HCA 54 ; (1975) 135 CLR 81 at 89 as follows: "Section 190(b) of the Act imposed on the appellants the burden of proving that the assessments were excessive. The appellants relied on their evidence and that of Graham [their land agent who acted for them] in order to show that the assessments were excessive. Once that evidence was rejected, the appellants' case necessarily failed. The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s. 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail." The view expressed by Mason J in this passage has been endorsed: see McCormack v Commissioner of Taxation [1979] HCA 18 ; (1979) 143 CLR 284, esp at 302-304 (Gibbs J), 306 (Stephen J), 323 (Murphy J); Macmine Pty Ltd v Commissioner of Taxation (1979) 53 ALJR 362, esp at 371 (Stephen J), 381 (Murphy J); Commissioner of Taxation v Dalco [1990] HCA 3 ; (1990) 168 CLR 614 esp at 624-5 (Brennan J with whom Dawson, Gaudron and McHugh agreed, and Deane J generally agreed) (" Dalco "). Practice Note No 22, referred to at [37], is consistent with it.


case_text: The role of ss 177(1) and 190(b) of the ITAA arose in George v Commissioner of Taxation [1952] HCA 21 ; (1952) 86 CLR 183 (" George "). A condition of the enlivening of the Commissioner's power to make an assessment under s 167 was, relevantly, his not being satisfied with the return furnished by a person. There were also alternative conditions, namely, default in making a return, or the Commissioner's having reason to believe that a person who had not furnished a return had derived assessable income. Mr George, however, had lodged a return. On appeal to the High Court in its original jurisdiction against the Commissioner's objection decision, the taxpayer sought an order for particulars of the sources of the additional income that the Commissioner had assessed to tax. Thus, like Avon Downs, George was a state of mind case, but the particulars sought did not relate to the Commissioner's state of mind. 47 At first instance, Kitto J dismissed the application for particulars. His Honour's exposition of the effect of s 190(b) is clear and deserves to be quoted at some length. His Honour stated (at 189-190): "If at the hearing the onus would be upon the commissioner to establish that the appellant did in fact derive more income in the relevant year than he had disclosed, there would be much to be said for ordering him to give particulars for the purpose of defining the precise issues for trial and preventing surprise. But s 190(b) places the burden of proving that the assessment is excessive upon the appellant; and in order to carry that burden he must necessarily exclude by his proof all sources of income except those which he admits. His case must be that he did not derive from any source taxable income to the amount of the assessment. That will involve him, of course, in accounting for the increase in his assets, and it may well be that the commissioner will direct his efforts mainly or even wholly to endeavouring to meet the evidence the appellant adduces on this point. But the source of the increase in the assets is not the actual issue in the case; even if it were proved, for example, that that source consisted of winning bets on the racecourse, the issue would still be whether or not from any source the appellant derived as much taxable income as the assessment treats him as having derived. The object of the present application is really to have the commissioner say whether he is prepared to assign a source or sources for the moneys included in taxable income in the assessment over and above those disclosed as taxable income in the return, and to admit that if they did not come from that source, or from one or more of those sources, those moneys were not liable to be included in the appellant's taxable income. The commissioner may, if he chooses, voluntarily narrow the possible range of evidence in that way, but there could be no justification for ordering him to do so, under the guise of ordering particulars. If he attempts to prove derivation from a particular source and fails, he is none the less entitled under the Act to point to another source, or, without troubling about source at all, to stand upon his assessment and submit that the presumption in its favour has not been displaced. Even if the commissioner at present has in mind to seek to prove that income not disclosed in the return was derived from a particular source, he cannot be pinned to that source, nor would it be proper to order him to reveal his present plan of campaign. He is entitled to say, 'I do not allege anything about source at all; I may have ideas on the subject, but if I have I shall develop or modify or abandon or replace them as occasion may require, until the evidence on the hearing is complete, and then I shall make my submissions to the Court'." His Honour then said, by reference to English authorities, that a defendant may be ordered to provide particulars where it is clear that he intends to establish his denial of the plaintiff's averment of a negative by proving a positive. His Honour said that if the Commissioner had admitted that he intended to set up a case that the additional income was derived from a particular source, he should give particulars sufficient to enable the taxpayer to meet that case. But the Commissioner had made no such admission, express or implied. 48 In a joint judgment dismissing the taxpayer's appeal, the Full Court said (at 204): "The fact is that unless the taxpayer discharges the burden laid upon him by s. 190(b) of proving that this ascertainment or judgment is excessive, he cannot succeed and it can be no part of the duty of the commissioner to establish affirmatively what judgment he formed, much less the grounds of it, and even less still the truth of the facts affording the grounds. Yet that is what is involved when the demand for particulars of the sources alleged of the appellant's income is justified by reference to s. 167. It is an error to treat the formation by the commissioner of a judgment as to the amount of the taxable income as if it were not the ascertainment of the taxable income which constitutes assessment or a necessary part of that process and as if it were but the fulfilment of a condition precedent to the power or authority to assess. If, however, it were a condition precedent the question would at once arise whether the fulfilment of the condition was not part of 'the due making of the assessment' of which s. 177(1) makes the production of a notice of assessment conclusive evidence. But of this it is unnecessary to speak specifically." 49 At 206-207, their Honours said that s 177 distinguished between "the procedure or mechanism by which the taxable income and tax is ascertained or assessed on the one hand and on the other hand the substantive liability of the taxpayer". The former, their Honours said, involved the "due making" of the assessment, as to which production of the assessment was conclusive. They concluded (at 207): "Obviously the 'due making of the assessment' was intended to cover all procedural steps, other than those [apparently, procedural steps] if any going to substantive liability and so contributing to the excessiveness of the assessment, the thing which is put in contest by an appeal." The distinction between two classes of procedural steps is a difficult one. A taxpayer is to be at liberty, by attacking procedural steps of one class, to prove in an appeal that the amount of the assessment is excessive, but may not attack other procedural steps which are left shielded by the "due making" of the assessment. 50 As noted earlier, in his SFIC in each of the present cases, the Commissioner has stated, in accordance with a familiar formula, that he relies on s 14ZZO of the TAA, and requires the Taxpayer "to discharge its burden of proving that the assessment is excessive" (see [39] above). 51 The Commissioner has identified the various objective conditions, the determinations made, and the amounts of the respective arm's length considerations involved ($17,897,644 in the case of WRCH, and $986,180 in the case of WRCA). He has not, however, positively asserted, or foreshadowed an intention to prove, that he had regard to any particular matters in making the determination. Why would he? His having regard to any particular matters is not made a condition of liability to tax. 52 George is at least clear authority against the Taxpayers' right to particulars on the second ground on which the Commissioner relies. 55 In a joint judgment, Dixon CJ, McTiernan and Webb JJ referred to the distinction, recognised in George at 206, 207, between the procedure or mechanism by which taxable income and tax are assessed on the one hand, and the substantive liability to tax on the other. They said that the conditions went to substantive liability, and that it was open to the taxpayer to dispute their existence on an appeal against an assessment. If the conditions were not satisfied, the Commissioner's power to amend would not be enlivened and the amended assessment would be shown to be "excessive" (at 271). 56 Similarly, Kitto J said (at 274-275) that the expression "due making" in s 177(1) covered "all procedural steps, other than those (if any) which go to substantive liability and so contributing to the excessiveness of the assessment" (his Honour also cited George at 207). His Honour added (at 275): "It [the expression 'due making' is s 177(1)] therefore covers the step of forming the opinion that an avoidance of tax is due to fraud or evasion, and the step of thinking that particular alterations or additions are necessary to correct an error in calculation or a mistake of fact or to prevent avoidance of tax. The correctness of these steps may be challenged on a reference to a board of review, for s. 177(1) seems clearly enough to be a provision relating only to evidence in the sense of material to be considered by judicial tribunals. (Doubtless it is for that reason that the words of exception in the sub-section, which refer to proceedings on appeal, make no mention of proceedings on a reference.)" His Honour referred to a statement by Isaacs ACJ in Commissioner of Taxation v Clarke [1927] HCA 49 ; (1927) 40 CLR 246 at 276 that the legislation does not contemplate "a curial diving into the many official and confidential channels of information to which the commissioner may have recourse to protect the Treasury". 83 Aickin J delivered the leading judgment (Barwick CJ, and Gibbs, Mason and Jacobs JJ expressed agreement with his Honour's reasons). His Honour said that the particulars sought were necessary so that the case would "proceed in an orderly and comprehensible manner" (at 227). His Honour thought that it was not in the interests of the proper administration of justice that on the hearing the appellant should have to "speculate about, and adduce evidence to negate, every possible kind of agreement or arrangement and avoidance which the imagination of his advisers can conjure up" (ibid). It did not matter that s 260 was "self-executing" and did not depend on the Commissioner's forming an opinion or reaching a state of satisfaction. With his Honour's approach may be contrasted that of Kitto J in George (see [47] above). 93 Both Hutley JA and Mahoney JA made certain observations relevant to the scope of an appeal, then under Pt V of the ITAA, against an objection decision. Hutley JA said (at 411), referring to Duggan and George , that an appeal under Pt V was of "the most comprehensive kind", so that, for example, it could be shown on such an appeal that a belief by the Commissioner as to the existence of certain facts was unsound. 115 The effect of ss 175 and 177(1) of the ITAA was considered by the High Court in Dalco . The Commissioner had assessed under ss 166 and 167 as in George . A majority in a Full Court of this Court had held that the taxpayer had shown that each assessment was excessive "in that it was not warranted by law" ( Dalco v Commissioner of Taxation 88 (1988) ATC 4649 at 4666). Accordingly, this Court had remitted each matter to the Commissioner for reassessment. 117 Brennan J and Toohey J (ibid) referred to George , in which the High Court stated that the burden lay on the taxpayer of "establishing affirmatively that the amount of taxable income for which he has been assessed exceeds the actual taxable income which he has derived during the year of income" ( George at 201). 118 I see the cases under ss 166 and 167 as distinguishable from cases under Pt IVA and Div 13 in one respect. In cases under Pt IVA and Div 13, the making of determinations by the Commissioner is a necessary element in the assessment. All other things being equal, if the taxpayer is permitted to establish and does establish that the determinations were not authorised by the ITAA, the real world will be left in place, the ITAA will work on it to establish the amount of the taxpayer's liability, and that amount will be less than the amount assessed. Under ss 166 and 167, however, in order to prove excessiveness, the taxpayer must prove affirmatively the correct amount of taxable income and of tax. If the taxpayer fails to do so, the possibility will always remain that the Commissioner's assessment is not excessive. 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax " (emphasis in original). His Honour referred to the distinction recognised in George , McAndrew , FJ Bloemen and Dalco , between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , FJ Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative régime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added). 139 Hill J, whose eminence in this field is beyond question, delivered the leading judgment. His Honour held that a taxpayer cannot challenge a determination under s 177F on the ground that the Commissioner had erred in the making of the determination, for example, by failing to take into account a relevant consideration. His Honour was clear in his view that ss 175 and 177(1) produced this result. He referred to George at 207 (see [49] above) and Richard Walter at 184 (Mason CJ) (see [128] above). Of the latter passage, Hill J stated (at 237): "In other words, it is not open to a taxpayer to challenge an assessment under Pt IVA by showing some error in the making of that determination." His Honour found support in the fact that in Richard Walter their Honours held that the question in every case was whether there was a tax benefit obtained in connection with a Pt IVA scheme susceptible to cancellation by the Commissioner. Hill J added (at 238): "The question whether the Commissioner's discretion [sic decision] as to whether there was a scheme to which Part IVA applied miscarried is thus not an issue in an appeal. Rather the issue will be, relevant to the present appeal, whether, the determination having been made, there was a scheme to which the provisions of Part IVA applied and if so, whether there was a tax benefit obtained in connection with that scheme. These will be matters of fact and the burden will lie on the taxpayer to show that objectively there was no scheme in connection with which the taxpayer obtained a tax benefit. If the taxpayer satisfies that burden he or she will have shown the assessment was excessive. That will not be shown by the taxpayer demonstrating that the person who made the determination in some way erred in making it so that the discretion conferred upon the Commissioner miscarried." 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer. 157 The second reason why the Commissioner should not be required to supply the particulars sought is that he has not asserted, and does not propose to assert, a positive case as to his state of mind or reasoning processes, of which, in accordance with the general principles governing the supply of particulars, particularisation might be appropriate (cf George , (Kitto J), discussed at [46] above). In the light of ss 136AD and 177(1) of the ITAA and 14ZZO of the TAA, the Commissioner is entitled not to assert any particular state of mind or reasoning process, and simply to rely on his assessment.


case_text: The Taxpayers rely on Giris Pty Ltd v Commissioner of Taxation [1969] HCA 5 ; (1969) 119 CLR 365 (" Giris "). Giris concerned the alternative bases of assessment of the income of trust estates provided for by ss 99 and 99A of the ITAA. Section 99A did not apply only if the Commissioner was "of the opinion that it would be unreasonable" that it should apply, in which case s 99 applied. The Commissioner assessed under s 99A. 60 In the High Court, Menzies J referred to a Full Court the question of the constitutional validity of relevantly, s 99A. All members of the Court held that s 99A was not constitutionally invalid as imposing an incontestable tax, because the taxpayer had access to the court to challenge the Commissioner's opinion. 61 Barwick CJ and Windeyer J indicated how this access might be availed of. The Chief Justice said that the Commissioner was under a duty to form an opinion and that the taxpayer was entitled to be informed of it, "and upon the taxpayer's request, the Commissioner should inform the taxpayer of the facts he has taken into account in reaching his conclusion" (p 373). His Honour added (at 374): "Thus the Commissioner must hold the opinion. The Court can decide whether or not he did hold it. In my opinion, the Court can require him to form it. It can determine whether the opinion is held bona fide and, although as I have said, the discretion is wide and though being really legislative in nature, what is relevant to its formation may range over an extremely wide spectrum of fact and consideration, the Court can determine whether or not the opinion was formed arbitrarily or fancifully, or upon facts or considerations which could not be regarded as relevant even to such a question as the unreasonableness of applying a taxing provision to a particular taxpayer in respect of the income of a particular year. In my opinion, it cannot properly be said that there is here an unchallengeable tax as that expression is used in reasons for decisions given in this Court." Windeyer J also observed (at 384) that the Commissioner could be asked by a taxpayer to state the grounds of his opinion, and, if asked, that he should do so. 62 Owen J approached the matter differently. His Honour seems to have accepted that the taxpayer might not be in a position to prove that the Commissioner had taken into consideration irrelevant matters (at 388-389). His Honour said that all that mattered for constitutional validity purposes, was that the taxpayer was not prevented from invoking the aid of the courts to determine whether his tax liability had been lawfully and correctly assessed. It did not matter for that purpose that it might be "difficult or impossible to exercise the right of appeal successfully because the facts necessary to success [could not] be established" (at 388). 63 Neither Kitto J at first instance nor the members of the Full Court referred to the relationship between ss 177(1) and 190(b) of the ITAA. 64 Giris was another state of mind case. Moreover, examinability of the Commissioner's opinion was, in substance, all that stood between a contestable tax and an incontestable one. On the assumption that there was no challenge to the Commissioner's assessment of the taxpayer's taxable income, the only question going to the excessiveness of his assessment of tax was his opinion that it was not unreasonable that the special rate of tax imposed pursuant to s 99A should apply. 78 Barwick CJ dissented. His Honour said (at 541) that the Commissioner should have recorded "his relevant state of mind and the facts or his view of the facts on which it is based", and that it should not be left to the Court to draw inferences as to whether he had considered a matter. The Chief Justice added, citing his own judgment in Giris , that the Commissioner "must expose to the taxpayer, particularly if so requested , both his state of mind at the relevant time and its basis" (at 541) (emphasis added). Like the majority and Windeyer J in Brian Hatch , his Honour saw the issue as being one of fact: was the Commissioner in fact satisfied at the point of assessment or not? His Honour disagreed with the majority, however, as to the Commissioner's right to support his state of dissatisfaction at the time by a course of reasoning devised later. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_text: In Jackson v Commissioner of Taxation (1989) 87 ALR 461 (" Jackson "), the Commissioner made a determination pursuant to s 177F that the amounts of certain tax benefits should be included in the taxpayer's assessable incomes for two years. The taxpayer served on the Commissioner a notice to produce. Gummow J set aside certain questions for separate decision. 100 The first question was whether, on the hearing of an appeal against the disallowance of an objection against an assessment made consequent upon the making of a determination under s 177F(1), it is necessary or relevant for the court to inquire into the matters taken into account by the Commissioner, or his reasoning process, when he formed the view that a tax benefit had been obtained, or would have been obtained, but for the operation of s 177F, by a taxpayer in connection with a scheme to which Pt IVA applied. His Honour answered this first question "No". 101 This holding is instructive but not presently relevant. The obtaining of a tax benefit was one condition precedent to the arising of the Commissioner's power to make a determination under s 177F. Whether that condition was satisfied was to be decided by the application of objective criteria. The condition was thus akin to the present objective condition that the taxpayer supplied property under an international agreement, or that the amount of the consideration received or receivable by the taxpayer was less than the arm's length consideration. 102 While, no doubt, the Commissioner did think that that condition was satisfied, his opinion that it was not made an element of the liability to tax, and his reasons for being of that opinion were therefore irrelevant. Defective reasoning on his part would not advance the taxpayer's case if the condition was in fact satisfied. 103 The second separate question was related to the Commissioner's determination pursuant to s 177F, but not to the provision of particulars. The question was whether, in an appeal, documents are discoverable by the Commissioner or liable to be the subject of a subpoena or notice to produce addressed to the Commissioner, by reason only that the documents record or comprise, in substance, the submissions and internal memoranda prepared by the Commissioner's officers for consideration by the officer who made the determination under s 177F, and any decision or reasons for decision recorded by that officer, or the facts, matters or circumstances referred to in such submissions and memoranda. 106 Gummow J's answer to the second question does not resolve the present question of the Taxpayers' entitlement to particulars. It does, however, suggest that those particulars are not to be refused on the broad ground relied on by the Commissioner that s 177(1) of the ITAA prevents the Taxpayers from attacking the Commissioner's par (d) and subs (4) determinations on judicial review grounds. While his Honour did not refer to s 177(1) of the ITAA, he did refer to s 190(b), and must have regarded a determination not authorised by the ITAA, whether because it failed to satisfy statutorily prescribed conditions or because of judicial review grounds, as lying outside s 177(1). (An appeal from his Honour's judgment, in so far as it answered a further separate question not presently relevant, was dismissed: Commissioner of Taxation v Jackson (1989) 27 FCR 1.) 135 Of some relevance to the present case is the following statement made by his Honour (at 138-139): "A taxpayer may seek to challenge the making of such a determination on the basis that it is not authorised by the Act. Indeed, the objection to the present assessment includes such a ground. In such a case the court has a discretion to order that there be produced to the court, and subject to matters of privilege, to the taxpayer, the material which was before the decision-maker who made the determination at the time the decision maker did so. The court's power to make such an order was recognised by Gummow J when a Judge of this court and is discussed by his Honour in Jackson v Commissioner of Taxation (Cth) (1989) 20 ATR 611 at 621. I am of the view in the present case that discovery of such documents should be given and the applicant be permitted inspection of them but that discovery and inspection be limited to the material that was before the decision-maker." Hill J's reference to a determination's not being "authorised by the Act" is capable of being read as a reference to the non-satisfaction of the statutorily prescribed conditions of the power to make a determination under s 177F(1), or as a reference to judicial review grounds (or as both). The question is not resolved by the reference to the particular passage cited in Gummow J's judgment in Jackson that his Honour cited. In view of his Honour's judgment in the next case to be discussed, however, I would not understand him to have intended to include a reference to judicial review grounds. 142 With respect, however, their Honours appear to have found the result to be more clearly dictated by the authorities, and, in particular, by Richard Walter , than I have found it to be. It is not clear to me why the passage from the judgment of Mason CJ in Richard Walter at 184 (set out in [128] above) establishes that in an appeal it is not open to the taxpayer to challenge the making of a determination on judicial review grounds. Moreover, there is no reference to the passage from the judgment of Mason CJ at 187-8 (also set out at [128] above) (the primary Judge, RD Nicholson J, did refer to that passage, but did not discuss it). There is no reference, either, to Gummow J's answer to the second separate question in Jackson (see [104] [106] above) or, admittedly less relevantly, to WA Capital (see [107] [114] above). 147 Gyles J considered that an appeal to the Court assumed the existence of a valid assessment, and raised only the question whether the amount of it was excessive. This, in turn, his Honour said, involved only one issue: whether or not the actual consideration was an arm's length consideration as defined in s 136AA (see [8] above). His Honour remarked that this is an objective question, and that the Commissioner's opinion concerning it is not probative evidence in respect of it. I respectfully agree (cf Gummow J's treatment of the first separate question in Jackson ). 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_text: Kolotex Hosiery (Australia) Pty Ltd v Commissioner of Taxation [1975] HCA 5 ; (1975) 132 CLR 535 (" Kolotex ") was another case concerning the carry forward loss provisions. On the taxpayer's appeal to the High Court against the Commissioner's disallowance of its objection, the Commissioner's file was in evidence before the primary Judge, Mason J, who held that the Commissioner had been entitled to be "not satisfied" of continuity of beneficial ownership. 81 The operation of s 190(b) of the ITAA was explained by Mason J (dissenting) in Gauci v Commissioner of Taxation [1975] HCA 54 ; (1975) 135 CLR 81 at 89 as follows: "Section 190(b) of the Act imposed on the appellants the burden of proving that the assessments were excessive. The appellants relied on their evidence and that of Graham [their land agent who acted for them] in order to show that the assessments were excessive. Once that evidence was rejected, the appellants' case necessarily failed. The Act does not place any onus on the Commissioner to show that the assessments were correctly made. Nor is there any statutory requirement that the assessments should be sustained or supported by evidence. The implication of such a requirement would be inconsistent with s. 190(b) for it is a consequence of that provision that unless the appellant shows by evidence that the assessment is incorrect, it will prevail." The view expressed by Mason J in this passage has been endorsed: see McCormack v Commissioner of Taxation [1979] HCA 18 ; (1979) 143 CLR 284, esp at 302-304 (Gibbs J), 306 (Stephen J), 323 (Murphy J); Macmine Pty Ltd v Commissioner of Taxation (1979) 53 ALJR 362, esp at 371 (Stephen J), 381 (Murphy J); Commissioner of Taxation v Dalco [1990] HCA 3 ; (1990) 168 CLR 614 esp at 624-5 (Brennan J with whom Dawson, Gaudron and McHugh agreed, and Deane J generally agreed) (" Dalco "). Practice Note No 22, referred to at [37], is consistent with it. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_title: Macmine Pty Ltd v Commissioner of Taxation (1979) 53 ALJR 362


case_text: In my view, however, the Court has implied power to order particulars (cf the reference to "inherent" power to order particulars in Master Butchers Ltd v Commissioner of Taxation [1974] 1 NSWLR 350 at 356 (Mahoney J) (" Master Butchers "); Bailey and Ors v Commissioner of Taxation [1977] HCA 11 ; (1977) 136 CLR 214 at 221 (Jacobs J), 227, 231 (Aickin J)) (" Bailey "). 74 In Master Butchers , the Commissioner contended that s 260 of the ITAA applied. The taxpayer requested that its objection be treated as an appeal to the Supreme Court of New South Wales pursuant to s 187 of that Act. The taxpayer requested particulars of the way in which the Commissioner contended s 260 applied, including particulars of the contract, agreement or arrangement relied on. The Commissioner, referring to s 190(b), replied to the effect that he reserved the right, at the conclusion of the evidence to advance such arguments based on s 260 as seemed appropriate. 88 Bailey was neither a state of mind nor a Commissioner's determination class of case. I understand Bailey , like Master Butchers , as a case concerned with the practical running of a trial. It does not determine the question whether the Commissioner should be ordered to provide particulars, not of positive assertions made by him, but of his thought processes antecedent to a positive statutorily required step that he does assert the making of a determination.


case_text: McAndrew v Commissioner of Taxation [1956] HCA 62 ; (1956) 98 CLR 263 (" McAndrew ") was also an appeal to the High Court in its original jurisdiction against an objection decision. Subsection 170(2) of the ITAA provided that where a taxpayer had not made to the Commissioner a full and true disclosure of all material facts necessary for his assessment, and there had been an avoidance of tax, the Commissioner might amend the assessment. Where the Commissioner was of opinion that the avoidance was due to fraud or evasion, he might do so at any time, otherwise there was a six year time limit. Thus, the power to amend was conditioned upon the objective fact of the taxpayer's not having made a full and true disclosure, and on the subjective fact of the Commissioner's being of the opinion that there had been an avoidance of tax. At the parties' request, Dixon J stated a case which submitted certain questions for the opinion of a Full Court. 54 The Full Court held, referring, inter alia , to s 190(b) of the ITAA, that upon production of a notice of assessment, the Commissioner did not bear the onus of establishing satisfaction of the conditions, but that the taxpayer bore the onus of establishing their non-fulfilment. 58 Consistently with the joint judgment in McAndrew , the Taxpayers seek to establish non-satisfaction of the conditions that enliven of the powers to make the par (d) and subs (4) determinations. Only Kitto J in McAndrew addressed the question of the Commissioner's antecedent thought processes, and his view, as expressed above, was that by reason of s 177(1) they were not to be inquired into on an appeal to the court. 116 The High Court reversed this Court's decision. Mason CJ, Deane, Gaudron and McHugh JJ agreed with Brennan J and Toohey J. Brennan J said (at 621) that a taxpayer's burden of proving that an assessment is excessive is not necessarily discharged by showing an error by the Commissioner in forming a judgment as to the amount of the assessment. His Honour distinguished McAndrew as a case in which it was denied that the Commissioner had the power to make an amended assessment, for non-fulfilment of a condition precedent to the arising of that power. His Honour said (at 623): "[t]he amount of the assessment might not be excessive in fact, though the reasons which led to the assessment were erroneous". 119 The distinction between state of mind cases and Commissioner's determination cases was referred to by the High Court in Commissioner of Taxation v Peabody [1994] HCA 43 ; (1994) 181 CLR 359 (" Peabody "), a Part IVA case. In a joint judgment, all seven members of the High Court stated (at 382): "Under s. 177F(1), the Commissioner's discretion to cancel a tax benefit extends only to a tax benefit obtained in connexion with a scheme to which Pt IVA applies. The existence of the discretion is not made to depend upon the Commissioner's opinion or satisfaction that there is a tax benefit or that, if there is a tax benefit, it is obtained in connexion with a Pt IVA scheme. Those are posited as objective facts [citing McAndrew at 276-277 (Kitto J), and referring to Avon Downs at 360 (Dixon J)] . The erroneous identification by the Commissioner of a scheme as being one to which Pt IVA applies or a misconception on his part as to the connexion of a tax benefit with such a scheme will result in the wrongful exercise of the discretion conferred by s. 177F(1) only if in the event the tax benefit which the Commissioner purports to cancel is not a tax benefit within the meaning of Pt IVA. That is unlikely to be the case if the error goes to the mere detail of a scheme relied upon by the Commissioner. An error of a more fundamental kind, however, may have that result where, for example, it leads to the identification of the wrong taxpayer as the recipient of the tax benefit. But the question in every case must be whether a tax benefit which the Commissioner has purported to cancel is in fact a tax benefit obtained in connexion with a Pt IV A scheme and so susceptible to cancellation at the discretion of the Commissioner" (emphasis added). The "erroneous identification" and "misconception" to which their Honours referred might be compared to an erroneous identification by the Commissioner of the international agreement in question in the present case. The error may or may not vitiate the Commissioner's exercise of his discretion determining that subss 136AD(1) or (2) (as the case may be) is to apply in relation to the Taxpayers in relation to the supply of property. 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax " (emphasis in original). His Honour referred to the distinction recognised in George , McAndrew , FJ Bloemen and Dalco , between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , FJ Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative régime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added).


case_title: McCormack v Commissioner of Taxation [1979] HCA 18 ; (1979) 143 CLR 284


case_text: No doubt, many descriptions of the purpose of particulars can be found. It suffices to refer to that given by Isaacs J in R v Associated Northern Collieries & Ors [1910] HCA 61 ; (1910) 11 CLR 738 (" Northern Collieries ") at 740: "I take the fundamental principle to be that the opposite party shall always be fairly apprised of the nature of the case he is called upon to meet, shall be placed in possession of its broad outlines and the constitutive facts which are said to raise his legal liability. He is to receive sufficient information to ensure a fair trial and to guard against what the law terms 'surprise' ... ." I see no meaningful distinction between inquiring whether the Commissioner should be required to give the particulars sought, and inquiring whether his SFIC is inadequate for not having included them: cf the taxpayer's notice of motion in Rio Tinto Ltd v Commissioner of Taxation (2004) 55 ATR 321 at 329, which sought an order that the Commissioner file and serve an SFIC "in compliance with O 52B, r 5 of the Federal Court Rules ". 75 Mahoney J held that the Court had inherent power to order further and better particulars where the requirements of justice so dictated, and cited Isaacs J in Northern Collieries at 740 (see [38] above). While his Honour accepted that in an appropriate case, the Court had power to order the Commissioner to provide further and better particulars "of a matter in issue in the proceeding" (at 356), he did not order the Commissioner to provide any of the particulars sought. For his Honour, the test to be applied was whether it appeared to the court, upon the material before it, that there was "a real and a substantial danger that the party seeking the particulars [would] be prejudiced by not knowing the nature of the case to the [sic be] made out against him" (at 357). His Honour said that in a proper case, such a party may be entitled to an order that the other party furnish particulars of "the general nature and of the constituent facts, of the case to be relied upon or to some other order appropriate in the circumstances" (ibid).


case_text: Several references were made to the principle enunciated by Dixon J in R v Hickman; Ex parte Fox and Clinton [1945] HCA 53 ; (1945) 70 CLR 598 at 615, where, as is well known, his Honour said that a privative clause (cf s 177(1)) is given effect despite non-compliance with provisions governing the exercise of a power, provided always that the purported exercise (1) is a bona fide attempt to exercise the power, (2) relates to the subject matter of the legislation, and (3) is reasonably capable of being regarded as referable to the power ("the Hickman principle"). 127 It was held (Mason CJ, Dawson, Toohey and McHugh JJ) that s 177(1) of the ITAA does not purport to deprive this Court of the jurisdiction conferred on it by s 39B of the Judiciary Act; (Deane and Gaudron JJ) that s 39B overrides or amends s 177(1) to the extent that s 177(1) would make a notice of assessment conclusive evidence of the due making of an assessment in a proceeding under s 39B in which the applicant's case is that an assessment is invalid on the ground that it was not made bona fide; (Brennan J) that in proceedings other than reviews or appeals under Pt IVC of the TAA, ss 175 and 177(1) operate congruently and are to be given effect consistently with the Hickman principle. Brennan J said that in proceedings under Pt IVC, however, s 177(1) presents no obstacle to giving full effect to the general provisions of the ITAA governing the assessment of the taxpayer's taxable income and tax liability (at 198). 128 Mason CJ observed (at 178) that the making of a determination under s 177F "forms part of the process of assessment and goes to the ascertainment of the substantive liability of the taxpayer to tax " (emphasis in original). His Honour referred to the distinction recognised in George , McAndrew , FJ Bloemen and Dalco , between the procedural mechanism by which taxable income is ascertained on the one hand, and the taxpayer's substantive liability on the other, the former (alone) involving the "due making" of the assessment (at 182-184). After referring to certain illustrations of the distinction, the Chief Justice observed (at 184): "... the making of a determination by the Commissioner under s 177F of the [ITAA] is a determination going to substantive liability and, in conformity with the interpretation of s 177(1) adopted in George , McAndrew , FJ Bloemen and Dalco , is put in issue by an appeal which challenges the assessment on the ground that it is excessive." Later, Mason CJ referred specifically to the susceptibility of a determination under s 177F to attack in an appeal to this Court against an objection decision. His Honour stated (at 187-8): "In such an appeal, it is for the taxpayer to show that the assessment is excessive. In that context, the existence of an inadmissible purpose on the part of the Commissioner plays no part. The central element of the legislative régime is the making of an assessment by the Commissioner which ascertains the taxpayer's liability to tax and the reference to the Tribunal or the appeal to the Federal Court, in which the taxpayer is entitled to dispute his or her substantive liability to tax. In such an appeal, the taxpayer is at liberty to challenge the exercise of any relevant discretion by the Commissioner. Thus, on appeal, the court will set aside the assessment if any relevant exercise of discretion by the Commissioner is affected by error of law, if he has taken an extraneous factor into account or if he has failed to consider a material factor [citing Avon Downs at 360]" (emphasis added). 129 Unguided by later authority, one might be excused for thinking that the effect of both passages from the judgment of Mason CJ is that it is open to a taxpayer on an appeal to this Court under Pt IVC of the TAA to challenge a determination under s 177F, and, I suggest it would follow, under s 136AD, on judicial review grounds. The reason is that the taxable income and tax are as high as they are only because the discretion to make a determination was exercised, and it is open to the taxpayer to show the excessiveness of the assessment by bringing down the determination. As will be seen, however, in the case to be discussed next, both the primary Judge and a Full Court of this Court understood Mason CJ differently. 137 The primary Judge, RD Nicholson, held ( Sleight v Commissioner of Taxation (2003) 53 ATR 667 at (697)) that the making of a s 177F determination was "part of the process of making the assessment ... and not liable to challenge in this proceeding save in respect of matters going to substantive liability: Richard Walter at CLR 178, 203". His Honour held that it followed that any deficiency was validated by s 175. For this last proposition, his Honour referred to Richard Walter at 182, 187-8, 193-5, 196-7, 198-9, 209-211, 222-3 and 240-2. Finally, his Honour noted that no argument had been made that the case fell within "the conditions delineated in R v Hickman ". 143 Hill J also said (at 237) that Richard Walter was consistent with what the High Court said in Peabody at 382 (the passage set out at [119] above). I respectfully agree that that passage in Peabody does favour the view that the only basis on which a determination by the Commissioner under s 177F (and, it would follow, determinations by him under s 136AD) could be challenged, even in an appeal, is the non-fulfilment of the statutorily specified conditions precedent to the enlivening of the discretion (and, I suggest, the Hickman principle). 144 In both ss 177F and 136AD, the ITAA specifies a number of conditions, and provides that if they are met, the Commissioner may make a determination, the effect of which is that the taxpayer's taxable income will be greater than it would otherwise have been. With one exception, all of the conditions are "objective" (the exception is the condition in s 136AD(1)(b) and s 136AD(2)(b) (and s 136AD(3)(b), not presently relevant) that the Commissioner is satisfied that the parties to the international agreement were not dealing at arm's length with each other). Neither section makes the existence of any particular state of mind of the Commissioner in relation to the making of the determination, a condition of the power to make it. Sleight should be regarded as establishing that the legislature has revealed an intention that even in an appeal under Pt IVC of the TAA, the Commissioner's reasoning that led him to make the determination is shielded by s 177(1) from attack on judicial review grounds as part of the "due making" of the assessment. Of course, the fact itself of the making of the determination goes to the substantive liability to tax: if a determination was not even purportedly made, or if a determination purportedly made was not authorised by the ITAA because the statutorily prescribed conditions of the enlivening of the power were not satisfied, or, I suggest, failed to satisfy the Hickman principle, the assessment will be shown to be excessive. 145 Consistently with Sleight , so understood, not only should the Commissioner not be ordered to provide particulars relating to judicial review grounds, but also he should not be required to give discovery, and the taxpayer should not be entitled to lead evidence or to cross-examine any witnesses called by the Commissioner, in each case in relation to such grounds . 158 Although the Taxpayers are not at liberty to attempt to bring down the present determinations on judicial review grounds, the determinations remain vulnerable to attack in the appeals on the basis of both non-satisfaction of the statutory conditions of the Commissioner's power to make them, and the Hickman principle. 159 For the above reasons, both motions will be dismissed with costs. I certify that the preceding one hundred and fifty-nine (159) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate: Dated: 20 September 2006 Counsel for Applicant in each proceeding: Mr JW Durack SC, Ms RL Seiden and Mr JH Momsen Solicitors for Applicant in each proceeding: Becwell Legal Services Pty Ltd Counsel for the Respondent in each proceeding: Ms MM Gordon SC and Mr HP Steward Solicitor for the Respondent in each proceeding: Australian Government Solicitor Date of Hearing: 29 June 2006 Date of Judgment: 20 September 2006 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2006/1252.html


case_text: No doubt, many descriptions of the purpose of particulars can be found. It suffices to refer to that given by Isaacs J in R v Associated Northern Collieries & Ors [1910] HCA 61 ; (1910) 11 CLR 738 (" Northern Collieries ") at 740: "I take the fundamental principle to be that the opposite party shall always be fairly apprised of the nature of the case he is called upon to meet, shall be placed in possession of its broad outlines and the constitutive facts which are said to raise his legal liability. He is to receive sufficient information to ensure a fair trial and to guard against what the law terms 'surprise' ... ." I see no meaningful distinction between inquiring whether the Commissioner should be required to give the particulars sought, and inquiring whether his SFIC is inadequate for not having included them: cf the taxpayer's notice of motion in Rio Tinto Ltd v Commissioner of Taxation (2004) 55 ATR 321 at 329, which sought an order that the Commissioner file and serve an SFIC "in compliance with O 52B, r 5 of the Federal Court Rules ".


case_text: The primary Judge, RD Nicholson, held ( Sleight v Commissioner of Taxation (2003) 53 ATR 667 at (697)) that the making of a s 177F determination was "part of the process of making the assessment ... and not liable to challenge in this proceeding save in respect of matters going to substantive liability: Richard Walter at CLR 178, 203". His Honour held that it followed that any deficiency was validated by s 175. For this last proposition, his Honour referred to Richard Walter at 182, 187-8, 193-5, 196-7, 198-9, 209-211, 222-3 and 240-2. Finally, his Honour noted that no argument had been made that the case fell within "the conditions delineated in R v Hickman ".


case_outcome: followed

case_text: Recently in Syngenta Crop Protection Pty Ltd & Anor v Commissioner of Taxation (2005) 61 ATR 186 (" Syngenta "), a case in which the taxpayer also sought particulars of the kind sought here, Gyles J observed (at 188): "I do not propose to track through all the authorities or endeavour to reconcile all of the statements in them on the topic. Such statements are not always easy to reconcile, partly because appeals cover many situations." I agree with the second sentence, although I will refer below, in chronological order, to those authorities which seem to me to be the most important. 42 Two matters should be noted at the outset: 1. Subsection 177(1) of the ITAA expressly recognises a distinction between reviews or appeals under Pt IVC of the TAA and other proceedings, in relation to the conclusive evidence of the due making of an assessment that is provided by production of a notice of the assessment. The reason is that s 14ZZO within Pt IVC contemplates that if an assessment is excessive, the taxpayer should, in a proceeding under that part, have the opportunity of proving that it is. The tension between s 177(1) of the ITAA on the one hand, and s 14ZZO(b) of the TAA (or its predecessor, s 190(b) of the ITAA) on the other hand, permeates the cases. 2. It will prove to be important to identify precisely the conditions of tax liability specified in the ITAA, and to distinguish between provisions referring to the Commissioner's state of mind, eg his "opinion", or his being "satisfied" or "not satisfied", on the one hand, and provisions referring to his taking a step, such as making a "determination" or "decision" on the other hand. I will refer to them as "state of mind" and "Commissioner's determination" classes of cases, respectively. 146 Finally, in Syngenta , Gyles J dismissed a taxpayer's motion for discovery and particulars in circumstances substantially identical to those of the present case. For reasons given by his Honour, he delivered an ex tempore judgment. 147 Gyles J considered that an appeal to the Court assumed the existence of a valid assessment, and raised only the question whether the amount of it was excessive. This, in turn, his Honour said, involved only one issue: whether or not the actual consideration was an arm's length consideration as defined in s 136AA (see [8] above). His Honour remarked that this is an objective question, and that the Commissioner's opinion concerning it is not probative evidence in respect of it. I respectfully agree (cf Gummow J's treatment of the first separate question in Jackson ). 153 The first reason why the Commissioner should not be required to supply the particulars sought relates to the Commissioner's primary and more general submission. I hold, in accordance with Peabody, Sleight and Syngenta , that the Commissioner should not be required to supply the particulars sought because, under the statutory provisions mentioned, it is not open to the Taxpayers to make the Commissioner's state of mind and reasoning processes leading to the making of the determinations under s 136AD an issue in the appeals. My reasoning in this respect is found largely in my discussion of Sleight and Syngenta at [136] [150], and in particular, [144] above. 154 The position established by Peabody (see [119] above), Sleight (see [136] [145] above), and Syngenta (see [146] [150] above) seems to be that a distinction is to be drawn between cases in which the ITAA specifies a state of mind on which the assessment of the amount of taxable income (and tax) depends (cf Avon Downs , George , Giris , Duggan , Brian Hatch , Kolotex , WA Capital , Dalco ), and those in which it specifies, not a state of mind, but the making of a determination, as the event on which the amount of taxable income (and tax) depends (cf Jackson , Peabody , Richard Walter , Binetter, Sleight , Syngenta ). In the latter class of case, the legislature is taken to indicate that the interaction between s 177(1) of the ITAA and s 14ZZO(b) of the TAA produces the result that the Commissioner's state of mind, on the basis of which the determination was made, is part of the due making of the assessment, and cannot be put in issue by the taxpayer.


case_text: The taxpayer was held entitled to particulars in Western Australian Capital Investment Co Ltd v Commissioner of Taxation (1989) 87 ALR 183 (" WA Capital "). The Commissioner had issued notices under the Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) ("the TUCTA Act "). Subsection s 18(1) of the TUCTA Act governed the giving of such a notice. The relevant condition which enlivened the Commissioner's power to give a notice was that the Commissioner was of the opinion that vendor's recoupment tax was likely to become payable by a person or persons in relation to ordinary company tax or undistributed profits tax, as the case may be. The taxpayer asserted, and the Commissioner denied, that the Commissioner did not, prior to the issue of the notice, address his mind to this matter. The taxpayer said that the inference that he did not do so was to be drawn from the Commissioner's letter that accompanied the notice, which did not refer to the Commissioner's being of the opinion that vendor's recoupment tax was likely to become payable. 108 The case can be classified as a state of mind case, albeit one in which the legislation did not operate to create a liability immediately upon the existence of the specified state of mind. Rather the existence of the state of mind was expressed as the condition which enlivened the Commissioner's power to give the notice. 109 The taxpayer sought particulars as to the making of the opinion, such as who made it, what facts he or she took into account, whether the facts of opinion were recorded in writing, and the authority of the person who formed the opinion.


case_text: In relation to the Bias Decision and the Stay Decision, leave is required but for a different reason - each is an interlocutory decision. Neither decision " finally " determined " the parties' substantive rights " ( Cubillo v Commonwealth [2001] FCA 1213 ; (2001) 112 FCR 455 and Carr v Finance Corp of Australia Ltd (No 1) [1981] HCA 20 ; (1980) 147 CLR 246 at 248 per Gibbs CJ and 253-54 per Mason J) but dealt with questions about how, when and by whom the substantive application should be determined. The Stay Decision dealt with the timing of the Costs Decision. The Bias Decision dealt with the capacity of the Federal Magistrate to determine the Costs Decision and the Stay Decision.


case_title: Cubillo v Commonwealth [2001] FCA 1213 ; (2001) 112 FCR 455


case_outcome: applied

case_text: To obtain leave to appeal these interlocutory decisions, Ms Winn is required to satisfy the Court in respect of each decision that: (1) it is attended by sufficient doubt to warrant reconsideration by a Full Court; and (2) substantial injustice would result if leave were refused, Décor Corporation Pty Ltd v Dart Industries Inc (1991) 33 FCR 397 at 398-99 (per Sheppard, Burchett and Heerey JJ). 26 It is well established that in cases where the interlocutory decision does not determine substantive rights, particular caution is required and a "tight rein" must be kept on appeals ( Décor at 400). This is such a case. Ms Winn must satisfy both limbs of the test. She cannot. 27 Neither decision is attended with any doubt let alone sufficient doubt to warrant reconsideration by a Full Court. Even if either decision was attended with doubt, I am not satisfied that Ms Winn would suffer any injustice let alone " substantial injustice" in the event that leave was refused. The facts and matters set out above support that view. 28 In the circumstances, I would not grant Ms Winn leave to appeal the Stay Decision or the Bias Decision.


case_outcome: referred to

case_text: During the course of the oral argument and in a memorandum provided to the Court following the hearing on 25 September 2007, Ms Winn submitted that she had, in fact, filed but not served the notice of appeal on time. Despite being invited to file evidence to support the contention that a copy of the notice of appeal had been filed within the time specified by the Federal Court Rules , no documentary material in an admissible form was provided to the Court. The Court file records the receipt at 16.04 pm on 1 August 2007 of the application for extension of time to file and serve a notice of appeal. The facsimile header read "page 2". There is no record of page 1. Ms Winn handed to the Court a copy of a facsimile transmission record she held which purports to record that 21 pages were sent by facsimile to a facsimile number attached to the Victorian Registry of the Federal Court at 16.04 pm on 1 August 2007. Ms Winn submitted from the bar table that the facsimile (of 21 pages) recorded as having been sent at 16.04 pm comprised the application for leave to appeal and an unsworn affidavit which exhibited a draft of the notice of appeal. Whether the pages were received by the Court at 16.04 pm and, if so, what the 21 pages consisted of, I cannot and need not resolve. Even if evidence was provided to the Court that established that at 16.04 pm on 1 August 2007 a copy of an unsworn affidavit together with a copy of a draft notice of appeal was provided to the Court with the application for leave to appeal out of time, it would not constitute the institution of proceedings by way of appeal in this Court. O 52 r 12 provides that an appeal is instituted by filing a notice of appeal in the appropriate registry: cf Griffiths v Boral Resources (Qld) Pty Limited [2006] FCAFC 149 ; (2006) 154 FCR 554. That did not occur.


case_text: In the circumstances, I will proceed to determine the application for leave to file a notice appeal out of time. Leave to file out of time a notice of appeal in relation to the Costs Decision requires " special reasons" : O52 r 15(2). In Parker v The Queen [2002] FCAFC 133 (applying Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344 at 348-49), the Full Court summarised the principles to be applied (at [6]) as follows: "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."


case_text: Although Ms Winn outlined her personal and other circumstances that were said to explain the delay in the filing of the notice of appeal, I do not consider that she has demonstrated " special reasons" sufficient to warrant a grant of leave to file a notice of appeal out of time. Especially is that so where: (1) The only real issue between the parties is Ms Winn's liability to pay the costs order. The nature of the costs order is not a "special reason" given the futility of the orders sought in the draft notice of appeal and the reluctance, in principle, to allow leave in relation to a disputed costs order: see eg, Merit Protection Commissioner v Nonnenmacher [1999] FCA 274 ; (1999) 86 FCR 112 and Ogawa v University of Melbourne (No 2) [2004] FCA 1275 ; (2) Ms Winn seeks to have the Court revisit a contention which she has pursued without success before Registrar Mussett and before McInnis FM. The contention is without foundation. The only substantive issue between the parties (a dispute about the validity of the bankruptcy notice) was resolved in her favour before the Registrar. Ms Winn seeks to re-agitate that issue when none exists. Registrar Mussett set aside the bankruptcy notice with Brian Ward's consent. Ms Winn cannot revive that question merely to seek to reverse the costs order against her; (3) Ms Winn's contentions do not take account of the nature of the Registrar's discretion to make orders as to costs under s 79 of the Federal Magistrates Act 1999 (Cth) ("the FMC Act "). Costs do not always follow the event. A variety of circumstances, including the conduct of the parties during or preceding the litigation, will be relevant: Cummings v Lewis [1992] FCA 334. Where a party unreasonably prolongs a proceeding or pursues issues and arguments which are untenable, an adverse costs order may result, even where the party succeeds on its substantive claims: Newcrest Mining (WA) Limited v Commonwealth of Australia (1993) 40 FCR 507. If Ms Winn had wished to file an appeal against the costs order made by the Registrar on the basis that the discretion under s 79 of the FMC Act had miscarried, then that is something she should have done before the FMC when she had an opportunity to do so. She did not. She should not now be permitted to do so by the current application; (4) the validity of the bankruptcy notice was resolved when Brian Ward voluntarily agreed that it be set aside and that the judgment debt, to which it related, was unenforceable; (5) Ms Winn's persistent pursuit of issues relating to the validity of the bankruptcy notice has resulting in numerous costs orders against her and the considerable expenditure of Court resources and the resources of Brian Ward in defending the proceedings. Brian Ward offered to settle the proceeding with no order as to costs prior to the hearing before McInnis FM and notified Ms Winn of its intention to pursue an order for indemnity costs if she refused that offer. Ms Winn did not respond. The proceedings have been unduly prolonged by the choices Ms Winn has made not only to the detriment and inconvenience of Brian Ward, but also, so far as the material before the Court reveals, to herself.


case_title: Newcrest Mining (WA) Limited v Commonwealth of Australia (1993) 40 FCR 507


case_title: Ogawa v University of Melbourne (No 2) [2004] FCA 1275


case_title: Parker v The Queen [2002] FCAFC 133


case_text: On 17 October 2008 I ordered that Apache Northwest Pty Ltd ("Apache") give preliminary discovery of certain classes of documents to Newcrest Mining Limited ("Newcrest"): see Newcrest Mining Limited v Apache Northwest Pty Ltd [2008] FCA 1527. A verified list of documents was to be filed and served on or before 30 October 2008. 2 Apache applied for leave to appeal from this decision. On 30 October 2008 Middleton J varied my order by extending, until 14 November 2008, the period within which Apache was required to file and serve its verified list of documents. 3 When I made the order for preliminary discovery I foreshadowed that it might be necessary, at a later time, for the matter to return to Court to deal with consequential issues such as confidentiality. Apache subsequently advised the Court that it considered that it would be necessary for a confidentiality regime to be put in place to deal with commercially sensitive documents. An issue also arose as to which party should bear the costs of preliminary discovery.


case_text: The conventional approach to costs orders in this area was explained by Burchett J in Cappuccio v Australia & New Zealand Banking Group Ltd [1999] FCA 1188 at [3] - [4] where his Honour said that: "3. ... I have a discretion as to just what I should do in respect of costs, and it seems to me that the costs order which would be appropriate in a case like this depends very much on the consequences of the discovery obtained. If the applicant for preliminary discovery uncovers enough to enable that applicant to bring proceedings which are successful, there may be much to be said for the proposition that the costs of the preliminary discovery should form part of the costs of the action. On the other hand, if the applicant proceeds, brings an action, fails, and is ordered to pay the costs of that action, there seems to be every reason why, generally speaking, the costs of the preliminary discovery should be included in the costs payable to the respondent. 4. There may, of course, be cases where there are special reasons to vary the normal rule that costs follow the event. In this particular case, having listened to the arguments of both sides, each of whom seeks a costs order, I have come to the conclusion that the appropriate order, in the event that a case is brought for substantive relief, is that the costs of this application be at the discretion of the tribunal which hears the substantive application. In all the circumstances, I order that, if a substantive application is brought by the applicants against the respondent bank within six weeks of today's date, the costs be dealt with in the way I have indicated."


case_outcome: distinguished

case_text: A different approach was taken by Gyles J in C7 Pty Ltd v Foxtel Management Pty Ltd [2001] FCA 1864. C7 had sought preliminary discovery of documents. The application was opposed but C7 was largely successful. His Honour expressed the view (at [50]) that an application pursuant to Order 15A of the Federal Court Rules was a discrete application and that he should deal with the costs issue. In reaching this decision his Honour was influenced by the fact that, despite the fact that C7 had been successful, the relief which it obtained was offered prior to the hearing. He was also concerned that the respondent would be out of pocket, awaiting "some indefinite future event" because it was required to undertake the expense of providing the preliminary discovery. 8 In my opinion, in the circumstances of the present case, it is appropriate to make a conventional order. Apache opposed the making of any order relating to preliminary discovery. Moreover, orders of the conventional kind will not expose Apache to an indefinite delay in recovering its costs, at least no more delay than would attend recovery of the costs of discovery in an ordinary proceeding. Apache's interests will be protected by an order that Newcrest pay its costs in the event that no proceeding is commenced in this Court within six weeks of Newcrest undertaking inspection of the discovered documents. Even if Newcrest commences a proceeding in a Court other than this Court Apache will be entitled to recover its costs of providing discovery once the six week period has elapsed. I certify that the preceding eight (8) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Tracey. Associate: Dated: 7 November 2008 Counsel for the Applicant: Mr C Archibald Solicitor for the Applicant: Blake Dawson Counsel for the First Respondent: Ms B Murray (Solicitor) Solicitor for the First Respondent: Malleson Stephen Jaques Date of Hearing: 7 November 2008 Date of Judgment: 7 November 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/1663.html