case_outcome: discussed

case_text: Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) [ Home ] [ Databases ] [ WorldLII ] [ Search ] [ Feedback ] Federal Court of Australia You are here:   AustLII >> Databases >> Federal Court of Australia >> 2006 >> [2006] FCA 267 [ Database Search ] [ Name Search ] [ Recent Decisions ] [ Noteup ] [ Download ] [ Help ] IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) Last Updated: 22 March 2006 FEDERAL COURT OF AUSTRALIA IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 INCOME TAX large corporate group inter-group transactions undertaken over six consecutive fiscal years transactions involving inter-group interest bearing borrowings principally by one group member and transfers of tax losses arising out of those borrowings to other group members prior primary and appellate claims by proceedings in Federal Court made by borrowing member against the Commissioner for interest deductibility in respect of one fiscal year decision at first instance and on appeal in relation to that fiscal year adverse to that single group member findings made in context of those proceedings as to assessability to tax of that group member in respect of some transactions for differing fiscal years after conclusion of single fiscal year further proceedings commenced by the same corporate group member together with other corporate group members in respect of transactions involving borrowings and transfers of tax losses in respect of antecedent as well as subsequent fiscal years to that resolved by Federal Court in favour of Commissioner whether issue estoppel, Anshun estoppel and/or abuse of process should operate in favour of Commissioner in respect of deductions for losses of antecedent and subsequent fiscal years meaning of privies authority in Australian Courts of earlier decisions of Privy Council and House of Lords summary judgment application of Commissioner granted Income Tax Assessment Act 1936 (Cth) ss 51(1), 79E and 80G and Part VII Tax Administration Act 1953 (Cth) Part IVC Federal Court Rules O 20 r 2 subrule 2(1)(b) and (c) and Order 52B Spassked Pty Ltd v Commissioner of Taxation (No. 5) (2003) 197 ALR 553 cited and applied Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 cited and applied General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 applied Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1948-1949) 78 CLR 62 applied Jackson v Goldsmith [1950] HCA 22 ; (1950) 81 CLR 446 referred to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 referred to Blair v Curran [1939] HCA 23 ; (1939) 62 CLR 464 applied Rogers v The Queen [1994] HCA 42 ; (1994) 181 CLR 251 referred to Trawl Industries of Australia Pty Ltd (in liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 referred to Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 applied Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378 applied Sea Culture International Pty Ltd v Scoles [1991] 32 FCR 275 referred to Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537 discussed Hoysted v Federal Commissioner of Taxation [1925] HCA 51 ; [1926] AC 155; (1925) 37 CLR 290 discussed Henderson v Henderson (1843) 3 Ha 100 discussed Murphy v Abi-Saab (1995) 37 NSWLR 280 applied Johnson v Gore Wood & Co [2000] UKHL 65 ; [2002] 2 AC 1 cited Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 applied Taylor v Ansett Transport Industries Limited [1987] 18 FCR 342 cited Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax Colombo [1961] AC 584 discussed and distinguished Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 discussed and distinguished The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400 discussed and distinguished Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987-1988) 164 CLR 502 discussed Chamberlain v Commissioner of Taxation (1991) 21 FCR 21 cited Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 referred to Society of Medical Officer of Health v Hope [1960] AC 551 discussed and distinguished Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 referred to Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163 cited and discussed Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 referred to Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77 not followed Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131 applied Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436 referred to re Sharpe (1944) QSR 26 referred to Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 cited and discussed Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94 referred to Hawkins v Clayton (1986) 5 NSWLR 109 referred to Federal Commissioner of Taxation v Cappid Pty Ltd [1970] HCA 41 ; (1970) 127 CLR 140 distinguished Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578 discussed and distinguished Arthur JS Hall & Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 discussed R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 discussed IEL FINANCE LIMITED, QUEENSLAND TRADING AND HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED v COMMISSIONER OF TAXATION NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 CONTI J 21 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING & HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE OF ORDER: 21 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent Commissioner lodge with the Court and with the taxpayer applicants draft declarations and/or orders giving effect to the reasons for judgment within fourteen days, including orders as to costs. 55 One of the later authorities principally relied on by the taxpayer applicants, which may be conveniently next addressed for reasons that will shortly emerge, was the decision of the Privy Council in Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax, Colombo [1961] AC 584. The difference in spelling of the appellant's surname from that of the designation of the Trust appears incidentally in the report. The conclusion was there reached that the Commissioner of Income Tax of Ceylon was not estopped by a decision of the board of review constituted under the Income Tax Ordinance of Ceylon, being a decision made in respect of the fiscal year 1949-1950, from challenging the trustees' claim to exemption from income tax for subsequent fiscal years and in particular the 1950-1951 year, upon the footing that an issue of liability to income tax for one year was to be treated as inherently different from that of liability for another year, even though there might appear to be similarity or identity in the questions of law which they respectively yield. Hence the finding by the Privy Council in that income tax context was that the principle of res judicata did not apply, albeit that both the terms of the trust and the relevant law were precisely the same in relation to the two fiscal years addressed. The Privy Council expressed the following opinions upon which the taxpayer applicants here placed strong reliance (at 598): 'The critical thing is that the dispute which alone can be determined by any decision given in the course of these proceedings is limited to one subject only, the amount of the assessable income for the year in which the assessment is challenged. It is only the amount of that assessable income that is concluded by an assessment or by a decision on an appeal against it ... Although, of course, the process of arriving at the necessary decision is likely to involve the consideration of questions of law, turning upon the construction of the Ordinance or of other statutes or upon the general law, and the tribunal will have to form its view on those questions, all these questions have to be treated as collateral or incidental to what is the only issue that is truly submitted to determination ... It is in this sense that in matters of a recurring annual tax a decision on appeal with regard to one year's assessment is said not to deal with " eadem quaestio " as that which arises in respect of an assessment for another year and, consequently, not to set up an estoppel.' 56 It may be however not without significance to bear in mind that prior to the first passage cited above from Caffoor , the Privy Council had been describing at 597-598 the purpose for which the board of review in Ceylon had been established and the nature of its functions. In the present circumstances, perhaps by way of contrast, the taxpayer's challenge to the previous litigation originated in the Federal Court, being of course a superior court of record with all the implications thereby entailed, for instance, as to prior interlocutory processes, and the admissibility and taking of evidence did not originate in an administrative or quasi-administrative tribunal exercising at least a more limited judicial function. That may be thought in my opinion to involve one distinction of relevance. Yet what followed in the Privy Council's further reasons in Caffoor described (at 597-598) the process of initial review as there involving '... in one sense a part of the process of assessment' , in the wider context reproduced below: 'In their Lordships' opinion the question of estoppel cannot be decided merely by inquiring to what extent the Board of Review exercises judicial functions. The critical test is not the bare issue whether or not such a board exercises judicial power ... What is important here is that the Board of Review is a tribunal set up under the Income Tax Ordinance for the purpose of deciding income tax appeals at a certain stage of their prosecution, and that decisions given with regard to such appeals are effective only within the limited jurisdiction that the Ordinance creates for all tribunals that deal with the matter of an appeal. All such appeals remain in one sense a part of the process of assessment since all the tribunals, including the Supreme Court, have independent power to increase or reduce the assessment under appeal. While, therefore, it is unexceptionable to say that the Board of Review when exercising its powers ... is acting in a sense judicially, that the dispute which it has to determine is at any rate somewhat analogous to a lis inter partes and that the assessor who made the assessment or some other representative of the Commissioner... resembles a party hostile to the appellant, those considerations are not those that are critical to the issue of estoppel'. The functions of that former Board of Review constituting 'a part of the process of assessment...' and having a ' limited jurisdiction ' as above described, were not readily comparable to the exercise of the jurisdiction presently undertaken at first instance by a court of record, such as the Federal Court or a Supreme Court of a State or Territory in Australia, in at least an income tax appeal. Nor is readily comparable the limited jurisdiction exercisable by the present Administrative Appeals Tribunal. The process of review invoked by Spassked could have, but did not of course, involve in the first instance or at all recourse to that Tribunal, but rather to a single justice of the Federal Court as I have earlier indicated. 57 Further to the reasoning of the Privy Council in Caffoor , reference was made to the implications of the decision of the Privy Council in Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 made on 10 November 1925 (about one month earlier than the Privy Council's decision in Hoysted, though Broken Hill was not referred to by the Privy Council in Hoysted ) on appeal from the Full Court of the Supreme Court of New South Wales. Broken Hill related to the assessment of the unimproved capital value of a producing mine for the purpose of annual assessment of municipal council rates pursuant to s 153(3) of the Local Government Act 1919 (NSW), the assessment having been made on an output basis equal to 20% of the average annual saleable value of ore produced from the land over the three years preceding the assessable year. In reversing the decision of the Supreme Court in Broken Hill , which had followed an earlier decision of the High Court in The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company Limited [1922] HCA 15 ; (1922) 30 CLR 400, the Privy Council in Broken Hill made the following observation (at 289): 'It was also contended before this Board on behalf of the respondents that, having regard to the said decision of the High Court of Australia, the question raised by this appeal is res judicata as between the appellants and the respondents, and the appellants are estopped from contending that such decision of the High Court of Australia is wrong... The decision of the High Court related to a valuation and a liability to tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new question, namely, the valuation for a different year and the liability for that year. It is not eadem quaestio , and therefore the principle of res judicata cannot apply.' No other authority was cited by the Privy Council in Broken Hill for that thesis as to the implications of annual revenue or fiscal assessments. Given the inherently changing nature of a valuation of realty for rating purposes, even over one year or so and in particular in relation to a mine in production, the juridical basis for that approach may be perhaps more comprehensible. Once again, the reference to res judicata above, and not issue estoppel, may also be observed. 58 Returning to Caffoor , the Privy Council continued at 598-600 as follows: 'The Broken Hill decision is in itself a striking application of the principle involved, since the earlier judgment which it was sought to set up as an estoppel was one given by the High Court of Australia on a rating assessment referred to it by way of appeal under the tax procedure. It underlines the point that it is not the status of the tribunal itself, judicial or administrative, that forms the determining element for estoppel in cases of this kind but the limited nature of the question that is within the tribunal's jurisdiction. The judgment of the High Court that had been given in the earlier year was explicitly directed to the construction of a particular section of the rating Act and to the correct measurement of the liability in the light of that construction. Precisely the same point arose in the later year and was ultimately decided by this Board in a sense contrary to that which had previously been adopted. So, on the present appeal, the earlier decision of the Board of Review governing the 1940-50 assessment was based upon a construction of section 7(1)(c) of the Income Tax Ordinance as applied to the income of the Abdul Gaffoor Trust; and the same point of construction now arises again but in respect of assessments of that income for other and later years. In their Lordships' opinion it is not possible to distinguish the principle of the Broken Hill decision from that which should prevail in the present case on any such ground as that here the earlier decision related to the taxpayer's "status" as an exempt person while in the Broken Hill case the decision "merely" related to the correct amount of the assessment; for in truth, as has been explained, in all these cases which arise under income tax or rating appeal procedure the decision is essentially as to the correct amount (if any) of the assessment, and in the one case as much as in the other the decision was based upon a question of law, the proper interpretation of one of the provisions of the taxing Act. To apply the principle of the Broken Hill decision to the case now before their Lordships is to bring it into line with what seems to be by now the regular course of authority with regard to appeals in successive years against income tax or rating assessments ... . It may be that the principles applied in these cases form a somewhat anomalous branch of the general law of estoppel per res judicatam and are not easily derived from or transferred to other branches of litigation in which such estoppels have to be considered; but in their Lordships' opinion they are well established in their own field, and it is not by any means to be assumed that the result is one that should be regretted in the public interest'. Reference to the irrelevance of the status of the tribunal undertaking administrative review may be observed. 59 Significantly to the taxpayer applicants' case, the Privy Council in Caffoor eschewed the approach taken in principle in the earlier decision of the Privy Council in Hoysted , which as in the case of Broken Hill , also originated in Australia. As I have also mentioned, the Privy Council decision in Broken Hill was given on 10 November 1925, yet no reference was made thereto in the Privy Council's reasons for decision in Hoysted published 37 days later. The following opinion was expressed by the Privy Council in Caffoor in relation to what was seen to be inconsistency between the Privy Council decisions in Hoysted and Broken Hill: 'Unfortunately, however, the argument that the determination of an assessment for one year could not set up an estoppel upon an assessment for another year, an argument that was accepted by the Board at almost the same time in the Broken Hill case, does not appear either to have been presented to the Board or to have been noticed or adjudicated upon in the opinion which was delivered by Lord Shaw [in Hoysted]. It is not possible to explain why the matter was dealt with in this way; and it is fair to note that in the majority judgment of the High Court, which was reversed on the appeal, there is a reference, though a passing one, to the point of "eadem quaestio". In the result, however, the attention of the Board in delivering its opinion was wholly occupied with a discussion of what is quite a different issue in connection with estoppel, whether there can in law be estoppel per rem judicatam in respect of an issue of law which, though fundamental to the issue, has been conceded and not argued in an earlier proceeding. Their Lordships are of opinion that it is impossible for them to treat Hoysted's case as constituting a legal authority on the question of estoppels in respect of successive years of tax assessment. So to treat it would bring it into direct conflict with the contemporaneous decision in the Broken Hill case; and to follow it would involve preferring a decision in which the particular point was either assumed without argument or not noticed to a decision, in itself consistent with much other authority, in which the point was explicitly raised and explicitly determined.' 61 I have encountered difficulty with the description of the issue in Hoysted , appearing in the Privy Council's reasons in Caffoor , as involving a ' question of estoppels in respect of successive years of tax assessment', in contrast to the circumstances underpinning the issue in Broken Hill which might more readily bear that description, in that Hoysted was not concerned with realty valuations per se but the construction of fiscal legislation relating to concessional rates referrable to the extent of division of co-ownership by beneficiaries of a deceased estate. Broken Hill involved the ascertainment of the annual saleable value of a mining property to a mine owner based on iron ore product derived during the three year annual average last preceding the municipal rating year. By way of apparent contrast, the circumstance to which the passage in Hoysted was directed was the recommencement of litigation upon a different assumption of fact fundamental to an existing decision and the legal quality of that fact, and by reference to ' new views... [entertained] of the law of the case', or 'new versions... as to what should be a proper apprehension... of the legal result... of the construction of the documents or the weight of certain circumstances...' , (to repeat the dicta of the Privy Council in Hoysted at 299), such fact not being in the nature of an annual recurring value requiring annual recalculation on change of value in the peculiar context I have earlier distilled. As I have foreshadowed, Hoysted related in particular to the circumstance whether or not the juridical status beneficiaries to a deceased estate, in the events which had evolved since the death of the former owner testator, were joint owners for the purpose of operation of land tax legislation. The circumstance merely that land tax was assessable annually was therefore not per se the critical factor to the ratio of the decision, as a matter of substance and reality. 62 The taxpayer applicants drew attention, next in sequence of their submissions, to Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987) 164 CLR 502, in the context of their case seemingly to the effect that the doctrine of issue estoppel has no application in principle in relation to revenue proceedings, or referrable at least to periodic assessments or levies. The context to that litigation was that the Commissioner had brought an action for payment of income tax due by a taxpayer for specified years of income, but had caused judgment to be entered for an amount substantially less than that actually due, being an amount involving the same numerals per se, yet with one decimal point being placed out of sequence apparently by inadvertence, thereby purportedly seeking to enforce a substantially lesser impost in favour of the taxpayer. The Commissioner did not seek to have the judgment vacated, or to explain precisely how that evident mistake had occurred, but instead brought an action for recovery of the balance of the tax assessment the subject of the obvious shortfall. The High Court held that the second action was not maintainable by the Commissioner by reason that the cause of action had become merged in the earlier judgment, which the Commissioner had chosen not to impeach on account of mistake. It was observed in the joint judgment of Deane, Toohey and Gaudron JJ in Chamberlain at 510 that '... it may well be that no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act' , referring in that regard to the well known principle enunciated in Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 at 117, being a principle not here of course in dispute. Nevertheless the broad but brief proposition that '... the Commissioner is not bound by a determination made in respect of an assessment for one year, so far as other years are concerned...' was described in that joint judgment at 510 'as equally true' , Caffoor at 598-601 being cited generally in relation to that brief assertion. There was however no other discussion of that bare proposition, and in particular as to the reach thereof. There is something to be said for the view that such observation in Chamberlain was obiter, the circumstances giving rise to the issue in Chamberlain being conceptually distant from contexts at least such as here involved. Significant to that observation is the fact that no reference was made to Caffoor in the reasons for judgment in Chamberlain of both Brennan J and Dawson J . No reference was made in any of the Chamberlain judgments to Broken Hill or Hoysted or Hope . 65 The revenue issue arising in Hope thus related to the Society's claim for a continued exemption from local government rates which the Society had earlier secured by the decision of a local valuation court, and it was that decision which the House of Lords held not to create an estoppel per res judicata . The unanimous findings of the Law Lords occurred in the context of a property valuation list which became the attention of the decision. That list had come to the end of its statutory life and a new 'quinquennial valuation' list was required to be brought into existence, even though it was apparently shown, or else mutually agreed, that there had been no change of circumstances. The jurisdiction of the local valuation court there involved was significantly limited, as in the case for instance in Caffoor, its function involving decision-making upon the assessment and liability of a ratepayer for a terminable period, being circumstances bearing insignificant analogy to that of the jurisdiction of the Federal Court exercisable on income tax appeals, as exemplified by the earlier concluded Spassked proceedings relating to the 1992 fiscal year. 66 Before moving to other observations and reasoning appearing in the advice of the Privy Council in Hope, it is material to take further into account the following additional observations of Lord Radcliffe at 563, which tend to be supportive of the view I have emphasised, by way of distinguishing the operation at least of Caffoor and Hope in terms of the nature of extent of the function undertaken by the initial review body or entity: 'To say that the issue of liability to one year's rate is not the same subject-matter as the issue of liability to another year's, or that the one cause of action is different from the other is, perhaps, rather an arbitrary way of disposing of the appellants' case. There are legal contexts, in trespass or recurring claims for rent, for example, in which much of the same might be said and yet it is not impossible for an estoppel to arise. The reason why, when you are dealing with rates and taxes, the difference of subject-matter is treated as being so important seems to lie in two considerations which, as I read the authorities, are peculiar to their particular field. One consideration is that the jurisdiction of the tribunal to which the decision belongs by the administrative scheme is a limited one. It is limited in the sense that its function begins and ends with that of deciding what is to be the assessment or liability of a person for a defined and terminable period... For that limited purpose it is a court with a jurisdiction competent to produce a final decision between the parties before it: but it is not a court of competent jurisdiction to decide general questions of law with that finality which is needed to set up the estoppel per rem judicatam that arises in certain contexts from legal judgments...' Moreover his Lordship continued at 565-566: 'The other main consideration which has influenced the courts in their treatment of these questions is the special position of the valuation officer, surveyor or equivalent official or committee... It is no reflection upon the responsible work carried out by the local valuation courts if I say that they are not the natural repositories of the right to decide for good such legal issues as the interpretation of statutes or general legal questions affecting ratepayers: and to hold that, subject to appeal, such decisions are to be treated as conclusive for all time would be, in my opinion, to impose a needlessly heavy burden upon the administration of rating.' The contextual background and issues prevailing in Hope are thus to be seen to be far removed from those of the earlier concluded Spassked proceedings. Lord Radcliffe then proceeded to contrast, if not wholly distinguish, the implications of the Privy Council's decision in Hoysted, pointing out (also at 566) that '[t]he estoppel related to a question as to the nature of legal rights in property and the interpretation of the taxing statute with regard to them' , and that Hoysted was therefore '... useless to illuminate the only point which is now before this House, [being] the effect on a succeeding valuation list of a decision given with regard to an earlier [decision]', and further (at 566) that '[a]t no stage of the proceedings, so far as appears, was the argument put forward on behalf of the commissioner of taxation that the assessment for 1920-21 was a new subject-matter in relation to the assessment for 1918-1919: nor is the point noticed in the opinion of the Judicial Committee delivered by Lord Shaw' . His Lordship concluded, following further discussion as to insufficient information of relevance emerging from the decision of the Privy Council in Hoysted, more significantly as follows (at 566-567): 'We do not know for what reason the point of "new subject-matter" was not raised in Hoystead's (sic) case. It is to be noted, however, that the decision that was set up as an estoppel was a decision of the highest legal tribunal in Australia, the High Court, arrived at by the full court upon a case stated for their opinion by a single judge of the High Court to whom there lay an appeal from the decision of the commissioner of taxation. Any objection, therefore, which was based on difference of subject-matter between the taxes for the respective years, would have to meet the puzzling question whether for the purposes of estoppel the jurisdiction of the High Court in adjudicating upon points of law arising in tax proceedings is not wider and more comprehensive than the jurisdiction of the original assessing tribunal. It is true that that aspect does not seem to have had any weight attached to it in the other decision of the Judicial Committee of the same year, the Broken Hill case. But there the point did not call for, or receive, any full attention. I say nothing more about this. It is not the point before us and, if it ever arises, it will need separate consideration.' The jurisdictional distinction thus drawn above between the exercise of the jurisdiction of an original assessing tribunal and that of the High Court in Australia may be observed. 72 The taxpayer applicants asserted further that none of the authorities relied on by the Commissioner addressed what the taxpayer applicants described as the divergence of views between Hoysted and Broken Hill in relation to tax matters, save briefly in Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163. That litigation was concerned with relief against forfeiture, in the context of emergency legislation enacted in the depression years to address hardship arising from the consequences of default in payment of mortgage indebtedness, in circumstances where such payments as had been made by a mortgagor to a mortgagee had been received and applied by the mortgagee on account of the mortgage debt generally and thus without distinction as to principal or interest, thereby resulting in default as to payment of interest, and further where the mortgagee had entered possession and received rents and profits pursuant to a default which appeared to have differing statutory consequences, depending on whether the same relating to principal or interest. In the joint reasons for judgment of Rich, Dixon, Evatt and McTiernan JJ in Falk at 171, the following appeared: '...The reasons of the Full Court for refusing to determine the questions reserved may be taken to be the basis of the decision by the County Court that interest had not been paid. The decision in the County Court was that interest had not at that time been paid up to a given date. The question at issue here is whether it has now been paid up to another and later date. An affirmative answer to that question involves no necessary contradiction of the County Court decision. The issues are not the same; but the decision of each issue involves a common question, namely, what, in the case of a mortgagee in possession, amounts to payment. It is this question with which the reasons of the Full Court deal. It may, therefore, be right to regard those reasons as forming only a subsidiary ground leading to the decision of the issue between the parties, and not as constituting the decision of an issue. An estoppel of this kind arises from the decision inter partes of an ultimate issue identical with one of the ultimate issues that are again raised. But it does not arise from the adoption of a process of reasoning in the decision of the issue, although the same process may be applicable in the decision of a second and different issue. It is upon this ground, if at all, that the decision of the Privy Council in [Broken Hill] is to be reconciled with its decision in [Hoysted].' The Commissioner had contended that the foregoing dicta in Falk was to the effect that 'the advices of the Privy council in Broken Hill and in Hoysted were capable of being reconciled upon the basis that an estoppel does not arise merely by reliance upon the process of reasoning in an earlier decision', and further, that 'the High Court did not decide that Hoysted was wrong, and that Broken Hill was to be applied in Australia instead of Hoysted', and that therefore so much is the law in Australia, notwithstanding that the Privy Council itself did not treat the two decisions as consistent with each other and disavowed the authority of Hoysted '. The Commissioner's analysis in relation to Falk , so far as it goes, must be correct, and is not sufficiently answered by the circumstances that the Privy Council decided in Caffoor at 599-601 to follow Broken Hill instead of Hoysted by reason of the latter's inconsistency with the line of English authority there identified in Caffoor. Moreover there is much to be said for the view that the critical findings of the primary judge and of the Full Court in Spassked referrable to the period of time from 1988 to 1994 (both of course inclusive) which I have earlier cited, cannot aptly be described (to adopt parts of the Falk dicta ) as ' only a subsidiary ground leading to the decision of the issue between the parties.' Moreover it would be at least more realistic to say that on true analysis, such findings comprised or formed part of ' the decision... of an ultimate issue identical with one of the ultimate issues that are... raised' , to cite from the above passage in Falk . 73 Be all that as it may, the taxpayer applicants submitted that the reasons for judgment of the Privy Council in Caffoor at 599-601, though not binding on the Federal Court, should be afforded ' the highest respect ' ( Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 at 135 per Mason J (as he then was)). I will later refer to Viro and other authority relating to Privy Council decisions. The taxpayer applicants submitted in any event that 'while Hoysted has not been specifically overruled by the High Court in relation to its application to tax matters, the High Court has referred with approval to the decision of the Privy Council in Caffoor , where the decision in Broken Hill was followed and Hoysted rejected', and I was referred again Chamberlain at 510, where the brief reference thereto was made by Deane, Toohey and Gaudron JJ and which I have earlier discussed as being at least arguably not sufficiently on point arising for present examination. The taxpayer applicants further submitted 'that whilst Hoysted remains good law in relation to the application of issue estoppel other than to tax cases, it is clear that the decision of the Privy Council in Broken Hill is to be preferred where the issue is the effect of a decision on one year of income on litigation over a different year'. In my opinion, so much is far from 'clear'. Indeed the framework of the taxpayer applicants' case was assembled by reference to authorities concerned not with particular situations involving the kind or scope of that the subject of the earlier concluded Spassked proceedings, which involved a factually comprehensive and complex enquiry as to the purpose and the objectives of application of the proceeds of borrowings in a substantial commercial context and moreover which also involved corporately related borrowers and corporately related lenders operating otherwise than at arms length, in order to determine the deductibility or otherwise for income tax purposes in relation to the years of income the subject of dispute which were immediately proximate to that year of income the subject of resolution by the earlier concluded Spassked proceedings. Of course, the purpose of application of the proceeds of borrowings by a taxpayer from a third party in one fiscal year for an income producing purpose may subsequently transpose to a non-income producing purpose to that of the proceeds of the original borrowing or of an ongoing borrowing, in either case from the same lender, whether in the course of the same or a subsequent fiscal year. 76 The taxpayer applicants submitted conversely that Queensland Trustees was of no assistance, being '... simply not a tax of one year... and tax under the same Act in another year', but was instead 'tax under two different statutes', one relating to stamp duty in relation to a settlement and the other in relation to death duty, albeit statutes involving the same revenue commissioner; I do not think that so much is of any decisive significance. The taxpayer applicants contended further that Queensland Trustees stands outside the 'directly relevant authorities', being authorities to which I have referred earlier in these reasons and which dealt with annual assessments of income tax, land tax and other duties. Rather Queensland Trustees was said by the taxpayer applicants to have been decided upon the basis that the existence of an issue estoppel had been determined by the Privy Council decision in Hoysted , without reference to the 'contrary decision in Broken Hill ', and further that after the decision in Queensland Trustees , 'Caffoor decisively rejected Hoysted and adopted Broken Hill' . It was acknowledged by the taxpayer applicants that Queensland Trustees was not referred to in Caffoor or Hope, though neither case had of course originated in Australia. The taxpayer applicants further argued on that footing that the decision in Queensland Trustees was not directly in point, and could only 'stand with the line of authority running from Broken Hill to Chamberlain ' on the basis that, unlike those cases, it was not concerned with annual assessments of tax, and further that '[i]n the light of the other decisions, ... including the adoption of Caffoor by the High Court in Chamberlain ', Queensland Trustees should not be regarded as persuasive in the context of a Part IVC appeal on annual income tax assessment. I have of course emphasised the context involved in relation to Chamberlain and the relative briefness of reference made therein to Queensland Trustees. 78 The taxpayer applicants responded by pointing principally to what may be described as the distinction between the single or confined revenue circumstances involved in Queensland Trustees , being revenue in the form of ad valorem stamp duty or instruments or transactions, from those of successive annual (or other periodic) revenue circumstances involving the incidence of income tax or analogous revenues addressed for instance in Broken Hill , Caffoor and Hope . The critical issue presented by the taxpayer applicants consequently was whether or not taxing or rating systems of annual (or other periodic) assessments or exactions allowed room for the operation of issue or similar estoppels in the determination of successive years of income tax. 80 Faced in any event with the hurdle presented by the Commissioner that contrary to the earlier concluded Spassked proceedings, Caffoor and Hope did not purport in any event to deal with a year or years of income that was or were the subject of subsequent proceedings, whereas the earlier Spassked proceedings did so, in the light in particular as to the findings relevantly prevailing in relation to the six fiscal years 1988 to 1994, the taxpayer applicants asserted that for reasons already explained (and which I have sought to summarise in these reasons), '... the earlier Spassked proceedings did not, and could not determine the tax payable in any year other than the 1992 year'. In further pursuit of that theme, the taxpayer applicants pointed out, in reliance upon Hope in particular, that 'what is under review is the Commissioner's decision on the taxpayers' objections', referring thereby to ss 14ZY and 14ZZ of the Administration Act. I was referred by the taxpayer applicants again to ANZ Savings Bank (at 476 and 479), where discussion occurred concerning an appeal relating to an objection decision, 'albeit that a taxpayer may be dissatisfied with only of that decision' , and to the Court's task to determine whether the amount assessed as taxable income is excessive. 99 The case of the taxpayer applicants, propounded to the Court in the context of the present proceedings, was at least largely to the effect that there is an inherently different and distinguishable justiciable issue falling for determination concerning the revenue character or otherwise of whatever expense is outlaid or cost is incurred by a given taxpayer in relation to one fiscal year from that which the same taxpayer has outlaid or incurred in relation to any other fiscal year or years, whether antecedent or subsequent to that former single fiscal year and whether consecutively or otherwise. That thesis was maintained by the taxpayer applicants in the context of the present proceedings, notwithstanding that any income so derived by Spassked as borrower in the respective fiscal years here in issue might or would have emanated from the same source and crystallised in the same context, and moreover that the relevant outgoings, being interest on moneys lent, might have been outlaid or incurred in respect of moneys lent for similar purposes and in similar circumstances. Put emphatically by the taxpayer applicants, each fiscal year of a taxpayer was said to produce a discrete fiscal issue or issues for determination for income tax purposes, whether as to assessability or deductibility. Juridical support for those propositions was invoked by the taxpayer applicants principally from the Privy Council authorities of Broken Hill and Caffoor , and from the House of Lords authority of Hope . I have earlier sought to summarise the operation as judicial precedents of Privy Council and House of Lords decisions generally, in terms of binding authority in Australian courts, particularly in the present times. In the course of my review of those English authorities invoked by the taxpayer applicants, I have made certain qualifying observations concerning the context and the scope of operation of those decisions, and have done so not only by reference to subsequent Australian judicial dicta but also to distinguishable factors conceivably attending those English cases. 106 Moreover it is further appropriate to point out that the context and circumstances of the present proceedings are I think significantly distant and removed from those of the authorities relied upon by the taxpayer applicants, being principally of course Broken Hill, Caffoor and Hope , such as to render those authorities of no sufficient assistance here to the taxpayer applicants as judicial precedents. I have drawn attention to those contexts and circumstances in the course of my review of those cases. Moreover as I have earlier discussed in the context of the reasons in the joint judgment I have extracted from the High Court's decision in Falk, there is at least something plausible to be said for the view that Broken Hill and Hoysted are susceptible to reconciliation and thus distinction in operation, and in any event, that Hoysted should be preferred to the extent of any inconsistency. So much would be in line with the observations of the three members of the High Court in Queensland Trustees who reviewed the United Kingdom authorities. Moreover I do not think that the taxpayer applicants gain assistance of sufficient significance here from the relatively brief citation of Caffoor appearing in the joint judgment of three members of the High Court in Chamberlain , for the reasons I have earlier mentioned, which included reference to the proposition that ' the Commissioner is not bound by a determination...' , and thus not contextually to a process of reasoning leading to a substantive determination by a superior court of record. In none of those English authorities moreover was the doctrine of abuse of process, additionally to estoppel, apparently invoked. 111 As I have further foreshadowed, the taxpayer applicants' principal contentions were in any event to the effect that there is a per se entitlement to curial disputation of the Commissioner's determinations in respect of each fiscal year beyond that of 1992 in controversy, since those disputed determinations, relating apparently to the 1991, 1993, 1994 and 1996 fiscal years (in the case of 1996 involving merely transferred losses originally incurred during the critical 1988-1992 fiscal years), constitute inherently different and discrete matters falling for curial resolution, in conformity with the ratio of the decisions of the Privy Council in Broken Hill and Caffoor and of the House of Lords in Hope . As I have sought to explain earlier in the context of discussion of those English decisions, the same were made in contexts significantly removed from the present, the latter involving of course complex and substantial inter IEL group commercial transactions. The circumstances in Broken Hill, Caffoor and Hope occurred in contexts involving the imposition of yearly taxing or rating assessments, based on criteria inherently susceptible to annual variation by way of change in valuations upon the basis of which rating or taxing would fall for assessment or determination by specialist administrative tribunals exercising functions not juridically comparable to the functions and authority exercised by superior courts of record. 112 The taxpayer applicants contended of course for the operation of a per se entitlement to litigate, discretely or cumulatively, in relation to each of the 1991, 1993 and 1994, and apparently also the 1996, fiscal year revenue objections, and the consequential disputes the subject of disallowed objections, in line with those English decisions of high authority. Bearing in mind those distinguishing jurisdictional features, and as the Commissioner moreover rightly observed, if the taxpayer applicants were to be permitted to raise for redetermination each and all of the same substantive issues, or virtually so, that were raised, considered and determined in the earlier Spassked proceedings, albeit that the latter proceedings were geared and related to a different fiscal year (ie 1992), being issues principally as to the purpose of relevant borrowings, and as to the use or otherwise of borrowed funds in activities carried on for the purpose, or otherwise in the course of gaining or producing assessable income, and if the taxpayer applicants were to be successful in any such further proceedings against the Commissioner, there would be on record, as I have already mentioned, what would be inconsistent or substantially inconsistent reasons for judgment of the Federal Court. All that would constitute situations well removed, conceptually as well as contextually, from that involved for instance in Saffron . Moreover there was reversed by the Privy Council's decision in Broken Hill what had been an earlier decision of a Full Bench (by majority) of the High Court of Australia, and there was inconsistency between that decision of the Privy Council and the almost contemporaneous Privy Council decision in Hoysted , involving an appeal which also emanated from Australia . Moreover as has been further mentioned, Hoysted was applied by the Full Court in Chamberlain (though the principal judgment of the High Court in Chamberlain cited Caffoor though briefly and not in any controversial context), and Caffoor and Hope did not involve appeals from Australia. Furthermore Dixon J (as he then was) in Blair v Curran cited Hoysted , not irrelevantly in terms of the scope of principle here the subject of scrutiny. The High Court in Falk , without expressing any preference, pointed to the dilemma in reconciling Broken Hill with Hoysted. More directly of assistance to the Commissioner's case moreover was the favourable approach taken to Hoysted adopted by those three members of the High Court in Queensland Trustees who made reference to Hoysted. In all those circumstances, the emphatic approach adopted by the taxpayer applicants in the present proceedings as to the operation authoritatively of the Privy Council decisions in Broken Hill , Caffoor and Hope might be thought to have at best debateable viability, particularly if account be also taken of the nature and extent of the jurisdiction and functions exercised by the tribunals etc from where at least the litigation in Caffoor and Hope originated. 119 At least the primary case of the taxpayer applicants, in relation to the principal income tax issue raised by them, was as I have recounted, to the effect that the earlier concluded Spassked proceedings involved an 'essentially different question' for instance to the issues falling for resolution at the instance of the Commissioner, because the issue there falling for determination concerned a different fiscal year, that being of course 1992, and further that what occurred in those earlier proceedings could not 'elevate the decision to cover matters that were not before the Court as part of the proceedings'. The matters so referred to as 'not before the Court' in the earlier concluded Spassked proceedings were submitted by the taxpayer applicants to be the matters concerning income tax deductibility related to losses sustained by Spassked in respect of the 1991, 1993 and 1994 fiscal years (and subsequently as to the 1991 and 1993 years as to losses transferred to IEF and QTH), and the 1996 fiscal year to the extent that the same related to losses also sustained earlier by Spassked and transferred to IEF. In that context, the taxpayer applicants submitted that judicial findings made in the context of income tax or other annual revenue disputes could not lawfully create estoppels in relation to the resolution of fiscal disputes arising between the same revenue authority and the same taxpayer(s), or its or their privies, in respect of any fiscal year subsequent to that earlier fiscal year in relation to which any such prior resolution originally occurred. No distinction was drawn by the taxpayer applicants between a dispute involving an earlier fiscal year falling for resolution and a dispute involving a subsequent fiscal year falling for resolution. Both of those situations were here involved by reason of the estoppel relied upon arising in respect of the 1992 fiscal year by reference on the one hand to the 1991 fiscal year and on the other hand by reference to the 1993 and 1994 fiscal years (and also the varying circumstance of the 1996 fiscal year). The taxpayer applicants sought to invoke reliance for those propositions primarily of course upon the ratio of the Privy Council decisions in Broken Hill and Caffoor and of the House of Lords decision in Hope , and what it contended to be the limits of the doctrine as to privity in relation to estoppels.


case_text: Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) [ Home ] [ Databases ] [ WorldLII ] [ Search ] [ Feedback ] Federal Court of Australia You are here:   AustLII >> Databases >> Federal Court of Australia >> 2006 >> [2006] FCA 267 [ Database Search ] [ Name Search ] [ Recent Decisions ] [ Noteup ] [ Download ] [ Help ] IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) Last Updated: 22 March 2006 FEDERAL COURT OF AUSTRALIA IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 INCOME TAX large corporate group inter-group transactions undertaken over six consecutive fiscal years transactions involving inter-group interest bearing borrowings principally by one group member and transfers of tax losses arising out of those borrowings to other group members prior primary and appellate claims by proceedings in Federal Court made by borrowing member against the Commissioner for interest deductibility in respect of one fiscal year decision at first instance and on appeal in relation to that fiscal year adverse to that single group member findings made in context of those proceedings as to assessability to tax of that group member in respect of some transactions for differing fiscal years after conclusion of single fiscal year further proceedings commenced by the same corporate group member together with other corporate group members in respect of transactions involving borrowings and transfers of tax losses in respect of antecedent as well as subsequent fiscal years to that resolved by Federal Court in favour of Commissioner whether issue estoppel, Anshun estoppel and/or abuse of process should operate in favour of Commissioner in respect of deductions for losses of antecedent and subsequent fiscal years meaning of privies authority in Australian Courts of earlier decisions of Privy Council and House of Lords summary judgment application of Commissioner granted Income Tax Assessment Act 1936 (Cth) ss 51(1), 79E and 80G and Part VII Tax Administration Act 1953 (Cth) Part IVC Federal Court Rules O 20 r 2 subrule 2(1)(b) and (c) and Order 52B Spassked Pty Ltd v Commissioner of Taxation (No. 5) (2003) 197 ALR 553 cited and applied Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 cited and applied General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 applied Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1948-1949) 78 CLR 62 applied Jackson v Goldsmith [1950] HCA 22 ; (1950) 81 CLR 446 referred to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 referred to Blair v Curran [1939] HCA 23 ; (1939) 62 CLR 464 applied Rogers v The Queen [1994] HCA 42 ; (1994) 181 CLR 251 referred to Trawl Industries of Australia Pty Ltd (in liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 referred to Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 applied Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378 applied Sea Culture International Pty Ltd v Scoles [1991] 32 FCR 275 referred to Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537 discussed Hoysted v Federal Commissioner of Taxation [1925] HCA 51 ; [1926] AC 155; (1925) 37 CLR 290 discussed Henderson v Henderson (1843) 3 Ha 100 discussed Murphy v Abi-Saab (1995) 37 NSWLR 280 applied Johnson v Gore Wood & Co [2000] UKHL 65 ; [2002] 2 AC 1 cited Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 applied Taylor v Ansett Transport Industries Limited [1987] 18 FCR 342 cited Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax Colombo [1961] AC 584 discussed and distinguished Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 discussed and distinguished The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400 discussed and distinguished Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987-1988) 164 CLR 502 discussed Chamberlain v Commissioner of Taxation (1991) 21 FCR 21 cited Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 referred to Society of Medical Officer of Health v Hope [1960] AC 551 discussed and distinguished Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 referred to Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163 cited and discussed Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 referred to Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77 not followed Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131 applied Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436 referred to re Sharpe (1944) QSR 26 referred to Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 cited and discussed Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94 referred to Hawkins v Clayton (1986) 5 NSWLR 109 referred to Federal Commissioner of Taxation v Cappid Pty Ltd [1970] HCA 41 ; (1970) 127 CLR 140 distinguished Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578 discussed and distinguished Arthur JS Hall & Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 discussed R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 discussed IEL FINANCE LIMITED, QUEENSLAND TRADING AND HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED v COMMISSIONER OF TAXATION NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 CONTI J 21 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING & HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE OF ORDER: 21 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent Commissioner lodge with the Court and with the taxpayer applicants draft declarations and/or orders giving effect to the reasons for judgment within fourteen days, including orders as to costs. 57 Further to the reasoning of the Privy Council in Caffoor , reference was made to the implications of the decision of the Privy Council in Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 made on 10 November 1925 (about one month earlier than the Privy Council's decision in Hoysted, though Broken Hill was not referred to by the Privy Council in Hoysted ) on appeal from the Full Court of the Supreme Court of New South Wales. Broken Hill related to the assessment of the unimproved capital value of a producing mine for the purpose of annual assessment of municipal council rates pursuant to s 153(3) of the Local Government Act 1919 (NSW), the assessment having been made on an output basis equal to 20% of the average annual saleable value of ore produced from the land over the three years preceding the assessable year. In reversing the decision of the Supreme Court in Broken Hill , which had followed an earlier decision of the High Court in The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company Limited [1922] HCA 15 ; (1922) 30 CLR 400, the Privy Council in Broken Hill made the following observation (at 289): 'It was also contended before this Board on behalf of the respondents that, having regard to the said decision of the High Court of Australia, the question raised by this appeal is res judicata as between the appellants and the respondents, and the appellants are estopped from contending that such decision of the High Court of Australia is wrong... The decision of the High Court related to a valuation and a liability to tax in a previous year, and no doubt as regards that year the decision could not be disputed. The present case relates to a new question, namely, the valuation for a different year and the liability for that year. It is not eadem quaestio , and therefore the principle of res judicata cannot apply.' No other authority was cited by the Privy Council in Broken Hill for that thesis as to the implications of annual revenue or fiscal assessments. Given the inherently changing nature of a valuation of realty for rating purposes, even over one year or so and in particular in relation to a mine in production, the juridical basis for that approach may be perhaps more comprehensible. Once again, the reference to res judicata above, and not issue estoppel, may also be observed.


case_title: The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400


case_text: Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) [ Home ] [ Databases ] [ WorldLII ] [ Search ] [ Feedback ] Federal Court of Australia You are here:   AustLII >> Databases >> Federal Court of Australia >> 2006 >> [2006] FCA 267 [ Database Search ] [ Name Search ] [ Recent Decisions ] [ Noteup ] [ Download ] [ Help ] IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) Last Updated: 22 March 2006 FEDERAL COURT OF AUSTRALIA IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 INCOME TAX large corporate group inter-group transactions undertaken over six consecutive fiscal years transactions involving inter-group interest bearing borrowings principally by one group member and transfers of tax losses arising out of those borrowings to other group members prior primary and appellate claims by proceedings in Federal Court made by borrowing member against the Commissioner for interest deductibility in respect of one fiscal year decision at first instance and on appeal in relation to that fiscal year adverse to that single group member findings made in context of those proceedings as to assessability to tax of that group member in respect of some transactions for differing fiscal years after conclusion of single fiscal year further proceedings commenced by the same corporate group member together with other corporate group members in respect of transactions involving borrowings and transfers of tax losses in respect of antecedent as well as subsequent fiscal years to that resolved by Federal Court in favour of Commissioner whether issue estoppel, Anshun estoppel and/or abuse of process should operate in favour of Commissioner in respect of deductions for losses of antecedent and subsequent fiscal years meaning of privies authority in Australian Courts of earlier decisions of Privy Council and House of Lords summary judgment application of Commissioner granted Income Tax Assessment Act 1936 (Cth) ss 51(1), 79E and 80G and Part VII Tax Administration Act 1953 (Cth) Part IVC Federal Court Rules O 20 r 2 subrule 2(1)(b) and (c) and Order 52B Spassked Pty Ltd v Commissioner of Taxation (No. 5) (2003) 197 ALR 553 cited and applied Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 cited and applied General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 applied Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1948-1949) 78 CLR 62 applied Jackson v Goldsmith [1950] HCA 22 ; (1950) 81 CLR 446 referred to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 referred to Blair v Curran [1939] HCA 23 ; (1939) 62 CLR 464 applied Rogers v The Queen [1994] HCA 42 ; (1994) 181 CLR 251 referred to Trawl Industries of Australia Pty Ltd (in liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 referred to Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 applied Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378 applied Sea Culture International Pty Ltd v Scoles [1991] 32 FCR 275 referred to Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537 discussed Hoysted v Federal Commissioner of Taxation [1925] HCA 51 ; [1926] AC 155; (1925) 37 CLR 290 discussed Henderson v Henderson (1843) 3 Ha 100 discussed Murphy v Abi-Saab (1995) 37 NSWLR 280 applied Johnson v Gore Wood & Co [2000] UKHL 65 ; [2002] 2 AC 1 cited Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 applied Taylor v Ansett Transport Industries Limited [1987] 18 FCR 342 cited Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax Colombo [1961] AC 584 discussed and distinguished Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 discussed and distinguished The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400 discussed and distinguished Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987-1988) 164 CLR 502 discussed Chamberlain v Commissioner of Taxation (1991) 21 FCR 21 cited Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 referred to Society of Medical Officer of Health v Hope [1960] AC 551 discussed and distinguished Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 referred to Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163 cited and discussed Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 referred to Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77 not followed Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131 applied Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436 referred to re Sharpe (1944) QSR 26 referred to Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 cited and discussed Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94 referred to Hawkins v Clayton (1986) 5 NSWLR 109 referred to Federal Commissioner of Taxation v Cappid Pty Ltd [1970] HCA 41 ; (1970) 127 CLR 140 distinguished Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578 discussed and distinguished Arthur JS Hall & Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 discussed R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 discussed IEL FINANCE LIMITED, QUEENSLAND TRADING AND HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED v COMMISSIONER OF TAXATION NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 CONTI J 21 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING & HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE OF ORDER: 21 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent Commissioner lodge with the Court and with the taxpayer applicants draft declarations and/or orders giving effect to the reasons for judgment within fourteen days, including orders as to costs. 62 The taxpayer applicants drew attention, next in sequence of their submissions, to Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987) 164 CLR 502, in the context of their case seemingly to the effect that the doctrine of issue estoppel has no application in principle in relation to revenue proceedings, or referrable at least to periodic assessments or levies. The context to that litigation was that the Commissioner had brought an action for payment of income tax due by a taxpayer for specified years of income, but had caused judgment to be entered for an amount substantially less than that actually due, being an amount involving the same numerals per se, yet with one decimal point being placed out of sequence apparently by inadvertence, thereby purportedly seeking to enforce a substantially lesser impost in favour of the taxpayer. The Commissioner did not seek to have the judgment vacated, or to explain precisely how that evident mistake had occurred, but instead brought an action for recovery of the balance of the tax assessment the subject of the obvious shortfall. The High Court held that the second action was not maintainable by the Commissioner by reason that the cause of action had become merged in the earlier judgment, which the Commissioner had chosen not to impeach on account of mistake. It was observed in the joint judgment of Deane, Toohey and Gaudron JJ in Chamberlain at 510 that '... it may well be that no conduct on the part of the Commissioner can operate as an estoppel against the operation of the Act' , referring in that regard to the well known principle enunciated in Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 at 117, being a principle not here of course in dispute. Nevertheless the broad but brief proposition that '... the Commissioner is not bound by a determination made in respect of an assessment for one year, so far as other years are concerned...' was described in that joint judgment at 510 'as equally true' , Caffoor at 598-601 being cited generally in relation to that brief assertion. There was however no other discussion of that bare proposition, and in particular as to the reach thereof. There is something to be said for the view that such observation in Chamberlain was obiter, the circumstances giving rise to the issue in Chamberlain being conceptually distant from contexts at least such as here involved. Significant to that observation is the fact that no reference was made to Caffoor in the reasons for judgment in Chamberlain of both Brennan J and Dawson J . No reference was made in any of the Chamberlain judgments to Broken Hill or Hoysted or Hope .


case_outcome: cited

case_text: Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) [ Home ] [ Databases ] [ WorldLII ] [ Search ] [ Feedback ] Federal Court of Australia You are here:   AustLII >> Databases >> Federal Court of Australia >> 2006 >> [2006] FCA 267 [ Database Search ] [ Name Search ] [ Recent Decisions ] [ Noteup ] [ Download ] [ Help ] IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 (21 March 2006) Last Updated: 22 March 2006 FEDERAL COURT OF AUSTRALIA IEL Finance Limited v Commissioner of Taxation [2006] FCA 267 INCOME TAX large corporate group inter-group transactions undertaken over six consecutive fiscal years transactions involving inter-group interest bearing borrowings principally by one group member and transfers of tax losses arising out of those borrowings to other group members prior primary and appellate claims by proceedings in Federal Court made by borrowing member against the Commissioner for interest deductibility in respect of one fiscal year decision at first instance and on appeal in relation to that fiscal year adverse to that single group member findings made in context of those proceedings as to assessability to tax of that group member in respect of some transactions for differing fiscal years after conclusion of single fiscal year further proceedings commenced by the same corporate group member together with other corporate group members in respect of transactions involving borrowings and transfers of tax losses in respect of antecedent as well as subsequent fiscal years to that resolved by Federal Court in favour of Commissioner whether issue estoppel, Anshun estoppel and/or abuse of process should operate in favour of Commissioner in respect of deductions for losses of antecedent and subsequent fiscal years meaning of privies authority in Australian Courts of earlier decisions of Privy Council and House of Lords summary judgment application of Commissioner granted Income Tax Assessment Act 1936 (Cth) ss 51(1), 79E and 80G and Part VII Tax Administration Act 1953 (Cth) Part IVC Federal Court Rules O 20 r 2 subrule 2(1)(b) and (c) and Order 52B Spassked Pty Ltd v Commissioner of Taxation (No. 5) (2003) 197 ALR 553 cited and applied Spassked Pty Ltd v Commissioner of Taxation [2003] FCAFC 282 ; (2003) 136 FCR 441 cited and applied General Steel Industries Inc v Commissioner for Railways (NSW) [1964] HCA 69 ; (1964) 112 CLR 125 applied Dey v Victorian Railways Commissioners [1949] HCA 1 ; (1948-1949) 78 CLR 62 applied Jackson v Goldsmith [1950] HCA 22 ; (1950) 81 CLR 446 referred to Effem Foods Pty Ltd v Trawl Industries of Australia Pty Limited (1993) 43 FCR 510 referred to Blair v Curran [1939] HCA 23 ; (1939) 62 CLR 464 applied Rogers v The Queen [1994] HCA 42 ; (1994) 181 CLR 251 referred to Trawl Industries of Australia Pty Ltd (in liquidation) v Effem Foods Pty Limited (1992) 36 FCR 406 referred to Spalla v St George Motor Finance Ltd (No 6) [2004] FCA 1699 applied Walton v Gardiner [1992] HCA 12 ; (1993) 177 CLR 378 applied Sea Culture International Pty Ltd v Scoles [1991] 32 FCR 275 referred to Hoysted v Federal Commissioner of Taxation [1921] HCA 56 ; (1921) 29 CLR 537 discussed Hoysted v Federal Commissioner of Taxation [1925] HCA 51 ; [1926] AC 155; (1925) 37 CLR 290 discussed Henderson v Henderson (1843) 3 Ha 100 discussed Murphy v Abi-Saab (1995) 37 NSWLR 280 applied Johnson v Gore Wood & Co [2000] UKHL 65 ; [2002] 2 AC 1 cited Port of Melbourne Authority v Anshun Pty Limited [1981] HCA 45 ; (1981) 147 CLR 589 applied Taylor v Ansett Transport Industries Limited [1987] 18 FCR 342 cited Mohamed Falil Abdul Caffoor, The Trustees of the Abdul Gaffoor Trust v Commissioner of Income Tax Colombo [1961] AC 584 discussed and distinguished Broken Hill Proprietary Company Limited v The Municipal Council of Broken Hill [1925] HCA 44 ; (1925) 37 CLR 284 discussed and distinguished The Council of the Municipality of Broken Hill v The Broken Hill Proprietary Company [1922] HCA 15 ; (1922) 30 CLR 400 discussed and distinguished Chamberlain v Deputy Commissioner of Taxation [1988] HCA 21 ; (1987-1988) 164 CLR 502 discussed Chamberlain v Commissioner of Taxation (1991) 21 FCR 21 cited Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105 referred to Society of Medical Officer of Health v Hope [1960] AC 551 discussed and distinguished Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 referred to Falk v Haugh [1935] HCA 35 ; (1935) 53 CLR 163 cited and discussed Viro v The Queen [1978] HCA 9 ; (1978) 141 CLR 88 referred to Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77 not followed Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131 applied Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436 referred to re Sharpe (1944) QSR 26 referred to Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 cited and discussed Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94 referred to Hawkins v Clayton (1986) 5 NSWLR 109 referred to Federal Commissioner of Taxation v Cappid Pty Ltd [1970] HCA 41 ; (1970) 127 CLR 140 distinguished Saffron v Federal Commissioner of Taxation (1981) 30 FCR 578 discussed and distinguished Arthur JS Hall & Co v Simons [2000] UKHL 38 ; [2002] 1 AC 615 discussed R v O'Halloran [2000] NSWCCA 528 ; (2000) 36 ACSR 315 discussed IEL FINANCE LIMITED, QUEENSLAND TRADING AND HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED v COMMISSIONER OF TAXATION NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 CONTI J 21 MARCH 2006 SYDNEY IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NSD 539 OF 2004 NSD 543 OF 2004 NSD 540 OF 2004 NSD 94 OF 2005 BETWEEN: IEL FINANCE LIMITED, QUEENSLAND TRADING & HOLDING COMPANY LIMITED AND SPASSKED PTY LIMITED APPLICANTS AND: COMMISSIONER OF TAXATION RESPONDENT JUDGE: CONTI J DATE OF ORDER: 21 MARCH 2006 WHERE MADE: SYDNEY THE COURT ORDERS THAT: 1. The respondent Commissioner lodge with the Court and with the taxpayer applicants draft declarations and/or orders giving effect to the reasons for judgment within fourteen days, including orders as to costs. 63 The Commissioner's submission in relation to Chamberlain was to point out that in the earlier concluded Spassked proceedings, Spassked had sought and obtained a determination of facts and issues which necessarily resolved the liability of the taxpayer applicants to pay the primary tax assessed to them, and that the Federal Court's jurisdiction to prevent a re-litigation of those issues was confirmed by the Full Federal Court in its decision upon the initial appeal ( Chamberlain v Commissioner of Taxation (1991) 28 FCR 21), where Davies, Ryan and Foster JJ at [26] purportedly applied the doctrine of estoppel as exemplified in Hoysted , and thereby prevented the Commissioner of Taxation from seeking to re-litigate in the Federal Court upon the basis of a mistaken assumption upon which a consent judgment had been entered earlier in the Supreme Court. Incidentally, in the course of the reasons for judgment of Deane, Toohey and Gaudron in Chamberlain at 509, there was reproduced the first sentence of the dictum in Henderson I have earlier extracted, it being explained that ' Henderson was not concerned with res judicata in its strict sense but rather with its implications when an issue is sought to be raised which could and should have been litigated in the earlier proceedings ', referring thereby to what was established by the High Court's decision in Anshun. I would add for completeness that the success of the taxpayer in the High Court in Chamberlain was seemingly treated in any event as based on res judicata : see the joint reasons for judgment of Deane, Toohey and Gaudron at 507, and also the reasons of Brennan J at 504 and of Dawson J at 512. However the subsequent proceedings brought by the Commissioner in the Federal Court, also resolved as above indicated in favour of the taxpayer, turned on Anshun estoppel, by reason of the omission of the Commissioner to raise the issue of mistake in the earlier High Court proceedings. In the result I do not think that Chamberlain provides the assistance, at any rate decisively, for which the taxpayer applicants' case for denial of the operation of an estoppel in the present circumstances was propounded. On the other hand and for what it may matter, I think that the taxpayer applicants were correct in their rejection of the characterisation of Chamberlain as 'revenue proceedings', in the sense of involving an issue as to liability to tax and/or as to the assessable quantification of that liability as such.


case_outcome: referred to

case_title: Federal Commissioner v Wade [1951] HCA 66 ; (1951) 84 CLR 105