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 . 64 The applicant taxpayers next invoked as further applicable that part of the speech of Lord Radcliffe in the House of Lords in Society of Medical Officer of Health v Hope [1960] AC 551 at 562, in which the following appears in the context of discussion of the decision of a land valuation tribunal in England, arising out of a case stated by that tribunal upon an issue as to exemption from payment from payment of rates in favour of scientific societies: 'I do not think that it is possible to discuss the point raised by the present appeal simply in terms of these general phrases, or without giving full weight to the fact that what is in question is the conclusiveness for liability to one rate of a decision given with regard to another. The system of rating involves certain considerations that are special to itself. Its nearest analogy is with the system of annual personal taxation. With regard to both one has to begin by recognising that there is high and frequent authority for the proposition that it is not in the nature of a decision given on one rate or tax that it should settle anything more than the bare issue of that one liability and that, consequently, it cannot constitute an estoppel when a new issue of liability to a succeeding year's rate or tax comes up for adjudication. The question of this liability is a "new question". It is not " eadem quaestio" . The "cause of action is different". "The subject-matter is a different year's tax and a different year's assessment and is not the same as the subject-matter of the previous ruling". All these things have been said with reference to rates or taxes, and the list of decisions that recognise or enforce the principle is a long one...'. The fiscal context to that restatement of principle bears remote resemblance to the fiscal context of the earlier concluded Spassked proceedings. The authorities cited thereafter by Lord Radcliffe at 562-563 included Broken Hill . At 563, his Lordship continued: 'It would not be at all easy for us to depart from this long line of authoritative opinion, even if we wanted to. Personally, I do not want to, because I think that, on the whole, it is more in the public interest that tax and rate assessments should not be artificially encumbered with estoppels (I am not speaking, of course, of the effect of legal decisions establishing the law, which is quite a different matter), even though in the result some expectations may be frustrated and some time wasted.' In relation to his Lordship's observation last made, I would not think that the implications of the present proceedings continuing to trial, in the light of the factual matrix to the earlier Spassked proceedings, recorded and addressed both at first instance and on appeal, and the nature and extent of the findings consequentially made, would readily reflect any notion as to the taxpayer applicants being here sought to be 'artificially encumbered by estoppels' at the instance of the Commissioner. What doubtless troubles the Commissioner in the present circumstances, at least for one matter, is the substantial cost and delay in resolution of protracted litigation, similar to that experienced in the earlier concluded Spassked proceedings, by what would necessarily involve a re-run and subsequent re-appraisal of much of the evidence tendered in those earlier concluded proceedings. 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. 67 Given therefore the jurisdiction of the forum to which the taxpayer in the Spassked proceedings undertook recourse in respect of the 1992 fiscal year, being of course the Federal Court as a superior court of record exercising jurisdiction pursuant to Part IVC of the Administration Act, whatever assistance might be obtainable by the taxpayer applicants from Hope is I think of insufficient significance to the resolution of the present proceedings. It cannot be said for instance of the Federal Court that ' ... 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... that arises in certain contexts from legal judgments ' . It is indeed a '... natural repositor[y] of the right to decide for good such legal issues as the interpretation of statutes or general legal questions affecting [taxpayers]', within the foregoing description appearing in Lord Radcliffe's speech in Hope at 563 . Moreover it is the Commissioner's bureaucratic decision on a taxpayer's objection which is referred to the relevant court by a taxpayer for review, albeit that a taxpayer is dissatisfied with only part of that decision; once that reference takes place, the court is '... then seized of the decision in its entirety... ', in the sense that '... the court is concerned to determine whether the amounts assessed as taxable income are excessive', in relation to which '... the Commissioner must be able to raise for the Court's determination the deductions properly to be allowed in the light of the Court's decision as to assessable income' ( Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 at 476 and 479). 68 Viscount Simonds agreed explicitly with Lord Radcliffe's comprehensive speech in Hope . Lord Cohen stated simply 'I concur', and Lord Jenkins similarly 'I agree', in both instances without distinguishing between the speech of Lord Radcliffe and that of Lord Keith who wrote the only other speech containing reasons. The speech of Lord Keith, which followed that of Lord Radcliffe, included the following process of reasoning (at 567): 'The proposition submitted... for the appellants was that where a question has been decided by a court of competent jurisdiction in a lis inter partes, these parties are estopped from reopening the same question in a subsequent suit between themselves. This submission necessarily proceeded upon the assumption, which has not been challenged by the respondent, that the facts and circumstances relevant to the appellants' exemption from rating under section 1 of the Scientific Societies Act, 1943, remained unchanged from what they were when the local valuation court on October 24, 1951, decided that the appellants' hereditament was exempted from rating under the Act of 1843. Otherwise it would not be the same question that comes up for reconsideration. The proposition advanced, which is impeccable in circumstances in which it is permitted to operate, is, in my opinion, inapplicable to the circumstances of this case. I find it difficult to equate the procedure followed out under the statute with a proper lis inter partes, though that, of itself, might not be conclusive. Nor do I find it easy to distinguish the functions performed by assessment committees before the coming into operation of the Act of 1948 from those now performed by a local valuation court, or to think, because the new body is differently constituted and called a court, that a greater importance and effect should be attached to its decisions. The introduction of a court into the proceedings instead of a committee played some importance, if I understood aright, in the submission for the appellants. What we are faced with here is an administrative act of a public official, the valuation officer, against which the party affected has a right of appeal to the local valuation court, with further appeals to higher courts. The valuation officer has a public duty to perform by making periodically every five years a valuation list of all hereditaments, with certain exceptions, in his rating area. He must necessarily reconsider and revise the previous valuation list. He has no personal interest in any appeals taken against his valuations, and has a duty to hold the scales as fairly as he can among the ratepayers affected, the occupiers of the various hereditaments. The general body of ratepayers is constantly changing. With each quinquennium the revaluations will affect a new body of ratepayers. I doubt if the valuation officer owing such a duty to an ever-changing body of ratepayers can be regarded as always the same party in the sense in which that expression is used for the application of the rule of res judicata. What if the appellant society changes its habitat and moves into another rating area with a different valuation officer? I emphasise these aspects of the functions of a valuation officer under the statute, for they lead to what I regard as the true answer to the submission for the appellants, which is that a public officer in the position of the respondent cannot be estopped from carrying out his duties under the statute.' The distinction drawn by Lord Keith between ' the procedure followed out under the statute with a proper lis inter partes' may be observed, the former being there carried out of course by 'an administrative act of a public official, the valuation officer'. 69 It may therefore be seen, for one matter, that the functions of the valuation officer the subject of the analysis undertaken by the House of Lords in Hope , for instance to 'reconsider and revise the previous valuation list', are not sufficiently comparable to the decision-making by a Federal Court judge in addressing an appeal from the disallowance by the Commissioner of a taxpayer's objection to an income tax assessment, as in the case of course of the earlier concluded Spassked proceedings. Particularly must that be so, as in the present case, of decision-making by a Federal Court judge upon a taxpayer's entitlement or disentitlement to income tax deductibility, in respect of outgoings or losses incurred in continuing business operations of subsequent or successive fiscal year or years, as this is necessarily or inherently ' not eadem quaestio as the issue decided in the later proceedings ', to adopt Lord Radcliffe's description in Hope . Put another way, the judicial function of a Federal Court judge is hardly to be equated with the administrative function to '... reconsider and revise the previous valuation list' , and probably also of a quasi administrative function. Incidentally I have of course earlier referred to the English doctrine of res judicata having a wider connotations to that prevailing in Australia. 70 Further in the speech of Lord Keith in Hope , reference was made (at 569-570) to 'much reliance' by the appellant society upon the Privy Council's decision in Hoysted , his Lordship there observing that such '... authority is not binding on this House, and the point was never taken in the case that a decision on liability to assessment to tax for one year is not conclusive of liability to assessment in a later year' , and further that '[t]he judgment [of the Privy Council in Hoysted] would seem to conflict with what was said a month earlier in [Broken Hill] by a Board differently constituted, rejecting a plea of res judicata ...' . His Lordship concluded by adopting a similar conclusion, as in Broken Hill, as to there not being involved the '... eadem quaestio , and therefore the principle of res judicata ... ' not being applicable, and by further observing the absence of what was essential to a successful plea of res judicata . For completeness I record also that Hoysted was of course decided by the Privy Council on an appeal from Australia, unlike Caffoor, and moreover Hope was a decision of the House of Lords, and that those circumstances have implications in terms of the present principles of juridical authority in operation in Australia, to which I have of course made reference. True it is of course that Broken Hill was determined by the Privy Council on appeal from Australia, but as earlier mentioned, about five weeks prior to the Privy Council's decision in Hoysted , also on appeal from Australia, yet without being apparently referred to by counsel appearing in Hoysted and nor by the Privy Council in the course of its reasons. 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. 79 At this point of my review of submissions on authorities it is appropriate to address more closely the taxpayer applicants' contentions upon the theme generally as to the binding authoritative operation of decisions of the House of Lords and the Privy Council in Australia, irrespective of the Commissioner's contentions to the effect that the taxpayer applicants' reliance upon the leading English decisions of Broken Hill, Caffoor and Hope were in any event misplaced. Additionally however to what I have earlier cited in relation to Viro, my attention was drawn by the taxpayer applicants to the later decision of the High Court in Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 at 390, where Mason, Wilson, Deane and Dawson JJ jointly discussed the implications of the circumstance that the Judicial Committee of the Privy Council was no longer the ultimate court of appeal or one of the ultimate courts of appeal in Australia, and said as follows: 'The history of this country and of the common law makes it inevitable and desirable that the courts of this country will continue to obtain assistance and guidance from the learning and reasoning of United Kingdom courts just as Australian courts will benefit from the learning and reasoning of other great common law courts. Subject, perhaps, to the special position of the House of Lords given in the period in which appeals lay from this country to the Privy Council, the precedents of other legal systems are not binding and are useful only to the degree of the persuasiveness of their reasoning.' The dicta would seem to have marginally modified the earlier authority of Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94, where Kitto J said at 104 as follows: 'The position of this Court in relation to decisions of the House of Lords does not seem to me to need clarification. The Court is not, in a strict sense, bound by such decisions, but it has always recognized and must necessarily recognize their peculiarly high persuasive value'. The taxpayer applicants for their part also cited at 135 (per Mason J as he then was) and Hawkins v Clayton (1986) 5 NSWLR 109 at 136-137 (per McHugh JA as he then was). The taxpayer applicants asserted that the decision of the House of Lords in Hope was one of those cases referred to in Cook as being in a 'special position'. Whether in any event of course, the speeches in Hope provide the applicant taxpayers with the extent of assistance sought to be invoked is a further matter for their concern. 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. 81 The taxpayer applicants asserted in context that despite the width of the powers in s 199 of the Tax Act and s 14ZZP of the Administration Act, the same can only be exercised in relation to the objection decision and the assessment before the court. Consequently it was said that the objection decision and the excessiveness of the assessment to which it relates define the Court's jurisdiction in a Part IVC appeal, and reference was made in that context of the taxpayer applicants' submissions to what appears in the course of Lord Radcliffe's speech in Hope at 563, which I have earlier extracted. As I there indicated, so much tended however on close analysis to be supportive of the commissioner's case rather than the case of the taxpayer applicants; I am unable to comprehend why the same can sensibly be said to exclude in principle or otherwise the imputation of an estoppel otherwise appropriate according to law. 82 The taxpayer applicants raised a number of other contentions in opposition to the Commissioner's case for summary relief which fall to be addressed. The first was that inherent in the Commissioner's present summary application was that '... the Commissioner invites the Court to assume that the evidence to be led in the current proceedings will be the same as that in the earlier Spassked proceedings', yet '[i]t is simply not possible for the Court to make that assumption'. The submission tends to misconceive the juridical basis of the present summary judgment application of the Commissioner, which is primarily to the effect that in the light of the estoppel or estoppels arising from the evidence led by the Commissioner and established by the Federal Court at first instance and on appeal, no case in substance remains open to the applicant taxpayers to pursue in relation to the fiscal issues purportedly raised by the taxpayer applicants' present proceedings. 88 Moving specifically to the Commissioner's invocation of an operation relevantly of Anshun estoppel, the taxpayer applicants contended that '[f]or the same policy reasons that taxation and rating cases are an exception to the doctrine of res judicata ' (thereby referring implicitly to res judicata in the English sense of inclusivity of the Australian notion of issue estoppel per se ), 'they must also fall outside the ambit of a claim for Anshun estoppel', the asserted reason being that '[i]f a party is not estopped in relation to a matter it has raised in proceedings relating to another year, it surely cannot be estopped in relation to a matter it did not raise in those earlier proceedings', referring thereby further to the doctrine as to privies described in Effem . Upon those purported footings, it was therefore emphasised by the taxpayer applicants once more that 'QTH and IEF were not parties to the earlier Spassked proceedings and so cannot fall within the principle of so-called Anshun estoppel... even if... QTH and IEF could be regarded as privies of the parties to the earlier proceedings'. The theme of those submissions of the taxpayer applicants is sought to be answered by the Commissioner in the first place by joinder of issue upon the proposition for which Broken Hill, Caffoor and Hope are said by the taxpayer applicants to espouse. If that proposition be not sustainable in circumstances such as the present, the case for the operation of Anshun estoppel upon the basis of the findings of the Federal Court in the earlier Spassked proceedings referrable to the six fiscal years 1988 to 1994 presents at least prima facie as a viable proposition. In this further context the applicant taxpayers once more placed emphasis on the circumstances that 'issues as to liability to income tax in respect of years other than 1992 could not have been litigated in the earlier proceedings, even by the parties to those proceedings', by reason of course of the apparent absence of determination of those objections by the Commissioner until after the conclusion of the earlier Spassked proceedings, a proposition which I think cannot survive juridical analysis as I have earlier opined. It is true that '... [i]t can hardly be said that at the time of the earlier Spassked proceedings the [taxpayer applicants] were delinquent in not prosecuting an appeal against a decision which had not then been made, or that the opportunity to contest that decision was available, and should have been pursued in the earlier proceedings'. However as I have consistently emphasised, the parties mutually contested critical issues, in the context of the earlier concluded Spassked proceedings, which involved and related entirely to the circumstances relevantly prevailing throughout those critical six fiscal years. Moreover it can scarcely be said reasonably that IEF and QTH were not privies of Spassked, each being wholly owned subsidiaries of IEL (and thus having threshold qualification for Part IVC purposes) and being subject at all material times together to the same at least ultimate controlling and governing parent corporate mind. 89 Moving finally to the issue raised by the Commissioner as to abuse of process, in relation to which doctrine I have earlier cited Walton and Spalla , the taxpayer applicants advanced the further proposition that 'for the same policy reasons which make annual taxation and rating cases an exception to the doctrine of res judicata , those cases are generally not amenable to a claim of abuse of process', upon the footing that '[t]he question of liability is different in each year'. It was contended by the taxpayer applicants that '[i]t is inconceivable that the High Court, the Privy Court and the House of Lords left it open to contend that in circumstances in which they held that a party was not estopped (from presenting its case in relation to another year), that party, if it raised the matter in respect of which it was found not to be estopped, was or might be guilty of abuse of process', and I was referred once more to what was said in Hope by Lord Radcliffe as to '... the public interest that tax and rate assessments should not be artificially encumbered and estoppels... even though in the result some expectations may be frustrated and some time wasted' . I have of course already made observations at length in relation to the implications or otherwise of Broken Hill, Caffoor and Hope to such distant contexts as the present, and also what was observed briefly in Chamberlain in as yet a further different but once again distant context to the present, and will not repeat those observations. It was submitted broadly in that context by the taxpayer applicants that a different outcome in respect of a different year is not to be regarded as a matter which would bring the administration of justice into disrepute. The force of that proposition conceivably gives way to circumstances illustrated for instance by the present context, where a litigation was undertaken at obviously very considerable expense over a lengthy period of time in order to determine the existence of financial circumstances and relationship attending a public company taxpayer over a period of six fiscal years, and as a consequence the fiscal implications to one of those fiscal years which arose for specific determination, and apparently without objection by the taxpayers applicants to the absence of inclusion as to the issues arising in relation to the proximate years of income. 100 If the IEL corporate group, whereof the taxpayer applicants were wholly owned subsidiaries at all material times, had not originated and thereafter pursued to conclusion the earlier concluded Spassked proceedings (related of course specifically to the 1992 fiscal year), implicitly in order to obtain judicial precedent for corporate group member exposure to income tax liability in relation to the remaining proximate fiscal years in dispute with the Commissioner, it may be conceivably inferred that related proceedings would have been contemporaneously put in place by the Commissioner in relation to the other fiscal years in controversy at the instance of Spassked, and correspondingly of the relevant IEL related companies involved in the transfer of Spassked's tax losses, subject of course to the Commissioner having first responded formally to the objections lodged in respect of those other fiscal years. However it is unnecessary for me to draw that inference, at least in the light of the conclusions I have otherwise reached. For some unexplained reason, any such further steps did not eventuate until at least some later time prior to the commencement of the present proceedings. However the apparently unexplained delay of the Commissioner in responding to those outstanding objections does not in my opinion produce any adverse significance to the operation of issue estoppel, Anshun estoppel or abuse of process, if otherwise established upon the footing of findings of the Federal Court in the context of the earlier concluded Spassked proceedings, whether at first instance or on appeal. In that regard there was no finding of the Full Court inconsistently with any finding at first instance, at least of significance. The taxpayer applicants have not distilled the existence of any distinguishing factor, relevant to the resolution of the proceedings presently on foot in relation to the 1991, 1993, 1994 and 1996 fiscal years, that was not material or would not have been material to the circumstances falling for resolution in the context of the earlier concluded Spassked proceedings. Of course as I have foreshadowed, the taxpayer applicants contended that the critical and pervading circumstance, said to answer the present summary application of the Commissioner, is that each of those fiscal years other than 1992 involved a distinct and discrete issue to that the subject of the earlier concluded Spassked proceedings, in that an income tax assessment is conclusive and final only for and in relation to the fiscal period for which it is made, given the reasoning of the Privy Council and House of Lords authorities in particular of Broken Hill, Caffoor and Hope . Yet as I have indicated already, the earlier concluded Spassked proceedings were determined in the context of, and in explicit reliance upon evidentiary material covering relevantly the commercial activities of Spassked and other members of the wider corporate IEL group undertaken in respect of at least the six fiscal years 1988 to 1994 inclusively, and thus inclusive of the 1992 fiscal year, being evidentiary material upon which the Commissioner placed specific reliance in support of its application for summary judgment in each of the subject four proceedings falling for present resolution. 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. 121 Other considerations and findings of the Full Court in Spassked, referrable implicitly and explicitly to circumstances prevailing both prior, during and subsequent to the circumstantial scope of the 1992 fiscal year, serve to demonstrate the unreality, as well as the misconception, inherent in the taxpayer applicants' case for the exclusion in principle of the operation of the doctrines of issue estoppel and Anshun estoppel (additionally of course to abuse of process) from consideration in relation to the Commissioner's present application for summary judgment. The complex processes of judicial consideration and findings, undertaken by Lindgren J in his reasons for judgment in Spassked at first instance, and subsequently by the Full Court on the appeal upholding his Honour's decision, demonstrate the inherent inapplicability, in relation to circumstances such as here present, of the reasoning in, and the ratios of, Broken Hill, Caffoor and Hope in the Privy Council and House of Lords respectively, based as each decision was of course on the principle there enunciated as to each new or successive fiscal year of rating or taxing in dispute constituting an inherently new or different question or issue from that the subject of any preceding (or for that matter following) fiscal year. If I may be repetitious, the rating authority in Broken Hill failed in the Privy Council upon the footing that the prior majority decision of the High Court made in its favour had related '... to a new question, namely, the valuation for a different year and the liability for that year' . 123 The predication of the taxpayer applicants' case boiled down to or at least involved the proposition that although the circumstances of business operations of the 1992 fiscal year, in relation to which the previous Spassked proceedings were determined, remained essentially unchanged in scope in the course of the subsequent fiscal year or years the subject of ongoing dispute, and moreover remained unchanged from the circumstances of the prior fiscal year or years, any purported findings in line with such subsequent or prior circumstances cannot govern or control that taxpayer's entitlement to fiscal determination de novo in respect of the later fiscal year, freed from the constraints of estoppel. The reasoning of Lord Keith in Hope at 567, which appears within the context of what was one of the only two speeches of the House of Lords on that appeal in relation to which reasons were also provided, reflects the following unresolved dilemma of significance appearing after his Lordship's reference to Hoysted : '... 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 even arises, it will need separate consideration.' 124 As I have foreshadowed, the taxpayer applicants' case seemingly boils down to an entitlement per se to a full hearing in respect of each of the fiscal years asserted by the taxpayer applicants to remain in dispute, following upon, and notwithstanding the basis, nature and scope of resolution of, the earlier concluded Spassked proceedings, yet without the need for the taxpayer applicants to demonstrate the existence any material distinction from the circumstances the subject of the ratio decidendi of the earlier concluded Spassked proceedings. The factor merely as to the existence of different fiscal years of income in contest to that of 1992 is said by the taxpayer applicants to be enough to constitute in law a new issue or dispute required to be determined, freed from the restraints of operation of the doctrine of estoppel, and by reason of the ratios of the Privy Council and House of Lords decisions respectively in Broken Hill, Caffoor and Hope . The consequences of that proposition of the taxpayer applicants being correct in principle for the purposes of the law of income tax have radical implications in relation to issues arising in litigious circumstances such as the present, involving as they would the further hearing and determination of the same substantial scope of evidence, or virtually so, as was adduced in the context of the earlier concluded Spassked proceedings. 125 I have reached the conclusion that the Commissioner has established a viable case for summary judgment upon the basis of estoppel arising upon or out of the circumstances falling within the scope of the findings of this Court made at first instance, and subsequently by way of confirmation on appeal, in the context of resolution of the earlier concluded Spassked proceedings, that is to say of course, the circumstances the subject of the Federal Court's findings at first instance and on appeal relevantly to the period of six fiscal years from 1988 to 1994, and the fiscal implications and consequences of those circumstances. Unlike fiscal litigation involving or relating for instance merely to quantifications of value of realty or personalty, or of losses and outgoings otherwise uncontroversial in character, the resolution of the earlier concluded Spassked proceedings required the Federal Court's consideration of a spectrum of circumstances relating to the business operations of Spassked which had taken place in substantial commercial contexts, being circumstances which extended in scope beyond the duration of the 1992 fiscal year, antecedently as well as subsequently. It makes no sense, nor is there justification moreover for the consequential requirement, that the Commissioner submit to what doubtless would be a further lengthy and costly Federal Court hearing, and further curial decision-making, in relation to what would require and involve the tender and judicial consideration once more of a significant amount of viva voce and documentary evidence based on, or arising out of, events which occurred and matters which were undertaken in relation to fiscal years both prior and subsequent to 1992, when that scope of evidentiary material has been already afforded the Court's extensive scrutiny and findings both at first instance and subsequently on appeal. I refer of course in that regard to the entire six fiscal years from 1988 to 1994 (inclusive). Further would that be so in the present context of events, if the inference reasonably open to be drawn is that the previously concluded Spassked proceedings in relation to the 1992 fiscal year were in substance and reality in the nature of a test case implicitly intended to resolve all of the outstanding objections to assessments lodged by the applicant taxpayers with the Commissioner, being an issue strictly speaking unnecessary for me to resolve.


case_outcome: referred to

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. 67 Given therefore the jurisdiction of the forum to which the taxpayer in the Spassked proceedings undertook recourse in respect of the 1992 fiscal year, being of course the Federal Court as a superior court of record exercising jurisdiction pursuant to Part IVC of the Administration Act, whatever assistance might be obtainable by the taxpayer applicants from Hope is I think of insufficient significance to the resolution of the present proceedings. It cannot be said for instance of the Federal Court that ' ... 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... that arises in certain contexts from legal judgments ' . It is indeed a '... natural repositor[y] of the right to decide for good such legal issues as the interpretation of statutes or general legal questions affecting [taxpayers]', within the foregoing description appearing in Lord Radcliffe's speech in Hope at 563 . Moreover it is the Commissioner's bureaucratic decision on a taxpayer's objection which is referred to the relevant court by a taxpayer for review, albeit that a taxpayer is dissatisfied with only part of that decision; once that reference takes place, the court is '... then seized of the decision in its entirety... ', in the sense that '... the court is concerned to determine whether the amounts assessed as taxable income are excessive', in relation to which '... the Commissioner must be able to raise for the Court's determination the deductions properly to be allowed in the light of the Court's decision as to assessable income' ( Federal Commissioner of Taxation v A.N.Z. Savings Bank Ltd [1994] HCA 58 ; (1994) 181 CLR 466 at 476 and 479).


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. 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 . 74 More recently in Orica Ltd v Federal Commissioner of Taxation (2001) 182 ALR 77, Merkel J, as a Federal Court judge at first instance, said as follows (at 87), in the context of a capital gains tax dispute, upon which the taxpayer applicants sought to place additional reliance in support of the same major theme of their present case: 'Issue estoppel has been held not to apply to a taxpayer where the previous decision relied upon as founding the issue estoppel related to a different year of income. Although there was some support for the contrary view in [Hoysted] , that decision was not followed in [Caffoor] . In Caffoor the Privy Council determined that a taxpayer is not estopped from contending it was entitled to an exemption in respect of a year of income by a decision in respect of a different year of income. More recently, in [Chamberlain] Deane, Toohey and Gaudron JJ cited Caffoor as authority for the 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". It must follow that the Commissioner's issue estoppel argument also fails.' The estoppel issue raised in Orica was in the nature of an alternative contention, and arose in the context of the 'relation back' provisions of s 160U of the capital gains tax provisions of the Tax Act and did not occupy the principal focus of attention of those proceedings. It appears that Merkel J was not provided with the substantial scope of juridical references to and analysis of authority that has been presently afforded to the Court by the parties in contest, including that analysis and debate referrable to the High Court's later decision in Queensland Trustees Limited v Commissioner of Stamp Duties [1956] HCA 75 ; (1956) 96 CLR 131, which I will shortly next discuss, or for that matter to Falk . The decision in Orica did not survive appeal (see Commissioner of Taxation v Dulux Holdings Pty Ltd [2001] FCA 1344 ; (2001) 113 FCR 436), though the issues of the scope here arising did not feature in the reasons for judgment on that appeal. I will later return to Orica . 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. 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.


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. 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. 79 At this point of my review of submissions on authorities it is appropriate to address more closely the taxpayer applicants' contentions upon the theme generally as to the binding authoritative operation of decisions of the House of Lords and the Privy Council in Australia, irrespective of the Commissioner's contentions to the effect that the taxpayer applicants' reliance upon the leading English decisions of Broken Hill, Caffoor and Hope were in any event misplaced. Additionally however to what I have earlier cited in relation to Viro, my attention was drawn by the taxpayer applicants to the later decision of the High Court in Cook v Cook [1986] HCA 73 ; (1986) 162 CLR 376 at 390, where Mason, Wilson, Deane and Dawson JJ jointly discussed the implications of the circumstance that the Judicial Committee of the Privy Council was no longer the ultimate court of appeal or one of the ultimate courts of appeal in Australia, and said as follows: 'The history of this country and of the common law makes it inevitable and desirable that the courts of this country will continue to obtain assistance and guidance from the learning and reasoning of United Kingdom courts just as Australian courts will benefit from the learning and reasoning of other great common law courts. Subject, perhaps, to the special position of the House of Lords given in the period in which appeals lay from this country to the Privy Council, the precedents of other legal systems are not binding and are useful only to the degree of the persuasiveness of their reasoning.' The dicta would seem to have marginally modified the earlier authority of Skelton v Collins [1966] HCA 14 ; (1966) 115 CLR 94, where Kitto J said at 104 as follows: 'The position of this Court in relation to decisions of the House of Lords does not seem to me to need clarification. The Court is not, in a strict sense, bound by such decisions, but it has always recognized and must necessarily recognize their peculiarly high persuasive value'. The taxpayer applicants for their part also cited at 135 (per Mason J as he then was) and Hawkins v Clayton (1986) 5 NSWLR 109 at 136-137 (per McHugh JA as he then was). The taxpayer applicants asserted that the decision of the House of Lords in Hope was one of those cases referred to in Cook as being in a 'special position'. Whether in any event of course, the speeches in Hope provide the applicant taxpayers with the extent of assistance sought to be invoked is a further matter for their concern.