case_text: there is a real risk of the same facts being re-litigated. That is plainly oppressive to Owston. Owston should not be exposed to two (or possibly more) trials of the same issue, particularly given the nature of the relief sought in this action. As non-parties the investors are not bound by any findings in Owston's favour: Ann Street Mezzanine Pty Limited (in liq) v Beck (2009) 225 ALR 324 at [26] and [32] per Finkelstein J. Owston's primary submission is that it will not be bound in later proceedings by a finding of fact or law, other than the latter's precedential value that is made against its interests in this action. Although unable to bring proceedings which amount to a collateral attack on the result in these proceedings, Owston submits it is entitled to defend itself from attack by re-litigating issues decided against its interest. (Hon K Handley " Res Judicata: General Principles and Recent Developments " (1999) 18 Aust Bar Review 214 at 220 and the authority cited). That findings made in these proceedings are not binding in any later proceedings brought by any investors is consistent, it says, with the structure of the Act. It observes that ASIC can bring, but has not brought, representative proceedings under s 1325(3) of the Act provided certain condition are met. It also points to the fact that under s 1317F certain findings of breach of a civil penalty provision are binding on the defendants. The legislature has decided that only findings in civil penalty proceedings are binding, and not findings in other proceedings brought by ASIC. Owston acknowledges that these submissions "may not be unquestionably right". Third, where the relief sought in these proceedings is calculated to encourage re-litigation of the issues this will likely bring the administration of justice into disrepute. The possibility of re-litigation according to Owston is not a mere risk but rather is the very purpose of these proceedings. It is not the function of this Court, or proper exercise of a power under the Act, to promote litigation. Fourth, in the event of the issues in these proceedings being re-litigated there is the obvious potential for inconsistent findings. That is a possibility to be avoided, not encouraged. These proceedings are calculated to promote the re-litigation of the same issues in which inconsistent findings are possible.


case_outcome: referred to

case_text: J in ASIC v West (2008) 100 SASR 496 at [203] adopted the same approach to the grant of declaratory relief in favour of ASIC. More recently a bare declaration was granted by Finkelstein J in Australian Securities and Investments Commission v HLP Financial Planning (Aust) Pty Ltd [2007] FCA 1868 ; (2007) 164 FCR 487. The Court declared that the "scheme" in question was an unregistered managed investment scheme in contravention of s 601ED(5) of the Act. His Honour said that the power to do so may be exercised whether or not other relief is sought and rejected the defendant's submission that a mere declaration would have no utility as the scheme had already been wound up following the winding up of the HLP companies, for the reason that: ... it is appropriate to make the declaration sought by ASIC. Many people put money into the scheme. They are entitled to know that the scheme was illegal and that is one reason why the HLP group was wound up. The declaration will not enable the investors to recover their money. But at least it will inform them what they had got themselves into.


case_text: submits that the s 1324B order is not consequential on the declarations sought and that in terms it can only be consequential on a finding of a breach of the Act. It says that here the order sought is relevantly disconnected from the breach with no sufficient nexus, citing ASIC v McDougall (2006) 57 ACSR 175 at [69]. It says that it is not a remedy in the true sense for the alleged wrong, but amounts, in effect, to advice from ASIC, with the Court's endorsement, to the shareholders concerned. It says that a final determination between the parties of an issue that has no practical consequence between those parties does not convert a hypothetical question into a "matter", otherwise all hypothetical questions would be a "matter" once a contradictor was found. As Young J in Re McDougall: Australian Securities & Investments Commission v McDougall (2006) 57 ACSR 175 at [55] observed, the courts, since Australian Softwood Forest Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 have recognised that the grant of declaratory relief on the application of a statutory body such as ASIC may serve important law enforcement purposes: Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596 at 603; 14 ACLR 644 at 647; Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 at [30] - [31] ; Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561-574.


case_text: Young J in Re McDougall: Australian Securities & Investments Commission v McDougall (2006) 57 ACSR 175 at [55] observed, the courts, since Australian Softwood Forest Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 have recognised that the grant of declaratory relief on the application of a statutory body such as ASIC may serve important law enforcement purposes: Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596 at 603; 14 ACLR 644 at 647; Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 at [30] - [31] ; Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561-574. Davies AJ in Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310 ; (2002) 41 ACSR 561 at [38] adopted what Austin J had said in Sweeney as well as by Young J in Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205 at 209. In particular his Honour agreed with the views expressed by their Honours that when declarations are sought by a public authority such as ASIC then the declaration should be made if it is in the public interest to do so (at [39]).


case_outcome: cited

case_text: submits that no final determination or resolution of the alleged contravention will take place without additional factual findings and determinations of issues of law and that accordingly, the Court is being asked to consider a hypothetical situation where its decision will produce no foreseeable consequences for the parties as to which it relies upon Forster v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 ; Australian Institute of Private Detectives Ltd v Privacy Commissioner [2004] FCA 1440 ; (2004) 139 FCR 394. Owston also cites Australian Institute of Private Detectives Ltd v Privacy Commissioner [2004] FCA 1440 ; (2004) 139 FCR 394. However in that case the applicant sought declarations "independently of any specific factual allegations" [29] which went "merely to future events or circumstances" which would not quell any existing controversy between the parties to the proceedings [31] and which was, in effect, seeking an advisory opinion [32]. A Full Court of this Court has expressed doubt as to whether an application for a declaration as to the legality of proposed future conduct involves a "matter" within the meaning of ss 75 , 76 and 77 of the Constitution of the Commonwealth: IMF (Australia) Ltd v Sons of Gwalia Ltd (Administrator appointed) [2005] FCAFC 75 ; (2005) 143 FCR 274 per Moore and Emmett at [16], [67] and [68]; (cf IMF (Australia) Ltd v Sons of Gwalia (Administrator Appointed) (2004) 211 ALR 231 per then French J at [43]. That, however, is not this case. In the present proceedings, by contrast, ASIC has made quite specific factual allegations concerning past events so that the court's decision will quell the controversy between it and Owston. Australian Institute of Private Detectives is not authority for the proposition that declarations must quell all controversies about an issue that might arise between a defendant and persons who are not parties to the litigation and who might sue that defendant about the same or similar issues.


case_text: Young J in Re McDougall: Australian Securities & Investments Commission v McDougall (2006) 57 ACSR 175 at [55] observed, the courts, since Australian Softwood Forest Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 have recognised that the grant of declaratory relief on the application of a statutory body such as ASIC may serve important law enforcement purposes: Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596 at 603; 14 ACLR 644 at 647; Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 at [30] - [31] ; Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561-574. Austin J in Australian Securities & Investments Commission v Sweeney (2001) NSWSC 114 at 30-31 said: It is beyond contest that this Court has plenary jurisdiction to make a declaratory order concerning contravention of the Corporations Law, by virtue of ss 23 and 75 of the Supreme Court Act 1970 (NSW). In Australian Softwood Forests Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 , the High Court expressly disagreed with the Court of Appeal of New South Wales, which had declined to grant a declaration with respect to contravention of the 'prescribed interests' provisions of the Companies Act 1961 (NSW). Gibbs CJ remarked that it was proper to grant a declaration in that case although it had been agreed that an injunction was not an appropriate remedy (at 125). In Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205 , 209, Young J dealt with the question more fully. He observed that, while a declaration will not ordinarily be made that a defendant has committed a crime, there is jurisdiction to do so in a proper case. In his Honour's view, older cases which discouraged a statutory authority from commencing proceedings for declaratory relief are no longer applicable, in view of the changed social climate, and the Court will now grant declaratory relief at the suit of the statutory authority which exists to regulate an industry, in an appropriate case: at 214. In his Honour's view, the fact that the subject matter of the declaration is of public interest is an important consideration in favour of the granting of declaratory relief, even though the order may be of only slight utility: at 213. In that case the Court declined to make a declaratory order, because (inter alia) the declaration would affect investors who were not parties to the proceedings. That consideration is not present here. The approach taken in the Federal Court is very similar: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 83 ; (1993) 113 ALR 257. and at 34-35: The present proceedings have been brought by the public regulator to enforce the corporations and securities legislation. According to s 1(2) of the Australian Securities and Investments Commission Act 1989 (Cth), in performing its functions and exercising its powers, the plaintiff must strive to achieve various objectives, including: to promote the confident and informed participation of investors and consumers in the financial system; to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and to take whatever action it can take, and is necessary, in order to enforce and give effect to the laws that confer functions and powers on it. These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court's and the community's disapproval of it) and may deter other wrongdoers. It is appropriate for the Court to take these matters into account in the exercise of its discretion to grant or refuse such relief. Davies AJ in Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd [2002] NSWSC 310 ; (2002) 41 ACSR 561 at [38] adopted what Austin J had said in Sweeney as well as by Young J in Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205 at 209. In particular his Honour agreed with the views expressed by their Honours that when declarations are sought by a public authority such as ASIC then the declaration should be made if it is in the public interest to do so (at [39]).


case_text: Young J in Re McDougall: Australian Securities & Investments Commission v McDougall (2006) 57 ACSR 175 at [55] observed, the courts, since Australian Softwood Forest Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 have recognised that the grant of declaratory relief on the application of a statutory body such as ASIC may serve important law enforcement purposes: Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596 at 603; 14 ACLR 644 at 647; Australian Securities & Investments Commission v Sweeney [2001] NSWSC 114 at [30] - [31] ; Australian Securities & Investments Commission v Pegasus Leveraged Options Group Pty Ltd (2002) 41 ACSR 561-574. This last observation reflects what was said by a Full Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) [1993] FCA 83 ; (1993) 41 FCR 89. It was there held that the Court has power under s 21 of the Federal Court of Australia Act to make a declaration of right in proceedings for injunctive relief brought under s 80 of the Trade Practices Act 1974 (Cth) irrespective of whether injunctive relief is granted or not: Sheppard J at p 98 (Foster J agreeing at p 106); Hill J at 110. As Sheppard J said: "[a]s in [ Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel Corporate Affairs Commission [1981] HCA 49 ; (1981) 148 CLR 121] , it is often useful to be able to make a declaration in a case that does not warrant the granting of injunctive relief. The making of declaratory orders in such cases without the grant of injunctive relief in litigation brought under the general law to enforce public rights is not an uncommon course." In the same case, Hill J said (at 110) [t]here can be little doubt that a declaration might be obtained by a regulatory authority that particular conduct is in breach of a statutory provision ... It has never been suggested that no power exists to grant such declaratory relief merely because the consequence of a declaration is to declare the existence of a wrong. The declaration that an offence has been committed is the concomitant of the non-existence of a right. Semantically, it may be said to be the declaration of a negative right. It is appropriate, in my view, to refer to it as a declaration of right. Austin J in Australian Securities & Investments Commission v Sweeney (2001) NSWSC 114 at 30-31 said: It is beyond contest that this Court has plenary jurisdiction to make a declaratory order concerning contravention of the Corporations Law, by virtue of ss 23 and 75 of the Supreme Court Act 1970 (NSW). In Australian Softwood Forests Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 , the High Court expressly disagreed with the Court of Appeal of New South Wales, which had declined to grant a declaration with respect to contravention of the 'prescribed interests' provisions of the Companies Act 1961 (NSW). Gibbs CJ remarked that it was proper to grant a declaration in that case although it had been agreed that an injunction was not an appropriate remedy (at 125). In Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205 , 209, Young J dealt with the question more fully. He observed that, while a declaration will not ordinarily be made that a defendant has committed a crime, there is jurisdiction to do so in a proper case. In his Honour's view, older cases which discouraged a statutory authority from commencing proceedings for declaratory relief are no longer applicable, in view of the changed social climate, and the Court will now grant declaratory relief at the suit of the statutory authority which exists to regulate an industry, in an appropriate case: at 214. In his Honour's view, the fact that the subject matter of the declaration is of public interest is an important consideration in favour of the granting of declaratory relief, even though the order may be of only slight utility: at 213. In that case the Court declined to make a declaratory order, because (inter alia) the declaration would affect investors who were not parties to the proceedings. That consideration is not present here. The approach taken in the Federal Court is very similar: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 83 ; (1993) 113 ALR 257. and at 34-35: The present proceedings have been brought by the public regulator to enforce the corporations and securities legislation. According to s 1(2) of the Australian Securities and Investments Commission Act 1989 (Cth), in performing its functions and exercising its powers, the plaintiff must strive to achieve various objectives, including: to promote the confident and informed participation of investors and consumers in the financial system; to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and to take whatever action it can take, and is necessary, in order to enforce and give effect to the laws that confer functions and powers on it. These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court's and the community's disapproval of it) and may deter other wrongdoers. It is appropriate for the Court to take these matters into account in the exercise of its discretion to grant or refuse such relief.


case_title: Australian Securities & Investments Commission v West (2008) 100 SASR 496


case_text: submits that in order for a " matter " to exist for the purposes of s 39B(1A) of the Judiciary Act , there must be a controversy as to some immediate right, duty or liability to be established by the Court's determination: Re: Judiciary and Navigation Acts (1921) 29 CLR 257 at 265; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 ; (2003) 132 FCR 428. Owston submits that on ASIC's case, no liability will be established on the part of Owston should ASIC be successful and points to the fact that ASIC does not seek recovery of damages in a representative capacity for shareholders, nor does the pleaded contravention give rise to a civil penalty. It claims that the relief sought is an advisory opinion on a purported contravention of the Act and does not quell any controversy between the parties. Here, Owston relies upon Bass v Permanent Trustee Co Ltd [1999] HCA 9 ; (1999) 161 ALR 399 and Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16 ; (2002) 209 CLR 372 at [61] - [62] per Gaudron and Gummow JJ. Bass v Permanent Trustee Co Ltd does not assist Owston. There is nothing hypothetical or advisory about the present proceedings. They involve the corporate regulator alleging various actual breaches of the law. The defendants deny those breaches. The result will quell that real controversy between them and will finally determine, subject only to any appeals, ASIC's allegations of breaches of s 727 of the Act and whether declarations of contraventions should be made together with consequential relief under s 1324B.


case_text: is defined by "matter(s)" because the Commonwealth's judicial power is derived from Chapter III of the Constitution , which requires jurisdiction to be defined in those terms: IMF (Australia) Ltd v Sons of Gwalia (Administrator Appointed) (2004) 211 ALR 231 at [43]; Litmus Australia Pty Ltd (in liq) v Canty [2006] NSWSC 196 ; (2006) 57 ACSR 71 at [35] citing British American Tobacco Australia Ltd v Western Australia [2003] HCA 47 ; (2003) 217 CLR 30 at [5] [6].


case_title: Corporate Affairs Commission (NSW) v Transphere Pty Ltd (1988) 15 NSWLR 596


case_text: submits that in order for a " matter " to exist for the purposes of s 39B(1A) of the Judiciary Act , there must be a controversy as to some immediate right, duty or liability to be established by the Court's determination: Re: Judiciary and Navigation Acts (1921) 29 CLR 257 at 265; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 ; (2003) 132 FCR 428. Owston submits that on ASIC's case, no liability will be established on the part of Owston should ASIC be successful and points to the fact that ASIC does not seek recovery of damages in a representative capacity for shareholders, nor does the pleaded contravention give rise to a civil penalty. It claims that the relief sought is an advisory opinion on a purported contravention of the Act and does not quell any controversy between the parties. Here, Owston relies upon Bass v Permanent Trustee Co Ltd [1999] HCA 9 ; (1999) 161 ALR 399 and Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16 ; (2002) 209 CLR 372 at [61] - [62] per Gaudron and Gummow JJ. In Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 ; (2003) 132 FCR 428 Cooper J stated: (a) the word "right" in this context is used in a sense that is wide and loose [12]; and (b) there "need not be a cause of action before the power [under s 21 of the Federal Court Act 1976 (Cth) to make a declaration] may be exercised, provided the subject matter in respect of which the declaration is sought is within the jurisdiction of the court and there is a real controversy to be determined" [14]. I respectfully agree with Cooper J as to this and reject Owston's submission, in effect, that declaratory relief is only available in circumstances where ASIC is suing for damages or a civil penalty, absent which, a "matter" cannot be said to exist. Section 21 of the Federal Court Act also contradicts that submission. It expressly provides that declaratory relief may be granted "whether or not any consequential relief is or could be claimed". In any event ASIC is seeking consequential orders under s 1324B of the Act. In Direct Factory Outlets Pty Ltd v Westfield Management Ltd , there were questions as to whether the applicant had a sufficient interest to bring the proceedings and whether there was utility in the declarations sought. It was said that the applicant had no personal right or interest that it sought to assert or protect in the proceedings, and that any interest it had was purely commercial. By contrast, in this case ASIC as the corporate regulator is charged with enforcement of the Act and has a public interest in pursuing this action against Owston.


case_text: submits that no final determination or resolution of the alleged contravention will take place without additional factual findings and determinations of issues of law and that accordingly, the Court is being asked to consider a hypothetical situation where its decision will produce no foreseeable consequences for the parties as to which it relies upon Forster v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 ; Australian Institute of Private Detectives Ltd v Privacy Commissioner [2004] FCA 1440 ; (2004) 139 FCR 394. Forster v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 was cited by Owston in support of the proposition that the Court may not be "forced to consider a hypothetical situation where its decision will produce no foreseeable consequences for the parties". Jododex is not authority for such a proposition. Rather, this formulation reflects the language of the joint judgment in Ainsworth at p 582 adopting what had been said in University of New South Wales v Moorhouse [1975] HCA 26 ; (1975) 133 CLR 1 at 10 as to a hypothetical question and in Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180 at 188, as to "foreseeable consequences". It is also the formulation adopted by Gaudron J in Truth About Motorways at [52]. Gibbs J at 435 in Jododex said that the jurisdiction to make a declaration is a very wide one. Jododex is, as was also approved by the majority judgment in Ainsworth, authority, at 437, that the power of superior courts to grant declaratory relief is discretionary which "it is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise". The jurisdiction to grant declaratory relief is wide. In JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432 at 435-436 there is a useful collection of relevant authority to that effect. King CJ, with whom Prior and Perry JJ agreed observed: Authoritative judicial statements make it clear that the jurisdiction to grant declaratory relief is very wide and that judicial pronouncements appearing to restrict the circumstances in which such relief will be granted relate to the sound exercise of the discretion rather than to jurisdiction; Ibeneweka v Egbuna [1964] 1 WLR 219 at 225; Forster v Jododex Australia Pty Ltd esp per Gibbs J at 438; Salmar Holdings Pty Ltd v Hornsby Shire Council [1971] 1 NSWLR 192 per Mason JA at 201. It is not necessary that the plaintiff have a cause of action against the defendant: Guaranty Trust Company of New York v Hannay and Co [1915] 2 KB 536. A statement by Lord Sterndale MR in Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 at 507, quoted by Gibbs J in Forster v Jododex at 435, appeared to confine the otherwise unlimited character of the jurisdiction to cases involving "a question of defining the rights of two parties". As was pointed out, however, by Street CJ in Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation [1977] 1 NSWLR 43 at 51, that statement was made "at a time when the declaratory jurisdiction had not achieved the full development manifested in the last 20 or 30 years." By 1970 the Privy Council could say in Rediffusion (Hong Kong) Ltd v Attorney-General of Hong Kong [1970] AC 1136 at 1158 that to exclude the jurisdiction it must appear "that the questions were purely abstract questions the answers to which were incapable of affecting any existing or future legal rights of the plaintiffs" [emphasis mine]. In Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation (above), Street CJ (at 53) repudiated the notion of jurisdictional cut-off points in relation to declaratory relief. Moffitt P said (at 57): The proper conclusion to be drawn concerning the power to make a declaration is that the jurisdiction (in the strict sense) to grant declaratory relief in a properly constituted action is very wide, so that no particular limitation can be pointed to ... I can find no warrant for the imposition by the courts of a self-denying restriction on their jurisdiction to grant declaratory relief. In my opinion there is no jurisdictional limit. The court's power to grant such relief is "only limited by its own discretion" ( Hanson v Radcliffe at 507), and the boundaries of judicial power: Ainsworth v Criminal Justice Commission [1992] HCA 10 ; (1992) 175 CLR 564 at 581-582.


case_text: v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 was cited by Owston in support of the proposition that the Court may not be "forced to consider a hypothetical situation where its decision will produce no foreseeable consequences for the parties". Jododex is not authority for such a proposition. Rather, this formulation reflects the language of the joint judgment in Ainsworth at p 582 adopting what had been said in University of New South Wales v Moorhouse [1975] HCA 26 ; (1975) 133 CLR 1 at 10 as to a hypothetical question and in Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180 at 188, as to "foreseeable consequences". It is also the formulation adopted by Gaudron J in Truth About Motorways at [52]. Gibbs J at 435 in Jododex said that the jurisdiction to make a declaration is a very wide one. Jododex is, as was also approved by the majority judgment in Ainsworth, authority, at 437, that the power of superior courts to grant declaratory relief is discretionary which "it is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise".


case_text: is defined by "matter(s)" because the Commonwealth's judicial power is derived from Chapter III of the Constitution , which requires jurisdiction to be defined in those terms: IMF (Australia) Ltd v Sons of Gwalia (Administrator Appointed) (2004) 211 ALR 231 at [43]; Litmus Australia Pty Ltd (in liq) v Canty [2006] NSWSC 196 ; (2006) 57 ACSR 71 at [35] citing British American Tobacco Australia Ltd v Western Australia [2003] HCA 47 ; (2003) 217 CLR 30 at [5] [6]. In these proceedings, as was the position in Sons of Gwalia , ASIC relies on the jurisdiction and powers conferred by: (a) s 39B(1A) of the Judiciary Act 1903 , which confers jurisdiction in any matter arising under any laws made by the Parliament; (b) s 21 of the Federal Court of Australia Act 1976 (Cth), which provides that the court "may, in relation to a matter in which it has original jurisdiction, make binding declarations of right, whether or not any consequential relief is or could be claimed"; and (c) s 1337B(1) of the Corporations Act 2001 (Cth), which confers jurisdiction on the Federal Court "with respect to civil matters arising under the Corporations legislation". Owston also cites Australian Institute of Private Detectives Ltd v Privacy Commissioner [2004] FCA 1440 ; (2004) 139 FCR 394. However in that case the applicant sought declarations "independently of any specific factual allegations" [29] which went "merely to future events or circumstances" which would not quell any existing controversy between the parties to the proceedings [31] and which was, in effect, seeking an advisory opinion [32]. A Full Court of this Court has expressed doubt as to whether an application for a declaration as to the legality of proposed future conduct involves a "matter" within the meaning of ss 75 , 76 and 77 of the Constitution of the Commonwealth: IMF (Australia) Ltd v Sons of Gwalia Ltd (Administrator appointed) [2005] FCAFC 75 ; (2005) 143 FCR 274 per Moore and Emmett at [16], [67] and [68]; (cf IMF (Australia) Ltd v Sons of Gwalia (Administrator Appointed) (2004) 211 ALR 231 per then French J at [43]. That, however, is not this case.


case_text: jurisdiction to grant declaratory relief is wide. In JN Taylor Holdings Ltd (in liq) v Bond (1993) 59 SASR 432 at 435-436 there is a useful collection of relevant authority to that effect. King CJ, with whom Prior and Perry JJ agreed observed: Authoritative judicial statements make it clear that the jurisdiction to grant declaratory relief is very wide and that judicial pronouncements appearing to restrict the circumstances in which such relief will be granted relate to the sound exercise of the discretion rather than to jurisdiction; Ibeneweka v Egbuna [1964] 1 WLR 219 at 225; Forster v Jododex Australia Pty Ltd esp per Gibbs J at 438; Salmar Holdings Pty Ltd v Hornsby Shire Council [1971] 1 NSWLR 192 per Mason JA at 201. It is not necessary that the plaintiff have a cause of action against the defendant: Guaranty Trust Company of New York v Hannay and Co [1915] 2 KB 536. A statement by Lord Sterndale MR in Hanson v Radcliffe Urban District Council [1922] 2 Ch 490 at 507, quoted by Gibbs J in Forster v Jododex at 435, appeared to confine the otherwise unlimited character of the jurisdiction to cases involving "a question of defining the rights of two parties". As was pointed out, however, by Street CJ in Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation [1977] 1 NSWLR 43 at 51, that statement was made "at a time when the declaratory jurisdiction had not achieved the full development manifested in the last 20 or 30 years." By 1970 the Privy Council could say in Rediffusion (Hong Kong) Ltd v Attorney-General of Hong Kong [1970] AC 1136 at 1158 that to exclude the jurisdiction it must appear "that the questions were purely abstract questions the answers to which were incapable of affecting any existing or future legal rights of the plaintiffs" [emphasis mine]. In Johnco Nominees Pty Ltd v Albury-Wodonga (NSW) Corporation (above), Street CJ (at 53) repudiated the notion of jurisdictional cut-off points in relation to declaratory relief. Moffitt P said (at 57): The proper conclusion to be drawn concerning the power to make a declaration is that the jurisdiction (in the strict sense) to grant declaratory relief in a properly constituted action is very wide, so that no particular limitation can be pointed to ... I can find no warrant for the imposition by the courts of a self-denying restriction on their jurisdiction to grant declaratory relief. In my opinion there is no jurisdictional limit. The court's power to grant such relief is "only limited by its own discretion" ( Hanson v Radcliffe at 507), and the boundaries of judicial power: Ainsworth v Criminal Justice Commission [1992] HCA 10 ; (1992) 175 CLR 564 at 581-582.


case_title: Litmus Australia Pty Ltd (in liq) v Canty [2006] NSWSC 196 ; (2006) 57 ACSR 71


case_outcome: applied

case_title: Re: Judiciary and Navigation Acts [1921] HCA 20 ; (1921) 29 CLR 257

case_text: submits that in order for a " matter " to exist for the purposes of s 39B(1A) of the Judiciary Act , there must be a controversy as to some immediate right, duty or liability to be established by the Court's determination: Re: Judiciary and Navigation Acts (1921) 29 CLR 257 at 265; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 ; (2003) 132 FCR 428. Owston submits that on ASIC's case, no liability will be established on the part of Owston should ASIC be successful and points to the fact that ASIC does not seek recovery of damages in a representative capacity for shareholders, nor does the pleaded contravention give rise to a civil penalty. It claims that the relief sought is an advisory opinion on a purported contravention of the Act and does not quell any controversy between the parties. Here, Owston relies upon Bass v Permanent Trustee Co Ltd [1999] HCA 9 ; (1999) 161 ALR 399 and Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16 ; (2002) 209 CLR 372 at [61] - [62] per Gaudron and Gummow JJ. The majority of the members of the High Court in Re: Judiciary and Navigation Acts explained that "a matter under the judicature provisions of the Constitution must involve some right or privilege or protection given by law, or the prevention, redress or punishment of some act inhibited by law" (at 266). Owston contends that in light of the statutory scheme there is no right, privilege or protection given to ASIC which is sought to be enforced, nor is the relief sought in the nature of preventative relief, or redress, or a punishment. I do not accept Owston's submissions. In my opinion, the present proceedings fall within the majority's several alternative descriptions of "matter" in Re: Judiciary and Navigation Acts. They concern the rights and protections conferred by s 727 of the Act as well as the redress available under ss 1324B and 1337B of the Act and under s 21 of the Federal Court Act and s 39B(1A) of the Judiciary Act for contraventions of s 727 of the Act. Re: Judiciary and Navigation Acts is not authority for the proposition that for a "matter" to exist, a claim of civil penalty or for recovery of damages or some relief which undoes the wrong must be present, or that somehow the proceedings must ensure finality of litigation by ensuring that there is no real possibility that another plaintiff will commence proceedings in relation to some or all of the issues in the proceedings. Nor is it authority to support a contention that bare declaratory relief which does not meet or aid one of those ends will not ordinarily be granted. Involved in this proceeding is at least the question of the right of investors to receive a prospectus under the provisions of the Act and the corresponding duty of Owston to provide one. Owston is liable to the declaratory relief sought. These are sufficient.


case_text: submits that in order for a " matter " to exist for the purposes of s 39B(1A) of the Judiciary Act , there must be a controversy as to some immediate right, duty or liability to be established by the Court's determination: Re: Judiciary and Navigation Acts (1921) 29 CLR 257 at 265; Direct Factory Outlets Pty Ltd v Westfield Management Ltd [2003] FCA 1095 ; (2003) 132 FCR 428. Owston submits that on ASIC's case, no liability will be established on the part of Owston should ASIC be successful and points to the fact that ASIC does not seek recovery of damages in a representative capacity for shareholders, nor does the pleaded contravention give rise to a civil penalty. It claims that the relief sought is an advisory opinion on a purported contravention of the Act and does not quell any controversy between the parties. Here, Owston relies upon Bass v Permanent Trustee Co Ltd [1999] HCA 9 ; (1999) 161 ALR 399 and Re McBain; Ex parte Australian Catholic Bishops Conference [2002] HCA 16 ; (2002) 209 CLR 372 at [61] - [62] per Gaudron and Gummow JJ.


case_text: Court has a general power to control its own proceedings which includes a power to stay proceedings: Sterling Pharmaceuticals Pty Limited v The Boots Company (Australia) Pty Ltd [1992] FCA 72 ; (1992) 34 FCR 287 at 290). It also has power by virtue of O20 r 5 of the Federal Court Rules to stay proceedings which are an abuse of the process of the Court. Proceedings will be an abuse of process if, regardless of the propriety of the person bringing the proceedings, they may be converted into instruments of injustice or unfairness, or are vexatious or oppressive: Walton v Gardiner (1993) 177 CLR 378 at 393 per Mason CJ, Deane and Dawson JJ.


case_text: last observation reflects what was said by a Full Court in Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc (No 2) [1993] FCA 83 ; (1993) 41 FCR 89. It was there held that the Court has power under s 21 of the Federal Court of Australia Act to make a declaration of right in proceedings for injunctive relief brought under s 80 of the Trade Practices Act 1974 (Cth) irrespective of whether injunctive relief is granted or not: Sheppard J at p 98 (Foster J agreeing at p 106); Hill J at 110. As Sheppard J said: "[a]s in [ Australian Softwood Forests Pty Ltd v Attorney-General (NSW); Ex rel Corporate Affairs Commission [1981] HCA 49 ; (1981) 148 CLR 121] , it is often useful to be able to make a declaration in a case that does not warrant the granting of injunctive relief. The making of declaratory orders in such cases without the grant of injunctive relief in litigation brought under the general law to enforce public rights is not an uncommon course." In the same case, Hill J said (at 110) [t]here can be little doubt that a declaration might be obtained by a regulatory authority that particular conduct is in breach of a statutory provision ... It has never been suggested that no power exists to grant such declaratory relief merely because the consequence of a declaration is to declare the existence of a wrong. The declaration that an offence has been committed is the concomitant of the non-existence of a right. Semantically, it may be said to be the declaration of a negative right. It is appropriate, in my view, to refer to it as a declaration of right. Austin J in Australian Securities & Investments Commission v Sweeney (2001) NSWSC 114 at 30-31 said: It is beyond contest that this Court has plenary jurisdiction to make a declaratory order concerning contravention of the Corporations Law, by virtue of ss 23 and 75 of the Supreme Court Act 1970 (NSW). In Australian Softwood Forests Pty Ltd v Attorney-General (NSW) [1981] HCA 49 ; (1981) 148 CLR 121 , the High Court expressly disagreed with the Court of Appeal of New South Wales, which had declined to grant a declaration with respect to contravention of the 'prescribed interests' provisions of the Companies Act 1961 (NSW). Gibbs CJ remarked that it was proper to grant a declaration in that case although it had been agreed that an injunction was not an appropriate remedy (at 125). In Corporate Affairs Commission v Transphere Pty Ltd (1989) 7 ACLC 205 , 209, Young J dealt with the question more fully. He observed that, while a declaration will not ordinarily be made that a defendant has committed a crime, there is jurisdiction to do so in a proper case. In his Honour's view, older cases which discouraged a statutory authority from commencing proceedings for declaratory relief are no longer applicable, in view of the changed social climate, and the Court will now grant declaratory relief at the suit of the statutory authority which exists to regulate an industry, in an appropriate case: at 214. In his Honour's view, the fact that the subject matter of the declaration is of public interest is an important consideration in favour of the granting of declaratory relief, even though the order may be of only slight utility: at 213. In that case the Court declined to make a declaratory order, because (inter alia) the declaration would affect investors who were not parties to the proceedings. That consideration is not present here. The approach taken in the Federal Court is very similar: Tobacco Institute of Australia Ltd v Australian Federation of Consumer Organisations Inc [1993] FCA 83 ; (1993) 113 ALR 257. and at 34-35: The present proceedings have been brought by the public regulator to enforce the corporations and securities legislation. According to s 1(2) of the Australian Securities and Investments Commission Act 1989 (Cth), in performing its functions and exercising its powers, the plaintiff must strive to achieve various objectives, including: to promote the confident and informed participation of investors and consumers in the financial system; to administer the laws that confer functions and powers on it effectively and with a minimum of procedural requirements; and to take whatever action it can take, and is necessary, in order to enforce and give effect to the laws that confer functions and powers on it. These provisions imply that it is appropriate for the Commission to take civil proceedings for declaratory and injunctive relief in respect of past events, even if there is no risk of repetition, where the outcome may establish that the conduct complained of was wrongful (and thereby mark the Court's and the community's disapproval of it) and may deter other wrongdoers. It is appropriate for the Court to take these matters into account in the exercise of its discretion to grant or refuse such relief.


case_text: accepts that declaratory relief is often given on the motion of a regulator, but it says that usually a declaration is only granted in conjunction with substantive relief which is in its nature either protective such as by the grant of injunctive relief or corrective advertising orders or alternatively a punishment by awarding, for example, civil penalties. It contends that a bare declaration will be made only in rare circumstances, absent other relief that gives effect to a right or obligation. It cites Gaudron J in Truth About Motorways Pty Limited v Macquarie Infrastructure Management Limited [2000] HCA 11 ; (2000) 200 CLR 591 at [52] : There may be cases where a bare declaration that some legal requirement has been contravened will serve to redress some or all of the harm brought about by that contravention. Ainsworth v Criminal Justice Commission (109) was such a case. But a declaration cannot be made if it "will produce no foreseeable consequences for the parties". (110) That is not simply a matter of discretion. Rather, a declaration that produces no foreseeable consequences is so divorced from the administration of the law as not to involve a matter for the purposes of Ch III of the Constitution . And as it is not a matter for those purposes, it cannot engage the judicial power of the Commonwealth. (See Ainsworth v Criminal Justice Commission [1992] HCA 10 ; (1992) 175 CLR 564 at 582, per Mason CJ, Dawson, Toohey and Gaudron JJ). Forster v Jododex Australia Pty Ltd [1972] HCA 61 ; (1972) 127 CLR 421 was cited by Owston in support of the proposition that the Court may not be "forced to consider a hypothetical situation where its decision will produce no foreseeable consequences for the parties". Jododex is not authority for such a proposition. Rather, this formulation reflects the language of the joint judgment in Ainsworth at p 582 adopting what had been said in University of New South Wales v Moorhouse [1975] HCA 26 ; (1975) 133 CLR 1 at 10 as to a hypothetical question and in Gardner v Dairy Industry Authority (NSW) (1977) 52 ALJR 180 at 188, as to "foreseeable consequences". It is also the formulation adopted by Gaudron J in Truth About Motorways at [52]. Gibbs J at 435 in Jododex said that the jurisdiction to make a declaration is a very wide one. Jododex is, as was also approved by the majority judgment in Ainsworth, authority, at 437, that the power of superior courts to grant declaratory relief is discretionary which "it is neither possible nor desirable to fetter ... by laying down rules as to the manner of its exercise".


case_title: University of New South Wales v Moorhouse [1975] HCA 26 ; (1975) 133 CLR 1


case_title: Walton v Gardiner (1993) 177 CLR 378


case_text: first ground of appeal is a restatement of the first ground for judicial review before the Federal Magistrate. It is, as the Federal Magistrate rightly pointed out, no more than a claim to have the Court perform a merits review of the Tribunal's finding. Her Honour dealt extensively with this ground in her reasons. An application for a judicial review of an administrative decision does not give rise to a merits review of the decision: Attorney-General (NSW) v Quin [1990] HCA 21 ; (1990) 170 CLR 1 at 35. The purpose of the review is to determine whether the Tribunal has exercised its power in accordance with its obligations and, in particular, without jurisdictional error. The Federal Magistrates Court and this Court has limited jurisdiction to determine whether the Tribunal has made jurisdictional error. If no jurisdictional error is shown, then the Tribunal's decision cannot be quashed. It is not entirely clear what is meant by the second ground of appeal. Her Honour said in her reasons that there was no obligation on the Tribunal to require the Tribunal to write to the applicant pursuant to the provisions of s 424A requiring particular documentary evidence to be adduced. That clearly was right. She also said that if the Tribunal was of the opinion that there was a lack of evidence before the Tribunal, that was not information for the purposes of s 424A. That also is clearly right. The second ground must be dismissed. It is also not entirely clear what is meant by the third ground, although an examination of her Honour's reasons does assist. It was put to her Honour as part of the third ground in support of the application for judicial review that the Tribunal had erred in questioning why it was that the appellant husband was not subject to further attacks after the home invasion. The Federal Magistrate rejected the argument that such an approach amounted to a consideration of a hypothetical situation or hypothetical issues. The Tribunal gave consideration to the issue which it identified in considering whether or not the appellant husband's account was credible. It was not a hypothetical issue but it was a reason in the Tribunal's opinion why the appellant husband's account could not be accepted. In my opinion, none of the grounds of appeal have been made out and the appeal must be dismissed. The appellants must pay the respondent's costs. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lander. Associate: Dated: 21 April 2008 Counsel for the Appellants: Dr J Azzi Solicitor for the Appellants: Davidson James & Associates Counsel for the First Respondent: Mr T Reilly Solicitor for the First Respondent: Sparke Helmore Date of Hearing: 15, 22, 29 November 2007; 3 March 2008 Date of Judgment: 21 April 2008 AustLII: Copyright Policy | Disclaimers | Privacy Policy | Feedback URL: http://www.austlii.edu.au/au/cases/cth/FCA/2008/499.html


case_text: Coulton v Holcombe [1986] HCA 33 ; (1986) 162 CLR 1 , the majority said at 7: It is fundamental to the due administration of justice that the substantial issues between the parties are ordinarily settled at the trial. If it were not so the main arena for the settlement of disputes would move from the court of first instances to the appellate court, tending to reduce the proceedings in the former court to little more than a preliminary skirmish. The appellate process is to correct error. If a party is entitled to raise issues for the first time on appeal, the appeal court will become de facto the primary court. That is undesirable. It is particularly undesirable where the appellate jurisdiction of the Court is being exercised by a single judge and any right of appeal from that single judge is to the High Court. If a party is entitled to raise an issue for the first time on appeal in this Court, the High Court will be burdened by applications for leave to appeal from judges sitting alone who have not had their decision reviewed. That must be particularly undesirable from the High Court's point of view. Moreover, to allow new grounds of appeal is to defeat the purpose of the legislation which requires that judicial review of a decision of the Refugee Review Tribunal to be within solely the jurisdiction of the Federal Magistrates Court. If new grounds are advanced on appeal, it effectively means that the jurisdiction is being exercised by this Court. In VUAX v Minister for Immigration and Multicultural and Indigenous Affairs [2004] FCAFC 158 , the Court said that leave to argue a ground of appeal not raised before the trial judge should only be granted "if it is expedient in the interests of justice to do so." After referring to the dicta in Coulton v Holcombe [1986] HCA 33 ; 162 CLR 1 , the Court said that the Court may grant leave if the point which has not been raised in the Court below has merit and there is no real prejudice to the respondent in permitting the point to be ventilated.


case_text: the Full Court of this Court has recognised that a residual discretion resides in this Court to allow a party to advance a ground of appeal not advanced before the Court from which the appeal is brought where it is in the interests of justice to do so: Iyer [2000] FCA 1788. In Gomez v Minister for Immigration and Multicultural Affairs [2002] FCAFC 105 ; (2002) 190 ALR 543 , the Full Court adopted the test propounded by the High Court in appeals to that Court in Metwally v University of Wollongong [1985] HCA 28 ; 60 ALR 68 at 71 that a party is bound by the conduct of the party's case in the Court below except in "the most exceptional circumstances".


case_text: course, appeals of this kind are particularly sensitive: Iyer v Minister for Immigration and Multicultural Affairs [2000] FCA 1788. It is particularly important to the party seeking refugee status that that party's claim be considered by the Tribunal in accordance with law. That said, however, it seems to me that it is necessary to protect the integrity of the appellate jurisdiction that parties be bound by the way in which they conducted their application for judicial review before the Federal Magistrates Court: H v Minister for Immigration and Multicultural Affairs [2000] FCA 1348 ; (2000) 63 ALD 43.


case_text: course, appeals of this kind are particularly sensitive: Iyer v Minister for Immigration and Multicultural Affairs [2000] FCA 1788. It is particularly important to the party seeking refugee status that that party's claim be considered by the Tribunal in accordance with law. That said, however, it seems to me that it is necessary to protect the integrity of the appellate jurisdiction that parties be bound by the way in which they conducted their application for judicial review before the Federal Magistrates Court: H v Minister for Immigration and Multicultural Affairs [2000] FCA 1348 ; (2000) 63 ALD 43. However, the Full Court of this Court has recognised that a residual discretion resides in this Court to allow a party to advance a ground of appeal not advanced before the Court from which the appeal is brought where it is in the interests of justice to do so: Iyer [2000] FCA 1788. In Gomez v Minister for Immigration and Multicultural Affairs [2002] FCAFC 105 ; (2002) 190 ALR 543 , the Full Court adopted the test propounded by the High Court in appeals to that Court in Metwally v University of Wollongong [1985] HCA 28 ; 60 ALR 68 at 71 that a party is bound by the conduct of the party's case in the Court below except in "the most exceptional circumstances".


case_text: will the Minister in an appeal to this Court from a migration judgment of the Federal Magistrates Court be able to point to any prejudice of the conventional kind. That cannot be a reason to allow a party to raise issues not raised in the Court below. In Iyer v Minister for Immigration and Multicultural Affairs [2001] FCA 929 ; (2001) 192 ALR 71 , Gyles J said at 86: In my opinion, it is wrong to analyse a question which arises here as requiring a balancing of prejudice. Departure from the proper role of appeal in the court system is not simply a discretionary procedural decision. Furthermore, in public law matters like this, it can always be said that no actual prejudice apart from costs is suffered by the respondent compared with the prejudice to the appellant. It can easily be overlooked that there is a significant public interest in the timely and effective disposal of litigation. This aspect has particular force in this area of public law, where delays in dealing with applications for protection visas are obviously to be avoided if possible. In the present case, there was no bona fide ground of appeal from the primary decision and the litigation should have ended at that point more than 7 months ago. The Minister has a legitimate interest in the timely disposal of applications for protection visas. There are other public interests, however, to which regard should be had. There are good reasons why this Court should not be made de facto the Court of original jurisdiction when sitting on appeal. Otherwise its role as an intermediate Court of Appeal will be undermined. The High Court should not be burdened by applications for leave to appeal from decisions of this Court which have not been reviewed. The respondent conceded that I needed to consider whether any of the grounds had any merit before determining whether or not I should allow the application to amend. The concession was rightly made having regard to the decisions of this Court and, in particular, VUAX [2004] FCAFC 158. Adopting that procedure, however, means that in every case where there is an application to raise a ground not previously raised in the Court below, the party seeking to have the ground agitated will by reason of the application itself require the Court to consider the ground. It is a curious result when the Court would otherwise discourage such applications but a result which arises because the Court's overriding duty is to do justice. The reason for the power to allow a party to raise a ground on appeal for the first time is to do justice.


case_text: High Court has made it plain that, ordinarily, a party is confined in its grounds of appeal to matters which have been raised in the Court below. The High Court said in Metwally v University of Wollongong [1985] HCA 28 ; (1985) 60 ALR 68 at 71: It is elementary that a party is bound by the conduct of his case. Except in the most exceptional circumstances, it would be contrary to all principle to allow a party, after a case has been decided against him, to raise a new argument which, whether deliberately or by inadvertence, he failed to put during the hearing when he had an opportunity to do so. However, the Full Court of this Court has recognised that a residual discretion resides in this Court to allow a party to advance a ground of appeal not advanced before the Court from which the appeal is brought where it is in the interests of justice to do so: Iyer [2000] FCA 1788. In Gomez v Minister for Immigration and Multicultural Affairs [2002] FCAFC 105 ; (2002) 190 ALR 543 , the Full Court adopted the test propounded by the High Court in appeals to that Court in Metwally v University of Wollongong [1985] HCA 28 ; 60 ALR 68 at 71 that a party is bound by the conduct of the party's case in the Court below except in "the most exceptional circumstances". Section 430(1)(c) does not oblige the Tribunal to make findings of fact that a court may consider to be material. In Minister for Immigration v Yusuf [2001] HCA 30 ; (2001) 206 CLR 323 , McHugh, Gummow and Hayne JJ said at [68]-[69] that the obligation on the Tribunal is to set out in its written statement its findings on what it considered to be material questions of fact.


case_text: 430(1)(c) does not oblige the Tribunal to make findings of fact that a court may consider to be material. In Minister for Immigration v Yusuf [2001] HCA 30 ; (2001) 206 CLR 323 , McHugh, Gummow and Hayne JJ said at [68]-[69] that the obligation on the Tribunal is to set out in its written statement its findings on what it considered to be material questions of fact.


case_outcome: distinguished

case_text: Central to the concept of derivation is the proposition that there must be a gain in the sense of an amount which has 'come home' to the taxpayer, i.e. it is available for the taxpayer's separate use, benefit and disposal: Federal Commissioner of Taxation v Montgomery [1999] HCA 34 ; (1999) 198 CLR 639 at [65] and [117]-[118]; Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia (' Carden ') [1938] HCA 69 ; (1938) 63 CLR 108 at 155; Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation [1965] HCA 58 ; (1965) 114 CLR 314 at 318; Eisner v Macomber [1919] USSC 118 ; (1920) 252 US 189 at 207 applied in Montgomery at [117]. That is, receipt of itself is not sufficient to constitute a gain or an amount as income derived: Arthur Murray at 318. 79 In order to determine whether a receipt has come home the enquiry is focused upon the general understanding among practical business people as to whether the receipt has come home for the separate use, benefit and disposal of the taxpayer: Arthur Murray at 318; Montgomery at [117]. 81 A receipt will not come home where the amount received is affected by a legal or equitable restriction affecting the separate use, benefit or enjoyment of the recipient: Arthur Murray at 318; Barratt v Federal Commissioner of Taxation [1992] FCA 271 ; (1992) 36 FCR 222 at 231; RW Parsons, Income Taxation in Australia : Principles of Income, Deductibility and Tax Accounting , Law Book Company, Sydney (1985) at [11.49]. For example, where the receipt is affected by a constructive trust (see, MacFarlane v Federal Commissioner of Taxation (1986) 13 FCR 356) or where the recipient is not the beneficial object of the receipt (see The Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 424). 82 Further, even where there is no legal or equitable restriction affecting the receipt, the receipt may not come home where: (a) the practical 'realities' prevent the taxpayer from the separate use, benefit or enjoyment of a gain because the obligor cannot meet their legal or contractual obligations to the taxpayer (see Prior at 13); or (b) it would be unsound from a business or legal perspective, to recognise the receipt as income because the receipt did not give a 'substantially correct reflex of the taxpayer's true income': see Carden at 145; Arthur Murray at 318; Ballarat Brewing Company Limited v Federal Commissioner of Taxation [1951] HCA 35 ; (1951) 82 CLR 364 at 368, 369. 90 The consequence is that BARM derived income represented by the management fees payable pursuant to the Syndicate Deeds (subject to the operation of the ' Arthur Murray principle' discussed below) at the time at which the management fees became due to it by Participants; so understood, neither the time at which the payment obligation was discharged, nor the mode by which the payment obligation was discharged, were matters which affected the derivation by BARM of the income represented by the management fees. 94 The present state of authority recognises only a very limited class of cases in that payments may be actually received by a taxpayer, but only derived as income at later points in time. The relevant class of cases are those coming within the principle recognised in Arthur Murray . 95 It is not disputed here that, to the extent that BARM received management fees in one year that related in part to the provision by it of management services in the next year, the principle recognised in Arthur Murray would apply to defer the derivation of that part of the management fees until the later year, when the services in connection with those management fees were actually performed. Indeed, that is how it returned the income represented by the management fees. 96 The present case is, however, an attempt by BARM in reliance on Arthur Murray , to advance a broader proposition, namely, that notwithstanding: (i) the incurring by Participants of debts in favour of BARM in respect of management fees; and (ii) the discharge of those debts by delivery of the bills to BARM; there was no derivation of income by BARM in respect of the management fees. 97 Unlike Arthur Murray , the foundation for this broader proposition does not relate to the time of performance by BARM of the management services. Rather, it rests on the following circumstances: (a) BARM's conduct in entering into commercial transactions (i.e. loans) that were distinct and separate from the provision of the management services; (b) the utilisation of the consideration received by BARM from Participants in respect of management fees in making those loans to PGF; and (c) the circumstance that, by agreement with the borrower (PGF), BARM had limited or restricted its ability to enforce repayment of the loans. 98 The Commissioner submitted that the flaw in BARM's argument is that it attempts to conflate, for taxation purposes, the consequences of distinct and separate transactions being: (i) the arrangement under which BARM provided management services to the Participants; and (ii) the arrangement under which BARM made loans to PGF. 99 The first of those arrangements resulted in BARM agreeing to perform management activities which constituted the provision of services in the ordinary course of the business that it carried on and that resulted in the Participants discharging their payment obligations to it. 108 The argument underlying alternative (2) involves the deferral of derivation of income represented by the management fees to the time BARM receives payments of interest and repayments of principal on the deposit with PGF. For an accruals basis taxpayer, the point of derivation of such income would normally be, as the Commissioner contended, when the management fees fell due, subject of course to the principle that comes out of Arthur Murray that, even if received, there will be no derivation until the receipt is earned. As indicated in [95] above, that latter principle was observed in the way in which BARM returned the income represented by the management fees. 109 The argument for deferral to the time BARM receives payments of interest and repayments of principal on the deposit with PGF is said to '... look to realities' to use the words of Rich J in Prior at 13. What it effectively asserts is that BARM should be treated as a cash basis taxpayer in respect of such income and then only for the amount of money received. Reliance for this argument is placed on the process of reasoning in Arthur Murray , albeit for a very different principle, Prior and Barratt . I deal with each of these cases below. 112 Whatever else it might support, nothing was said in Arthur Murray which supports the argument underlying alternative (2). Arthur Murray was a case stated by Barwick CJ in five pending appeals from decisions of the Board of Review. The facts relevant to the only question that had to be formally answered were few and simple. They are recited in the judgment of the Court in the following terms at 316: 'In the relevant years the company carried on a business of giving courses of tuition in dancing for fees of varying amounts per hour. What the case describes as basic courses of tuition available consisted of 5, 15 or 30 hours of private tuition to be taken by appointment within a year, though some students contracted for a course of 1,200 hours' tuition to be taken at any time during the student's lifetime. Payment for a course of lessons was often made in advance, either in the form of a lump sum or by instalments, a variable discount being allowed for immediate payment. For example, the fee for a lifetime course of 1,200 hours was [sterling]3,300, reducible to [sterling]3,000 for immediate payment. The student was given no contractual right to a refund in the event of his not completing the course--indeed the form of contract in general use denied any such right--though in practice refunds were sometimes given. In the company's books, fees were credited immediately upon their being received to an account styled "Unearned deposits--Untaught Lessons Account", and from that account amounts corresponding with lessons taught were periodically transferred to the credit of an account styled "Earned Tuition Account". The company made up its income tax returns on the footing that fees received in advance of tuition formed no part of its assessable income at the moment of receipt, but became such as and when earned by the giving of the lessons. The Commissioner, on the other hand, made the relevant assessments upon the view that fees received in advance of tuition possessed the character of assessable income in the company's hands from the moment of receipt, so that in respect of a given year of income there was no need to distinguish between fees for which lessons had been given during the year and fees for which at the end of the year the lessons still remained to be given. The question to be decided is, in effect, whether on the facts as stated it is open to the Justice hearing the appeals to uphold the Commissioner's view.' 113 The Court answered that question 'no' by declaring that on the facts appearing in the case stated the conclusion is not open that a receipt of fees for a specified number of dancing lessons to be given over a period subsequent to the receipt is a derivation of assessable income. In the course of their reasons, the Court said at 320: 'Nothing in the Act is contradicted or ignored when a receipt of money as a prepayment under a contract for future services is said not to constitute by itself a derivation of assessable income. On the contrary, if the statement accords with ordinary business concepts in the community--and we are bound by the case stated to accept that it does--it applies the provisions of the Act according to their true meaning.' 114 Earlier in their reasons, the Court had said at 318: 'As Dixon J. observed in Carden's Case: "Speaking generally, in the assessment of income the object is to discover what gains have during the period of account come home to the taxpayer in a realized or immediately realizable form". The word "gains" is not here used in the sense of the net profits of the business, for the topic under discussion is assessable income, that is to say gross income. But neither is it synonymous with "receipts". It refers to amounts which have not only been received but have "come home" to the taxpayer; and that must surely involve, if the word "income" is to convey the notion it expresses in the practical affairs of business life, not only that the amounts received are unaffected by legal restrictions, as by reason of a trust or charge in favour of the payer--not only that they have been received beneficially--but that the situation has been reached in which they may properly be counted as gains completely made, so that there is neither legal nor business unsoundness in regarding them without qualification as income derived.' 117 In my view, there is no process of reasoning in, or principle coming out of, Arthur Murray which supports the argument underlying alternative (2). And this would be the case whether BARM is an accruals basis or cash basis taxpayer, assuming of course that the principle coming out of Arthur Murray applies equally to both. While Arthur Murray concerned an accruals basis taxpayer, there seems to be no reason why the principle does not equally apply to a cash basis taxpayer. 118 Prior concerned a cash basis taxpayer who, during his lifetime, was a member of a partnership which was dissolved by a deed. His sole co-partner had borrowed money from him on his private account and the deceased had lent money to the partnership. An account was made up of the dealings between them on the dissolution and the result was shown as leaving the co-partner indebted to the deceased in the sum of [sterling]8,388, which included a sum of [sterling]2,535 made up of two amounts: (1) [sterling]1,462 interest, said to be owing at 13 August 1932 by the co-partner on his personal account. (2) [sterling]1,073 interest, said to be the deceased's half share of the interest owing to him by the partnership at the time. By the deed, he undertook a personal liability to the deceased for the amount and secured it over a certain property already mortgaged, for part of the sum. The property was actually worth only [sterling]3,295 and by reason of his financial position the co-partner was unable to pay even the arrears of interest included in the sum and no payment had ever been made in respect of the sum. 119 The Commissioner contended that the interest referred to represented interest derived by the deceased during the account period ended 30 June 1932 but capitalised by means of the deed dated the 13 August 1932 affecting the dissolution of the partnership. Under the deed, the interest had been carried to the capital account. 126 In conclusion, my view is that, consistent with BARM being an accruals basis taxpayer, the income represented by the management fees was derived by BARM when those fees fell due; or, in the case of fees which related to the provision of services in a year of income after the year in which the fees fell due, consistent with the principle that comes out of Arthur Murray , in the year of income in which those services were provided. That is, as I understand the evidence, how BARM returned the income represented by the management fees. Even if BARM were to be taxed on the management fee income as a cash basis taxpayer, and as indicated in [111] above, I do not think such a basis is appropriate, that would only defer derivation to the date of delivery of the bills of exchange or, in the case of fees which related to the provision of services in a year of income after the year in which the fees were received, consistent with the principle that comes out of Arthur Murray , in the year of income in which these services were provided. 127 Moreover, in the absence of evidence that the money value of the bills at the time of delivery to BARM was less than their face value, no deferral would also result in a reduction in the quantum of the amount derived. 128 BARM's position in relation to Issue 1 cannot be sustained; and it follows that its position in relation to Issue 2 must also fail.


case_text: Further, even where there is no legal or equitable restriction affecting the receipt, the receipt may not come home where: (a) the practical 'realities' prevent the taxpayer from the separate use, benefit or enjoyment of a gain because the obligor cannot meet their legal or contractual obligations to the taxpayer (see Prior at 13); or (b) it would be unsound from a business or legal perspective, to recognise the receipt as income because the receipt did not give a 'substantially correct reflex of the taxpayer's true income': see Carden at 145; Arthur Murray at 318; Ballarat Brewing Company Limited v Federal Commissioner of Taxation [1951] HCA 35 ; (1951) 82 CLR 364 at 368, 369. 83 This is illustrated by the approach to income recognition in the area of insurance. It is accepted that, in an appropriate case, the aggregate of insurance premiums received by an insurer in a year of income does not give a substantially correct reflex of that insurer's income because of the contingencies affecting those premiums: see Sun Insurance Office v Clark (1912) AC 443 at 452-4, 456 and 460, 461, approved in Ballarat Brewing and Carden .


case_text: In determining whether an amount paid or payable to the taxpayer has the character of income, it is necessary: (a) to have regard to the quality of the amount in the hands of the taxpayer and not to the character of the expenditure to the payer : Federal Commissioner of Taxation v McNeil [2007] HCA 5 ; (2007) 229 CLR 656 at [20] and [55]; G.P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1990) 170 CLR 124 at 136; (b) to have regard to the whole of the surrounding circumstances or factual matrix, and not just to the contract under which the amount is paid or payable: Federal Coke Co Pty Ltd v Federal Commissioner of Taxation (1977) 34 FLR 375 at 385; Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 53; (c) as an elaboration of the previous paragraph, to consider the substance rather than the form of the transaction, particularly where an amount is paid as part of a wider, composite transaction: Dickenson v Federal Commissioner of Taxation [1958] HCA 62 ; (1958) 98 CLR 460 at 482, 491; Reuter v Federal Commissioner of Taxation 93 ATC 5030 at 5036 5037; Federal Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) 45 ATR 507 at [50]; Macquarie Finance Ltd v Federal Commissioner of Taxation (2004) 57 ATR 115 at [61], [64] per Hill J, on appeal [2005] FCAFC 205 ; (2005) 146 FCR 77 at [109] [111] per French J, [169] [170] and [187] per Hely J, and [251] [253] per Gyles J; Customs & Excise Commissioners v Diners Club Ltd [1989] 1 WLR 1196 at 1207; see also Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684; and (d) to disregard the labels used by the parties: Federal Commissioner of Taxation v Krakos Investments Pty Ltd (1995) 61 FCR 489 at 495; Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350 at [64] [72].


case_text: A receipt will not come home where the amount received is affected by a legal or equitable restriction affecting the separate use, benefit or enjoyment of the recipient: Arthur Murray at 318; Barratt v Federal Commissioner of Taxation [1992] FCA 271 ; (1992) 36 FCR 222 at 231; RW Parsons, Income Taxation in Australia : Principles of Income, Deductibility and Tax Accounting , Law Book Company, Sydney (1985) at [11.49]. For example, where the receipt is affected by a constructive trust (see, MacFarlane v Federal Commissioner of Taxation (1986) 13 FCR 356) or where the recipient is not the beneficial object of the receipt (see The Countess of Bective v Federal Commissioner of Taxation (1932) 47 CLR 417 at 424). 89 In respect of an accruals basis taxpayer, the time of derivation will normally be the time when a recoverable debt arises: Barratt at 231.2; Henderson v Federal Commissioner of Taxation [1970] HCA 62 ; (1968) 119 CLR 612 at 650.6. 103 The Commissioner submitted that it is a fundamental defect in BARM's argument that it impermissibly seeks to make derivation of the income amount (the debt/payment in respect of management services) dependent upon the capacity to recover the capital asset arising from investment of the income (the debt owing by PGF). Apart from the illogicality of the contended dependence, it is relevant to note that even if there had been an impediment to recovery of the debt on income account, that would not lead to the result that it would not have been derived as income. In Barratt at 232, Gummow J (Northrop and Drummond JJ agreeing) drew attention to the distinction between: (a) the situation where a debt has not come into existence, with the result that income will not have been derived (an example of which was Federal Commissioner of Taxation v Australian Gas Light Co (1983) 74 FLR 13); and (b) the situation where a debt has come into existence, but there is an impediment to recovery. Accordingly, statutory prohibitions against recovery of fees for medical services pursuant to s 35(2) of the Medical Practitioners Act 1938 (NSW) were only impediments to enforcement that did not lead to the result that taxpayers assessable on an accruals basis had not derived the fees as income. 109 The argument for deferral to the time BARM receives payments of interest and repayments of principal on the deposit with PGF is said to '... look to realities' to use the words of Rich J in Prior at 13. What it effectively asserts is that BARM should be treated as a cash basis taxpayer in respect of such income and then only for the amount of money received. Reliance for this argument is placed on the process of reasoning in Arthur Murray , albeit for a very different principle, Prior and Barratt . I deal with each of these cases below. 124 Barratt was concerned with whether an accruals basis of tax accounting was appropriate for a partnership of medical practitioners carrying on a pathology practice where the partnership required the use of large and expensive equipment and laboratory, courier and clerical services which were provided by service entities associated with the partners. A Full Court of this Court held that it was and dismissed the taxpayer's appeal. The principal judgment was given by Gummow J with whom Northrop and Drummond JJ agreed but, with respect, it does not shine any light on the appropriateness of the principle put forward by BARM that is alternative (2).


case_text: The authorities support the proposition that an agreement may be implied from the acts and conduct of the parties even where the strictures of offer and acceptance cannot be strictly proven: see Brogden v Metropolitan Railway (1877) 2 AC 666 at 672, 678, 679, 686, 689, 698; Integrated Computer Services Pty Ltd v Digital Equipment Corp (Aust) Pty Ltd (1988) 5 B.P.R 11,110 at 11,117; Pobjie Agencies v Vinidex Tubemakers (2000) Aust Contract R 90-112 at [21]-[32]; see also Vroon v Foster's Brewing Group Ltd [1994] 2 VR 32 at 67.


case_text: Expert accounting evidence was called by BARM in support of the argument underlying alternative (2) from Professor Robert Walker, the Professor of Accounting in the Faculty of Economics and Business at the University of Sydney. The Commissioner relied on expert accounting evidence from Mr Wayne Lonergan to deny the appropriateness of any financial accounting treatment consistent with the argument underlying alternative (2). With respect to both experts, I did not find their evidence provided me with any constructive assistance in resolving the issues raised by BARM's arguments. In any event, as Davies J observed in Commissioner of Taxation v Dunn (1989) 85 ALR 244 at 252: '... ordinary accounting principles and practices are not determinative of the issue, they are relevant and may be influential, as Dixon J in Carden's case (at 152) and Barwick CJ, Kitto and Taylor JJ in Arthur Murray (at 318) pointed out ...'


case_outcome: considered

case_title: Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia [1938] HCA 69 ; (1938) 63 CLR 108

case_text: Central to the concept of derivation is the proposition that there must be a gain in the sense of an amount which has 'come home' to the taxpayer, i.e. it is available for the taxpayer's separate use, benefit and disposal: Federal Commissioner of Taxation v Montgomery [1999] HCA 34 ; (1999) 198 CLR 639 at [65] and [117]-[118]; Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia (' Carden ') [1938] HCA 69 ; (1938) 63 CLR 108 at 155; Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation [1965] HCA 58 ; (1965) 114 CLR 314 at 318; Eisner v Macomber [1919] USSC 118 ; (1920) 252 US 189 at 207 applied in Montgomery at [117]. That is, receipt of itself is not sufficient to constitute a gain or an amount as income derived: Arthur Murray at 318.


case_title: Customs & Excise Commissioners v Diners Club Ltd [1989] 1 WLR 1196


case_title: Dickenson v Federal Commissioner of Taxation [1958] HCA 62 ; (1958) 98 CLR 460


case_text: While the Commissioner's primary submission is that the mode of discharge of payment of the management fees is irrelevant to the issue of derivation by BARM, the mode of discharge adopted (utilising bills of exchange) had the consequence that payments in the amounts shown on the bills of exchange (i.e. full payment of the management fees instalments) are to be taken as having been made to BARM on the dates on which the bills of exchange were delivered to it: Howland-Rose at [128] [130]; Equuscorp Pty Ltd v Glengallan Investments Pty Ltd [2004] HCA 55 ; (2004) 218 CLR 471 at [44] [47].


case_title: Federal Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) 45 ATR 507


case_title: Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42


case_title: Federal Commissioner of Taxation v Krakos Investments Pty Ltd (1996) 61 FCR 489


case_title: Federal Commissioner of Taxation v McNeil [2007] HCA 5 ; (2007) 229 CLR 656


case_text: Central to the concept of derivation is the proposition that there must be a gain in the sense of an amount which has 'come home' to the taxpayer, i.e. it is available for the taxpayer's separate use, benefit and disposal: Federal Commissioner of Taxation v Montgomery [1999] HCA 34 ; (1999) 198 CLR 639 at [65] and [117]-[118]; Commissioner of Taxes (SA) v Executor Trustee and Agency Co of South Australia (' Carden ') [1938] HCA 69 ; (1938) 63 CLR 108 at 155; Arthur Murray (NSW) Pty Ltd v Federal Commissioner of Taxation [1965] HCA 58 ; (1965) 114 CLR 314 at 318; Eisner v Macomber [1919] USSC 118 ; (1920) 252 US 189 at 207 applied in Montgomery at [117]. That is, receipt of itself is not sufficient to constitute a gain or an amount as income derived: Arthur Murray at 318. 79 In order to determine whether a receipt has come home the enquiry is focused upon the general understanding among practical business people as to whether the receipt has come home for the separate use, benefit and disposal of the taxpayer: Arthur Murray at 318; Montgomery at [117].


case_text: In determining whether an amount paid or payable to the taxpayer has the character of income, it is necessary: (a) to have regard to the quality of the amount in the hands of the taxpayer and not to the character of the expenditure to the payer : Federal Commissioner of Taxation v McNeil [2007] HCA 5 ; (2007) 229 CLR 656 at [20] and [55]; G.P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1990) 170 CLR 124 at 136; (b) to have regard to the whole of the surrounding circumstances or factual matrix, and not just to the contract under which the amount is paid or payable: Federal Coke Co Pty Ltd v Federal Commissioner of Taxation (1977) 34 FLR 375 at 385; Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 53; (c) as an elaboration of the previous paragraph, to consider the substance rather than the form of the transaction, particularly where an amount is paid as part of a wider, composite transaction: Dickenson v Federal Commissioner of Taxation [1958] HCA 62 ; (1958) 98 CLR 460 at 482, 491; Reuter v Federal Commissioner of Taxation 93 ATC 5030 at 5036 5037; Federal Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) 45 ATR 507 at [50]; Macquarie Finance Ltd v Federal Commissioner of Taxation (2004) 57 ATR 115 at [61], [64] per Hill J, on appeal [2005] FCAFC 205 ; (2005) 146 FCR 77 at [109] [111] per French J, [169] [170] and [187] per Hely J, and [251] [253] per Gyles J; Customs & Excise Commissioners v Diners Club Ltd [1989] 1 WLR 1196 at 1207; see also Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684; and (d) to disregard the labels used by the parties: Federal Commissioner of Taxation v Krakos Investments Pty Ltd (1995) 61 FCR 489 at 495; Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350 at [64] [72]. 104 There is much force in BARM's contention that alternative (1) does not involve taxation by reference to economic equivalence. Generally speaking, that doctrine has been relied on to seek re-characterisation of a receipt or outgoing where there is more than one way to achieve the desired economic result and the taxpayer chooses the way which is the most tax effective. Anti-avoidance provisions aside, the courts have consistently rejected the doctrine of taxation by reference to economic equivalence, that is, by reference to the ways in which the transaction could or might have been done, as an aid to characterisation. As was said in the joint judgment of Gaudron, McHugh, Kirby and Hayne JJ in Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33 ; (1998) 194 CLR 500 at [70] : '[L]ittle or no guidance is offered by considering what other transactions the taxpayer might have made to achieve a commercial result substantially the same as the commercial result said to flow from the making of the Principal Assumption Agreement. No doubt the taxpayer might have taken the amount of $62,309.546 which it paid to MMBW and instead of paying it to MMBW under the Principal Assumption Agreement have invested it in Commonwealth Bonds maturing at or about the same time as its debentures were to mature. If it had done that it would have derived income which it might then have applied in satisfaction of most, if not all, of its liabilities to debenture holders. Similarly, it might have invested the same amount as it paid to MMBW on more speculative investments and it might then have obtained returns greater than the amount necessary to pay the debenture holders. Examination of those other transactions does not reveal whether or when the taxpayer derived income as a result of the making of the Principal Assumption Agreement. In particular, the characterisation of the gains or receipts obtained in accordance with hypothetical transactions of the kind described is of little, if any, assistance in characterising the nature of the benefits identified as flowing from the making of the Principal Assumption Agreement.' In many ways, this is no more than an echo of what was said over twenty years before by Sir Nigel Bowen in Federal Coke Co Pty Ltd v F C of T (1977) 34 FLR 375 at 386 387: 'His Honour appears to have considered that he could approach the characterisation of the receipts in the hands of the taxpayer by treating them as if they were received by Bellambi or the Bellambi group. On the other hand, if they were treated as received by Federal, his Honour thought that they were received by Federal just as much as compensation for the contraction of the contract to supply coke as if the payee had been the parent rather than the subsidiary. One may have some sympathy with an approach of this kind. However, in taxation matters, the court is obliged to have regard to the actual facts and not to their equivalents. In cases where it is appropriate the court may apply a statutory provision such as s 260 to get rid of a contract, agreement or arrangement and deal with the case in disregard of that element, but, where there is no statutory warrant for doing so, the court cannot disregard certain of the facts or re-arrange the facts or decide the case according to its view of the substance of the matter. It is not legitimate to disregard the separateness of different corporate entities or to decide liability to tax upon the basis of the substantial economic or business character of what was done.'


case_text: The Commissioner submitted that it is a fundamental defect in BARM's argument that it impermissibly seeks to make derivation of the income amount (the debt/payment in respect of management services) dependent upon the capacity to recover the capital asset arising from investment of the income (the debt owing by PGF). Apart from the illogicality of the contended dependence, it is relevant to note that even if there had been an impediment to recovery of the debt on income account, that would not lead to the result that it would not have been derived as income. In Barratt at 232, Gummow J (Northrop and Drummond JJ agreeing) drew attention to the distinction between: (a) the situation where a debt has not come into existence, with the result that income will not have been derived (an example of which was Federal Commissioner of Taxation v Australian Gas Light Co (1983) 74 FLR 13); and (b) the situation where a debt has come into existence, but there is an impediment to recovery. Accordingly, statutory prohibitions against recovery of fees for medical services pursuant to s 35(2) of the Medical Practitioners Act 1938 (NSW) were only impediments to enforcement that did not lead to the result that taxpayers assessable on an accruals basis had not derived the fees as income.


case_text: There is much force in BARM's contention that alternative (1) does not involve taxation by reference to economic equivalence. Generally speaking, that doctrine has been relied on to seek re-characterisation of a receipt or outgoing where there is more than one way to achieve the desired economic result and the taxpayer chooses the way which is the most tax effective. Anti-avoidance provisions aside, the courts have consistently rejected the doctrine of taxation by reference to economic equivalence, that is, by reference to the ways in which the transaction could or might have been done, as an aid to characterisation. As was said in the joint judgment of Gaudron, McHugh, Kirby and Hayne JJ in Federal Commissioner of Taxation v Orica Ltd [1998] HCA 33 ; (1998) 194 CLR 500 at [70] : '[L]ittle or no guidance is offered by considering what other transactions the taxpayer might have made to achieve a commercial result substantially the same as the commercial result said to flow from the making of the Principal Assumption Agreement. No doubt the taxpayer might have taken the amount of $62,309.546 which it paid to MMBW and instead of paying it to MMBW under the Principal Assumption Agreement have invested it in Commonwealth Bonds maturing at or about the same time as its debentures were to mature. If it had done that it would have derived income which it might then have applied in satisfaction of most, if not all, of its liabilities to debenture holders. Similarly, it might have invested the same amount as it paid to MMBW on more speculative investments and it might then have obtained returns greater than the amount necessary to pay the debenture holders. Examination of those other transactions does not reveal whether or when the taxpayer derived income as a result of the making of the Principal Assumption Agreement. In particular, the characterisation of the gains or receipts obtained in accordance with hypothetical transactions of the kind described is of little, if any, assistance in characterising the nature of the benefits identified as flowing from the making of the Principal Assumption Agreement.' In many ways, this is no more than an echo of what was said over twenty years before by Sir Nigel Bowen in Federal Coke Co Pty Ltd v F C of T (1977) 34 FLR 375 at 386 387: 'His Honour appears to have considered that he could approach the characterisation of the receipts in the hands of the taxpayer by treating them as if they were received by Bellambi or the Bellambi group. On the other hand, if they were treated as received by Federal, his Honour thought that they were received by Federal just as much as compensation for the contraction of the contract to supply coke as if the payee had been the parent rather than the subsidiary. One may have some sympathy with an approach of this kind. However, in taxation matters, the court is obliged to have regard to the actual facts and not to their equivalents. In cases where it is appropriate the court may apply a statutory provision such as s 260 to get rid of a contract, agreement or arrangement and deal with the case in disregard of that element, but, where there is no statutory warrant for doing so, the court cannot disregard certain of the facts or re-arrange the facts or decide the case according to its view of the substance of the matter. It is not legitimate to disregard the separateness of different corporate entities or to decide liability to tax upon the basis of the substantial economic or business character of what was done.'


case_text: In determining whether an amount paid or payable to the taxpayer has the character of income, it is necessary: (a) to have regard to the quality of the amount in the hands of the taxpayer and not to the character of the expenditure to the payer : Federal Commissioner of Taxation v McNeil [2007] HCA 5 ; (2007) 229 CLR 656 at [20] and [55]; G.P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation [1990] HCA 25 ; (1990) 170 CLR 124 at 136; (b) to have regard to the whole of the surrounding circumstances or factual matrix, and not just to the contract under which the amount is paid or payable: Federal Coke Co Pty Ltd v Federal Commissioner of Taxation (1977) 34 FLR 375 at 385; Federal Commissioner of Taxation v Cooling (1990) 22 FCR 42 at 53; (c) as an elaboration of the previous paragraph, to consider the substance rather than the form of the transaction, particularly where an amount is paid as part of a wider, composite transaction: Dickenson v Federal Commissioner of Taxation [1958] HCA 62 ; (1958) 98 CLR 460 at 482, 491; Reuter v Federal Commissioner of Taxation 93 ATC 5030 at 5036 5037; Federal Commissioner of Taxation v Broken Hill Pty Co Ltd (2000) 45 ATR 507 at [50]; Macquarie Finance Ltd v Federal Commissioner of Taxation (2004) 57 ATR 115 at [61], [64] per Hill J, on appeal [2005] FCAFC 205 ; (2005) 146 FCR 77 at [109] [111] per French J, [169] [170] and [187] per Hely J, and [251] [253] per Gyles J; Customs & Excise Commissioners v Diners Club Ltd [1989] 1 WLR 1196 at 1207; see also Barclays Mercantile Business Finance Ltd v Mawson [2005] 1 AC 684; and (d) to disregard the labels used by the parties: Federal Commissioner of Taxation v Krakos Investments Pty Ltd (1995) 61 FCR 489 at 495; Vincent v Federal Commissioner of Taxation (2002) 124 FCR 350 at [64] [72]. 91 Nor did the use to which the bills of exchange were put by BARM affect the derivation by it of income represented by the management fees: see G.P. International Pipecoaters . 101 The High Court noted in G.P. International Pipecoaters at 136 137: 'The question in this appeal is the character of the establishment costs as receipts in the hands of the taxpayer 'Whether or not a particular receipt is income depends upon its quality in the hands of the recipient': Scott v Federal Commissioner of Taxation [1966] HCA 48 ; [(1996) 117 CLR 514] , per Windeyer J. The relevant question is not the character of the expenditure by SECWA A receipt may be income in the hands of a payee whether or not it is expenditure of a capital nature by the payer. Nor is the relevant question the nature of the expenditure made by the taxpayer in the construction of the plant. A taxpayer may apply income in the acquisition of a capital asset or, conversely, apply a capital receipt to discharge a liability of a non-capital nature. As Cozens-Hardy MR observed in Hudson's Bay Co v Stevens: '... if the money is otherwise liable to income tax it cannot escape taxation by reason of its being applied to a capital purpose'. And thus a receipt may be income although the recipient is bound to apply it for the purpose of discharging a capital liability: Mersey Docks v Lucas [(1883) 8 App Cas 891, at 904, 909-910; Commissioners of Inland Revenue v Corporation of London (as Conservators of Epping Forest) [(1953) 34 TC 293, at 329]. The Commissioner and the taxpayer both treated the cost of constructing the plant as capital expenditure, but the question is not whether that was an expenditure of capital nor whether the plant was used for the purpose of producing assessable income so that depreciation of the plant was deductible under s 54 of the Act. The relevant question is whether the receipt of the establishment costs was income in the taxpayer's hands. It is necessary to keep that question steadily in mind and not to confuse the character of the receipt with the nature of the asset acquired by application of the moneys received. The appellant's argument was, in substance, that the plant was a capital asset, that the moneys expended in its construction were an expenditure of a capital nature by the taxpayer and that, as those moneys were received for the purpose of expenditure on the construction of the plant, their receipt was a receipt of capital. The first two steps may be accepted but the final step assumes that, when money is received for the purpose of its being expended by the recipient, the. character of the receipt is necessarily determined by the character of its proposed expenditure by the recipient. That assumption is erroneous and, even if the establishment costs were received for the purpose of expenditure on the construction of the plant, it does not necessarily follow that their receipt was a receipt of capital. Before turning to the character of the receipt, it is desirable first to consider the means by which the character of expenditure may be determined.' (emphasis added) 102 The taxation consequences of the loans to PGF must be addressed independently of the taxation consequences of the provision of management services. The loans to PGF were transactions that: (a) had to be evaluated separately as coming within the capital gains regimes under the ITAA 1936 and the ITAA 1997: and (b) represented a use of the consideration received from Participants in respect of management fees, by way of investment for income earning purposes; (c) had the result that BARM incurred capital losses to the extent that there existed limited recourse provisions which had the consequences that loans to PGF were not repaid in full.


case_text: In respect of an accruals basis taxpayer, the time of derivation will normally be the time when a recoverable debt arises: Barratt at 231.2; Henderson v Federal Commissioner of Taxation [1970] HCA 62 ; (1968) 119 CLR 612 at 650.6.